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CEO Best Practice: Customer Retention

Executive Tools

  • Executive Summary
  • Self Assessment Checklist

Expert Practices Articles

  • The New Era of Customer Retention
  • Building Customer Loyalty
  • Measuring Customer Satisfaction
  • "Moments of Truth"
  • The Value of Service
  • Employees: Your Internal Customers
  • Customer Service Makes the Difference
  • What Do Your Customers Think?
  • Turning Complaints into Devotion
  • The Customers Who Got Away

Tools & Analysis

  • 20 Tough Questions About Customer Care
  • Customer Sensitivity Quotient
  • Keeping Customers for Life: 37 Proven Solutions

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The New Era of Customer Retention

The CEO must transmit three essential principles to all employees:

  1. Every function of the company must look at the business through the eyes of the customer.
  2. Each person in the company must add value on top of the product.
  3. The customer, not the company, determines value.

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Building Customer Loyalty

Successful companies focus "outside-in" (looking through the customers' eyes), not "inside-out" (looking through your own eyes). They maintain an "outside-in" focus through the following techniques:

  • Model the behavior. Create an environment where employees can make decisions at the tactical level. Leaders need to model the behavior they want employees to exhibit, not the "do as I say, not as I do" model.
  • Know your customer. Allocate time to go out and meet with customers and suppliers.
  • Manage out, not up. If an employee's orientation is to please the boss, he or she won't focus on pleasing the customer.
  • Put customer service first at your management meetings. If you always ask questions about cost cutting or meeting the budget, your management team will focus on these issues, not customers.

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Measuring Customer Satisfaction

Most businesses measure success by such typical key indicators as profit margin, sales and accounts receivable. These indicators measure what's in it for the business. The real challenge lies in measuring what's in it for the customer.

In addition to the most obvious measurements (referrals generated from current customers, level of repeat business from current customers, rate of customer complaints), The Vistage speakers recommend these "future customer-focused key indicators":

  • Time to answer inquiry. Business studies show that a customer lead loses one percent of its potency for each day it remains unanswered or unfulfilled. Responding quicker than your competitors translates into a clear advantage.
  • On-time delivery. If your product doesn't get to the customer when he or she needs it, the value of that product is diminished severely. Promising a specific delivery date and not sticking to it lends the perception that your company is incompetent.

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"Moments of Truth"

Your employees' first responsibility is making customers feel special. A customer-focused company recognizes that it's not in business to deliver a product or service, but to enable people to reap the benefits of that product or service.

Customers have certain expectations. Moments of truth are inextricably linked to these expectations. They include:

  • Ambience. Customers expect to find clean, comfortable and attractive surroundings. They expect to be greeted warmly by well-groomed, professional-looking employees.
  • Quality. Customers expect quality in every part of your business, from the way your staff treats them to the product itself.
  • Solutions. You're expected to stand behind the product you sell, to be an expert in this area. Your customers will have questions. You should have answers.
  • Reliability. The customer expects your product or service to be reliable and dependable. A sense of confidence grows out of this expectation and can lead to much future business.

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The Value of Service

Providing value not only serves the customer, it benefits the organization as well. These benefits include:

  • Greater efficiency. Focusing on areas that directly affect customer satisfaction requires businesses to use their resources more efficiently.
  • Cost effectiveness. According to the U.S. Department of Consumer Affairs, the cost of gaining a new customer is roughly five times more than the cost of keeping one. With a mere five percent rise in customer retention, a company's profitability can jump by 25 percent or more.
  • Increased morale. When the CEO, senior management, mid-level management and front-line staff are "in sync" on the importance of customer service, everyone shares a common purpose and goal. The result: enhanced employee morale and satisfaction.

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Employees: Your Internal Customers

According to the Vistage speakers, most companies today simply don't invest time up front understanding what type of people thrive in their corporate cultures and what they need to take good care of customers. They offer these tips to facilitate the hiring process:

  • Design a profile of the type of person you feel is best equipped to serve your customers.
  • Incorporate the latest behavioral hiring techniques as part of the interview process.
  • Make sure several staff members interview the applicant.

Hiring the right employee is only the first step. What happens during orientation and training is equally important. Companies that deliver world-class service have a formal orientation program, a comprehensive employee handbook and numerous ways to introduce a new employee to the company's culture.

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Customer Service Makes the Difference

Businesses are increasingly finding that employees can be that competitive advantage. The key is hiring employees with the skills to deliver outstanding service.

Outstanding service requires:

  • A sincere commitment to serve all customers at the highest possible level every time
  • Clearly articulated policies about how customers should be serviced, as well as a system of accountability for enforcing these policies
  • A culture that requires serving customers consistently in a manner that not only meets their expectations, but often exceeds them

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What Do Your Customers Think?

Your internal records may suggest you're doing a great job, but the only voices worth listening to belong to your customers. Find out what they want, provide it to them on a consistent basis and ask them how well you're doing.

"Listen and learn" sources include:

  • Customers. For many businesses, the person who purchases your product isn't necessarily the one who uses it. To get a clear picture, always be sure to talk to the end-user.
  • Sales representatives. Often, sales reps are the eyes and ears of an organization. Based on their firsthand contact with customers, they are certain to have valuable insights for the business.
  • Ex-customers. Track down former customers and find out why they no longer do business with you. This can also be a valuable source of information.
  • Surveys are an effective way to gauge customer satisfaction. They can also measure the importance customers place on specific characteristics of these goods -- which in turn offers additional information on where to focus your customer-retention efforts.

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Turning Complaints into Devotion

Complaints should be viewed as opportunities -- a chance to learn what customers don't like about your products or services, and what can be done to make things better. The Vistage customer retention experts offer these tips for coping with unhappy customers:

  • Reward the customer. The first thing to say in response to an angry customer: "Thank you for bringing this problem to my attention." This "rewards" the customer for taking the time to contact you in the first place.
  • Stay calm. Remember, you're here to serve the customer. This is your chance to show what you can do!
  • Listen. Pay close attention to the customer's complaint. He'll be able to tell – even through his irritation – that you care about his complaint and that you value his business.

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The Customers Who Got Away

Only the CEO and/or senior management should "fire" a customer. This customer should only be let go for "just cause" -- either because the customer has become unprofitable or because he's asked your company to do something immoral, unethical or illegal.

Some customer defections are inevitable. Still, thriving businesses should have a strategy in place to make the most of these defections.

If customers are defecting in significant numbers, first consult your front-line staff. They know how people feel about the company and can, if properly trained, observe what's going on around them, as well as offer keen insights and possible solutions.

Figure out why the customer has stopped doing business with you. Be open to feedback about your company. Seek concrete, specific information that will lead to genuine product or service improvements.

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