The Digital Transformation-Customer Retention Connection

August 11, 2016

Is digital transformation simply next-generation tools? Javier Aldrete discusses the critical customer retention features the tech should have and shares a story from the sales VP at an industrial distributor.

In sales, it’s often said that a sales person’s time is best spent selling, and it’s true. Yet, in the past 25-30 years, the role of the B2B sales person has significantly changed making it impossible for them to spend time with each customer. Most notably, B2B companies have grown more complex.

Reps have had to lean on the 80/20 rule to keep their heads above water. As a result, customer retention is on the decline. We often observe that – at any given moment – 20 to 40 percent of a typical company’s customer base is significantly dropping purchase volume. With rates this high, companies are starting in a deep hole relative to top-line growth targets.

Complexity Crowded Out Customer Retention

How did we get this far? In the age of machine learning and self-driving cars, how have B2B companies grown to the level that the sheer complexity of the business has completely overshadowed customer retention? Consider this quote:

“Businesses don’t transform by choice because it is expensive and risky. Businesses go through transformation when they have failed to evolve.”

This is quite telling and many companies I work with are in this position. Failure to evolve into the digital age has rendered the company, and its sales team, ill-equipped to retain valuable customers.

Quick Story: Digital Evolution Retains, Grows Customer Accounts

Actually, it reminds me a story one of our distribution customers recently told. Much like a lot of traditional B2B companies, the company seriously needed to modernize its systems.

In fact, in 2015, when I first talked to the sales VP, green screens were still in place. They were in the midst of a three-year transformation to bring next-generation tools to the workforce.

Like most sales leaders, he knew that churn was a problem. There were some business intelligence tools and whitespace reports in place to stave off churn. But, after a data diagnostic, he was shocked to learn that customers were churning, or dropping off, at an annual rate of 20 to 30 percent.

That’s when it became clear that it wouldn’t be enough to just have next-generation tools, it would be critical for the new digital technology to help sales reps retain their accounts. Reps didn’t need more tools telling them that they were selling four out of nine product SKUs in a given category. They needed to know when they were underpenetrated in a category and when customers began dropping purchase volume.

True Transformation: Retaining & Growing Accounts

Ultimately, sales reps were able to get just what they needed. Retention and cross-sell opportunities were delivered in non-disruptive, easy to use emails. In just six weeks, the solution was configured and tweaked to meet their needs. Now, they can see all the data driving a sales opportunity such as the dollar value in account growth and recovery, the top three SKUs driving change and the 12-month revenue baseline for comparison.

That result? Sales reps received smarter sales guidance, customer retention rate increased by 20 percent and revenue has increased more than 110 percent for accounts with growth potential. That’s truly transformative.

If you’re curious about the actual rate of customer churn in your business, contact us for information on our courtesy sales diagnostic. 

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