Archive for category Practical Advice
In a vibrant economy, Customer Service, can be a key differentiator for two B to C competitors. With a sluggish economy, Customer Service may well determine which competitor survives and which fails. Here’s another example of a real multi-billion dollar struggling company that does not understand the relationshp between customer service and customer wallet share. The author has requested anonymity to protect his current status.
Fly the Friendly Skies
Discrimination is a sociological term referring to the treatment taken toward or against a person of a certain group in consideration based solely on class or category. Discrimination is the actual behavior towards another group. It involves excluding or restricting members of one group from opportunities that are available to other groups. We are fortunate to live in a country that does not embrace racial, religious, gender, age, creed, sexual, disability or class discrimination. There are no castes in the United States. We are all equal.
Well not quite, for air travelers there are “loyalty” programs that divide us. I’ll focus on United Airlines (UA) as that is my only point of reference.
The loyalty programs are just S&L Green Stamps carried to a different level. You purchase my services and I’ll reward you with theses stamps or in the case of UA Mileage Plus, miles. The miles accumulate and you can trade them in for a reward. The reward with UA is flights, upgrades and even membership to the Red Carpet Club when you use your miles to obtain the reward.
The rewards are to secure loyalty because you flew with them instead of American or Delta.
Here is where the class system raises its ugly head.
Example: You have been flying UA and have saved 200,000 miles. On your next flight 60 days in the future you decide to use 40,000 miles to upgrade from economy to first class (FC). You receive your confirmation and a computer generated boarding pass on a wide body airbus seat 2A. You can almost taste the wine and feel the warmth spacious FC seat.
In 60 days you arrive at the airport, even dressed up a bit because you are in FC today.
Little did you know that Lois, the international computer chip VP of sales, needed to go to LA on short notice. Lois is a million mile UA customer and she likes seat 2A.
You are toast. This happens each and every day. So that loyalty you gladly provided, even through the bankruptcy, is rewarded with a seat in 6A. That’s right; in economy at the bulkhead where the seats are tiny and the cabin wall presses against you for 6 hours.
Lois is happy and you are offered a $100 voucher good for a year and you need a chiropractor at the flights end..
The marketing staff at UA headquarters has no clue what they just did to a core business traveler— who is now looking at American and Delta as a UA replacement.
Lois must be better than me—I am not worthy. Everybody votes in Selma Alabama—refrain please.
What a difference a year makes. In the second quarter of 2009, Starbucks was closing stores, laying off staff, and hunkering down to weather this deep and prolonged recession that has cut deeply into the latte budgets of the majority of Americans. This year Starbucks has returned as a darling of the stock market as defined by the price per share / earnings per share ratio.
Reacting to changing tastes and tighter family budgets, Starbucks made some smart changes in menu and pricing. Certainly those have made a difference in Top Line Revenue – particularly their pursuit of healthy alternatives to traditional fast food breakfast and lunch choices.
But these changes did not make the key difference. What kept Starbucks customers coming to stores — even if they ordered more plain drip coffee and fewer lattes was Starbuck’s atmosphere and ethos. At Starbucks the most important product is a great customer experience — each and every time you are in one of the stores or online at their website.
For example, a Sundays ago, I misplaced my old and battered Starbucks card — probably at the Campbell,Califoria store. A week later, as I was paying for my Sunday morning coffee (black, no room for cream), I asked the clerk if anyone had found the missing card. It was really a rhetorical question —expecting no answer — an awks sucks, gave it a try — question.
A few minutes later, the store manager came over to the table where I was sitting with a group of my friends. She brought the Starbucks Customer Service 800 # and suggested calling Customer Service right then. To make a long story short, a new card loaded with the remaining balance from my old card arrived in the mail by the following Wednesday. Like the old, the new card is now registered with Starbucks.com –
This commitment to the Customer — first and foremost — is at the heart of Starbucks enduring success. Unlike Direct TV(Customer Dissatisfaction Hurts Your Bottom Line) and T-Mobile (You Gotta Make Noise to Get Satisfaction from T Mobile), Starbucks grows its business by increasing its customers’ stickiness not with steeply discounted introductory pricing and short-term gimmicks.
As we’ve illustrated in these three blogs, its not the most expensive customer strategy that works the best, its the most consistent and the most sincere that gives a company a great reputation and an Excellent Bottom-Line!
There are two absolute truths in sales and marketing that impact a company’s Bottom-Line Profitability.
- 20% of your customers are likely to produce 80% of your income
- It costs 4 to 5 times as much to acquire a new customer as to keep an existing customer
In the light of those truths it is hard to argue that excessive or unnecessary customer churn (i.e. customer turnover) does not hurt the Bottom-Line. And what single factor accelerates Churn faster than any other –? Bad customer service — unfulfilled expectations, promised benefits etc.. drive churn.
I was the principle consultant on a global telecommunications study a couple of years ago that demonstrated that an improvement in the customer service process and related technology upgrades could reduce annual Churn by 20 to 30 (depending on the country etc..). The longer credit worthy customers remain your customers, the more profitable their businesses become.
- Fewer sales people and more less expensive post-sales support personnel can better manage the business at a lower personnel cost
- More opportunities for service and product upgrades with a positive image of your company. Less pressure on existing prices.
- Fewer “loss leader” promotions
- More predictable revenue stream
- Equipment can be fully depreciated etc..
There have been hundreds of text and business books written on this subject but some consumer product household name companies have obviously never read them. High on my list of companies that just don’t understand how important managing customers’ churn can be, especially among their multi-year customers, is Direct TV .(]http://www.directv.com/DTVAPP/index.jsp)
I have been without cable television for two weeks now – despite the fact that I have paid Direct TV a monthly fee to maintain and service the required equipment for more than 5 years. Not even a threat to call Comcast could get a service technician out to fix(what they have already acknowledged is their) problem in less than 2 weeks. The long delay seems to be due to a backlog of new dish installations for new customers with a special introductory rate of 20% of what existing customers pay.
The only reason for such a steep discount is to maintain Direct TV’s market share in a competitive market place?
I think DirectTV is a great product. But I am going to be shopping for a new television services vendor just as soon as I finishing watching the 11 HD episodes of Fox’s series “24″ that I have recorded over the last couple of months. Only one simple reason to leave — their customer service and customer attitude are so poor!
Based on their currently advertised first year pricing, it will take 5 new customers to equal my one bill. Think of this as CHURN THEY CAN USE as an object lesson!!!
The Bottom-Line for Direct TV is either going to be insolvency or a hostile takeover – neither of which can be defined as a success!!!!
@CORDI AND ASSOCIATES – all rights reserved.
Every major technology company client we have worked with during the last 5 years has asked one question – how can we sell to the Small and Medium (SMB) customer segments? This increased interest in the SMB market place is born of self interest.
- For every enterprise client (revenue >$2B), there are 144 potential customers with revenues <$250M
- In the US, alone, manufacturing firms with <1000 employees generated close to $1 trillion in revenue in 2009 – down significantly from 2007 but still substantial.
Multiple business data research firms have documented the fact that SMB firms spend a larger percentage of their revenue on technology but spend more carefully. Our research finds that as a group they –
- Value technology solutions not technology tools
- Suspect that existing technology solutions do not address their specific business challenges
- On the surface, face the same challenges as enterprise customers. However when examined more closely, SMB challenges are more compelling and require different solutions
- Trust their peers more than technology professionals
- Are lagging adopters
- Buy when they feel a “direct relationship” to the vendor –
Feel the vendor is invested in them!
Technology vendors who want to have a successful Go-to-Market strategy need an approach that is specific to the SMB market segment they want to penetrate. This begins with a solid understanding of the market segment – issues and opportunities, total market size, competition, cross industry alliances and existing suppliers, etc.. Next, a great Go-to-market-Strategy is only as good as it’s implementation plan —
- A tailored product offering and the value proposition
- A multi-channel marketing strategy
- A multi-channel sales strategy
- An effective executive to executive communication plan
- A best-in-class post-sale customer service and technical support capability
- A strong set of ROI measures
- A set of well-defined plan milestones
- An extra dose of patience to sustain a longer selling cycle
Technology vendors who master the differences in selling to the enterprise and the SMB market space have a great opportunity to increase their own market share and to improve their Bottom Line by developing a new and loyal customer base.
@Cordi and Associates
All Rights Reserved 3/2010
Our research proves that an effective WIN/LOSS ANALYSIS process IS the 21st century “CANARY IN THE COAL MINE”
Want to know how your business plan is working? Our experience shows that competing effectively in a fast-paced global economy requires a disciplined win/loss analysis process that takes into consideration every aspect of sales effectiveness. Win/loss analysis should be conducted at least quarterly and in the current economic uncertainty preferably on a monthly basis. Sales, Marketing and Operational Management should examine all aspects of the Go-to-Market process.
- Measuring the health of the sales pipeline
- Calculating the return on marketing investment
- Segmenting customers and then targeting specific customer segments
- Discovering early indicators of shifting demands – product-based or market-based.
- Managing and sharing internal sales best practices
- Conducting a forensic transaction analysis on so-called “big deals” after their close.
By comparing the results of the win/loss analysis to the revenue plan management can quickly determine whether they are on track to meet or exceed their plan or need to make adjustments to that plan immediately –
- Increasing or slowing manufacturing to meet product demand
- Speeding or slowing new product introduction
- Expanding or revamping advertising
- Adjusting sales personnel etc..
An effective win/loss process is an essential tool in the quest to maintain focus on Bottom-Line Excellence even in the most challenging of economic conditions – just as the 19th and 20th century coal miner was warned by the canary of unseen danger below — .
@copyright Cordi and Associates
ALL RIGHTS RESERVED 3/2010
The Marketing Executives Network (MENG) released the results of its annual member survey today. As a participant in the survey, I selected Marketing ROI as the “concept of the year”. It appears that many of my colleagues felt similarly – making Marketing ROI number one this year over Customer Retention and Brand Loyalty.
This ranking does not diminish the importance of Customer Retention (based, of course, on segmentation and customer profitability studies) or the importance of “living” and enhancing the Brand. What it does reflect is a new appreciation for the “business of marketing” over the classic “art of marketing”.
The majority of respondents believed that 2010 will be a “better” year than 2009, even as the economic facts point more to “hope” than “expectation”. In such a fluid situation, the best marketers are going to spend marketing dollars carefully and where those dollars have the most impact. They can only spend as wisely as they measure well.
Determining the Return on Marketing Investment does not have to be complicated and difficult to implement. It can be as simple as measuring the cost of new revenue from existing customers compared to new customers. Detailed analysis should be done only as a pattern emerges – and the pattern will be different in different business segments and different companies within a segment.
Measuring the effectiveness of marketing, also, helps executives to understand the impact of larger economic forces on their business – so that they can make choices in their tactical approach to their Go-to-Market Strategy earlier and more surgically than in the past. This, in turn, leads to sustainable bottom-line profitability and long term business success.
I received an e-mail from Aberdeen Research today that claimed 73% of companies responding to an earlier survey expressed “a need to improve operating expenses as a top priority.” Operational efficiency is subject to many definitions and in the Aberdeen case it is an argument for tools over technique. My definition is a little different.
My definition of operational excellence is the technique of maximizing profit by optimizing the cost of doing business in any economic circumstance. Excellence does not just happen; it is the result of advanced planning and timely execution.
Companies that are going to be successful in this more precarious and opaque national and global economy will be those that have a good Go-to-Market Strategic Plan supported by a set of solid tactical plans geared to optimize efficiency in any economic circumstance. The tactical plans must be based on the probable and the possible and the unthinkable business scenarios – all in support of the Strategic Plan.
Operational excellence is a product of good scenario design, and tactical implementation. The final question management must ask before accepting a tactical plan is “does the company have the focused business processes and the enabling tools to quickly identify the changing economic conditions (early indicators) and respond urgently”? If the answer is “no”, the remediation begins with determining if the answer “no” is a fault of the tactical plan or the result of sub-optimal business operating practices or enabling tools ?
Bottom Line Excellence is the result of focusing on continuous re-examination of strategic assumptions and the nimbleness to adjust to changing assumptions.
Joyce Stoer Cordi
All Rights Reserved 2/18/2010
What is a small or medium business to do in the current, unstable global and (US) national economy? I was reminded yesterday, while reading the Businessweek small business e-letter, of just how unclear the path to economic recovery is — or whether we are on the road to recovery at all? No two “economic experts” agree —
- It’s a V shaped recover and we have passed the bottom
- It’s a W shaped recovery and the double – dip is coming in the second half of 2010 or in q1 2011
- The US economy needs another stimulus plan (I have lost count. Is this the 4th?)
- Government stimulus plans have had little or no impact on economic recovery
- When government stimulus is withdrawn later this year, the unemployment will rise
What is the owner of a, just for a practical example, $50M plant nursery that sells to big box retailers to do?
- Small and medium business should be acting aggressively to be prepared for a surge in demand in second half 2010
- n Small and medium business should delay hiring and building inventory until there is more evidence of consumer demand
How about neither?
The smart nursery owner needs to plan for either, both, or neither eventuality in the next 12 months by focusing on the only important measurement – bottom-line profitability. A consistent record of profitability in good and bad economic conditions is the key to great customer confidence, employee loyalty and flexible, affordable, available credit.
Bottom-line profitability doesn’t just happen. It is the result of careful analysis and planning. It does not take a lot of executive time, but it does take executive focus. To learn more just click here http://www.cordiconsulting.com/thought_leadership.html
Washington Post Technology Page (2/3/2010) ran the headline “AOL posts profit, but subscribers dwindle”.
Disciplined customer segmentation and analysis will help a struggling company to reduce their operating expense by prioritizing their marketing and selling activities on the limited number of customers who produce the most revenue. The analysis may not provide an exact statistical 80%/20% breakdown but it won’t be far different.
When a company focuses on its most valuable customers it accomplishes two things:
Improves customer loyalty and, potentially, wallet share
Creates a model for increasing the total number of high value customers
$50M companies that aspire to be $1B companies need to build processes to continually monitor who their key customers are and why they are key customers