SMART DESIGN

30 | L&L
Making the most
of your sticky business
BY BOB CRONIN of the Open Approach asks whether you are investing enough in making your employees
and customers ‘stick’
Pressure-sensitive, cut-and-stack, shrink sleeve, packaging,
product identification. Whatever your business, you likely spend
a large percentage of gross annual revenues on the adhesive
properties of your products. You review suppliers, evaluate
environmental and recyclability issues, and test formulations.
And you are likely look to at Labels & Labeling to introduce you
to new possibilities to achieve greater manufacturing success.
Indeed, glues and adhesive substrates are key to what you
produce, and they deserve every bit of attention and cost you
wish to expend.
But what about the ‘stickiness’of your customers and
employees? What expenses are you dedicating to ensure their
adhesion to your business? What programs and opportunities
have you established that specifically address these
constituencies and their needs? You can market yourself by
products, services, equipment, and capabilities. You can boast
about your competitive advantages and your cutting-edge
digital press or unique die-cutting ability. But it all boils down
to your people. This is how you are really judged in the
marketplace.
Every credible M&A transaction centers on an examination of
customers and employees. And no discussion about company
preparation – on either the selling or buying side – would be
complete without addressing these crucial resources.
Though less tangible than the xxx-per-minute output
device, the human element remains the essential factor in the
ongoing health – and growth – of every business. In today’s
electronically driven world, this can be easy to forget. You may
think your neighbor’s next-generation systems platform will
automatically give them a higher value. Or that more equipment
will be more attractive to prospective investors. But the truth
remains: Nothing drives prosperity in the label industry more
than your customers and employees. And thus, any wise
acquirer is going to review both of these, just as thoroughly as
they do your financial data and value proposition.
THE STICKY CUSTOMER
When you put your company up for sale, every acquirer will
ask for information on your accounts. Reviewing your customer
list, length of relationships, and retention rate/account turnover
can tell an acquirer about how you are viewed by the client
and the marketplace at large. It can indicate where you stand
competitively and how you compare to similar properties. Your
top 10 customer list and historical performance can also help
give them a picture of the value of the business based on the
ability to secure and retain customers and the cash flow they
generate.
Surprisingly, very few selling companies have this information
readily available. In fact, many times, this information is
relegated to the chief financial Rottweiler or company auditor.
Yet, understanding your best customers is something that really
needs to be done by everyone in a customer-facing position
– sales team, customer service reps, etc. And it’s not just a
matter of determining who they are, it’s about finding out what
LABELS&LABELING
it is about your company that keeps them onboard. In order
to create new sticky customers, you really should understand
what you’re doing right – or wrong. From there, you can apply
that same thinking as you develop new relationships.
Many companies neglect their long-time loyals or top 10,
focusing efforts on winning new ‘whales’ or trying to fight the
never-ending bidding wars. True, in today’s marketplace, we
are all confronted by the issue of price. And it’s an important
topic to confront. Never do you hear you are not charging
enough, but often you hear that you are charging too high, or
not competitive. You’ll hear this from every type of client, with
the intimation being that they might change suppliers. But
change equals risk, and the reality is that conversion to a new
label provider can be extremely painful to the customer – and
not likely the path they want to take. Their negotiation with you
may simply be a strategy to keep you competitive and keep
their management teams assured they are spending wisely.
At the same time, there are dozens of prospects that you have
been calling on for years that have never done business with
you – even though you know you can price more competitively
than their current supplier. Truly, price is not the end-all, be-all.
This may be the reason we hear for not getting a particular
project or landing a particular client. But that’s simply because
it’s the easiest answer to give –by the client and by the sales
rep. Price may be an issue, and sometimes concessions may
be necessary. Overall, however, there are at least 10 other
factors that weigh heavier on the typical purchasing decision.
As you view your customer list, you likely have a group of
companies that have been with you a long time. In many ways,
their success has been the basis of yours. Somehow you have
aligned your goals with theirs, and that alignment creates the
value that transforms a relationship from ‘vendor’ to ‘partner.’
You do not treat them simply as ‘revenues,’ and in turn they do
not judge you simply on ‘price.’
So what is it that you bring them? Perhaps it’s a full
solution. Perhaps it’s the ease of dealing with you. Perhaps
it’s the knowledge you have of their unique business or the
appreciation you show them for their work. Whatever it is,
it’s the adhesive you need to be formulating for use in all
your customer development and retention strategies – efforts
that should be every bit as tangible and meaningful as other
operational activities.
THE STICKY EMPLOYEE
Likewise, your employees are not simply with your company
‘because they are getting paid.’ People invest a good portion
of their waking life at work and choose to be at their respective
workplaces for varying reasons. Sure, a paycheck is important,
but the most valuable employees are those that are connected
– ‘sticky’ to your company – by means other than the mighty
dollar.
Employee tenure is another big consideration in the
acquisition process. Immediately, it can speak to your
company’s experience, and thus to the ability to integrate new