A valuable lesson we should all learn is: Before you criticize someone, first walk a mile in their shoes.Then they’ll be a mile away. And they won’t have any shoes.
Let’s look at a case study of how this applies to your business.
Our study starts with the owner of a mid-sized manufacturing company which had fallen on tough times. After a little analysis, it became clear that the main reason was a very low level of ‘repeat business’ from his customers.
When I mentioned that this lack of customer loyalty was the primary cause of his declining profitability, he said “Just goes to show you should never underestimate the power of stupid people in large numbers’.
Hmmm. There was certainly evidence of stupidity. But it wasn’t by the customers.
Fact is, the owner of that business was on a course to ruin, because he was ignoring two fundamental truths about customer loyalty. If you don’t want to find yourself in the same position, you MUST understand these truths.
Fundamental Truth #1 is: “The customer is the most logical beast on earth.”
In other words, no customer ever knowingly ‘duds’ themselves. Confronted with two options, the customer will ALWAYS take the option which they perceive offers the greatest value.
That being the case, we can count on the fact that our customers will NEVER leave us if they perceive that we’re offering the best ‘value’.
Conversely, we can be equally sure that when a customer leaves … it’s because they believed they were going to get a better deal somewhere else.
That might be a bitter pill to swallow … but there’s a positive side to the message. You see, if we accept that the customer is departing for logical reasons, rather than irrational reasons, then we can find out what that reason was – and we can do something to counter it.
On the other hand, if we allow ourselves to pretend that the customer left for illogical reasons, then there’s very little we can do to address the problem.
Fundamental Truth #2 is: “The customer WANTS to be loyal.”
Here’s the proof…
When we’re shopping for an item we look high and low to find the product which best suits our needs. But once we’ve found the item we’re looking for, we want to own it with a minimum of fuss. We want to buy it immediately. We don’t want to shop around for the best deal.
So … if the customer is confident that they’re going to get the ‘best deal’ from us, they’ll willingly transact the business on the spot.
Harking back to ‘Truth #1′, they’ll only ‘shop around’ if we’ve failed to convince them that they’ll get the best deal from us.
Does that means we have to convince the customer that we’re offering the lowest price? No.
In fact, ‘price’ is one of the LEAST important reasons why a customer will choose to take their business elsewhere.
According to Betsy Sanders, author of ‘Fabled Service’, there are 6 broad reasons why customers ‘defect’ from a business, as shown below.
• less than 1% die
• approximately 3% move to another location
• approximately 5% transfer allegiance to support a friend or family member
• approximately 9% switch to a cheaper competitor
• approximately 14% leave in protest at unsatisfactory product quality; and,
• a massive 68% leave because of ‘Perceived Indifference’
Take a close look at those numbers. The ‘price’ issue is a significant
factor in only 9% of cases.
By comparison, the ‘product quality’ and ‘perceived indifference’ issues account for a staggering 82% of defections.
And guess what? Both of those factors are within our control.
We might not be able to do much about customers dying, or moving, or being related to a competitor. But we CAN adjust our product to better satisfy our customers’ requirements. And we can certainly do something to make sure that they don’t feel we’re ‘indifferent’ about them.
The good news is, when we do those things – we effectively eliminate the two main reasons why our customers choose to leave.
Virtual Business Advisor
How to book a meeting with a business advisor, mentor or coach?
Find out about Government Grants for Queensland business?
Would you like to become an Accredited Advisor?
Need information on how to prepare a business plan?
Do you want a step by step guide to growing your business?
Become a sponsor or partner of BAN and connect with small business decision makers?
I wish to make a donation to help small business.