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|Author||John Towler, Ph.D.|
How to focus on customer retention to increase longterm profits and stability
It has long been recognized that the key to success is customer satisfaction. However, this realization has reached a new level of importance under the guidelines of the ISO. The International Organization for Standardization has decreed that accredited companies have until the end of the year to comply with the ISO 9001:2000 standards that require an emphasis on the analysis and improvement of customer service. Smart firms have always attended to their customers, but in the future, customers will be asked to have more than just a one-way conversation with firms. Not only will companies be expected to enable customer input, but they will be required to act upon the information they receive.
In the past, firms have collected feedback, but not only have they failed to act on it, they have made little or no attempt to get back to their customers and tell that them the firm has heard them and what they are doing as a result. In the absence of any feedback from the firm, customers feel that telling the company anything has been a waste of time and is unappreciated. A vague sense of satisfaction from speaking their mind is not enough to make customers feel good about a firm.
Until now, companies have attempted to retain customers by investing in hugely expensive ad campaigns, Customer Relations Management systems, rebates, incentives, discounts and loyalty programs. However, they have ignored the key questions of why customers are buying from them in the first place, what they want and just as important, why they have stopped buying and have turned to the competition.
The truth of the matter is that the last issue far outweighs the others. While happy, contented and loyal customers shouldn’t be ignored, it is the unhappy customer that needs the most attention and represents the greatest costs. Suppose one customer spends $10,000 in your company in one year. If you keep that customer for ten years, he or she will have given you $100,000 in business. But what happens if you lose that customer? Not only will you lose the $100,000 , but since he or she will complain to 20 other people who will never become your customers, in just one year you will have lost $10,000 times 20, or a total of $200,000. And all this from just one unhappy customer!
It is far easier and more cost effective to retain existing customers than to find new ones. Best of all, you don’t have to invent a new process to do it. The goals should be to fulfill your customers’ needs and expectations, to communicate with them, to act on the information you collect, and to let them know you have listened. If you want to know what your customers want from you, you have to ask them. Your satisfied customers will tell you what you are doing right and the unhappy ones will be only too glad to tell you what you are doing wrong. But, and this is an important point, you must ask them as close as possible to the time of their experience of delight or disaster. However, you must make it easy, comfortable and convenient for them to do so. Asking them to fill in a questionnaire or stand at an electronic survey kiosk isn’t the solution. Few customers feel like hanging about after they have stood in line at the cash register and they certainly won’t do it if they are dissatisfied or angry.
A far better approach is to invite them to go online at their convenience and take your customer service survey. They can do this anytime, anywhere and if you want to offer an incentive as a thank you, that’s easy to arrange. But make sure that you don’t ask only the questions about the things in which you think they may be interested. If you want the most useful information, invite them to tell you what they think, want and feel by using open-ended questions. Responses to a question like “You could improve my experience by ---“ will generate better information than “Rank your experience on the following scale.”
Next, you must act on the information you have received. If your customers tell you that your sales people are rude, or that your deliveries are always late, do something about it. Knowing that your customers are unhappy and then ignoring them and not acting on the information is absolutely guaranteed to turn them off and turn them away. A survey that solicits information which is never used to make improvements is a waste of time and money and does more harm than good. If you are going to collect the information, you must have a process ready to ensure that managers act on it.
Finally, you must do something to let your customers know that you have heard, appreciated and acted upon whatever they told you. This means two-way communication. It also presents you with a golden opportunity to engage in excellent public relations. Ads, flyers, letters, posters, notices, electronic newsletters and public announcements are only some of the ways that you can get back to your customers, show your progressive management practices and encourage further feedback.
And now for the bottom line. Does it actually work and pay off? Yes, for sure. There are so many examples, it is hard to know where to start but WestJet Airlines is a good case in point. WestJet initiated a customer input process a year ago. In July, it announced second quarter earnings that were 19.5% higher that the second quarter earning of the previous year.
Knowing what your customers want, addressing their concerns, making changes and telling them about it can pay huge dividends. If that isn’t enough to propel you into making the effort, ISO companies will have to do it anyway. The only choice seems to be whether you want to lead the pack or be running to catch up with it.
Re-printable with permission.
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