So much for the golden age of e-business. Today, the crowds of dot-com enterprises and brick-and-mortar Web wannabes have dispersed. New project starts and RFPs have declined sharply. The task of servicing new customers has been replaced by another imperative: holding on to existing customers.
"All sorts of new ventures were popping up [and] people were following the money," recalls David Munn, president of the Information Technology Services Marketing Association. The market downturn, however, has "helped some companies return to their roots," Munn observes. "Companies are going back to their best clients, who might not have been sexy or growing at wild rates, and making sure they are spending more time with them."
Welcome to the new reality of customer retention. Integrators and service providers are redoubling efforts to keep their customers happy. They're attending workshops and hiring consultants. They're employing tactics ranging from customer satisfaction surveys, to free seminars, to new service promotions. They've discovered that hanging on to old customers is a lot cheaper than pulling in new ones. Industry executives estimate that the expense of selling a new account can be anywhere from two to 11 times the cost of maintaining an existing client.
"It's harder to find new clients," says Janet Szilva, president of AJS Group, a sales consultancy, voicing a sentiment shared by most industry executives.
Therefore, rather than expend most of their energies chasing new accounts, integrators are exploring ways of getting the most out of their existing customer relationships. One such company is EYT, an application service provider.
Jim Hunt, the company's CEO, says it recently won a deal with a major automotive manufacturer and now wants to ensure that it becomes a permanent fixture at the client site. The ASP's salespeople have been given customer badges and are working in the account's purchasing group every day.
"Every deal is very competitive and every deal is hard fought," Hunt says. "Leveraging the first sale is much better than going out and finding a [new] client of that ... stature."
Still, challenges remain. Larger integrators, hungry for work, are moving downstream to pursue smaller accounts, making life even harder for mid-market integrators. In addition, some customers are breaking up the few projects they do initiate into separate bids, making account control difficult. Companies also must contend with internal issues, such as declining sales and marketing budgets.
What follows are a few approaches for hanging on to what you've got.
Boost customer research
Any businessperson will tell you that keeping the client happy ("customer delight" is the preferred phrase in modern sales texts) is the key to retention.
But some integrators have lagged a bit when it comes to quantifying happiness and determining exactly where customers are content and where they are not. Experts recommend that solutions providers administer customer satisfaction surveys more frequently.
"Too many companies have fallen into the problem of just doing customer research once a year," says Munn. "In today's market, [companies] need to gain access to leading indicator information. We are working with some clients and proposing [that] in some ways you really need monthly surveys with customers, prospects, employees, and partners."
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Munn points to Electronic Data Systems as a company that frequently takes the pulse of its customer base. To wit, every time a senior manager changes within a customer organisation, EDS tries to gauge the new manager's expectations of EDS.
Automated surveying tools aim to make it easier to conduct frequent customer polls. Change-point, for example, last month launched a Survey Management application as part of its professional services automation suite.
"It's common for companies to do once-a-year customer satisfaction surveys," says Lori Ellsworth, director of product management at Changepoint. "We can accommodate that, but we are talking about the ability to interact with customers on a more frequent basis and collect a more granular level of information."
Changepoint's Survey Management module lets solutions providers conduct surveys at certain trigger points, such as the completion of a project milestone. This approach allows surveys to be "built into the business process," Ellsworth adds.
Callisma, a network consulting services firm, surveys customers and employees after each engagement and is piloting the Survey Management application to automate that process, notes Jeff Johnson, VP of IT at Callisma.
Stay in touch
It's all well and good to survey customers after they've purchased services, but what if they aren't buying anything? Sales experts advise solutions providers to remain close to customers, even if they aren't cranking out purchase orders.
"Even if they aren't buying, find an excuse to call," says Steve Waterhouse, president of the Waterhouse Group, a sales consultancy. "They may not have a pile of PO's, but they are going to have a pile in six months or six weeks or six hours. The question is: is yours the name that is on top of the pile?"
It's also important to stay on top of staff changes. "With this new era of layoffs, the person buying from you today may be gone tomorrow," says Szilva. She advises clients to go "deep into the account" to cultivate high-level contacts. "If [solutions providers] haven't gone deep, they could lose business," she cautions.
"Project people change," adds Erik Dodier, CEO of PixelMedia, a Web services firm. "You need to have more than one person you can call back into."
Waterhouse agrees that companies must "aggressively" maintain rapport with customers in a downturn. He recalls a tactic he once used at an electronics company where sales had ground to a halt during a tough economic patch: Waterhouse had his sales force visit customers to hand out new company catalogs. The main point of that exercise wasn't to distribute marketing literature, but to get the sales force out in front of the customers, he says. Sales picked up as a result.
Munn says services firms also can keep the lines of communication open through Web seminars, briefings, and invitations to events. "The main part of that is keeping the relationships with the clients," he notes.
Offer something new
Offering something new is another effective outreach tactic. Netsolve, a management services provider, is encouraging its customers to sign up for services they previously haven't used.
A program Netsolve launched earlier this year provides customers with credit based on their monthly recurring revenue, explains Melissa Mine, director of marketing at Netsolve. That credit can be exchanged for services they are not currently using. A customer using Netsolve's wide-area networking management service, for example, could use the credit to try the company's virtual private network service.
The program will run through the end of this year. At that point, customers wishing to continue with the new service will pay the regular price.
Some companies are fundamentally rethinking their service lines. At MicroE, president Tod Shedlosky says he periodically reinvents the company to enhance its appeal to customers. The 16-year-old Harrisburg, Pa., firm started out reselling hardware, then segued into Internet services, and now pushes wireless technology. In June, MicroE introduced a wireless broadband Internet service for its Central Pennsylvania client base. "It's one more way to retain customers," he says.
Customer retention is typically something companies work on after the sale is made. But Szilva believes a customer retention philosophy should be built into the sales process itself. Too often, she notes, solutions providers start fretting about customer retention only after they start losing clients.
Szilva says you must put a plan in place to deal with the messy side effects of deploying technology. Solution providers should advise their customers on project risks and discuss the potential workarounds, an approach that Szilva describes as so-called service recovery. "You retain customers by preparing them," she says.
IT providers, however, haven't been especially good at managing their customers' expectations. "The computer industry doesn't do that," Szilva says.
Szilva's company provides sales seminars for solutions providers in conjunction with The ASCII Group, which represents independent computer resellers.
Among those independent resellers is Richard E. DeFord of Central Communications Service, the customer retention function boils down to "brutal honesty."
"If a customer comes and asks me something, I tell them the truth, whether it is going to mean a sale for me or not," he says. "Customers appreciate the honesty and are willing to pay me more for the products I represent when they know I have their best interest in mind more than my bottom line."
An era of honesty, after months of unrelenting hype, may be just what this industry needs right now.
Four customer retention keys
Consider more frequent customer satisfaction surveys. A steady stream of feedback can help root out problems before customers are lost.
Stay close to the customers--even if they aren't buying. A range of tactics from Web seminars to invitations to sponsored events can keep you on the customer's mind now and lead to business later.
Review service lines. Make sure your offerings haven't grown out of step with customers. Outsourcing, for example, is gaining momentum, while high-end consulting is hurting.
Don't over-promise results. Managing the customer's expectations and identifying potential risks will build your credibility and boost customer loyalty.
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