The recession has culled the weak from the pack but it’s likely that your competition is still fierce. Is there a way to attract and retain B2B customers without lowering your price? And is there a way to leverage the social web to keep your customers … even in the extreme case of a commodity market?
Holding onto customers in a buyer’s market is one of the most extraordinary challenges in business, especially if you’re selling a commodity (Commodity = purchasers view suppliers as identical on all factors but price, i.e. common coal, steel, or chemicals).
There is usually only one winner in a commodity market — the lowest cost supplier — except in periods of high demand when supply falls short. But there are ways to lock-in customers even in ugly downturns. One strategy I used throughout my career was to create a systematic plan to raise switching costs. By this I mean create obstacles — through valuable benefits — to prevent a customer from leaving you for the competition.
A process to retain customers
This process starts with getting out to your most valued customers and listening. And I mean REALLY listening. We would sometimes have half-day sessions to explore un-met and under-served customer needs that would …
- Improve their competitive position
- Enhance profitability or productivity
- Eliminate waste
- Lower risk
- Increase speed to market
One strategy that uncovered potential points of differentiation was to ask customers what they hated about their job. This always seemed to get people to open up about an idea we could implement to make their life easier! Some other potential approaches to this challenge:
- Solve a customer problem (reporting, data-gathering, analysis/testing) that might add slightly to your cost, but establishes enough value to create a hurdle to switching
- Create a specialized service that would be difficult for competitors to match (we did a specialized truck-return recycling program, for example)
- Work actively with customers to influence specifications and terms that could advantage my company or disadvantage a competitor
- Focus retention efforts on most profitable customer locations
- Look at eCommerce integration options to enhance retention
Notice that all of these ideas go beyond the basics of price, quality and service. Those aren’t strategic initiatives. Those are competitive tablestakes these days.
When customers don’t play nice
This process of listening, reacting and renewal must be continual and integrated through an effective CRM system. But it doesn’t always work.
In the middle of all this great creative marketing work I just suggested is another dynamic. Purchasing may not want you to implement your ideas – even if there is an advantage – because it reduces their flexibility with suppliers. They may even force you to hand over your innovations to competitors. I witnessed this in the automotive market in the 1990s. This ended up hurting customers because when there is no reward for innovation, innovation ends.
Now what about the social web?
Is it possible to develop some distinct value through social media that could create a switching cost? My answer – probably not. The social web might be a tool to listen and tune-in to possible innovations and market needs but I don’t see how social networks can create sustainable switching costs in this part of the sales cycle. It’s free to everyone and easily duplicated by competitors.
However, I do think you can create PRIVATE information networks and communities that create distinct value. For example, one idea that worked really well was a private, unique market information hub for customers who remained in our top tier in revenue.
What are you doing to hold onto your best customers in tough economic conditions? Can you think of any way to leverage the social web for DISTINCT value in a commodity market?