In my last post (What Defines A “Bad” Customer?) I made the points that the primary measure most organizations use for their customers is Profitability and that customer behaviour can negatively impact profitability. In this post I want to look at some of the traits of a “Good Customer” and how we can influence them. I am going to ignore profitability since everyone is already thinking about that one. I’m sure you all remember the catch line from “Field of Dreams” – Build it and they will come. Let’s modify that to “Build happy customers and the profits will come” and move on to other traits.
I would like to propose three “Good Customer” traits in addition to profitability – Loyalty, Effectiveness, and Willingness to Partner.
I think most people would agree that there is far less brand loyalty now then there was in years gone by. The problem is that it is expensive to be constantly replacing customers so how do we encourage loyalty in our customers? If you ask people why companies switch suppliers most would say because of lower prices, because of bad service or product, or because of a process change. While these are undoubtedly major reasons, over the years I have seen many reports on the reasons companies change suppliers. They do not always agree with each other but the largest category in most of these reports was “Other”. This Other category tends to get overlooked as it is a combination of many little reasons and most organizations prefer to concentrate on big reasons so they get a good return on their effort. Instead of looking at the specific reasons it would be far better to concentrate on what all these reasons have in common. David Moseby & Michael Weissman in their book The Paradox of Excellence make the point that Quality, Price and Service by themselves are not enough to maintain loyalty. You need to be communicating regularly with the customer and ensuring they are aware of all the good things you do for them. Sure, someone may have a cheaper price but will they also provide this or that specific value add. Communications is critical to maintain a loyal customer.
Effectiveness, at first glance, may seem like a strange trait to be looking for but if you stop and think about it, you are already using that as a measure of your suppliers. When we pick our suppliers we want to know that they will do what they agree to and that they will still be there tomorrow to provide the service or product we want. It is the same with customers, we want them to still be there in the future to buy our service or product and the more effective they are the more competitive they will be. The more competitive they are, the more of their product they will sell and (hopefully) the more of our product they will buy from us. So not only do we want our customers to be effective, we should be doing everything we can to make them more effective. Can we shorten our lead times? Can we integrate our systems better with their systems? Do we have any training available such Lean Six Sigma that we can share with them? And how do we encourage all this? Well first we need to understand the customer as best we can. This means talking to them, not just through the sales force but at as many different levels as we can. Set up reciprocal visits between engineers, or purchasing or logistics… You never know where the next great idea will come from. Communications is critical to maintaining effectiveness, both in your organization and in your customers.
Over the years what companies have competed on has changed, from quality, to cost, to service, to value. For the last several years people have been suggesting that most companies now compete based on who has the most effective supply chain. The assumption is that an effective supply chain will have the lowest cost, best service and the fewest problems which allows you to be more competitive than your competition. The problem is that most organizations are only looking in one direction – backwards at their own supply chain. They also need to look forward to their customers and on through to the ultimate consumer. Unless you are selling to the ultimate consumer you are part of someone else’s Supply Chain and as pointed out earlier, the more product a customer sells, the more product you can sell to them. This means that it is in your best interest to pay as much attention to the supply chain above you as to the supply chain below you. But what makes an effective supply chain? Companies working together to find and improve any constraints or issues in the movement of product and information through the supply chain. This means partnering together, possibly setting up joint teams to map and review adjoining processes. (Can you say Kaizen?) If companies are not willing to work together as partners in a Supply Chain they will always be at a disadvantage to other chains that can and will work together. So how do we encourage this willingness to partner? Communications is critical to both understanding the needs, wants, & desires of your customers and to working together effectively as partners in process improvement.
If we look back over this posting, what do we see? There is one common element to encouraging Loyalty, Effectiveness, and Willingness to Partner. This common element is… Communications. So how do we build a better customer? In order to improve at all levels and in all the interactions we need to communicate effectively with them…at all levels and in all interactions in order to build a better customer.
If you would like to discuss how to measure the true cost of your customers’ behaviour I would be more than happy to meet with you and to explore this in more detail. Please feel free to contact me at firstname.lastname@example.org to discuss how a Customer Value Survey can help your organization.
If you would like to read more about this topic check out the other posting on my website – http://jadetrilliumconsulting.com
Hope you enjoyed this posting. Talk to your friends and co-workers about their experience and thoughts about customer value, especially what it means for your organization. And, as always,I would love to hear back on your (and their) thoughts. Just fill in the comment box below along with your contact information to let me know what you think.