Quality Speaks Loudest

Most businesses measure success by traditional key indicators like profit margin, sales and accounts receivable. The problem is, according to Vistage customer retention expert Howard Hyden , these indicators measure what’s happened in the past, rather than what’s likely to occur in the coming months and years. “Managing a business this way,” he says, “is like driving a car by looking in the rearview mirror.”

Furthermore, these indicators measure what’s in it for the business. The real challenge lies in measuring what’s in it for the customer.

Vistage speaker Chuck Reaves suggests reversing traditional measurement standards to reach a more accurate assessment of where the business stands.

“Take the standards your company normally uses and reverse them,” he says. “For example, instead of measuring defects per unit, measure units per defect.” Whatever the method, set your company’s standard for 100 percent quality: “If your corporate culture allows for a certain number of defects, you’ll end up with those defects. And more.”

Other useful measurements are found in analyzing customer behaviors:

• Number of referrals generated from current customers
• Level of repeat business from current customers
• Rate of customer complaints

“Look closely at key operational data,” advises Vistage expert JoAnna Brandi . “Check the status of your product backlogs and how often you’re out of stock. If these numbers are significant, it’s likely your customers have been dissatisfied with your delivery cycle time at one point or another.”

The same principle applies to refunds and returns. When these figures are high, it’s a clear indication that customers are unhappy with your product. Either its quality is substandard or customers feel you’ve misrepresented its claims to value; in any case, you have a problem.

Establish benchmarks that assess quality on a continual basis. “Quality benchmarks should be measured in small increments that can be tracked quickly and efficiently. The first benchmark should be very short-term, preferably same-day.”

This may seem like a time-consuming approach, but it’s far preferable to waiting until the end of the fiscal year to assess the quality of your products or services.

Customer-Friendly Policies

To supplement your benchmarking processes, Hyden recommends these “future customer-focused key indicators”:

• Time to answer inquiry – How long does your business take to respond to a customer’s inquiry (a request for information, response to an ad, etc.)? Business studies show that a customer lead loses one percent of its potency for each day it remains unanswered or unfulfilled. Responding quicker than your competitors translates into a clear advantage.
• On-time delivery — If your product doesn’t get to the customer when he/she needs it, the value of that product is diminished severely. Promising a certain delivery date and not sticking to it lends the perception that your company is incompetent and doesn’t place a high value on pleasing its customers.
• Volume by customer — Track customer sales by dollars or units per month and see if key customers are starting to order less frequently; this could indicate they’re giving business to a competitor. Also, it’s important to track your customer growth rate. Customers may be growing significantly, but if the number of orders from them isn’t increasing, you may be missing a valuable growth opportunity.
• Error rate – How many mistakes are made when entering customer orders into your computer tracking system? These errors often translate into wrong products being shipped and/or increased delivery time.
• The 80/20 rule — In most businesses, 80 percent of profits comes from 20 percent of customers. At a minimum, companies should track their top 20 percent of sales to see if they’re growing, staying flat or on the decline.
• System-up time — This measures the percentage of time a company’s equipment is up and running in the customers’ environment. If the product constantly breaks down or is unreliable, it severely reduces the value of the product or service in customers’ eyes.
• Returns/rejects – This indicator focuses on how many products customers return or reject.
• Unused product – This lets you know which items aren’t effectively fulfilling a need or purpose.
• Referral rate — This measures the percentage of business originating from referrals. It also sums up your overall success rate at creating value for your customers.

Determine which customer-focused key indicators you want your business to measure and quantify. Then establish a baseline of current performance, and set goals to increase performance in these critical areas.

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.