The answer is simple: Long Term-Profitability. Years of research prove that when leaders are customer-focused they help to differentiate their organization from their competitors and the result is greater customer loyalty and revenue.
Customer Focus is a Leadership issue. Truly customer-focused organizations are run and managed on a day-to-day basis by Customer-Focused Leaders.
• Customer contact and support employees are rarely the biggest obstacles to service improvement.
•It’s up to leaders at all levels of management to create the conditions where service excellence flourishes throughout the entire organization.
The research over the past 20 years clearly shows that a customer-focused strategy will at the very least:
1. Build long-term revenue
This is loyalty-based revenue. It comes from winning customer trust and forging long-term relationships. Loyal customers cost less to serve (5 to 8 times less), tend to buy more and are more open to new products and services because they know and trust you. According to the Global Service Barometer, customers who feel they are valued and consistently served well will remain loyal for at least 10 years, provided of course that the products and services are maintained at the same level of quality and that price is considered to be fair.
2. Keep customers when times are tough
Whenever there is a bump in the economy, and you know there will be one soon, customers who do not feel valued are less likely to remain loyal to a brand or a provider. They will shop around because there is a good chance that there is a drop in their disposable income and they will look for the best price. The exception is loyal customers who are actually willing to pay more for a product or service if they know that the provider will consistently deliver exceptional service. The service experience has a financial value.
Create a Customer Focused Culture
Loyal customers become advocates for a business. They brag about you. They create low cost referral traffic. Referrals are pre-sold on dealing with you. All you need to do is make sure you don’t mess up. Since the acquisition cost of new business is usually 5 to 8 times that of keeping your existing customers, loyalty-based referrals can have a significant impact on your marketing budgets. Add to this that exceptional customer service acts like a customer magnet. People want to deal with organizations which have a reputation for service excellence.
4. Differentiate your organization from your competition
Customers like dealing with winners. They like dealing with organizations that stand out. In today’s global market they only way you can truly differentiate your business in through the service experience you provide. If you want to see our rationale for this, check out our article entitled Why Customer Focus Differentiates.
5. Bring out the best in employees
Customer-Focused Leaders are successful at engaging their employees in a way which enables the organization to maximize the quality of the customer experience. Systems, processes and procedures are customer aligned and it is fully engaged employees who make this alignment happen. This results in operational efficiencies, improved morale, reduced absenteeism, lower demand on certain benefits, lower turnover etc. All of these represent significant cost savings.
6. Maximize operational performance
When you have fully engaged employees working together to align your systems, processes, and procedures to make it easier for the customer to do business with you, research shows that your operational performance will be maximized. It stands to reason that this should result in reduced operating and/or production costs. It should also enhance the loyalty effect of a customer-friendly organization.
7. Reduce operating expenses by eliminating the cost of poor service
The cost of poor service in the service industry ranges from 30 to 35 % of operating expenses depending on your business. Time spent resolving customer problems, rework, replacement of products and/or services adds up. Any reduction in the cost of poor service can have a significant impact on your bottom line.
Put another way:
• Your customers buy more and spend more
• You make more per customer and spend less
Customer-contact and support employees are rarely the biggest obstacle to service improvement.
When customer-contact employees are empowered to provide better service, they are given more authority and discretion to act. They are encouraged to use their creativity and initiative and then they are rewarded for doing so. Making this happen is the fundamental role of the customer-focused leader.
The reality is that you can talk about how important service is from the highest levels of your Organization, you can begin to change processes and procedures Organization-wide which reinforce customer-focus, and your staff can work diligently at trying to provide service excellence. But, at the end of the day, the only way to ensure sustainable service excellence is for those in management positions, throughout your Organization, to do things which create an environment where service flourishes.
Everyone who manages and leads others must consistently execute the fundamentals of Customer-Focused Leadership.