Now, I am sure that everyone reading this can point to examples of this type of promotion that companies put in place to attract new customers during slower times. However, we would like to take this opportunity to challenge companies to resist using this type of tactic which can ultimately devalue the perception of your solution within the market, and can alienate the customers who have already validated your solution with their purchases.

OK…so sales are down and your sales forecasts are telling you that it is going to be slower for the foreseeable future. We get it…we agree that something needs to be done to avoid what your sales forecasts are telling you. These times are when you need to get even closer to your current customers, scrub your forecasts of laggard deals, and find new ways to uncover fresh sales opportunities. Here are just a few ideas that you can use beyond short-sighted simple pricing discounts to help you achieve your goals:

• Revisit your referral program! Why not put in place a strategic promotion that rewards your current customers with a gift or discount for every new paying customer that they refer to your company? BTW…this type of discount does not devalue your solution like the discount for new customers. Current customers will not come to expect the same type of discount on future purchases…unless of course they bring you another new customer!
• If you offer multiple products and services, review current customer past purchases. Zone in on customers who have purchased more than just one of your offerings and engage with them to understand the value that they have received from the combined solution. Build these solutions into a bundle and build a promotion on this bundle that offers even more value to the customer when purchased together.
• Get out of the building and talk with your current customers. Uncover how they would like to buy your product or service. Find ways in which you may be able to change your models in order to make it easier for customer to purchase your solution today. Bottom line…eliminate the risk and make it easy for new customers to purchase.
• Rather than discounts, offer payment terms. Potential new customers not having budget to move forward with a purchase of your product or services today is a reality. However, simple discounts will typically not solve this issue. Engage with these prospects in an honest dialogue to understand any constraints that they may have. Use this dialogue to offer extended payment terms in order to reduce any perceived risks and to lower the barriers for them to buy from you today.

There are many options that you can utilize to free up stalled prospects and to attract new sales opportunities. However, take the time to make sure that you recognize the investments your current customers have made into you, and the solutions that you provide. Avoid implementing quick fix sales tactics like simple price discounts which may attract you a few new customers, but may harm you in the long run as you may be throwing your current customers out with the bath water.

We would love to hear your comments. As a customer or consumer, how do you feel when you see these types of promotions which are made available only to new customers?

– Trust that you are equally focused on their best interests as well as yours.
– Trust that you are building a relationship for the long-term and not just for short-term gains.
– Trust that your product or service will do what you said that it will do.
– Trust that before making any major product decisions, you will solicit input from them or others within their industry.
– Trust that your support will be there when they need it.
– Trust that the feedback and input that they offer gets considered even though it may not always be used.
– Trust that you will continue to focus on building solutions that meet their needs as well as others within their industry.
– Trust that the confidential information remains confidential.
– Trust that any referrals that they offer will be treated with the same level of service as they receive.

What are you doing to build trust with your customers?

✔ Marketing – Beyond click rates, website hit rates, etc. measuring customer word of mouth or referral rates can speak volumes. Do you have in place the processes and data points to know how many customers are talking about your solution, and how many times they are promoting it to others within their industry, etc? Although initially it may seem difficult to do this, the reality is that if you take on your next marketing initiative with this type of metric in mind, then it is much easier than you may think.

✔ Sales – Along with the traditional sales metrics like the number of qualified leads, number of customer interactions, conversion rates, etc. an interesting metric is to track how many of your sales deals require significant price negotiations or are closed as a result of giving deep discounts. Although there may be exceptions to the rule, it is pretty safe to say that if most of your sales are closed due to how deeply you are discounting…then it may mean that the customer is not fully understanding and appreciating the value of your product/service.

✔ Support – Support is typically one of the best departments for monitoring metrics. However, some of these metrics may be deceiving. First off, if you think about it, your customers could care less about how many cases they have open, closed, escalated, etc. The customer on the other end of the phone only cares about finding THE permanent solution to their issue. So, a key metric may be to measure how many customer interactions are required to solve one customer issue. Or, measuring the number of times a customer has to call back for the exact same issue within a specific timeframe (ex. Quarter, Year, etc.).

Each department within the company can…and should have a few key metrics that are used to measure how they are doing as it relates to helping the company as a whole to be more aligned with your customers. Again, if it is not measured, chance are good that it will not get the focus that it deserves, and ultimately it will not be managed.

What are some of the metrics that you are using to determine how aligned you are with your customers?

Let me give a bit of background information…one of our current customers is a very specialized service provider who has been around for 20 years solely focused on servicing a very specific industry. Although they do not produce any intellectual property (software), they have been the sales and support partners for industry specific financial systems for many years. As the sales and support company, they not only resell the software, they also provide all of the implementation support, training, technical support, etc.

As part of the Ideas2Revenue process, we spent some time with this client to better understand their offering, current customers, implementation processes, etc. However, the main thing that we try to pull out in this initiation meeting is to have our client articulate the value that they believe that they are providing to their customers. So, this client told us everything about the software solution that they were selling. They told us about how modern the solution is compared to the competition, how the software package is user friendly, etc. However, not once did they talk about the value that they as an organization provided to their clients. In many ways, they were often reducing the price of their own services and implementation support in order to help drive the software licensing deals.

Now, again as part of the Ideas2Revenue service, our next step was to identify, engage, and interview a few of their current customers. When we started to conduct the customer interviews, and we started to use our questioning process to uncover a number of key measurable value metrics, can you guess what we found out? Simply put, is that many of these customers purchased that particular software package because our client was the one selling it. Each and every one of our clients customers stated that the decision to move forward with a new financial solution was based first on the level of support and service that they would receive from our client. The functionality and capabilities of the software package itself were important, however were secondary to the support that they knew they would receive from our client. Each one of these clients used words like trust, reliable, and dependable to describe our client.

So, the point is that you need to make sure that you truly understand what your customers are truly buying when they buy from you. In this example, our client thought that their customers were buying the capabilities of the software that they were reselling, however the reality is that their customers bought the level of support and comfort that they were going to receive from our client and their support organization. In this particular situation, our client was giving away or not charging enough for the services that they provide in order to implement the software solution…in yet what they were not charging enough for was exactly what the customers were buying when making their purchasing decision. So, obviously moving forward the pricing for the services being provided will now have a different price point as this is the value that the customers want and are willing to pay for.

Are you selling yourself short? Do you truly understand what your customers are buying when they purchase from you? There is really only one way to know for sure, and that is to get out of the building, talk to your customers, and ask the right questions in order to reveal the right information. You may be surprised as to what you can learn from this exercise which in itself, if done right can help you to begin making more profitable revenues by selling what your customers are actually buying.

I was recently reminded of the importance of properly pricing your product or service. A couple of weeks ago, I went out to my vehicle and took off as usual. As I was driving down the street I noticed that my windshield was cracked…(after a few choice words) I thought that I had better get it taken care of right away so that it would not spread. When I arrived at one of the local glass repair shops, I went inside and gave the make and model of my vehicle to the person working behind the counter. Within a couple of minutes I was happily given a quote for $800 installed. Again, I mumbled a few unrepeatable words to myself as I went back out to my vehicle and drove home.

When I got home, I thought that I would check with a second shop which we had used a number of years ago, and had received good service. I called and after describing the vehicle, I was quoted $300 installed. Wow, I was going to save $500 by going with this second shop….but hold on….this can’t be right! I was instantly confused and thought that this had to be a mistake. How can there possibly be $500 difference for the exact same windshield? I began to doubt myself and the person on the other end of the phone at the second shop. So after a few minutes, I picked up the phone and called them again…and sure enough I was again quoted $300. I then had my wife phone and she too was quoted $300.

So, whats the issue? If you take a few minutes to look at this, there are a number of key things in this real world pricing example worth highlighting:

1. The second place is leaving money on the table. When I was in the shop, they told me that they actually order from the exact same distributor as the first shop. However, they were shocked to hear the price their competitor was quoting. Yes, they won the business from me…but even if they were $700 they would have won the business from me as they would have still been cheaper. At $700 it goes without saying that they would have made more profit. Know your competitors pricing!

2. The second shop almost lost the business because their price was too low. Had I not wanted to get to the bottom of this pricing difference, I could have just as easily made the decision that it must have been a mistake and made the decision to go somewhere else. Yes…having your pricing too low can hurt you. If there is such a big difference between your price and the rest of the market, people will begin to wonder “what’s the catch?” and may actually decide to deal with someone else. In certain cases with extremely low prices, customers will begin to wonder if you are desperate for business, and will ultimately feel safer going with a solution that is priced more in line with the rest of the market. Again, it pays to know your competitors pricing, and if you are significantly cheaper…make sure you address this price difference early in the sales process. If you leave it to the clients to try and figure out why your price is less, they may attribute it to the wrong reason and end up going to a different supplier.

3. Low prices can cost you more. In this situation, the lady on the other end of the phone at the second shop had to take 3 calls from us before we decided to go with them. So, if you think about it, not only did the second shop make less top line profit than their competitor (had they gotten the business), they actually had a higher cost of sales than the first shop. In fact the second shops cost of sales was actually 3X that of the first shop as they had to take 3 phone calls from us instead of 1. Sure, the second company got the order….but even with such an aggressive price, their cost of sales is actually ended up being higher. So, again make sure your pricing is not too far out of line from your competitors…and if it is make sure you are explaining this up front so your sales team does not have to spend even more time convincing customers that the pricing is accurate.

Sure, this is an example for a consumer focused business. However, the example and the key points are just as applicable and valid for B2B companies and sales organizations. Take a look at your pricing…if you have an aggressive pricing strategy, take the time to make sure that you are not loosing sales due to your low pricing.

One of the key things that I cover in this session is how to get crystal clear on the true target market for your product or service. This is one of the core fundamentals of any business no matter their size, maturity, etc. It does not matter if you are a start-up who is going through the Customer Development and Lean Startup processes or if you are an existing company that has some great sales results already on the scoreboard. If you do not get this step right, then the list of potential problems ranging from spending precious marketing dollars on marketing to the wrong audience all the way through to even developing a solution that is not truly needed by the market can present itself. The ripple effect of this core mistake can be felt right across the whole company and the problems will present itself in many different forms.

I have done previous posts on this topic so I will not repeat any of these. However, there are two sources of additional information that I have come across and I wanted to share regarding this topic. First, if you are a follower of the Lean Startup and Customer Development methodologies then you may have heard of Giff Constable who is the CEO of a new upcoming start-up company called Aprizi. If you are not familiar with him then be sure to check out his blog. He just did a recent post entitled Targeting Matters! which I think is worth the read.

Second, during the recent presentation that I did with the Lead To Win program, I had them conduct an exercise. The exercise was simply to write to themselves a thank-you letter from one of their hypothetical customers. I first learned about this item from the Lean Startup Wiki and a post Kent Beck did on his blog Three Rivers Institute. This was a great tool to not only help to get people approaching their solution from the customers perspective (the only one that matters), but also to begin identifying the true target market for their solution. In this letter they were asked to write it from the perspective of their “ideal” customer, and were to focus on the benefits (not features) of the solution that they provided to the customer. I found that this was a great tool.

So, are you 100% crystal clear on your target market? If you are not sure, then now is the time to get clear. One way to find out is to write yourself a hypothetical thank you letter from one of your customers.

The answer to this question in many ways is simple. However, it is only once we have had the opportunity to explain it to the client does it truly appear to be simple. The following is how we approach answering this question, and hopefully it may be able to help you as part of your Customer Development process….

1. You are not selling anything! As we highlight in our book and what Steve Blank has laid out in his methodology, the point of this exercise is to truly understand the customer, their requirements, and their definition of value. The goal is not to “sell” something. This is a very important distinction that people have a hard time overcoming. If you approach a situation where you have a sincere desire to learn and understand, people will know and sense this. If however, you approach it as a sales exercise, no matter what words come out of your mouth…clients will see right through this and will not truly open up to give you the information that you are trying to uncover.

2. Do your homework. This is extremely important for the next item on this list, but as far as we are concerned it is a “business basic”. The bottom line here is that many of these people will be less likely to spend time with you trying to help you understand their needs and requirements when you have not taken the time to do some basic homework. Go to the company website to better understand what they do and how they make money. If they have annual reports available, take the time to read the most recent one so that you can understand the companies strategic goals and directions. Use tools like LinkedIn, Spoke, Hoovers, Facebook, or even Google to find out more about the company and the individual. Find out what are some of their issues…and their motivation…

3. Try to find their motivation. This is where you need to do your “homework”. Once you have identified the right person to contact, and before you pick up the phone, make sure you have put some thought towards why this person may be motivated to share some of their valuable time with you. Using the tools mentioned above, you can often get some insight into what motivates them. Often, motivators fall into one of the following categories:

• Recognition – People who are motivated by “Recognition” are interested in respect, admiration, notoriety and celebrity. They want to be recognized by people around them as someone important, credible, and someone to be associated with.

• Influence – People whose primary motivator is “Influence” find power, control, competition, independence, and order to be most important. These people are similar to recognition seekers in many ways; however it is more about what they feel the recognition will give them. They may view this power, or influence, as something they need to accomplish their goals.

• Internal – Some people are motivated by “Internal” factors like morals, duty, intellect, creativity, philanthropy, and honor. These people are less affected by what others say than they are about what they say about themselves. This inner voice is what will make them take action, if they believe in the cause.

• Profit – “Profit” motivated people strive for success with money, possessions, acquisitions, wealth, income and growth. Most often people who are in this category will be very upfront and direct about it, which makes it easier to understand and work with them.

4. Just Ask. Not sure how else to describe this other than the fact that people do want to help others. Yes, you are going to come across some people who could care less about you and your desire to learn. However, the world is still a good place, and there are still people out there that are willing to help you if you just ask. If your solution is appropriate and can have a tangible impact on them, their company, and their industry then do not be afraid to pick up the phone and just ask.

The power of the Customer Development methodology is that you can be building your potential customer base while you are developing products and services that clients truly need, and are willing to pay for. With a sincere desire to understand and learn, combined with doing a bit of homework ahead of time will allow you to get the most out of the CD process.

This is how we approach getting meetings with real-life potential clients for our customers. What are some of the things that you do in order to generate live discussions with potential clients as part of your Customer Development process?