Manufacturing Best Practices to Increase Customer Revenues

Highlights

  • Research shows that the Best-in-Class industrial companies did not achieve the top financial results with random strategies, processes or technologies. The data reveal they excelled by adopting proven programs that achieve forecasted results. Three of the manufacturing best practices consistently used to grow customer revenue were customer affinity, strategic account management and customer lifetime value.
  • Customer affinity turns first time buyers into repeat customers and repeat customers into advocates. And that makes customer affinity a valuable and durable industrial asset and proven program to increase customer revenue.
  • Strategic Account Management programs shift selling to existing customers from reactive to proactive, and from random purchases initiated by customers to intentional sales pursuits led by salespeople.
  • Customer Lifetime Value is a leading indicator of revenue growth. It's an efficient and highly effective measure of an industrial company's relationship with its customers and indicative of future revenues and profits. Customer lifetime value is influential because even small increases multiplied by the number of customers creates large revenue growth.
Johnny Grow Revenue Growth Consulting

Most industrial company revenue is sourced from recurring customer purchases much more so than new customer acquisitions. That makes growing customer share a critical success factor.

But many times, these types of revenue programs are born from interesting ideas or ambitious explorations. Unfortunately, unsupported methods most often lead to trial-and-error pursuits that squander investments and delay results.

A better approach is to replicate manufacturing best practices that have been proven effective by other industrial companies. These evidence-based prescriptive methods are born from research findings that show what the Best-in-Class industrial leaders (i.e., the top 15%) did to outperform all others.

They are proven processes that save time, increase focus, lower risk and show the most direct route to improving customer revenue.

Manufacturing Best Practices for to Grow Customer Share

There is no one-size-fits-all method to grow customer share, customer lifetime value and customer revenues. But there are manufacturing best practices that share valuable lessons of what works, what doesn't and how to prioritize time and investments for the biggest revenue impact. Here are three of those lessons.

Manufacturing Best Practices Grow Customer Revenues
1

Start with Customer Affinity

Customer relationships are extremely influential in growing customer share. However, when the mission of growing customer relationships is left to informal methods, the results are inconsistent. To grow customer relationships systemically and at scale requires a customer strategy.

The overarching goal of a customer strategy is to create customer affinity. Customer affinity is important because strong customer relationships are a leading indicator of increased customer purchases, customer share, referrals and retention; all factors that deliver significant and sustained company revenue growth.

Customer affinity also delivers lower cost of sales, word of mouth referrals and customer advocacy. Even better, it creates a protective barrier against competitors offering similar products and benefits.

But achieving customer affinity doesn't occur by happenstance. It's built pursuant to a well-executed plan. The below diagram illustrates the 6 components to achieve customer affinity and the downstream revenue and profit objectives.

Customer Strategy Framework

Despite the benefits, customer affinity research findings published in The Business Growth Report found that most industrial companies do not have an active customer strategy. However, those who did increased customer share far more than those who did not.

The research also found the four most used customer strategy frameworks are Customer Relationship Management (CRM), Customer Experience Management (CXM), customer engagement and customer loyalty programs. Each of these customer strategies has overlap with the others but is unique and delivers unique benefits.

Customer affinity is one of only four sustainable competitive advantages and a differentiator that is not easily duplicated by competitors or displaced by new technologies. In fact, achieving customer affinity creates a connection that can withstand disruptive technologies, competitor encroachment and the erosion of other competitive advantages.

2

Apply Strategic Account Management

Selling to existing customers achieves a much lower cost of sale and higher margin revenue growth.

Research published in the Sales Excellence Report found that the highest growth industrial companies apply Strategic Account Management programs to systemically grow customer share. In fact, the research results found that manufacturers with active Strategic Account Management programs achieved 23% higher existing customer sales than those without.

Think about that. A single sales program that grows existing customer revenues by 23%. That should cause any industrial company sales leader seeking high margin revenue growth to take note.

But the research also found account management programs are easier said than done.

Strategic Account Management (SAM) was most often informal and inconsistent because of a lack of process and supporting technology.

That's why SAM processes must be solidified in strategic account plans. These plans are long-term sale opportunity roadmaps that provide prescriptive actions to align company products with customer growth aspirations over an extended horizon. This brings measurability to land and expand sales strategies.

Strategic Account Planning Process

There are a few CRM for manufacturing business systems that support SAM and account plans. However, most CRM apps do not.

For those companies without this built-in account plan support, you can create a new CRM object with a subset of the opportunity object fields. The CRM software can then manages the data to create and feed the strategic account plan and make highly relevant product recommendations for up-sell and cross-sale.

The highest growth industrial companies do one more thing.

They monitor their customers to predict and prevent customer churn.

Customer churn prediction and prevention is a game changer for industrial companies that struggle with customer retention. The ability to improve customer retention delivers significant and sustained revenue growth. So, to aid that goal you can leverage manufacturing CRM software to calculate customer health scores and use AI algorithms to identify customers at risk.

Even better, knowing why customers leave permits industrial companies to fix causes of churn and prevent that churn before it happens.

Customer Churn Prevention Framework
3

Measure Customer Lifetime Value

There is no single key performance indicator that defines a customer's value. But customer lifetime value comes close.

Most industrial companies measure customer profit, but that's a historical metric. Customer Lifetime Value (CLV) is a predictive analytic that forecasts future value.

It is the present value of the future cash flows earned over the course of the customer relationship. Some industrial companies present CLV as a revenue figure. Others deduct customer related expenses, such as customer acquisition costs and costs to serve, and present CLV as a profit figure. We typically recommend the later. But either way, CLV is a projection showing the financial value of each customer to the company.

But most industrial companies don't act on CLV because their CRM software system doesn’t calculate this figure in the aggregate, by customer segment and for each customer. They are simply without this important metric.

Fortunately, adding a CLV measure to each customer record is not a difficult task. However, it should be done pursuant to defining what actions to take based on the value. Here are some guidelines to get the most action from a calculated CLV value.

  • Before you can increase customer lifetime value, you need determine CLV by customer segment and for each customer. You can then insert this metric to the customer record so it is available for information reporting and workflow processing; and so it can be acted upon. Display this measure in the CRM system, at the account record.
  • Shifting from static to dynamic customer segmentation will result in more accurate CLV calculations. That in turn will enable more precise, timely and contextual communications, selling recommendations, support services, and customer experiences.
  • CLV scores will prescribe actions to increase customer value. But those actions require time and investments. Before you invest to increase customer value, apply industrial benchmarks to objectively forecast the financial uplift. This will rank investments by payback and ROI. The example below shows how changes in Customer Satisfaction (CSAT) impact CLV and revenue.
Customer Experience Predictive Analytics
  • To grow customer value at scale, you need to know what customers want and are willing to pay for. Customer intelligence provides the insights to understand each customer segment's behaviors, top priorities, buy criteria and what it takes to grow customer share.
Customer Insights Integration to CRM

In the above illustration, customer intelligence is componentized so it can be easily applied to different use cases. It also feeds the Account Plan for Strategic Account Management.

Customer intelligence can be acquired by capturing digital footprints and online behaviors. This data then creates or feeds customer segments, personas and a 360-degree customer view in the CRM account record.

Another popular industrial technique is to use a voice of the customer (VOC) program to periodically and continuously capture customer feedback and related data. This type of program uses mostly digital tools such as periodic surveys to ask customers what they want and record those answers in the customer record.

  • Increasing customer lifetime value is also aided with industry metrics that precede or align with customer share. Most customer metrics are stagnant, historical and do not provide the insights to grow customer share. However, a short list of metrics frequently leads to predictable improvements.

These leading indicators include Account Engagement Score (AES), Net Promoter Score (NPS), Customer Satisfaction (CSAT) score, customer health score, purchase history (RFM), and online advocacy.

We have also found a few measures, such as increasing trends in RMAs, A/R aging and Days Sales Outstanding, that are indicative of future declining customer share. Recognizing these measures early enables swift course corrections.

The bottom line is that Customer Lifetime Value can be used to systemically and predictably grow customer share. It is also helpful in recognizing customer relationships as durable assets, repositioning business focus from short-term profits to long-term lifetime relationship value, and complimenting other customer-centric metrics such as customer satisfaction or NPS.

See manufacturing best practices to increase customer share and accelerate company revenue growth.

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The Point is This

Customer affinity, strategic account management and customer lifetime value are three of several manufacturing best practices that can be applied to grow customer share and company revenues.

Other customer growth best practices include improving manufacturing sales leads, customer satisfaction, dynamic customer segmentation, customer service benchmarking, proactive customer service, customer self-service, customer experience programs, customer service analytics and reducing costs to serve and to name a few.

The most helpful programs for any given industrial company will depend upon the company’s baseline performance and target goals. Short-listed programs should then be validated using a predictive analytics model to forecast payback and ROI.

The point is that manufacturing best practices show how to grow customer share most effectively. They provide prescriptive execution to achieve forecasted results and share lessons that save time, reduce investment and minimize risk.