Why do your customers buy from you?

Why do your customers buy from you? I’m sure we all have our own ideas of how we are better, faster, cheaper and just an overall better choice than our competitors; but sooner or later we all pause and wonder if those are the real reasons why our customers are…well, our customers.

You’ve probably heard it said that customers buy from us because they are drawn by our Unique Selling Proposition (USP). True enough. To take that further, they actually formulate a Unique Value Proposition of their own based upon our expressed USP. But enough of the marketing jargon, how do we even create our USP in the first place?

We don’t start our businesses just thinking of what we can do to attract customers, although that is important. More important to us, at least initially, is how are we going to make money. And that brings us to the heart of most businesses…profit! This is where we concentrate much of our planning if the company we run is actually going to sustain itself, sustain growth, and sustain an acceptable return on invested capital (ROIC) over time. Now we are really getting to the heart of most businesses and “what makes them tick”.

So what is the key ingredient to the recipe which allows an acceptable ROIC, make a profit, attract customers and create a highly valued USP? Why do they come to us? The foundation for all of the above rests within our distinctive competencies.

Distinct competencies form the basis upon which companies earn above average profits and are usually those capabilities which competitors are either unwilling or unable to imitate. If a company has distinctive competencies it will earn above average profits. Competitors will notice and will naturally wish to imitate whatever competency they see as the basis upon which you’re earning these higher that average profits. Their ability to imitate these competencies will determine how quickly they can erode your higher than average profits, so the level to which they are distinctive is very important.

By erecting barriers to imitation, you increase the distinctiveness of these competencies and therefore your competitive advantage. These barriers can be a patent or trademark, technological know how, a secret recipe, or some particular skill not easily replicated. They could even be composed of special access to a particular market or sales channel. The degree to which a business develops or nurtures these competencies determines the ultimate formula used to create their sustainable competitive advantage. This is the fundamental reason that some companies seem to flourish and other struggle against seemingly insurmountable hurdles. Luck works too…just not very often. I’d much rather have a plan to follow than rely on the goodness of lady luck, the weather, or the much awaited economic upturn to help a new or underperforming company.

So how do we craft this formula for a sustainable competitive advantage? There are four keys you can dial into in varying degrees comprised of Price (efficiency), Innovation, Quality, and Customer Responsiveness. (Hill, C., Jones, G. 2008 Strategic Management) Through these keys you will determine whether your competitive advantage leans toward low cost (low price to customer) or differentiation (high margin). The goal with either scenario is to achieve a sustainable advantage which means that there must be enough ROIC to be able to also continue feeding the needs of the four keys to achieve growth and maintain barriers to imitation.

Competitive advantage is not about a willingness to accept less profits, it is about a drive to sustain and improve those keys which fuel growth over time.

© 2009 Best Business Associates – May not be reproduced in whole or in part without written permission and attribution.

Customer service betrayed by those pesky details.

We are all familiar with customer service. We interact with customer service representatives, we ask to be connected with them, and we hear of or take part in initiatives to improve it. Companies tell us how great theirs is, or even ask us to help them improve it by taking a survey. Do they really care? Of course they do, but do they really get it? What is it anyway?

Some companies think it is a process. Some think of it as contact points with customers, and that those should be improved. Still others think of it as a metric to be measured and improved. It is really much more than any of those well meaning definitions can encapsulate. Customer service should be a mindset that drives the basic premise of how a company should envision its customers would be most satisfied. And satisfying a need is what marketing (business) is all about. So how does a company’s well intentioned mindset get derailed?

The details will betray company mindsets that are not truly systemic. I’ll offer just two examples of companies, one large and the other small, that think they are offering truly great customer service but are failing miserably.

The first is a bank. Now we all know the problems plaguing the banking sector, so we don’t need to stretch our imaginations to realize they could use some customer loyalty right now. The bank I have in mind has done the traditional “me too” types of promotions such as free checking, but do they really have a customer service mindset? As it happens, this particular bank has a front and rear entrance. In the rear there are two parking spaces right at the door, with about twenty more a short distance away. I noticed that there are always the same two cars parked right by the door so one day I asked the branch manager, with whom I am friendly, just whose cars were parked there. She responded one was hers. I asked why she would park in the best parking space instead of leaving it for customers. Her answer? “Well, you wouldn’t want me to get my shoes dirty, would you?” (There was some slush in the lot from an overnight storm, but you can bet she is there on sunny days as well). Clearly this manager does not have a customer service mindset. She is the most important person in that building and she is going to make sure everyone knows it, including customers! Oh, and to whom did the second car belong? Why, the assistant manager of course! These people just don’t get it! (You might be thinking at this point that most customers will not know who is parked there anyway. You would be right, but those customers will never experience the feeling that “hey, this is really a convenient bank that lets its customers park right here by the door. I’m always going to use this bank.”)

The second company is a smaller business; a dance studio that has done relatively well in recent years. They’ve done so well, in fact, that they moved into a larger building with its own parking lot. You’re seeing a theme here, right? Yes, you guessed it; the owner and instructors park right by the door leaving all the customers who drop off their kids to park further away. But there is decidedly more to this story. Just to make sure each and every customer knows who is the most important to this company, they erected signs (two of them) right by the door. What do they say? One says “Reserved for Jane Doe” (name changed to protect the guilty), who is the owner of the studio. The second sign has her mother’s name. Her current customers may be putting up with that but how about the visitors that check out the place before signing up. How many of them get the message and end up going elsewhere? Clearly the owner will never know. She obviously doesn’t care.

And, that is the point of customer service. A company…no, strike that… a company’s employees must know their customers are the driving force of their success and they must care. If your company directors think customer service might be important to bottom line results, then it would be wise to pay attention to bottom line interactions with those customers. If you are communicating one thing to your employees, yet they are communicating an entirely different message to your customers; it is probably the insidious details that are betraying your efforts. The next time you look at customer satisfaction surveys and customer retention metrics, ask yourselves if you have included the small details that can have large effects on the mindset of your employees. Do the customers truly rank higher in importance than “clock out time” or “key in the door” time? If the phone rings at 1 minute after hours, does it go unanswered? Are your customers’ calls left on hold for 10 minutes before a human answers? Do your employees “park next to the door”? It’s not the acts themselves but the mindset that will eventually create a negative spirit in both the company and its customers. If you truly value your customers, you sometimes have to get your shoes dirty. Do your employees go the extra distance?

© 2009 Best Business Associates – May not be reproduced in whole or in part without written permission and attribution.