Tapping true value of the customers

True value of the customer lies not in volumes of purchase that he has made or intends to make. The real value lies in what they feel of you, your products and services. Do they feel it compelling to talk of your company to other customers in such a way that they are influenced to use your products and services? This word of mouth publicity is the real value a company must target by building a loyal customer base. This is obviously applicable for branded products and services and in general to even businesses competing in commodity markets as well.

True reflection of customer satisfaction

The customers’ act of giving positive referrals is the ultimate level of exhibiting their loyalty and a true reflection of customer satisfaction. Any business doing satisfactorily well in a competitive environment might be getting occasional references by its existing customer base. The real gap that exists is that there is no process or system in place to monitor this kind of customer behaviour in a company - not even for a very competitive business, operating at high levels of customer orientation. At the most, questions pertaining to their intention or willingness to refer the company’s products and services to other users are made part of customer satisfaction surveys. Against this there are companies that score as high as 99%, but in reality we know that even such heights of willingness from customers does not get converted into even a reasonable levels of referrals and much less gets converted into actual business.

Target potential customers & provide personalized service

How do you target those customers who are more likely to make positive referrals that are converted into profitable business for you?

The key is personalized customer service. Understand your customers at individual levels and provide a customized service to suit their requirements. This is going beyond identifying profitable customer segments and saturating the segments. Here you must identify individual customers based on the clout that he has on the industry segment that he operates in and competition that exists in such industry segments.

Targeting customers that are considered quality sensitive and living up to their expectations is one way of ensuring that industry takes note of you. Also an appreciation or recommendation from such customers has higher probability of influencing potentially profitable customers in the future.

Also if you are targeting a customer segment where there is an imperfect competition, and you have customers whose expectations are consistently met, there is a chance that such customers may pass on this information to other in their industry as they do not vie for the same pie.

This would definitely give an edge over competitors who do not have such a focused approach of targeting individual customers with this kind of preciseness and will be a great asset during the low demand periods.

More than customer segmentation

With traditional segmentation and initiatives to deliver value to those segments of customers what we achieve is loyal customer base which prefers company’s product over the competitors’ offering. Though their loyalty drives today’s profitability, the question companies need to put across is: Are the most loyal customers today the most valuable too. The term true value of customer lies not only in being committed to a company but also introducing potentially profitable customers through word of mouth publicity.

Framework for increasing positive referrals

A system must be in place to encourage such kind of positive referrals. All the discussion – above and the one ensuing is based on the premise that company is competitive with respect to its products and services and can definitely hope for positive referrals based on quality / key characteristics of products and services it offers. The key lies in making customers your raving fans. Customers experiences of you are built around the repeated pattern in the way you deal with them. Patterns influencing their perceptions start from how well you manage customer expectations and how truthful your front line executive is with the customers, how credible information a customer is given, how often you fulfill your commitment on quality, volumes and timeliness and so on and so far. A practical framework of increasing likelihood of positive referrals by customers is shown below.

Manage customer expectations to realistic levels of fulfillment

It takes a cultural shift in the mindset of the people in the company – more so, for those who are responsible for customer facing processes. It all starts with setting customer expectations to realistic levels of delivery. You cannot build a loyal and value added relationships on the basis of “over promise and realistic deliveries”. Give customer the information that is important for him, even if that means that a bad news such as delayed shipment. Be honest and transparent, so that he gets a chance to make up for your faults. Later on you can make up for your inability to meet your commitment by explaining the reasons and corrective mechanisms put in place, in fact you can use customer experience with your competitors in improving your systems. This kind of engagement will make them feel important for you.

Be consistent in living up to the customer expectations

Your intentions of customizing your products and services at individual level will be counted as your strength only if you are consistent in delivering upon your commitments to these all important customers. Any thing short of consistency in the eyes of these high potential customers will be viewed as an inherent weakness in the company in implementation. Ability to consistently live up to your commitments will go a long way in building a reputation for you and in turn making your potentially high value customers your raving fans.

Look for opportunities for proactive engagement with customers

To take the relationship to the highest levels of trust, you must proactively engage your customers in unleashing their ideas of improving value proposition in your products and services – a complete outside-in approach where customers feel involved in your product development process and genuinely interested in long term success of the business.

As you work collaboratively with your customers to solve your business and product problems, you will not only improve your chances of increasing the true value of that customer but also develop the kind of trust where you also get information of the positive referrals made by them.

This is how you can improve the likely hood of your customers recommending your products and services to others, who would over a period of time, become one of the most profitable customers themselves.