Creating Customer Alignment
Recently, I’ve heard concerns from some ag retailers about their difficulties in selling seed. Much of this seems focused on margin received for effort delivered. It’s a reasonable concern, but unfortunately these concerns hide a greater trend. Many full-service retailers may be missing the opportunity to fully participate in one of the greatest opportunities in agriculture today, which is the increasing dominance of the seed factor relative to other crop inputs.
It seems to me that many full-service retailers don’t really know how to sell seed, and consequently, they don’t effectively compete against a local farmer seed specialist. I don’t mean to offend, but the business model of too many retailers is rooted in operational competence and not selling skills and customer knowledge. At the end of the day, you get paid for the value you deliver to customers, and increasingly most of this value comes from delivering outstanding customer experiences across the whole customer experience corridor.
I believe full-service retailers can only achieve a sustainable competitive advantage by paying more attention to the quality and consistency of the experiences they deliver to customers. Recently, I have been discussing how this applies to seed market share and profitability. Work done by AgKnowlogy is showing full-service retailers lag behind their farmer seed specialist competitors in terms of delivering outstanding customer experiences.
As a grandparent, I am reminded again how quickly children learn. A child continually re-evaluates the response it receives from its behavior and tries new approaches. Sadly, adults tend to stick with old behaviors that may not produce optimum results. Without a discipline of learning, we cannot hope to improve. This is the primary reason why I aggressively advocate measuring customer experiences for your business. By segmenting your customers (and prospects) into Promoters, Passives, and Detractors and measuring how each of these rates your performance on experiences that drive loyalty, you can begin to make the organizational changes that drive customer loyalty.
Without ongoing feedback from customers on how well you meet their needs, how will you improve? Where will you focus your efforts if you can’t identify which customer experiences are the most important in driving loyalty? If you don’t know your key performance indicators relative to competitors, how do you know if you are winning or losing the market share race with customers?
In 2005, business consulting firm Bain and Co. did a study in which it asked 362 mid- to large-size companies a single question: “Do you believe you deliver a superior customer experience?” The survey found 80% of executives believed their company delivered outstanding value and a superior customer experience, but only 8% of their customers agreed. We are finding similar results for ag retailers, leading us to believe closing this Customer Experience Gap is the single most strategically important initiative a retailer should priorities in 2010.
The Customer Experience Gap means most companies are not well aligned with their customers. Either they don’t know what is important to their customers — and flounder through lack of focus — or they ineffectively deliver on their service promise. The implications of this for a full-service retailer in the seed business are staggering. In one of our projects, we found the revenue deficit between Promoters and Detractors in our client’s seed business was $21 per acre for corn alone. Across all agronomy categories, we found more than $4 million in annual revenue lost due to misalignment between the company and its customers.
A chart plots grower vs. company perception of the importance of various customer experiences in determining loyalty. Experiences where the retailer and its customers “agree” on the importance fall along the diagonal line. Experiences where customers placed more importance are below the diagonal, and experiences that the retailer placed more importance are above the diagonal.
Revealing what these experiences are would violate confidentiality with our client. However, most relate to seed purchases. Point “S and Q,” for instance, are “recommends appropriate seed varieties to me” and “works hard to win my business.” We worked with our client to help them understand that no matter what they thought, customers believe they need to place more emphasis on certain areas of the Experience Corridor. We used the Service Blueprinting technique I have written about to help the client visualize how they actually work with customers, and yes, how they sell seed.
Our client was able to identify several important areas where service could be improved. Some of these will involved using previously untapped strengths in the company to create new value for customers. As our client’s plan is implemented, we will help them with ongoing monitoring.
At this point, we’ve come full circle. The Customer Experience Gap is real in every industry, and betting it doesn’t apply to you is betting long odds. We recommend taking a serious look at how well you are aligned with customers, measuring your performance vs. competitors on the key drivers of loyalty and then develop a companywide plan to fine tune your service delivery.