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SECTION I:
CUSTOMER RELATIONSHIP BUILDING
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Chapter 1
Introduction:
A Way to Reach Customers
A dynamic, practical sales tool that can greatly enhance the customer development and retention process and give firms a distinct competitive advantage is the customer advisory board (CAB). A board can help a sales force broaden its decision-making expertise and generate more business. Sales involves more than an upbeat personality and hard work. It involves product or service knowledge, a proficiency in selling, an awareness of market conditions, and adding value to what the customer is doing. Industries and markets that are changing rapidly, due to globalization and advancing technology, pose a more complex business environment today. Thus, some firms have a customer advisory board, or its equivalent, to act as an advisory and management auxiliary resource in the face of these conditions.1 (For specific activities of CABs see Figure 1.1.)
FIGURE 1.1. Role of CABs in the Marketplace
Customer retention is more complex than ever before and there has been a dramatic change in how selling takes place. Customer relationship building is a driving force in the selling process. To assess what entails an effective sales effort, companies must first identify why their customers chose them. It is essential to have a clear understanding of what customers want and concentrate on providing it. In a study conducted by Learning International, 29 percent of 210 corporate customers with vendors in the technology, financial services, and pharmaceutical industries reported that business expertise and image ranked highest among various attributes that lead to satisfaction levels with a supplier.2
Instead of selecting what a company has to offer, today's customer tells the company what he or she wants; it is then up to the company to figure out how to supply it. These customers present some important questions that must be answered:
How can a product or service be differentiated when rising quality is forcing industries toward the same standard?
How do you distinguish what customers are saying and what they really mean?
Where can you find your best customers?
What service levels please customers most?
How do you hold on to current customers?
Thus, identifying relevant customer information is the essence of having the competitive advantage. A CAB can provide this edge and strengthen a company's presence in the marketplace.
AN OVERVIEW OF THE CAB
A board is far more effective than advisers because board members are empowered to offer advice that can affect the company.3 Allowing outsiders to look inside the workings of your company can lead to a feeling of vulnerability, and in fact only 5 percent of closely held companies actually do allow their boards to be dominated by outsiders.4 CABs, which essentially target actual prospective customers as members, are a cost-effective way to find out directly from the marketplace how to become a firm with which customers would initiate or continue to do business. Their feedback also provides a fresh perspective from which to approach business opportunities. (For an overview of the dynamics faced by CAB s in relationship building, see Figure 1.2.)
The advisory board is more informal than the board of directors and counsels without the voting power and legal liability to protect shareholder interest. To be manageable a board should have five to ten members or as many as twelve to fifteen members who are prominent in the business community. Companies can even use a revolving board that changes membership every one to two years to broaden the pool of participants.
The length of tenure for board members can be short or long term depending on the needs and circumstances of the company and the board members. For example, a membership period of one to two years allows for more frequent influx of new members and the perspectives that they bring through their participation. Longer-term memberships provide a more stable, familiar board presence.
The board can meet quarterly or more frequently, as circumstances dictate. In the event of a crisis or emergency situation, the board may
FIGURE 1.2. Dynamics of Today's Challenges for Effective Customer Development and Dealings
actually provide a company with a fuller range of perspectives to help overcome the dilemma. At a minimum, boards should meet at least twice a year to be of some strategic utility, which means they need not be a totally time-consuming endeavor to provide some clear benefit.5
The CAB can be comprised of CEOs and presidents or the functional executives who decide where they will direct their business. Members could be selected for their particular expertise. For example, a strategic planner with a good long-range perspective or a technical expert who understands a product's or service's features might be a good choice.6 Other favored board candidates are women and minorities, who can reflect a diversity of views and insights that can be of great benefit to a firm. Members could also be selected for their demographic segment, geographical location, revenue potential, reputation, and prestige in the marketplace.
Board membership can serve as a perk for current customers and reward them for their loyalty or reach prospective customers who do not currently use a company. Customers want to believe that companies care, and the formation of a CAB alone can show this and help to develop a rapport. Board membership also makes it possible for the various professionals on the board to network with one another. Membership can also be a stamp of success for candidates who accept companies' invitations since the criteria for selection are their prominence and knowledge. Thus, a unique feature of CABs is that the members expect their advice to be taken seriously.
In 1998, companies spent $3.5 billion with the fifty biggest research firms to learn about their customers. Market research can be extremely valuable but is expensive and can be done fraudulently. Companies can wield the information that comes out of board meetings as one source of market research, and as a way to study the psychology of buyer behavior in order to enhance sales.7 In many cases, a CAB can be operated without any fees. The rationale for this, besides being cost-effective, is to avoid any appearance of impropriety, such as an attempt to “buy business,” relying instead on the members' expertise in solely an advisory capacity.
An effective board encourages the participation of the sales force and management personnel. Their suggestions help target desired board members and frame the relevant issues to be discussed when the board meets. In addition, their involvement with the board places them in the position to build relationships. Sales management should also be involved with the board so as to signal a serious commitment on the part of the corporation to provide high-level feedback that can impact company policy.
A critical role for the board is helping to identify and resolve strategy and performance issues. This means that board members must have a solid understanding of both industry and individual functions as well as knowing what creates value in the business. The board members should be routinely informed about relevant company, industry, and economic events. They should receive the appropriate press clippings, subscriptions to selected industry journals, and any other relevant information that will keep them informed. Board members should know the concerns and thoughts of the people working in the company and what the competition is doing.
To maximize the effectiveness of the advisory board a company should raise certain questions early in the board's formation and operation to allow for necessary adjustments later on:
1.Do yo...
