Partnering with Your Customers

“If a customer feels like he’s part of a genuine partnership with your business, he may not care all that much about price,” notes Vistage speaker JoAnna Brandi . “On the other hand, if the relationship offers little value, customers will go elsewhere and buy for the lowest price. Saving money this way, they can afford value-added services somewhere else.”

Successful businesses place a high priority on delivering quality service. These businesses recognize that service itself is a product — “a product that’s sold every time the customer has contact with an employee,” says Vistage speaker Howard Hyden .

“Service” as a product? Between rival businesses offering the same goods at comparable prices, it’s often the crucial differentiator.

“Under-promise and over-deliver,” says Vistage expert Chuck Reaves . “Promise only what it takes to gain the customer’s commitment and then deliver 100 percent. If you promise 100 percent and deliver 100 percent, you’ve only met expectations. If you promise 80 percent and deliver 100 percent, you have exceeded expectations.”

Service:

• Must be produced upon demand
• Can’t be “recalled” like a malfunctioning toaster (you can apologize for bad service, but by then the damage may already be done)
• Is experienced by the customer at the moment it’s delivered (there’s no opportunity to take a “time out” and consult with management)
• Is subjective (because each person’s notion of “good service” differs, your staff should be skilled and flexible enough to deliver it in a variety of shapes and sizes)

“Good service shouldn’t be offered as an emergency response to a crisis or as an interim strategy to prop up sagging sales,” says Brandi. “It must be ongoing, credible and fully supported by senior management.”

How Customer Service Benefits Your Company

According to the Vistage customer retention experts, providing value not only serves the customer, it benefits the organization as well. Among the benefits:

• Greater efficiency. Focusing on areas that directly affect customer satisfaction requires businesses to use their resources more efficiently. “An effective customer service program forces the business to concentrate on what’s most important to the customer and away from the day-to-day distractions of the marketplace,” Hyden notes.
• Cost effectiveness. According to the U.S. Department of Consumer Affairs, the cost of gaining a new customer is roughly five times more than the cost of keeping one. (That’s because consumers spend slowly at first, but increasingly more after years of good experiences.) With a mere five percent rise in customer retention, a company’s profitability can jump by 25 percent or more.
• Increased morale. When the CEO, senior management, mid-level management and front-line staff are “in sync” on the importance of customer service, everyone shares a common purpose and goal. The result: enhanced employee morale and satisfaction.

“Too often, senior management looks at customer service as an expense item,” says Reaves. “We need to start looking at it as a profit center. Expanding your customer service program will actually contribute more to the bottom line than hiring a new marketing director or sales rep.”
Great Service After the Sale

In any industry where two or more businesses sell the same goods or services, success is ultimately measured by how well the customer is treated — not only at the time of sale, but afterwards as well. Treating the customer with dignity adds value and entices him or her to come back again and again. Repeat customers equal greater profits.

So how can your business offer great customer service after the sale has been made?

• Never break a promise. Honor your commitments. If a shipping delay occurs, keep customers informed on developments. When you communicate in an honest, timely manner, customers tend to be very understanding and patient.
• Show customers you care about doing business with them. People respond to businesses that are friendly, accommodating and interested in them. You show you care by sharing current product information and helping customers when they need further assistance.
• The customer can teach you about your business. “When a customer comes to you with a perception about your business, whether it’s accurate or not, it can tell you something,” Reaves says. “After all, aren’t customers the ultimate goal of your advertising, distribution, pricing, marketing and sales efforts? What they say reflects how well you’re achieving what you set out to do.”
• Help with problems, don’t evade them. When a customer comes with a problem to your front-line staff, they should never pass it on. Customers don’t want to hear, “That’s not my job.”
• Never too busy to help. Never let your customers feel like they are intruding on a staff person, interrupting them in the course of talking on the phone, typing up an invoice, etc. Your employees’ primary job is helping the customer or delivering outstanding service to the customer.
• Think ahead. No longer is it enough to meet your customers needs today. Your organization must always be thinking ahead, anticipating customers’ future problems and desires. Waiting for the customer to bring these concerns to you means you’re simply too late.
• Every employee counts. Do your employees in shipping or the mailroom believe that only those on the front-line impact the customer? Ultimately, every employee is responsible for customer satisfaction and well-being. When employees fail to work together, sooner or later the customer is negatively affected.

A Disturbing Trend

Consider the following:

• It costs far less to retain existing customers than to go out and get new ones.
• Two-thirds of customers who leave do so because they feel neglected and/or unappreciated.
  Most companies are so busy chasing new business that they overlook their existing customers or, worse, take them for granted.

There seems to be a trend here.

Customer retention, according to Vistage speaker Duane “D. J.” Sprague, represents one of the most cost-effective ways to grow a business. Yet, far too many companies spend more time and resources hunting down new business than taking care of existing customers.

Why the disconnect? In most cases, says Sprague, it stems from a lack of focus.

“Most companies understand the importance of customer retention,” he explains, “but they don’t make it a priority and/or they don’t put the systems and procedures in place to make it happen on a consistent basis. Customer retention involves more than a program or management initiative; it needs to be a core part of the way you do business.”

Keeping Your Customers

How do you hold on to the customers you already have? Sprague outlines a three-step process:

Engage in customer follow-up.

Customer retention starts with paying attention to your existing customers. In fact, Sprague recommends focusing 15 to 25 percent of your marketing resources on creating regular, meaningful and personalized contacts with your customers. These can include:

• Birthday and holiday greeting cards
• Invitations to special sales and events
• Free opportunities for customer feedback (i.e., postage-paid opinion surveys after each purchase or exit surveys to customers you have lost)
• Apology letters to customers who complain or have a bad experience
• Announcements of new products and services, new hours, new employees, new locations, etc.
• Newsletters with tips and information about industry trends, the customer’s business and/or their personal and professional life
• Requests for referrals

“The key is to have a system in place so that these kinds of customer follow-up events happen automatically,” notes Sprague. “Keep in mind that today’s follow-up represents a down payment on your future. By staying in touch with your customers on a regular basis, you’re investing in future sales, growth, retention, referrals and profits.”

Segment your customers.

According to Sprague, smart companies divide their customer databases into three distinct categories — bottom 20 percent, middle 60 percent (core customers) and top 20 percent (VIP customers). More important, they also identify the characteristics and buying patterns of each segment and use that information to target their sales, marketing and retention efforts.

To identify the bottom 20 percent, ask:

• Who are our least profitable customers?
• How much time and resources do they consume?
• Are they worth keeping?

“In most cases, the bottom 20 percent usually cost more than they’re worth,” explains Sprague. “They tend to complain more, expect more services, beat you up on price, and buy less at lower margins. When in doubt, fire these customers!”

To determine the middle 60 percent, ask:

• Who are our core customers?
• What is their demographic, geographic and psychographic profile?
• Can we increase the amount they buy from us? If so, how?

Finally, identify and profile the top 20 percent, your VIP customers. What characteristics, attributes or special requirements make them different from your core clients? Where are they located? Why do they buy more? What problems do you solve for them? Why do they do business with you?

To keep your VIPs from straying to greener pastures, suggests Sprague:

• Give them direct access to top management in your firm.
• Provide gratuitous services.
• Never let them down.

“Become passionate about retaining your VIPs,” urges Sprague. “Make it a top strategic priority for your company. Constantly ask, ‘What more can we be doing? How can we serve you better?’ Work hard to understand your VIPs, solve their problems, make their lives easier and save them time.”

Give your VIP and core customers what they want.

Step three sounds like a no-brainer. Yet, Sprague sees too many companies giving customers everything except what they really want.

“For example, customers say they want the best quality at the lowest price,” he points out. “In truth, most want ‘good enough’ quality at a fair and honest price, meaning prices that are consistently low. Not necessarily the lowest, but not up and down all the time.

“Consumers also value predictability. Wal-Mart doesn’t always have the lowest price, but they do have consistently low prices. They don’t rely on sales, coupons or special discounts to get customers in the door. Day in and day out, people know they will save more by shopping at Wal-Mart.”

So, what do customers really want? In general, says Sprague, retail customers want:

• A consistently good experience
• To be treated with respect and dignity
• Convenience and time savings
• Honest and knowledgeable salespeople
• Easy access to the products they want
• Fair and honest prices

B2B customers want a vendor that:

• Knows them and their needs
• Provides some form of relationship and personality
• Shows recognition and appreciation for their patronage
• Addresses them as human beings
• Provides customized solutions to unique or individual needs
• Engages in a two-way dialog
• Asks for feedback and responds to their concerns or problems

To guide your company’s specific customer retention efforts, ask:

• What do our core and VIP customers really want?
• What problems do they need solutions to?
• What benefits or results are they looking for?
• What level of quality is good enough for them?

“If you can’t answer these questions with hard data, you’re just guessing,” concludes Sprague. “And if you’re guessing, you’re taking chances with your most important relationships.

“To get that data, survey your customers about their expectations and the actual experience of doing business with you. Once you get the data, follow up, acknowledge their feedback and rectify any problems. But you must have a system in place so that you survey on a regular basis. Otherwise, your customer retention efforts will be strictly hit or miss.”