Why customer relations matter to the organisation
Success comes from
- delivering a high quality product or service
- a convenient delivery method (time and place)
- efficient systems
and, last but, as we shall show, definitely not least
- staff with the ability and freedom to use those systems for the customers’ benefit.
All the ingredients of success listed above are important, but the last factor, in particular, is what will give customers a positive experience, one they will remember and tell others about. That’s the essence of excellence in customer relations. But how does that help the organisation?
The bottom line
Organisations without positive customer relations approaches may lose half their customers in five years. They then have to replace them just to stay in business. So says Fred Reichheld in his book The Loyalty Effect. He ought to know. He is the Harvard guru on the subject. He reckons that ignoring customer relations leads to low growth, weak profits and shortened corporate life expectancy. Just consider how much more it costs – in terms of advertising, time and money spent cold calling and so on – to sell to a new customer rather than to an existing one.
On a more positive note, Harvard Business School has estimated the value of retaining existing customers:
- If you retain two per cent more of your existing customers, you could reduce operating costs by ten per cent
- If you retain five per cent more, you could increase profits by between 25 per cent and a staggering 80 per cent!
On the other hand, a survey by Coca Cola reported that
- Some 96 per cent of dissatisfied customers don’t get back to you, but they do tell ten other people
- And 13 per cent of those who share the tale will tell more than 20 others – so the numbers get even higher.
- Of all those who are dissatisfied, 91 per cent never return.
- The average satisfied customer tells three others about their experience, so for every ten happy customers you win 30 pieces of free advertising.
What makes a loyal customer?
In one survey, the top five reasons people gave for dealing with one business rather than another were all about relationships. Regular customers said that the customer service staff at the favoured companies
- Made me feel special
- Used my name (in other words, they remembered my name!)
- Helped me enjoy the buying experience
- Felt ‘on my side’ (for example, took time to explain how to use the product – went out of their way to help me make my own decision to buy, rather than selling to me)
- Built a mutual feeling of trust.
On the other hand
- Up to 68 per cent of customers don’t return because of an attitude of indifference.
Clearly, service staff enthusiasm breeds customer enthusiasm – and vice versa.
Enhance the bottom line
Let’s look again at those figures from Harvard Business School. Remember, retaining just two per cent of your customers will reduce operating costs by ten per cent. Keeping five per cent more will increase profits by between 25 per cent and a staggering 80 per cent. Whatever the final figures, the message is that customer retention offers
- Increased profit (they buy more)
- Increased return on investment in terms of sales effort – for every customer attracted to you by advertising, promotions and the like, more go on to become regulars
- Increased value of goodwill (effectively, customers doing your advertising for you), or other ‘customer value’ on your balance sheet.
Build long-term success
You may think of each customer as being worth only what they spend at any one time. That can lead to you under-valuing your customers. It can also focus your attention on pushing for every single sale, but in the long term, that can actually drive customers away.
Selling something to a customer for £100 may not seem to amount to much, but if you keep that customer’s loyalty for ten years, they might be worth £100 a month over that period. Changes the scale a bit, doesn’t it, if that customer is suddenly worth £12,000 rather than £100? And the cost of marketing to them goes down!
A researched database has published findings that the businesses that succeed in the long term are those which constantly
- Develop and deliver new products or services in new ways
- Anticipate the imminent needs and desires of their clientele
- Exceed customer expectations
- Offer welcome surprises to customers
- Focus on total customer value rather than value of single transactions
- Empower and encourage staff to delight the customer
- Contribute to the community and/or environment.
Now think about your own great experiences of being a customer:
- How many times have you gone back again?
- Have you ever told friends about that place or business?
- How many have you told?
- Have they used that same supplier too?
When we are customers, we instinctively know if we are getting a great service. We need to be able to translate that into providing the same for our own customers. So you might say the future depends on how individual members of staff use the business systems for the customers’ benefit.
Quite a few businesses get all (yes, all) their work by personal recommendation. So getting your customers to do the marketing can pay off in a big way.
Excellent customer relations help increase long-term profitability for the business.