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11 Industry Experts Discuss “What’s More Important: Customer First or Profit First?” 

Steve DiGioia | Dec 6, 2016 688 views 4 Comments

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Businesses across the land champion their great service and the positive experience given to their throngs of loyal customers. They tout the benefits of their product and how they tend to the specific needs, wants and desires of their customers.

Customer First or Profit First

But as time passes many forget their original stated intent and lean more toward reducing payroll, lowering operational/product costs and finally to increasing profit as their primary goal.

Recently I had the pleasure of interviewing many leaders in the business world and customer service industry.  Whether a best-selling author, keynote speaker, top sales trainer or customer service guru they were gracious enough to share their view on this one (1) question:

As an organization gets larger there is a tendency for the mindset to change from “the customer comes first” to “higher profits and lower payroll first”.  What are the causes of this change and how do you keep this from happening?

Shep Hyken

Customer Service and Experience Expert—Hall of Fame Speaker—New York Times and Wall Street Journal Bestselling Author, Shep Hyken, CSP, CPAE works with companies and organizations who want to build loyal relationships with their customers and employees.

As an organization gets bigger, there is no excuse for it to lose its focus on the customer, if that is actually what the company wants to do. As some companies grow, they purposely change their shift from customer focused to bottom line focused. Long term that can be a mistake.

For those that are interested in staying focused on the customer, it is more important than ever to hire the right people that fit the customer focused culture. Training is also essential. Also, as the company grows, it is important for leadership to be aware if any part of the company (departments within the company, people within the company, etc.) is going out of cultural alignment.

How to prevent it? Keep focused on the people. Constant reinforcement of the importance of customer service is key to sustaining the culture.

A good example of this is Amazon.com. As they grew and added different areas to their business, they always put the customer first. The first question was to ask if what they were doing was right for the customer. The second question they asked was if it was a good business decision.

Remember what Dr. Ted Levit of Harvard business school said: “The function of a business is to get and keep customers.” The goal is to make money. If you don’t focus on the function, it might not reach your goal.

Bob Thompson

Bob Thompson is CEO of CustomerThink Corp., an independent research and publishing firm focused on customer-centric business management, and Founder/Editor-in-Chief of CustomerThink.com, the world’s largest community dedicated to customer-centric business. Thompson is a popular international keynote speaker, blogger and author of Hooked On Customers: The Five Habits of Legendary Customer-Centric Companies.

As for me, I think the cause is that as organizations get larger, senior leaders have more stakeholders to answer to. Having worked in a very large organization earlier in my career, it’s all too easy to spend your day in one meeting after another. Metrics are designed to focus on what the organization wants to achieve. Direct contact with customers is limited, so they become figures on a sales report, not real people.

The solution is to keep customers “front and center” for leaders and everyone else. I like the idea of a Customer Room proposed by Jeanne Bliss. I also think that companies should require leaders to spend time answering calls and dealing personally with customer issues. Metrics that focus on customer satisfaction/loyalty, and have a real impact on compensation or advancement, are also essential.

Grant Cardone

New York Times Best Selling Author with 7 books & 12 Business programs, international speaker, & considered the top sales training and social media expert in the world today.  Visit grantcardone.com

When you lack commitment, you lack creativity. If you aren’t living with purpose, you will lose commitment. Purpose is the holy grail of the obsessed and the reason for doing something or the reason for which someone or something even exists. It is the big “why” of all whys and the fuel for your obsessions.

It’s vital to know your purpose and identify those things worthy of becoming obsessed with. You don’t need to love your job or even do what you are passionate about to become obsessed enough to be successful.

Dennis Snow

Dennis Snow is the president of Snow & Associates, Inc. Dennis worked with the Walt Disney World Company for twenty years and now consults with organizations around the world, helping them achieve their customer service goals. He is the author two best-selling business books: “Unleashing Excellence – The Complete Guide to Ultimate Customer Service,” and, “Lessons From the Mouse – A Guide for Applying Disney World’s Secrets of Success to Your Organization, Your Career, and Your Life.”

You can reach Dennis at (407) 294-1855 or visit his website at http://www.snowassociates.com.

When a business enterprise is just beginning, often the only way to compete (or create a market in the case of a new product/service) is through an all-consuming focus on the customer experience.

The focus can be on several factors that affect the customer experience, but almost always include quality and service. Startups that fail on these two factors usually don’t last long. The owner of a successful startup and the management team, if there even is a management team at the beginning, will be relentless in creating a customer experience that results in growth.

As the organization grows, a seductive voice often appears. “You know, we could increase our margin by buying our materials a bit cheaper from this other supplier. Our customers won’t notice.” Or, “If we outsourced this part of our operation, we could save some money on headcount. Our customers won’t notice.” And those initial compromises usually aren’t drastic, but they become more prevalent over time.

Those seemingly small compromises are hard to resist because as the organization grows.  That small startup management team that used to be so close to customers and the day-to-day operation, is now somewhat insulated from the immediate impact of those compromises – at least in the short term. Often those seductive voices come from “advisors” who weren’t there during those humble, customer-driven days.

The solution to this issue is to be very clear about what made the organization successful in the first place. You can call these success factors values, core principles, traditions, or anything else, but they must be identified and become embedded in the organization’s culture.

I advise my consulting clients to identify three things they would want customers to say or think about the organization after any interaction. My business background includes twenty years with the Walt Disney World organization. Things they might want their customers (guests) to say or think might include:

  • It was a magical experience.
  • They paid attention to every detail.
  • They made us feel special.

The roots of these three statements can be traced all the way back Walt Disney’s vision for Disneyland.

The company has grown exponentially since Disneyland’s opening in 1955, but its success still relies on creating magical experiences, paying attention to every detail, and making guests feel special. These philosophies are woven into every aspect of the organization’s culture.

From hiring, training, communication, recognition, accountability, and all of the other cultural factors, Disney employees (cast members) clearly know what is expected of them. Any potential decision that could erode that magical experience, attention to detail, or special feeling, is rejected or adjusted.

But what if you’re already a large company and feel like you’ve “lost your way” when it comes to the customer experience? There’s no time like the present to identify what you want the customer experience to be.

What do you want customers to say or think about any interaction with your organization? Simply ask the question, “So what has to happen in order for our customers to say or think those things?” Then get to work in embedding those factors in your hiring, training, communication, recognition, accountability, etc. It takes commitment, but it works.

Joseph Michelli, Ph.D., CCXP, CSP

New York Times #1 Bestselling Author, Certified Customer Experience Professional, Strategic Consultant, Certified Professional Speaker, TEDx Presenter. Visit josephmichelli.com

As companies get bigger there are more stakeholders and leaders making decisions on behalf of customers and get farther removed from customer interaction.

In entrepreneurial organizations leaders are often engaged in direct interactions with customers and they are more solution and action-focused.  These smaller companies also have less brand equity and entrenched processes to circumnavigate as they nimbly address customer needs.

The solutions for growing organizations include customer experience officers, c-level sponsors of customer facing initiatives, voice-of-the-customer metrics presented on the dashboard of senior leaders, and other processes to assure that leaders strategically hear from and prioritize sustained customer engagement, loyalty and referrals.

Micah Solomon

Micah Solomon is one of the world’s leading authorities on customer service, the customer experience, consumer trends, hospitality, and company culture. He is a consultant, keynote speaker, trainer, and training designer specializing in these subjects, as well as being a best-selling author.

Well, I don’t know if that is exactly what happens. I think that when an organization is tiny, the owner is still able to personally keep tabs on and serve all of the customers in a very personable way.

When that phase ends (and it doesn’t necessarily have to end, if the owner is creatively innovative about using technology to extend the personalization of the experience), there can be trouble.  Of course, when a company goes public or, worst of all, is acquired by an unsympathetic new owner, there can be a lot of pressures on the bottom line and a foolish disregard for what actually supports that bottom line.

Shaun Belding

Shaun Belding is an international expert and speaker on customer service and author of five books published globally in 12 languages.

There are two common reasons why organizations find themselves drifting away from a focus on customers and toward a focus on profits:

1.  One of the realities in a growing business is that the founders are increasingly forced to detach themselves from its day-to-day operations.  More layers are introduced, and the business becomes more complex.  At the top levels customer focus, out of necessity, changes to operational focus.

2.  Many times, as a company grows, its fundamental structure can begin to change.  Investors are brought in – partners and shareholders – infusing money and expertise to fuel the growth.  Return on investment is their primary goal.  Company founders, initially answerable only to their customers, find themselves answerable to people with a very different agenda.  It becomes a balancing act, with customers all too often on the losing end.

In both situations, it becomes critical that a clear and indisputable link is made between customer experience and business success. It’s not good enough to show how improved customer experience will, for instance, improve customer loyalty.  “Loyalty” is too fuzzy for those who are thinking about profitability.  You need to connect the dots all the way through to financial results.

Here’s an example of how one might demonstrate the financial impact of improving customer experience:

  • We know that the average customer spends $1000 per year with us, but that the average “highly satisfied” customer spends $1,200
  • Every customer we can convert to being highly satisfied, therefore, will increase our revenue by an average of $200
  • We currently have 10,000 customers who are not highly satisfied.
  • If we can convert 10% of these customers, we will now have 1,000 more highly satisfied customers
  • 1,000 more highly satisfied customers will generate $200,000 in additional revenue.

These are the types of arguments that can make decision makers stand up and take notice.

Kate Nasser

Kate Nasser, The People Skills Coach™ & President of CAS, Inc. delivers global workshops on delivering the ultimate customer service experience.  Go to katenasser.com for more workshop information.

This happens for different reasons:

  • A larger company with a “profits first” vision buys a smaller customer focused company
  • Entrepreneurs’ dreams of being big drive them to listen to profits first advice

To keep this from happening, and if you are an entrepreneur/business owner, ask yourself; what evidence is there to show that customer focus blocks great profits? It doesn’t. Look at the retailers who rewrote the book on that e.g. Nordstroms, Costco, and even Kohl’s. Look at hotels at different price points that are very customer focused and doing very well.

In truth, the idea that you have to choose between customer focus and great profits is patently false. Lead from the truth. Profits come from great customer experience.

Bill Quiseng

Bill Quiseng, Chief Experience Officer at billquiseng.com, is a professional speaker, award-winning writer and blogger in the areas of customer service, associate engagement and leadership. Bill has over thirty years of luxury hotel resort, and club management experience.

WHY IT HAPPENS: As front line customer service staff moves up the organizational ladder with each promotion, they move further and further away from the customer. Instead of taking care of the customer who is in front of the them they realize that it is more important to take care of the boss who now is center stage.

Somewhere up the climb, the mindset is changed from people over profit to profit over people. And the further up the manager goes, the more detached the manager gets. When once he recognized the customer as a real person he now sees the customer as a statistic or $ sign.

WHAT CAN YOU DO ABOUT: Every customer service manager should regularly ask his staff two questions:

What are you hearing? Corporate leaders may know 10-15% (the percentage of customers who fill out a survey) of customers’ paint points. Onsite managers may know 40%. But the customer service staff knows 100% of the customer concerns and complaints because customers tell them every day.

What can I do for you? Managers preach empowerment. But without the knowledge, tools and equipment, customer service staff eventually becomes demoralized because they aren’t prepared to really take care of their customers. So ask these two questions frequently. But even more critical, actively listen and then act.

Mark Sanborn

Mark is the president of Sanborn & Associates, Inc., an idea studio for leadership development and the author of The Fred Factor.

The customer comes first is always a viable strategy for higher profits, until you start replacing imagination and creativity with money. What that means is you become capital intensive at creating service and value, rather than out-thinking your challenges.

If you start throwing money at customer service, you start to think it is costing you too much. You see lower margins because you’re over-relying on your budget rather than the skills and creativity of your team.

Steve Curtin

Steve Curtin was rated #4 by Global Guru on its 2015 listing of the Top 30 experts in the world on the topic of customer service. He is the author of Delight Your Customers: 7 Simple Ways to Raise Your Customer Service from Ordinary to Extraordinary

Surprisingly for most students of management is that the late Peter Drucker, the father of modern management, didn’t even mention ‘profit’ when he said, “The purpose of a business is to create and keep a customer.”

In my experience, the reason managers’ priorities may change from “creating and keeping” customers to increasing profits/reducing costs is due to the low risk/increased certainty that their decision to reduce hours to schedule by some percentage will result in increased productivity/decreased labor costs.

If hours are reduced by some percentage, then certainly payroll costs will also be reduced. That’s easy math. However, when these managers are faced with a higher risk/less certain decision to increase hours to schedule by some percentage in order to better serve (i.e., “create and keep”) customers, then there’s a tendency to hesitate – under the assumption that this decision will hurt productivity and profitability metrics (on which the manager’s performance and, quite possibly, her compensation is evaluated).

The most effective way to overcome this mindset is for businesses to establish measure, evaluate, critique, celebrate, and reward metrics associated with customer experience in the same way they currently do for those metrics that appear in productivity reports and P&L statements.

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I am forever grateful to these industry titans for their willingness to share their expertise today.  Now it’s up to us to take their advice to ensure our business doesn’t get mired in the age old question – “Customer First or Profit First”?

Thank you.

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4 Responses to 11 Industry Experts Discuss “What’s More Important: Customer First or Profit First?”

  1. Andrew Rudin December 6, 2016 at 1:27 pm (240 comments) #

    Hi Steve: In your title, I don’t see customer first and profit first as necessarily conflicting. If a company includes in its mission to serve its customers, there becomes a mutual dependency. An unprofitable – or marginally profitable – company puts itself at risk, as well as its customers. When vendors and customers have a relationship that is truly symbiotic, doesn’t a profitable company become one that is also better able to serve its customers?

  2. Steve DiGioia December 6, 2016 at 8:29 pm (56 comments) #

    Hi Andrew,

    Your premise is fine, no, it’s the way business is supposed to be. But the question posed in the article is taken from the perspective of a business that forgoes service for profit.

    Selling or using inferior products with the intent of doing what’s in the best interest of the business first, regardless of the level of service provided to the end user, is the intended mindset we must change and is discussed here.

    As senior management or owners get removed from the day-to-day customer first aspect of a business their focus may become less service-based.

    But I hope your version is the norm. Thanks much.

  3. Suzan M Harris December 9, 2016 at 2:40 pm (2 comments) #

    As someone who was worked in a variety of different customer service positions, I have a tendency to agree. I am always the front line for corporate decisions that don’t always work to the customers advantage, and yet I am able to keep those clients because of my excellent service to them. And then we are the first people let go when the business falters. If companies would take better care of your front people, train them better and pay them more, it would be a great advantage to the business.

  4. Steve DiGioia December 11, 2016 at 5:47 pm (56 comments) #

    Hi Suzan,

    As mentioned by the experts, and I fully agree, when key organizational personnel move up the ranks of management they lose sight of what has brought on much of the business success – their great customer service.

    Money, profits and cost controls become the first priority over the true foundation of any business, service.

    You situation is not uncommon and must be fixed for the good of all. Thanks for your comment.

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