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Conventional Wisdom: Truly Wise or Dated Advice?

“You can’t manage what you can’t measure.” – “The customer is always right.”
–  “Lowest price wins!”

We’ve all heard the tried and true adages that govern our business environment.  These knowledge nuggets have been around for decades, and continue to be quite widely accepted as “truth.”  Yet, the business environment we experience today bears very little – if any – resemblance to that of the previous millennium when these insights were initially shared.

Believe me, I’m not yearning for the good old days.  The technological transformation we experienced in the last several decades is nothing short of incredible and brings so many new opportunities within reach that we would never have thought possible.  These new opportunities bring more change rendering the “status quo” an outdated concept.

CEOs and their leadership teams constantly shift, adjust and move on to the next great idea, next competitive threat, or next innovative approach.  Clients regularly tell us that the speed of change is breathtaking and that teams today work harder, faster AND smarter, yet barely seem to keep up with the changing environment and shifting client expectations.

So, change is our new norm.  Why, therefore, do we so often fall back onto “conventional wisdom” when examining our business and contemplating strategic initiatives for the year ahead?  What do I mean? Here are a few examples.

“If you can’t measure it, you can’t manage it”

As a trained economist and someone who believes vehemently in goals, action plans and tracking for accountability, this particular conventional piece of wisdom should be my favorite quote.  This is one of those classic business “truisms” that is indeed true for many aspects of operations, quality control, and financial processes.   Unfortunately, this concept has been extrapolated by some (many?) to mean “if you cannot measure it, it isn’t happening.”

We deal with C-level executives who understandably need to know the potential outcome of their investment in their people.  Sure we can, and should, measure business results and remain extremely focused on outcomes.  However, those tricky “soft skills” (and that even more elusive “attitude” element) will always and forever remain key to success and very, very hard to measure.  We know we have succeeded in our work when senior executives tell us that they can “feel” the change in the environment, and they can “sense” the enthusiasm of their team.  By definition, these are outcomes you cannot measure, but you surely do try to manage because these “soft skills” significantly affect measurable outcomes.

“Customer satisfaction is key.”

More truisms with great validity – up to a point.  But if interpreted literally, these can profoundly limit organizational growth.  For example, if the goal is to deliver exactly what the client expects on time and within budget, do you get a satisfied customer?  Yes.  A loyal repeat customer?  Not necessarily.  Ensuring teams go to the next level, lead with value and truly exceed expectations is how to develop truly loyal customers – those who keep coming back and continually refer you into a new client base.

In our view, loyalty is a huge differentiator that creates an engine of growth that protects a company from their competition and secures their spot on the leader board for years to come.

“Lowest price wins!”

Sales is full of “truisms.”  My least favorite is “Lowest price wins.”  There is no argument that having a lower price helps you close in most situations, but in today’s environment where time is one of the of the most precious commodities – who out there can afford to re-do a project if the “lowest bidder” fails to do the job right the first time.  Come on – we’ve all been there.  Have you ever hired the cheapest contractor to fix the basement, and then had to hire the higher priced contractor anyway?  If you truly believe “lowest price wins,” then how do you explain success phenomena like Starbucks, Apple, the Red Door Spa, or more locally – the Inn at Little Washington?  In our experience, customers want the highest value possible, and that is a combination of price and outcomes (both measurable and unmeasurable).

Isn’t it time to shift the conversation beyond “conventional” wisdom and think creatively about the current environment we face (challenges and opportunities) then develop some new absolute truths to guide our decision making for today’s ever changing environment?

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Customer Experience and Customer Loyalty – $B Dollar Insights from Oracle and Sprint

“Customer experience (CX), customer loyalty… honestly Lesley I cannot keep track of the buzz phrases.  Isn’t this just customer satisfaction presented with different language?”  This was a question posed to me recently from the CEO of a growing government contracting firm who was genuinely convinced that the management consulting practitioners had created yet another “paradigm” to capture the essence of what we already know.  Fair enough – there is no shortage of old ideas dressed up as new insights when it comes to business advice!

But sometimes the language really does matter.   Listening to senior leaders from Oracle and Sprint at a recent CXPA* conference in Atlanta further underscored that conviction.  Jeb Dasteel (Oracle’s Senior Vice President and  Chief Customer Officer) shared fascinating analysis that demonstrated exactly how a strategic focus on the quality of the customer relationships has led to a significantly higher customer spend – 8 times higher to be precise.  How did they do this?  “Relentless focus” on customer and employee engagement, truly understanding what drives your customer’s loyalty and engaging directly with your customers were just a few of his keys to success.  (Reach out if you would like to hear more about the “how” – it was a rich discussion.)

And if significant revenue increase is not sufficient justification for investing in strengthening customer experience and customer loyalty, listen to what Bob Johnson, the President of Sprint Retail, had to add.  By focusing on customer experience (and in Sprint’s case – intense focus on first call issue resolution as opposed to “hold while I transfer you to my colleague), 74 call centers have become 40, operating expenses have been reduced 50%, and Sprint has saved roughly $1B annually since 2009.   Using a motto of “serve, solve, satisfy”, Sprint is realizing enormous financial returns without even taking into account the reduced “churn” of customers and the positive impact that is having on their bottom line.

In our experience, the difference between satisfied and loyal customers can represent millions of dollars in revenue, reduced sales and marketing costs, and lower operational/customer service expenses.  Understanding why is the simple part – stronger customer relationships results in more repeat business, new sales into existing customer accounts and last but never least – referrals to new customers.  That is not a new insight for senior management and executive teams. Where it gets interesting is when you transfer that knowledge down into your organization and ask the teams who actually deal with the customers on a daily basis – “How do you provide value to our customers, and how can we strengthen those customer relationships?”  Sprint and Oracle are deservedly proud of their CX turnaround – what are you doing to shift from good to great, and create loyal lifelong customers?  We’d love to hear.

*CXPA – Customer Experience Professionals Association (yes – there is even an association now…)

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One Good Question is Worth a Thousand Half Baked Answers

mp900387691It was roughly two years ago when a highly intelligent, and successful prospective CEO client of ours slammed his papers on the boardroom table and pronounced “I cannot lose one more client to the competition”.  Imagine our surprise, given the only question we had asked at this early point in a preliminary meeting was very simply this: “What has been critical to your success and growth over the last few years?”  Naturally, questions raced through our heads: Were we having two entirely separate conversations?  Had we lost him to an unrelated train of thought?  It can be a challenging moment for a consultant, when it appears your prospect has left the station, so to speak, without you.

That concern proved entirely unfounded. This well timed question prompted some serious thinking and a response that went straight to the core of the main challenge facing this CEO.  How do we strengthen the value we bring to our clients and retain ALL those customers we fought so hard to land in the first place? Our query about success drivers had led the CEO to quickly make the connection between his core values surrounding customer service, his company’s track record in the early years in meeting client needs and delivering beyond expectations, and the company’s more recent experience with service delivery challenges and client loss.

We have had the good fortune of working with this CEO and his team from that day to this, implementing a customer focused, management driven, employee supported strategy with one end goal in mind: customer loyalty.  We have worked with every member of the company (from the front desk, to the management team to the warehouse fork lift operators) and it has been a real joy to watch that culture of “service beyond expectations” lead to rapid revenue and profitability growth.

This change does not happen overnight however.  In working with their operational managers who deal with the clients every day, we worked extensively on asking questions with one major obstacle to overcome. Questions are harder to deliver than answers. Why? First, because many believe that when we ask questions, we somehow undermine our own “expert” status and we may (even worse) look stupid.  Solving that resistance to questions can be worth millions (literally). Ask yourself this question – how many questions do I ask in a conversation with my prospective (and current) clients?  Then ask yourself, when I am preparing for a meeting, how much time do I devote to preparing what I am going to say as opposed to questions I might ask? You’ve heard this before – God gave us two ears and one mouth, and they should be used in that proportion. Implementing this pearl of wisdom and strengthening your questions will have a lasting and highly profitable impact on your business!

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Satisfaction Guaranteed – So What?

Did you know it’s time to throw out the old notion that having satisfied customers is the path to a successful business?

Think about it. If you’re merely satisfying your customers than you’re earning about a “C” grade.  You provided a product or service, and got paid for it. It was a tit-for-tat exchange and that’s the end of it. There’s no certainty of return business. Customers are just as likely to use someone else the next time if all you have done is fulfill their request and deliver what they think they paid for.

Think about the restaurants you return to again and again, or your regular drug store or dry cleaner. Sure, price and location have something to do with where you spend your money. But chances are you frequent these businesses because they go out of their way to create an emotionally positive experience for you. I stick with my pharmacist because he takes the time to talk to me about all of my medications and any possible side effects when my prescriptions are being filled. And why did I choose my grocery store from a handful of options that are just as close and carry the same items? It’s the little things like the cashier who hands me an extra store coupon from behind the counter and the stocker who addresses me by name then shows me where he just stocked the unblemished apples.

These interactions have something in common: they create a positive and personal experience between me, the customer, and the store representative – Joe (the cashier) or Sally (the stocker).Personal attention with a giving attitude creates a relationship resultinng in my loyalty to the individual and, ultimately, the store.

Loyal customers come back … again and again. In today’s tough economy that’s critical.  By definition the loyal customer comes back to use your business repeatedly, which in turn produces a much longer and stronger income stream.  In fact, businesses that emphasize customer loyalty tend to grow about twice as quickly as those that do not.

Here’s another benefit. The loyal customer feels vested enough in your business to tell others about their positive experiences. That’s not only free advertising, but also the most effective advertising there is! Recommendations from friends or colleagues are far more effective that any advertising campaign – and it works to drive business. Think about how you came to select your favorite doctor or dentist and you’ll know exactly what I mean. More than likely it was a recommendation from a friend, rather than a splashy ad, that guided your selection.

If customer loyalty is the goal rather than customer satisfaction, you might ask, “How do get there?” It can’t be an afterthought; it has to be part of your organization’s culture.

That means everyone in the organization needs to be on the same page — valuing customer loyalty and aiming for that with every personal interaction.

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Satisfied – or Loyal – Customers?

Is there really a question?

According to author, Jeffrey Gitomer -”Customer Satisfaction is Worthless, Customer Loyalty is Priceless”

Apparently companies like Costco understand the difference. They have been recognized as the leader in customer loyalty among warehouse retailers, rocketing from start-up to Fortune 50 status in less than 20 years, while spending next to nothing on advertising and marketing because of word of mouth referrals. They know that companies with the highest customer loyalty typically grow at more than twice the rate of their competition. And, by raising customer retention rates by 5% it is possible to increase the value of an average customer by 25% to 100% (The Loyalty Effect, F. Reichheld). Rather than spending time trying to remember if you’ve ever seen a Costco advertisement, let’s talk about behavior and why emotions matter in the customer experience.

Regardless of how high a company’s satisfaction levels may appear, satisfying customers without creating an emotional connection with them has no real value. This should be a red flag issue, especially when you consider that it’s reported that 90 to 96% of customers won’t complain. They simply walk away. Emotions Matter…because customers and staff are always emotional, and in service industries where the interaction with customers is often personal and stressful and the emotions are more intense. A healthy way to view emotions is not as a problem But as the basis for forming relationships – This is how to develop loyalty!

Start with a discussion about the vision of the company. If it’s written, you can usually find a statement about customers under glass on a conference room wall. It often goes something like this – “We believe Customer Satisfaction is our #1 Priority.” But when you ask people inside the organization what that statement really means and how it is measured, the silence is often deafening. If the people in the organization don’t have a clear definition of what you mean by customer satisfaction, then how do they convey it to your customers?

I have come to the realization that “Customer Loyalty is all that matters,” especially when you define loyal customers as people who will do business with you again, tell others about you without hesitation, and refer people they care about to do business with you. Hugh McColl, founder of North Carolina National Bank, ultimately became Bank of America had a simple philosophy: “I take care of my people, my people take care of my customers, my customers take care of my shareholders.” He never said, “I want to be the number one bank on the planet.” Loyalty is earned. It stems from actions that are taken and the words that are spoken by employees. It’s not just business as usual!

By Norm Gauthier. Reprinted and adapted with permission for Sorrell Associates.