Are Stagnant Customer Relationships Pushing You Toward Extinction?

Tech dinosaurs face extinction

Calling all tech dinosaurs. You know who you are.

Or do you?

I was talking to some colleagues last week, and the topic of “tech dinosaurs” came up. The first thing most of the group thought of were examples of technology products that weren’t keeping up with the Jones’ (or Jetsons’ as it were.) Tech companies who find their products closer to the blunt end versus the bleeding edge of innovation. A Kodak moment, anyone?

And while an aging product certainly impacts tech business success, the particular dinosaur I’m thinking about isn’t threatened with extinction because of a lack of product innovation, but rather a lack of customer relationship innovation. Specifically, with respect to a company’s existing customer base.

We’ve all read the studies about the cost of acquiring new customers versus retaining the ones we have—that it’s anywhere from five to 25 times more expensive to acquire new accounts. Harvard Business Review talks about the value of keeping and growing the right customers, and the dreaded churn rate. While losing customers altogether to churn can cause a hit to revenue numbers, so can an idle customer with a complex—and potentially lucrative—relationship that you simply aren’t tapping into.

Large B2B technology business leaders know 80 percent of next year’s revenue will come from this existing customer base. Yet many haven’t addressed the significant gaps within their customer lifecycle that leak millions of dollars in profits every quarter.

Evolving your product is critical, but if you aren’t also harnessing and acting on the rich revenue value sitting within complex customer relationships, you could soon find yourself on the edge of extinction.

Learn more about revenue leakage, profit threats and how other B2B leaders have evolved to overcome them by finding hidden revenue opportunities within their existing customer base. Download our ePaper, Traditional Tech Dinosaurs Face Extinction.

Warning! You’re Leaking Revenue … but how Much and how Fast?

Check the revenue gauge

My first car was an old Pontiac Bonneville.  The car was fantastic – a little ‘seasoned’ but otherwise perfect for my 16-year-old self. There were just two problems: first, it had a slight, but steady, oil leak.  Second, the ‘check oil’ light stopped working. The first problem I knew about. Unfortunately, I found out about the second problem the hard way while driving 65 mph down the highway. The engine locked up, the car was towed, and because of the ‘seasoning’, I ended up trading the title for the tow fees.

One great thing about my job is that I have the opportunity to talk to senior leaders at some of the best companies in the world. Their biggest concern isn’t that they are leaking revenue – they assume some leakage as a cost of doing business – it’s that they don’t know how much or how fast. The problem isn’t the oil leak, it’s the oil light.

There are lots of solid business reasons to leave some revenue on the table. Maybe you shouldn’t exercise CPI+ price increases because there’s strong downward pressure on your industry. Maybe you should over-service your customer and not charge certain fees because of a currently “rocky” relationship.

The problem is, in most companies, these decisions are handled in an ad hoc way, often by sales reps or service teams who lack all the necessary information. No one knows the magnitude of the opportunities.  No one is developing a programmatic approach to solve the problem. And that means no one is accountable for driving results.

It’s a shame, because those results add up quickly.  I’ve worked with companies who’ve discovered an annual recurring revenue gain of over $12 million, just by examining one big source of leakage across their most valuable customer relationships.

The truth is that significant revenue opportunities could be escaping from almost anywhere along the customer value lifecycle—from sales to delivery, operations to retention. Here are just a couple of the places you should be looking:

Purchase Commitments

Your customers made a purchase commitment for a specific volume of product or services or a certain spend amount. But are they still meeting their agreement? Without consistent checkpoints in place and timely, accurate insights, you could be getting shortchanged.

Cost Pass-throughs & Chargebacks

When your company’s supplies, utilities or other operational fees increase, are you eating the full cost? Identifying and applying appropriate cost pass-through opportunities to customer accounts can make a significant difference in your bottom line.

As an executive, you need to make conscious, informed decisions about your business. When my oil gauge was working, I knew how much oil I was leaking.  I knew when to add oil and I knew how much. Without that visibility, I found myself buying another ‘seasoned’ car (with a bad transmission, but that’s a blog post for another day).

Discover the other points where you could be losing big revenue opportunity in our 5 Major Leaks in Your Customer Value Lifecycle infographic.