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Most businesses do not systematically gather any customer data (intelligence). Most do not even gather data sporadically on their top customers. With big data staring down on all non-users with some surprise, I encourage companies to start today.

Big Data
Your customers’ intelligence will make your business’ long-term profitability much easier to achieve. Big data is what makes Amazon so effortless– it knows your preferences, stores your payment and shipping information, shows you products you purchased in the past and others ones that might interest you, etc. It is why the Trump administration wants to allow all internet providers to sell information about how you use the internet to internet companies. They want to get inside your head. Why? They want to predict your needs and wants and immediately fulfill them. A friend had Googled snow blowers and then he clicked on a news outlet which, to his shock, had advertisements for snow blowers! It is that instantaneous!

Where to Start?
Identify the top 20% of customers who generate 80% of your company’s revenue and profit. If that is too many to start then select your top 20 customers. Focus on them and learn everything about them: what is their preferred channel of communication, how often do they buy something, what do they buy, do they use social media, are they happy with your company, how long have they been a customer, do they refer friends, etc. This intelligence will provide you with fresh and personalized insights that you would not be able to conceive without this customer intelligence. Start personalizing their experiences with your company and they will be delighted. Personalization is especially crucial to retain the Millennials.

Benefits
Even if you can only obtain a slice of what Amazon delivers, it will make your customers love your company more and feel cared about. “Cared about” is a powerful message with predictable results. It is the opposite of “indifference.” “Indifference” is the # 1 reason approximately 68% of customers leave any business.1 Your efforts to understand your customers’ needs and wants ensure that they will stay longer with your company. That is terrific news in today’s sometimes chaotic and unpredictable world.

1. Forbes Magazine, U.S. News & World Report, American Bar Association.

More and more Clients have asked for some guidance on how to attract and retain Millennials as employees and customers. They are quite different than any other generation. They are the largest generation ever, and number over 80 million in the US alone, which exceeds the Baby-boomers. They will represent approximately 50% of the workforce by 2020.

“These digital natives grew up in the shadow of September 11 and the Great Recession, and are well adapted to change, technologically-savvy, multi-tasking, and are poised to unleash innovation when given the right environment, support, and autonomy.” (Katherine Reynolds, Fortune.com) They expect technology to work and prefer self-service options. They operate on multiple and mobile channels. They want to know everything. It is hard to overwhelm them with pertinent information.

To attract them, your company must be active on social media. They extensively research companies and products before making a decision and are swayed by user reviews. To gain their loyalty, your company needs to respond to any negative feedback on social media within 15 minutes. They expect you are as engaged on social media as you are with answering calls and emails.

They are very social; they like to eat, shop, travel in groups and thus are a terrific source for referrals. 33% indicate that they also significantly influence their parents in their purchasing decisions. Additionally, they are very self expressive, liberal, upbeat, and open to change. For them, communication = texting. Do you offer texting to employees and customers? Communicate regularly with them – you are not “bothering” them but are engaging with them. Most Millennials sleep with their phones nearby.

They expect a work/life balance and they are continuous learners. They value Mentors and know they have much to learn. However, they also are aware that they have much to offer, especially regarding companies’ sometimes outdated technology and older employees who still are not technologically skilled. They frequently become the go-to person for older employees’ technology problems. They usually do not mind as long as they are given credit for it and it is part of their job.

Some have said they are high maintenance, which could be true, but the flip-side is they are also the most innately innovative, technologically-savvy, highly educated, adaptive to change, and thus may be the highest performing generation. Engage with them; ask them their opinions. They need to and want to make a difference; it is part of their DNA.

This was the generation that was hit the hardest by the Great Recession. That has left its mark. This is the first generation that does not expect to be as financially well-off as their parents. They carry more student debt than any other generation. Many choose to live with their parents after college and delay getting married or purchasing a home.

As Millennials become a larger portion of the workforce, all companies need to learn to work with them. Most smart companies are adapting their recruitment, training, and retention efforts to match their needs. All companies will eventually need their unstoppable optimism, innovation, technological skills and willingness to change to just stay ahead of the curve. To truly be great, you will need to genuinely and warmly welcome them to your company, listen to them, and only then will your company experience future repeated outstanding successes. They are the road to the future.

Most companies view a customer’s worth as the annual revenue or profit the customer generates. This provides a short-term and inaccurate perspective. I think it is because of our annual accounting practices that we tend to adopt this time period rather than a multi-year viewpoint. A lifetime value analysis is a more accurate calculation of the customer’s value to your company. Why?

  1. Regardless of the industry, it always costs more to replace a customer than to retain a customer.
  2. Customers are by nature loyal. No one wants to sever a relationship and search for a new provider; it requires using free time that few people have.
  3. When customers stay for many years, they will give your company the largest share of their wallet as well as invite their friends.
  4. Studies show that only 2% of customers will leave any business that they have worked with for seven or more years.
  5. Your customers will spend money with your company or with a competitor. They need and thus will buy your industry’s services. Your company has already invested in the high customer acquisition costs and thus it is financially prudent to protect these expensive sunken costs.

The key question is what profit will the customer generate over a lifetime? For example, if a customer generates $2,000 annual profit and the average lifetime of a customer in your company is ten years, a more accurate valuation is that the customer represents $20,000 of profit. If then you add in cross-selling opportunities, referrals and a decrease in operating expenses associated with tenured customers, a typical $20,000 lifetime value customer can be easily worth over $50,000. Your company may decide that it wants to interact with and service a customer worth $50,000 quite differently than it would do with one worth $2,000.

For any company, its most valuable assets are its customers. The lifetime value will allow a company to make more informed and economically wise decisions when establishing service standards and policies. Without this information, how does a company know for sure if it would be economically prudent to invest in upgrading its computer or telephone systems? Will any upgrade increase its customer retention, and thus its profitability?

By adopting the lifetime value perspective, businesses will retain more customers which will have a positive impact on their bottom lines. Be willing to spend a small amount to protect your larger and long-term investment: your current customers.

Why should you love those of your customers who complain? It seems illogical. The twist is that your complainers are your most loyal customers. Only 4% of customers complain and 96% walk away quietly. They give you their precious time to tell you how your company can improve and the other 96% just walk away. That 4% are fiercely loyalty. We are all loyal by nature. No one wakes up and thinks I hope my dentist, doctor, attorney, dry cleaners, etc. makes a huge mistake so I can search for a new professional. If anything, we all are hoping that everything proceeds smoothly because none of us has the time to find other professionals. Your customers are the same – they want to stay with you and how your employees treat them creates reasons that chase them away. As loyal customers, we do need to be chased out the back door, to cause us to leave.

In this country, businesses spend $500 billion annually on marketing and $9 billion on customer service. Businesses are so willing to pay the high costs of acquiring brand new customers rather than to spend a small fraction of those costs to retain customers. A few of the reasons customers leave businesses are beyond a company’s control; about 67% of the reasons they leave are due to how an employee’s behavior communicated loudly, “I do not care about you!” The best businesses retain 95% of their customers and employees. If a company has a lower retention rate, it can take action to retain and even win back former customers and employees.

The core issue with complaints is that most companies do not respond to them e.g. ignore them and that is the problem. When they are ignored, there is a loud message that screams, “I do not care!” That means every complaint needs to be answered on every channel and every time. Some companies do respond to complaints via the channel the people at the company are most comfortable with and when they get to it. That does not work in this 24/7 on-demand multi-channel market.

Ideally, all complaints need to be answered within 15 minutes via Facebook, Twitter, calls, emails, etc. Discover card recently sought to be the best company to respond to all complaints and compliments within 10 minutes. Customer service is now the new marketing for Discover.

Walker and other organizations state that by 2020 customer experiences will be more important than price, features, etc. This is already true for some industries. Gathering feedback is a critical element for business improvements. When a customer gives you feedback, respond within the 15 minutes, then wait another 45 minutes, and thank the customer for his/her valuable insights and send a gift card.

If someone gives you feedback via social media, what the person usually wants is an audience and they are competing for attention. Studies estimate that less than 50% of “on stage” complainers want a reply. These are called “on stage” complainers versus those who complain via calls or email. These customers are referred to as the “offstage” complainers and do want an answer. Approximately 66% of complaints currently come via “off stage” channels and the remainder comes via “on stage” channels.

“On stage” complaints in the UK increased more than 800% in the last 15 months. Eighty percent of Americans trust online reviews as much as personal recommendations. Fifty-two percent of customers who complain via an online review site expect a response. Answering customers online increases customer advocacy by 16%. If the company does not respond, that is a response which says loudly, “I do not care about you.”

Guidelines

  1. Reply online only twice regardless if it is positive or negative feedback. Beyond that it is a waste of time and is only a spectators sport.
  2. Eighty percent of companies say they deliver exceptional customer service yet only 8% of the companies’ customers agree. That reveals a 72% gap between their realities.
  3. Few companies are very good at customer service online. You need to outflank the competition, because if you do not they will steal your customers because it is easy to replicate a company’s website, marketing, etc. if they deliver exceptional customer experiences.
  4. Responding to a customer’s complaint is your last opportunity to save your customer. Magnify the complaints by 20 to have a more realistic view of the issues.

Many of the statistics I used are from Jay Baer’s SCORE Webinar, January 21, 2016.

What is the Wow! Level?

February 8, 2016

In essence people buy only two things: a positive experience or the expectation of a positive experience. What does your business sell? What types of experiences are your customers buying? All companies need to create a compelling buying experience that incorporates the elements of surprise and delight. Most companies do not develop products or services with this compelling buying experience as the ultimate goal. Thus the products and services are about average, producing average profits and average results. As the customer experience economy continues to evolve, if your business does not generate a positive customer experience, your company may become irrelevant.

Some people have asked me why it is so important to Wow! customers. Why can’t we just satisfy them? AT&T was doing some customer satisfaction research when they were breaking up into the Baby Bells. AT&T was keeping track of customer satisfaction levels. They had a five -point satisfaction scale and they identified the customers who gave them a “3” which was “Good,” a “4” which was “Very Good” or a “5” which was “Excellent.” They grouped these customers together and called them satisfied. What puzzled senior management was that over 94% of its customers were in these categories and the company was still losing market share. If the customers were satisfied why were they leaving?

Scale showing how satisfaction levels relate to retention

Management tracked these customers for the next two to three years and what they noticed astonished them. Of the customers who gave them a “5,” 92% were still with the company; of those that rated them as a “4,” only 85% still remained; and of those that rated them as a “3,” only 50% were still with ATT.

This is a powerful point. Satisfaction is an antiquated and inaccurate measurement to predict current or future retention rates and profitability. Mere satisfaction which is a “3” in fact has a ZERO correlation with retention: one-half of the satisfied customers are as likely to stay as they are to leave. It has no stickiness, glue or staying power.

Look closely at this scale. At the “4.7” level, customers become not just more likely to stay but SIX times more likely to stay, SIX times more likely to cross-buy, and SIX times more likely to refer. This is the goal. Is 4.6 truly different from 4.7? Yes, it is! There are four questions we use to evaluate where a customer is on this scale. “4.7” is the level when the economics start to pay off with a multiplying effect to a company’s bottom line.

So you can choose if you want to just satisfy customers or really Wow! them. It is just a bit more effort but so much more fun, profitable, and is a financially prudent strategic decision!

Over the 25+ years I have worked in the customer and employee retention and experience business, I have been puzzled by one common management practice. Why don’t more companies implement customer retention efforts to generate higher profits than the common practice of repeatedly seeking new business? The latter usually takes years to produce a profit. Yes, every company needs new business, but when viewed from a profitability perspective, the excessive value placed on generating new business is financially imprudent.

The average company loses 15% of its customers every year. So to maintain the same revenue level, the company needs to generate 15% more new customers per year, while to grow, it must generate even more than that. Additionally, after three years, approximately 45% of its customers have left. That strains any business’ resources—people, systems, goodwill and money. Yet year after year, one company after another continues to do the same things while expecting better results. The end result is these companies produce more-or-less the same average results. People in these companies feel that they are doing their best, achieving the best they can. How frustrating! In this country, we lose 180 million customers a year! We spend $500 billion on marketing and $5 billion on customer service. How about taking $100 billion from marketing and reassign it to retention? Now that would be a powerful driver of higher profits!

Additionally, it costs most companies, on average, six to eight times more to obtain a new customer than to retain an existing customer. So, let’s do some simple calculations. If an average customer generates $1,000 of profit each year, and will stay with a company for an average of ten years, then that customer would create $10,000 of revenue for the business. If the average company pays $4,000 in acquisition costs to attract a new customer, but $500 to retain an existing one, where should the company focus most of its resources? Yes, on retaining existing customers, because doing so will have a multiplying effect on profits: it will reduce operating costs and increase profits, as well as increasing the company’s sales hit ratios.

In two to three years, a 5% increase in a company’s retention rate will generate a 15% to 85% increase in profits. Tell me about another marketing or financial strategy that will generate this level of profitability? It is the most powerful leveraged opportunity in your company today. No doubts. No questions. No second thoughts. It is the winner, hands down. Improving your understanding of the whys and hows of customer retention will allow your company’s profits to soar!

Recently we moved our offices. When our business liability policy’s renewal was due, I told the company representative that we had moved and gave her our new address. She wanted to confirm the old and new addresses. The old address she mentioned had not been active for over 8 years; we had moved in 2007. I explained that we had not been at that address for over eight years. The mailing address had been changed but not the physical address. She immediately blamed me for not telling them we had moved. She asked me specifically if I remember telling them in 2007 that we had moved. I respectfully said I do not and was then again told I needed to tell them.

A bit annoyed, I then asked for a refund of the 8 years of premium I paid for the liability insurance that would not have been honored because the address where we were at was not covered. I knew the chances were very slim, but I wanted to see if she would eventually say she was sorry and/or view the events from my side and show some compassion or empathy. The blame game continued.

I was both disenchanted and disheartened. My company has worked with many insurance companies to deliver extraordinary experiences to their Clients and they all made huge improvements. Isn’t the blame game antiquated? Did they not know that it costs 13 times more to attract a new Client than to keep one? This is a very large global company which is both well-known and respected.

I just shook my head in disbelief. I then called the agency, one of the largest in the country, because clearly I had not been given a review during the past 8 years. The agent emphasized that it was my responsibility to notify the agency that we had physically moved. I agreed, but what about their responsibility to conduct business reviews. I also asked for a refund for the liability portion of the policy for the past 8 years. She said that she could not address that and she would have her manager call. That was six days ago. No call, nada, nothing.

I could call again, but regardless of what she would say, I will move all of my business to a new agency and company. I feel sad. I feel mad. I feel this industry could easily improve leaps and bounds if they really cared about the Clients. Why is that so hard to do? It would rock Wall Street!

I think the culture of many companies is that they do not genuinely care about their Clients and they still make money. So until their culture of indifference to the Client causes financial pain, they will stick with the way things are. Why are so many people and companies in this country so afraid to improve? It takes more energy to be negative than positive. Why not create extraordinary experiences for your Clients and see the impact it has on your employees, Clients, and profits? Is the same old behavior really fulfilling? The future is always created when someone has the courage or chutzpah to do something new, different, or refreshing. That is always how the future is created!

 

Each frontline employee has immense power to have an extremely positive or negative impact on the company’s bottom line. Never underestimate their power. Most do not realize the economic power they wield.

Every day they work with your top Clients. They become the faces of your company. They deliver the Client experiences that will make or break your company. They are your company. How do you want them to interact with your top Clients?

Do you want them to be engaged with these Clients? To truly care about them? I expect so. The cost of an indifferent or unengaged employee is incalculable. 67%-68% of all Customers leave all businesses because of the indifference exhibited by someone at the company. It can be a small lack of attention, a delay in delivering an answer, abruptness in their response to a question, the mispronunciation of the Client’s name, etc.

Do your frontline employees receive continuous top training so their skills remain sharp, well honed, and the best bar none? If not, everyone loses. Every day that they remain less trained than your competitors’, your business is falling behind and that gap is harder to close, the longer your company waits to train them.

Do not think it really does not matter. I have surveyed and interviewed over 10,000 Clients and they tell me the real reasons they would leave or did leave your business. The truth is they do not think you really care about them. When was the last time you contacted them just to say hi, or checked-in to see how everything is going?

If you have not done so, do not think it is your frontline employees’ job to do so. They do not have the time or the focus. They are not highly trained in how to precisely handle difficult Clients, or Clients that are very demanding, or Clients in a rush, etc. You think they do. When did you train them? If not, it is not innate for people to know how to handle these difficult conversations.

Training is a highly leveraged activity which means that doing it has a multiplying impact on your Clients. When you do it, you realize much more than you invest. The employees are more confident and that is priceless. They feel valued and appreciated and when these are lacking employees will not regularly put forth their best.

They are more productive – they can do more in less time and then they are less stressed. If they are less stressed, they are more creative because cortisol, a stress hormone, reduces a person’s brain’s ability to be creative. If they are more creative they have a greater chance to delight a Client, which is what all Clients really want.

Most businesses will not know if a Client has partially left their business. For example, with an insurance agency, a Client may place their personal lines or life insurance with another agency and the business account executives will usually have no idea that this has occurred. Or with many retail businesses, the Clients come in less frequently and the owner does not notice that the Clients now split their business with a competitor.

It is vitally important to growth to have a system in place to alert you when a Client partially leaves your business. e.g. Early Warning Defection System. The paramount reason is that when a Client partially leaves, s/he becomes statistically five times more likely to totally leave within the next five years than a Client who keeps all his/her business with your company. Thus, you want to intervene sooner rather than later and do what you can to win back all of their business.

The best way to respond to a Client who has partially left your business is to call him/her and ask what occurred that s/he has moved his/her business. Usually, these Clients are surprised and happy that you noticed they have partially left since very few businesses ever notice.

When was the last time someone called you when you partially left a business? Probably never. It is so rarely done, that Clients are Wowed that you noticed and cared enough to call. They usually will become an advocate for your business and a lifetime Client.

These are the benefits when you take the small extra steps to let Clients know you care. Over 67% of Clients leave any business because of perceived indifference. It is endemic in this country and few businesses seem concerned that 25% of their retained Clients partially leave them every year. Take these steps and let your business stand out from your competitors by truly caring about your Clients and they will reward you for many years to come.

It is estimated that a Client, let’s call her Kathy, who has a negative experience with a professional service provider, will tell on average 11 friends about her negative experience. When Kathy communicates her negative experience to each of her 11 friends it creates a decrease of 20% loyalty per friend depending if the experience is positive or negative.

The true cost of a negative experience is the loss of 20% of Kathy’s loyalty and then 20% for each friend for an additional loss of 220% loss of loyalty.  The total is a decrease of 240% loyalty.  This translates to 2.4 Clients are lost because of Kathy’s one negative experience.

So next time you hear an employee not treating a Client like royalty, just imagine the pool of your company’s possible new Clients has just shrunk by 2.4 people. Then let’s quantify that by assuming the average lifetime value for Kathy is $5,000 which is low.  Thus, $5,000 X 2.4 potential Clients = $12,000 which is a conservative lifetime financial cost for every lost Client.

Let’s say an employee creates three negative experiences daily which is a very low estimate. Each employee who lacks the training to deliver extraordinary Client experiences costs the company at the bare minimum $36,000 daily in lost potential new business!  That is an ouch and one that can easily be rectified to create the opposite – referrals to new Clients and increased loyalty with current Clients!

So can you really afford not to train all your frontline employees?

 

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