By Sean Geehan, CEO, Geehan Group

In the B2B world, the actual number of customers is small when compared to B2C.  For example, At Celestica, an $8 billion manufacturer, the customer base is 100.  (And like most B2B firms, you’ve probably never heard of Celestica).  B2B executives are truly addressing a much smaller pool of customers, as opposed to a B2C company like Starbucks, whose revenues are close to Celestica at $10 billion, but the number of customers is 70,000,000.

Running a business is a challenge. Here's a way you can protect your business from major account losses.

Why is this critical?  Like most B2B companies, Celestica’s top ten customers amount to 90 percent of their revenue.  Imagine Celestica losing just 2 or 3 of these customers?  The loss would result in a devastating (15 to 30 percent loss of their total revenue) and since many B2B companies transact multi-year contracts, the compounding effect year-over-year would be even greater.

Conversely at Starbucks, their top 80 percent of total sales comes from approximately 15 million customers. So, no matter how many venti, nonfat, cinnamon-sprinkled, decaf lattes Starbucks’ top one thousand customers bought, it wouldn’t cause a dent to Starbucks’ performance if all those customers decided to switch to McLattes from McDonald’s.

High revenue concentration with a small number of customers in B2B companies is a harsh reality up and down the scale, regardless of the company’s size:  the fate of any B2B operation lies in the hands of just a few—and the power of these customers is enormous.  “Once we realized that we only need to address a few dozen large customers in order to dominate our market, it changed the game for us, strategy, marketing, sales, etc.” cites Richard Hearn, CEO of $20 million Crown Partners.  “Coming from a Procter & Gamble background, it was a complete mind-shift for me and other members of the leadership team.”

What if your B2B firm lost two of your top five accounts in the next year? Unlike comparable-sized B2C firms, if your B2B company loses just a few of your top customers, your business is significantly and possibly catastrophically impacted (top line, bottom line, headcount, support, economies of scale, morale, and solvency).  Given this, how are you addressing strategy, retention, customer growth differently?  How are you engaging the few customers that control your fate?  Marketers need to work closely with sales organization to develop and implement comprehensive plan that ensures that the few that control your fate are here to stay and grow.

In conclusion, to elevate your marketing programs to the next level, focus on the referrals coming from influencers and decision-makers within your existing customer accounts.

How? Start by establishing a Customer Advisory Council. A Customer Advisory Council is made up of 20-30 decision makers from your best accounts. Unlike other marketing or sales activities that are focused on generating leads or closing deals, Customer Advisory Councils are focused on building and enhancing relationships at higher levels and securing market insight necessary to keep your business ahead of the competition.

The results: In addition to insight and market direction, organizations which have implemented Customer Advisory Councils, have seen on average:

• 12-22% increase in customer retention
• 10-25% increase in new sales
• 50-400% increase in references at decision maker level
• Enhanced alignment between Sales and Marketing

If moving up the value chain is the goal within your customers, a Customer Advisory Council can be the ultimate B2B weapon for your organization.

Sean Geehan is CEO and founder of the Geehan Group, the recognized leader in connecting B2B executives to their most important customers in order to maximize customer retention, sales, profits and long-term market alignment.  Geehan is also the author of the upcoming book The B2B Executive Playbook. Contact Sean: sean@geehangroup.com or 877-226-1621.

Monday, July 26th, 2010, 3:42 am   |   B2B  |  RSS feed |  Respond  |  Trackback