CEO User's Guide: Awake at the Switch

Remember the old "I’d rather fight than switch" cigarette advertisements? Well, customer loyalty is a lot harder to come by these days, even for an addictive product such as cigarettes. The Internet has conditioned customers to shop around for the best deal. If that deal is offered by a competitor, your customers will leave you in a New York nanosecond.

Yet there are methods to mitigate this evaporation of customers, which is becoming known as "customer scarcity." By all means, you should follow conventional wisdom and innovate like mad, while also getting to know as much about your customers as you can. While you take on those major projects, though, I would like to suggest that you also do three relatively simple things to make your business an environment where customers can solve their own problems, faster and more easily. If you create that sort of environment, those customers will reward you with more sales and profits.

You don’t need to launch some grand data-gathering expedition to follow these three principles. You probably already have all the customer data you need at hand. The trick is to reorient your profiling of customers to provide immediate value to them, instead of, like most companies, thinking about gathering future marketing data for you. To make that shift, you should:

Remove the stupidity from the interfaces that you use to deal with customers.

Help your customers learn from each other.

Make it easy for your customers to buy.

Let’s look closely at each, and at exercises that will let you see how you are doing:

PRINCIPLE NO. 1: Remove the stupidity from the interfaces that you use to deal with customers. If you call Quicken credit card’s 800-number for customer support, before you can get to a human operator you have to enter your 16-digit account number. When the financial software company’s automated system finally lets you get to a customer-service representative, the first question asked of you is, "What is your 16-digit account number?" That is pure stupidity. This situation, sadly, is far too common.

The good news is that you can differentiate your company by implementing common sense. In a world of customer scarcity, buyers will tend toward interfaces that demonstrate a higher IQ.

Exercise No. 1: If you have the courage, call your own voice-response system, or write your company an e-mail, and discover just how the interface works day in and day out at your organization. You probably will find some obvious areas for improvement.

PRINCIPLE NO. 2: Help your customers learn from each other. W.W. Grainger (www.grainger.com) is a perfect example of this, albeit an unheralded one. Grainger is in one of the most boring businesses known to man: It distributes $6 billion of industrial parts annually for the backstage corporate functions known as maintenance, repair, and operations, or MRO. Yet Grainger does such a good job of learning from each experience with customers that its FindMRO.com online service can quickly help customers find anything from bear repellant to a replacement for an electrical motor whose nameplate has long since rusted off. The core of the Grainger system is millions and millions of questions, facts, and experiences that have been gathered from customers over 30 years. Because new customers benefit so much from those who have gone before, they reward Grainger with an average order size of $1,500, which is 10 times as large as the average order in a Grainger retail branch.

Similarly, online retailer Amazon.com Inc. (www.amazon.com) compares your buying profile with millions of others and suggests things you might like to buy, based on what people with similar profiles are buying. The retailer doesn’t disclose how much this type of suggestive selling increases the order size, but I estimate it to be 10% to 20% per order.

In the world of scarce customers, those places that help a customer address an important need, with the help of other customers, will thrive.

Exercise No. 2: Call your organization and see if you can find out three things: What is your fastest-moving product or service? What have your customers said they think about it? What is the most insightful independent review of that product or service? If you can’t find the answer to these questions easily, your customers aren’t learning from each other, and you are leaving sales on the table.

PRINCIPLE NO. 3: Make it easy for your customers to buy. An old saw in marketing says that only two things matter: price and availability. Most companies have built their organizations to make it easy for customers to compare price. Fewer have made it easy for customers to know that a product will be available when they order it. This represents a missed opportunity.

Alliant Exchange Inc. (www.alliantexchange.com) which distributes $6 billion of food a year, has found that customers will buy 20% more from it when they order through its easy-to-use Web site. Alliant is the only food distributor that can provide online reservation of goods—meaning the system is tied into inventory, instantly "reserving" the product and quantity for shipment. Competitors call customers back after checking, or send some other form of order confirmation. Management at Alliant is convinced that its ease of buying and reservation is central to the company’s increased order size.

Exercise No. 3: Try to buy something from your organization on the Web, as well as over the phone. If you are passed along to three or more people before you can spend your money, your company has a problem. In a world of scarce customers, they will take the easiest path when buying.

The rationale for these three principles is simple. You may be having trouble holding on to customers, but they are having the same problem, in reverse: They are overwhelmed with choices from dozens of providers and millions of Web pages. Although the New Economy gives them a greater ability to get that deal of a lifetime, they still have to find it, amid rising confusion. This means that—along with looking for a name brand and a reputation for trustworthiness—they will seek out buying experiences that are intelligently designed, provide useful comparative information, and are easy, easy, easy.

If you use these three principles, you will see customer retention increase, sales per customer rise, and profit swell.

There are many reasonable organizational excuses for not doing the right thing by customers, but great leadership won’t accept them. In other words, you need to fight before you let customers switch.


Sviokla is a vice chairman of DiamondCluster International Inc. He can be reached at john.sviokla@diamondcluster.com.


Back to Index


Copyright © 1997 - 2008 Diamond Management & Technology Consultants, Inc.
Legal Notice & Privacy Policy