How My Car Dealer Lost My Customer Loyalty

It was not a single event, but a series of interactions over the span of a few years that caused me to no longer feel like a valued customer. The local, family owned car dealership had earned my loyalty for the past 25 years.  My family had purchased a total of 16 new vehicles from them and we opted to have the cars serviced exclusively at their facility. I kept going back and giving them my business because I knew I would get a fair deal and because they made the whole experience so incredibly pleasant.

Over the past few years, I noticed an attitude shift in the ownership and staff.  Instead of approaching me with a smile, they walked by me, trying not to make eye contact.  My service advisor stopped acknowledging that I had been a longstanding customer.  The car service remained competent but my customer service experience declined.  Prices went up, smiles went down.

Other customers noticed this change as well.

The day after my car was serviced, I would receive a string of follow up calls and surveys. All they were interested in was my completion of their service satisfaction survey.  The calls became intrusive, as did their automated, recorded phone calls to wish me a happy birthday or to remind me to bring my car in for service.

I bought a new car from them 18 months ago and the team was just “okay”.  A few months ago, I needed to buy a truck.  I decided I was going to shop around.  Why?  The prices had increased and my overall experience at my preferred dealership had declined.  The intrusive phone calls were irritating me and the sales manager, with whom I had dealt for ten years, failed to even stand up when I entered his office for our scheduled appointment.  I felt devalued and taken for granted.

I went to another dealership and found the same truck for $200.00 less.  In the past, I would have happily paid $200 more for the pleasant, reliable customer service experience I had come to rely on at my favorite dealership.  This time, I returned to my dealership and negotiated a $500 discount.  The change in their attitude and behavior cost them $500.00.  They no longer have my exclusive trust and the next time I need to purchase a car, you can bet I will shop around.

Service Innovation Takes Your Business To Where You Want It To Be

If you are like most business owners, you want your service business to be more profitable and easier to run so you can dedicate more of your efforts to building your business for the future.  In order to accomplish this, you must find innovative ways to profitably grow your business.

Service Innovation determines and delivers the optimum value to customers, for each customer segment your business serves.  In order for any business to profit it must deliver sufficient “value” to attract customers in at least one market segment that is large enough to financially support the business.

The concept of “value” is determined solely by the customer’s perception of the value received.  Customers are astute at recognizing value when they see it and demand the best value for themselves. Value is determined by total price, a service level that meets the customer’s needs, customer’s perception of “risk” and the total customer experience from arranging the service, to concluding the transaction and after sale service.

Three Service Innovation goals:

1)      Achieving competitively superior Competence to profitably deliver the “right value” to customers.  Competence is how your service business demonstrates that it delivers the best value from the customer’s point of view.  This requires your company to have deep insight into what the customer is expecting and meets those expectations.

2)      Establishing and maintaining an absolute level of Trust with your customer based on actions that your customer consistently perceives are in their best interest.  Demonstrating Competence is the first step in a trusting relationship.  Your company’s relationship with the customer, however, extends far beyond just delivery of the service and involves many interactions, each of which must reinforce in the customer’s mind that your company is behaving in their best interests.

3)      Creating Evangelist Customers to build the lifetime value of each customer through repeat business and / or referrals resulting from favorable “word of mouth”.  Customers can be hard to come by, expensive to acquire and difficult to keep.  Positive comments about your business enhance the impression of Competence and Trust that are essential to acquiring and retaining profitable new customers.

Two questions lead to the discovery of innovative opportunities:

1)      What’s in it for the Customer?

2)      What’s in it for Team Members?

What’s in it for the Customer?

Discovering the “right” innovations is challenging.  Your company must relate to the service being provided solely from the customer’s point of view without thinking in terms of the “best of everything” or the “greatest service”.  Instead this is about your having a deep understanding of the “right” type of services that your customer wants and making sure that your company can deliver what is expected in a competitively superior, competent way.

From the customer’s point of view; What’s in it for the customer?

1)      Is the level of service just “right” and not too much or too little?

2)      Are your service offerings appropriately adjusted for different customer segments?

3)      Are only properly and thoroughly trained Team Members been assigned to the service?

4)      Are the Team Members properly equipped technically?

5)      Is the service delivered in a “visually” efficient manner?  Do your Team Members look competent as they perform their tasks?  Does there appear to be a minimum of time wasted?  (Think Lean 5S)

6)      Is the relationship with the customer appropriately transparent relative to quoting, status updates, outcomes and billing?

7)      Does the customer believe your company is making decisions in their best interest? 

8)      Issues effecting cost, timing, function and appearance occur when performing service work.  How this is communicated to the customer and how the customer is involved is central to their perception of value.

9)      Is the service delivered 100% on time, 100% on spec and 100% on budget or what should the customer expect?

10)   What is your company asking the customer to do?  Is the service convenient?  Is what you are asking the customer to do consistent with what the customer wants to do and is capable of doing?  Does the customer become a better customer, over time?

11)   Is the customer really unreasonable or is your company unprepared to deliver a level of service your customer should expect?

12)   What “risk” does the customer perceive in doing business with your firm?

13)   Does your firm have a reputation of being trustworthy based on it consistently acting in the best interests of the customer?

14)   How are problems between the customer and your company identified and resolved?

15)   Is there an effective feedback mechanism for the customer to use?  Does your company deal with the feedback in a manner to encourage the customer to be an Evangelist?

What’s in it for the Team Member?

It is often, and rightly said, that PEOPLE are the key to the success of any business.  This is especially true in a service business as Team Members perform the work, interact with the customer, and are the face of the business.

From the Team Member point of view:

1)      Is the Team Member properly trained to perform the work in accordance with the “right” service standards?

2)      Is the Team Member properly resourced with tools, parts, equipment, and communication capability?

3)      Is the Team Member properly trained in the necessary communication skills to interact with customers to deliver the service standard?

4)      Does the Team Member understand exactly what is expected of them on each assignment?

5)      Does the Team Member understand exactly what is expected by the customer on each assignment?

6)      Does the Team Member perceive themselves as a “trusted” partner in satisfying the customer?

7)      Is the Team Member empowered to make “on the fly” decisions on behalf of the company to resolve issues that arise either with the service being provided or with the customer?

8)      Is the Team Member compensated in a way consistent with the customer’s best interests, the company’s best interests and their own best interest?

Service Innovation starts with asking the right questions.  As a business owner, are you asking the right questions, from the right view point?

 

 

Customers Are No Longer Willing To Pay Enough. Why?

Tough economic times increase complaints by business owners that: Customers will only buy based on low price, Quality no longer matters, and Competitors are giving their product away,

It is economic reality that weak demand generally results in softer prices.  Though the key reason that customers no longer pay what they once did may actually be that your customer’s perception of value has changed.

A Value Proposition is the sum of the benefits of the actual product/service your firm provides plus the experience your customer has with your firm, viewed from the customer’s point of view.

The Value Proposition your company offers is the reason your customer chooses your company over competitors when your firm solves a problem or meets a need for a particular segment of customers in a compelling way.

During tough economic times, customers re-evaluate their “wants” Vs. “needs” and, to save money, focus solely on satisfying “needs”.

What is often stated as “quality” by owners of companies that make and sell things is just a different specification or feature set.  When customers select a less robust feature set they are minimally satisfying their “need”.  Products/ Services that include features that add cost and exceed the minimum features required to solve the customer’s problem or meet the need will become uncompetitive.

Some competitors may be in a financial position to enhance their Value Proposition by lowering prices to protect market share during periods of weak demand.  Sometimes this action is taken unwisely.  However, adaptable competitors will detect a change in a customer segment’s perceived Value Proposition and adjust their offering and business model to sell at a lower price, in a sustainable manner.

Deep knowledge of customers and customer segments is necessary to ensure that your firm’s Value Propositions stay in sync with changing customer wants and needs.

Winning Value Propositions are a result of effective listening to customers in a given customer segment so the right blend of elements can be created and adopted to solve a customer problem or meet a customer need better than competitor’s offering.

Value Proposition Elements (Typical)

1) Price / Terms

2) Product / Service Benefits & Solutions

3) Ease of Acquisition of Product / Service

4) Performance of Product / Service, as represented

5) Customer Experience with resolving issues

6) Customer Perceived Risk

When customers that once paid enough for your product /service are no longer willing to do so means something has changed in the customer’s perception of your Value Proposition.

Your company must be culturally built to engage with and listen to each customer, with every interaction, to detect any pattern of change in a customer segment’s needs or problems.  How to accomplish this is the subject of another post, but key is that a process must be culturally embedded in your company to avoid denial which delays acknowledgement of changes occurring in a customer segment and prevents your firm from effectively adapting to the new environment.

A Few Examples of Changing Value Propositions in Tough Economic Times

1)  Legal Support Services, the Economic Buyer Moves Upstream to the Client

The most common practice for handling legal support services was for the client to let their attorney hire legal services as they wished.  In these tough economic times, clients are asking for competitive quotes and large corporate clients are circumventing attorneys by contracting directly with legal support service providers applying buying power to get lower prices.  This is a change that will not likely reverse as the economy improves.  This change is disruptive for legal support service firms.   Suddenly the repeatable sales models, which have been built over decades, no longer are effective as the economic decision maker for legal support service has changed to someone with whom the service provider likely has no relationship.  Further, the power exerted by the economic buyer has permanently lowered prices, while simultaneously commoditizing the legal support service industry.

2)  Specification / Feature Set changes to “Good Enough”

Customers will often change their specification on a product to “good enough” in tough times to save money.  For example, there are varying grades of in-shell peanuts that are offered by grocery retailers at different price levels to consumers.  There is a meaningful difference in price and some brands choose to differentiate by offering a premium grade that is a little larger and has a more pleasing visual appearance.  In tough economic times, in order to save money, many consumers will shift to a lower grade generic peanut that is “good enough”.

The recently announced iPad Mini tablet computer will likely be a “good enough” trade-off for many consumers wishing to save money vs buying the full size iPad.

Product offerings with “extra features” that add cost and exceed the customer needs will get replaced by “good enough” products.

 

3)  Switch to “The Whole Product” to Reduce Risk

Risk reduction can take on increased importance in tough economic times.  Customers may assign a higher value to “reduced risk” and will favor the product/service perceived as the safest.  This relates most often to products that require additional activities such as design, customization, and installation.  Instead of dealing directly with the various individual entities for each aspect of a job, a customer will prefer to deal with a single, qualified, proven company.   For example, a new hospital under-construction must make a selection for its counter and wall surfaces.  Key elements of this product choice are the performance of the surface while in use over its economic life, how close the real styling is relative to the “as designed” style, fabrication of proper shapes with accuracy and durability, and on-time installation.  At risk is the economic value of the hospital space as it is revenue producing.  If hospital space is unavailable because of construction delay or need to take patient rooms out of service for surface repair, there is a high economic cost to the downtime.

In this scenario, customer’s will most likely select a product that offers the most proven reliability available from a single company combined with its proven “authorized” partners capable of completing “the whole job”, thereby creating price reduction pressure on “non-Whole Product” Value Propositions.

Be Present - Two Minutes at a Time

As a Business Owner you must handle multiple “interruptions” every day by team members asking questions and seeking guidance.  There are only so many hours in a day, so managing your time is critical, but then again so is leading your team.

A powerful approach is giving the team member Two Minutes of singularly focused thought and discussion on their topic.  The solution may appear, or it may not.  But more importantly these brief encounters give you the opportunity to reinforce the key elements of your business model such as core differentiation, core values and how to make consistent decisions.  You, in return, will learn from carefully listening to your team members.

In today’s rapidly changing business world it has never been more important to build a companywide culture in which team members are trained in, and believe in, the business model.   Only then can all team members make decisions that result in actions that are consistent with building the competitive advantage as designed in your business model. 

Giving your team members undivided attention for Two Minutes will allow your team to get more done on their own and get it right more often.

Fatigue can kill your business, if you let it.

Is your company experiencing financial challenges?  Are these challenges increasing your team’s workload, worries and contributing to organizational fatigue?

Businesses with financial challenges experience a vast increase in organizational workload that will cause team member and stakeholder performance to degrade.

Due to diminished resources, routine, repeatable processes must be handled manually and micro-managed.  These increased tasks add stress and lead to mistakes which require even more counter-measures.

Team members, suppliers and other stakeholders become weary.   They lose confidence.   Little by little, the added tasks go undone or are delayed.   All stakeholders begin to perform less effectively.  Organizational performance degrades, sales drop, and costs rise due to poor execution.

To prevent and combat the fatigue induced “death spiral”, leaders must do the following with team members and stakeholders:

1)      Do not understate the severity of the problem

2)      Define the problem the company faces and explain it completely

3)      Collaborate on a realistic vision of the solution

4)      Set clear expectations

5)      Be honest and clear in your communications

6)      Maintain open, proactive communication

7)      Deal with concerns directly and promptly

8)      Get commitments and assess willingness of each team member and stakeholder to rise to the challenge

9)      Focus on the best and most committed of team members and stakeholders

10)   SHOW UP for the hard stuff

11)   Model calm and deliberate behavior

12)   Help.  Be part of the solution by taking on additional roles where your skill set delivers good outcomes, demonstrates commitment and reduces overall organizational workload

13)   Clarify and Simplify continuously by focusing only on essentials

14)   Define the metrics for determining progress and report them - good or bad

15)   Iterate as necessary, quickly

“We’ve already thought of that.” But, did you do it?

Good ideas are often met with the response, “We’ve already thought of that.”  But, did you do it?

Many good ideas are trapped on the “To Do List” while day-to-day demands prevent progress.  In order to propel an initiative forward there must be a champion with the “will” to visualize and support a step- by-step process to achieve the desired outcome.

How do you climb a mountain?  One step at a time…if you have the “will”.