Even though the Ansoff Matrix model is over 50 years old it still is the most commonly used model for analysing the possible strategic direction that a business should take.
How many times have you asked yourself the questions in business – How saturated is the market in which we do business and is there an opportunity to sell more of my product/service to existing customers?
In the fast moving world we live in today we are often preoccupied with looking to where the next big customer will come from with all our attention placed on acquiring new customers rather than looking under our noses at our current customers to see how we can encourage them to buy more of the same product or purchase a different product/service that they don’t currently know about ..
The following article by Jonathan Moules highlights this exact issue and begs the question – are you squeezing your customers for all you can?
Squeezing the lemon can be fruitful
Financial Times January 16 2009
In these straitened times, it is more important than ever to get more out of your existing customers. However, understanding how to do this is not straightforward.
Gerard Burke, who runs the Business Growth and Development Programme (BGP) at Cranfield University, has coined the phrase “squeezing the lemon” to explain where most entrepreneurs go wrong.
His theory is based on the observation that lemons used in home cooking often end up only half used because the recipe only calls for the juice of half the fruit. The remainder is left in the fridge.
Many business owners, he claims, act the same way with their customers, even in the good times.
“One of the advantages of just keeping on talking to your customers is that they will tell you about things you don’t otherwise know about,” Burke says.
He gives the example of Hotel Chocolat, the retailer of luxury treats, whose founder Angus Thirlwell is a BGP graduate.
Hotel Chocolat takes the view that each gift of chocolates comes with two customers, the person who places the order and the recipient. So it makes sure that the latter knows all about where their box of goodies has come from, Burke notes.
Squeezing the lemon could also mean something as simple as reminding your existing customers of other products or serves that you can supply.
This was the case for Tony Simpson, owner and chief executive of Clough Smith Rail, which builds signalling systems.
It was not his sales staff who squeezed the lemon, but a junior operations manager, who had heard Simpson talking about getting more from existing customers
When the operation manager’s counterpart at Network Rail started talking about other work the public body was planning, the manager asked if Clough Smith Rail could do the work for it.
The Network Rail executive had not even considered Clough Smith Rail would be interested. But, as a result, Simpson’s company landed a contract worth £2.4m.
Some organisations might have promoted such an employee to a sales position. But Simpson, who notes that you need these people all around the business, has been happy to allow the manager to remain in his operations role. “He just feels great about the fact that he recognised the opportunity,” Simpson says.
Clough Rail Smith is less desperate than many companies for new business at the moment.
Major transport infrastructure investments in recent years, such as the West Coast Mainline project, have generated plenty of work and the York-based company currently has a full order book.
“I am not being smug, but we are OK,” Simpson says.
Back at Cranfield, Burke claims that one of the reasons that companies fail to get more out of their existing customers is that their sales staff are trained as hunters, gathering new leads. What they need to be, he claims, is farmers, nurturing contacts to produce a regular harvest of work.
Changing behaviour could be as simple as drilling the sales force in the advantages of pumping current customers for new business leads, although the incentive structure might also have to be changed to achieve maximum effect, Burke admits.
Until about 18 months ago, Dave Abraham thought his IT security business, Signify, was doing a pretty good job of serving its clients.
The Cambridge-based company was generating a little over £1m in turnover providing the random password generator devices used by mobile workers to access their employers’ IT networks away from the office.
Customers ranged from small businesses that lacked the resources to run such a system themselves to multinationals that preferred to outsource security services.
“We already knew that managing existing customers well was important… and we were pretty good at it,” Abraham says. “However, we didn’t realise how much better we could be.”
Abraham started by redeploying his customer account manager, who had previously handled all client relations, to focus on the relatively small number of customers that supplied the top 80 per cent of revenues. He then appointed a new starter, who was relatively inexperienced in sales, to manage the remainder of the client list. This enabled the more experienced account manager to devote more of her time to managing the best customers.
Abraham and his team created a simple web-based survey for the top customers and set its now senior account manager the target of getting 20 per cent of them to complete all the questions.
This provided good pointers about what Signify could do better, and lifted staff morale with some great testimonials from the people buying the technology, according to Abraham. “The survey has helped completely change the perception of our employees,” he says.
From the survey, 10 customers came forward to take part in a forum organised by Signify to help improve the service to them. Although these were mid-level IT people, they knew a lot about their business strategies.
“It gave a good snapshot of the economy at the time,” Abraham notes. “There was an interesting mixture of companies suffering in the downturn and others growing stunningly.”
The real benefit from this came when Signify’s staff visited the customers, according to Abraham.
“Rather than just discussing what new things we’ve got coming up, and would they like to buy them, we now have them telling us what’s important to them.”
He adds that, in the last year, Signify’s revenues and profit have risen 30 per cent, primarily by selling more to existing customers. “I’ve realised that squeezing the lemon is not about selling them anything – it’s about helping to solve customers’ problems for them, and about customers trusting us to share their requirements. If we can provide value, they will pay us for our services.”
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on Wednesday, January 21st, 2009 at 3:54 pm and is filed under Ansoff Matrix model, Communication, Customer Satisfaction, Market Assesment, Sales, Transportation.
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January 26th, 2009 at 8:04 am
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