Know Thy Customer: Five Ways to Use Customer Insights to Build Sustainable Growth in B2B Markets
It’s been called the first Commandment of Marketing: know thy customer. Few would argue that understanding your customer is critical for driving sustainable growth. While it’s a driving force in the B2C market, far few companies in the B2B environment are known to live by this principle, and as a result, many are perpetual “victims” of market forces, struggling to keep their heads above water amid rough seas.
Even in the B2B space, creating meaningful, effective, and intimate relationships with customers is the key to fueling sustainable growth. Why? Customer needs are at the very heart of identifying growth opportunities. They are alpha and omega of every industry: key customer needs create demand, unmet needs drive innovation, and changes in preference and technology influence market maturity and eventual decline.
Getting to know your customer better than your competitors is incredibly valuable for gaining an upper hand, and it can only happen if it is given strategic priority, supported by appropriate investments. Knowing your customer must go beyond periodic reviews; it must be embedded into organizational systems, culture and behavior, and even compensation policies, to ensure real-time monitoring of the key value drivers and timely development of business strategy.
Establishing these protocols—how you gather the data and what you do with it—takes careful planning, but the payoff can be great. A smart sustainable growth strategy built upon relevant customer insights should be based on five key best practices to ensure the greatest return on investment.
Understanding your ability to own and defend an opportunity space is key to any significant market entry and growth initiative. It is dangerously easy to overstate competencies that drive your ability to win and underestimate your competitors. Identifying the gaps you need to close to improve and elevate your competencies, as well as a plan to defend and distance yourself from competition, is the pathway to making a market space truly own-able and strengthening your ability to win.
1. Expand beyond the needs of your immediate customers.
- Look further down the value chain to understand what keeps them awake at night and what you can do to help them break away from competition. Then, use this insight to make your services and products indispensable. For example, at the most recent In-Cosmetics event in Paris, raw material supplier Merck didn’t waste time talking about its labs and molecules. Instead, they focused on results of their joint research with a trend agency to identify which psychological themes – for example, “sublime” vs. “imagination psyche,” including the colors and images – would better resonate with end-users of personal care products. Merck is two steps removed in value chain from the actual consumer, but they clearly recognize the opportunity to devise a compelling marketing story for their ingredients and position these better with customers like L’Oréal or Estée Lauder, who are competing in an increasingly crowded personal care market.
2. Don’t rely on what your customers tell you– observe them, collect data, and draw your own conclusions.
- Customers don’t always know exactly what they want or need; sometimes you have to tell them. This visionary approach is exactly how entirely new concepts are born – by surfacing and satisfying your customers’ undiscovered needs. The development of Apple’s iEmpire is the perfect example, and the legendary Steve Jobs captured this sentiment perfectly when he said, “It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.” As Apple’s example is well-known to many, a more obscure B2B example exists in the lubricants industry. Royal Purple has generated sales and new industrial customers not by focusing on the product and its performance, but by focusing more on the critical pieces of equipment it protects. Targeting users of lower quality lubricants, Royal Purple has been able to show them an alternative point of view on lubrication by preaching the benefits of reduced maintenance costs, energy savings, and increased up time on equipment that is achievable by switching from a lower quality conventional product to Royal Purple’s synthetic lubricants. As a result, they have grown their position by expanding the synthetic lubricant market as opposed to competing directly against similar products. While it may not be as easy or cost-effective as these examples make it seem, it may be well worth investing in a few ambitious areas of your business to lead the customer rather than be led by them.
3. Differentiate to grow in declining markets. In mature or declining markets, it may be tempting to use these areas as cash cows to feed more dynamic segments.
- However, differentiating your product or service from the crowd, even in declining markets, can enable you to maintain a competitive edge and grow. To do so requires a firm understanding at a very granular level about what factors customers perceive to underlie differences across products in a given category, and which level of quality versus price provides the optimal value as these needs evolve. In the personal care market, Croda has used this strategy to drive uninterrupted growth over the last decade, even while their peers struggled through the recession. How? They invested in maintaining a close, direct relationship with all of their customers, big and small, working to develop innovative ingredients and technologies that allow their customers to make differentiated claims, which in turn put them in a stronger competitive position.
4. Manage complexity by segmenting and prioritizing:
- Many businesses have areas with multiple customer service requirements that add complexity to understanding the customers’ needs and complicate strategic prioritization. Avoid spreading your efforts too thin by defining the depth of customer knowledge critical for each market served. For example, in analyzing its customers, Dow Corning realized some are commodity buyers and that creating multiple business models to meet their needs could be more efficient. Their use of Xiameter, a web-based portal to sell commoditized product directly to customers, was aimed at creating new business models best suited to serve different parts of companies’ portfolios with varied degrees of differentiation in the most cost-efficient and effective way. By segmenting their customers, Dow was able to carve out a segment best served by a no-frills, less intensive model.
5. Build tangible links:
- If customer intimacy is perceived only as a management slogan, it will remain such and customers will see right through it. Everyone in the organization must understand how “know thy customer” translates into their daily work and the benefits it may deliver. One way is to reward these efforts among employees to create a model of customer intimacy. PC giant Microsoft has leveraged this strategy by incentivizing employees to participate in its customer support forums, providing assistance and advice on products and technical issues, building direct, tangible links with customers that keep them feeling engaged, validated and “heard” by the massive company.
Finding a pathway to growth is a paramount concern for virtually every business. However, uncovering and pursuing hot prospects is just one piece of the puzzle. The real challenge lies in achieving sustainable growth in the medium and long term. Growth beyond the quick hit requires a deep, fundamental understanding of key customer drivers and influences and the ability to leverage these insights to be proactive, creating new opportunities rather than merely reacting to the market. B2B companies that are able to derive clear, actionable insights from customer relationships can drive long-term sustainable growth, regardless of industry forces.