It's a real challenge for me sometimes with my "warm and fuzzy" message to appeal to the CEO crowd but I've been doing it successfully now for more than 11 years. How do I convince "C" level execs to take a look at my emotionally based work? Easy. I talk numbers. Not the kinds they're used to seeing which are based on accounting principles - but the numbers that fuel the economics of loyalty. After all, only a small percentage of increase - 5% - in the number of profitable customers you have can yield anywhere from 25% - 100% on your bottom line. There's a lot of leverage in customer love.
And because all my teaching uses questions that are provocative and get the brain searching for new answers, I ask questions that I think C-level execs should know the answers to - here are a few:
- How many customers do you have? How many are repeat customers? How many have only bought once?
- How many customers have you lost in the past year? It's not uncommon for businesses to lose at least 10% and, more commonly, up to or around 30% of their customers annually. (These days sadly, a lot more...)
- How many customers have you retained in the last year?
- Do you calculate the Life Time Value (LTV) for each of your customers? Do you calculate profitability for each of your customers? If so, do you then grade them according to their value in the company, with the intention of moving customers up on the continuum? Do you know who your most profitable customers are? And why they are profitable?
- How many customers have you upgraded in the past year (cross-sell, upsell or moved into a new category)? Many companies 'grade' customers; customers with the highest LTV are 'A' customers, ones with the next highest LTV are 'B' customers and so on. Ideally the object should be to move Cs to B status, Bs to an A and so on.
- How much of your customers' 'share of wallet' do you get? Do you get all the possible business you can? For example, if you work for a bank do most of your customers have only checking and savings accounts, or do they also have mortgages, car loans and other investments with you?
- How many referrals or testimonials did customers give you last year?
- When customers leave why do they leave? (Just because they tell you it was about price doesn't mean that's really what it was about. Often it's about value, but when customers don't have a language to articulate that, it sounds like, "The price was too high.")
- How much does it cost you to get new customers? (Sales, marketing, advertising)
- How long does it take for a new customer to become profitable - or to recoup what you've spent to acquire them? (In most companies that track such numbers, it takes 18-24 months just to break even). So that means a customer doesn't become profitable until after they've been there for close to two years. This leads to more questions: What happens to your acquisition costs if you lose customers before that two-year period of time? Do you know how many new customers leave before you've broken even on the cost of getting them? Obviously losing customers costs companies a whole lotta money - but how much? What is the cost of failure when you don't consciously build long-term relationships with customers?
- How much does it cost to replace good customers after they've left? (Think about it, factor in the time and money involved in acquiring customers, the money you're no longer making from the good customers who have left and the amount of time it's going to take to get new customers to buy at the same level as old customers.)
- What is attrition costing you? (In some companies attrition is the single largest cost, but it's not showing up on a traditional balance sheet. No one's tracking it!
- How does the number of incoming customers compare with the number of outgoing ones? What percentage of your customer base are you actually losing on an ongoing basis? (If you're losing 30% and replacing 30% of customers every year, that means only 40% of your customer base is stable - so how reliable and proficient can your research possibly be? Be cautious if you're making sweeping decisions based on this small percentage of customers.)
- What are your customers' top three (current) expectations?
- How many dollars would drop to your bottom line if you could keep only 5% of the profitable customers you currently lose?
So how'd you do? We've found it's quite unusual for our clients to rattle these answers off the top of their heads. When they do take the time and effort to learn them, this knowledge dramatically enhances all other quantitative and qualitative data the organization has collected. These numbers drive home the point that the customer is the reason you're in business. And when organizations share these numbers with their people, they help generate appreciation among employees that inspires them to create Exquisite Customer Care and keep more of those all important customers happy.
C-level execs that share the results of this important inquiry with employees can then enlist the brilliance that I believe lies mostly dormant in most workforces. Knowing these numbers and creating a plan to keep customers happy can provide a sense of meaningful work for people.
Meaningful work releases the brilliance, the passion and the energy in a workforce. Focusing on what people do well and enlisting their strengths in the service of discovering what will create customer happiness is the skill of a Positive Leader.
So off I go again to teach the importance of emotional intelligence, positivity and engagement in the workplace. Soft skill? Yes, but soft skills with hard tangible profitable results.
Have you seen and heard the manifesto yet? www.ReturnOnHappiness.com