The Customer is Always Right, and
the Right Customer is Always Right
By Ken Talentino

It’s always our goal to build new relationships and create new business partnerships. The more people we connect with, the stronger we both become. So, you probably never thought about interviewing a prospective customer to determine if they really should become a customer in the first place. This appears to be historical sales heresy, since the salesperson’s job is to get a customer. However, successful strategic OEM salespeople understand the value of identifying the right customers: Those that have the highest probability of developing a successful partnership. The development of strategic OEMs is a major investment in both sales and operational resources. A long-term sustainable relationship enables the organization to recoup the substantial initial investment. It also facilitates minimizing the insidious impact of customer base erosion. A high customer retention rate is critical to sustainable sales growth.

A rule of thumb is that annual customer base erosion is approximately 10 to 15 percent. This means a $1 million sales territory could actually start a new year with sales between $850-900K. Thus, new sales of $100-150K are required to attain last year’s number, which means businesses need to grow 20 percent just to achieve a five percent sales forecast. In addition to the strain this places on the sales team, this translates into additional demands upon the entire organization. A negative cycle of working faster—yet hopefully, smarter—while achieving suboptimal sales results is created. The solution is to improve your customer retention rate.

One of the most effective ways to keep your customers is to assure more upfront due diligence in the customer qualification process. In short: Solve the problem before it becomes a problem. Make connections that are built to last. There are several important factors to consider when qualifying a strategic OEM. Below are several key criteria that make a prospect a viable long-term partner.

1. Strategic position in their respective markets. It is important that you understand the customers’ customer. I always like to say, know the game you are playing and determine if you want to play. What are the customers’ major drivers?

2. Financial strength and ability to invest for the long term (historical growth and profits).

3. Technology capabilities, both technically and commercially (excellence in key drivers).

4. Total quality and attitude towards long-term supplier relationships (partnerships).

However, one of the most important factors in customer retention is the compatibility of business models. What are the business drivers? For example, a low-cost producer model will ultimately result in the need for lower component cost. Thus, a premium is placed on lower costs, no frills, and an unwillingness to pay for R&D costs associated with technology-driven companies. A supplier with higher overhead associated with a technology-driven strategy will have a difficult time developing a long-term relationship. This does not rule out finding a profitable niche, but be realistic about customer expectations and needs vs. your capabilities and business model.

Proper upfront due diligence may take more time and effort. It may also reduce your perceived Served Available Market (SAM), but it will focus your resources on the potential customers with the greatest ability to develop into long-term, profitable relationships. The ability to align your organization with the right customer will lead to a higher customer retention rate, resulting in more sales and profits with higher leverage.

Next time: Our series concludes with “Global Sales: A New 30-Year-Old Trend.”

Ken Talentino has held executive sales and marketing positions with leading technology-based companies over the past 25 years. He has been responsible for selling more than $1 billion worth of products to leading OEMs in a variety of global markets, and has played an upper management role in corporate turnarounds in several technology-based companies, while strategically revamping their sales teams. Ken earned a bachelor of science degree in marketing from Sacred Heart University, an MBA in marketing and finance from the University of Bridgeport, and a Six-Sigma Green Belt Certification from the University of Michigan school of engineering. Contact Ken at kentalentino@verizon.net or 508.789.3211.