Listen and Learn

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Feedback from your customers is essential in developing profitable business relationships. Listening carefully is vital if you want to attract new customers and retain existing ones, says SARAH COOK.

The increasing power of the customer and the fierceness of competition means that many organisations are seeing their traditional marketplaces and profit margins eroded. The challenge for business today is to move from product-orientation to customer-focus. The process of setting up a customer-service infrastructure using call centres and web-enabled technology is a good start to becoming customer-orientated. Currently, 75 per cent of technology investment is funnelled into basic call-centre applications. However, organisations with the best practices are going much further by introducing the concept of Customer Relationship Management.

In a recent survey by KPMG Consulting, 89 per cent of companies said that they considered customer information to be extremely important to the success of their business. Yet, only 16 per cent of respondents believed they were fully exploiting the customer information provided and 12 per cent were unable to say how many customers they have. The principle of CRM is that the more information a company has about its customers, the better. According to Professor Adrian Payne of Cranfield University, CRM is "the strategic process of identifying desirable customer segments, micro segments or individual customers on a one-to-one basis and developing integrated programmes that maximise both value to the customer and the lifetime values of customers to the organisation through targeted acquisition, profit enhancing activities and retention."

Barriers to listening

The editor of Business Week summed up many companies' attitudes to the customer when he wrote: "Probably the most important management function that is being ignored today is staying close to the customer to satisfy his needs and anticipate his wants. In too many companies, the customer has become a nuisance whose unpredictable behaviour damages carefully made strategic plans, whose activities mess up computer operations, and who stubbornly insist that purchased goods should work."

Often, organisations believe that they have an understanding of their customers' requirements. This may, however, be based on a subjective, rather than an objective, viewpoint. The barriers which prevent organisations getting close to their customers include:

  • The evidence of anecdotal events, which occur on a one-off basis and can cloud a manager's opinion.
  • The views of complainants which are often not counterbalanced by non-complainants. A high percentage of customers do not complain - only one in 26 people is the figure often quoted, based on research undertaken in America.
  • The opinion of a strongly articulate group of customers which may cloud an organisation's view of customers requirements.
  • Preconceptions within the organisation - the "we have always done it this way and this is what the customer wants" syndrome.

These are all factors which prevent companies from gaining a true understanding of how well their products and services match customers' requirements.

It has been proven that by actively listening to customers, companies can save, rather than expend money. The 1-10-100 rule illustrates this point. This says:

"For every pound your company might spend on preventing a quality problem, it will spend £10 to inspect and correct the mistake after it occurs. In the worse case, the quality failure goes unanswered or unnoticed until after your customer has taken delivery. To fix the problem at this stage, you probably pay about 100 times what you could have paid to prevent it from happening at all."

A useful means of evaluating the cost of errors which go unheeded, is to compile a cost diary and to estimate both the professional and personal costs of each error that occurs and the savings which could have been made, based on prevention.

Organisations with the best practices actively encourage complaints. As business guru, Theodore Levitt, explains: "One of the surest signs of a bad or declining relationship with the customer is the absence of complaints. Nobody is ever that satisfied, especially over an extended period of time. The customer is either not being candid or not being contacted."

The first step

Successful service quality programmes, therefore, begin by listening to customers. To gauge the quality of service an organisation provides, it is important to gain the views of customers before a service initiative begins. Likewise, it is critical that customer satisfaction measures are based upon a customer's perception of what is important, rather than those of the organisation. Conducting surveys of customers before a service improvements programme begins provides a benchmark against which to monitor the progress of a service campaign.

Organisations such as Jaguar Cars have successfully applied this approach. At the beginning of the quality initiative instigated at Jaguar, Sir John Egan commissioned telephone research to gain customer's opinions on the quality of the product and service provided. Recordings of these conversations were played to senior management to demonstrate the areas of customer concern.

Often there is a difference between the "perceived" and the "received" levels of service. That is the quality of the service received by the customer and the perceptions of the quality of service given by the service provider. Research conducted amongst customers of Jaguar Cars illustrated that the company needed to take urgent steps to bridge this gap.

Listening to customers is a vital element of customer care. The more direct feedback an organisation receives from its customers, the better it can develop its relationship with them. Research should be used to establish customer needs, both externally and internally, and to act as a benchmark against which to measure the effectiveness of progress in creating a customer focus. In addition, monitoring satisfaction levels on an ongoing basis is an important method of sustaining a customer focus.

A definition of good service is meeting customers' expectations. Excellent service is exceeding customer expectations. To provide world-class service, organisations need to improve their total relationship with the customer, improving the process through which service is delivered to the customer. The need for organisations to embrace change has been shown in the rise of call centres, e-business and the Internet. Customer Relationship Management allows organisations to offer a personalised one-to-one service by using information to improve knowledge, thereby targeting more effectively and providing the customer with a better service. However, business would be wrong to place all their faith in technology as a means to achieving customer orientation.

Managers play a key role in providing support and encouragement to their staff to achieve customer focus. Unless customer initiatives originate from the top of an organisation, they have no long-term effect.

Sarah Cookis Managing Director of customer experience specialists The Stairway Consultancy. This article has been taken from her book Customer Care - How to Create Effective Customer Focus, published by Kogan Page and available in good book stores at £19.95.

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