With the start of 2015 comes the obligatory new year’s resolutions that, studies show, many will attempt but few will actually achieve. While these results may not be surprising in our personal lives, we at Ignite Advisory Group are troubled when companies take a similar approach – with parallel results – to launching their customer advisory board programs.
Many companies seeking our guidance have robust plans or at least the desire to launch (or perhaps restart) their advisory program. Yet such well-intentioned initiatives can too quickly reach “failure to launch” status due to lack of understanding (or internal communication) of the crucial business benefits, be stalled due to analysis paralysis, or simply pushed to the perpetual back-burner by the “tyranny of the urgent.”
As such, and while there is abundant information outlining the benefits of holding a well-run customer advisory council, perhaps it would be more insightful to review – and calculate – the potential costs of NOT starting your customer advisory board program in 2015:
Is your company on-track to meet its revenue projections in 2015? Do you know the revenue produced by your top 20 or 25 accounts? Do these accounts plan to expand – or at least maintain – their relationship with you in the coming year? Ignite’s data shows that B2B companies that operate successful customer advisory boards enjoy a 9% increase in new business among advisory board members starting in year two of advisory programs above non-advisory customers. As such, take the revenue of, say, 10 of your top 25 accounts and multiply this times 9%. Hold on to this figure.
What would be the cost of one – or several! – of your top customers leaving you for a competitor in the coming year? Such an occurrence usually sets off alarm bells and extensive post-loss analysis within companies – after the key client has left. But customer advisory boards can proactively mitigate against this even happening in the first place. Ignite’s analysis shows that companies benefit from a retention rate of 95% amongst advisory program participants. As such, take the revenue of one or two of your top 25 customers.Hold on to this amount.
3. Product Roadmap
Is your product management team confident its products and features under development are desired and will be accepted (purchased) by the market? (If so, how?) Have they engaged with actual customers to vet their product roadmap? What would be the cost to your company if it missed the mark in its product strategies? Take your number of developers and multiply by a year’s salary each.Hold on to this figure.
4. Strategic Priorities
In 2015, is your company making a big bet on an existing market or expanding into a new one? Assuming the appropriate market data has been meticulously collected and extensively analyzed (it has right??), what would be the cost to your company if it gets this bet wrong? Were your customers – perhaps the actual purchasers of the new offerings – consulted on these investments? What was their feedback? Do you know approximately the investment being made on these big bets? (E.g. product development, marketing, new hires, etc.) If so, hold this figure.
What is the opportunity cost of potential clients not hearing about your products or services? Worse, what is the cost of a prospect asking one of your existing clients about your firm, and getting a negative review? Our experience shows that customers that participate in client advisory councils are more likely to recommend their host companies. In fact, customer advisory board member participation in reference programs, testimonials and thought leadership efforts is 57% higher than non-CAB members. As such, take the contract value of one or two prospects that didn’t hear about you or heard something negative.Hold this figure.
Now add up the amounts in items 1-5 above (or at least the ones that apply to your business). If you’re like most companies, this represents not only a large amount, but a large percentage of your company’s revenue in the coming year. Even if you don’t know the amounts, hesitate to make wild estimates or just didn’t bother doing the math, you can see that this is a tremendous amount – one that would be fiscally devastating to your company to lose.
Now consider the relatively small amount it would take to mitigate these risks and proactively engage with your best customers in 2015. Investing in a world-class customer advisory program would surely be a savvy, cost-effective investment to ensure your company’s success in 2015.
Indeed, the cost of NOT doing so would almost certainly be much, much higher.