When juggling new clients, or simply balancing between current accounts, companies often fail to prioritize the right customer. They focus on the squeakiest wheel, or just default to the biggest client, rather than the customer with the greatest long-term potential. Or worse, they strive to treat everyone equally.
In fact, when a small firm has one or two customers that promise to dwarf the others, tough decisions need to be made. Ian Gordon, a principal at Convergence Management Consultants in Toronto, believes small businesses balancing competing accounts shouldn't attempt to treat all their customers the same, even though he admits this may sound like heresy.
"Some clients are just vastly more important than others," he says. He cites the example of a printing company that landed a large, fast-growing customer. The printer opted to cultivate the relationship, offering this one customer a range of new services that produced a tenfold increase in revenues, says Mr. Gordon. "They treated that one important account as a market."
Ian Gordon works for Convergence Management Consultants Ltd. , and helps companies to develop strategies to accelerate their revenues and build more profitable customer relationships. Over the past twenty years, he has consulted with owner-managed, family-owned and publicly-traded companies in sectors such as technology, financial services, manufacturing, distribution, retail and not-for-profit, as well as governments and industry associations.
Mr. Gordon took your questions Tuesday afternoon.
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Matt Frehner, globeandmail.com: Hi Ian, thanks for joining us today. Let's get started.
In your opinion, where does customer service rank in the list of factors influencing purchase decisions? I know it may be impossible to generalize, but if a client was trying to figure out selection, pricing, customer service or location, where does customer service fall in that list of key considerations?
Ian Gordon: As you rightly suggest, purchase criteria do vary according to the industry sector within which the company participates, and it is vital that companies understand - and measure - what factors determine customers' purchase decisions, as well as the company's positioning in respect of these criteria. It's not hard for smaller companies to do a small survey or focus group to identify criteria and their ranking. The important thing to recognize is that customers buy on value, and sometimes customer service will be an important part of that, and sometimes not -- say when price is key when visiting the local big-box mass merchandiser.
Having said that, in many markets, product or service differentiation has declined over the past number of years, so that companies are perceived as providing customers with more or less similar value. In an environment where goods and services are almost commodity-like in nature, small differences can mean a lot to customers. All else being equal, better performance in respect of any one purchase criterion -- including better customer service -- should keep customers, build loyalty and drive increased sales. The problem is, many companies are doing their best to provide customer service excellence so focusing here may no longer be a game-changer in today's marketplace but a necessary activity to at least be in the "strategic set" from which customers make their purchase selection decision. Still, there are opportunities in some marketplaces where products are similar but service could be a lot better -- companies listening to their customers will know if their firm falls into such a category.
Rather than thinking about customer service, it is important that companies think about customer relationships. Service is what a customer receives at the time of the transaction. A relationship is built one transaction and interaction at a time to keep customers, grow the value of the connection over time and get referrals to other customers. That is, a focus on relationships rather than transactions can help build profitability over time. Many companies say they focus on relationships but few have plans to actively improve the quality of their relationships and measure the improved business performance that comes from deeper relationships that attract, retain and develop customers. And as the old saying goes, without a plan, any road will get you there.
