Grow Market Share

Yep, Saturday was Cinco de Mayo; hard to believe it is here already. Now for those of you that think Cinco de Mayo is five reasons to choose real mayonnaise over Miracle Whip, you’d better buckle up before reading on.

Cinco de Mayo is Mexican Independence Day, right? Nope. Not right.

Cinco de Mayo is a holiday recognized mostly in the United States to celebrate the Mexican culture. Oh, and to drink lots of Coronas, with limes of course. It is also celebrated in the Mexican state of Puebla, where it is formally referred to as El Dia de la Batalla de Puebla (translation: The Day of the Battle of Puebla).

In this battle in 1861 against the French, a group of about 2,000 from the Mexican army defeated a well-armed group of French soldiers numbering about 6,000—in a single day. Realize that the French army was comprised of professional soldiers, who were well-financed and consistently successful. The 2,000 representing the Mexican army? Farmers, locals and others with little financing and little experience.

How did they win? There are probably lots of factors that contributed to the victory, but there are four things that stand out that businesses can learn from.

1. They were grossly underestimated by their enemy. The French never imagined the Mexicans would really even put up a fight. In fact, some of them believed they were likely to be friendly to the French. So, a force of 6,000 trusting the enemy would simply lay down encountered a violent response, one that turned out to be deadly for about 500 of the French. We cannot underestimate our competition. We must always assume they are working against us and a little ahead of us. We must be motivated to increase our market share.
2. The men comprising the Mexican army were chosen by the Mexican president, Benito Juarez. He chose a group of men that were fiercely loyal to Mexico. Men who were willing to go above and beyond to make sure they succeeded, even in the face of adversity. Another good lesson for businesses…loyalty is a strong emotion, especially with associates. And associates are the “tip of the sword” for businesses.
3. This group chosen for their loyalty was hastily thrown together. They were led by General Ignacio Zaragoza who died of typhoid shortly after this victory. While Zaragoza was there to lead these men, they succeeded because they were self-starters, self-motivators. While they relied on their leader to direct them on the battlefield, they all took their positions and each “did their thing.” Just like each of us. We don’t need anyone to motivate us; we are motivated to serve our customers and to succeed, to grow our business profitably.
4. This victory was a real energizer for the Mexican army and set the stage for this resistance movement, with the aid of the United States, to eventually force the French to withdraw. Success breeds success. It did for the Mexican army and it will for us. We should always use even the smallest of wins to propel us.

I know. All you want to know about Cinco de Mayo is where you can get the cheapest case of Corona. But this holiday, like many things, can remind us of the things we need to do to succeed. Good lessons and a party to go with them…what more can you ask for?

Another post in my 140-word blog series (it's harder than you think!).

I once wrote a post on the importance of testing your hypotheses. In it I mentioned the importance of a culture of testing and inquiry. The problem is that many meetings consist of opposing belief statements that are resolved by majority rule instead of actual testing and validation.

Here is my simple idea for creating a stronger culture of inquiry:

• Replace "I think..." with "My hypothesis is..."

If I hear, "I think we can grow market share by offering better support," I immediately think whether I agree or not. If I hear, "My hypothesis is that better support would result in growing our market share," I immediately think about the customer feedback we can use to test it. Maybe this only works for analytical types, but try it for a week and see what you think.

P.S. For a fun meeting game, count how many times "I think..." is used in your next meeting or add it to your business buzzword bingo sheet.

While Channel Partners are customers too, unlike the traditional customer, partners are able to provide a unique perspective. When it comes to Voice of Partner versus Voice of Customer survey research, consider these four differences:

1 - Many Channel Partners sell competing products and services giving them a unique perspective on what drives customer purchase decisions. Their input can help companies understand what causes a customer to purchase one product over another competing product.

2 - In a similar manner, OEMs can use partner input to understand what drives a partner to recommend one product over another.

3 - Many partners are combining an OEM's products with other products to deliver a complete solution. Having a better understanding of solution offerings, can be valuable input for the product group.

4 - Customers who purchase from a channel partner often go to the partner for support. Partners can provide a unique perspective on what is needed to support the indirect customer. This input can also be leveraged for serving the direct customer.

Corporate business strategy can benefit from insights provided by the channel. The partner perspective can be used to grow market share, enhance the product roadmap, and deliver an experience that both direct and indirect customers value.

If you are working to create a customer focused leadership position, consider including the perspective from all customer types.

Photo credit: stevendepolo

Walker recently set out to answer the question, "What drives partner preference?" Or, asked a different way, "Why do partners recommend one product or brand over others?" 

As we analyzed data from more than 20,000 partner surveys across multiple IT OEMs, one of the findings that emerged is partners have similar needs as customers.  

As we reviewed the drivers of partner preference and compared them to the drivers of customer satisfaction and loyalty, we noticed some similarities:

• Partners and customers prefer OEMs that offer reliable products. This area, more than any other, including the financial incentives that OEMs provide to their channel, has the greatest impact on partner preference and is a common top driver of customer satisfaction and loyalty.
• Partners and customers want to work with companies that are easy to do business with. While this is a nebulous concept, partners and customers generally consider the people and the processes they interact with when evaluating a company as being easy to do business with.

As we sifted through all of the data, I couldn't help but wonder what would happen if OEMs adapted their voice of customer (VoC) best practices to their partner relationships. Best practices such as soliciting partner input, creating partner-specific action plans for vulnerable relationships, and leveraging partner feedback to prioritize improvement initiatives. Would that help them grow market share? Would this help them solidify their customer retention strategies?

Based on the work that we've done, the answer is yes.

As a customer strategist, your role is to help your organization listen to customers and develop customer strategies that will help to earn more from customer relationships. (e.g. Strengthen customer loyalty. Retain customers. Attract new customers. Grow market share. Develop new markets. Be innovative.) It’s a big responsibility. As a result, it is important to have the required knowledge, experience, and expertise. 

But, what if you don’t have all of the answers? Our culture often sets the stage for people to feel compelled to give the impression they have all the answers - even when they don't. Despite that cultural phenomenon, I am starting to see signs where vulnerability is valued.

·         In the book Getting Naked, Patrick Lencioni challenges service providers to be, “completely transparent and vulnerable with clients in order to overcome the three fears that ultimately sabotage client allegiance.” 

·         A recent Harvard Business Review - Management Tip of the Day encouraged readers to, “Admit you don’t know all of the answers.” 

·         Steven D. Levitt made the case that it can pay to say, “I don’t know,” on the new Freakonomics Radio Podcast.   Pretending to know the answer to something can be destructive and makes it impossible to learn.

Of course one can’t use this approach all the time. But surely, no one is fooled into thinking we always have all of the answers…

Kitty Radcliff
Vice President

Serving customers in a way that creates a loyal following is hard. Add in the complexities created by an indirect go-to-market strategy and the degree of difficulty rivals the reverse 4 ½ somersault in the pike position (4.8 out of 5.0).

Why is such a strategy difficult? The main reason is that many of the actual interactions with the customers are conducted by your channel partners, not by your people. It also creates a more complex relationship comprised of several relationships as shown below.

There are several companies that have built a strong channel and leveraged that go-to-market strategy to drive revenues and create market expansion. Here are some of the ways in which these companies have created a strong customer experience with indirect customers.

1.      Listen to your customers. It doesn’t matter so much whether the customers are served directly or indirectly, their demand is still driving your revenues. A strong Voice of the Customer program helps understand the customer experience from their perspective. Make sure to share the feedback and insights with your channel partners—much of the action and follow-up required might come from the partners themselves.

2.      Listen to your partners. Lots to learn here. First, how can you improve the experience of partnering with you? How can you make it easier to work with you? How can you build a preference for your brand? How can we drive more business together, benefiting both our businesses and growing our market share?

3.      Listen some more to your partners. Your partners are dealing face-to-face with your customers and they are learning from your customers every day. They are learning what it is like to experience your products, what unmet needs they have, and how they interact with your partners. These insights can help us to create the consistent experience we know customers thirst for.

4.      Treat your partners like customers. I know we don’t think of them this way, but channel partners are customers. We sell to them (and through them), we invoice them, we collect from them. While they are a conduit to the ultimate customer, they buy from us and help us drive revenues. We need to treat them like customers and focus a little attention on them. Part of being customer-focused is being partner-focused.

The best way to deal with complex situations is to break them down into manageable pieces. Eat the elephant one bite at a time. In this case that means understanding all aspects of the channel and understanding how we interact and create an exceptional experience for channel partners and customers.

If you go to a horse track and intend to place bets on certain horses, you will likely end up looking at a racing form that looks something like this. My first reaction? Wow, there is a lot of data here and I’ll bet most of it is important. But, what I really need to know is which horse is going to win and how much should I bet on that horse.

Same thing happens with customer listening initiatives. There is a lot of data … answers to several questions provided by many customers. And, it is likely all important in some way. But where the rubber hits the road (or in this case, where the hooves hit the dirt) is in the analysis that is predictive (what is going to happen?) and prescriptive (what should I do about it?).

These initiatives should tell you:

1.      Which customers are likely to defect and what can we do to stop them (assuming they are good customers and we want to stop them!)?

2.      Which customers are likely to refer us, buy new offerings, give us additional share of wallet, etc., and what can we do to leverage and accelerate these behaviors?

3.      Given our current customer experience, what is likely to happen to our market share, customer profitability, top line growth, etc., and how can we optimize those success measures?

4.      Which customers are not likely to help us grow and what are the irritants causing them to refrain from helpful behaviors?

Whether you are betting on the ponies or betting resources that you can improve your growth and profitability, having the right data, analyzing it correctly and focusing on the important insights will increase your odds of success. A focus on your ultimate objective—increased shareholder value through profitable growth, rather than an artificial score like satisfaction or NPS—will point your analyses in the right direction.

Are we or aren’t we headed for a double-dip recession? Hard to say, especially since most of us feel like we never left the first recession. So how about this premise: It doesn’t matter. For most businesses right now, demand is soft, business could be better. Forget what the economists think about the macro-situation; let’s all worry about our own businesses and get them headed in the right direction.

What can we do to deal with the current environment that is, at best, apathetic and at worst, slowing from lethargic to near dead?

1.      Be confident. I’m not crazy and asking you to be confident in leadership or government. I am suggesting we all be confident in ourselves and in the value we each offer to our customers. That confidence is contagious and we could use a heavy dose of viral growth in the feel-good arena.

2.      Focus on success. Focusing on avoiding failure is much like trying not to lose—it almost certainly assures that you will. Look for ways to take advantage of the current market. Focus on positives and find the growth opportunities where you can.

3.      Celebrate wins. Don’t worry about the size of the wins, if you see some wins, call them out. Celebrate them. Get in the habit of winning. Constantly losing or underperforming tends to breed a culture or build a habit, even an expectation. Build an expectation of performance.

4.      Help your customers. First realize if your demand is not great, chances are your customers are hurting a little too. Can you help them solve some of their problems? That is what customer-focused companies do well.

5.      Co-create. Find ways to work together with your customers to identify the best way out of this bramble. There is no better time to innovate than now and no better partners than those you will be helping with your innovations.

6.      Partner with your best customers. Your best customers, those where the mutual value is the highest, are terrific sources of opportunity. If you are looking to grow your market share (after all, if the market is not growing you will have to take market share to grow), look first to grow your share of wallet within your best customers (those that view you as a partner.)

Double dip or not, there are ways for us to succeed in this soft economy. And guess what happens as one-by-one companies start to succeed? We dig ourselves out of this mess. Double dip? Maybe, maybe not. Long-term recession? It’s up to us.

When we show customers and prospects The Walker Index, we generally get two questions:

1)      Can I invest in that index? The answer is no – the Index is a “virtual” fund made up of our publicly-traded clients. The purpose of the Index is to provide a tangible proof-point for why adopting a customer-oriented strategy makes good business sense. In this case, the focus creates the kind of financial outcomes that the market at large finds attractive, and therefore, demand for stock in these companies increases (which makes the price of the stock increase).[1]

2)      What explains the differential in the long-term value of the Walker Index vs. the broader market indices? Since its inception in 1994, the Walker Index has outperformed the broader market indices by anywhere from a factor of 6:1 to 8:1. What explains this? I believe the answer is that companies that have a true orientation toward their customers are attracted to working with Walker, which increases their likelihood of long-term success. 

This answer, however, is not very actionable – so, with the help of my colleagues, we conducted an assessment of the companies in the Walker Index across the six areas of world-class customer listening in an effort to better understand what steps companies can take to emulate the success exhibited by our clients. Over the next several weeks, I will share some data from that assessment and will conclude with some additional insights that we have seen in the data that we have tracked over the last seventeen years.

The first area that we will examine is the notion of Relevance and Alignment. The idea is simple – for an organization to have an effective customer listening program, there has to be a firm connection to the company’s strategic initiatives. This effectively cements the notion of customer centricity with the key methods and indicators that management will use to assess the firm’s success. This critical first step is what keeps a customer-focused strategy from becoming the management “flavor of the day;” moreover, it creates the imperative to pursue the discipline of Validation. We will focus specifically on validation in a future blog.

Relevance and alignment are commonly thought of across two dimensions – business issues and financial outcomes. I tend to think of these in a cause-and-effect manner – we link to business issues so that we can connect the rationale of the customer strategy to the core issues facing the business; if we are successful in addressing these issues, then the financial outcome will be the outcome we achieve. Common business issues might include:

1)      How can we more effectively cross-sell our product/service portfolio across our existing client base?

2)      How do we make certain that our new product initiatives are aligned with the needs of our customers (and can we foresee those needs even before our customers – and our competitors – do)?

3)      How can we improve our revenue forecasting capability in an effort to minimize variance in our anticipated financial results?

4)      What firms would be an attractive acquisition candidate for us (and how do we maximize our probability for a successful integration of the two firms)?

The financial outcomes are generally the outcome from addressing the business issue; common examples include:

1)      The level of customer retention (and the corresponding impact to the top- and bottom lines);

2)      Share of wallet and growth within an account;

3)      Average customer spend and breadth of the product/service portfolio that a typical customer purchases;

4)      Adoption rates of new technologies or products among existing customers and the impact on firm revenue growth;

How do the firms in the Walker Index stack up? Over 90% of the Walker Index companies have clear connection to the core business issues, and nearly three out of five firms have strong alignment to financial outcomes and the trend appears to be showing signs of continual improvement.

This focus on relevance and alignment clearly creates a "stickiness" that is a hallmark of world-class customer listening, as it provides a foundation upon which customer-centricity can nurture and grow, which leads to superlative financial performance. 

In my next entry, I will focus on the importance of Team and Resources in the customer listening process and will share how the Walker Index companies perform on that dimension.

Mark A. Ratekin
Senior Vice President, Consulting Services

• Their role
• Why it is important to follow-up with customers
• What you want them to share with customers
• What you don't want them to share with customers
• What you would like them to do after the follow-up

• How closely does this feedback align with your experience?
• Will these areas of focus have the greatest impact on your experience or are there others that would have a greater impact?
• While the company is looking at these areas for improvement, are there any additional suggestions that we can focus on to improve the value you receive?

• Client interactions - Walker clients shared their journey and best practices for leveraging customer, partner, and employee insights to create world-class outcomes. We heard numerous stories about individuals who have used the customer or partner perspective to drive change within their organization and generate a return on the investment.
• Roundtable discussions - Walker clients and Walker associates facilitated roundtable discussions on the topics of 1) strengthening channel/partner relationships , 2) engaging account teams, 3) leveraging the customer perspective for a competitive advantage, and 4) increasing the value of customer comments through text analytics.
• Six working sessions  - Walker consultants facilitated discussions and activities related to each of the six essential elements for world-class listening (see diagram for the six elements). Each session included a description of world-class and steps for getting there.
• Social time - There were several opportunities to network and interact with all of the attendees and to enjoy the Palm Springs destination.

I am from from Indianapolis, the Racing Capital of the World.  It is the month of May when the Indianapolis 500 Mile Race, The Greatest Spectacle in Racing, is held. Fast cars are on my mind. And we tend to use some racing analogies once and awhile in this city. Here’s a couple that apply to managing key accounts.

There are no pit stops in account management. When something is wrong with an Indy car, the driver pulls it into the pits, stops and lets the crew make the appropriate changes. Sort of like a time out except that the rest of the cars are still making lots of left turns at 200 mph.

When we are managing key accounts, we don’t have the luxury of stopping to make the appropriate changes. We have to make them on the fly, sort of like changing the engine while the car is still flying around the track. Without the ability to make a pit stop, your changes need to be well orchestrated and executed. And they had better be consistent with the needs of your customers. The more responsive you can be to the needs of your customers, the more likely you will be to execute a significant change without pulling into the pits.

Strategy follows measurement. Indy-car racing has become so scientific and fact-based that the racing teams have a terrific amount of capital invested in information systems that are linked to the performance of the cars. The computers feed all kinds of performance information to the crew chief who sets strategies based on the measurement. The teams that win, measure the right characteristics in a sophisticated way and set strategies that are responsive to the measurements. The race is run for 500 miles at speeds in excess of 200 mph and sometimes the winner is separated from second place by less than the length of a car!

Our businesses operate the same way. Understand your customers by listening to them in a sophisticated, validated way (no serious racing team EVER tries to take a simpler approach that gives them less information). Then, use what you have learned in your strategic and account planning processes.

Just like in racing, the difference between growing our market share and losing can be created by a very slight performance difference. Assuming you know enough about your customers will ensure your competitor takes the checkered flag.

As we head into Final Four weekend it got me thinking about the keys to winning basketball games. Being from Indianapolis, I couldn’t help but reflect on the Butler victories in my analysis. Here are a few factors I think make the difference between winning and losing.

1.       A strong defense

2.       Capitalizing on turnovers

3.       Balanced scoring

No team has scored 60 points against Butler in the NCAA tournament. You can win games with good defense. Against Syracuse, as it was with Murray State in the second round the difference was turnovers and Butler’s ability to score points off of those turnovers. Balanced scoring is another Butler strength. Five different players have led the team in scoring in the last 10 games, including defensive specialist Ronald Nored’s 15 against Murray State.

Ready for the transition from basketball to business? Here we go. I think these three lessons in basketball success relate well to consistently growing revenue year over year. Here is the thinking.

One way to grow revenue is to keep what you currently have. It’s hard to fill a leaky bucket. Keeping customers is like playing good defense. Defending your market position and the relationships you’ve worked hard to develop with your customers.

Another way to grow revenue is to take share from your competitors. Capitalizing on competitor’s vulnerabilities is one way to take share. Not too much of a stretch from capitalizing on turnovers in a basketball game, right?

How many championship caliber teams have only one player that can score? And how many companies consistently grow revenues by banking everything on one growth strategy? Not many. Luckily for Apple they didn’t bet everything on Apple TV. Companies that consistently grow revenues do so with a diversified portfolio of growth strategies. 

That’s enough analysis on the keys to victory. Time to play the game. Go Butler!

Noah Grayson
Walker

Customer-focused companies hammer the competition. Measured as many different ways as we can come up with, every time, companies that are customer focused beat those that aren’t. And not by a little either. They hammer them.

For the last 15 years, we have maintained the Walker Index. The Walker Index is a stock index comprised of our clients—companies that are customer focused and use that focus as a lever to generate better performance. Over the last 15 years, these companies have outperformed the marker by a multiple of 5 to 1!

Sort of begs the question, “What are these companies doing differently that allow them to consistently be high performance companies?” Here’s their secret. There are three areas that make them different, but all three are characteristics that are simply part of their culture, they are subconscious and second nature.

The first characteristic is their customer-focused leadership. All the leaders in the company put the customer first, starting with the CEO. And it isn’t lip service. They really mean it, they demonstrate it with their actions. The importance of customer relationships is part of all internal business reviews. It is discussed on earnings calls. It is viewed as a competitive advantage within the company, not an area to score once in a while.

The second characteristic is the infrastructure built to accommodate customer-focused initiatives. This infrastructure makes customer insights part of the management information system, no different than financial or operating data. It also ensures that the customer perspective is part of every strategic plan or critical decision made by the company. Customer focus is part of the culture of the company, its built into the processes that all employees use every day.

The third characteristic is also part of the culture. These companies are never satisfied that they have done enough to help their customers succeed. They have an insatiable thirst for action to improve the value delivered to their customers. Some call this a bias for action. Call it what you want, but it is a game changer. The companies that use customer focus as a differentiator are constantly listening to customers and acting on their learnings in a quest to help their customers achieve their goals.

We all strive to be high performance companies. And who doesn’t want to hammer the competition? Our companies can use the perspectives of our customers to leverage an effective competitive advantage, grow our market share and improve our margin structure. But only if we have these critical characteristics in place.

In my last entry, I discussed ways that we conduct analysis that links customer loyalty to firm financial performance at a customer/account level. In this entry, I will discuss the linkage between customer loyalty and market performance.

A growing base of research has quantified the linkage between stock price, stock returns and customer loyalty (see, for example, Aksoy, Cooil, Groening, Keiningham & Yalcin (2008) and Fornell, Johnson, Mithas, & Krishnan (2006)). Much of the literature has focused on the connection between customer loyalty and stock price – that is, is there a link between customer sentiment (as measured by traditional customer satisfaction/loyalty metrics) and how much value a share of the company’s stock carries? As it turns out, there is a connection, and it follows intuitive reasoning – the more satisfied a company’s customer base, the more favorable the stock price.

But stock price is only one factor to consider – the other factor to consider is volatility. Volatility refers to the ups and downs a stock price experiences, and it is a measure of risk – the more risk in a stock, the greater the volatility. When we refer to volatility in a stock, we are generally referring to the composite of two broad types of risk – first, there is systematic risk – this is the risk that is associated with the market at large, best characterized by the John F. Kennedy quote that “a rising tide lifts all boats.” The other type of risk is idiosyncratic risk – this is the risk associated with actions of the firm. For example, management decisions regarding products, pricing, customer segments, etc. have an impact on idiosyncratic risk.[1]

To date, the literature on the connection between stock risk and customer loyalty has been pretty sparse. Moreover, the available literature has focused exclusively on the topic of systematic risk – in other words, they have focused on how stock prices move relative to the total market, not the company-based idiosyncratic risk.

In the November, 2009 Journal of Marketing, Kapil Tuli and Sundar Bharadwaj add significantly to the literature in their paper “Customer Satisfaction and Stock Returns Risk” by focusing on both sources of risk – systematic as well as idiosyncratic. They find that customer satisfaction scores “insulate a firm’s stock returns from market movements (overall and downside systematic risk) and lower the volatility of its stock returns (overall and downside idiosyncratic risk).”[2] That is, the greater the satisfaction/loyalty of a customer base, the less volatility that is exhibited by the stock.

So, the bottom line is this - companies with strong customer loyalty enjoy not only better stock returns, but they are also less susceptible to volatility in their stock price. We have independently corroborated these findings with our Walker Index - a composite stock index  of Walker clients that has outperformed the broader market indices by a factor of 5 to 6 times since its inception. The Walker Index also has less volatility than the broader market indices, as measured by beta as well as upside and downside capture ratios.

In these first two entries, we have discussed how loyalty metrics and financial performance are linked from an internal/micro perspective (i.e., at the customer/account level) as well as at an external/macro perspective (i.e., at the market performance level). What are the implications of these findings? I’ll address that in the third (and final) entry of this series.

In the meantime, what do you think? How can we leverage this information to more effectively run our businesses?

Mark Ratekin
Sr. Vice President, Consulting Services & Resource Management

You wouldn’t really expect to find Yeti in the Mojave, Sasquatch in the Caribbean or Nessie in Lake Michigan. And many companies are not expecting to find dramatic growth in revenue during these trying economic times when overall spending is being reduced substantially by many companies.

But, the companies that will emerge from these challenging times the strongest, are those that are growing their market share, even if the total market is shrinking. Many companies are growing their market share one customer at a time. They are focusing on increasing their “share of wallet” with their current accounts. The aggregate effect of growing your share of wallet with your existing accounts, of course, is to grow your total market share.

Easy to say, but hard to do? Maybe. But, what if you knew how loyal your customers were to your company and to your competitors? What if you knew that for each individual account? What if you knew the names of your truly loyal customers who were not at all loyal to your competitors? Talk about targeted selling…that’s like hitting a bullseye with a shotgun.

The better you understand your customers and their perspectives about you and your competitors, the better equipped you are to grow your market share and emerge from these doldrums a winner.