Customer loyalty, offers unmatchable products and services | Daily News
So, you want to start-up and develop a small business – Part 27

Customer loyalty, offers unmatchable products and services

It is no secret that the level of customer service in many Sri Lankan businesses leaves much to be desired. An only a foolish business owner would assume that unhappy customers will continue to tolerate poor service or buy products that do not perform.

A huge factor in your business’s long-term success is not only attracting but also satisfying and retaining customers. As a small-business owner, you may be on the front lines of dealing with your business’s customers.

However, if you have enough employees, some of them will likely be dealing with customers, too.

Therefore, the importance of providing excellent customer service must be clear to everyone in your organization who has any impact (direct or indirect) on customer satisfaction. This includes the receptionist, the accounts receivable clerk, the delivery truck driver and many others.

Consumers generally have many choices, so if you and your employees do not satisfy your customers’ needs, you will likely face these unpleasant results:

Competitive threats: Now more than ever, customers have many options for buying what your company has to offer. For the vast majority of businesses, competition is intense at the global, national, state, regional, and local levels. It’s only a matter of time before your unhappy customers become your competitors’ newest customers.

Negative word-of-mouth: Even worse than losing dissatisfied customers to the competition is negative word-of-mouth, whereby unhappy customers talk and tell other consumers why they shouldn’t buy your products and services.

Furthermore, your competitors are more than happy to recount the negative stories they’ve heard from your disgruntled customers.

In this instalment, we offer some helpful advice for providing excellent customer service. Here, you discover many strategies for keeping your current customers, whether they’re satisfied or dissatisfied.

Retaining your customer base

As the owner of a small business, you need to keep your customers happy. How? Well, you have an enormous impact on your customers’ satisfaction through your company’s products and services and the way in which you present them.

Of course, not all customers will stay satisfied and loyal to your business. So, we also explain how you can learn from customer defections to minimize their happening in the future.

Getting it right the first time

As a small-business owner, if you don’t get your product or service right the first time, you may not have a second chance with customers. Customers aren’t stupid, and if you sell them inferior merchandise - especially when better merchandise is available from other sources -they won’t come back the next time they’re in the market for the products and services you offer. What’s more, your goodwill is severely damaged.

Somewhere in 1970s and 1980s, the big U.S. auto manufactuers (Ford, Chrysler, GM, and AMC) made a major mistake: They ignoredthe competitive threat of foreign automakers. Despite having a relatively small market share in the early 19 70s, the foreign auto manufacturers had intensely loyal customers.

Why? Because the best foreign automakers made quality cars that rarely had problems. And when the rare problem did occur, they generally provided excellent service.

Domestic automakers, on the other hand, upset customers by producing subpar cars. Sure, their cars looked nice on the auto dealers’ lots, but after a short time in use, many of them developed problems. To add insult to injury, U.S. auto customers didn’t get particularly good customer service when they brought in their cars for needed tune-ups and repairs.

They were too focused on short-term profitability and didn’t consider the after-sales service that was required as a result of their initially shoddy products.

As a result, they couldn’t stand up against the up-and-coming foreign automakers, who worked on getting their cars right the first time.

Continuing to offer more value

Getting your product or service right the first time isn’t enough to keep customers coming back in the long run. Like life, the business world keeps changing. Because of the ever-present threat of competition, resting on your laurels is foolish - and perhaps fatal. In addition to initially developing a top-notch, quality product or service, you must regularly examine how you can offer even more value - improved products or services at the same or lower cost. If you don’t, competitors who faithfully keep up with market forces will gradually eat your lunch.

Remembering that company policy can be bent

Flexibility is paramount in any organization, but it’s especially important in a small business, where responsive and personally tailored service can set you apart from the larger companies. One place where you should be flexible is in your company policy.

If a customer has a problem but you have a rule or regulation preventing you from resolving that problem, forget the rule or regulation. Bend it. Skirt it. Find a loophole in it.

You’re a regular customer at a dry cleaner. It’s Wednesday and you need your tuxedo dry-cleaned by Friday night due to an urgency. You explain it to the drycleaner.

But he informs you that it won’t be ready until Saturday because of the firm’s three-day turnaround policy.

What are the common threads here? The dry cleaner apparently has cast-in- stone rules and regulations that dictate the way they do business, and they won’t bend those rules to solve a customer’s problem. The business is in danger of alienating a customer.

Be flexible

How can the business owner become more flexible to satisfy the customer? The dry cleaner can put the customer’s tuxedo in front of someone else’s order, no matter what the company’s operations manual dictates.

These are the moments of truth in any business - the times when what the business says it will do conflicts with what the business actually does. These times differentiate the business that says the customer is king from the business that acts as if the customer is king.

It doesn’t mean you should always provide extra service casually or for free. In some situations, you may want to charge more for a special service. Consider the special favourand the one-time transaction when you set your pricing strategy. Also, you don’t want to tell your employees to feel free to break any rule at any time; that’s the road to chaos and lack of profitability.

But flexibility helps keep customers feeling happy and coming back - and recommending you to others. Let your managers and employees know that you stand behind this philosophy, and you’ll empower them to always provide good customers with top-notch service.

Learning from customer defections

The costs of acquiring a new customer are huge. After spending the marketing effort and money needed to secure a new customer for your business, you need to keep that customer coming back to your business for many years.

If you experience much customer turnover, your cost of doing business will rise significantly as you try to attract replacement customers, so youneed to take action quickly.

After all, customer turnover can indicate major problems with your company’s products or services and customer service.

As a small-business owner, you’ll stick around much longer if you scrutinize your failures and make positive changes to correct them.

Take the time to examine customer defections and their underlying causes. The following sections dig deeper into this topic.

Examining the value of customer loyalty

Frederick Reichheld, a well-known management consultant who specializes in understanding, and working with corporations on, customer loyalty says: The average company today loses half of its customers in five years.

The typical Fortune 500 company has an average annual real growth (that is, growth in excess of the rate of inflation) of 2.5 percent.

If such a company retained just 5 percent more of its customers each year, its real growth would jump to 7.5 percent. A 5 percent increase in customer retention in a typical company generally translates into an increase in profits of more than 25 percent.

In some industries, good, long-standing customers are worth so much that reducing customer defections by 5 percent can double profits.

Clearly, retaining customers - particularly your best customers - has an enormous bottom-line impact.

Given how important and valuable retaining customers is, you may think that if a business were losing many of its customers, it would seek to understand why and to correct the underlying problems. Well, if that were the case, customer loss wouldn’t be as high as it is in many businesses.

Tracking customer defections

In his consulting work and research, Reichheld has also found that, not surprisingly, many businesses don’t learn from their customer losses.

He says, it’s difficult and sometimes threatening to look at failure too closely. Ambitious managers want to link their careers to successes; failures are usually examined for purposes of assigning blame rather than detecting and eradicating the systemic causes of poor performance.

The good news for you, the small-business owner, is that you don’t have to be concerned with bosses and organizational politics when addressing the problem of customer defections. After all, you’re the boss.

However, it’s a natural human tendency to spend more time chasing and celebrating successes than investigating and learning from failures and losses.

Make a commitment to tracking the customers that you lose and asking why. (This is the customer equivalent to the exit interview that you should always perform with departing employees.) Knowing that you’ve lost customers isn’t enough; you must find out why you lost them. Doing so can help keep you in business and help keep your business growing.


(Lionel Wijesiri is a retired company director with over 30 years’ experience in senior business management. Presently he is a business consultant, freelance newspaper columnist and a writer.)

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