Tuesday, March 2, 2010

The Bottom Line Trumps the Customer

It just seems like such good financial sense. The bottom line is more important that the customer. Afterall, what good to the customer is a company that goes out of business? But of course, it's not really ever that black or white. And yes, without the customer, there would be no bottom line. But when is the satisfaction of one customer more important that the bottom line? Maybe when it's your only customer? Or your biggest customer? Maybe one's not that important. But what about one hundred? Or one thousand? How do you decide how many customers you can afford to lose? That's the real question, because you can't define processes for the fringes and expect them to be cost effective. Or can you?

If the economics of your business includes a small handful of customers that pay you a ton of money for your product or services then you don't really have to worry about this question. It's moot, because you probably can't afford to lose any customers without severly damaging your bottom line and therefore, all your processes can afford to deal with the fringes. But most businesses just don't have the luxury (and risk) of that economic model. So the fact is that most businesses can afford to lose some customers without much negative effect on the bottom line. But consider this, it is not unusual for it to cost up to 20X to acquire a new customer vs. saving a current one. Couple that with the fact that current satisfied customers will buy more from you year over year and that loyal customers will increase their revenue with you even more, it can be a pretty compelling financial strategy to acheive zero defections. Unfortunately, this type of wholistic analysis is not usually considered when companies are combing over cost reductions in the support organization.

Nobody is suggesting that companies should stop acquiring new customers. But saving customers should at least have equal footing with aquiring new ones. And part of your corporate strategy should be a Customer Retention Strategy and the focus on post sales support to pull it off.

Wednesday, February 24, 2010

It Only Sells Books

I chuckle every time I remember a conversation with one of my colleagues a few years ago. "Superior Customer Service? Customer First? The Customer is Always Right? Ha!! Those are just catchy titles that sell books!" She was a Director of Customer Support at the time and clearly frustrated after have gone toe to toe with one of our internal departments to try to solve a customer issue.

We've all been there. It seems so clear to us that customer loyalty is one of the most important things we can do to protect our future revenue. And while nowadays we can usually get the attention of the CEO and the CFO and oftentimes even get them to agree, we can seldom get the support we need to bump our program needs to the top. The economics still don't work. Customer Service and Support (unless it is a discreet P&L) is still just a cost center. A necessary evil in the eyes of the "bottom line" folks. And, honestly, as a cost center, we just, plain and simple, cost too much.

The biggest ongoing expense is labor, of course, which is why Support Management is constantly under the gun to move to lower labor markets: offshoring or outsourcing or relocating the support center to North Dakota. Puleeeaasse! I have nothing against North Dakota except that if it's good enough for your employees that are talking to your customers all day long, it's probably a great place for your marketing, engineering, finance folks and the CEO too. Just think how much money you could save!

Okay, quit whining! Your CEO and your CFO aren't reading this. You are. What's a better way to cut your labor expense? Cut your headcount! If your headcount cost is running $60K a head where you are, which is a better result? Moving that head to India (a $30K savings) or cutting it altogether ($60K)? That's a pretty easy decision. But how can you cut headcount when you have all those customer calls to answer? You make the calls go away. Fix the products so that customers don't have to call you to get help making them work. Implement self-help for those pesky issues that still persist. Don't have the budget to implement self-help? You say you can't fix the products? Then you need a Customer Support Strategy for your whole company that supports them. And that is your job. You need to lay out the strategy and provide the right economics to make it make it compelling to your CFO. S(he) will take care of the CEO. Believe me, if you don't have a strategy to either become a wildly profitable P&L or to make the economics of your cost center work for your company, eventually your company will implement a strategy for you. And you probably won't like it.