If you want to build scale in your business, beware of the overly-demanding client, warns entrepreneur John Warrillow.
The other day I shared the perils of giving customers too much choice in what they buy. Today I'd like to share my experience with giving customers too much say in how you make what they buy. Quite simply, overly-demanding customers can undercut your ability to grow a valuable business.
First some background: a decade ago I tried to scale up a subscription research offering similar to a Bloomberg or Forrester research program—you know, the model by which a customer subscribes to a pre-set number of reports provided to all.
I had managed to convince 17 of my consulting business clients to migrate to the new model—a good start, I thought, but then things went off the rails. Part of the problem was that I ran the subscription business while simultaneously accepting consulting projects. The other major problem was that we started to customize each report for the 17 subscribers.
I fell down the slippery slope of customizations quickly. First one client, whom we had done a number of consulting projects for, agreed to subscribe only if we would customize his reports based on the different market segments his company targeted. I was desperate to see our subscription offering succeed—and also to make a sale. (I am a sales guy at heart, after all.) I agreed to tailor his reports. It seemed to me like a reasonable request, and I justified it to myself (and my staff) by arguing that other clients would benefit from the reports being stratified along market segments. But it set a dangerous precedent that would eventually be my downfall.
Next, a client in the technology industry asked us to customize our reports by the type of Internet connection the survey respondent used. So now I had agreed to customize reports along industry lines.
Once our staff got wind that one subscriber was getting a special report, all of our account managers wanted their customers to have the very best reports for them. Soon we were customizing each report for every client—thereby compromising the leverage I'd hoped to achieve through a subscription model.
It wasn't long before things started spiraling out of control. With six major studies per year and 17 clients demanding special reports, we faced the prospect of creating 102 unique reports—untenable for our 20 employees.
Eventually, I had to shut the program down.
Five years later, I launched a new version of the subscription service and made some big changes. First, we stopped offering custom consulting. Next, we stopped offering customization of the reports. Instead, we assembled a customer advisory board, which allowed customers to voice their opinions about what we studied and how we reported our data before we undertook any new report.
The customer advisory board gave clients a venue in which to have their say and made them feel a part of the development cycle. When they proposed a line of reporting that was pertinent only to their industry, a member from another industry would speak up and explain why the suggestion was not applicable to his or her company. This self-policing allowed us to spend less time batting away requests for customization.
The customer advisory board wasn't perfect, but it was the best weapon I could find to defend against the natural inclination of customers to want something specific to their needs. In the end, it worked, and we were able to scale up the research offering more quickly because each incremental subscriber required very little effort from us.
In hindsight, I realize a big part of the problem was my involvement in the selling. I'm just too tempted to make a sale at just about any cost. Next time, I'll know better than to let my sales instincts undermine my entire business model.