Ten Things a KAM Really Needs to Know about Customers
by Terry Kendrick, Information Now Ltd (t.kendrick@netcom.co.uk)
and Julian Blackmore, Wilson Lee & Ptnrs (julian.blackmore@w-l-p.co.uk).

Everyone knows that knowledge is power, especially in business. Having the right information can give real competitive advantage: with it you can steal a march on competitors, anticipate changing customer needs, negotiate better deals with suppliers and navigate your business successfully through good times and bad; without it you are working in the dark. The trouble is, with so much information available it can be difficult to pick-out the really useful data from the rest - and all too easy to become bogged-down with information overload.

Over the past fifteen years or so we've been privileged to work with literally hundreds of companies of all sizes on a broad range of business development projects. Drawing from this experience, we've compiled a series of checklists of key information which we think every business really needs to know. We make no claim that our lists are the only way to approach these questions, nor do we pretend that they are exhaustive. What we can say, however, is that in our experience this information can make a critical difference to business performance in the real world.

So to kick off, here are ten things we think you really need to know about your customers.

1. Why do they buy from us?

At first, the answer to this may appear obvious: but is it really? What are they actually buying from us - our core product or service or some other aspect of how we do business with them that fits their particular needs? Do they come to us because our product or service is the best or because we're the cheapest? For our comprehensive range and excellent service or because we're the only choice? Because of our excellence or because we're the nearest? What's really important to them? If we're to understand why we, and not our competitors, are winning the business, we need to know precisely  what our customers are buying and why they buy it. Challenge your
assumptions!

2. What are their other options?

Fine, so our customers buy from us now but what are their alternatives? Are there other suppliers that could also meet our customers needs? If so, how easily could they change suppliers? What alternative offers would test their loyalty to the breaking point? Beyond our competitors, are there alternative ways of doing things which could make what we do completely unnecessary?

Could our customers go direct to our suppliers? We need to understand not only our direct competition but the broader alternatives as well.

3. What will they want in the future?

We already know something about what they want now (or they wouldn't be buying from us at all) but we can't count on their needs being static. We need to know and understand their future plans and how we can fit into what they'll be doing tomorrow. Are there technical or other developments happening that will impact on customer requirements? Unless we constantly monitor our customers' changing needs and make sure our offering stays both relevant and attractive we could find our products increasingly out-moded and / or our business practices less attractive in changed times.

4. Which of our customers are of most interest to our competitors?

Probably not all of them, as different competitors will be pursuing their own strategies and objectives and for a variety of reasons what is good business for us might be completely non viable to a competitor. In addition, as we'll see later, some of our customers could be an absolute threat to them! However, in general, the more valuable the customer is to us the more likely they are to be of interest to one or more of our competitors. The key point here is that we need to make sure that we know which of our customers are most attractive to the competition and, if they're of interest to us, make sure that we 'lock them in'.

5. What do we have to do to retain existing business?

How loyal and/or averse to change are our customers? Are they, for example, likely to leave us for just a small price advantage with a competitor? Or are they so tied into a status quo mentality that keeping their existing business is simply a matter of keeping our delivery promises at reasonable cost? Will a policy of continuous improvement be enough to hold them or do we need to innovate to be sure of their business? Awareness of potential triggers for changes of suppliers is a key principle of effective customer management.

6. What do they really think of us?

All right, our MD plays golf with their MD and our salesman tells us that their buyer says we're doing fine - but are we getting the full picture? Would they really tell us if we're not doing as well as they would like? Are we measuring our performance on their criteria or just on ours? The things that we think we're good at may not be enough. This is all about perceptions and it is their perceptions which are by far the most important. By obtaining regular feedback on the elements of our performance which are important to them not only do we get priceless information, we also demonstrate our commitment to them as a customer, the importance we place on keeping their business and our suitability as a key supplier.

7. How much of their business are we getting and how much would they let us have?

If we recognise that we are only given a portion of our customer's spend is it worth trying to get more? Some businesses pursue a deliberate policy of using several sources for the same item. They do this in order to avoid over dependence on a single source (and the potential vulnerability that can bring) and to keep their suppliers competitive by perhaps playing one off against another. So before trying for a bigger share of the total spend we need to check their buying policy and be sure that we've not already reached their limits. If we haven't reached the limits and further penetration of the account would seem good for us then strategies to win the extra business should be devised and implemented.

8. Are our 'best' customers actually vampires?

Asked to identify their best customer many managers will often name the biggest: but is this realistic? The biggest customer may well have negotiated substantial discounts and will then take a long time to pay. Added to that they are frequently the most demanding in terms of service and back-up. They often know that they are your biggest customer and expect to be treated accordingly tying up cash, production and staff resource for potentially very little return. Looked at this way our 'best' customer may be of marginal value or may actually be costing us money. In extreme cases it has been known for a business to practise a form of guerrilla marketing by foisting these vampires onto competitors. It is vital to keep a regular check on which customers are generating our profit and which are bleeding us dry.

9. How do we spot a good customer and where can we find more like this?

Different businesses will have different answers to this question, dependent upon their markets, placement and strategy. It could be customers generating the most profit or it could be those with the most potential for growth; it could be a combination of these and / or several other factors. So what are the characteristics of 'good' business and a good customer? What do our ' good' customers look like. We need to consider this very carefully and then use the resultant criteria to identify our top ten or twenty customers. From looking carefully at these we should be able to spot similarities and produce a profile of a 'good' customer which can be used to find more of the same kind.

10. What would happen if the person who deals with us leaves?

When a buyer leaves a company the new person is often keen to establish themselves in their new role by making their mark early on. One of the ways in which they can do this is to review and replace some of the key  suppliers; sometimes too they want to bring in their own favoured supplier from their previous company. Could this happen to us? How much of our status with the customers is dependent upon the goodwill of individual buyers? If we feel that we might be vulnerable, what can we do about it? Thinking about these questions now could avoid nasty surprises in the future.

Answering these questions honestly and objectively will help you to:

• Challenge your existing assumptions about customers
• Ensure that you are the customer's best option
• Recognise that the customer's perceptions are reality
• Develop an understanding of the profitability of individual customers
• Ensure that your customers are not simply those that your competitors don't want.

An understanding of your customer base is an essential element in ensuring a healthy business. The ten things you really need to know about your customers are not easily acquired: the analysis will need more sound judgment than reference to factual data. Nevertheless keeping good profitable customers is worth thinking hard about.

Date published: October 2002