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If businesses are able to identify and meet customer wants and needs, customers will generally pay more for their products. The company, in turn, will spend money on developing products that it knows its customers want. "Repeat customers and their repeat business lower per unit sales costs."
Consider L. L. Bean, the successful mail-order sportswear company. It recently planned to expand its warehouse capacity and mail its catalogs to more potential customers. After studying its merchandise return rate--it had climbed to 14 percent per year--it decided to stop expansion plans and redirected its efforts into making its existing customers happier before going after new ones. Merchandise returns are wisely viewed by L.L. Bean as an indicator of customer dissatisfaction, and deserving of attentions because they reflect what is happening in the marketplace.
Better understanding of customer needs can also lead to increased sales and a larger market share. Chris Craft's Vice President and General Manager, Bob MacNeill, is a believer. He has had first-hand experience watching his company improve its products by listening to customer complaints. But sometimes, MacNeill says, you have to help customers along because they do not always voice their complaints directly to the company. Some boat owners report that they do not express dissatisfaction because they are not sure what to ask for, or they fear being perceived as a nuisance by the boat dealer. Other boat owners lack confidence in the dealers' knowledge about the boats they sell or think that everyone has these problems. So Bob MacNeill encourages his dealers to go out and interact with boat owners when they are on their boats to actively solicit complaints.
Time and time again, when companies listen to customers, they learn how to fashion products and services to meet customer needs, how to revamp internal processes for greater speed and accuracy and how to lay the groundwork to better serve the customer.
General Tire, Inc., based in Akron, Ohio, learned by asking how it could improve its operations, that 65 percent of its dealers would buy more General Tire products if they were able to place purchase orders through one order taker. This was a common source of customer annoyance that General Tire only heard about by actively soliciting complaints from its top dealers. As a result of this information, General Tire has undergone a complete reengineering effort, resulting in a revamped company that has cut costs and dramatically improved how it interacts with its customers, or so report General Tire customers.
Wesbar, a trailer accessory manufacturer located in West Bend, Wisconsin, asked for and then listened to bitter complaints about product quality from consumers. As a result, Wesbar developed a range of improved products that have become standard equipment for two dozen of the larger trailer manufacturers. Even today, people say these products are unique in the marketplaces. One of these redesigned products was a two-dollar light bulb on the back end of the trailer that continually failed. Scott Johnson, Wesbar's Vice President for Marketing, notes, "As a manufacturer who sells to trailer builders and distributors, who then sell to dealers, we are a little bit isolated from the actual end-user of the product." Wesbar has to work hard to get their complaints.
In many instances, the information a company obtains through customer complaints is impossible to get through any other means. Even if complaints are several levels away from the consumer, as in the case of Wesbar, companies can learn about specific service gaps and product failures. Companies are being presented with an opportunity to prove their commitment to customers by addressing these concerns, even when the complaint seems minor. Marina owners Nick and John Hoty of Ohio's Hoty Enterprises learned from listening to customer complaints that clean restrooms are the "fastest way to have happy, paying customers, who will recruit more customers."
Complaints that customers bring directly to businesses are the most efficient and least costly way of getting information and understanding customer expectations about products and services. Other more costly and less direct methods for communicating with the customer include reviewing customer expectations in parallel industries; conducting transaction-based studies, such as using mystery shoppers or external auditors; or conducting comprehensive customer expectation research.
Big companies can afford to conduct or commission market research of the type noted above; small companies "must" rely on their customers to tell them what they think about their products and services.
Customers, in most cases, are not going to generate ground-breaking ideas for companies. They will not suggest that Ford invent a minivan; they will not encourage Sony to invent the Walkman. Innovation is the purview of any company's research and development department. But customer feedback can help fine-tune product concepts for particular groups of people. Furthermore, businesses may never understand customer needs until there is some kind of product or service failure. Complaining customers tell the company what does not work once the product has been invented or as it is being sold or serviced.
For businesses that need to be responsive to quickly changing market conditions, listening and rapidly responding to complaints help the company stay in touch with customer expectations. Convenience stores, for instance, sell items that may remain in high demand for just a few months. Customer complaints ("Why don't you carry...?") rapidly communicate changing marketplace interests to the company. Other, less trendy businesses have learned this lesson as well. Market research can be static compared to the complex, dynamic, talking marketplace.
Coca-Cola was blasted with complaints on its 1-800-Get-Coke lines in 1985, when it substituted the "New Coke" for what is today known as Coke Classic. It responded immediately to the outraged public, mollified their shaken customers, and averted a potentially huge financial loss. When a company pays attention to its marketing research, it may only hear part of the story. After all, Coca-Cola had thoroughly researched the "New Coke" concept.
Marketing experts measure what they think is important, especially if the primary means of gathering customer feedback is the typical ratings report card. Hotels ask about cleanliness of their rooms and friendliness of staff. Guests "expect" these things. What "satisfies" them may be firm, nonlumpy mattresses in quiet rooms that have big light bulbs in the lamps next to the beds so people can easily read themselves to sleep. Unfortunately, hotels almost never ask questions about light bulb sizes, or mattress lumps, or even quiet rooms. But if hotels listen to complaints, and even encourage them from guests, they may learn about low-wattage light bulbs, lumpy mattresses, and the noisy elevators or vending machines that can be heard through thin walls. Market research can reveal these kinds of issues if carefully conducted, but complaints will cut to the quick.
In addition to calling attention to product defects, service shortcomings, and poorly designed systems, complaining customers can also alert managers to front-line personnel problems. Customers are usually the first to know when the company is being poorly represented by staff. In fact, managers may never learn about poor treatment of customers through simple observation of staff because employees generally behave better when their managers are around.
The Value Of A Customer Over A Lifetime Of Buying
Loyal customers are not easily produced, though disloyal ones are. The multitude of statistics generated in this area suggest that if customers believe their complaints are welcomed and responded to, they will more likely repurchase. In addition, long-term customers are not only easier to sell to, but they are also easier to serve because they know how to get their needs met; they know your products, your people and your systems for conducting business.
You might say that customers buying inexpensive services are not worth significant sums of money. Here is where the long view is critical. Each dry cleaning exchange, for example, may only be 10 or 15 dollars. Over a lifetime, however, a customer can easily spend around $30,000 on dry cleaning. And this says nothing about the number of friends or relatives a satisfied customer might send to a responsive dry cleaning establishment. Domino's Pizza calculates that over just a 10-year period, regular customers are worth about $5,000. Based on its research, Bain and Co., the Boston-based consulting group, estimates that profits can be boosted 25 to 95 percent--from just a 5 percent decrease in customer defection rates. What easier way to retain customers than by better handling of customer complaints?
Certainly consumer research tells us that a lot more than 5 percent of customers leave because of poor complaint handling. An IBM study suggests that if customers are left with an unresolved problem, less than half say they will repurchase. On the other hand, if customers feel their problems have been satisfactorily resolved, almost all say they will give the company another chance.
Some people refer to selling more to existing customers as "customer share"; "market share" refers to selling to as many customers as you can. For most companies, about two-thirds of sales are from existing customers. At a minimum, companies generally know who their existing customers are or have access to them in their stores. So while it is not free to sell to existing customers, it is frequently easier, more direct, and less costly.
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