Surface Ripples

Rise Above The Rest - Effective Customer Service

“Conventional Wisdom” says that it costs less to retain customers than to obtain them. How many businesses focus on increasing sales or revenues though acquiring new customers as opposed to maintaining the goodwill of those who already buy from them, or increasing their rate of purchase to get more of their business?

At times, a business may only be able to increase its revenues by increasing the number of customers if it’s constrained by geography (i.e. located in an area where there are a limited number of customers for its product, or where the market is “full” of that product).

The issue, though, is that many businesses seem more driven to acquire new customers (by various means) than to hang on to what they’ve got. Generally, this is done by offering a product or service that is:

• “New”;
• “Better quality”;
• “Cheaper”;

… than the competition.

Look at mobile phone operators, internet providers, energy companies or cable/satellite TV operators and you will see that they often have “special deals” for new customers. How many of them have a deal for those who are coming up for renewal? How many of them actually look to the continuing relationship with their customers?

For those products/services that can be copied quickly by competitors at roughly the same cost, price may often be the only differentiator, particularly during hard times. This means that other costs (usually service) have to be cut to remain competitive. As long as the product/service does what it’s meant to do, the customer remains satisfied and moves only if either prices rise too high or if the provider makes a “serious mistake”. This is known as “customer” (or “buyer” inertia”), and many businesses take advantage of this.

And yet, there are businesses that not only survive, but consistently show better returns even when they charge higher prices than the “competition”. Why? These businesses really understand what their customers need and the value of “annuity business” (business that has been won and continues to flow in a steady stream). This is “free business” as the costs of winning it have been paid off.

Winning new business is like buying a new car: you spend a lot to buy it, but from then on, your costs are maintenance only: petrol, servicing, insurance, road tax, annual inspection. Assuming no misfortunes, you won’t spend the same amount as the purchase price every year to keep the car running. If you don’t maintain your car, it breaks down and you spend more on having it fixed, or may even have to replace it.

So it is with customers; you put great effort into acquiring them, but then you need to maintain them. Why do so many businesses do the equivalent of not maintaining their car? There may be any number of reasons, but ignoring customer service leaves a business open to competitors.

The “cost” of maintaining a relationship is low, but it pays itself back over and over. You get to know about complaints before they happen, about changing tastes or needs, or about what the competition are doing just by “staying in touch”.

Thanks to a more intrusive news media and the internet, customers have much more information available than ever before through special reports, online forums, price comparison sites and interest groups. Nowadays, I find that I look at other customers’ comments on products that I buy from (say) Amazon before I buy, and I have refrained from making purchases because of those comments. I still go back to Amazon, though.

How many potential customers aren’t coming to you or coming back to you because of poor maintenance?

I have spent more than half my life working in different world markets from the most developed to “emerging” economies. With more than 20 years in the world financial services industry running different service, operations and lending businesses, I started my own Performance Management Consultancy and work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of services.

Labels: Customer Care, Productivity, Selling, Strategy, Teamwork

posted by William Martin @ 16:57