Customer service is more about what you don’t do

Recently my daughter ran into a problem at the car dealership where she bought her car.

When closing the deal the business manager arranged financing through the bank and explained the conditions to us.  The most important issue to my daughter was the amount that she needed to pay.  When she ran into problems with the bank after a month, she approached the dealership that had provided us with the details surrounding the car loan and asked why the conditions (according to the bank) were different from those that had been explained by the business manager.

After discussion with the business manager, it was clear that an honest mistake had been made.  However, the business manager told my daughter that she needed to solve the problem by getting another loan, on her own, and pay off the original loan.  In other words: despite the error that the business manager had made, she was not prepared to take on the responsibility, and accountability for the error, and resolve the issue on my daughter’s behalf.

This attitude did not sit well with me and I approached the general manager of the dealership, explained that this was the third car our family had bought from them in the last three years and that I was sure he felt that the dealership needed to take a more proactive role in resolving this issue.  Not surprisingly, he agreed, and they are now buying out the loan themselves and putting my daughter into a loan at a bank that can accommodate her needs.

Has this left a bad taste in our mouths?  Absolutely.  However, the general manager may just have saved the day, as long as the new deal goes through without a hitch.

By not taking responsibility for the error she made, the business manager put at risk, on the dealership’s behalf, a 10-year relationship (leasing and then buy-outs) with a family that has been totally loyal to them.  A family that has referred numerous other people to them.  And all because she just couldn’t be bothered to solve a problem that was of her own making.  It was much easier to push the problem onto a young and inexperienced person (as far as car loans goes) than to realize this was a much bigger issue than just concluding a deal and patting herself on the back.

Most often customers expect good service.  That is not what keeps them loyal.  It’s that one experience of bad service that tears a relationship apart, and drives customers away (also read Why do customers leave you).  A few year’s ago I read a wonderful book titled: “Delight Me…The Ten Commandments of Customer Service”.  The most most dramatic and incredible fact that was presented in that book was:
• 60% of “satisfied” customers regularly switch companies or brands.
These days it’s less about keeping customers satisfied – everyone tries to do that.  These day’s it’s all about Customer Delight – going above and beyond.

So, how are YOU making sure that your customer stays happy and loyal, and that your staff are not creating problems for your business relationships?  Make sure that there is a process for customer feedback in place and ensure that your employees are well trained.  It only takes one small problem with a bad attitude and your customer could be gone forever.  And remember, if your business is built on repeat sales, then that bad attitude could cost you the lifetime value (multiple purchases over many years) of that customer – not just the deal that has a problem attached to it.

Neville Pokroy from the marketing company Mastermind Solutions consults in the areas of strategic marketing planning, as well as in the development and execution of marketing strategies and plans. He assists companies who require marketing expertise to plan and fully execute marketing programs.   He helps them make good choices, particularly with regard to the emerging technologies.  If you want to have more choice in marketing your business, set yourself apart, and increase the odds of generating additional revenue for your business, visit our website or call (905)886-2235.  Please follow me on Twitter: @smaaketer

Coaching your Controller – Part 1

This article first appeared in CanadaOne, an online business newspaper and resource centre.

As the owner of your business, do you have a person heading up the accounting function who has limited experience managing an accounting and finance function?  Very few SMEs will have an accountant with a designation and strategic skills in that role, which for convenience I will refer to as the Controller (other common titles are Accountant, Office Manager, Accounting Manager, etc.)

As a result, there often is a Controller with good basic accounting skills but limited experience and formal training, reporting to a President who does not know what guidance or direction to give her. In Part 1 of this article we will lay out six simple steps to enhancing the contribution of your Controller.  Next month, in Part 2, we will help you coach your Controller to find the time to implement these improvements.

The situation is often compounded by the Controller being overloaded with work (who isn’t?) and frustrated.  Would your Controller like to be able to do more than balance the books and produce the financial statements that the current accounting package is set up to produce.  In the extreme, management doesn’t even read the monthly financial statements, beyond perhaps looking at the “bottom line.”

This type of scenario is a prescription for a Controller who is considered an overhead and not a “contributor,” who is frustrated and demoralized by their job.  With no one to guide them they often stagnate and continue to do more of the same.

Here are some steps that the President of a business can take to upgrade the value of the Controller, which may seem like extra work but often can help to make the function more efficient (more about this in Part 2, next month) and enhance the satisfaction they get by becoming a valued member of management:

1.    Set a standard for the preparation of your monthly financial statements in number of days after the month end. Ensure that your financial staff are committed to publishing them on time every month e.g. 10th of the month.  This will assist them to keep this as a priority, so that you get the information on a timely basis.

2.    Arrange a meeting with all your senior management, including the Controller, every month, to be held shortly after the financial statements are available.  The Controller should review the results and highlight unusual or unexpected results.  Management should discuss each such item to determine what steps to take.  Consider both good news and bad news. Good news is an opportunity to determine what can be done to repeat the events that gave rise to it and bad news is an opportunity to mitigate the risk of the circumstances recurring.

3.    Having this meeting on a regular and timely basis facilitates management using the financial statements as a springboard to highlight opportunities for action that will enhance the business operations and its profitability.  Ensure that management asks the Controller to explain what has caused major variances from budget and/or preceding comparative periods.

4.    Management and the Controller must prepare a budget annually.  Ensure that it includes an earnings statement budget, balance sheet and cash flow forecast.  Bankers and other outsiders who read budgets are always much more impressed when a budget includes a forecast of the balance sheet at the end of each month and a cash flow statement.  You would also need them for internal purposes so that you are not caught in a sudden crisis, by not anticipating the cash flow consequences of your operating expectations.

5.    If a banker looks at the ratios in a set of financial statements to determine the health of a business, shouldn’t you, the owner, look at the same information? The Controller should prepare a monthly statement of ratios and key performance indicators on a comparative basis.  He should be able to explain, in simple words, why a ratio has changed, so management can consider the trend in each of them and what to do to manage the situation, for better or worse. Some ratios that apply to most businesses are:

  • Current ratio
  • Quick ratio
  • Gross margin percentage, by sales category
  • Expenses, in major categories, as a percentage of sales
  • Debt to equity ratio
  • Days receivables outstanding
  • Days inventory on hand

For example, the days receivables outstanding and days inventory on hand are often very good warnings about cash flow problems and often are the first sign that more analysis and focus is required to ascertain exactly where the problem lies, so that management can develop a plan to solve the problem.

6.    In order to stay on top of the business on a timely basis, your Controller should prepare a snapshot of month-to-date information for the Key Performance Indicators (KPI) that are available for your business.  This should not take more than an hour, at most, to prepare, once the format is set.  I find that the most appropriate frequency is to prepare this every Monday for the week just completed, plus on the first day after a month-end so that you have a clear indication of the status of the key areas of the business.  Each business will select different indicators to include in the snapshot.  Some ideas to get you started:

  • Sales
  • Cost of Sales
  • Gross margin %
  • Bank balance/Line of credit usage
  • Outstanding cheques
  • Accounts receivable – aging breakdown
  • Days sales outstanding
  • Accounts payable – aging breakdown
  • Inventory – by major category
  • Orders received – # and $ value
  • Operating statistics
  • Labour statistics

Of course, there are many more depending on the nature of your business and the nature of your tracking systems.

In Part 2 of this article we will address where the Controller can find the time to implement these improvements.

James Phillipson is a Chartered Accountant and a Principal of Mastermind Solutions Inc. with extensive experience in large and small businesses.  He has provided financial counselling to his clients since 1996, often in the role of or as a coach to a Controller or Chief Financial Officer.  James has experience in financial roles in a wide variety of businesses and industries.

Why do customers leave you?

Does someone in your business ever-so-often ask, “Whatever happened to (fill in the name) and how come he doesn’t shop with us any more? Several surveys asking this same question were taken through the years by (but not limited to) the American Society for Quality Control, the Harvard Business Review, U S News & World Report — even the Swedish Post Office titled “Satsa pa kunden” (“Focus on the customer”).

Each survey was done independently from the other and yet, amazingly, all came with nearly identical responses.

  • 14 percent left because of complaints not taken care of.
  • 9 percent left for the competition.
  • 9 percent moved out of town.
  • 68 percent said they left for “no special reason.”

In other words, seven out of ten people who were “steady” customers said they left for “no special reason.”

I don’t believe that. I think there was a reason. I think the reason was the business did not keep in touch with their customers. They took them for granted. And when someone is taken for granted they don’t feel important and are susceptible to the next mating cry. Having the customer repeat buying from you means doing more business with you. Good selling depends heavily on repeat business.

Here’s why: It is far, far easier to sell more to the customer you have than to sell a new customer. And yet the average business spends five times as much time and money searching for a new customer than they do on the customer they already have. If they keep following that path they will soon discover the customer they thought was locked up, committed and loyal has…disappeared.

The national average of customers who leave you every year is about twenty percent. That’s one out of five of your current customers! If that trend continues for a few years you will be out of business if you don’t go in one of two directions: (1) Find a way to have 20 percent new customers or (much better) (2) Recapture some of the ones that left.

A study by Bain & Company in Boston said if you can cut that 20 percent defection in half you can double your bottom line profit!

  • Because of the money you spent to secure them the first time.
  • Because they will spend more as the years go by.
  • Because their income increases.
  • Because their family (or business) grows larger.
  • Because they tell others to buy from you.
  • The longer you keep a customer the more money you make. An auto service company said their expected profit from a customer that stayed with them for four years was more than triple the profit the same customer generated their first year.

John Romero, the premier direct marketer in the casino industry tells of the time a senior executive came to his office and said, “We need new business.” John’s answer: “What’s wrong with old business?” His point: businesses overlook the once productive customers they once had still hidden away in the company’s database. His question: “Why would you spend years developing a customer then ignore him because he stops coming? There’s pure gold in that file of names waiting for you to dig it out. It¹s the best new business you can find.”

How do you know when a customer is about to leave? New computer programs can track your customer’s behavior past and present. When their pattern begins to vary greatly with fewer sales, smaller sales, less contacts, you should start hearing warning bells ringing. Their pattern is changing. Time to contact them and ask if everything’s all right.

Here’s why this is important: Accounting systems don’t list the value of a loyal customer. Most businesses don’t recognize, know about or pay attention to this phrase: “The lifetime value of a customer.”

I remember talking to Stew Leonard at his famous supermarket in Norwalk, Connecticut who explained it simply: “The lifetime value of a customer in a supermarket is about $246,000. Every time a customer comes through our front door I see, stamped on their forehead in big red letters: $246,000! I’m never going to make that person unhappy with me. Or lose her to the competition.”

Some businesses ingratiate themselves to their customers to the point where they almost become a part of the owner’s family. Customers are greeted warmly as old friends when they arrive and your conversation picks up from the last time they were with you. There’s an old speaker’s phrase: “No one cares how much you know unless they know how much you care.”

Some businesses succeed because they simply persevere, like the salesman who called on me to sell me ties. His products were made of synthetic fabrics. All our ties were natural fabrics: silk, cotton, wool. One year when he appeared, I said, “Phil, we don’t carry ties made out of polyester or synthetics. When are you going to stop calling on me?” He looked at me and softly said, “Depends which one of us dies first…”

For those who say, “Well, it worked for others but it won’t work for me. I tried and gave up.” But why give up? Persevere!

Remember the words of Winston Churchill in his 1941 address at the Harrow School: Here’s almost his entire speech: “Never give in. Never. Never. Never. Never. Never. Never.”

Article by Murray Raphel

Murray Raphel is one of the world’s leading speakers and consultants on direct marketing, advertising and promotion with an emphasis on taking care of the customer.

Murray speaks to business groups, associations and international corporations on how-to-do-more-business. www.raphel.com

Marketing Tip of the Month

Really understanding your customers or clients, and their needs, is crucial to keeping them. It’s not only their business that needs to be understood, but also a whole range of non-tangibles, including:

  • How do they make decisions?
  • How quickly do they make decisions?
  • How can their perceptions be recognized and (perhaps) influenced?
  • Who are the influencers of the decision?
  • What is their typical lag time for making a decision?
  • What are the factors that they consider when making a decision?
  • Can you influence their needs to create a demand for other products or services?
  • What needs to be done to positively mould their attitudes towards you?

Building the foundation upon which a decision is made is as much a part of selling, as the selling process itself. That foundation building process is called marketing. It is a crucial part of the overall selling process that develops the environment that makes selling easier, or in many instances, possible.

Make sure that your marketing and selling efforts are in alignment. If they aren’t, the process of selling could be as tough for you as it is for a fish to swim upstream. Just ask the fish: doesn’t he find it easier to swim WITH the current?

Read also: Customer service is more about what you don’t do

Neville Pokroy from the marketing company Mastermind Solutions consults in the areas of strategic marketing planning, as well as in the development and execution of marketing strategies and plans. He assists companies who require marketing expertise to plan and fully execute marketing programs.   He helps them make good choices, particularly with regard to the emerging technologies.  If you want to have more choice in marketing your business, set yourself apart, and increase the odds of generating additional revenue for your business, visit our website or call (905)886-2235.  Please follow me on Twitter: @smaaketer