Building Blocks
How to take the focus off of the
big, one-time sale and concentrate instead on
building long-term relationships with your customer.
By
Bridget McCrea
When Gagne Precast Concrete
Products quotes a precast pump station, it doesn’t
just slap a price on a precast concrete product
and wait for the order. According to Fred Gagne,
president of the Bangor, Maine-based firm, the
company digs deeper, evaluating the pump station’s
surroundings to ensure the precaster is quoting
the right product for the right application.
It also places calls to the contractor or engineers
who designed the station to discuss the customer’s
project goals, timelines and budgets.
“Many times we find
that we can lower the unit cost by using an
alternative – something that the engineer
may not be familiar with,” says Gagne,
whose firm produces manholes, catch basins,
concrete utility structures, transformer pads,
underground vaults and septic tanks. “We’ve
found that our customers really appreciate the
extra effort we put in before the manufacturing
process even starts, so they come back to us.”
Keeping customers coming back
for more is a deep-rooted philosophy at Gagne
Precast, a company founded by Gagne’s
grandfather in 1945. Serving the customer and
adding value to all products that leave the
company’s yards has been – and continues
to be – a primary goal for the firm, which
has grown from 12 employees in 1982 to more
than 50 today.
Gagne attributes much of the
growth to his family’s emphasis on cultivating
long-term relationships with its customers.
The proof is in the numbers: The company currently
has six customers who have been buying from
it for 20-plus years, another six who have stuck
around for 15 years, and a few dozen more who
have been loyal for 10 years. “Our philosophy
is to establish partnerships with our customers,”
says Gagne. “Building long-term relationships
is our most important business strategy.”
To make sure customers stick
around, Gagne says the precaster spends time
learning what their needs are, then meeting
those needs with a wide variety of precast concrete
products and associated supplies. “We
like to think of ourselves as a one-stop shop
for them,” says Gagne, who relies on his
employees to make key decisions and solve problems
at the customer level. “I empower my employees
to make decisions that take care of our customers’
needs. It’s taken me a long time to realize
that my company’s value lies in its people,
and not the product.”
Where long-term customers
come in handy, according to Gagne, is when mistakes
are made – the kind of mistakes that probably
wouldn’t be tolerated from a new vendor.
“Long term customers realize that we are
all human and that it’s not whether you’ll
mess up, but how you deal with it when you do,”
says Gagne. “We take an honest approach
with our customers and they not only appreciate
the candor, but also the fact that we’ll
do whatever it takes to make it right.”
Creating bonds
Depending on whom you
ask, it takes anywhere from five to 15 times
as much money to sign on a new customer than
it does to sell more to an existing account.
That doesn’t include hidden costs like
the time, money and resources required to get
up to speed on a new customers’ wants
and needs; to learn their processes; and to
form relationships with their key employees.
That’s not to say that precasters shouldn’t
be out developing new business, but it does
give precasters good reason to augment their
new business development efforts with a system
that actively seeks out more business from existing
customers.
If the cost of acquiring
a new customer doesn’t convince you to
pull out your customer list and start asking
for more business, check out this statistic:
By increasing customer retention by just 5 percent,
a company can increase profits by 100 percent.
It sounds simple enough, but Michael King, group
vice president at Atlanta-based marketing consultancy
Grizzard Performance Group, says the trick is
finding out which 5 percent will be most profitable
for your company.
“That’s where
an analysis of lifetime value, by customer or
customer segment, comes in handy,” says
King. “It’s about optimal allocation
of fiscal and human resources to optimize a
company’s return on investment, and it
applies to a 50-person manufacturing facility
all the way up to a 500-person operation.”
King says the easiest first step to long-term
success is to establish meaningful dialog with
your customers. Ask them: What do you need that
we can help with? How are we doing? How can
we improve? What ancillary products are you
using with ours that we might consider including
in our manufacturing company’s business
model? Where are my competitors falling down?
Particularly in today’s
uncertain economy, the answers to those questions
can help precasters better focus their own operational
efforts to meet the specific needs of their
valued customer base. If a customer complains
about a competitor’s slow delivery times,
for example, find a way to beat those times
and make your company shine in that customer’s
eyes. Or, if a customer is sourcing an accessory
that goes with your manufactured precast product
from another company, why not add it to your
lineup?
“In today’s
economic environment, with so little new business
being generated, it’s important that companies
be able to sell more into their existing customer
bases,” says Jay Lipe, author of “The
Marketing Toolkit for Growing Businesses”
and CEO of business consultancy Emerge Marketing
in Minneapolis. “Spending more time and
effort on existing relationships – where
the company already has an established trust
with the client – will ultimately fuel
a firm’s sales and cash flow through this
period.”
Three-step process
Andy Birol, consultant
and speaker with Birol Growth Consulting in
Solon, Ohio, says long-term relationships are
particularly critical in a field like precast
concrete manufacturing, where high fixed costs
are the norm and customer needs can be infrequent,
depending on the size of the customers. He advises
precasters to break down the selling process
into three parts: finding customers, keeping
customers and growing the customers that you
have kept.
“Instead of looking
at sales as a homogenous effort, concentrate
first on getting the new customer to place an
order instead of trying to sell the total solution
on the first time out,” says Birol. “Next,
focus on turning him into a stable, reordering
customer. Lastly, grow that customer by upselling
and cross-selling other products and services.”
Along the way, Birol cautions
precasters to avoid letting any single customer
comprise more than 20 percent of your company’s
total sales. “You always need to be able
to walk away,” he says, adding that precasters
should focus on increasing either the average
size or the average profitability of a customer.
If, for example, your average sale last year
was $50,000 for a customer, make it a goal to
increase the average sale every year or the
average profitability of your customers. “This
will force you to go out and get newer and better
customers,” says Birol, “and ‘fire’
those who are bringing down your average.”
Mitchell Gooze, president
of Santa Clara, Calif.-based Customer Manufacturing
Group Inc., helps companies build solid customer
relationships. He says precasters should make
a list of all of their customers, then determine
each one’s profitability to come up with
a plan for maximizing those that will help the
manufacturer boost its own profitability. Never
be afraid to ask questions like, “If I
could have all of your firm’s business,
how much would it be worth?” He suggests:
“Go for your unfair share.”
Strong Ties
Horton Precast Concrete
Inc. had 63 years of experience in the concrete
burial vault business when it decided to call
more attention to its architectural precast
line of building trim and ornamental products
back in 1996. At the time, its long-term customer
roster was heavy with burial vault customers
but pretty light on the architectural precast
side. Dave Brugger, president of the Gerard,
Pa.-based firm says finding repeat customers
for the latter was a top priority for his 27-employee
firm.
“We knew that was the
only way we could be successful,” says
Brugger. A handful of customers came on board
early and gave Horton Precast the opportunity
to fill all of their architectural precast needs.
Word of the company’s quality products
and customer service spread quickly, says Brugger,
and referral business began coming in. “Our
early customers were more than willing to tell
other people how good we were, and we used them
as references,” says Brugger. “In
fact, they would even discuss us favorably with
their competitors, which led to even more business.”
Mark Dancer, vice president
and principal at Pembroke Consulting in Philadelphia,
says long-term customer relationships are a
critical part of any manufacturer’s success,
though he points out that the term “long-standing”
does not imply a static relationship. “As
business conditions change, the value that a
manufacturer provides to its customers must
also change,” says Dancer, whose firm
develops business and marketing strategies for
leading wholesale distribution, manufacturing
and business-to-business technology companies.
“If manufacturers don’t adapt, the
relationship will dissolve.”
Dancer says manufacturers
can earn the right to “sell more”
by finding ways to serve customers better. In
business-to-business markets, he adds, that
almost always means taking costs out of the
customer’s business. “Since most
manufacturers don’t want to lower their
price to gain sales, they must adopt a ‘total
cost of ownership’ mentality,” Dancer
explains, “and demonstrate how their product
can make the customer’s business run better
and more efficiently.”
To make that happen, Dancer
says precasters should discard their “ideal
customer” profile, think through the relationships
and its potential, and avoid shooting from the
hip. “Instead, create a real dialogue
with customers while avoiding selling or problem
solving, and shut up and listen to your customers,”
says Dancer. “It’s all too easy
to talk over customers and not hear what they
have to say.”
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