Sales & Marketing November 13, 2009, 12:15PM EST

How to Not Go Out of Business

Start by studying how your best customers interact with your brand and its competitors, then brainstorm ways to address any shortcomings

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Have you ever thought about how banking has evolved over the past 20 years?

The other day, as I maneuvered my car past the drive-up ATM, I was telling my kids about the way things used to be. Like when I had to plan ahead and make sure I got to the bank by 3 on Friday to deposit my paycheck and get spending money for the weekend. Or how I had to buy travelers checks so I didn't risk losing a wad of cash while on vacation. Or when I actually had to hand-write checks, one at a time, then stuff, seal, stamp, and mail the envelopes to pay my bills.

My kids, not surprisingly, found this description of how banking used to be rather quaint. With access to ATMs, direct deposit, online banking, and debit cards, they'll never experience the ties that used to bind you and me to physical banks with limited hours. Whether your bank has thousands of branches or a single location down on the corner, it no doubt understands that staying relevant to consumers' changing needs is critical in our fast-paced, competitive economy.

Staying with the Times

Maintaining relevance is essential in every industry, not just financial services. As long as competition thrives and technology continues its relentless march forward, companies that don't evolve are destined for extinction. The good news is that innovation doesn't always have to be radical. In fact, a steady stream of minor enhancements to a product, service, or experience can help a company maintain relevance quite nicely. Innovation is like investing—small gains over time compound to deliver longstanding benefits.

Apple (AAPL) is a company that knows how to stay relevant. Just about every time I visit the App Store, I find updates to several of my iPhone applications. Some correct little frustrations I've been experiencing, while others add helpful features or simply make a good user experience better. These minor innovations come with such frequency that I've become convinced that any little bug that annoys me today will soon be addressed. That gives me confidence that Apple is committed to keeping the iPhone relevant to my needs. As a result, it keeps me a loyal Apple customer.

Of course, most companies don't have the resources to invest in innovation that big banks or leading computer companies do. But a strategy of staying relevant doesn't necessarily require significant time or money. You just have to know where to focus.

Start With the Who

Any discussion of relevance presupposes an audience to whom relevance is required. For most companies, that audience comprises your most loyal customers. Not only do you have a relationshihp with them, it's a lot cheaper to keep them on board than it is to win new ones. In addition, the more relevant you become to your best customers, the more likely you are to attract people like them. And since you already are familiar with your customers, you have a good opportunity to understand their evolving needs.

And understanding is what you'll need. There's a difference between knowing facts about your customers (names, Zip Codes, annual household income, purchase history, etc.), and truly knowing them. Step 1 in a continuous innovation program is to put in place an ongoing consumer discovery process.

Get to know your customers as well as you possibly can—not just what makes them happy, but also their frustrations and disappointments. Ask them what hassles and inconveniences surround the occasions when they do business with you. Find out what alternative solutions they may consider, what substitutes they sometimes choose, and what they do (and why) before and after they transact business with you. You can gather this insight through formal research methods or by informally observing, listening to, and having conversations with your customers. Ideally, you'll do all of it on a continual basis.