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Growing Your Business, Part 1 of 3 Parts. Customer Satisfaction - The First Key To Business Growth The following article was published in the "New Hampshire Business Review" as the first part of a three-part series. Your business will grow if it has the ability to create and maintain an ever-expanding group of satisfied and loyal customers. Making sure that your customers and satisfied with your products and service should be the cornerstone of your business growth plan. This is the first article of a three part series on how to make your business grow. The focus of this article is the importance of customer satisfaction in achieving growth. There is nothing more devastating to your business than the loss of one of your customers. When a customer becomes dissatisfied and stops buying from you, your loss is far greater than the sales revenue. You also lose the investment that you made in securing the customer in the first place, and, more importantly, you undermine your ability to grow. Think about what it means to lose a customer. Unless you want your business to shrink, you have to get a new customer to take his place. Add up the cost of getting a new customer. What does it take? You may have to advertise more, use discount pricing, stay open longer, or hire extra salesmen. This extra expense and effort that could have produced growth was instead absorbed by the need to replace a lost customer. Stagnating sales could be the first sign of customer satisfaction problems. You may have increased sales activity but revenue is not growing. You can't put your finger on it, but you seem to be running harder just to stay in the same place. The first thing to do is to determine how satisfied your customers are by means of the following approach. The first step is to establish close contact with your current customers. Review your records and select 10-20 of your best customer. Familiarize yourself with the last few months of sales history. Then, over a one or two month period personally visit each account. This is not a job to delegate to a junior person. This is a job for the boss. You should discuss the following seven topics with each customer. First, find out if your product line meets your customer's needs. Do you offer the right sizes, varieties, colors, or models? If you don't have the right products, your customers will have to look elsewhere. Second, ask about specific quality problems. How does your quality compare to that offered by other vendors? Does your quality meet your customer's expectations? Ask about all aspects of quality, including the product itself, instructions, packaging, appearance, and service. Third, ask your customers to evaluate your delivery performance. Are you delivering your product on time? How does our performance compare with other vendors? Fourth, have you responded to your customer's requests for information? Has he been satisfied with the timeliness and accuracy of the response? Fifth, is your customer satisfied with your day-to-day services? Are your accounting, sales, production, repair, and credit departments meeting his needs? Sixth, when something goes wrong, what is your response? Do you respond quickly to correct the problem? Seventh, ask about prices and payment terms? Are you competitive? Compared to your competition are you offering good value? Once you have visited your top current customers you should repeat the process with a group of former customers. Review your records and identify about 6-8 former customers. You should contact each one and find out why they have stopped buying. Discuss the same seven topics to find out why they selected a new vendor. Aim at uncovering the cause of their dissatisfaction with your product or service. The final step is to carefully review the information obtained from your current and former customers. Look for opportunities to be of further service to your current customers. Pinpoint ways to improve their satisfaction with your product or service. Pay careful attention to the reasons why customers were lost. Suppose you find that quality problems led to the loss of several accounts. Also suppose that current customers complain about quality problems. Be especially concerned if ex-customers and current customers have the same problems. This may mean that fundamental improvements are needed in our business in order to prevent the loss of additional customers. The following is an actual case history. A husband and wife team founded a small manufacturing and distribution company. After about ten years of steady growth sales leveled off and profits began to drop. A careful review of the situation revealed that they had lost one or two important customers during each of the last few years. The significance of these losses had been masked by the large number of active accounts, high level of inquiries, and success in attracting new customers. In each case the lost account was viewed as an isolated situation, just one of those things. We visited these lost customers. We discussed the seven topics noted above to find out why they had taken their business elsewhere. Poor delivery performance was the main reason given. This company was well regarded for quality, and low prices. Nevertheless, customers were forced to develop alternate vendors because reliable delivery had not been provided. We then visited the top 20 current customers and discussed the seven topics. We became alarmed when we found that more than half of the top 20 customers complained about delivery problems. We were certain that more customers would be lost to other vendors if the delivery problems were not immediately corrected. A loss of customer satisfaction caused by poor delivery performance proved to be the underlying reason for the company's stagnant sales and declining profitability. Armed with this information the company mobilized its resources and took action to correct the problem. Fortunately the corrective action was taken soon enough to prevent further erosion of the customer base. Of all the problems a business can have, the loss of established customers is one of the most serious. These losses can gradually undermine a business making it necessary to work harder just to stay in the same place. The alert executive will recognize the seriousness of the loss of customers and take steps to prevent it from happening. The key step is to contact your customers on a regular basis to find out how well you are meeting their total needs. Done at least once a year, this approach will help assure that you maintain a solid base upon which to achieve your business growth plans. In Part 2 of this series we will look as ways to generate additional sales from current customers. This is one of the most efficient and profitable ways to achieve business growth. Bradley E. Hosmer, CMC, heads The Beta Consulting Group in Concord, NH, specializing in improved sales, marketing and new business development for generating profitable growth. For further information please contact Mr. Hosmer at Beta Consulting. |
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