How to Turn an Economic Downturn into an Opportunity For Profit and Sustainable Growt
As I was contemplating the subject matter for this article a quote leaped into my head. "The problems we have today can not be solved with the same level of thinking we used to create them." Albert Einstein said this many years ago. Was he only talking about science or does this also apply in the world of business? It's certainly not as profound as E= MC2 or is it?
Is the only way to survive the current economic situation to entrench and focus on short-term survival as so many organizations seem to be doing? That's what many did the last time there was a bump in the economy. Or is that thinking at the same level that created the situation in the first place?
Another quote also springs to mind. "The definition of insanity is doing the same thing over and over expecting a different result."
During the last economic downturn after 9/11 most companies realized that while they had survived, it was at the expense of valuable relationships with their customers. Many began all out campaigns to win back their customers' good will and loyalty. And it seemed to be working. That is until the sins of investment bankers caught up to us.
Recent (2010) survey results would suggest that most companies continue to use that old level of thinking. The recent AMEX Global Customer Service Barometer revealed that only 28% of customers (globally) believe their service providers are doing things which demonstrate that they value their customers business. Put another way, it would seem that only 3 in 10 companies are applying a new level of thinking while they navigate through the current economic minefield.
What an Opportunity!
What if there was a way that you could turn the current economic climate to your advantage? What if you had a roadmap which could show you how to turn today's economic reality into opportunities for profit and sustained growth?
There is a way - but it requires your total commitment, a sincere desire to succeed and a leap of faith.
If you are willing, read on. If you are not prepared to make the changes necessary to be successful, go back to your in basket.
Here are 3 things you can do which are guaranteed to help you apply a higher level of thinking to help you not only survive the current economy but thrive in the current economy.
1. Find out what your competition is doing and do the opposite!
If your competition is like most businesses these days they are probably focused on expense control and cutting corners. That is what most companies do when times get tough. They don't invest in training their staff, they focus their marketing dollars on attracting new customers, they ignore the relationships they have with their existing customers and they spend their time finding ways to do more with less. If you have 10 competitors there is a good chance that at least 7 of them are doing these things. Makes sense if you believe the AMEX survey results.
That same survey goes on to reveal that most customers would be willing to stay loyal if you proved you care.
These data would suggest that there are a significant number of customers just ready for the plucking. You may be wondering, why they would leave their current provider.
Well, based on another 2010 survey recently published by Right Now and Harris International:
"82% of consumers in the U.S. said they've stopped doing business with a company due to a poor customer service experience. Of these, 73% cited rude staff as the primary pain point, and 55% said a company's failure to resolve their problems in a timely manner drove them away."
In other words 8 out of 10 customers have stopped doing business with their current provider because of poor, inept, shoddy uncaring customer service.
Customers are voting with their wallets and their feet. They are leaving their current providers and spending their hard earned cash elsewhere in the hope that they will find a provider that values their business.
Another thing you have going for you is that 8 out of 10 of your competitors probably think they are providing a good customer experience when in fact, their customers think otherwise. A 2009 study by Customer Focus Inc reported that 80% of companies believe they deliver a superior Customer Experience. BUT only 8% of their customers agree.
The gap between what their customers want and expect and what companies are actually providing is enormous. Customers are primed to move provided you focus on what is important to them.
The only codicil to this first step is that in the unlikely event that any of your competitors are looking for ways to add value like you are, duplicate what they are doing, but do it better.
2. Embrace Customer Focus as a critical business strategy
Here are a few reasons why, according to past consumer research data, including the two we have cited, customers want good service and they are willing to pay for it.
Both referenced surveys reported that:
• 9 out of 10 customers include the quality of their service experience when making their buying decisions, and
• These customers are also willing to pay MORE if they are served in a manner which shows that their business is valued.
It doesn't take a mathematical wizard to figure out that you can't afford to lose the customers you have.
Research dating back to the 90's by TARP and as recently as last year by Customer Focus Inc. reveals that it is very expensive to replace an existing customer. The actual amount is between 5 and 6 times the original costs you incurred acquiring that customer. In simple terms that means that if it cost you $100.00 to acquire that customer, the cost to replace that customer is $500.00 to $600.00.
A moment ago we mentioned that 8 out of 10 customers report having stopped dealing with a provider due to poor service. Based on these numbers and the other research findings in those surveys it's reasonable to conclude that at least 7 out of 10 companies are losing customers. What if you lost 10 customers this week or 100 this month, or more?
Harvard Business Review reported a few years back that a mere 5% increase in customer loyalty translates to a net profit of between 25% and 125% and this profit goes directly to your bottom line. Recent research studies reveal that these numbers are as true today as they were when this study was originally published.
The cost of poor service tends to range from 25% to 40% of your operating expenses. While this does tend to vary based on your industry, even if you consider the lesser percentage, the cost of re-work, and the time/ cost associated with solving customer problems can be significant.
3. Implement a Customer Focus Strategy now while every one else is in survival mode.
Here's what you need to do unless you are content to lose most of your customers:
- Embed a shared vision of service and define a set of clear service values throughout your organization through training, constant communication and accountability.
- Communicate and reinforce a deep commitment to the customer among your employees again through training, constant communication and accountability.
- Recognize that every function in your company has an impact on the customer and ensure that everyone understands and what they must do to add value to the customer experience.
- Develop and implement support functions that teach and reinforce service behaviour.
- Define the unique and pivotal role managers and supervisors play in reinforcing quality and service, and train them to be customer-focused leaders.
- Recognize that Customer Satisfaction is a reflection of Employee Satisfaction and put in place the action steps and measures which will raise employee satisfaction levels.
- Align your processes and procedures to ensure a quality customer experience based on what your customers value.
- Train managers, supervisors and employees to reinforce service behaviours.
- Define performance standards for staff that illustrate service behaviour and expectations.
- Utilize pro-active service recovery as a means to strengthen customer relationships.
- Provide recognition and reward for employees who exemplify stellar service.
- Listen to the voice of the customer, constantly and use these data to align your processes and procedures with what your customers value and to measure the efficiency of these processes and procedures.
The payoffs are huge. Some of the payoffs include:
- Long-term loyalty based revenue
- Customer trust and long-term relationships
- Less customer churn when times are tough
- New customer acquisition through word-of-mouth
- Higher levels of employee engagement (service excellence through employee performance excellence)
- Maximized operational performance by focusing on what customers value
- Reduced operating expenses by eliminating the cost of poor service
The opportunity is there for anyone wishing to seize the moment. And keep in mind, if you don't think you can handle this right now, one or more of your competitors may decide that now is the time to take the leap. The expression, "You snooze, you lose", does come to mind.
With so much to gain, why not go for it!
If your Company is one of those remarkable few who has taken advantage of all that customer focus has to offer, congratulations and thank you. I would love to hear your story. If possible I would like to profile you in my next book. Drop me a line and tell me your story.
Have a question for Ray? Ask or leave a comment below!