Delusions
of adequacy can be costly
 I
have a letter on my desk from the head of sales and marketing of a very large
and well known global New Zealand company assuring me his company has its
customer service strategies sorted out. I thanked him for his letter and
enclosed a report showing customer satisfaction in his industry worldwide
is at a 15 year low. I also pointed out I did not see his company listed
in the top five performers. Two weeks later, I had a bad experience with
the company and I complained to the frontline staff. The next day, I had
a phone call from someone in head office saying they had been told I was
unhappy and asking if they could do anything. I repeated my complaint. “The
problem is management,” I was told. “They expect us to do more
with fewer people and it is only going to get worse.” For the next
20 minutes he denigrated his company and criticised senior management.
Perhaps you would agree this was not a good way to handle a customer complaint.
To be fair, I do not imagine the head of sales and marketing will be very happy
to learn what is being said to their customers either. But experiences like
this make me wonder why senior managers and business owners are so out of touch
with what their customers are actually experiencing?
Most senior managers suffer from delusions of adequacy. A study by Bain & Company,
an American consulting firm, found that 80% of senior managers believe their
company is doing an excellent job of serving its customers. Only 8% of their
customers agree! A NZ study by Rainger and Brunton in 2005 concluded that customer
service in this country is often practiced insincerely, leading to sceptical
customers and disgruntled staff. That would explain the behaviour of the person
who telephoned me at least.
Ask any professional who consults or trains in the area of customer service
and they will tell you how important providing a great customer experience
is to business success. A recent American study, for example, found that 80%
of the people interviewed said the quality of the customer experience was more
important than the quality of the product and both were more important than
the price. These experts will also tell you their biggest frustration is that
senior managers, who control the purse strings, believe their company is doing
an adequate job of looking after its customers. They also know research from
around the world shows customers are not merely dissatisfied with the way they
are being treated; they are outraged.
The evidence is also very clear that this disconnect is costing companies
dearly. A recent study by the London School of Economics revealed companies
whose customers are telling their friends about their bad experiences with
that company grow four times more slowly than companies whose customers are
raving fans.
Other studies show when people have a bad experience, 25% complain to a colleague
or friend, 24% complain to staff, 20% take their business elsewhere and 10%
stay but buy less. On the other hand, if customers have a positive experience,
31% tell a colleague or friend, 22% praise staff and 19% spend more. The NZ
survey estimated that 45% of customers stopped dealing with a company in the
past year because of bad service. Overseas research suggests that companies
lose 10% of their customers every year. That is 50% every five years! The NZ
study found that customers who defect each tell 13 other people about their
bad experience and 25% say they will never do business with that company again.
Here is a thought to keep you awake at night. If you lost 10% of your customers
every year and 25% never did business with you again how long would it take
you to run out of customers in a market of 4 million people?
If this all sounds too academic, consider this real-life example. On a recent
visit to one of my client’s sites, I learned about a customer who for
several years has spent $85,000 dollars each year, which is an average spend
in that industry. Last year he had a bad experience with the company and consequently
this year he is spending only $10,000. So, the bad experience, you are thinking,
cost them $75,000. They wish! That customer is in his early 30s and would probably
have spent $85,000 a year for another 20 years. Therefore, the bad experience
could well cost them $75,000 for 20 years or $1.5 million. But what if that
customer tells 13 others about his bad experience? Canadian research indicates
that half of us avoid doing business with a company just because someone told
us about their bad customer experience. If six of the people our customer tells
decide not to do business with my client, and if they also would have spent
$85,000 each year for 20 years, my client will miss out on another $9 million
in sales. Add this to the original $1.5 million and that bad experience just
cost the company $10.5 million!
How well are you looking after your customers? I suggest you ask your customers
before answering. Delusions of adequacy can be costly!
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