Strategies for Maximum Customer Loyalty, Profits

 

If you’re finding it a challenge to create profits, you might appreciate knowing that you’re not alone. Profits in this Great Recession are elusive  for other businesspeople, too.

A case in point: 50 percent of the members in a Seattle-area business-networking group admit to selling products at below cost to remain in float. That’s according to a survey by Washington State University and the Seattle Executives Association (Feb., 2010).

The leads group, with about 100 member businesses, is comprised of one business per category throughout the greater Seattle area.

They described their employment, financing, inventory and sales situations as “stagnant to declining.” However, they were optimistic about their prospects.

Obviously, it’s important to do a profit analysis to determine your strengths, weaknesses, opportunities and threats. Then develop a strategic action plan and implement it.

Another factor affecting profits is customer retention. American businesspeople and consumers have become cost-conscious and look for opportunities to save money.

Many companies are slashing prices and making the mistake of focusing on price in their sales messages. That means your customers are constantly hit with discount offers. And they are tempted to change to your competitors because of price, quality and service.

But it isn’t a permanent switch. Such customers will gravitate to the next low-ball offer. So advertising to attract such customers is simply not cost-effective.

It’s true that many customers base their decisions on price, only. That’s 18 percent of buyers. So, it’s key to target the other 82 percent who can be persuaded to buy based on their five perceptions about value.

My research also shows that you have to reach a prospect with five positive messages before the decision is made to buy your product or service.

Why companies lose customers

When devoutly loyal customers shop elsewhere, 70 percent of the time they feel taken for granted.

Customers will leave you for a myriad of reasons, including failure to properly answer questions, treating them abruptly, making the buying process inconvenient, failure to solve problems quickly and subsequently failing to provide added value to assuage an unhappy customer.

Losing customers also means blown opportunities for word-of-mouth advertising and customer referrals. Plus, social networking and blogs – positive and negative – have changed the marketplace even more.

That’s why listening to customers is so vital – to gather information, to analyze it, and to develop answers.

In large cities, the advertising opportunity costs are high – usually $300 to $400 or more per customer.

If you lose a customer, it will cost you more to attract a replacement. Then, you have to factor in the sales curve – how long it takes for a new customer to become profitable.

So profits suffer in a down economy if you lose customers and can’t easily replace them. That means layoffs, which will hurt you even more.

Fifty-two percent of a customer’s value-perceptions motivating them to buy from you hinges directly on what they think about your people – spokespersons, sales reps and other personnel. (For more on value perceptions, see “The Seven Steps to Higher Sales.”)

So it helps to have ongoing discussions with your staff on these topics: Why customers buy from you, perceptions about poor customer service, and the factors about your service and products they like the best.

Meantime, be proactive in other ways.

Continually query your customers in formal surveys and in casual conversations using open-ended questions to get solid answers, not “yes” or “no” answers.

Take action steps and make improvements when feasible.

After you get great feedback and measure the results of improvements, tell your customers and express your appreciation.

When customers make purchases, don’t forget to thank them and prevent buyer’s remorse by tactfully reminding them of the value of their purchases.  

And explain to your employees why it’s important to stop using the most-trite phrase on the planet: “Have a nice day.” Instead, your employees need to focus on providing an attitude of service and gratitude.

You’ll be creating a happy buying environment for repeat business and customer loyalty.

From the Coach’s Corner, how would you like some social-networking tips from an outstanding salesperson?

Meet Sean Heiner, he’s director of the membership department at one of the nation’s premier business organizations, the Association of Washington Business (AWB). AWB is Washington state’s chamber of commerce.

From personal experience, I can tell you he’s pleasantly persistent and personable, but I’ve also noticed he keeps up with the times and social-networking trends.

He graciously provides five social-networking tips:

1. Don’t stop networking outside the social media world, and think that LinkedIn, Facebook or Twitter are replacements for actual human interaction, they aren’t. If you use all of the tools listed above, you will progress much faster with higher quality contacts who actually want to hear from you.
2. This one is basic but crucial – use the same picture on your Twitter/LinkedIn accounts, and Facebook, as well, if you use it at all for business purposes.
3. Post! Don’t simply regurgitate information you read somewhere else. Sure, this will allow people to know what you’re interested in, but it will not enhance your personal brand within the business world, online or otherwise. Plus, once people catch on they may begin to tune you out, and that is social networking death. 
4. Verbiage and diction – don’t use shorthand text style messaging ever in a professional setting, and spell check anything you put on the web. You would be appalled at how many people don’t.
5. Jump in feet first. So many tell me they are not “techy” enough to use social networking sites, and I’m sure they are also still enjoying their gramophones, but just go for it!  All of the social networks I use, and there’s about five total, take up less than 20 minutes a day, unless of course you count reeling in all of the new business I’ve been able to generate through that activity.

How to Ease Debt-Collection Headaches

 

What are your choices when your accounts receivables reach 60 to 90 days past due? After all, cash flow is a paramount priority.

Certainly, you don’t want to be too aggressive in debt collection and lose possible revenue from slow-paying customers – they might soon be able to pay you. Even a court judgment isn’t a cure-all. Nor do you want to let your receivables cripple you.

Many businesses face this perplexing problem even though numerous economists believe the recession is over. That’s because of the improvement in the nation’s gross domestic product. But this economy is a new ballgame – unlike what we’ve experienced in recent recessions. Consumers don’t have money to spend so they’re not consuming. Consumer spending usually helps end recessions.

My sense is the unemployment rate is closer to 23 percent. Many unemployed workers aren’t counted because their benefits have expired. Many were forced to accept temporary freelance work or have been self-employed, but when the jobs ended they weren’t eligible for benefits.

Following the last downturn, the Small Business Administration reportedly indicated small businesses with less than 20 workers created 40 percent of the jobs. However, we’re not seeing such job creation in the small business sector. Why?

Here are three salient reasons:

1.       Tight credit has traumatized business. Consider Advanta, the nation’s 15th-largest credit card company with about 360,000 small-business customers. It declared bankruptcy in Nov., 2009 – five months after it cut off all credit to its customers.

Advanta CEO Dennis Alter was quoted by CNN as claiming the economy hurt his company (Bankruptcy filing is a blow to small business). That’s partially true, but there is plenty of evidence to the contrary. Advanta and other credit card companies helped create our nation’s financial mess. Advanta has been repeatedly accused of bilking countless customers with predatory interest rates at higher than 30 percent for dubious reasons, and abruptly cutting credit lines without warning to unsuspecting businesses long before the recession was acknowledged by economists. Little wonder about Advanta’s downfall. Its customers couldn’t pay their credit card bills.

Here’s a representative sample of consumer complaints: http://www.consumeraffairs.com/credit_cards/advanta.html.

Why has Congress allowed certain states to permit such behavior? It also ruins the credit ratings of small business owners and prevents them from getting other lines of credit, not to mention the tight-lending practices of many banks even when businesses have stellar credit. But that’s a big-enough problem for a separate Biz Coach column.

2.      Weaker sales and fewer exports. The red ink cycle in the GDP may be over, but the majority of small business owners isn’t feeling relief. We continue to see universal evidence of the downturn in loss-leader sales and empty commercial space. Personally, during a recent visit to a chamber of commerce in what is perceived as a successful community, I was astonished to see vacant storefronts on all four corners of the nearby intersection of a busy street.

 3.      Mounting healthcare costs. Employers are suffering from double-digit percentage increases. And the root causes of escalating healthcare costs haven’t been solved.

Here’s an example: Healthcare Reform Increases Costs to Workers, Study.

So in view of these woes what can you do to improve your receivables? Consider using the Golden Rule and train your staff in empathy techniques.

The majority of slow-paying customers are likely to be downtrodden, but not mean-spirited. If a slow-paying customer has an otherwise good track record with you, the odds are you’ll see your money when conditions improve – if you practice empathy.

Empathy means a breezy, easy-going approach. Treat past-due accounts like you’d want to be treated. Ask friendly, open-ended questions to get your customers to talk with you. Listen to how they hope to repay you.

Admittedly, in my third year in business, I fruitlessly felt anger toward a client who didn’t follow my counsel and his company consequently fell on hard times. As I dragged my bag of resentment around, it grew bigger and bigger. My obsession was a drain on my emotions.

Fortunately, I remembered a passage in an old best-selling paperback book, “Love Is Letting Go of Fear,” in which author Gerald G. Jampolsky, M.D., related his experience with a non-paying client. Dr. Jampolsky, who was angry over the nonpayment, changed his mind and used a new g0-slow approach to the problem. Soon, he unexpectedly received payment.  But that wasn’t his motive for an easy-does-it approach. He did it for his own serenity.

I decided to try his approach. So when the client owed me more than $4,000, I decided to let go of the problem after being unsuccessful after months of soft-collection efforts. To my surprise – a year later – I got a phone call with a promise to pay in full. Yes, the check arrived three days later and it didn’t bounce.

The experience also taught me two other valuable lessons in best-practices:   

• Don’t be so eager in taking on new clients, and be certain to practice due diligence. I politely turn down new businesses as clients and now only help companies that have some challenges but follow my recommendations. (This philosophy caught the interest of a talented columnist at a nationwide publication in Been There… Done That… Here’s How – New York Times). Even if my firm is paid a retainer in advance, startups don’t work for me because most take up an excessive amount of time at the expense of other valued clients. 
• Closely monitor clients’ progress. I held them accountable if they ignored my suggested best-management practices. 

FYI, five years after my $4,000 surprise, I got an opportunity to see if I indeed learned my empathy lesson:

As I was turning into a parking lot to meet buddies for our weekly sailboat race, a young waitress with a small child rear-ended my late-model vehicle. The damage was slight – about $100. The driver begged me not to report it and promised to reimburse me. I agreed.

Soon, I realized the joke was on me – she was not in a position to pay – so I decided to let go of it. My loyal accountant was chagrined with me.

But just an hour after deciding to let go of the matter, I unexpectedly met a person who formerly worked for one of my clients. He mentioned how my work benefited his ex-boss, and asked me to approach his new employer to offer my services.  A week later, I had a new client, who became my biggest. Not to be gauche, but it was six figures a year in revenue for nearly five consecutive years.

Meantime, my accountant had to remind me to stop chortling over our little disagreement.

However, this doesn’t mean you should ignore collection problems. But don’t approach each customer with a sledge hammer. See the situations as opportunities for growth and more options for due diligence.

In conclusion, think long-term. As much as possible, treat your customers as partners and use the Golden Rule – treat others as you would like to be treated if you were in a similar plight. What goes around comes around.

Besides, if you use due-diligence with customers early on and use best-practices in management, you’ll be OK. The odds are the majority of your delinquent customers will remember your empathy and will remain loyal after their situations improve.

From the Coach’s Corner, for more on Dr. Jampolksky’s organization, visit: www.corstone.org.