Are we customer driven?

The simplest answer would be to cover three main steps...

• Find out what your customers want
  
• Do your best to give it to them better than your competitors can
  
• Keep checking to make sure that you are on track

Of course, it's never as easy as that in today's complex business world, and there are probably hundreds of activities and decisions that would contribute to success. These include product R & D, market and competitor research, decisions about market segmentation, targeting and positioning, and, of course action to implement hundreds of choices offered by the ubiquitous seven Ps of marketing, (product, price, place, promotion, premises, people and processes). It's quite overwhelming.

I'm amazed at how companies are prepared to spend vast amounts of money on these activities - General Motors alone spent US$4.2billion last year, and worldwide estimates claim up to US$600billion. And all of this is mostly spent in the hope that new customers will come and buy something new. One of the founders of the modern advertising industry as we know it today, David Ogilvy, quoting another industry executive, wrote, "We know that only 50% of all advertising works. The problem is, we don't know which 50%!" A recent study published by University of Reading's Henley Management School says that the success rate has probably dropped to around 20%.

And yet I'd be surprised if companies spend even 10% of this on customer retention and loyalty, and yet marketing executives acknowledge that the best source of new business is - Taa Daa - current and past customers.

A simpler model

I'd like to suggest a simpler model*, however: A model which can be applied to most businesses - large or small - and which helps you to focus on the key areas that will create customer loyalty in the longer term.

Like all good strategies it begins with a process of analysis and planning, but the specific actions needed are clear, and unlike the traditional world of marketing and promotions, these actions are guaranteed to improve customer loyalty and spend.

Very briefly then, here is what you need to do:

• Develop the dynamic customer value proposition(s) that clearly describe(s) what kind of experience you want your customers to have. This shouldn't be a long and pompous statement, but something that is real. Use three sources of information to come up with such a statement:

  1. Customer expectations, and more specifically what they want and how they want to be treated
     
  2. Customer perceptions of your business and your rivals' businesses. Understand their perceptions in four areas: products, service delivery, image of your business (brand,) and the people with whom they deal
     
  3. Your own brainstorming, knowing what you know about your industry.
     

• Your next step is to translate this value proposition into the customer management cycle. Ask questions like the following:

  1. Who are the customers that we want to target for our success, not only new prospects, but also current customers that we want to pay attention to. This helps you to avoid the typical "Spray and Pray" approach of traditional mass marketing.
     
  2. How successful are we at managing inquiries and converting these into real orders? How can we improve this?
     
  3. Do we welcome new customers in an appropriate manner, and once on board, do we have a system for getting to know them and their needs, wants and desires better. (Peppers and Rogers talk about a process of "drip irrigation" to understand customers so that they don't feel interrogated.) This step also includes training the customers to get to know our business better. It can also save you a lot of time and trouble later when they know how things work, but we also know that the more a customer knows about a business, the greater their loyalty to that business. Familiarity breeds liking, (not contempt.)
     
  4. Deliver on the basics. The beginning of a relationship is when customers make judgements that may last a lifetime, and it is critical that new customers have a very positive experience so that they are not tempted to try someone else. Make it easy to do business with you by simplifying all processes.
     
  5. Once the customer is on board, what formal and informal activities will you use to ensure that your business retains that customer? There are dozens of ways of doing this, (at the Leadership LaunchPad we have identified at least 82 ways to keep customers loyal, but it's not only about loyalty cards and rewards.) This involves lots of communication and building relationships.
     
  6. Your business is not a charity, and at some stage when the customer is comfortable, you need to develop strategies for growing the value of each customer to your business. The three most common ways to do this are through cross-selling additional products and services, through up-selling and upgrading customers' purchases, and by using the power of referrals and recommendations. What strategies do you have in place to do this?
     
  7. All companies will occasionally encounter customer complaints and problems, and you need to have a very positive and responsive system for recovery. The most loyal customers in your business are probably those that experienced problems but whose perceptions you turned around because of your skill in dealing with the problems. It builds their confidence and sense of assurance that no matter what happens, they will be okay. Also ensure that your recovery system has a built-in process for prevention of problems in future.
     
  8. Finally how can you win back lost customers? Most of your lost customers were lost for the wrong reasons - price and value perceptions, a sense of being neglected, and so on. They may also know that the grass is not greener on the other side, but are too embarrassed to come back. You need to be able to invite them back, and to welcome them back as old customers, not as new customers.
     

• The old adage says, "What gets measured gets done." Keep track of important measures like customer retention and loyalty, profitability per customer, likelihood to recommend and propensity to defect.
  
• No company can be successful without a team of skilled and motivated people who are able and willing to help customers. In fact, this is probably the biggest cause of failure. You need to ask two questions here:

  • What knowledge, skills, training, and experience do your people need to be the best in the world at what they do?
    
  • What do you need to do to manage and motivate your people so that they are inspired to delight your customers?

• Processes and systems: Process-driven companies are usually far more successful than those that do things randomly. However, every single process and system in your business needs to be challenged to ensure that it helps customers rather than hinders them. So often we find that policies are written to protect the company, not the customer. You also need to simplify everything so that customers find it very easy to do business with you at four levels: physically, (is it physically hard?); intellectually (is it too complicated?); emotionally, (do they feel frustrated or angry?); and time effort, (do we waste their time on trivial things?)

• Do we collect, store and use appropriate customer information so that we can constantly add value for them and build relationships? Are we using the power of the latest technology to help us in this quest?

• Are we constantly and continuously coming up with innovative and creative ways to add value for our customers and for our business? If it isn't broke, fix it anyway, because customers get bored, and your business also falls into the trap of doing the same old things in the same old way. Have a constant process of regenerating everything that you do to keep it fresh and exciting.

• Finally, how are we doing compared to other companies? Benchmarking the best practices from other companies around the world in order to be the best is vital. Don't limit your search to local competitors: go global, and look beyond your industry - then imitate and improve.

Carry out these steps and your customer loyalty, profitability and reputation will flourish. Neglect them at your peril.

*The work of Doug Leather and the CMAT team is acknowledged in this model.