At my old company, we did everything to retain customers: built dedicated facilities, designed innovative packaging, offered aggressive pricing and delivered quality second to none. Still, a few major accounts dumped us. Is customer loyalty dead?
—Carl Warren, Ridgefield, Connecticut
Not dead, but different. Time was, you could “earn” a customer’s loyalty with tickets to a big game, a Disney World vacation or even a nice dinner a few times a year. And you could pretty much keep that loyalty with what used to be called belly-to-belly selling or, put less graphically, relationship building.
(Illustration: Malay Karmakar / Mint)
You would listen to your customers’ dreams and worries, visit them to see how your product fit their needs and troubleshoot their problems. In more competitive situations, you would add the sort of extra manufacturing and design services you mention in your letter. And usually, such partnering was enough to keep customers in the fold.
Yes, price mattered in those halcyon days. Sometimes it mattered a lot. We are only talking about, say, 10 years ago. But it never mattered like it matters in today’s fierce economy. The Internet, in particular, has made pricing transparent and purchasing global. And as a result, it is increasingly becoming a buyer’s world. But we are not ready to bury customer loyalty—only to redefine it from a transaction to a two-way street. With the transaction approach to loyalty, you give your customers competitive pricing, high quality and excellent service. They give you repeat business in return. It is a nice deal...until someone comes along with slightly better pricing, quality or service. Then it is ground zero again as you try to win back your customer.
With the two-way street approach to loyalty, you and your customers do not have a deal as much as you have mutual dedication. Because you, the seller, are not delivering on just price, quality and service. You are demonstrating intense loyalty to your customer by giving him a comprehensive, inimitable way to win. Better productivity. Faster throughput. Lower inventory.
You are delivering something—anything—that makes you indispensable to your customer’s success in the marketplace. Then, and only then, will you get complete loyalty in return. Now, you may be thinking, “We did that!”
To which we would ask: But did those services—no doubt costly to you—fundamentally change the game for your customers? Did they allow your customers, for instance, to expand into profitable new markets or catapult old competitors? It seems unlikely; how could they have walked away?
They could not have. Modern loyalty, then, ultimately comes down to that old saying: “What goes around comes around.” The more fervently committed you are to making your customers win big in the long haul—not just meeting their immediate demands—the more fervently committed they will be to you. That is a hard order, of course.
But given the direction of the ever-more competitive global economy, a two-way street approach to customer loyalty is the only road to take.
What are the characteristics of a good company “university”?
—Vladamir Glazunov, Moscow
Your question, of course, mainly applies to large companies as most other organizations do not have the luxury of affording an in-house learning centre.
And what a luxury it is too, as effective management development programmes can provide a real competitive advantage.
Note the word “effective”, however. Because corporate universities too often are not. The most common reason is that companies bring in outside “actors” to do the teaching—typically, business school professors and consultants. Talk about undermining the process. You want your own managers in front of every class demonstrating for employees what “success” thinks and acts like in your organization. That is motivating.
In-house universities also fail for a second, more insidious reason: They become warehouses—a polite word for “dumping grounds”—for employees who can be spared for a few weeks.
That happens, of course, because few managers like being parted with their most productive employees. The antidote is to make sure managers understand and abide by the fact that the in-house development programme is a reward for superior performance. Only the best get selected to go—and the company’s leaders and HR people pick them.
©2008/BY NYT SYNDICATE
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