Keep those customers happy

High growth companies have higher rates of sales referrals and greater account penetration. This observation comes from some US research on the difference between high growth and low growth firms. What was also interesting in the conclusions of the study was that high growth firms spend less on marketing per unit of sales than low growth firms. High growth firms ‘go the extra mile’ to keep customers happy and to retain their business. But what did these firms do to create this situation in the first place?

Generally speaking, you can only build a referral capability if your prospects can relate to your existing customers. If I am in a different sector to you and I am trying to solve a different problem, your relationship to the firm bidding for my business is of little interest to me. But, if my problem is the same as yours and we have many aspects of our businesses in common, the fact that the product or service worked for you is going to resonate with me. What this tells us is that focus is important. Doing more of the same stuff for the same type of customer and doing it well tends to drive growth.

Companies which specialise tend to pick up the language of the customer so their salespeople actually sound like they know what they are doing. Both the firm and the customer get business done more quickly because they understand each other better. You might say that this connection benefits from a learning curve effect. Basically, I don’t need to educate you on my business because you deal with my type of business all the time.

However, just doing something well is not sufficient, you also need to look after the customer post-sale and make them part of your extended family. Customers place a value on customer service and on relationships. Firms which engage with their customers, involve them in surveys, discussions, marketing activities and listen to their needs, resolve problems quickly and acknowledge their contribution, keep customers long-term.

Higher account penetration, that is selling more of the same or selling complementary products to the same account, occurs because there is a preferred supplier relationship. We don’t want to have to bid for every purchase. What we want is for our current customers to come back to us because they felt they were treated well and we value their continued business.

The combination of sales referrals and deeper account penetration has multiple positive effects on the business. Marketing costs are lower, profitability is higher, forecasts are more accurate and new products have a ready market. Even in an economic downturn, these businesses have higher reliance because customers are less likely to shop around for a lower price. They value the service they receive and are more loyal.

I have always wondered why businesses expand by going into different products and different markets instead of expanding geographically where they can find more of the same valued customers. If you want to drive growth – do more of what you do really well.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia.