Tired of the end-of-quarter panic? Want some relief from the indigestion of the chronic, last-minute quota drill? ¶ Try focusing your sales efforts on selling trust rather than products. ¶ Hockey-stick quarterly sales patterns, and the distortion these patterns cause in your company's operation, occur when a company focuses too closely on current-period numbers without paying enough attention to creating long-term value.
But the “crisis of short-termism” in business is so all-consuming that it embodies many other problems, as well. The most straightforward advice we can give business executives is to remember that customers will do business with you tomorrow only if they (and their friends, colleagues and associates) trust you today. Therefore, customer trust is a prerequisite for long-term business success. Solving a customer's problem creates more value than selling the customer a product.
When you incur a cost, or forgo a profit, in order to provide a better, more appropriate solution to a customer's problem, the value of that customer asset increases, even though your quarterly sales figures may not. But if you push a sale across the quarterly finish line just because you can, and the customer later has regrets, the value of the asset declines, even though this quarter's sales might have been propped up. The problem is that we track sales and we don't track customer value.
Nevertheless, there are indicators of a customer's financial value that you can measure and track and, when used correctly, these indicators will prove just as important to your business' overall success as the quarterly sales figures. Most b-to-b firms would be able to use some version of at least a few of these, but perhaps not all of them:
* Relationship level, measured by such things as the seniority or rank of the manager you interact with at the firm.
* Account penetration, measured by the number of units or divisions at a customer that you sell to.
* Product and service breadth, measured by the number of different offerings you sell to the customer.
* Share of customer, measured as the percent of a customer's purchasing in your category that you receive.
* Customer satisfaction and willingness to recommend, measured by surveys or interviews.
Technology now enables your customers to shop for vendor reputations online, so earning and keeping the trust of customers has become way more important and useful to a business than it was even a few years ago. We think this issue will generate a much more fundamental shift in perspective than most people realize. And the most reliable way to earn the trust of customers is to overcome short-termism—by acting in the customer's interest in all situations, even when occasionally it is against your company's own short-term interest. This is the way lasting shareholder value is created.
Don Peppers and Martha Rogers' latest book, released last month, is “Rules to Break and Laws to Follow: How Your Business Can Beat the Crisis of Short-Termism” (Wiley, 2008). They can be reached at [email protected]