Whether it's on top of the world or back is against the wall, your company would be better off if it could win new customers -- especially ones that pay your invoices on time and communicate with you so you can serve them better over the long-run.
The benefits of winning more loyal customers are profound. They include higher revenue and profitability which create more opportunities for your people to develop, inspiration that gives you more opportunities to out-innovate its rivals, and a boost in the value of your shareholders' investment in your company.
While these benefits may be pretty obvious, what is notoriously difficult is for business leaders to imagine and execute strategies for winning those new customers. For years, as reflected in my Note on Gaining Market Share, I have been trying -- with some success -- to teach entrepreneurship students this challenging task.
Here are the two most essential things business leaders must do in order to gain market share.
1. Listen to customers perception of how well your company satisfies their most important purchase criteria.
When customers are choosing a product or service from competing suppliers, they evaluate the decision based on a combination of emotion and logic. More specifically, customers compare competing products on a common set of decision factors -- such as quality, price, selection, brand, or timely delivery.
The customer buys from the supplier that does the best job on the most important customer purchase criteria (CPC). For example, in the computer data storage industry, the CPC include offering customers more storage capacity, faster data storage and retrieval and lower capital spending -- a combination of the product's upfront and operating costs.
In 2012, I spoke with the CEO of Nimble Storage, a company that outperformed its rivals on these factors so well that in the two years ending August 2012, it had won 600 new customers. How so, Nimble gave customers two to five times more storage capacity and five to six times greater performance for the same amount of capital spending as rivals demanded.
Here are four steps you can take to find out the CPCs for your product(s) and where you stand on them vis a vis competitors in the mind of customers:
- Identify 20 current or potential customers
- Ask them which other companies they evaluate when buying your products and the factors they use to decide which supplier gets their business
- Encourage them to rank each factor in descending order of importance to their decision
- Request that they score your company and your leading competitor (on a scale of 5 = best to 1 = worst) on the ranked CPC and explain the reasons for each score
2. Assess how well your company performs critical activities compared to rivals.
With these responses, you should have a clearer idea of where you are ahead of the competition and where you lag. To win new customers, your company must maintain its lead in the CPC where it is strong and take action to bolster those where it's weak.
Chicago-based plastic bottle maker, Berlin Packaging, operated with deep insights into how it could sustain industry-leading performance on its CPC by leveraging key activities. About five years ago, its CEO told me that the company was growing 10 times faster than its industry because -- while it matched competitors on price, Berlin better satisfied the other CPC.
Specifically, Berlin delivered 99% of its shipments on time, better complied with customers' quality requirements, and improved their customer's cash flow in exchange for long-term contracts.
Berlin leveraged four critical activities to outperform rivals on these CPC. By designing its own bottles and other products and contracting manufacturing to 700 companies around the world, Berlin was able to match competitors prices.
Through tight management of outbound logistics, Berlin delivered the right order to the right location when the customer demanded it. By hiring and motivating top talent with bonuses linked to performance, Berlin improved its own cash flow.
And by showing its customers how to improve their production processes, buy more efficient machines, and install supply chain control systems, Berlin was able to boost its customers' cash flow in exchange for which it requested long-term contracts.
Simply put, if you hope to win new customers do as Berlin did: be better than the competition on the CPC and key activities.
To that end, hire an independent analyst to identify the critical activities needed to win in your industry, evaluate which activities are needed to satisfy each CPC, and assess objectively how well your company performs these activities compared to your leading competitors.
Given every company's need for bringing in more loyal customers, business leaders around the world should excel at these two essential things.