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.

Are Your Customer Relationships a House of Cards?

Complex business relationships can challenge us all

A few rainy Saturday’s ago (which you can’t say very often in Silicon Valley) my daughters’ soccer games were cancelled due to a hectic lightning storm. So, my husband and I used the precious free time and spent the afternoon on our sofa binge watching the latest season of Kevin Spacey and Robin Wright’s House of Cards on Netflix.

For you House of Cards fans, you know the twists and turns of this rollercoaster show that keeps us on the edge of our seats. But I wondered, how different would Washington be if all deals were tangible contracts and not simple handshakes or back room agreements? How would relationships in Washington change?

Luckily for us in the corporate world, customer relationships are solidified by specific legally binding contracts. But what happens when the contracts are complete? While the contracts may be filed away, the customer relationship journey is just beginning.

Complex Relationships are a Reality

In today’s environment, business relationships are necessarily varied and complex. Market conditions, customer needs, regulation and competition make them so. Every large B2B enterprise has a number of large, complex customer relationships and nearly every part of your organization—including sales, contracts administration, customer support and finance—exist to find, start, build and maintain these relationships.

Legacy Approaches Don’t Work

Despite standardization, automation, product-line pruning, total quality, business process re-engineering and any other attempts to reduce confusion and simplify access to customer information, variation and complexity continue to characterize the customer relationships of most companies. Think about the complex forces constantly at work–product line changes, price changes, customer requirements, corporate M&A, reorganization, regulatory change, negotiation—resistance to changing customer relationships is futile.

Efforts to eliminate complexity by standardizing all contract forms or automating the approval process to allow zero changes simply won’t work. And such efforts can have severe negative effects on the organization and customer relationships. The answer? Embrace the complexity! Embracing it means you’ll have a customer centered focus, you’ll be flexible and responsive, you’ll be innovative and you will enable new things to get done. Companies like CenturyLink, FICO and Novelis have embraced the complexity and greatly benefitted from it.

How Do You Master Complexity?
Leverage the complete information found in complex customer relationships – the agreements, exhibits, amendments, schedules, work orders and notices. The entire scope must be consolidated, digitized and centralized. And you must have the most up-to-date intelligence on all aspects of your critical business relationships, as they change over time. Key contract provisions must be translated into the business-related meaning that your organization needs, so people can do their jobs and contract intelligence can be provided to authorized users across your entire organization.

Make no mistake: mastering the complexity of your business relationships will lead to clear competitive advantage. Your organization will have immediate, digital customer insight in meaningful context. And that means deeper, stronger, more profitable customer relationships.

While Frank and Claire Underwood may have to rely on skillful cunning to strengthen their political alliances, we’ll keep helping Pramata customers in the real world harness the value of complex contracts to draw insights and improve their customer relationships. Read the Embrace the Complexity of Business Relationships to Grow and Retain Your Most Valuable Customers whitepaper to learn more.

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.

Congrats to our friends at Volition Capital!

Larry Cheng, Volition Capital

$250 million in capital commitments is no small feat. But we’d expect nothing less from our friends and colleagues at Volition Capital who just closed that truly impressive amount on their third fund in an amazingly short period of time—six weeks!

When Volition led the charge in Pramata’s Series A funding round last year, we knew we were working with a growth equity firm with a distinct collaborative philosophy that aligned very well with how myself and the Pramata management team looked at our business.

As Larry Cheng, Volition Capital managing partner and Pramata board member, has written in his illuminating blog post on the new fund, Volition is both a “conservative and aggressive firm.” At Pramata, we view ourselves in the same way—we are aggressive in creating a powerful and path-breaking suite of Customer Relationship Intelligence solutions. But at the same time, we are conservative in that we deliver what we say (no vaporware!) and we like to run our company as a healthy and profitable business.

With the support of Volition and our other valuable investors, Pramata is hitting its stride in a very big way. We’re digitizing valuable untapped customer data from contracts, billing systems, and CRM systems for some of the largest companies in the world. By partnering with us, they’re leveraging digital customer intelligence to unlock significant revenue opportunities within their most valuable customer relationships and establishing Pramata Customer Relationship Intelligence™ as a fundamental solution to drive results for finance, sales, operations and legal teams alike.

Entrepreneurs need more financial partnership options of the caliber Volition offers. It has been a wonderful partnership so far, and we look forward to becoming one of their market-leading home runs … adding to their outstanding track record. I’m also very excited to see the next class of Volition-funded companies and follow their own stories of success.

My hearty congratulations to Larry, Roger, Sean, and the rest of the Volition team. Cheers!