Syed Hasan, CEO, ResponseTek
Today’s competitive business environment means consumers and businesses have seemingly endless choices and products are commoditized quickly. Despite these challenges businesses must still strive to deliver growth in revenues and profitability.
Businesses that struggle to improve profitability are often guided to focus on their high-value customers. This is grounded in a misguided view that you cannot satisfy all of your customers, and satisfying the high-value ones generates greater returns.
This practice—called customer value management—is not necessarily a bad approach; it helps solve a real business problem. And it encourages companies to shift their focus from managing products to managing customers over the entire life of the relationship.
However, I believe that this approach has serious flaws that jeopardize long-term success. The first—and most troubling—is an organization-wide acceptance that, “we are only going to give customers that are high-value a great experience”. This sends a message from the top that great customer experience is optional and it becomes easy to justify poor customer service by writing off the “wrong” customer segment. Once this belief is ingrained in the psyche of a business it is difficult to remove and it will impact all of your customers over time.
Second, focusing on retaining the “right” customers may help short-term profitability, but is unlikely to deliver sustainable growth, since resources are directed at servicing a narrow sub-set of potential business.
Finally, by effectively ignoring a proportion of your customers, you will successfully motivate many of them to churn away from your company. Worse, if you give customers a bad experience, they tend to tell other people about it. Recent research into the retail sector by Wharton School of Business highlights what is at stake:
- 31% of customers tell one or more friends about a problem they experienced with a store
- On average, shoppers tell four people about their negative shopping experience
- Almost half of shoppers say they avoid a particular store because of someone else’s negative experience
- Negative word-of-mouth influences future patronage up to five times more than the person who experienced the problem first-hand
Customers share their experiences because they can. Blogs, message boards, and email enable customers to share their experiences and insights with other, potentially high-value, customers very easily. Can companies really afford this?
As an alternative approach, Customer Experience Management allows companies to capture and use those customer insights to improve. This approach is based on the simple concept of listening to what your customers want and then ensuring the company is aligned to deliver it. The goal is to make certain that every interaction with the company’s products and services provides something the customer values. This obviously makes sense for the customer, but does it make sense for the company?
Unequivocally—yes. And here’s why:
- Satisfied customers are far less likely to defect
- Giving customers consistently positive experiences builds advocacy and advocates bring in new business
- Satisfied customers are willing to pay for what they value
Customer Experience Management delivers short-term business improvements while simultaneously creating long-term advocates out of customers.
Learn more about how you can apply Customer Experience Management to your business: Sign up for our executive web seminar Using CEM to Build Advocacy, read more about CEM, or contact us with your questions.
