The impact of the term “Institutionalized” as it pertains to your customers impacts the predictability of future revenue into your business. Ultimately, institutionalized customers or lack thereof are a crucial factor in the valuation of your business, its ability to secure needed financing and alleviate the pressure if what might otherwise be very risky financial decisions.
Institutionalized customers bring the revenue your company can forecast with great accuracy. They’re the customers you don’t so much sell repeatedly, rather do business with to the benefit of each other and, most likely, your industry. Institutionalized customers do not make a move in the part of their business concerning your company without obtaining your company’s advice or counsel. They are the customers who know the whole story about your business in the way of your faults, struggles, and strategy. You seek their advice before you make a change in direction or add capacity or capability. Most businesses have institutionalized customers. All of us in business wish we had more of them.
If you happen to be in the majority of those businesses which does have institutionalized customers, but wishes it had more, or if you’re realizing by reading this your business doesn’t really have any, the following are steps which can be taken to create the kinds of customers being described.
State the Mission – If the plan is to create the kind of customers which increase the value of the business, everyone in the business must understand this is an on-purpose strategy.
Take Responsibility for Your Client Relationships – In businesses with a sales or a business development team, it is the responsibility of the individuals on that team to target and bring new business to the organization no matter the scale. What is the expectation of how these customers will be dealt with inside your organization? Will the single point of contact be the person who brought the business to your company? If so, institutionalization of this customer will likely not happen as most if not all of the client communication will be through this single point of contact. What’s also not likely to happen is a continued relationship with this client should your business development person leave your organization.
To develop institutionalized customers your customer must be exposed to several points of contact in your organization, including you. The more exposure a customer has to the people in your business, the more that customer feels a part of your business. You become less of a vendor, rather a group of people with common business goals. Your customers will begin to develop valuable relationships with the employees of their choosing, sometimes in the most unlikely of your employees.
Imagine secondary contacts being the sole reason some customers do business over and over with your company. Certainly, customer service representatives are logical touch points for your clients, however, delivery people, technical staff, and accounting staff can also become highly valued by your customers.
Develop a Sales Culture – There’s an old adage “everyone is a salesperson.” I suppose this pertains to trying to instill in the company culture the understanding amongst employees who are not apparently part of the sales team that they do, ultimately, impact revenue. Or, in more general terms, which is the most likely scenario, we all have an agenda and being good at articulating can be personally and professionally beneficial.
Institutionalizing customers requires much more. It requires everyone in the organization to include your customers as a valuable part of your business. It also requires you to empower your people to proactively welcome and develop their professional relationships with your customers. Some employees will not be capable of adapting to this culture. If this is to the detriment of institutionalizing your customers, the employees will likely not weather the transition.
Educate Your Business Development People – Paradoxically, amongst those who will most need to align with the sales culture in your organization will be your business development staff. In large part, salespeople don’t share well when it comes to who they perceive to be “their” customers. Expect a great deal of discomfort and push-back from business development staff when you tell them your vision for a sales culture in the organization. Those who sell tend to view customers possessively and as their long-term marketability. in most organizations, they are not wrong as it’s likely your business development people have always been held accountable for the company’s customer relationships, along with operating in a fairly autonomous manner.
The acceptance by sales/business development of this new culture will show up as added support to the sales/business development department. This will ultimately free up a great deal of selling time which will be focused on key customers (account management), accounts which should be bringing more business to your organization (farming) and, of course, filling the opportunity pipeline with new business (hunting, consultative selling and closing).
Regular Reviews – As in all things, inspecting what you expect is crucial to aligning development of a new strategy. As a part of each employee review, include examples of successes, areas for growth as it fits specific customers and individuals within your customers’ organizations.
Further refining of job descriptions and expectations as it pertains to your company sales culture are to be included. Examples of KPIs (key performance indicators) might be, examples where each employee can sight as having had a positive impact on customer relationships, unique information each employee may have about key customers like hobbies, birthdays and family information, and particulars about your company’s specific performance-related nuances as they apply to specific customers.
Enlist Your Customers – Invite your customers into your company’s endeavors and ventures. Create focus groups and user groups when implementing new technology, capability and workflow experimentation. It’s likely added capability, if focused on ahead-of-the-curve initiatives, is market-driven. In this case, the opportunity to align with customers through their participation in your process will shorten your organization’s ramp-up to proficiency and create stronger relationships with your customers for them having been important contributors.
Again, an example of this is, having been a part of a forward thinking commercial printer, my company was the regional market leader in the leap from analog to electronic prepress capability. This had the potential of falling flat. What made the difference between success and failure was the selection of key clients, who were early adopters themselves in this area, to join with us in our suffering through what would be a steep learning curve wrought with mistakes, frustrations and massive production delays. The endeavor was a huge success and, depending on who you ask, a lot of fun. What cannot be denied is that the by-product of becoming proficient was the creation of completely institutionalized customers for whom great struggles would be in store should they attempt this new workflow elsewhere. The customers built the platform!
Thin the herd – Reality is you’ll never institutionalize all of your customers. In fact, there may only be a handful of customers who, after all of this culture change, are those you could truly say are institutionalized and fewer still who will admit to it! When considering a conscious effort toward institutionalizing customers, realize most companies revenues can follow the 80 / 20 rule meaning 80% of your revenue comes from 20% of your clients. Applying focus in the proper areas can keep your organization on track.
Institutionalizing your customers takes effort, so begin in the obvious place, which is with your top 20%. These are the customers who, if aligned properly will be the basis for changing your company culture. When pursuing new customers, target those organizations which have like qualities in the highest impact areas.
Next, take a good hard look at the 80%. Ask who in that group should be bringing a greater amount of business and what might it take to move them into the same realm as the top 20% and then into what you can called institutionalized. Make a plan for these clients by name. Make that plan public throughout your organization. Set goals. Be accountable.
Finally, there are and will always be customers who don’t fit into the two above categories. If this business is profitable and is well-aligned, maintain that business under the guidelines of your newly developed sales culture and serve them as well as possible. For those who remain, it’s probably time to admit the relationship is not a very good fit for either company and part ways as friendly and professionally as possible.
Obviously, all of the elements of creating institutionalized customers are not here. Your vendor relationships as they pertain to your customers is one element which is an entire project on it’s own. However, there is enough here for you to ask, “What if it doesn’t work?” To which I’d ask, “What if it does?”
If it does work, we can begin to imagine in multiples when it’s time to start thinking about implementing the exit strategy. If it doesn’t work, I suspect creating this culture in your business pays off quite nicely in increased revenue, customer profitability, and lowered cost of sale, along with my wild guess that running your business will be much more fun and satisfying.