How to master the new rules of vendor-customer relationships

Success Chain’s Jason Whitehead explains why the advent of the subscription business model and the explosion of the customer success discipline has redistributed the power in the customer-vendor relationship.

The mega-shift in the customer-vendor relationship is as drastic as moving from a 1700s puritan marriage to a modern-day swingers’ party. The rules and expectations couldn’t be more different. Your ability to quickly recognise these shifts and master how to forge high-impact, mutually successful relationships with your customers will determine if your business will survive, thrive or die.  

Are you ready? 

Changing relationships 

In the good old days of software sales (think pre-year 2000), customers made big upfront purchases and commitments to a vendor. These relationships were akin to a 1700s marriage. Once the customer picked a vendor, both parties expected the customer to stay for years (or life), no matter how unsatisfied you were with the relationship. The time, costs, resource, and hardship to switch systems forced many customers to stick it out with their vendor longer after the romance had died. 

When the subscription business model came into the mainstream (thanks, Salesforce.com), customers had a great awakening. Customers became liberated. They were not only able to, but were actively encouraged to explore coupling up with new partners (vendors). They could experiment. They could try new things, just to see if they liked it.  They could see what worked best for them. They could stick with it for as long as it felt good and then move on. And they could do it at all risk (and guilt) free. So why wouldn’t they? 

If your business approaches customer relationships more like a 1700s married couple and not like a modern-day, Tinder-loving, “swipe-right” free-spirit, then you are in trouble.  Serious trouble. 

The new power dynamic  

The advent of the subscription business model and the explosion of the customer success discipline has redistributed the power in the customer-vendor relationship. Gone are the days when customers could be counted on to make significant commitments. Today, you need to constantly ensure your customers get the value they need for them to stick around.  

In short, you operate in the ultimate, “What have you done for me lately?” world, where only after your customer gets what they want (value) will you get what you want (sustained revenue and growth.) 

 So, what does all this mean for how you engage your customers? 

The era of mutual success  

Today, vendors and customers are mutually dependent on each other. The customer needs the vendor’s products and services to solve its underlying business problems and achieve its goals. The vendor’s subscription business model requires its customers to achieve success in order for the vendor to win the renewal year-over-year. 

Success Links 

When we look at this visually, we see that each cycle of a customer’s contract/renewal period is a circle, like a chain link. The success of the customer and vendor are inextricably connected, creating a “Success Link.”  

Within each Success Link, the customer purchases (or renews) the vendor’s product and then must adopt it in a way that creates and demonstrates value to the customer. Only after the customer achieves its goals will the vendor get its value – such as renewals, expansions, references, testimonials, and referrals.  

Success chains 

Each Success Link is a single contract cycle. Each new Success Link is connected to the one before, creating a “Success Chain.”   

The goal is that each customer’s success chain is as long and robust as possible. The longer the chain, the more value that is created for both the customer and the vendor. 

Beware of broken success chains 

As the saying goes, a chain is only as strong as its weakest link. Your customers will only renew and start a new success link if they like the results of the current cycle. If your customer doesn’t get the results they want, your customer doesn’t renew, and the Success Chain is broken. And you, the vendor, loses. 

Creating win-win partnerships between customers and vendors 

How do you engage customers to get your customer to use your product in a way that creates clear, measurable, and demonstrated value? How do you ensure your customer achieves the value they need so that you achieve the results that you need? 

You should: 

1. Look way beyond just the features of your product. Help the customer consider and address ALL the factors that impact their ability to solve business problems and achieve success by using your product. This requires a focused approach to managing change and driving user adoption in the customer’s organization. 

1. Recognise that user adoption is on the critical path for customers to achieve success. Low or ineffective user adoption is perhaps the most significant root cause of failure and lack of renewals. Remember:  No Adoption = No Value = No Renewal 
    
2. Evaluate your customer’s experience and capabilities in change management and user adoption. If they lack the expertise, capacity, and resources to manage change and drive adoption of your product effectively, they will not achieve the level of success needed for them to renew. And your company will suffer! 
    
3. Agree with your customers about the steps that need to happen to manage change, drive user adoption, and deliver success to them. If they lack the expertise and resources to make this happen, you need to figure out how to address this critical gap. 
4. Incorporate change management and user adoption actions and responsibilities into all of your customer success plans. Be sure to link all of these actions to the specific business outcomes your customers seek. 
5. Assist your customers in executing their plan, measure the actual results they are achieving, and then explicitly review with them all the benefits they have received. Remember, they need to achieve and perceive success! 

Historically, managing change, driving user adoption, and measuring results was left to the customer. It was their organization; it was their responsibility. Not anymore. 

Today, vendors recognise that while managing change and user adoption should not be the vendor’s responsibility, given the new power relationship between customers and vendors, it is most definitely now the vendor’s problem. 

Recognise that your success as a vendor is dependent on effective change management and adoption within your customer’s organization. You now have a need and vested financial interest in helping your customers manage change and achieving desired results, so that everyone wins.  

Keep them wanting more

Remember, customers are free spirits who need a reason to stay loyal. To keep customers satisfied and coming back for more, you need to evolve how you engage customers.  

Your customers need to: 

1. Achieve and perceive value from their investment in your product or service.   
2. Believe they will achieve more value from staying with you than from moving on to one of your competitors 
3. Solve the underlying business problem that made them purchase your product in the first place! 

Your success is linked to their success. Their success is linked to your success.  

Yup, the relationship rules between customer and vendor have dramatically changed. There is no going back – and really, who wants to? You need to go forward, get creative, and keep your customers satisfied and wanting more. You will love the results! 

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