Welcome, everyone, and my thanks to each of you for visiting with me on the phone earlier this week about your expectations for this session today. The question I specifically asked you – what is the takeaway you want from this session – was intentional. Would it surprise you to know that the majority of you said there was nothing in particular that you wanted from this hour of your time today? Your objective in dealing with customers is to reveal feelings, check understanding, or uncover questions. In our group today, we have managers and sales professionals. Since we only have an hour, we’re going to leap right into this discussion. As you introduce yourself, please respond to the question you drew from the basket when you came in this morning. Excellent.
Peter Drucker said, “The function of business is to attract and maintain customers.” Based on our experience with all types of organizations, traditional businesses as well as non-profits, we would add in order to make a profit or to be financially viable or best serve their community . Therefore, if the reason for organizations to be in business centers on their customers or the community they serve, managing and measuring your customer interface becomes one of your most important functions. Making certain that your customers get what they want and come back for more is of critical importance to the long-term success of any organization. All factors that impact negatively on the customer, (unfriendly policies, inappropriate response time, untrained employees, etc.) must be identified and corrected if you wish to compete effectively and profitably now and in the future. To a successful business, customers are the most important ingredients, and it is quite challenging to conduct a business without them. Your organization’s leadership team has several critical functions as it relates to your customers. The leadership team must develop appropriate customer-oriented strategies, design and implement customer-friendly policies/processes, develop your employees as it relates to creating and sustaining customer relationships, and constantly monitor and continuously improve your progress on the issues that are defined as most important to your customers. What does your organization do to attract customers, and what are the costs associated with attracting and maintaining loyal customers? [Implementation Note: Breaking the group into dyads may be effective here as well as having a group debrief.]
Here are the consequences of disrespectful treatment of a customer. How does your company define respectful treatment of the customer? Do you have any idea how much business you’ve retained or lost due to the respect shown the customer?
Individual recognition is something a customer wants. Is this a component of your service program? What are some of the components of your company’s service program?
Your customer wants what each of us wants when we are the customer. How do you demonstrate these behaviors to your customer? Let’s start with empathy. What is it? Do you have to agree or disagree with the customer? What does showing empathy mean? (It means you understand) When your objective is to reveal feelings, check understanding, or uncover questions, use open-ended questions. Some examples of open-ended questions include: What has been done to solve your problem? Where is it you are trying to take your business? Why do you feel there are so many customer complaints? Who is involved in helping you accomplish your goals? When do you think that you will take action on these issues? When someone is talking, pay careful attention to what they’re saying and how they’re saying it. Your ability to understand and apply the basic principles of effective communication will directly influence your sales performance and the achievement of personal and professional goals.
Consider an example from the hospitality industry to which most of us will be able to relate. You are on a business trip and you have just reached your destination for your first night’s lodging. There are hundreds of connection points when interacting with a hotel facility. Let’s focus on some of the obvious points of connection for this example. At each point you have a certain level of expectation and you expect your expectations to be met. As you are experiencing each point of connection, you are judging the value of your experience, and your cumulative experiences will generate a final judgment for that hotel facility. Now suppose your reservation was lost in the system, but the desk clerk found a resolution to your satisfaction, and the situation was handled quickly and politely. Even though there was an error, because all of the points of connection in the front desk interaction were handled well, you are feeling good about the facility and its value. However, even if the problem at the front desk was handled well, but you enter your room and it is not clean, there are no towels in the bathroom, and the wireless connection is down, your cumulative experience with the hotel has not met your expectations. Many points of connection in your room missed the mark and you are emotionally dissatisfied. To create loyal customers, an organization needs to provide a positive emotional tie during every point of connection even when it seems to be the smallest detail or perhaps even insignificant to you or your employees. Doing one thing or even multiple things well is not a replacement for consistently doing every step of the process well and, when appropriate, effectively handling a negative situation to your customers’ defined satisfaction.
There are 2 measurements that will help you understand and manage your customer relationships: customer satisfaction and customer loyalty. Currently, it seems that the majority of leadership teams are focusing on customer satisfaction to determine their customer service measurements, therefore their level of success. This measurement is flawed and often falls short of actionable expectations. Satisfaction surveys are unable to predict customer behaviors because they are built on faulty foundations. Many organizations assume that high levels of satisfaction translate into customer loyalty when, in fact, customer satisfaction ratings are more closely linked to your customers’ perceptions of your products or service attributes rather than to the value gained by those products or services. Satisfaction is a measurement of, “I expected it and I got it; therefore, I’m satisfied.” If this were translated into a grading system, satisfaction could easily translate into a grade of “C” on any report card. The desired score is obviously an “A” and A’s always equate to loyal customers. A’s imply that customers got more than they expected and their expectations were exceeded in some way. Based on what is truly important to customers, they received more value from you than from your competitors. Which measurement does your organization use?
Perceived value as defined by customers (as opposed to being satisfied) creates loyal customer relationships, and customer loyalty is the best predictor of your future strength and growth potential. The value you provide to your customers is always compared to the value your competitors provide; therefore, value is your customers’ perception relative to similar products or services in the marketplace—your competitors! Perceived value occurs at the intersection of what customers want and what they get from you versus what they could get from your competition. You can only sustain Customer Loyalty by continually meeting your customers’ product/service qualifications, specifications, or expectations. You also need to meet their needs in the order that customers deem important while maintaining a favorable comparison between you and your competition. In your marketplace, your competitors are the alternative suppliers your customers use to form their comparative value perceptions. How would your customer define perceived value? [Implementation Note: Breaking the group into dyads may be effective here as well as having group debrief.] For example if your customers expect your product to perform error free, to be delivered on time, to be supported by timely and personal technical support, and to be properly billed at a fair price, you must be good in all categories to get an “A;” you must be at least as good as your competitors. If you deliver a product that meets all of their design specifications but are unable to provide personal technical support, you failed in meeting an important criteria; therefore, the perceived value will decrease. For every mark you miss, the value as defined by your customers decreases and you slowly lose the ability to develop a loyal customer relationship. To create and sustain loyal customers it is necessary to consider every contact with each customer as an opportunity for you to provide value—every time! Every service point is critical, and every service point has a level of expectation from the customer that must be understood and managed. We call these contact points, Points of Connection.
Every point of connection gives your organization the opportunity to emotionally connect with your customers. Your customers will judge your value and their emotional tie at every point. Developing and implementing a strategy of creating a consistent emotional connection with your customers creates value, which creates loyal customer relationships.
Often, the challenge that organizations face is one of focus. Today most executives focus on profitability as the most important factor to the survival of their business. The notion that there is no linkage between customer retention and profitability is being proven false. Recent studies that looked for a linkage between customer retention and profits have supported the fact that the old notion is indeed false. There is a direct linkage between customer retention and profitability.
Even insignificant changes in customer retention rates have resulted in extraordinary improvements in profitability. One survey found that a 5% increase in customer retention consistently resulted in a 25-100% increase in profits. These almost unbelievable results would suggest that your emotional connection to your customer needs to be understood and effectively managed. Creating a new business model that focuses on customer loyalty shows that there is, in fact, a linkage between all elements of a business system: your employees, customers, and investors—and the generation of profits. Providing customer value begins with a management philosophy that supports the cultivation of strong customer relationships and is implemented by having properly trained and motivated employees who know how to deliver value. Research has shown that customers who have an emotional connection and feel valued will repeatedly come back and do business with your organization as well as provide a strong referral base for new customers. Loyal customers repeatedly purchasing your product or service are what generate sustainable business growth and profit. Your practices and processes that support loyal customer relationships must be in place first before you will begin to see a profitable impact. This model does not work in reverse, although many organizations seem to think the reverse is possible.
This loyalty model effectively provides insight to success versus failure in the business world. It is clear that the companies or organizations with the highest retention rates (loyal customers) also earn the highest profits and maintain viability. As mentioned earlier, loyal customers reduce cost. In one study it was found that in most service organizations “word of mouth” advertising accounted for 1/3 to 1/2 of all new customers. Relative customer retention also explains bottom line implications better than market share, scale, cost position, or any variables usually associated with a competitive advantage. It also explains why traditional management techniques often backfire. So what can you do differently for your business? Perhaps a good place to start would be to find better ways to create and sustain a loyal customer base. While there will be the need for an investment, the advantages will be enormous to your customers, employees, and investors. Strictly from a financial perspective, increased revenue from improved service quality tends to be 10-20 times the costs associated with fixing the problem. What is a loyal customer worth? There are many requirements to building a successful and sustainable business. We know that loyal customers will always return to purchase your product or service, which creates a long-term stream of income. Let’s take a moment and compare the value and significance of a loyal customer to your organization. A satisfied customer who has had an average experience may or may not come back, therefore, creating a one-time sale or revenue opportunity. Loyal customers always come back; whether it is once a week to their local grocery store or drycleaner, or monthly to their local pharmacy, or every April at tax time to the same accounting professional. No matter the business or industry, creating multiple and consistent revenue opportunities has a very positive financial effect on the organization.
Another advantage of loyal customers is that they will consistently boast about your product or service creating the most effective and least expensive form of advertising for your organization— word-of-mouth advertising . It costs 5 times more to obtain a new customer than it does to retain an existing customer. An organization that has disloyal customers will typically spend 4 to 5 times more in advertising to get additional customers, which could equate to millions of dollars obtaining new customers compared to an organization that has loyal customers. The advantage to the organization that has a loyal customer base is the ability to rely on word-of-mouth advertising and the knowledge that their customers are unlikely to be swayed by discounted pricing, coupons, or other incentives from competition. For example, would you rather shop based on a print or Internet ad you saw about a store, a product, or service; or would you rather choose a store, a product, or a service based on the recommendations of someone you know and trust? Did you choose your current physician or specialist by selecting a random name out of the phone book, or did you ask someone you trust for his or her advice? Typically you will make selections and choices based on trusted recommendations. Organizations also appreciate customer referrals that come to them from existing customer recommendations because referrals always present a better quality customer for the organization. Additional advantages of developing a loyal customer base include their willingness to pay more for your product or service, and they are also more forgiving when your organization makes a mistake. Why? As loyal customers they trust your organization and have faith that you are fair. It is truly all about building relationships through trust and strong points of connection. In this process, we will be discussing many techniques that will help you accomplish just that. Making the strategic decision to create a loyal customer base is one of the most important commitments you can make to the success of your organization. Your individual contribution is also a large part of that success. Now let’s look at your organization and markets specifically. Using the following formula or a modification to fit your specific customer experience, determine what one customer is worth to your organization.
Revenue per order multiplied by the number of orders per year equals the total revenue opportunity per year. Multiply total revenue per year by the average number of years or life span of a customer which equals the total value of a loyal customer to your organization. This number only reflects the dollar income potential from one loyal customer and does not reflect the other expenses that are also associated with finding new customers (advertising, sales expense, promotions, etc). Keep in mind that it costs 5 times as much to find a new customer than it does to maintain a current customer. If for no other reason, this fact alone makes it good economic sense to develop loyalty in your current customer base as opposed to constantly turning over those who do business with you. Let’s see what a customer is worth to your organization? Please turn to your workbook and take a few minutes to determine what you think a customer is worth to your organization. [Implementation Note: This exercise is designed to get participants thinking about what their customers are worth. You may want to take some time for discussion.] What are you doing in your organization to create customer loyalty? What are loyal customers worth to your organization?
1. Developing your personal customer service strategy Sue Hays Barr Barr Associates
2. “ The function of business is to attract and maintain customers.” – Peter Drucker
3. What does a Customer Want? <ul><li>Quality in a service or product is not what you put into it. It is what the client or customer gets out of it. </li></ul><ul><li>- Peter Drucker </li></ul>
4. No Respect? <ul><li>96% decide never to go back </li></ul><ul><li>They don’t bother to complain because that adds to the hassle </li></ul><ul><li>This really happened! </li></ul><ul><li>http://www.youtube.com/watch?v=wQDJEGSb02U&feature=related </li></ul>
5. Poor Service? <ul><li>6 out of 10 never return </li></ul><ul><li>It’s poor service, not poor products </li></ul><ul><li>They usually won’t complain </li></ul><ul><li>They just go elsewhere </li></ul>
6. Here’s what they want <ul><li>A positive experience </li></ul><ul><li>A service provider who has: </li></ul><ul><ul><li>Empathy </li></ul></ul><ul><ul><li>Understands how they feel </li></ul></ul><ul><ul><li>Creates strong points of connection </li></ul></ul><ul><ul><li>The Listening Game </li></ul></ul>
7. <ul><li>Parking </li></ul><ul><li>Checking in </li></ul><ul><li>Locating your room </li></ul><ul><li>Examining your room </li></ul><ul><li>Wireless access </li></ul><ul><li>Examining the bathroom </li></ul><ul><li>Comfort of the bed </li></ul>Hotel Points of Connection
8. A powerful point of connection creates a bond with customers and ensures a high level of trust. http:// www.youtube.com/user/RossShafer?feature = pyv&ad =3695012213&kw=customer%20service#p/u/0/8T54rQrMleA
10. Trust builds strong relationships and a strong relationship ultimately creates customer loyalty.
11. Perceived Value <ul><li>Defined by your customers </li></ul>
12. Every Service Point is Critical <ul><li>Points of Connection </li></ul><ul><li>Creating an Emotional Tie </li></ul><ul><li>http://www.youtube.com/watch?feature=player_profilepage&v=TMRXzANEGms </li></ul>On-Time Delivery Personal Technical Service High Quality Free Shipping 24-Hour Response Time Error Free
13. Why Do You Want Loyal Customers? <ul><li>? </li></ul><ul><li>? </li></ul><ul><li>? </li></ul><ul><li>? </li></ul>
15. A Loyal Customer is Worth: <ul><li>Long term stream of income </li></ul><ul><li>Employee Retention Increase </li></ul><ul><li>Profits Increase </li></ul><ul><li>Costs Shrink </li></ul>