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Profit Erosion And Low Margins - Part 2

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Continued From February/March 2003. Instead of price cutting, handle customer problems promptly and effectively or preempt them.

Too many retailers are trying to differentiate and grow their businesses by cutting prices. Initial sales are made but necessary service cuts also result in a growing pool of dissatisfied customers. This situation has created a window of opportunity for smart retailers to differentiate without cutting prices by delivering superior customer service. It’s the profitable thing to do. The first part of this article (posted to the marketing management index on www.furninfo.com) explained this phenomenon in detail.

Almost every store claims to have superior customer service, but most fall short, and many deliver truly inferior customer service. Often the difference between the owner’s perception and reality is a small one, but it is one that gets magnified by the number of people in an operation.

When times are good, customer service falls by the wayside because dealing with problems and challenges is not as much fun as making the next sale. When times are bad, everyone suddenly has an epiphany: “Let’s get back to our existing customers!” By that time the customers are gone and everyone wonders where they went.

Research into consumer behavior has shed some light on the reasons why customers stop patronizing a business:

  • 1% of them have passed away.
  • 3% of then have moved.
  • 5% patronize establishments recommended by peers.
  • 9% of them find cheaper alternatives.
  • 14% of them are dissatisfied with the product.
  • 68% never return due to an attitude of indifference by the staff.

These numbers reveal that 32% of customers never return for reasons beyond the control of storeowners, but 68% never return for reasons that storeowners can directly influence.

A recent survey of consumers revealed that fifty-nine percent said they would stop doing business with a company as a result of an unsatisfactory experience. One bad experience often causes stores to lose a customer and all their friends for life. It also revealed something very important for retailers to know: Seventy-nine percent of those surveyed said they would come back again and give the store a second chance if their negative experience had a positive outcome. Handling customer problems promptly and effectively is the best way for your customer service process to make a lasting positive impression.

There is even more value in building a business that focuses on providing customer service before problems occur. Eighty-two percent of those surveyed said they would recommend a business to family and friends on the basis of having had a good experience.

Many storeowners say they have a customer service based culture, but their stores often bring to mind the old adage: “The differences between theory and practice are greater in practice than they are in theory.” The best way to find out if your store has a customer service based culture is to watch the floor and see how your people interact with customers. It is easy to be customer service focused during the selling process, but how do your people respond to interactions outside of closing situations?

Recently, an associate took a day off of work to help his mother move furniture into her new condo. They found that they needed instruction on how to disassemble a recently purchased roll top desk. They first went to the store where the desk was purchased. His mother tried to ask several salespeople questions about taking apart the desk. The first salesperson said he had no idea and left her. The second told her to go to the manufacturers website and order a new set of instructions.
Frustrated, they went to another store. The salesperson didn’t know the answer and got someone from the warehouse. The technician took them to a display piece and explained the steps to take the desk apart. Several months later, when she refurnished the master bedroom which store do you think got the sale?

Over the next year, she refurnished several more rooms proving the fact that a small sale can generate a good customer. Service generates a customer for life.

HOW DO YOU KNOW IF YOU HAVE A CUSTOMER SERVICE BASED CULTURE?

How do you know if you have a customer service based culture? The more questions below to which you can answer “yes,” the stronger is your customer based service culture. Use them to help you draw a map to get from where you are, to where you want to be in the future.

Do You Have A Manager Assigned To Customer Service?

In many stores the owner is the default “customer service manager.” The problem with this situation is that when customers speak directly with the owner; there is an unrealistic expectation of immediate gratification and generous resolution. They feel that they are dealing with the owner who makes “so much” money. Many times customer service issues are complex and take time to resolve. Having owners deal with customer service issues distracts them from the tasks of running the business.

Do You Have A Documented Customer Service Policy?

Most stores claim to have a customer service program, but often there is no written documentation that can be used as a guide to handling problems. Ben Franklin once said, “Verbal contracts aren’t worth the paper they are written on.” Neither is a verbal customer service policy.

Is Your Customer Service Program Appropriate For Your Level Of Merchandise?

When customers go to Wal-Mart there is an expectation of service that is significantly different than when they shop at Neiman Marcus. Too much customer service can be as bad as not enough. Make sure your service level is appropriate for your target customer.

Listening to your customers and researching the changing demographics of your market area will also help you to better align your customer service polices to meet their needs and expectations.

Do You Document Customer Service Issues?

Most stores handle customer service issues on an ad hoc basis. Handling issues as they arise is good for the customer, but does not allow you to collect the kind of information needed to fix specific problem situations. Your staff may be very good at handling common customer service situations and be making a mess when unexpected or difficult problems arise. When you collect information and document it, you have the ability to fix problems immediately and permanently.

Do You Have Customer Service Benchmarks?

If you set performance standards and measure how well your team meets or exceeds these you will have the information needed to improve your processes.

Do You Have A Resolution Follow Up Process?

It is good to have the employee handling a customer service issue declare the problem solved to their satisfaction. It is much better for the customer to declare that their problem has been solved to their satisfaction. Once you are notified that a customer service problem has been resolved, have a separate employee (at management level) do a follow up call to the customer to confirm that the issue was resolved to their satisfaction.

This independent verification serves two purposes. The first is a subtle management tool that helps keep employees attending to their goal of making the customer happy. When employees know that someone from management is going to call after resolution, they will work a little more diligently to solve the problem to the customer’s satisfaction. The second purpose is to give a level of personal attention to the customer to reaffirm how much you value them and their business.

Are Your People Trained To Provide Customer Service?

When stores purchase computer or warehouse technology, they know it makes sense to teach people how to get the most out of these fixed asset investments. Customers are a store’s most valuable asset, yet many do not see the need to provide education to get the most out of each customer interaction.

Are Your People Compensated For Providing Service?

There are very few absolutes in the world of business, but one that everyone agrees on is: “Only behaviors that get rewarded get repeated.”


John Egger, CEO of Profitability, Inc., helps retailers refocus their marketing strategies from the current M.A.D. (Mutually Assured profit Destruction) policy trend, to compete against other industries and stores based on value. Inquires can be sent to John care of FURNITURE WORLD at jegger@furninfo.com.

 

Furniture World is the oldest, continuously published trade publication in the United States. It is published for the benefit of furniture retail executives. Print circulation of 20,000 is directed primarily to furniture retailers in the US and Canada.  In 1970, the magazine established and endowed the Bernice Bienenstock Furniture Library (www.furniturelibrary.com) in High Point, NC, now a public foundation containing more than 5,000 books on furniture and design dating from 1620. For more information contact editor@furninfo.com.