C.E.O.s routinely describe service as essential to success, and they are well aware that, thanks to the Internet, bad service can now inflict far more damage than before; the old maxim was that someone who had a bad experience in your store would tell ten people, but these days it’s more like thousands or even millions.
On the other hand, customer service is a classic example of what businessmen call a “cost center”—a division that piles up expenses without bringing in revenue—and most companies see it as tangential to their core business, something they have to do rather than something they want to do. Although some unhappy customers complain, most don’t—one study suggests that only six per cent of dissatisfied customers file a complaint—and it’s tricky to quantify the impact of good service.
So when companies are looking for places to cut costs it’s easy to justify trimming service staff, or outsourcing. The recession has aggravated the problem, as companies have tried to cut whatever they could but even in more prosperous times there was a relentless emphasis on doing more with less.
The real problem may be...
...that companies have a roving eye: they’re always more interested in the customers they don’t have. So they pour money into sales and marketing to lure new customers while giving their existing ones short shrift, in an effort to minimize costs and maximize revenue. Economically, this makes little sense; it’s more expensive to acquire a new customer than to hold on to an old one, and, these days, annoyed customers are quick to take their business elsewhere.
Source: The New Yorker, September 6, 2010. To read more, go to: http://www.newyorker.com/talk/financial/2010/09/06/100906ta_talk_surowiecki?printable=true#ixzz0ymLKPelI Making the first sale to a customer is very expensive.
It takes a lot of advertising and promotion dollars -- and a lot of time, energy and money chasing dead ends -- to land a customer. Yet subsequent sales to that customer are relatively inexpensive -- and profitable. Too many businesses make the mistake of focusing on generating more sales to first-time buyers -- rather than working harder to build sales with the customers they already have.
With first-time buyers, you not only have the costs of getting that first order, but you still have to build a foundation of mutual trust if you hope to get follow-on orders. With your existing customers, you've already built this foundation of trust -- you only have to maintain it -- by continuing to deliver quality products and service. Cultivating broad and deep relationships with your existing customers allows you to focus your limited resources wisely -- building as great a share of their business as possible -- while your competition fights tooth and nail just to get their foot in the door.
This customer-driven (versus product-driven or technology-driven) strategy goes by many names: Relationship Marketing, Retention Marketing, Frequency Marketing, Loyalty Marketing, Frequent Customer Marketing, etc. But whatever you choose to call it is not nearly as important as your understanding that your existing customers offer your greatest profit potential.
Here the old "80/20 Rule" applies: In an established business, 80% of your sales come from 20% of your customers. These are the customers to focus on. If you don't know who they are -- if you can't list them -- in order of decreasing sales -- find out. Analyze your sales and make a list -- and hang that list where you can see it every day. And every day, ask yourself, "How can I build my sales with these customers? How can I strengthen my relationship with them?"
Here are some suggestions:
- Look for ways of maintaining an on-going flow of information with them. Think of them -- and try to get them to think of you -- as a "business partner". Personal phone calls... Visits... A customer advisory council... Etc.
- Make the effort to learn their business so thoroughly that you can initiate new areas of business activity between you and them that can profit both of you. If there's a product or service that's giving them grief -- or from a vendor they're not totally comfortable with -- try to figure out a way to provide that product or service yourself. Even if it's not a product or service you currently offer -- or had planned to offer. Keep in mind that it's often easier and less costly to add new products/services than it is to add new customers.
- Add additional services -- preferrably unique to your customer's needs -- that demonstrates your attention to the small but important details -- and helps keep your competitor's foot out of the door.
- Think about adding "loyalty" programs where you can reward your customers' loyalty in ways that your competitors can't easily copy.
The evolution of a customer-driven business begins with your understanding of how important it is to invest your time and resources to be in constant communication with this 20% of your customer base. Cultivating relationships and making these customers more successful is not just a salesman's job. It's much smarter to get someone else to stay in the office and run your operations so you (the entrepreneur) can be out helping your key customers take care of their business!
Source: The Signature Marketing Series, http://www.tenonline.org/art/sm.html
