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Q: 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 costumer loyalty dead? Carl Warren,
Ridgefield,
Connecticut
A:
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.
You’d
listen to your customers’ dreams and worries, visit them
to see how your product fit their needs and
trouble-shoot their problems. In more competitive
situations, you’d 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’re 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, as you have so painfully discovered, it is
increasingly becoming a buyer’s world.
But
we’re 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’s a nice
deal...until someone comes along with slightly better
pricing, quality or service. Then it’s ground zero again
as you try to win your customer back, almost as if
you’ve never met before.
With the
two-way-street approach to loyalty, you and your
customers don’t 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. More
innovative products.
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! We built dedicated
plants. We designed special packaging.”
To which
we’d 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
couldn’t 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’s 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.
Q: What
are the characteristics of a good company “university”?
Vladamir Glazunov,
Moscow
A:
Your question, of course, mainly applies to large
companies, as most other organizations do not have the
luxury of affording an in-house learning center.
And what
a luxury it is, too, as effective management development
programs can provide a real competitive advantage. They
tend to attract the best kind of people during hiring
and, for those already onboard, can turn high potentials
into high performers.
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’s motivating—and it can also
provide a heck of a lot of growth (not to mention fun)
for the managers temporarily donning professorial robes.
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 program is a
reward for superior performance. Only the best get
selected to go—and the company’s leaders and HR people
pick them.
Look,
in-house universities are pretty rare, and well-run ones
don’t come easy. But when done right, they can be a
potent force for change. Your question suggests you may
be lucky enough to seize that opportunity. |
