Stephen H Baum Leadership

THE CHALLENGE

A huge transition is under way in how customers buy products and services. The customer landscape is shifting from inside-out (company to prospect) to outside-in (knowledgeable buyer seeks satisfaction). It will require major transformations of organizations, cost structures, accounting and more.

BACKDROP

Most of my clients are “old school,” regardless of age. In the sense I mean it, this is a compliment: leading by example, valuing ethics, hard work, collaboration and more.

Most of my clients are also “old school” when it comes to sales and the dependence of the enterprise on that function. That is not a compliment.

Why not? Because the customer landscape is shifting from inside-out (company to prospect) to outside-in (knowledgeable buyer seeks satisfaction).

Both Sam Bowers’ (Vistage speaker) workshop and Jim Blasingame’s new book set a great table for a crucial conversation inside any company — references provided at end of this post.

THESIS: TWO VERY DIFFERENT CUSTOMER SEGMENTS

Many companies (many industries) now have two customer segments: (1) those who buy based on value and relationships and (2) those who buy primarily on price for “good enough” alternatives. Good enough may include competing options that are highly specific and truly different. But price will determine the outcome of the final decision.

The difference between the segments? The second set has done their research and arrives at the buying moment informed about choices and prices. They are willing to pay only a small premium if any for a particular value add.

THESIS: TRAJECTORY

The new school customer wants only the product or service and little if any touch — no sales call, no layers of sales managers, no administration.  They see no reason to pay for anything else.

Until your costs do go away, you have a Hobson’s choice of which customer you charge for the SG&A. You will chase away the new customer if the price has even a little SG&A in it and you upset your most valued current and historical customers if they have to pay all the freight. There is real danger in the transition to a majority of new school  customers and retaining those who will pay for “value” as they see it. In some industries, the transition will be a tsunami once it starts. 

SOLUTIONS: UNBUNDLED PRICING, ACTIVITY BASED COSTING, MARKETING DOMINATES AND SALES GOES AWAY

 Imagine that you knew the cost of absolutely everything each customer received (product features, service features, touch, records, speed, whatever). Now imagine you could ultimately get your customers to give up what they wont pay for so each customer pays for only what they want and what they get (individualized prices). Some companies have been doing just this while treating a small base of best customers to a more gradual transition and a small premium based on trust, (customer’s) risk and cost of switching. And by shifting investment from sales to marketing (especially social media and internet marketing) to get in the “consideration set” of prospects.

That’s just my view. What’s yours?

For more on this key topic, visit:

 Small Bsiness Advocate and get a copy of Jim Blasingame’s new book The Age of the Customer: Prepare for the Moment of Relevance makes this transition accessible to those with a modest understanding of technology and social media. I read it on a flight to California and am glad I invested the time.

 Also check out the speeches, articles and such of R. Sam Bowers ([email protected]), a Vistage speaker and consultant.

If you are not already familiar with Vistage, the best CEO membership organization, also visit:

Vistage CEO Peer Advisory