Most people intuitively understand that if you are delivering a product or a service, you will not earn money if you have unhappy customers. There is a basic understanding that we need to keep an eye on customer satisfaction. And there is nothing wrong with that. But it is just not enough.
A basic misconception is that customer satisfaction as such will lead to prosperity. This is clearly not the case.
Mere satisfaction does not lead to growth and prosperity.
Satisfaction may just be enough to keep you in the game. In fact, Fred Reichheld and his research team have shown that 60–80% of customers who defect from companies scored “satisfied” or “very satisfied” in customer surveys immediately prior to their dumping a given supplier.
So what does it take to really drive profit and growth? According to the original SPC research, customer loyalty is the key. A strong link exists between high customer loyalty and profit. The reason for this is twofold. The “traditional” explanation is that it is much cheaper and easier to sell to existing customers. If you have a large, loyal following, you do not need to spend as much on advertising or PR to acquire new business. This still holds true, but the main reason that loyalty is a key driver of profit has to do with the ambassador effect. Loyal customers tell their friends.
They become brand ambassadors or, in Reichheld’s terms, promoters. As discussed in the first chapter, in an oversupplied world, traditional advertising becomes less and less effective. Just as we know from the bazaar, everybody is trying to shout louder than the guys in the stall next door.
3000 messages a day
Urban dwellers are subjected to around 3,000 messages a day from companies trying to influence their behaviour in one way or another. Sounds like a big number? Just run a typical day through your head and consider the inputs you are subjected to during that period from the radio, television, Internet banners, pop-up windows, newspapers, billboards, the sides of buses, sugar sachets, and toilet doors. The creativity that goes into thinking up new ways to stick messages in front of potential buyers is impressive.
But as marketing guru and author Seth Godin has pointed out again and again, this is interruption marketing.
We are disturbed by messages, 99% of which do not concern or interest us one bit. To the extent that we notice them, they may even produce the opposite effect – they annoy us. As a consequence, we develop a kind of message immunity and simply ignore such messages. Add to that, that the trust level that consumers have related to what they hear from advertisers has been steadily dropping for a long time now. Even if the product per se interests us, we do not trust the message from the vendor.
So whom do we trust?
Think about it. When faced with an important purchasing decision, what do you do? One option is to thoroughly research the products yourself, comparing performance, price, reliability, and service. Or maybe you consult consumer research magazines and Web sites. You too live in a world with ever more things to do and less and less time to do them in. So if you are like most of us, you go for a short cut, which is nearly always to ask someone you trust for an opinion.
In my case, I would not dream of entering into an agreement with a new training venue without checking with a few of my trusted colleagues. Maybe I will first do some research on the Web and discover an interesting venue that markets itself as the “Trainer’s Paradise”, state-of-the-art facilities, great food, and service. Sounds like just what I need. But I’ll then call my friend and trainer colleague Peter and ask him, “Have you been there? What do you think?” He may say, “Yes, the facilities are great, but the receptionists are just so pretentious.”
Well, that’s the end of that. There is no shortage of training venues, so why take a chance? I continue my search on the Web for something else. But, unfortunately, that is not the whole story. It gets worse. My friend Louise calls me the following week and asks me about the “Trainer’s Paradise”. “I am considering booking the ‘Trainer’s Paradise’ next month. Do you know it?” Chances are that I will reply, “I have not been there myself, but I have heard from others that it is lousy; can’t remember what the problem was, but if I were you, I would try and find something else.” Is that fair? No, it is not. My friend Peter may just have had a bad day; he may have been totally unreasonable, whatever. But I don’t have the time to investigate that further and I don’t need to; in an overcrowded market there is plenty of choice.
As a consequence, anyone delivering a service product lives on a knife’s edge every hour and minute of the day.
Every transaction you enter into with a client is potentially a marketing move that will promote or discourage future business. The good news is that this is also the only marketing you will ever need – apart from a Web presence – and you can save a lot of money if you get it right. In the service business, marketing is what we do on a daily basis. The way we meet and greet, the way we deliver what we do, the way we say goodbye – that is marketing. Don’t squander your money on trying to make more noise than your neighbour.
Nobody is listening anyway.
The above post is an excerpt from my book ” Best! No need to be cheap if you are..” you can find it here
“This book is addressed to individual managers who work in all aspect of the service industry, this volume is aimed at helping them first, to understand how the industry has changed, and changed dramatically, over the past few years.
With that basis, Mike Hohnen explains why and describes how such managers can focus their efforts in order to stand out in the marketplace, while avoiding, getting caught in the trap of unproductive and detrimental responses. Additionally, he explains how managers can get their people involved in the crucial task of turning customers into ambassadors, allowing word of mouth to work to their advantage.
Mike’s approach is rooted in the principles of the Service-Profit Chain described by Heskett, et al. in their book published by Harvard in the 1990′s and widely recognized as the foundational academic research on the subject”.
Most intelligent managers are fully aware that stones and dogs are very different, but when they are in the heat of the battle, they somehow forget this self-evident and important point.
Let’s recapitulate why there is a key difference between the two.
If I place a stone on the floor and kick it, it will travel a certain distance and in a certain direction, depending on the stimulus I provided. If I kick the same stone in the same way tomorrow, it will “perform” in exactly the same way. In fact, if I can find stones similar in shape and weight, they will also perform exactly the same way, as long as my kick is consistent. All of this was well documented by Newton years ago.
If, however, a large Doberman saunters past me and I decide to give it a solid kick in the behind as it passes…
What will happen then?
Nobody has a clue. Neither Darwin nor Dr. Doolittle created a law for that.
As Fritjof Capra describes it in his book, The Web of Life: a New Scientific Understanding of Living Systems. What modern biology has now shown beyond doubt is that when you disturb an organic system, the system responds in a way that is meaningful to it, but not necessarily to the disturber.
Organic systems are by definition unstable, while mechanical systems are stable. This is why we intuitively know that our Doberman may react one way today and in a different way tomorrow. We have no idea what makes sense to a Doberman.
This makes an enormous amount of HR principles and “truths” obsolete overnight. Every time somebody says, “When we do this… they will do that”, pause and think of the Doberman.
As a consequence, we can no longer see the people in our system as components in a huge mechanical system – as stones – they will not necessarily perform or respond in ways that make sense to us. They will only respond to our stimuli in ways that make sense to them.
Huh? Does that mean that when I offer employees a wonderful bonus for reaching our sales target this month, it will not encourage them at all?
Maybe it will, maybe it won’t. The bonus may motivate all, some, or none of your employees. It depends on the person, the day, and the circumstance.
This post is an extract from my recent book: Best! No need to be cheap if you are…
I am fascinated by what is happening in education at the moment – watch how this future scenario plays out as it leads to EPIC : Evolving Personal Information Construct
What is now playing out is similar to what has happend to the newspaper industry, and the music industry.
What at first seems like an inferior product is comming from below and disrupting the cosy and costly monopoly that universities have had. As the quality of online education improves – and it is improving at a break-neck speed in my opinion – it will eventually substitute the existing model.
The scenario follows the book to the T… (Clayton Christensen the Innovators Dilema)
But how will all that affect executive education?
Acording to this article in the HBR there is no escaping the tsunami there either: the article concludes:
…one needs only a few star professors who deliver the content online (the Khan’s of the exec ed market), and one needs a hoard of “lower-level” local instructors who will help with the breakouts. The traditional exec ed professor will be squeezed out (unless they can move to the purely interactive part, but that requires a very high skill level to pull off).
We certainly live in interesting times