Building customer relationships
Who is more likely to buy from you? An existing customer? Or a passer-by on the street who has never heard of you, your business or your product? The answer to this is pretty obvious. An existing customer is many more times likely to buy.
For a business to be secure and to produce high-quality long-term earnings (and provide you with a good, steady income), it needs to focus on retaining its customers and maintaining a high standard in customer reviews. It also suggests that this should be part of your initial strategic thinking. A business that relies on one-off purchases is building a steeper cliff to climb than a business that targets a group of customers and develops products that can be sold more than once and has much spin-off potential.
Clearly, when a business is starting, every customer is a new one. Potential customers need to be sold to in a number of different ways to generate confidence in your product. But once your business is up and running and has been going for some time, sufficient for your product to be known, tested and liked, your organisation needs to be ready to cope with the next part of your strategy, customer retention. Any well-run small business should have as its motto, ‘Once a customer, always a customer’.
What is in this chapter?
Customer care
It’s all too easy when you’re struggling with the finances, the production or the employees to regard customers as ‘just another problem’, ‘a nuisance’ or ‘getting in the way’. But you need to drag yourself back to reality. Without customers, you have no business, no matter how slick your financial control or how good your people management.
Put yourself in your customer’s shoes. What would you expect if you were buying this product? How would you want to be treated over the telephone if you are phoning with a query? How prompt a response to an email? You won’t be able to satisfy all customers, but you should struggle to satisfy all reasonable customers, because you want them to carry on buying from you.
When a new customer makes a purchase, this is not the end of the selling story. You should aim to build up a long-term relationship, because, in most businesses, you will be hoping for repeat orders or for additions to the original order. These will not come to fruition if you do not follow up orders, see they are delivered on time, or, if they are going to be late, warn your customer in advance. You need to give prompt attention to any problems or criticisms. If your business depends on a few sizeable customers, establish a network of contacts in the customer’s business, not just the buyer.
Response times
As a starting point, set up response times for the care of your customers. How quickly is an email replied to or the telephone picked up? For the telephone, within one ring? Two? Four? Or longer? A telephone line dedicated to customers that avoids the switchboard or general business line would provide a better service. It would mean that customers get directly through to the correct person to deal with queries or complaints. You could even look at providing an 0800, 0808 or 0500 freephone number for customers. You also need to set up required response times for replying to customer e-mails–one hour, three hours, two days?
Complaints handling
In some industries, money-back guarantees are commonplace – and in any case if you sell your products by credit card, you will find that if a consumer complains to the credit card company, the money will almost always be refunded to the customer to your cost. Distance selling means that a customer is legally entitled to a 14-day cooling-off period in which payment has to be refunded.
Perhaps you could adopt a money-back guarantee or some sort of guarantee of customer satisfaction. Businesses are happy to offer these guarantees, because the number of complaints or people who ask for refunds is usually tiny, but it encourages more people to buy from you in the first place.
If your sort of business cannot offer this sort of customer guarantee, you will need a clear policy and procedure on complaints and how they will be handled. Depending on the number of customers, there are also software programs developed specifically to deal with customer complaints. In some industries – for example, if you are an insurance or mortgage intermediary – you must comply with regulations that require you, among other things, to have a formal complaints procedure and to belong to an independent complaints handling body.
As a basic premise, you should follow the policy that complaints are valuable feedback and a customer who has complained but has been dealt with satisfactorily can turn into one of your most loyal and supportive customers. Research among Australian consumers suggests that an unhappy customer will tell up to eight other people about their bad experience, potentially damaging the company’s reputation further. By contrast, 70 per cent of customers who complain and whose complaint is resolved satisfactorily will carry on buying from the company or 95 per cent if the complaint is resolved immediately.
Bear in mind that the impact of poor service or complaints handing can be even more disastrous if it is discussed on social media sites (see p. 142). This is another reason why you might want to get actively involved with such sites. That way, even if you do have a bad patch with handling customers, you may then have an opportunity to respond online directly to disgruntled customers to show that you care and explain what you are doing to put matters right.
Customer reviews
You need to encourage satisfied customers to post ratings about your business, service or product on a relevant web site. Of course, the comment could be negative. You need to consider whether the comment is valid or not and work to improve your service. Answering comments needs to be done sensitively if not to be misinterpreted – see p. 146.
Developing the concept of a community
If you can convince customers that their input and opinions matter, they will feel as if they belong to a select group or a club. This feeling of belonging can help to increase the responsiveness from your customers to anything else they might be offered by you. So work on ideas that can reassure them of their value to you – special letters, special offers, or inducements offered only to them as one of your valued customers. A simple way to establish a club could be to set up a fan page on Facebook. Make sure you actively engage with the followers who sign up, preferably letting customers get to know you as a person rather than just being an anonymous company representative. Customers may feel flattered and special if they feel they have direct access to the people in charge.
Customer referrals
Another important reason for building up a good working relationship, online or not, with your present customers is that they can often be the source of your new business too. They may be able to suggest others in the same line of business who may be considering buying a product or service similar to yours. They may even be willing for you to use their name as an introduction. If the customer is very satisfied with your service or product, they may be willing to act as a reference for you, although obviously you must ask first. A reference means that you can give their name to potential customers and they will be prepared to discuss your business with them.
Data gathering
A very important part of building relationships with customers is data gathering. Databases are the key foundation for any business trying to put the emphasis on customer retention. All communications with customers (or potential customers) should be recorded. But check out the law – see overleaf and the Information Commissioner’s wesite.
If you get an enquiry from someone not yet a customer, it should be logged, along with as much relevant information as possible, such as name, e-mail address, mailing address, telephone number and any other details that come up.
A note of the communication should be made. Thus, whenever this person subsequently contacts you, you need only to ask for their surname and postcode and you can find that record and build on it.
Similarly, if you have a web site, once potential customers have had a chance to look around, invite them to register so that you can create a data record for them. Be aware that you will always lose some visitors at the registration stage. Think about what added value you can offer to encourage registration – for example, access to a useful guide, an email newsletter or a free gift.
When someone becomes a customer, you may be able to build a little more information, such as age or occupation, although you can’t constantly bombard people with demands for information that appear to them to be irrelevant and intrusive.
The basic premise, though, is to gather and capture whatever data and information you can about potential and existing customers. As you gain more experience, building up a picture of your current customers allows you to select lists to mail to attract new customers with greater certainty for a higher response.
Data warehousing and data mining are two jargon phrases used by the data and direct marketing industry. Warehousing is putting together lots of names with appropriate information, for example from the electoral rolls or from shareholder registers, which are lists that have to be available legally to the public. Data mining is searching through those names to target those that match your customer profile.
Individual records
The record will need to be tailored to your individual business or product, but more than likely it should include:
- name, address, e-mail address, telephone number;
- customer’s type of business (if any);
- what the customer has bought from you, how frequently and in what quantities;
- the name of the decision-taker and the names of other contacts and their positions;
- the customer’s credit rating or information about paying;
- any complaints and how they were resolved.
Checking out the law
The gathering and holding of personal data is tightly regulated and complex, so take expert advice. You are required by law to comply with the following eight principles. Data must be:
- Fairly and lawfully processed. This means you must have a person’s consent – usually this is done by including a tick box on any forms that gather data. Unless the information is sensitive, it is usually enough to give a person the right to opt out of your data lists. But where the information you collect is sensitive (for example, ethnic origin, political or religious beliefs) you must have the person’s express consent to be included. Fair processing includes observing people’s rights to confidentiality.
- Processed for limited purposes. This means using data only in ways that are compatible with the purpose for which you collected the data.
- Adequate, relevant and not excessive. In other words, you should stick strictly to the data you need for your purpose.
- Accurate. You must ensure the data you keep are accurate and up to date.
- Not kept longer than necessary. If you don’t need a person’s details or a particular category of information any more, delete it from your list.
- Processed in accordance with the data subject’s rights. This includes preventing processing if a person has indicated this could be damaging or distressing, and preventing processing for direct mailing purposes if the person has requested this.
- Secure. You must have adequate measures to prevent unauthorised use of the data and to guard against loss or destruction.
- Not transferable to countries without adequate protection. If you intend to transfer data to countries outside the European Economic Area, you must first check that the country has adequate data protection measures.
These principles apply to all databases, whether held on computer or manually. If you hold a computer database, you may in addition be required to notify the Information Commissioner* so that your name can be added to a public register of data controllers. There are exemptions from notification, including the processing of data only for the marketing purposes of your own business. Failure to register if you do need to is a criminal offence. If you hold manual data lists, you do not need to register, but you can do so voluntarily. For businesses with fewer than 250 staff, registration costs £40–60 a year (no VAT).
Be on your guard if you are contacted by an ‘agency’ that says you must be registered and that they will organise this for a fee (typically £95 or more). They have no official standing. You can find all the details you need on the Information Commissioner’s web site and, if needed, sort out your own registration for the standard fee.
There are bodies with which people can register if they do not want to receive unsolicited mail, telephone calls, e-mails or faxes. Becoming a member of the Preference Service (Mailing*, Telephone*, E-mail*) allows you to check their lists and so eliminate from your database those people who will not welcome your unsolicited advance. Under the data protection legislation, you do not have to belong to any of these bodies, but the Information Commissioner strongly encourages membership. If you belong to a direct marketing trade body, you may well find that its rules require you to be a member of the Mailing Preference Service or its equivalent bodies.
Using questionnaires
You could try sending around a simple questionnaire or survey for your customers to complete. Don’t make it too elaborate or too long (not more than a few questions), and offer an incentive to encourage people to complete it, for example a prize draw for a free product. Questionnaires can give you a huge amount of information about your customer base, what they are really looking for from your product and other general information.
New offers, new products and repeat purchases
This is where the real benefit to your business will emerge from adopting a proper customer care policy and being ruthlessly efficient at data gathering.
New offers
If you e-mail a list of existing customers with a new offer, you should expect a much higher response rate than from a list of people who have never heard from you before. What this means is that your business will become much more profitable.
New products
Successful customer care and data gathering should mean that the launch of new products can be infinitely less risky and more successful if you have a good existing customer base. For a start, you would choose your new products to appeal to your existing customers, as well as targeting other potential purchasers. Indeed, you might offer different products to different sections of your customer base.
The benefits of this should be obvious. Launching new products may even become cash-flow-positive. At any rate, the period between launch and the product becoming profitable should be considerably shortened.
Repeat purchases
A much higher proportion from a list of existing customers will make second or further orders of the same product (assuming it is a product that has a life of more than one purchase) compared with first orders from a list of potential customers.
Summary
- Develop a long-term strategy of building sales with recurring purchases to existing customers.
- Develop policies on response times, online customer reviews and complaint handling to improve customer care.
- Make data gathering and data capture a priority.
- Making very specific offers to existing customers should be very profitable.
- New products should become profitable after a much shorter period if you target an existing customer base.