Saturday, July 9, 2016

What Makes an Ideal Customer

Brian Woolf has authored two books on best customer marketing.  He is often referred to as the "Godfather of best customer marketing".  He says that as a general rule best customers:

1. Spend the most each year
2. Have the lowest defection rates
3. Visit the store most frequently each month
4. Buy items with a higher average price
5. Buy higher gross margin percentage items
6. Buy from more departments and categories
7. Have lower processing costs (larger order sizes, fewer questions about whre to find items, and fewer losses from bad checks).

The list is comprehensive and certainly defines the type of customer that is a good revenue source as well as a source of high margin.  It is possible that a non-loyal or unhappy customer could provide the same attributes of revenue and margin for reasons such as most convenient location, quickest shipping or the only one providing specific products or services not readily available from other sources.

This list seems to overlook a few VERY important "Rules" that in the opinion of The Customer Institute really define an ideal customer rather than a "best customer".  The following list of four customer relationship aspects do not require the previous list of 7 but, in the opinion of The Customer Institute, are sought by most companies.

1. An ideal customer will allow the company to make a mistake and understands that no company is perfect.  That customer will allow the company to correct the mistake and not penalize the company.
2. An ideal customer will recognize that ever company can only stay in business if they make a profit.  For that reason those customers will not challenge every price.   Yes, sales are important but in the long run the company can only survive by making a profit.
3. There is a bond of mutual trust between the ideal customer and the company.  Both the company and the customer know that the information shared is the truth and is accepted with that knowledge.
4. The products and services of the company fit the needs of the customer.  There is no attempt to sell either a product of service that does meet the needs of the customer.  There is no attempt to sell a product or service that does not satisfy the customer need and the customer knows that.

The bottom line is that the ideal customer is more than a source of revenue and profit.  The more important aspect of the ideal customer is one whose needs fit the products and services provided by the company.  In addition the values of the company are complementary with the customer and provides  the basis for an ethical relationship to exist.  Business is more than dollars and cents. 

Saturday, July 2, 2016

Word-of-Mouth Works - A Different Perspective

Everybody knows that word-of-mouth is a major component of customer satisfaction. Most everybody thinks that most word-of-mouth is negative. There is been some interesting research done lately that gives a different perspective of word-of-mouth.

A shopper survey performed by Brick Meets Click suggests that positive experiences may occur more frequently than negative experiences. They asked 1000 grocery shoppers about their experience shopping online. For those who shop online – those who had extremely positive or negative experiences how likely they would share them with others. The results are not what I would have expected; namely, only 60% of those who had a negative experience indicated they would share that experience with others whereas 95% of those who had a positive experience indicated they would share that experience with others.

This information suggests that online shoppers are acting differently than those who are brick-and-mortar shoppers. There is no clear research at this point in time to explain the change from what has been the belief that customers are more likely to provide negative responses from negative experiences than those customers who have a positive experience. Until we understand the components that drive these responses will not be able to construct customer models that will create positive word-of-mouth and higher levels of satisfaction and loyalty.

The bottom line is that online shopping appears to have very different characteristics than face-to-face shopping. This is an exciting time when consumers are in flux in the way they shop and the way they perceive experiences while shopping.

Monday, March 7, 2016

The Customer Experience is Evolving

Social media and texting are having a profound impact on the way customers and companies communicate.  Their have been studies done by Hailo, a taxi app and by the Pew Research Center.  Statistics that have been published by Andrew Prokop indicate findings that suggest the evolution.  These findings include:
1.       Text messages represent the two most often used method of contact by cell phone (both sending and receiving) whereas the voice phone call ranks as the 6th most frequently used method.
2.       American women text more frequently than men (14%)
3.       80% of American adults text every day.
4.       Text messages are opened more frequently than emails (98% versus 20%)
5.       Americans exchange more texts than phone calls
6.       More calls are coming to call centers from cell phones than from and lines
7.       One study from 2012 (source unknown) noted that texting was rated higher than voice communication in terms of customer satisfaction (text scored 90 out of 100 points and  voice scored 77 out of 100).
These statistics raise two issues (one good and one not so good)
The good news is that by cross training support personnel to respond to both productivity can be dramatically reduce the dead time that occurs during a lull in the arrivals.

The bad news is that the incremental stress that will be experienced by call center personnel and support personnel despite their ability. The fact that service personnel may be trained to have the ability to multitask multiple text messages as well as dealing with customers on the phone may have a deleterious effect over time.

The real problem is that text messaging is fast becoming (if it has not already become) a new means for supporting customers.  This is an issue that cannot be ignored and must be managed. 

The bottom line is that the world of on line support has just experienced a dramatic new dimension that can be used either as a strategic advantage or, if ignored, will become a major deterrent to customer satisfaction and loyalty.

Saturday, July 25, 2015

Amazing Statistics

Here are some customer service statistics that demonstrate the power of a positive customer service experience.  Note each statistic is provided with a reference for its source.  These statistics were compiled by Gigi Peccolo, the Content Manager at OneReach, a consulting firm.
1.   By the year 2020 (coming up fast!), customer service will beat out price and product as the key brand differentiator. (Walker Info)
2.   It’s 6-7 times more expensive to attract a new customer than to keep an existing one. (White House Office of Consumer Affairs)
3.   A 10% increase in customer retention can result in 30% increase in company value. (Bain & Co.)
4.   If customers have a “very good” or “excellent” service experience, 97% of them are “very” or “extremely” likely to tell friends and family about it. (Survey Monkey)
5.   89% of customers will start doing business with a competitor after a negative service experience. (VPI Corp)
6.   82% of customers stopped doing business with a company after a bad customer service experience. (RightNow)
7.   Over 65% of customers say that valuing their time is the most important thing a company can do to provide good online service. (NICE)
8.   Three out of five customers would try a new brand or company in order to get better service. (American Express)
9.   Over 90% of customers who have an effortless service experience with companies will buy from that company again. (CEB)
10.               Only a paltry 1% of customers feel that their expectations of good customer service are always met. (RightNow)
11.               90% of customer service decision makers believe that delivering good customer service is essential to their companies’ success. (Forrester)
12.               58% of customers are willing to spend more with companies that provide a great customer service experience. (American Express)
13.               87% of customers share good service experiences with others. (Zendesk)
14.               Nearly 50% of customers who had a negative service experience have told over 10 people about it. (Harvard Business Review)
15.               73% of consumers say that a friendly customer service rep can make them fall in love with a brand. (RightNow)
16.               74% of customers find a poor customer service experience annoying. (Synthetix)
17.               85% of organizations support multichannel customer service interactions. (Deloitte)
18.               Over 60% of companies think mobile customer service is a competitive differentiator. (ICMI)
19.               90% of customers expect to receive a consistent customer experience across channels. (Synthetix)
20.               74% of customers have spent more in response to good customer service. (American Express)
21.               68% of customers say they’ve switched brands because of bad customer service. (Accenture)
22.               U.S. companies lose approximately $41 billion annually due to bad customer service. (SmartCustomerService)
23.               78% of consumers have bailed on a transaction because of bad customer service. (American Express)
24.               81% of customers are likely to repeat business with a company after a good service experience. (Kissmetrics)
25.               A 5% increase in customer retention can increase profits by up to 125%. (Bain & Co.)

Saturday, May 16, 2015

How much are your customer relationships worth?

There's always a lot of argument about the way companies value their customer relationships as a percent of the value of the company. The value of customer relationships falls into the category of an intangible asset when looking at the balance sheet of a Corporation.  Brands and trademarks are included in the valuation of the company along with the value of customer relationships as the two major intangibles.

MARKABLES is a cross-border venture of experienced trademark experts who deal with the challenges of trademark valuation from different perspectives.  It is owned and operated by a privately held company located in Switzerland and specializes in company evaluations for M&A.

There really is no accounting data that can be used for evaluation of trademarks and customer relationships. The general methodology used to value intangible data is highly dependent on comparative data.  One of the best ways of valuing customer relationships occurs when a company unit being bought or sold since it's value must stand up to the scrutiny of auditors. The process used for estimating the selling price of a company requires valuing the different assets of the company which also includes the intangible assets of the brand or trademarks owned by the company and the customer relationships of the company.

A study of 6000 mergers and acquisitions (M&A) worldwide between 2003 and 2013 revealed some interesting characteristics of the value of customer relationships and brands and trademarks. Since evaluations were done by experts and documented, the data which were accrued from the evaluations can be used to indicate how experts are valuing the two intangibles of brands and customer relationships.

The outcome of this analysis shows that the value of brands and trademarks has dropped as a percent of the overall value the company from approximately 18% in 2003 to about 10% in this 11 year period. On the other hand, the value given to customer relationships has increased from about 9% in 2003 to 18% in the same time frame. Thus while brands and trademarks seem to be declining at a rate of approximately 0.8% per year in terms of asset value of the company, customer relationships value and as a percent of the company seem to be growing at approximately 0.9% per year.

The bottom line is that companies are seeing greater and greater value being given to customer relationships at the same time they are giving less value to brands and trademarks as a percentage of the value of the business. This does not mean the customer relationships will ultimately replace brands and trademarks in the valuation of the companies. It does reveal that more value appears to be given to customer relationships. These two intangibles, brands and customer relationships, are definitely connected. Continued success will be measured by how well the two intangible variables are integrated and managed. The challenge for every company will be to build a strategy that integrates these two variables so they complement each other with the proper emphasis on each.  

Monday, May 11, 2015

CLV versus EVC

The concept of CLV or customer lifetime value has been used for many years to describe the value of a particular customer or customer segment to a company.  It's easy to get caught up in the concept of what's good for the company because that's where profit comes from. However, it might be appropriate to look at EVC, a new concept, but often overlooked. EVC refers to the economic value of a product or service to a customer. For as CLV measures the value to the company of a product or service, EVC measures of value of the product or service to the customer.

Few organizations pay attention to EVC because even though it is a simple concept. The calculation has some challenging variables. The general formula for EVC can be stated simply as:

EVC = tangible value + intangible value

The tangible value is usually easier to calculate since it will refer to improved productivity, speed, or some other metric that is easy to measure.  The intangible value usually refers to variables that are not easily measured, such as color, ego satisfaction, keeping up with the Joneses or satisfying a whim.

The reason the concept of EVC is a worthwhile metric is that it is one of the easiest ways to compare products and services between competitors and even within an individual company with multiple products and services. So long as the EVC of a product or service is greater than the competitor’s it will have a greater attraction for customers. 

Another reason to use the EVC metric is to compare the value with the price of the product or service. When the price of the product or service exceeds the value of EVC, the attraction of the product or service will likely diminish in the eyes of the customer.

The bottom line is that the concept of EVC should become part of every company’s product analysis.  It is not a measurement that is taken once and forgotten since the value is obviously going to change as the market changes and hence should be a part of every periodic product or service review.  It's time to start measuring EVC.

Saturday, May 2, 2015

The State of Customer Loyalty in Small Businesses

A joint study of approximately 900 small business owners presents an interesting insight into what small businesses are doing in the world of customer loyalty. The surveys were performed through a joint study by BIA/Kelsey and Manta in 2014. Some of the top level findings from the study are noted below:

1.      61% of small businesses now generate the majority of their annual revenue from repeat customers.

2.      62% of small-business owners are now spending the majority of their annual marketing budget to retain existing customers.

3.      The survey reported that a repeat customer spends 67% more on average than a new customer.
4.      Only 34% of small businesses have a loyalty program.

5.      Of the small businesses that have a loyalty program, only 46% are in digital form, such as an e-mail list.

6.      Only 29% of small businesses use a customer relationship management (CRM) tool to track customer information.

7.      When asked about the purpose of their customer loyalty program the dominant answer was “improve customer relationships”. Only 39% of those with a loyalty program noted this as their primary purpose. The secondary purpose was to “grow revenue”, which occurred with 36% of the small businesses.

There appears to be a dramatic change over the last several years for small businesses. Surveys done in 2012 found that small businesses focused on customer acquisition seven times more than customer loyalty and retention. In the 2012 Survey only 6% of the small businesses surveyed spent more than half the annual marketing budget on customer retention.

The bottom line is that small businesses seem to be migrating to the concept that loyal customers provide a greater source of revenue from each loyal customer than a newly acquired customer.  It is also obvious, that loyal customers lower the cost of customer acquisition and provide a more sustainable revenue flow.  Customer loyalty programs work for small businesses just as well as they do for large businesses. It's about time that all the small businesses think about customer loyalty and make the decision to make it a strategic component of their business.

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