Avoiding the Pitfalls to B2B Success: First in a four-part series

(c) Geehan Group

In my B2B Executive Playbook, I take my readers through the four steps that can simplify strategic planning, focus product development and sales and marketing efforts, and most importantly, create a clear path to market leadership. In this four-part series, Avoiding the Pitfalls to B2B Success, I review the common pitfalls that challenge B2B firms. Be aware of them and act quickly if they surface in your company.

Pitfall #1
Inside-Only Thinking

The first pitfall is a mindset among the leadership team that goes something like this: “Hey, we’re smart and we’ve been in this industry for many years. Let’s brainstorm among ourselves and come up with the next great solution we can bring to market to change the game and win back our leadership position.” The leadership teams of B2B companies do indeed have deep stores of knowledge and creativity, but when they choose to go it alone, what they are really saying is, “We know better than our customers what they want and need.”

And this is a prescription for failure.

Far too often, the inside-only ideas and solutions that come out of these sessions are not created with current market conditions or even company resources, business models, and competencies in mind. In fact, they are usually based on legacy customer needs, current competitor offerings, or misguided ideas about a problem that may not even exist in the customer’s mind. This insular approach significantly contributes to the 60-70 percent product failure rate that continues to plague companies.

Case:

The leaders of a $1 billion company invested more than $100 million in developing a single solution they were convinced would revolutionize their market. They did this without asking a single customer to validate the idea. The result was a disaster. Virtually no customers wanted the solution because it couldn’t be integrated with their existing operations, and the few who did buy, demanded to return it for a full refund, plus damages. The stock tumbled, the leadership team was fired, and the company was sold off at a major discount to a company one-fifth its size.

Bottom Line:

Successful B2B companies systemically include their top customers in the development process. At Henny Penny, for example, all innovation and planning initiatives begin with the needs of customers and the market. “This is the backbone of our culture, strategic planning, and success,” explains President and CEO, Rob Connelly. With so many strategic and development alternatives to choose from, you must tap your top customers to prioritize, justify, and focus on those options that will deliver the most impact. Leveraging their industry knowledge through “outside-inside” thinking is the best way to secure market alignment and achieve profitable growth over the long-term.

©2017 Geehan Group

Coming up next: Pitfall #2: Limiting Input to End-Users

 


Looking for more on how to be successful in your B2B business? Download Sean Geehan’s free articleB2B: A Different Game.”  Click here 

 

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Customer Retention is 24K Magic

It is simple: Everyone gets excited when a new customer is signed. There’s a celebration, bells are ringing, and lots of recognition and rewards are handed out. Song’s like the Bruno Mars' “Uptown Funk” or “24k Magic” are blasting in the hallways and everyone feels as though the most popular person in school just asked them to prom.

Been there, done that: But let's think about your customer retention for a minute. How much celebration is there when a long standing customer renews for the 6th straight year? Forget that they haven’t bid out the work in 3 years (no competition=greater margin) and they are already in your system (low cost of support, faster payment = greater cash flow).

It still only generates the excitement of listening to a has-been, one-hit wonder backup band like the frosted haired Vanilla Ice. Yes, you’re at a concert, but it’s short and stale.

Now the reality: Here's the bottom line. It costs 3-5 times more to acquire vs. retain a customer. Getting your current customers buying more of your stuff means it’s harder for them to leave you (increased switching cost) and current customers are much less likely to bid out your work (increasing profitability). Shouldn’t you evaluate how your how you are spending your sales and marketing dollars? If that sounds like your firm, don’t fret. Even carpools and Karaoke can be cool (thanks to James Corden). 

Opportunity: Evaluating your sales and marketing mix today re-prioritizing the balance of acquisition to account growth can make a huge difference in top and bottom line results. Now that’s something the entire leadership team will be thrilled to hear about. 

 

Just maybe then you’ll become the most popular person in the company (or at least the leadership team) and the CEO throws you the keys to the company G6, backstage passes, and VIP access to the after-party on the Bruno’s current tour. Now that’ll generate 24K Magic in the air!

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B2B Strategy Case Files: What If Both B2B and B2C?

When we wrote The B2B Executive Playbook, I had every hope it would forever change the hearts of minds of B2B enterprise.  Recently, however, my colleague and B2B strategy guru @seangeehan received the following email from “Still B2Cing," so I guess our work is not completely done.

 

Oh yes, we’ve seen this situation many times, and it is particularly pernicious as the challenge lies on two fronts:

  1. The overall enterprise has both B2B and B2C markets, such as a manufacturer who sells both direct to consumer and through a distribution network, as well as a massive organization like GE.  No one could possibly believe the executive who runs the GE lightbulb division has the same approach to growth and profitability as GE Aircraft. Unless the ELT understands the differences, most often we see the executives with the flashier high-profile B2C resumes take charge, and it is most often a disaster for the B2B side of the business. Hybrid organizations such as these are the most difficult to manage and grow unless you have the right playbook in place for the each side of the business.

  2. Ex-P&Gers who won't or can't adapt (or insert here alumni from most consumer packaged good companies). These proven, smart folks tend to struggle in their transition to most non-CPG companies, but especially when they move to B2B.  Most of them stick to what they know, apply the same go-to-market methodology/formula, and expect similar results.

The most common example of hybrids are financial institutions who have both consumer and commercial segments.  Because the hybrid situation is so prevalent there, we showcase Wells Fargo in The B2B Executive Playbook and how they address their hybrid organization, particularly the B2B side.  They have adapted specific B2B practices to address the commercial side of their business. Very smart.

Other industries that commonly have both B2B and B2C markets and offerings include hotel and hospitality, as well as computer and technology (Microsoft, Symantec, Dell).  Let’s take Dell for example. After successfully making B2C history selling PCs to consumers, as a growth strategy Dell began acquiring B2B firms (middleware, integrators, etc.) and building solutions for B2B customers (e.g., mainframes).  However, they did not change their go-to-market strategy and approached CIOs fairly similar to how they marketed to college students.  It didn’t work, and eventually Dell went private after stock tumbled. Our company, along with Dell’s biggest corporate customers, tried very hard to get them to understand that a different approach was needed. The CMO didn’t agree (ex-major CPG executive) despite our very “dynamic” conversations.  Suffice it to say, that CMO is no longer there, which is the unfortunate outcome we have seen for so many talented B2C executives. 

Facing similar challenges, both IBM and GE have all but left the B2C world, and one reason is they found it difficult to do both successfully for mostly the same reasons as other B2B/B2C hybrids.  Either you invest to execute different strategies, or you focus on one. There really isn’t a “one size fits all” solution.

Sean points to another notable example, Cisco. The B2B stalwart tried to get into the B2C market and failed miserably: $4-6B write down and complete shed or shut down of most of their B2C business. 

Sean focuses pretty hard on the topic of differing strategies for the two worlds in chapter two of his book.  The picture below provides a great reference point for where the approach differs between B2B v. B2C, and it primarily lies in go-to-market strategy: marketing, sales, and the biggest buzz-word today, innovation (R&D).

The one key element missing in this picture is service.  Service delivery may overlap or not, depending on industry and model.  The important point is you have to realize there may be key differences which need to be identified and addressed.  For more advice from Sean about this and other B2B strategies, check out his B2B Customer Strategies blog.

So take heart, Still B2Cing, there is hope!  Experience has taught us that if you can convince B2Cers they have landed in a different world AND they are curious and willing enough to learn and adapt to their environment, the path to sustainable, predictable, profitable growth (SPPG) becomes quite clear and straight-forward to navigate.  The missing link is found!

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Thank You, Customer Success, for Uniting Marketing and Finance

“Over the years, I have come to dislike marketers,” a CFO at a $350M company recently told me.  “I have found they just aren’t good business people.”

I couldn’t help but smile and explain to him how his mind was about to change.

During the past several weeks, I've had the opportunity to work with my colleague Sean Geehan and the smart folks at Strikedeck to better understand the nuts and bolts of B2B marketing’s new priority, Customer Success.  Before this time, the Finance snob inside of me assumed “Customer Success” was just another slick label marketing had put on the tried and true function of customer service or the practice of simply following the immortal words of James Cash Penny, “The well-satisfied customer will bring the repeat sale that counts.”

I don’t know who gets credit for the name “Customer Success,” but my cohorts in Finance should scoff no longer.  Despite its glib name, disciplined Customer Success is serious business (over $50 million committed by the US venture community on solution providers), and it can make or break players in the Cloud Subscription XaaS Economy.  According to the Customer Success Association, “Across the SaaS B2B sector, the choice is becoming clear.  You either actively manage your customer relationships as strategic portfolio assets, or you effectively cede control over them and your company’s future to chance and/or the competition.” 

Whoa. Those kind of words place Customer Success at the crux of SaaS company strategy, so much so that the CS Association advises, “The ultimate strategic goal of the Customer Success role is sustainable corporate profitability and growth.  The method is to make your customers as profitable and productive as possible.”  With such an important strategic imperative, Marketing, who has to date been driving most Customer Success initiatives in XaaS companies, is now placed in an even more significant position.  I wonder if these marketers realize their elevated status (most think they are still low men and women on the corporate totem pole), or that to take advantage of it, they get to think again about a group to whom they can't help but feel a gravitational pull: Users.

"The fate of your B2B company rests in the hands of a few people," our team has said for years about the connection between executive decision makers and B2B strategy.  While this is still extremely true, in the SaaS model, users are taking back some of the attention because the adoption and use of their seat licenses have become a significant factor in determining the economic value borne by the purchase of SaaS technologies.  And, more importantly, it has become the onus of sellers and their technology to make sure users adopt and use it.  As such, a subscription based business is probably the closest a B2B organization has been to needing to consider users and their happiness strategically in quite some time. Furthermore, the importance of keeping user cheeks happily in license seats requires Marketing and Customer Success to plan, coordinate, monitor, and possibly even design most of the major functions of service delivery.

As one example, let’s look at one of the primary drivers of adoption and use: training.  In the not-so old days as a user, it was his responsibility to learn and adapt to whatever technology the decision makers several levels above his pay grade chose to purchase and install (I am reminded of a major software conversion required at a major US bank because the CEOs at the two companies golfed together).  To learn the new system, users might get to attend a class or benefit from hands-on training, but many times it came in the form of a set of very large binders through which time had to be found to dig and find answers.  Online training later offered a more efficient Q&A search tool, but again, the content was fairly static (and boring) and nowhere near our modern day definition of “interactive.”  All in all, learning the new system on which a user performed his job was really his responsibility, if he wanted to perform well.  The technology wasn’t going anywhere, or at least until when GAAP said it could.

Today, learning the system is no longer altogether the user’s responsibility.  Users expect the technology either to be intuitive enough so that even a caveman could use it, or to teach them with on-demand “Live Chat” training and quick answers to their questions in forums and chat rooms.  In fact, when I talk to millennials about their jobs, they expect to be taught how and when they want to learn.  If they don’t feel competent quickly enough - or they just don’t like the technology - they just won’t adopt and proceed to influence a move to an alternative.  It’s “There's another app for that” mentality. There is always another app or similar technology that can do the job just as well, but maybe it has better chat rooms with more clever emojis.  When their employers see adoption is low, they can scrap the technology by unsubscribing and moving their data elsewhere.  Gone are the capital expenditures that had to be amortized and force users to use or lose.

The Technology Marketing and Sales research and services company ITMSA recently held its annual Marketing Leadership Forum which included a panel discussion of leaders from Amdocs, Cisco, and Oracle on customer experience and customer success and the role marketing must take in both functions.  In his summary of the session, ITMSA President CEO Dave Munn notes the perspective of Steve Pinedo, vice president, Oracle Global Cloud Customer Success, “the shift to the cloud is driving dramatic changes in customer expectations for technology based solutions, with new demands for immediate and frictionless support and value at every stage of the relationship.  From a marketing perspective, this puts customer success front and center, and makes reducing customer churn the number one KPI.”

Customer Churn.  This is where the finance nerd inside me really takes notice.  As Sean wrote in his recent post "Customer Success: Applying Science to the Art of Customer Engagement," churn (the rate at which customers leave) is the metric which could finally give marketing and customer engagement a measurement by which these efforts have a benchmark, and benchmarks mean funding and more importantly, credibility and stature with The ELT. 

Armed with churn rates, Marketing may now have the words Finance has longed to hear.  Whenever Sean and I speak to a group of CFOs or financial leaders, we remind them of their right to demand ROI on the investments they make in marketing.  Unfortunately, their marketing peers have struggled to find an irrefutable number by which they can say, “Our programs elevated our position to Leader in Gartner’s Magic Quadrant,” or even, “Our efforts contributed to raising our market cap.”  The churn rate statistic erases this previous shortcoming as the metric becomes more heavily weighted in technology evaluations and company valuations.  Marketing leaders can now say, “Our Customer Success Program, with its new onboarding engagement plan, has lowered our churn rate and brought us a new round of venture funding.”  With this type of measurable contribution to the organization’s growth, how can a CEO or CFO not take notice?

Marketing has an excuse no longer to shy away from numbers and figures, and they should embrace this opportunity to take ownership of measuring, monitoring, reporting, and hopefully bragging about their contribution to low churn. This might be an overstatement, or even blasphemy, but marketing finally has a reason to embrace at least one statistic.  And they get to talk about user decision making behavior again.  Win-Win!

I end here by sharing a graphic I found on the Customer Success Association website because I think it effectively ties together the relationship between Customer Success, retention, and profitable growth.  It's a picture to rally around and unify all the corporate languages.

 

 

 

 

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3 Keys to Retaining and Growing B2B Revenue

In the B2B World, 80% of your revenue comes from 20% of your customers. The reality is that losing just 5% of those customers could potentially sink your organization. So in this age of big data and rapidly evolving technology, what are the best ways to retain and ultimately grow those customers?

B2B companies must meaningfully engage with their customers to evolve loyalty into advocacy, and engagement begins with a relationship.  Through our work with over 50 leading B2B companies, we have found time again the following three key relationship building practices lay the foundation for account retention and growth:

1.    Educate, Don't Sell.  B2B relationships start with education, not a sales pitch. Educate yourself on your customer's industry, market, challenges, and opportunities, and then demonstrate how you can show them a path forward.  Providing relevant content through discussions and forums, blog posts and articles, and research is an excellent way to establish your credibility and begin the customer loyalty to advocacy journey.

2.    Customer Advisory Boards create a platform where you can leverage happy customers and drive innovation through customer co-design and collaboration. The end result is overall market alignment in offerings, communications, and strategy.

3.    Executive Summits bring key decision-makers together to preview a strategy, product, or market innovation. Through these focused exchanges, customers become first-to-know, first-to-buy, and first to advocate your solution in the marketplace.

Structured, proven, and dynamic educational forums, customer advisory boards, and executive summits help organizations develop a deep understanding of market conditions while building the rapport with key executives. This powerful formula turns customers into true advocates and is the best recipe for retaining and growing your top customers.

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B2B Marketing's Huge Opportunity to Drive Profitable Growth

Marketers often times find it easier to apply the trusted tenets of B2C marketing to B2B selling. Unfortunatley, they then end up with disastrous results because of B2B marketing’s more complex and lengthier buying cycle. While some basic rules apply, B2B marketing is quite different and needs different tactics. It demands marketing involvement for a longer time, and with more specificity.

What else makes B2B marketing different? What should marketers change to get more results from B2B campaigns? How can a B2B marketer connect with customers and leverage innovation to drive business growth?

Join this free webinar sponsored by Regalix for a chance to engage directly with Geehan, as well as other marketing professionals. Don’t miss this insightful discussion on:

  • Unraveling the differences between B2B and B2C
  • Increasing marketing’s credibility with the Leadership team
  • Aligning strategies to market needs
  • Engaging & leveraging your most valuable customers
  • Achieving sustainable, predictable and profitable growth

All registrants will receive an abstract from Sean's National Best Seller, The B2B Executive Playbook.

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On-Line CABs Great for Users, Limited for Executives

Recently, a great question surfaced on LinkedIn about CABs: “Has anyone here implemented a successful online CAB group? If yes, how successful has it been?”

I find that online CABs can work well in certain areas, but have limited effectiveness in others.  For instance, with user groups and focus groups where you’re seeking incremental insight, online collaboration can be a great tool for getting input on feature/functionality or refining a product/service. 

On the other hand, if your CAB is more strategic in nature, and your members are the level of Senior Director or above, a face-to-face environment is more appropriate.  When seeking advice on your strategic direction, the conversations progress into deeper discussions – about business challenges and understanding your customers’ priorities, industry trends and sharing of market insights.  Face-to-face engagements build a certain degree of trust and provide a safe environment for sharing and networking, which we find results in a genuine “bonding” of the group.  Members appreciate the professional accomplishments and relish the personal relationships they develop.  Council meetings feel like “reunions” and customer members become advocates. 

Having said this, once these types of relationships and trust are built in a face to face meeting, online meetings can be effective supplement for small working groups between the face-to-face engagements. 

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Strategic Planning with Marketing and Sales

In my book, B2B Executive Playbook, I describe four steps that can simplify strategic planning, focus product development and sales and marketing efforts, and, most importantly, create a clear path to market leadership.  If implemented properly, it will also add sustainability and predictability to a B2B company’s top and bottom lines. 

As with any corporate initiative, however, success can be sidetracked if problematic modes of operating and behavior creep in.  Over my next four blogs, I’ll cover each of the top four common pitfalls that prevent B2B firms from succeeding; Inside-Only Thinking, Limiting Input to End-Users, Following a single Customer, Chasing the Competition.   Be aware of them, and act quickly if they surface in your company.

Pitfall #1: Inside-Only Thinking

The first pitfall is a mindset among the leadership team that goes something like this: “Hey, we’re smart and we’ve been in this industry for many years.  Let’s brainstorm among ourselves (internal off-site meetings) and come up with the next great solution that we can bring to market to change the game and win back our leadership position.”  The leadership teams of B2B companies do have deep stores of knowledge and creativity, but when they choose to go it alone, what they are really saying is, “We know better than our customers of what they want and need.”  And this is a prescription for failure or even disastrous results.

Far too often, the inside-only ideas and solutions that come out of these sessions are not created with current market conditions or even company resources, business models, and competencies in mind.  In fact, they are usually based on legacy customer needs, structures, business models, current competitor offerings, or misguided ideas about a problem that may not even exist in the customer’s mind.  This insular mindset and culture significantly contributes to the 60-70 percent product failure rate that continues to plague companies.

Case:  The leaders of a $1 billion company invested over $100 million in developing a single solution that they were convinced would revolutionize their market.  They did this without including of vetting the idea with a single customer.  The result was disasterous.  Virtually no customers wanted the solution because it couldn’t be integrated with their existing operations, and the few who did buy, demanded to return it for a full refund, plus damages.  The stock tumbled, the leadership team was fired, and the company was sold off at a major discount to a company one-fifth its size.

Successful B2B companies avoid inside-only thinking. At Henny Penny, for example, all innovation and planning initiatives begin with the needs of customers and the market.  “This is the backbone of our culture, strategic planning, and success,” explains Rob Connelly, CEO of $148 million Henny Penny Corporation, a family-owned manufacturer of food service equipment.  “It has enabled us to hold on to and grow our biggest customers for decades, because our plans help them serve their customers more effectively.  We work extremely closely with our top customers.  Our design and engineering teams share ideas, collaborating to provide new solutions, solve problems, or change the game.” 

One of the home runs at Henny Penny was the development of revolutionary low oil volume (LOV) fryer for McDonald’s Corporation.  “We’d been studying innovative ways of improving and shortening usage in the frying process for quite awhile,” recalls Connelly.  “Together with McDonald’s, we developed a breakthrough product, which not only yields significant cost savings, but is also easy to operate and minimizes environmental impact."

The LOV fryer earned Henny Penny the prestigious McDonald’s Global Innovation Award in 2008.  In 2009, MacDonald’s named it Worldwide Equipment Supplier of the Year and in 2010, Worldwide Equipment Partner of the Year.  That’s the kind of market clout and credibility that can’t be bought – and it led to even more sales.  In addition to sales opportunities at McDonald’s 30,000 restaurants worldwide, Henny Penny applied these innovations to stock models that were successfully rolled out to the small and mid-sized restaurant marketplace.  

Bottom Line:  With so many strategic and development alternatives to chose from, you must tap your top customers to prioritize, justify, and focus on the opportunities that will deliver the most impact.  Leveraging their industry knowledge through collaborative “outside-inside” thinking is the only way to secure true market alignment that drives Sustainable, Predictable and Profitable Growth.

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Love the Ones You're With

Everyone gets excited when a major new customer is secured. There's a celebration, bells are ringing, and lots of recognition and rewards are doled out. This event may even merit a personal call or note from the president.

 

Yet, how much celebration happens when a long-standing customer renews for the sixth straight year? Forget that they haven't bid out the work in three years (no competition=greater margin) and they are already in your system (low cost of support, faster payment= greater cash flow).  What is marketing doing to celebrate and sustain these key wins?

 

It costs 3-5 times more to acquire a new account than it does to retain an existing customer. Getting your current customers to buy more of your stuff means it's harder for them to leave you (increased switching cost), and current customers are much less likely to bid out your work (increasing profitability).

 market spend

In 2009, the IT industry was hit hard by the economic downturn. Indian Exercycle managed a 24% growth rate that year. Only one of their competitors grew during the same period (4% growth), and the rest of their competition were flat or fell below their previous year's sales. Over 70% of HCL's sales growth came from their current customers. The out performers like HCL, Oracle, Wells Fargo, and Intersource invest more marketing dollars into existing account growth than new customer acquisition.

 

Marketing can help sales increase account penetration by funding aggressive marketing programs targeted at current customers.  Too many companies miss this tremendous revenue opportunity. How many times have your customers said, "I wish knew your company did that...I would have purchased from you.?"  Marketing can change that.

 

By monitoring key metrics, you will increase your chances for success:

 

  • Retention rates
  • Percentage of penetration by offering, by account
  • ROI of the offerings your customers are buying
  • Level of awareness of each of your offerings
  • Level of awareness with regard to company acquisitions and/or partnerships

 

Once you have this key information, it is important for your business to focus on and evaluate the marketing spend necessary to maintain your current customers. At the aforementioned growth companies, this is a priority for their marketing team.

 

It quickly becomes apparent that your biggest opportunities lie within a few accounts.  This is true for most B2B companies like $3 billion HCL, where 70%of their revenue comes from just 70 customers, or $20 billion GE Aviation, where 80% of their revenue comes from 50 customers, or even a firm under $50 million like Intesource,where 80% of revenue comes from only 12 customers.

 

Start all your marketing and sales efforts plans with the few customers who control your fate.  It's where the greatest returns on investments are made.

 

 

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Three Ways to Avoid the Dread in Strategic Planning


If you are on a January-December fiscal calendar then you are entering the dreaded strategic planning cycle. Why is it dreaded? Usually it's because reams of data are poured over by strategic planners who create organizational thrusts and send them up the chain for review--only to be asked for a different slice or direction by senior leadership. I often hear organizations refer to the early stages of strategic planning as "analysis by paralysis." There is lots of great data, but no real compass to direct the analysis.

Where do you fit in this cycle? Are you the frustrated executive or the frustrated planner? Where is your presentation or binder from the past year? Please say it's not sitting on the shelf.

Materials on shelves are good for reference, not for day-to-day execution. The best strategic plans live within the organization.

 
  1. They are created from the outside-in based on the voice of the customer
  2. They are well understood by employees
  3. They are integrated into your management systems

 


A CMO told me the other day, "I know which customers are strategic to my company. My challenge is making my company strategic to those customers."

His comment demonstrates the shift in marketing that is currently occurring within high-tech and service companies. In these organizations the marketing function is no longer about awareness, brand or feel-good programs. It is a results-oriented entity enabling the relationships and market position necessary to increase customer value and drive revenue.

As a result of this shift, ITSMA research shows an increase in the following tactics as part of marketing strategies: 

  • Thought leadership development
  • References and testimonials
  • Senior level relationship management programs, customer advisory boards, councils


...and a decline in: 

 


  • Collateral (brochures, datasheets, etc.)
  • Hospitality
  • Sponsorships of sports/Cultural events
  • Print-based direct marketing
  • Traditional print/media advertising
  • Public trade shows

 

Source: ITSMA, Budget Allocations and Trends: Key Metrics Survey, 2010 www.itsma.com/access/research.asp

Has your company made the shift? If not, what's holding you back?

 

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