Customer Service is more important than Price.
Recently a Acenture Report into customer experience was released. One of the interesting things that this survey of over 120,000 people showed was that 69% of people left at least one supplier because of poor customer service in the preceding 12 months. This was up from 59% when the survey was conducted last in 2007. Also another aspect of their survey was the fact that more people changed suppliers because of customer service than because of price.
I’ve always believed that customer experience is what really matters in a relationship with the customer, rather than price and this survey reiterates this point. But this survey is during the midst the toughest recession that the Western world has seen since the great depression. United Kingdom and the United States where this survey is principally based have had an extremely tough economic climate.
Despite this the survey results still show that customer experience and customer service is still far more important than price.
This highlights the fatal assumption often held is that price is what drives the sale. If a customer has nothing else to compare to between two particular suppliers then price will drive the product sale. It is the little things that surround the product or service that make the customer experience difference.
Businesses focus on price and ignore the evidence from this and previous surveys. Therefore they enter in price orientated competition.
Be careful of the assumptions you are making in what attracts people to your service or product, and realise that every survey, even those done in the midst of some of the hardest economic times we’ve had, continue to highlight the fact that customer service is more important than price.
Focus on the essential – Leica
It is imperative that businesses determine exactly who they want to serve, exactly what products or service they want to deliver. They must not try to be all things to all people. Previously on this post I gave the example of a niche product being the Savile Row Tailors. In this post I pass on some lessons from a company who has got it right. ( I have no inside information just a keen interest).
The company is Leica Camera AG.
Leica make beautiful cameras and if anyone wants to be generous I would love the new M9.
Lieca cameras are very expensive but they create an experience for enthusiast, artistic or professional photographers. They are made in Soims Germany and also a second location in Portugal.
They have focused on building the best lenses, the essential camera that serves a market. They employ about 100 people and last year turned over 156 million Euro. They are not an insignificant business that is focused on serving a particular customer with a specfic product. They are not trying to take on Canon & Nikon etc but rather they are creating a different product and charging a premium price. There are forums, user groups both online and offline the world over. These people get together to talk about the products and what they have been able to create with the product. This just reinforces the word of mouth marketing of the brand which adds to the premium price that can be charged for the products.
On Leica’s website they say the brand speaks for visual enjoyment and lasting value. Also state that their values are building the best lenses and focusing on the essential. It is this point of “focus on the essential” which I wish to cover a little more.
To quote from their website
“In today’s market, many products attempt to attract buyers with countless features and unusual forms. Almost anything is possible. But it is often the things that appear simple which prove to be the most difficult to attain. For Leica, the focus is first and foremost on the needs of the user. Innovations are never ends in themselves but are always the result of countless discussions with and feedback from users. Leica products are designed from the ground up as tools for creating completely unique visual experiences – nothing more and nothing less. For this reason since the very first Leica, the focus during mechanical and optical development of mechanics and lenses has been on providing truly relevant functions. It is this focus on the essential that lies at the heart of the fascination inspired by the Leica brand. “
If only this was the focus of all businesses. Leica not only say this but deliver. They have the focus of their customers. Their customers are not all photographers. They are not trying to be everything to everybody. Focus on the needs of the customers you want to deal with. How can you focus on the essential in your business, with your product or service.
Not all customers are equal.
Do you treat all customers equally? But not all customers are equal.
Even in businesses that have offered different service offering eg Platinum, Gold, Silver etc I still some blurring of the lines. In businesses where they don’t have these distinctions all customers get very similar treatment.
Why is this so? Why does it matter?
Treating all customers equally means that
- clients that are marginally profit are getting the same service as customers who are very profitable.
- we are not tailoring our service offering to the customers needs.
- we have not taken the time to understand the customers in detail
- there are not KPI’s in place to ensure that this behaviour would be detected.
- there are not adequate systems and procedures in place
We hear the blanket statement from business that we provide great, awesome, fantastic (some other adjective) customer service to all our customers. But unless they have taken the time to carefully select the customers they deal with and also have taken the time to understand in detail their customers then this statement would be of little use. Now I am not saying you give poor service to the marginal customers. I am saying that if you decide to keep them as clients then they need to be educated on what to expect and it can not be the same level of service as the very profitable, high referring advocates.
Remember not all customers are equal.
Pricing is a marketing strategy.
Too often in business, particularly service businesses, pricing is not seen as an important business tool to develop the business. Pricing is often seen as something that is set by the market. From accountants, engineers, financial planners to physiotherapists often the answer to the question of how you set your prices is usually one of two answers. The first option is have a look around at what everybody is charging. The second option is, work out my costs and add a margin that I want to achieve as profit. These two approaches are not a determined appropriate pricing strategy to ensure that the price being charged for the service is in any way reflective of the value being delivered. Unfortunately too many businesses do not look at price as an important element of their marketing strategy
So what do customers buy? We are all familiar with the old, they don’t buy the drill bit they buy the hole, they don’t buy the sausage they buy the sizzle. Theodore Levitt of Harvard Business School put it best when he said that customers buy expectations. They expect a certain result, a certain outcome, a certain problem be solved, pleasure to obtain or pain avoided and that is what they are buying. They are not buying time, they are not buying effort, they are not buying the cost structure of the business – they are buying an expectation, an expectation of a result. Being mindful of this fact, why on earth would any business therefore price its services on a time basis or some other anachronistic tool that is not focused on the value being delivered to the customer?
We need to ensure that as a business that we are meeting our customers expectations because that is what they are buying, that is what they are going to pay for.
In the United States it has become known amongst management literature an effect called the “Starbucks effect”. Approximately 12 to 13 years ago, 3% of coffee sold in the United States was premium. Today, more than 40% of coffee sold in the United States is premium. This is primarily due to the development of Starbucks. They selected a customer base, delivered an experience that that customer base wanted.
Who would have ever thought that we would be paying the money that we are for bottled water. Something that we can get for free, it is not scarce in reality There is a plentiful supply of drinking water in the western world yet we are buying bottled water. To make this even more of interest is to have a look at the company Evian who sell premium bottled water. They make an experience out of bottled water. Maybe it is not coincidental that Evian is naïve spelt backwards.
Evian, Starbucks – they have loyal delighted customers. This wasn’t done by charging a fair price or catering to discount shoppers. It was done by delivering an experience to a particular customer base that wants that experience and charging appropriate for it.
Pricing can assist in the development of a business in so many ways as it transmits so much information. Take a minute and look at the lead pencil that you may have on your desk. Think of all the businesses that have been involved in putting that pencil together from the tree – the logger, all the way through to the end salesman from which you purchased that pencil from. Every which point, a price was charged. A price that was transmitted value to the next stage. Even in the humble pencil, the price mechanism is at work.
So the question is – how is the price mechanism at work in your business and is it being looked at properly.
The first point in determining what is the price is to look at the value side. Customers are only going to deal with your business if they see some value from doing so.
Build-A-Bear Workshop
We as a family had a holiday in Canada & USA. During this time my wife and daughters (aged 8 & 12) had to visit Build-A-Bear Workshop in Banff & Edmondton Canada. This business has been hugely successful throughout North America.
Essentially it is a store where you pay money to create your own teddy bear. So you pay money to get the materials and there is a step by step process to create the bear and then of course there is a myriad of options to dress the bear. There is a range of accessories as well. Off course there is the range of birthday parties and other events.
So why am I telling you this? This is a business that has taken something traditional like the teddy bear and turned it into an experience. The customers are paying money to customise their own bear. The whole process is staged but the customers love the experience. Now about the customers. It is not just the children but also the parents who love the experience as well.
Sure there is still a market for a normal teddy bear but there is a large market for those who want to create something that they perceive is unique and enjoy the experience.
How can you make your service an enjoyable experience for your customers.
Giving Customers what they want
Last week we went along with 50,000 other Brisbane people to Andre Rieu’s concerts. His business is amazing. He has had phenomal CD & DVD sales worldwide with light classical music. This is a genre of music that usually has limited appeal but Andre has transformed this by putting fun into it. He is a great musican but also a great entertainer and businessman. He has the complete package. He took an existing product being classical music and transformed it and marketed it in a fresh manner. So in the middle of Suncorp Stadium we had a castle with an ice rink. The castle was an incredible example of attention to detail. The show was an exceptional example of interacting with your customer base and giving them what they want. Now importantly remember the tickets cost in excess of $200 per person and the place was full and all we are hearing is recessions or business failures. Andre’s business was not an overnight success. He had to work at it. But he gave the customers what they wanted. And they gave him the worldwide success.
Give your customers what they want? Ask what they want and then give them a great experience.
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