Many startups fail due to a lack of perspective. A customer advisory board (CAB) may not be able to predict the future, but it could provide a business with the insight it needs to thrive.
When startup founders ignore the chance to install a CAB, they overlook one of the most valuable tools available to them. Incorporating a CAB into a business model can help guide strategic direction, increase customer loyalty, and grant access to customer insight.
What is a customer advisory board?
In simplest terms, a CAB is a group of trusted customers. It advises an organization on product development and helps form forward-facing strategies.
The purpose of an advisory board is to help companies solve problems or explore new directions. The board’s role is not to make decisions, but rather to provide the company’s decision-makers with current knowledge, critical thinking, and objective analysis.
Different types of customer advisory board
CABs can take on different forms but generally fit into two categories:
Startups that focus on selling to SMBs or developers may benefit from a wider demographic of customers and professionals.
Community-based CABs are often managed through continuous communication platforms such as Slack, Brosix or even Discord. Given the wider audience segment for SMBs, it is beneficial to possess a diversity of board members.
Businesses that sell to the enterprise or upper mid-market often create CABs with strategic customers as the members.
This approach tends to be more intimate and communication often occurs in person or through video conferences.
The functions of boards can also vary, depending on the objectives of the organization:
1. Customer Satisfaction Boards
- Improve customer satisfaction and simplify processes.
- Consists of mid-to-low tier management, or, in some cases, end users
- The board focuses on customer satisfaction and discussion is about how the organisation can do that with improved services and support.
2. Product or Service Solution Roadmap Boards
- Seek input on strategic direction as well as product and solution offerings.
- Consists of product or service users
- The board collects user opinion. It uses this insight to improve the business’s offerings so they satisfy customer needs.
- These CABs explore features, functionality and the resulting benefits.
- The primary objective is to identify areas for improvement in your solutions that will benefit the customer experience and generate more revenue for the organisation’s members.
3. Strategic Boards
- Aim at steering the business direction.
- Generally composed of senior-level executives and partners.
- Focus on issues and opportunities in the industry, and helping customers to address those issues.
- Create a roadmap for strategic direction and marketing plans.
- Attain or maintain industry leadership.
- Aim to yield significant growth in revenue, market share and customer base.
Why is a customer advisory board important?
Businesses that focus on improving customer experience have a greater competitive advantage.
Well-organised customer advisory boards are powerful engagement programmes that improve customer experience, improve product strategy, and drive business results.
They give customers the opportunity to share best practices. They foster community relations and encourage networking among peers, whilst also deepening relationships with company executives.
Guiding the company’s strategic direction
CABs create an open forum, where key customers can speak openly about why they’ve chosen a specific company or product over the competition. This can provide a clearer indication of where to direct efforts and resources.
Plotting the product roadmap
A customer advisory board can provide insights into how customers are using your products. They show what aspects of those products are most important to them, and what additional functionalities or tools could be introduced to enhance or develop the customer experience.
Increasing customer loyalty
Customers value interest in their experience and opinion. There is no greater way to create loyalty than by fostering participation. According to research by Ignite Advisory Group, businesses with customer advisory boards experience an average of 9% more in new business from CAB members than from their broader customer base.
Encouraging customer advocacy
Customer advocacy is the most powerful marketing tool available. Forrester Research shows that 79% of marketers who turn customers into advocates see increases in cross-sell, upsell, and enrichment.
The benefits for board members
Compensation can be a contentious issue, especially when non-customers are part of the board. There are different opinions on whether to compensate monetarily or incentivise via other means.
The key is to be consistent across the membership group. From the outset, you must share a vision and explain to potential board members why they should spend their valuable time as part of a startup.
Key points to mention are:
- Exclusivity. Explain why each person is important and unique. Each recruit is part of a selective group asked to help solve specific problems.
- Professional development. This is an opportunity for CAB members to have an inside perspective on industry, allowing them to participate in the creation and marketing of a product.
- Resume builder. Board members can use their involvement to bolster their professional portfolio, connecting their name to successful products or projects they have contributed to.
- Peer networking. One of the main benefits of being an advisor is the opportunity to grow their professional network and peer group. Startups should take the opportunity to showcase any successful members who are already part of the board.
- Monetary compensation. If monetary compensation is offered to high-level advisors, direct payment is not recommended. Focus on providing advisory option grants instead. These will pay in return for advisory services and will help keep advisors invested in success.
Key components for a successful customer advisory board
Define who to recruit
You should identify what you need from the CAB. Board members can compensate for weaknesses in the organisation and fill any gaps in knowledge, connections, and experience.
Keep the board engaged
- Keep a mutually beneficial agenda. Ensure that the content is customer driven
- Pay attention to ongoing management of the customer advisory board, after and in-between meetings
- Commit to active listening
- Motivate the the customer advisory board by being action-oriented
- Create a sense of shared future
Set specific goals
- Secure strong executive sponsorship and find agreement on board objectives
- Prepare a detailed agenda
- Create a compelling narrative and a sense of shared future
Build a customer-centric business
Customer advisory boards are an effective way to grow a customer-centric business. They are a powerful yet inexpensive way to bring businesses and customers closer together. They help an organisation to stand out among the competition.
In a climate where the distance between startup success or failure is measured in fine margins, CABs can help set founders on the steadiest course. Need help with creating your customer advisory board? Our growth mentors can help you get where you need to be to grow a customer-centric business.