Customer Intimacy Leads to Customer Loyalty
There are three critical disciplines of market leaders, “Operational Excellence” and “Product Leadership” as defined by Michael Treacy and Fred Wiersema in their book, The Discipline of Market Leaders. The final of the three is “Customer Intimacy.” The premise of their book is that in order to be a market leader you have to choose a discipline on which to be outstanding while at the same time be good in the other two disciplines. “Customers know that to expect superior value in every dimension from the same supplier is unreasonable. But, for any market leader, whatever value it chooses to deliver, it must maintain reasonable standards in the other dimensions as well.”
The discipline of “Customer Intimacy” is probably the most important for a small retailer. While execution is important for Operational Excellence, the typical flooring retailer will never be able to compete with the likes of a mass merchandiser whose operating expenses may be around 18%, while his may almost be 30%. Sure a retailer may be able to differentiate his product and service, but any differentiation that will truly distinguish to give a competitive advantage, will likely be copied by most of his competitors. Additionally a small retailer would not have the funds to invest in an R&D department like a multi-national chain.
Customer intimacy is the edge that will give the small independent retailer the competitive advantage against the big boys. The greatest asset of a Customer Intimate Company is customer loyalty. “A company that delivers value via customer intimacy builds bonds with customers like those between good neighbors.” “Customer-intimate companies don’t deliver what the market wants, but what a specific customer wants.”
Customer Intimate Companies don’t pursue transactions; they pursue relationships.
Customer Intimate companies consider the customer’s lifetime value, not just the profit and loss on a few transactions.
It is interesting to note that even today’s consumer expects more from independent retailers. Jon Trivers reports that customers that are disappointed with the service in big box stores will probably return to that store. But customer’s who are disappointed in an independent retailer will probably not return even if they are satisfied. The problem: they expect better service, more personalized attention in these stores. That’s just the way it is. The customer clearly expects more, and we had better deliver or she will vote with her feet.
The customer intimacy model focuses on a total solution for the customer. That means that a customer intimate retailer must deliver the best total solution from the buying experience and decision making process to hassle-free installation and leaving the home beautiful down to the last detail. This culture embraces specific rather than general solutions and thrives on deep and lasting client relationships.
The operating model features an obsession with the management of results the customer receives for their investment and the management of the store/client relationship. This model’s business structure delegates decision-making to employees who are close to the customer, so that the employee closest to the customer can serve the customer in real time without seeking upper management approval. The management systems are geared toward creating results for carefully selected and nurtured clients.
Since the core asset of a Customer Intimate Company is customer loyalty, what is responsible for creating this loyalty? It’s the employees who interact with the customer. “A company’s reputation is shaped by the customer’s experience with its employees.” To the customer, your employees are your business. Britt Beemer’s research shows that the number one standard by which a customer judges a store, “does the employee look like he/she wants to be at work?”
The Gallup organization found that “The salesforce generates four times more customer loyalty than the product or service itself, and twice as much as advertising and marketing.” Even more astounding was the fact that “90% of customer loyalty is generated by the top 25% of the salesforce.” In other words your average or below average salespeople do not really add to your customer loyalty.
For a customer intimate company, who you choose to represent you may be your most critical decision. Southwest airlines have found their people to be one of their competitive advantages, so they have carefully created a hiring process that eliminates selfish and un-fun people. Customer Intimate Companies “hire slow and fire fast.”
Customer Intimate Companies know that employee satisfaction is key to having their people be willing to jump hoops when the customer needs him/her to jump or be responsive. “Every company claims that its people are its most important asset. The most admired companies show they really mean it” (Fortune). Harvard Business Review writes that for “Every 5% increase in employee satisfaction, there is a resultant 2% increase in customer satisfaction, returning up t 1.8% in net profit.”
In order to operate as a Customer Intimate Company, besides making the employees feel satisfied, the customer must feel valued in the relationship. How do your customers feel when they leave your store or have completed their project? Have you delivered the total solution? Total solution means that you have satisfied their emotional needs as well as their project needs. Not only is their project perfect, but also the customer feels your company really values their business. It means maintaining customer contact and relationship. “Once my job was paid for and complete, I never heard from the guy again.”
This is your chance. This is where you can compete with the big boys. Are you up to it? Can you deliver? Or will meeting customer expectations mean that you will only sell this customer once? Customer loyalty is your goal, it’s about relationships; yours with your employee and your employee’s with your customer and how she feels about. How do your current customers feel about your company? Which are loyal and which are satisfied? Which employees drive customers away and which create loyalty? You’d better find out!