How to Keep Customers in a Downturn

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Keeping Customers In Tough Trading Conditions

Here’s some ammunition to convince the boss or the finance director (or you, if you are the top boss or finance director) that customer-facing resources deliver profit and need to be sustained, not cut back, in tough trading conditions.

1. Cutting service problems increases profit

“1% cut in customer service problems could generate an extra £16m in profits for a medium size company over five years.”

Source: Henley Centre

2. Keep the ones you’ve got

“It can cost six times more to buy new customers than retain existing ones.”

Source: US Office of Consumer Affairs

3. Service leaders are more resilient in a downturn

“Service leaders…

Charge on average 9 to 10 percent more for their basic products and services

Grow twice as fast as their low-service competition

Improve market share an average of 7 percent per year. (Low flyers lose market share by as much as 2 percent annually.)

Have an average return on sales of 12 percent compared to 1 percent for low flyers.”

Source: Strategic Planning Institute, USA. (Research into ‘low cost’ vs ‘high service’ as two extreme customer propositions on which to base your business)

4. Your bills get paid

We all know that large business customers start shifting you from 30 day to 60 day payments or even the 90 day payment run, often without telling you in advance, to preserve their own cashflow in a downturn.

“Many people feel that the only measure is the ‘bottom line’. However, a survey* of 3,000 businesses showed the benefits of customer service. This found that where there was high customer satisfaction then, on average, bills were paid at least 14 days earlier than where there was poor customer satisfaction. So, Customer Service creates money”.
*(PriceWaterhouseCoopers/University of Bradford, UK).

5. Reducing customer defections improves profits

Customers are more likely to shop around in a downturn, increasing the risk of defection. So, pay even closer attention to them. It doesn’t have to be expensive.

“Reducing customer defections can boost profits by 25-85%. In 73% of cases, the organisation made no attempt to persuade dissatisfied customers to stay; even though 35% said that a simple apology would have prevented them moving to the competition.”

Source: NOP/Ventura survey of 1,000 UK consumers

6. What did we say in Number 5? Here it is again

Points 1, 2, 5 and this one are all about keeping the customers you have and not losing them. Also bear in mind that in an economic downturn it’s far easier to win market share from the competition, so becoming defensive-minded is not always a sensible strategy.

Tough trading conditions can prompt the Board to look inward, at processes and resources, and to look outward, at suppliers and customers, through a lens that has written on it “Where can we make savings?” Not by cutting down on how customers are treated. Big, big mistake…

“68% of customer defection takes place because customers feel poorly treated.”

Source: Research by TARP (e-Satisfy)

1 COMMENT

  1. I once worked for a hardware company that outpaced its competitors in R&D investments during every economic downturn, and always emerged with market share gains as a result. The same certainly holds true for service, as shown in the impressive stats mentioned by Phil Dourado. Rather than cutting service and customer experience improvement programs, firms would profit more by emphasizing waste prevention in business processes that have highest impact on the full customer experience. Profit by eliminating unnecessary costs and by surpassing the customers’ alternatives in meeting their needs.

    Lynn Hunsaker, http://www.ClearAction.biz, mentors executives for customer profitability through advocacy and churn/hassle prevention.

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