Chapter 5

 Who’s Your Valued Customer?

Look at the title of this chapter. Sounds like a goofy question, doesn’t it? Your company depends on all your customers for its very existence. You appreciate the confidence they place in your company with their business, so they’re all valued and important.

Hey, a customer is a customer. Right?

Here’s another odd question: Should you treat all of your customers the same?

You don’t need to have a poster proclaiming “We love customers,” over your work area to remind you that every customer deserves respect and helpful, courteous, and fair treatment. But should you treat all your customers equally—offering all of them the same exact treatment?

Exactly Alike Only Different

When you see or speak with your customers you are probably aware that they’re all different as people. (In Chapter 7, we show you how to identify and relate to distinct personality types.) What you may not be aware of is that each of your customers is also very different as a customer.

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 Word to the Wise
Your customer base is all the customers you serve. Within that wide collection you might have many different types of customers. Customers can be divided into segments, groups of customers that have certain characteristics in common.

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While they are all important, some are more valuable to your business than others.

Some customers may do a lot of business with your firm, demand little extra attention from you, and make your business lots of money. Other customers may spend relatively little with your company, demand a lot from you, and actually cost your business more to serve them than the value of their purchases.

Do you know which of your customers contribute most to your profits or which actually cost you money to take their money?

Every business should segment its customers into distinct groups in order to serve their specific needs more effectively.

Divide and Serve

Peel an orange. See all those orange wedgy-things? Notice how they’re not all the same shape or size? Some are juicier than others. Some are sweeter than others. Your customers are like that. Collectively, they’re your customer base, the orange.

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 At Your Service
Grouping your customers into meaningful segments requires good information about each customer (such as purchase history, buying patterns, payment history, and so on). To understand what your customers have in common—and the important differences between them—you must maintain a customer database.

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Within your total customer collection are different groupings of customers (which we’ll describe in a moment). These are the orange wedgy-things. Let’s call the customer groups segments (you can call the orange wedgy-things anything you want).

Why Segment?

Dividing your customers into groups gives you two basic advantages.

1. You can serve customers better
2. You can improve your financial performance

Sounds pretty good so far, eh?

The 80/20 Principle

You can serve both your customers and your business better by separating customers into classes because of an economic rule of thumb. The concept was devised by an Italian economist and sociologist named Vilfredo Pareto. One day over some pizza and Chianti, ole Villy came up with the principle you probably know as the 80/20 rule. It roughly suggests that 80 percent of the results come from 20 percent of the causes.

How does that relate to your customers? How about:

• 80 percent of your profits come from 20 percent of your customers
• 80 percent of your recurring trouble calls come from 20 percent of your customers
• 80 percent of the time you get recognized for only 20 percent of your great work (Wait. That’s in Chapter 20. Onward.)

Now, don’t get stuck on the percentages. Of course, every business is different. But Villy had the right idea. No matter what part of life you look at, it’s usually a small number of factors driving the majority of results.

As an example, Don worked with a large, profitable business where a detailed analysis showed that only about two percent of the customers drove nearly ninety percent (yup, 90 percent!) of the profits. As dramatic as that startling relationship is, it was not apparent until someone poked through the data lurking around the company and really got a handle on how different customer groups influenced the fate of the company.

Who’s driving your success? And your problems?

Secret Relationships

How do you put this 80/20 stuff to work for you? Analyze your customers to discover hidden relationships between certain customers and their impact on your business. (We’ll tell you how a bit later in this chapter in the section titled, “Segmenting Customers.”) The goal is to identify the customers who:

• Account for most of your sales
• Buy specific products or services
• Require the most, and the least, follow-up servicing

As you gather this information, certain patterns will begin to present themselves. You might find that:

• Your most time-consuming (and therefore most expensive) service contacts come from your smallest customers
• Your greatest volume of sales and profits come from a relatively small group of customers

Some More Equal Than Others

When you learn how certain customers affect your business differently than others, you can make better decisions about how you use your limited support resources.

Golds Over Here, Silvers Over There

You might divide your customers into groups that receive different levels of service. Some companies use a simple scheme to label the groups, such as one of the following:

• Platinum, Gold, Silver, and Bronze
• Ultra, Plus, Standard
• Premier, Preferred, and everybody else

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 At Your Service
When is a dollar not a dollar? Well a dollar is always a dollar, silly. But . . .some dollars are worth more to you than others, when they come to you from more profitable customers. Not every customer is profitable, and so some customers are worth much more to your business than others. Treat everyone well. And make sure your most valuable customers are very well cared for.

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You might decide to provide your most profitable, and therefore most valuable, customers with special services. Such as:

• Special toll-free number with no, or vastly reduced, wait times
• Special privileges, the way airlines give early boarding rights to their most frequent fliers
• Awards for different levels of business attained
• Assigned contact people who can be reached directly
• More choice in when they receive their bills
• Special advance information or sneak previews of new products

If your customers come to your facilities to do business, you can create special areas for your higher value customers. Here are some examples:

• Airlines have lounges for their most traveled customers
• Banks have special reception areas for their biggest accounts
• Some restaurants have a casual-serve area and a fancier sit-down dining room (and they may offer complimentary desert to their frequent patrons)

Simple Segmenting

Say you work for an office supply company. Your firm deals in volume with some medium-sized businesses and government agencies based in your area. Your firm also carries several nicer, higher-end products than those huge chain stores. You sell these products typically to professionals in the area—doctors, accountants, dentists, lawyers.

The volume of business that your customers do with your company can range from about $50 a year to tens of thousands of dollars.

Most customer service contact is by phone with customers who call your local number to check whether you have certain items in stock, the status of their order, or to discuss a bill. The government agencies pay painfully slowly (but they’re good for it), and require little in the way of anything other than routine service. Most of the other large order customers are “low maintenance.” They routinely buy their big shipments (of copy paper, pens by the gross, etc.), pay their bills, and don’t require much hand-holding.

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 Watch It!
Large accounts may require large amounts or small amounts of service, depending on their needs at any given time. However, all large accounts expect preferential service when they need it.

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The same isn’t true for some of the customers who make relatively small purchases of the upscale items (fancy pens, desk sets, and so on). Some of them complain about everything, question invoices, and have a much higher level of product returns. In short, they’re more trouble to deal with.

You don’t want to stop doing business with most of the people in the second group, because their money is green, and even with the extra care and feeding, they still are profitable. But, and this is important, you want to make sure that they don’t suck up all your service resources and prevent your large, quiet accounts from getting through to your support staff because they’re on the phone with a small dollar whiner.

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 At Your Service
When you segment your customers, you aren’t saying, “This group is good, and this group is bad.” Your goal still is to provide all your customers with great personalized service. By segmenting your customers and providing different service levels, you are simply trying to assure your more valuable customers of a relevant, tailored, and memorable experience.

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You might consider giving a special number to your high-dollar, low-maintenance customers so that they sail right in, past the others. The extra line is likely a small incremental expense. And given that these large, low-profile customers don’t call much anyway, you aren’t likely to disturb the operation by asking your staff to attend first to the calls on the priority line.

Special Teams

Consider assigning a team of experienced service specialists to give very personal attention to your most valued customers. Not only might they staff a special “hotline” for your top customers to call, they might also take a more active role in servicing your most critical accounts.

For example, they could:

• Review account status on a scheduled basis, looking for any signs of potential trouble—returns, abnormal call activity, drop in purchases, slower payments.

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   At Your Service
  Some companies also group service specialists by product type, with a group of specially trained people to field calls. Such specialization is especially appropriate when detailed technical knowledge is required to adequately support certain products.

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• Contact customers a few times a year (yes, actually calling the customer instead of waiting for the customer to call you). In that call, you could find out if service has been maintained at an acceptable level, if the customer has any concerns or questions, and if there are other ways that your company might be of service.

Segmenting Customers

Segmenting customers means that you intend to serve them differently. Sometimes those differences may be slight. For example, the service on your Spanish language line is identical to the service on your English and Korean lines.

Other times, the service difference may be more pronounced. For example, a preferred customer at a bank with substantial assets in the bank’s care receives counseling and other services that a minimum checking account customer may neither know about nor value.

Slicing & Dicing

There’s no one right way to segment customers. You might decide to slice your customer base in many different ways:

• Where they’re located
• The kind of products they buy
• Their total spending with your company

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   At Your Service
  As you analyze the information you have about your customers, you’re bound to find that you don’t have all you’d like. Keep notes on what you don’t have that you’d like to have. Use this list as an agenda for discussion with your other management colleagues. Rule to live by: You can never know too much about your customers.

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• Their income (consumers)
• Their age (consumers)
• Their preferred language
• How often they buy from your company
• Total amount of business they do with your company
• The type of business they’re in
• Any other way that makes sense to you

How do you get at the information you need to decide who qualifies for what level of service? Start plowing through data.

Start the Data Dump

Your firm probably already gathers a lot of the information you need to examine your customers with a fresh pair of eyes. Ideally, you have a central database where you can grab lots of different information and manipulate it to see relationships between factors like:

• The number of purchases in a year
• The number of calls to your service center

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 Watch It!
Two cautions for you. First, revenues from a particular customer don’t always tell the whole story. Large dollar customers may have such a great price discount or receive such added benefits that they aren’t as profitable as smaller customers who are paying more or receiving less. Work with your financial wizards to delve into segmenting by revenue. There’s often more than meets the eye in the financial realm.

 

Second, don’t assume that a customer doing a small volume of business with your company isn’t important. That small customer may be sampling your wares while considering a switch away from another major supplier to your company. On the other hand, today’s small volume customer may be about to become an industry giant.

 

A small customer today could be your best customer next year. Treat all customers with respect and gather as much information about every customer as you can.

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If you don’t have a tidy central database where all the information is just waiting for you—like most places in the world, you can still get what you need. It just takes some work. There are many places you can gather information from:

• Sales reports
• Service records
• Billing records

• Credit records

You might have to get many of your colleagues into the effort. And you might have to begin your analysis without all the information you need. But get started anyway.

What You’re Looking for

The goal in slicing and dicing information about your customers is to see relationships between This and That. For example:

• Do your largest dollar customers use your service resources in proportion to their purchase volume? What about customers who buy a certain product? Customers who buy from a certain sales person?
• Do you get more billing inquiry calls from one region of the country or another? Or one customer classification more than others?

Fire Some Customers!

Ever deal with a customer you’d just love to tell, “Take a hike, pal!”

Oooh. That many, huh?

Well maybe you should do that now and then. Not use those exact words, but fire some customers.

As we pointed out previously, not every customer has the same value. Some, upon close inspection, may cost you more to serve than their business is worth. And some may cost you more aggravation than they’re worth.

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 Tales from the Real World
We don’t know if the following story really happened or not. But when we heard it, we wanted to pass it along.

 

A very crowded flight was cancelled at the Denver airport. A single gate agent was trying her best to accommodate a long line of inconvenienced, disappointed customers. Suddenly, a passenger pushed his way to the head of the line. He loudly declared, “I have to be on this flight and it has to be in First Class.”

 

The harried but calm agent, replied, “I’m sorry sir. I’ll be happy to help you but I’ve got to help these other people first, and I’m sure we’ll be able to work something out.”

 

Mr. Obnoxious wasn’t satisfied. He asked in a loud, demanding voice for all to hear, “Do you have any idea who I am?!”

 

Without missing a beat, the gate agent smiled, got on the public address system and announced, “May I have your attention, please. We have a passenger here who doesn’t know who he is. If anyone can help him find his identity, please come to the gate service counter.”

 

The line of upset customers broke into a hearty laugh. Mr. Obnoxious wasn’t so amused. He tensely scowled at the clever gate agent and blurted out an even more impolite version of “Screw you.”

 

Unflapped, the gate agent replied, “I’m sorry, sir. You’ll have to stand in line for that, too.”

 

The delayed passengers broke into applause. Mr. Obnoxious slinked off.

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Thanks, Kick Me Again?

When Don was giving a presentation to business executives in Croatia, members of the audience wrote questions which were then translated. Two different questioners asked about dealing with “abusive” customers. In post-war Croatia, the number of people with any money to spend is a small minority. Apparently, some of the well-off are using their powerful position to antagonize business people who are desperately trying to get a piece of that wealth.

As you know, you don’t need to travel to a war-ravaged economy to find abusive customers. Or those who make unreasonable demands.

Most customers enjoy being served well. A few want you to lick their boots. Some treat you like a slave. Or worse.

Make clear to your employees that they absolutely do not have to take abuse from a customer, no matter how important the account. Hostile customers should be treated respectfully but firmly. Try the following possibilities:

• Suggest to the abusive customer that your company values their business but insists on civility.
• Request that they speak with you later regarding the matter that has them so upset. Often, someone who has really lost his cool comes back quite apologetic and feeling quite in debt for his embarrassing behavior.

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 Quote, Unquote
There is a difference between giving good service and being subservient. No customer has the right to abuse one of our employees.
—Roger Conner, Corporate Vice President, Marriott hotels

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Whatever you do, stick with the facts and do not join in the battle of emotions. In that battle, there is no winner.

“See Ya!”

Not everyone fits the profile of being an ideal customer for your products and services. Yet, no matter what you say or do, some customers still insist on doing business with you even though you cannot service them to their satisfaction. You may reach a time when enough is enough and you decide to segment a customer right into the “out” basket (or maybe the waste basket). How can you tactfully tell a customer good bye?

It’s a tough call. And it might be quite painful financially. But there is a time to sever ties. Even golden ones.

Here are some words you can use in person or by letter to wish your soon-to-be-former customer bon voyage:

• You deserve a level of performance we seem incapable of meeting to your satisfaction . . .
• Your needs appear to have outgrown our capacity to meet them . . .
• Obviously we’re not meeting your needs, rather than continue to disappoint you . . .
• We tried, but it seems we’re not measuring up . . .

Yeah, we know, these pretty much are still in the kiss-up department, but why burn a bridge? Maybe someday your least favorite customer will leave his company and that nice #2 person will move up and you can rekindle the relationship. Or that nice woman whose husband was such a jerk—she finally leaves him and decides to do business with you again.

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 Watch It!
A pattern of abuse by a customer indicates a problem deeper than what even the most attentive customer caregiver can address. There is a time when you should ask a customer, even a valuable one, to take his account somewhere else.

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If you think the customer has been a particular stinker, you might just send a terse letter saying something like, “We appreciate your business over the (years, months), but regrettably, we can no longer serve you. May we suggest you take your business to one of the following companies. . . .” Then you can stick one of your competitors with this pain in the anatomy.

Successful businesses realize they cannot be all things to all people. They pick the market they want to serve and they serve it well. If you’re receiving too many complaints from a certain market, it means you are not serving it well. It may also mean that it’s not the market you should be serving to begin with.

Part 2
Service Is Communication

Communication is what makes us human. It’s the sharing of ideas and feelings between minds and hearts. And the process that is absolutely central to providing great customer service. In this section, you’ll learn how to communicate more effectively to deliver The Service Difference.

Improve your communication with customers by better managing your own communication skills. We look at how you can read your customers’ behavioral style to speak to them in “their language” and handle complaints and problems effectively through better question-asking.

You’ll learn how to assist an angry customer without getting sucked into the emotional storm. Plus discover how to use written communication to win friends and influence people. And even create instruction manuals that truly help your customer and reduce customer service intervention.

Wow. There’s a lot of really good information here. We can’t wait for you to jump in and soak it up.