Avoid These Myths to Survive the Recovery

Consumers’ wallets and businesses’ checkbooks continue to be tight. In fact, the price index for personal-consumption expenditures, excluding food and energy, had bottomed out in late 2009, but it is now showing signs of being unstable again.

While sales and profits continue to struggle, employment will remain stagnant and the economy will be slow to recover. It’s a vicious cycle. Every company feels the trickle down effect. Customers have reset their expectations. And, companies attempt to cut prices to retain customers, grow shares and increase top-line revenue.

But is this really a viable business strategy? Focusing on short-term revenue hinders substantially improving the quality of your business for the future. Though not sustainable, many companies still operate on this short-term view.

There are common myths that keep companies “sprinting” to the finish line. If you want to survive the recovery, avoid these failed strategies to stay ahead in the marathon:

• Myth 1: Customers demand lower prices during a recession. When customers stop buying, the first reaction is to drop prices to jumpstart spending. When price is the carrot, buying behavior changes and customers wait for even deeper cuts.
• Myth 2: We’re good at what we do. Customers are privileged to do business with us. Sorry to disappoint you but it’s not about you! Companies with this attitude find that customers don’t stick around long.
• Myth 3: Customer retention initiatives are a cost that won’t pay back. Companies that treat customer retention as a cost will allocate only a few resources to protect their greatest asset. Their efforts fail to improve retention or increase sales and, therefore, support dwindles.
• Myth 4: Customer retention is the responsibility of the customer service representatives.

Service recovery is not a customer retention program. Only one out of every 19 unhappy customers complains—that’s just 5%. And of the 95% of unhappy customers who don’t even complain, more than two-thirds decide to buy elsewhere. Recovery as a retention strategy just doesn’t work!

Do any of these myths plague your agency? Does the number of customer defections surprise you? What are these defections worth in revenue? Margin? Are you spending more on new customer acquisition? How much more does it cost to win a new customer vs. retaining current ones?

Studies show that when customers believe they get more value for their money, they are much more loyal and spend more with those brands. Companies that take a long-term view of investing in value-based customer relationships are rewarded with double-digit growth and profitability that compounds over time.

Does this mean higher costs? More often, investing in value-based customer relationships means reducing your costs or being able to charge more for highly-valued products and services. Value is about how you make your customers successful. Don’t forget that customers expect you to deliver value, at a minimum, to meet their fundamental expectations if the relationship is to continue.

Keep in mind that a change in the economic climate causes the needs of your customers to change, which requires a change in how you respond to their needs. How do you effectively deliver greater value in this tougher environment and remain profitable to survive the recovery? Integrate these five value-creating imperatives into your business operations. Take a closer look at each imperative. As you review these brief descriptions, challenge your current thinking, culture and processes:

Voice. Give your customers one! Be disciplined about listening to their challenges and needs.

Accountability. Hold leaders accountable for customer voice and for action that responds to customer voice.

Levers. What is most important to your customers in how you help them succeed? How do they depend on you?

Unbelievable experiences. Create experiences that surprise and elate your customers! Focus on those levers that drive your custom­ers’ success and relationships.

Engage and empower. Customers and employees are your two most important assets. Engage them. Empower and trust employees to take good care of customers and build collaborative relationships.

How well does your agency do in each of these areas? How much value do your customers really feel?

Each of these value-creating imperatives requires discipline to become part of your organization’s DNA. They are critical to your success, for improving your customer retention and making your business more pro. table, no matter what the economic environ­ment. Be unequivocal about creating promoters who sing your praises—customers who know you are committed to their success and who are committed to your success!

Vivian Hairston Blade (www.eiglconsulting.com) is president & CEO of Experts in Growth Leadership Consulting, LLC (EiGL). Her professional certifications include GE Certified Lean Six Sigma Master Black Belt, Black Belt and Green Belt and Certified Net Promoter Associate.