Entrepreneurship Success: Customer Service (I)
A business organisation’s sales and marketing functions are essential in generating operating revenues for the business. A significant component of the value proposition of most businesses, as desired by customers, is customer service. This shall be our subject today. When we make choice between one airline and another or between one restaurant and another, the service […]
A business organisation’s sales and marketing functions are essential in generating operating revenues for the business. A significant component of the value proposition of most businesses, as desired by customers, is customer service. This shall be our subject today.
When we make choice between one airline and another or between one restaurant and another, the service we get tends to be a major factor in our choice. But while this factor is not restricted to airlines and restaurants, my experience and observation with most budding entrepreneurs and those seeking to grow their businesses in our environment are that they tend to focus disproportionately more on raising cash, supply chain management, production, etc. than the service they actually deliver to their customers. Yes, indeed all those functions are crucial to business success. However, ‘all other things being equal’, the quality of customer service a business is able to provide is a critical determinant of the level of revenues that can be generated over an extended period.
Benefits of great customer services: It is taken as given that whatever products you offer to your customers must meet certain quality expectations of theirs at the minimum. Beyond that, what attracts and keeps customers’ patronage is largely their experiences in interacting with you. Wonderful customer experiences are directly linked to the repeat business they can conduct with you and the referrals they can make of your products to friends, family and colleagues. In addition, great customer service can justify premium pricing and put you ahead of your competitors both in terms of the sales revenue you stand to generate as well as the profitability you make per unit of Naira invested. The beneficial consequences of all that are, obviously, better customer relations, increased turnover, profitability and growth.
How do you go about building a culture of great customer service in your business?
Understand what customer service is: Customer service is the totality of the experience that results from all interactions between a customer and your company as you make a product (goods, services or both) available to them. This experience starts from how you make initial contact with potential customers; what the customer sees on your website as they try to learn more about you and your business; what they experience when they put the first call through to your business to make enquiries; the customers experience as they bargain with you; the actual delivery of the product to the customer and the post-purchase service, etc.
Overall customer services delivery is made up of:
• The product you offer to your customers
• Your customer service policies
• Your customer service processes
• The internal and external structures of customer service delivery
• The totality of experiences provided to potential and existing customers
The schematic below illustrates major customer service components.
Understand the product life cycle: Understanding the product life cycle is important to managing both the product and the customers that are attracted to them at different phases. The five different product life stages often discussed are ‘product research and development’, ‘introduction’, ‘growth’, ‘maturity’ and ‘decline’. Most products tend to pass through these phases albeit differently. Each phase poses different challenges and attracts different types of customers. Understanding the phases and the types of customers at each point helps in managing the relationship between the business and the customers as well as, possibly, extending the life and value of the product.
Understand your customers: To be able to serve your customers very well, you have to first understand them very well! Are your customers business entities, government agencies or individuals? Are they professional buyers, ladies, senior citizens, working men or children? What are the customers actually looking for when they buy your product? What utility do they hope to derive? Are you able to identify the technical and emotional components of the buying process and decision process of the customers? What are their expectations in terms of pricing, product quality, delivery, post-purchase services, etc.? The point is that different customers have different needs and expectations and are excited by different services. Study the customers and ask them questions!
Understand the lifetime value of the customer: We have elsewhere introduced the concept of customer lifetime value (‘CLV’) as the present value of the projected cash flows that can be made out of a customer over the entire relationship. CLV looks beyond individual transactions with a customer into the totality of what could be made out of the customer in the future.
Understanding the lifetime value of customers is important because it justifies and encourages businesses to shift their focus from achieving only short-term benefits, which may be to the detriment of future benefits, to the long-term loyalty of customers. Their long-term loyalty will enhance sales and profitability for your business. Similarly, perhaps, on the other hand, CLV sets an upper limit on the investments that can be made to acquire new customers as well as retain existing ones. A clear understanding of customers’ lifetime values will make it worth your while to do what needs to be done to serve your customers well at known costs knowing the benefits that you will gain over time.
Today we have tried to introduce the importance of customer service, its benefits to a business as well as its components. Next week we will continue on how to build a culture of great customer service in your business.