In a marketing class many years ago the professor said we must consider the firm as a marketing entity. Not just the marketing department, but the entire firm. His message was that everything the firm does touches its customers in some way or another. He said it over and over, stamping it into our minds.
Now, some 40 years later that imprinted message is loud and clear. We talk more and more about the value of customer retention and strategies for enhancing customer retention. Financial studies have been made to attach equity value to retained customers. Other studies clearly show the cost of total cost incurred in selling to repeat customers is far lower than the total cost of acquiring new customers. Customer retention is becoming a greater part of long term strategies, receiving ever greater attention from corporate chiefs.
Why is it then than most firms spend vast sums on marketing and sales to attract new customers but spend very little to retain them for many repeat sales? If they adopt the concept “the firm is an marketing entity;” consider the customer impact of every facet of operations; and revise those that don’t meet internal or external expectations to better satisfy customers, they will be most of the way to increasing retention.
For example, I know of an auto repair chain that spends huge amounts on print and television advertising to attract new customers to their low price stores, but spends only the minimum on mechanic wages, careful diagnostic services, quality replacement parts and serious quality control. Doing those things would make the entire firm a marketing entity, allow them to charge higher prices, and no doubt spend far less attracting new customers while spending only a fraction of the advertising budget on improved internal operations. Based on what I see of large high-quality shops, more profit is made that way than through huge advertising budgets.
There are many, many more examples of firms that are marketing entities – and have high rates of customer retention. Your comments about them are invited.
Charles R. Schaul, Partner of SixPillars Research Group, focuses on increasing business profits by resolving the problem of customer attrition. Aligning companies with their customers; generating and implementing strategic initiatives; and promoting employees’ customer focus through commitment, responsibility and accountability combine to achieve the result.
Copyright 2008 by Charles R. Schaul, Boulder, Colorado. All rights reserved.
May 21, 2008
Apr 28, 2008
Thoughts on Consistency in Business
I believe consistency is one of the overlooked features of good business practice. We all know how important consistency is, and yet many companies completely fail at achieving it. Some stay in business, but many do not. Think about it. Would you do business with a firm that is meets your needs only inconsistently? I doubt it. There doesn’t seem to be a reason to.
Some companies don’t care about repeat customers. They advertise and promote heavily to get new customers, but don’t consistently serve them. Their philosophy seems to be, “It is a big market with many, many prospective customers. Keep up the advertising and promotion to keep them coming in and all will be well.” Personally, I like the philosophy that says our customer are the most important asset we have so we take good care of them and keep them coming back again and again. What do you think? I would appreciate having your thoughts as a comment part to this blog.
Charles R. Schaul, Partner of SixPillars Research Group, focuses on increasing business profits by resolving the problem of customer attrition. Aligning companies with their customers; generating and implementing strategic initiatives; and promoting employees’ customer focus through commitment, responsibility and accountability combine to achieve the result.
Copyright 2008 by Charles R. Schaul, Boulder, Colorado. All rights reserved.
Apr 24, 2008
Apr 1, 2008
Consistency - Leads to Quality, Customer Retention
Copyright 2008 by Charles R. Schaul, Boulder , Colorado. All rights reserved.
It is safe to say then, that firms that consistently provide customers with satisfactory products or services create more wealth for their owners than do firms that don’t do so. With profit in mind, following are four concepts that lead to consistent performance in business.
Policies, Rules and Work Instructions provide a framework for operations. Policies are corporate and usually strategic in nature. For example, one company does not want to incur the administrative cost of contracting with the government. It decided upon a Policy that it will not contract with the government. There is no question about it. It is a policy.
Rules are less strategic in nature, such as the myriad of rules that a Human Resources department imposes on a workforce.
Work Instructions tell the staff how to do the work. A work instruction might be that all inquiries are entered into the Inquiry Register that shows the inquiry details, and eventually shows if it becomes an order or why not if it doesn’t. Without policies, rules and work instruction, formal or informal, performance of tasks is hit or miss, and inconsistency reigns.
Caution! Policies, Rules and Work Instructions do not imply rigidity. They give workers a framework for doing their work in a consistent way, but do not mean to stifle creativity and empowerment.
Building consistency without training is like building a new road without a set of plans. No one seems to know what, when or where to do anything. Good training is a must when implementing work instructions. Without it the new instructions are wasted. Having people understand what is expected of them, and why, leads to consistent, repeatable application of the way the work is done. Having a team understand their instructions, and execute them well as a team, builds morale and performance.
“I’ll try.” “I’ll do my best.” “If I remember.” Theses are the words that mean NO COMMITMENT to getting a job done. If you are implementing a new set of work instruction for a particular task, and entering data in a log or register is the final step of the instruction, you must be committed to the final step, and train your staff to be equally committed. To develop consistency, and to maintain it, people must be committed to the rules, instructions and training that guide their work. Without commitment and discipline there is no consistency. In this context “discipline” does not mean punishment. It means a steady application of the instructions through persuasion and learning from mistakes, not punishing for them.
Accountability is the last step for insuring consistency. Accountability means giving clear instructions, making sure people understand them, and holding people responsible for following them. This does not mean rigidity, or punishment. It means having certain expectations for performance and holding to it through encouragement, training, gaining greater commitment.
Charles Schaul, Partner of SixPillars Research Group, focuses on reducing customer attrition through better market alignment, strategic initiatives and employee commitment, responsibility and accountability.
Mar 25, 2008
The Bigger They Are The Harder They Fall
A billion dollar computer and network services company engaged SixPillars Research Group to interview 80 of their largest customers. There were over 3,000 total customers, and 400 large ones. We objected to the sample size as wasteful of our time and their money, but they insisted.
Normally we get more than 90% participation of the people identified by our clients as key contacts. In this case though, we were able to interview only 57 of the 80 people listed, or some 71%. The reasons, some of the respondents were not current customers of our client (although the client thought they were.) Also, serveral of the people listed as contacts were no longer employed by our client’s customers. In one case the customer company no longer existed. Our client’s obviously poor recordkeeping was our first indication that all was not well.
The interviews confirmed it. Customers complained universally about the administrative nightmare of doing business with our client. There were many errors in shipment and in pricing, and the difficulty and time consumed in getting errors corrected was frustrating. At least ten of our contacts revealed there were actively searching for a vendor to replace our client.
At a meeting with the President of our client, and several of the Vice Presidents, their comment was, “You are not telling us anything new. We have known about these problems for a long time. Industry surveys show us as better than our competitors.”
It is no wonder that, as many of their largest customers fled, the company failed and filed bankruptcy.
Charles R. Schaul, Partner of SixPillars Research Group, focuses on increasing business profits by resolving the problem of customer attrition. Aligning companies with their customers; generating and implementing strategic initiatives; and promoting employees’ customer focus through commitment, responsibility and accountability combine to achieve the result.
Normally we get more than 90% participation of the people identified by our clients as key contacts. In this case though, we were able to interview only 57 of the 80 people listed, or some 71%. The reasons, some of the respondents were not current customers of our client (although the client thought they were.) Also, serveral of the people listed as contacts were no longer employed by our client’s customers. In one case the customer company no longer existed. Our client’s obviously poor recordkeeping was our first indication that all was not well.
The interviews confirmed it. Customers complained universally about the administrative nightmare of doing business with our client. There were many errors in shipment and in pricing, and the difficulty and time consumed in getting errors corrected was frustrating. At least ten of our contacts revealed there were actively searching for a vendor to replace our client.
At a meeting with the President of our client, and several of the Vice Presidents, their comment was, “You are not telling us anything new. We have known about these problems for a long time. Industry surveys show us as better than our competitors.”
It is no wonder that, as many of their largest customers fled, the company failed and filed bankruptcy.
Charles R. Schaul, Partner of SixPillars Research Group, focuses on increasing business profits by resolving the problem of customer attrition. Aligning companies with their customers; generating and implementing strategic initiatives; and promoting employees’ customer focus through commitment, responsibility and accountability combine to achieve the result.
Mar 12, 2008
The Joy of Management Consulting
It is amazing. I have been a management consultant since 1980, working with several hundred clients, and observing all sorts of business owners and managers. I have seen owners who are risk takers or risk adverse; visionaries, bureaucrats with no vision, or dreamers; driven by sales, technology, or expense management; customer focused or self focused (one regularly referred to customers as “the bastards;” leaders, pushers, autocrats, or those who delegate well; overextended or underutilizing their skills; procrastinators, impulse driven, having analysis paralysis, fear, or hiding in the details; brilliant and not-so-brilliant; great bosses or horrible bosses. And so on.
Yet the amazing thing is that most of their companies earn profits and create wealth for them, the owners. Sometimes I wonder how, other times I am convinced failure is just around the corner. I have seen brilliant people, dreaming and not doing anything, make a little money. I have seen not-so-smart owners get into a fixed pattern and over time grind out a fortune. Each individual is different; their blend of qualities works for them in their circumstance. I have seen fortunes squandered and fortunes made.
The point is, all businesses are different, making the business of management consulting fascinating. It’s our job to figure out who and what we are dealing with and create ways to help them seize opportunities and fix problems. It’s an ever changing mosaic providing new challenges and no boredom. It is the joy of management consulting.
Charles R. Schaul, Founder of SixPillars Research Group, focuses on increasing business profits by resolving the problem of customer attrition. Aligning companies with their customers; generating and implementing strategic initiatives; and promoting employees’ customer focus through commitment, responsibility and accountability combine to achieve the result.
Mar 11, 2008
The Importance of Commitment
Copyright 2008 by Charles R. Schaul, Boulder, Colorado. All rights reserved.
Of all the character traits exhibited by people, keeping commitments ranks at the top of the list for importance. Neither business nor personal relationships can exist where people don't keep commitments.
Here's what I mean. Last winter I moved my residence, and since I live simply, I decided to do the moving myself -- with the help of friends. I needed three friends to load the van at the old house and three other friends at the new house on the other side of town. Sounds easy.
After having heard all sorts of responses, from "I'll try to be there" to "I'll do my best to help you," I began to re-think what it means to receive a solid, full commitment versus what I'll call a "half commitment." I realized I couldn't get the van loaded with half commitments, but only by people who committed themselves completely and said, "I'll be there." Anything less meant furniture on the sidewalk, not in the van, or in the van but not in my new space.
Commitment means accepting an obligation, making a pledge, to either do or not do something. It seems simple, either you will or you will not do something. How is it that for some people the concept seems so vague? Making and keeping commitments is the cornerstone of our society. When you make a sale on credit, you are accepting your customer's commitment that in the future the bill will be paid. When you make a purchase with a credit card, it is done because you have made a commitment to the issuer of the card that you will pay the bill. It's plain and simple -- our business world relies on commitments every moment of every day.
Teachers and writers talk about five levels of commitment. Perhaps this will help understand what it means to make a commitment, versus making "half" of one. Here are typical responses for levels one through five.
Level 1 commitment - "I won't do it"
Level 2 commitment - "I'll do it if it's easy"
Level 3 commitment - "I'll try"
Level 4 commitment - "I'll do my best"
Level 5 commitment - "I will do it (provided it is moral, ethical and legal)"
This makes commitment seem easy.
Level 1 is a strong commitment -- not to do something. Level 5 is a strong commitment -- to do something. None of the others commit a person to achieving results, only to an effort (unless the task is easy.)
Level 2 commits a person to an activity provided it is easy. What happens if the task becomes hard? Would you want to rely on someone who gave you a level 2 commitment?
Level 3 - "I'll try" is the biggest cop-out of all. Trying gets you nowhere. It commits you to making an effort, and not necessarily good effort, but does not commit to achieving results.
Level 4 - "I'll do my best" sounds good, and in essence is a strong commitment -- but to an activity and not a result. What happens if "my best" is not good enough? Do you stop there? If you have made a level 4 commitment you do, because you committed to an effort and not to results.
Level 5 - "I will do it" (provided it is moral, ethical and legal) means that within the framework of what is moral, ethical and legal, everything possible will be done. This is a commitment to achieving results. Just like Level 1, there is absolute clarity here about what will happen. There is nothing weak or wishy-washy about Level 5 commitment.
Think of it this way, commitment is for the hard tasks -- you don't need it for the easy ones. Keeping commitments builds personal character, builds business reliability, and builds business relationships.
Remember the vendor who promised to "try" to get your important supplies to you on time, and then didn't. Were you told they would "do their best." Did that keep your machines running, or your copier supplied, or your freezer stocked for tonight's dinner crowd? What about the customer who "does his best" to pay his account with you. Can you spend "his best?" Would you rather receive the promise "I will have money to you by 3:00PM," versus "I'll try to get money to you by 3:00PM."
How many times have you waited to have a carpet cleaned, or a lawn mowed, or a TV fixed, and had to call the company later because no one showed up? Were you told "we're sorry, we tried?" As inconvenient as it is, when US West tells you the service person will be at your house between noon and 6:00PM, you can count on that happening. US West has learned a method of making schedules so that they can keep their commitments. That's better than promising a specific time for the service work and then not keeping the commitment.
Commitment doesn't have to be with others. Commitment to yourself has equal importance. If you set out to do a task, do you commit to it at Level 5, or at some lower level? Do you quit when difficulties arise, or do you use that commitment to get you through the tough times, to expand your thinking and your efforts to achieve a result that otherwise looks impossible. Commitment to a result will create a result. Lack of commitment to a result will create frustration, disappointment, failure.
Is this just semantics? Some people would say so. They are the ones who don't make strong commitments, who try and do their best most of the time. For those who make only those commitments they can keep, and then make sure they keep them, this is not an exercise in semantics.
Do you make commitments? Do you keep your commitments? Think about it the next time you tell a customer, client, vendor (or your children), "I'll try." Think about the words you will use next time you are asked to commit yourself to a task or an appointment. Level 1 or Level 5, or something in between?
Charles R. Schaul, Partner of SixPillars Research Group, focuses on increasing business profits by resolving the problem of customer attrition. Aligning companies with their customers; generating and implementing strategic initiatives; and promoting employees’ customer focus through commitment, responsibility and accountability combine to achieve the result.
Of all the character traits exhibited by people, keeping commitments ranks at the top of the list for importance. Neither business nor personal relationships can exist where people don't keep commitments.
Here's what I mean. Last winter I moved my residence, and since I live simply, I decided to do the moving myself -- with the help of friends. I needed three friends to load the van at the old house and three other friends at the new house on the other side of town. Sounds easy.
After having heard all sorts of responses, from "I'll try to be there" to "I'll do my best to help you," I began to re-think what it means to receive a solid, full commitment versus what I'll call a "half commitment." I realized I couldn't get the van loaded with half commitments, but only by people who committed themselves completely and said, "I'll be there." Anything less meant furniture on the sidewalk, not in the van, or in the van but not in my new space.
Commitment means accepting an obligation, making a pledge, to either do or not do something. It seems simple, either you will or you will not do something. How is it that for some people the concept seems so vague? Making and keeping commitments is the cornerstone of our society. When you make a sale on credit, you are accepting your customer's commitment that in the future the bill will be paid. When you make a purchase with a credit card, it is done because you have made a commitment to the issuer of the card that you will pay the bill. It's plain and simple -- our business world relies on commitments every moment of every day.
Teachers and writers talk about five levels of commitment. Perhaps this will help understand what it means to make a commitment, versus making "half" of one. Here are typical responses for levels one through five.
Level 1 commitment - "I won't do it"
Level 2 commitment - "I'll do it if it's easy"
Level 3 commitment - "I'll try"
Level 4 commitment - "I'll do my best"
Level 5 commitment - "I will do it (provided it is moral, ethical and legal)"
This makes commitment seem easy.
Level 1 is a strong commitment -- not to do something. Level 5 is a strong commitment -- to do something. None of the others commit a person to achieving results, only to an effort (unless the task is easy.)
Level 2 commits a person to an activity provided it is easy. What happens if the task becomes hard? Would you want to rely on someone who gave you a level 2 commitment?
Level 3 - "I'll try" is the biggest cop-out of all. Trying gets you nowhere. It commits you to making an effort, and not necessarily good effort, but does not commit to achieving results.
Level 4 - "I'll do my best" sounds good, and in essence is a strong commitment -- but to an activity and not a result. What happens if "my best" is not good enough? Do you stop there? If you have made a level 4 commitment you do, because you committed to an effort and not to results.
Level 5 - "I will do it" (provided it is moral, ethical and legal) means that within the framework of what is moral, ethical and legal, everything possible will be done. This is a commitment to achieving results. Just like Level 1, there is absolute clarity here about what will happen. There is nothing weak or wishy-washy about Level 5 commitment.
Think of it this way, commitment is for the hard tasks -- you don't need it for the easy ones. Keeping commitments builds personal character, builds business reliability, and builds business relationships.
Remember the vendor who promised to "try" to get your important supplies to you on time, and then didn't. Were you told they would "do their best." Did that keep your machines running, or your copier supplied, or your freezer stocked for tonight's dinner crowd? What about the customer who "does his best" to pay his account with you. Can you spend "his best?" Would you rather receive the promise "I will have money to you by 3:00PM," versus "I'll try to get money to you by 3:00PM."
How many times have you waited to have a carpet cleaned, or a lawn mowed, or a TV fixed, and had to call the company later because no one showed up? Were you told "we're sorry, we tried?" As inconvenient as it is, when US West tells you the service person will be at your house between noon and 6:00PM, you can count on that happening. US West has learned a method of making schedules so that they can keep their commitments. That's better than promising a specific time for the service work and then not keeping the commitment.
Commitment doesn't have to be with others. Commitment to yourself has equal importance. If you set out to do a task, do you commit to it at Level 5, or at some lower level? Do you quit when difficulties arise, or do you use that commitment to get you through the tough times, to expand your thinking and your efforts to achieve a result that otherwise looks impossible. Commitment to a result will create a result. Lack of commitment to a result will create frustration, disappointment, failure.
Is this just semantics? Some people would say so. They are the ones who don't make strong commitments, who try and do their best most of the time. For those who make only those commitments they can keep, and then make sure they keep them, this is not an exercise in semantics.
Do you make commitments? Do you keep your commitments? Think about it the next time you tell a customer, client, vendor (or your children), "I'll try." Think about the words you will use next time you are asked to commit yourself to a task or an appointment. Level 1 or Level 5, or something in between?
Charles R. Schaul, Partner of SixPillars Research Group, focuses on increasing business profits by resolving the problem of customer attrition. Aligning companies with their customers; generating and implementing strategic initiatives; and promoting employees’ customer focus through commitment, responsibility and accountability combine to achieve the result.
Mar 6, 2008
Alignment for Profit
Copyright 2008 by Charles R. Schaul, Boulder, Colorado. All rights reserved.
In a recent engagement we worked with a warehouse distributor of an automotive commodity, conducting what we call a “customer alignment” project for them. As is almost always the case, we were able to show our client that better alignment with their customers would produce substantially more profit, conservatively estimated at more than 30 times our fee for the engagement.
In speaking with customers of our client we learned that compared to competition our client had excellent inside sales personnel, provided far better delivery service, handled the few errors in shipping and pricing quickly and with no hassle, and provided excellent warranty claims handlinThey also were better in helping customers keep their inventory clean and balanced.
Many customers said they were willing to pay an extra $1.00 to $3.00 per unit for the overall level of service, especially the delivery service.
A second thing we learned was that some customers purchased only low priced products, but received all the same excellent services. Adding the cost of handling the product in and out of the warehouse to the cost of the other services provided, we found the company had negative gross profit on sales of low end products. Obviously, if a customer bought only low end products, the company lost money by selling to that customer.
As a result of the study we recommended adding $1.00 to $2.00 to the selling price of high end products; and either dropping or reducing delivery service to customers buying only low end product, The increase in profit from implementing these recommendations added very significantly to the profit of this automotive commodity warehouse distributor. The margin in this industry is very thin. As a result of our work our client added some 30% to their gross margin.
As usual, we finished the engagement with a feeling of great success. We had proven once again that alignment with customers produces both quick and long term increases in profit, as well as customer loyalty.
Charles R. Schaul, Partner of SixPillars Research Group, focuses on increasing business profits by resolving the problem of customer attrition. Aligning companies with their customers; generating and implementing strategic initiatives; and promoting employees’ customer focus through commitment, responsibility and accountability combine to achieve the result.
In a recent engagement we worked with a warehouse distributor of an automotive commodity, conducting what we call a “customer alignment” project for them. As is almost always the case, we were able to show our client that better alignment with their customers would produce substantially more profit, conservatively estimated at more than 30 times our fee for the engagement.
In speaking with customers of our client we learned that compared to competition our client had excellent inside sales personnel, provided far better delivery service, handled the few errors in shipping and pricing quickly and with no hassle, and provided excellent warranty claims handlinThey also were better in helping customers keep their inventory clean and balanced.
Many customers said they were willing to pay an extra $1.00 to $3.00 per unit for the overall level of service, especially the delivery service.
A second thing we learned was that some customers purchased only low priced products, but received all the same excellent services. Adding the cost of handling the product in and out of the warehouse to the cost of the other services provided, we found the company had negative gross profit on sales of low end products. Obviously, if a customer bought only low end products, the company lost money by selling to that customer.
As a result of the study we recommended adding $1.00 to $2.00 to the selling price of high end products; and either dropping or reducing delivery service to customers buying only low end product, The increase in profit from implementing these recommendations added very significantly to the profit of this automotive commodity warehouse distributor. The margin in this industry is very thin. As a result of our work our client added some 30% to their gross margin.
As usual, we finished the engagement with a feeling of great success. We had proven once again that alignment with customers produces both quick and long term increases in profit, as well as customer loyalty.
Charles R. Schaul, Partner of SixPillars Research Group, focuses on increasing business profits by resolving the problem of customer attrition. Aligning companies with their customers; generating and implementing strategic initiatives; and promoting employees’ customer focus through commitment, responsibility and accountability combine to achieve the result.
Insurance Agency Expansion
Copyright 2008 by Charles R. Schaul, Boulder, Colorado. All rights reserved.
A client alignment engagement for a large, high quality, locally owned insurance firm revealed their customers have a very high level of confidence in the firm and expect to have a long term relationship with them. The staff is well qualified. They made sure their customers covered all risks, and helped with risk management. They shopped markets for the best coverage at the lowest cost. In other words, they were completely customer focused, as well s very competent. Everything was great.
With one exception.
Many of their customers would like to buy health insurance and other employee benefits coverage from the agency. The agency, not knowing this, offered “personal lines” coverage for the executives of their customers, but nothing for the employees.
When we reported the level of interest their shown by their customers, our client decided to expand his health and benefits staff and enter the market. The result was spectacularly successful, adding some 30% to the agency’s revenue and profit.
Charles R. Schaul, Partner of SixPillars Research Group, focuses on increasing business profits by resolving the problem of customer attrition. Aligning companies with their customers; generating and implementing strategic initiatives; and promoting employees’ customer focus through commitment, responsibility and accountability combine to achieve the result.
A client alignment engagement for a large, high quality, locally owned insurance firm revealed their customers have a very high level of confidence in the firm and expect to have a long term relationship with them. The staff is well qualified. They made sure their customers covered all risks, and helped with risk management. They shopped markets for the best coverage at the lowest cost. In other words, they were completely customer focused, as well s very competent. Everything was great.
With one exception.
Many of their customers would like to buy health insurance and other employee benefits coverage from the agency. The agency, not knowing this, offered “personal lines” coverage for the executives of their customers, but nothing for the employees.
When we reported the level of interest their shown by their customers, our client decided to expand his health and benefits staff and enter the market. The result was spectacularly successful, adding some 30% to the agency’s revenue and profit.
Charles R. Schaul, Partner of SixPillars Research Group, focuses on increasing business profits by resolving the problem of customer attrition. Aligning companies with their customers; generating and implementing strategic initiatives; and promoting employees’ customer focus through commitment, responsibility and accountability combine to achieve the result.
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