The Value of Loyal Customers

We know that loyal customers will refer you to their friends and colleagues and this was the case with the experience I had with a local oil company. We were referred to this company to by a partner company, NFT Consult. As soon as I met the then Head of Human Resources, her comment was clear and re-assuring ‘since you were referred by NFT Consult (the regional Human Resource (HR) company), we believe you can do the job’. And that was it. NFT Consult had made this local oil company a loyal customer and it showed in value placed on the referral.

No lengthy discussions about ‘have you done this before’ or ‘have you worked in our industry before’ or ‘we have two proposals, we need a third one’, etc. We are told by the folks from Franklin Covey Customer loyalty practice, that loyal customers will do four things consistently. First, they purchase more in each visit, second, loyal customers come back and purchase more often, third, they refer you to their friends and lastly loyal customers devote time to give feedback. And all these four things are true from my favourite airline Emirates. I will fly to Dubai from Entebbe for 5 hours and take a 14 hour flight to New York City especially when flying with the family – thanks to Emirates in-flight entertainment, not to mention the awesome reception on the Airbus A380-500.  It is true for airlines as it is true for hotels. Take the following narrative from a blogger who had the pleasure of staying at the Mandarin Oriental Hotel in Shanghai:

‘Before I checked out of the room, I noticed a little card on the desk: an invitation for Mandarin Oriental guests to visit one of the Shanghai Tang stores to collect a mystery gift. I decided to collect mine at their airport store. After checking in for my flight and clearing immigrations, I headed straight for the Shanghai Tang store for my mystery gift. I handed in the card and was given a colorful little box in return. I opened it to find a little perfume bottle. The lady at the counter explained that it was a scent for the home. I sprayed it into the air and my thoughts immediately drifted back to the Mandarin Oriental – it was the same tea scent I’d smelled in the hotel’s corridors. Another amazing touch and a beautiful memento of my stay at this exceptional hotel’

Now creating a loyal customer base is not only good for repeat business, it is also great for the bottom line. According to Bain and Company Cross Industry, Net Promoter Score (NPS) Analysis for 2006, loyalty leaders grow 2.6 times their competitors’ average. So why do so few companies pay little attention to developing a following of loyal customers? It appears that several companies by their action and sometimes inaction fund their own customer disloyalty.

Take my last attempt at opening a business account, the business banker spent almost 10 minutes demanding for every documentation known – and here is a bank where I already had a personal account. ‘Know Your Customer’ (KYC) is the name of the game, not a memorable customer experience. No one told this business banker that the number one rule in customer loyalty, is that you must make it easy for me to do business with you. How about my local coffee shop around the corner, my son asked for cream cheese with his Bagel and he got grated cheese. When we complained, the Chef came out to explain the difference between Kenyan and Ugandan cheese!

But with a little thought and clear sense of the type of experience we want to offer, we can build a culture of loyalty at every touch point. Based on the work done by Franklin Covey with numerous organizations, we have learnt that first, treat your employees like you want them to treat your customers – this we have learnt from the folks at US based Southwest Airlines. For Southwest its ‘employees first and customers second’ and this has paid off in the numerous industry awards including coveted triple crown airline performance for on-time performance, baggage handling, and Customer complaints. Southwest was the first airline to be rated first in all three categories.

Second, make customer loyalty a core value and the experiences at local Cappuccino houses like Cafe Java and Cafe Pap are examples that customer loyalty is an integral part of the way service is delivered. While other places place premium on waitresses’ looks, these guys place a premium on the service that the frontline delivers.

Third, measure it accurately and frequently, establishments can benefit from the work of Fred Reicheld in The Ultimate Question. Simple questions of your patrons to determine: how likely they will refer your service to a friend or a colleague. The response you get to this simple question is a great predictor of business growth.

And finally, hold people accountable like you would financial data. Far too often, we chase monthly revenues and lose sight of the very thing that is predictive of the revenue.

 

What It Takes to Win

Mid way through a 3 day sales performance workshop I facilitated in Kigali, Rwanda recently, a participant asked if ‘going door to door’ for the business to business sales team was a viable practice. Not really, was the immediate response, we can go door to door to sell sim cards and airtime but not so for clients who are trying to improve productivity and generate great return on their technology infrastructure. You don’t need a relationship with a customer to buy airtime on the street but you need one to deliver business solutions on a consistent basis. One is an event and the other is a relationship, especially when done well.

And that is what we learn from the yearly Sales Best Practices Survey conducted by Miller Heiman International – now MHI Global. In the introduction to the results from the 2014 survey, we are reminded that like any sport, sales has rules. Rules for the sales leader are the expense plan; headcount. Rules for the salesperson are their comp plan. It spells out the rules for how they win. Sales has a playing field—an account, an opportunity, a territory. For the business, it’s a market. Sales have opponents. What makes sales different from every other function in the enterprise, is, ‘we have someone working just as hard, just as focused, just as dedicated as we are, to win what we want to win.

According to the survey, there are 3 behaviors of world class sales performance, 6 elements of the sales system and 12 behaviors that impact performance. The 3 behaviors (and we will elaborate each one later) identified in the study which had over 26,000 respondents, are (1) Customer core (sales people need to provide perspective to the customer (2) great sales organizations must have a collaborative culture (at the individual sales person level, there is need for conscious collaboration and (3) Sales teams must be calibrated for success (need to hold sales people accountable for performance).

And in selling to key buying influences in businesses, these behaviors prove to be the differentiators. First Customer core – here the sales person is concerned with what the individual buying influence is trying to fix, avoid or accomplish. Not what products do we have or how many doors or phone calls I make today. While there is a place for some of these practices, especially in lead generation, the effective principle is based on what is the buying influence trying to get done. The cultural component of this principle is How do we connect and engage with our customers? While the individual sales person behavior is to provide perspective to the customer.

The related question from the study is: “We clearly understand our customer’s issues before we propose a solution.” And 92% of world-class sales organizations agreed with this assertion. Note that the 92% is of the small (6%) of the overall respondents who qualify as world class. A major 48% of all respondents agreed with this statement.

Most sales people make an honest effort to understand customers’ issues, but organizations will usually give their people a pitch – so called key selling points for each product and send them on their way. A more sophisticated method is to give them a presentation: train the reps and teach them enough to deliver a market presentation.

But the most effective approach is to coach sales professionals on customer management strategies to provide a customer perspective. What we want to be able to do is truly connect to the customer and the customer’s core.

And this is where we talk about the expertise of the sales professional. It builds on their experience, knowledge and fluency in customer management strategies, and their experience in having dealt with multiple people going through that same decision process. This is what the true sales professional brings.

Second Collaborative culture – here the sales person and team is concerned with a developing a win-win relationship with client. The intention is to consciously seek out the opportunity for both seller and buyer to see the interaction as mutually beneficial. The cultural component is How do we work together to achieve better results in a shorter amount of time. Not sign the order or contract.

Even the most individual of sports requires collaboration and teamwork to achieve world-class results. Coaches, practice partners and trainers all work closely together, combining their expertise to improve the performance of the athlete.

Collaborative sales teams use a common framework, language and terminology when they discuss how to connect to the customer and their issues. Conscious Collaboration begins with the customer. World-Class Sales Performance is the result of working closely with customers, understanding their context and concept to craft a solution.

Conscious Collaboration at the organizational level is evolving beyond the internal, personal knowledge networks every salesperson uses to access information, intelligence and resources. The salesperson works as the subject expertise and account specialist to develop the strategy (Account plan, opportunity plan, and sales call objective). Additionally, the salesperson is clear on customer communications and knowledge necessary to engage and close the sale.

The key question around this behavior is, “Our organization collaborates across all departments to pursue large deals.” Here we find a significant difference between World-Class and All Respondents—93% to 46% and this has been a consistent average over the past four years.

And thirdly, looking at calibrated success and performance accountability, the cultural component is “what do we measure, recognize and reward?” World-Class Sales Performers are first and foremost accountable to their customer.

The key question connected to this behavior is, “Our sales performance metrics are aligned with our business objectives.” And here we see a considerable difference between World-Cass—92%, and the All Respondents category at 43%. And also there is a consistent difference over the last four years.

World-Class Sales Performers also hold themselves accountable to the standards and expectations set by their frontline sales manager, who in turn must be accountable for the performance of their team and their contribution to the sales organization.

It is accountability that differentiates the sales professional from the sales rep. Sales professionals seek to develop and advance their skills. World-Class professionals predicate their success on their customer’s success. They know that their long term, sustained success is tied to the success of their customers.

So what it takes to win is far from a ‘door to door’ random exercise. It takes the discipline to understand the customers concept, context and returns – what is the customer trying to fix, avoid or accomplish. It takes the ability to collaborate across account strategy, key messages and superior knowledge to engage and close the sale. What it takes to win is what we offer through our sales performance practice that is focused on the customer in a sales system that is positioned to help customers create opportunities, manage those opportunities and translate those opportunities into long term profitable relationships.

Towards building clarity and focus in B2B Sales

 'Our people don't know how to sell' is a common refrain that we run into in our work with clients from Telecommunications to Banks. There is this idea that sales people are 'born', some kind of genetic dispensation to creating leads and closing sales. And where companies feel they are not blessed with enough of the grafting, they resort to all manner of schemes to 'convince' the customer and ultimately achieve sales targets.

 Sounds good, not until you begin to peel the onion. Row Moriaty in a 1995 Harvard Business Review (HBR) article which focused on variability in productivity as a function of job complexity and identified Sales as almost infinite variability. The point was that the fewer decisions a sales person had to make (about activities, offerings, target markets, value propositions, etc) the greater their productivity. So true.

  So rather than 'our people don't know how to sell', it is real issue for the productivity of the sales force is clarity and focus. Clarity of the key activities that the sales person has control over that is predictive of the sales target and focus on developing the skill of how to engage a client in uncovering the issues and results that the client is concerned about.

 And this is what we have done in Franklin Covey in a single graphic called the sales wheel. At the centre of the sales wheel is the Face-to-Face (FTF) client meeting. The FTF is the single most important activity that the sales person must accomplish daily, especially in the business to business segment. Ideally, every account manager should be able to do 9 client visits per week, where the average duration of each meeting is 45 minutes. The more the sales person is able to do this, the better yield (value per transaction or single sales objective).

 Next to the FTF is the lead generation - the process for filling the sales funnel. Here is dedicated resource/s is assigned to ensure that leads are identified from referrals, research and marketing events. This step in the process is vital for the health of the sales funnel and a great predictor of your ability to maintain a healthy balance between the FTF and the number of leads.

 Next to lead generation is task substitution, the process that ensures all the activities that impede a sales ability to have FTFs are substituted with a resource, usually of a lower value than the sales person. We use sales administrators of inside business partners to handle these issues. Research from Miller Heiman (MHI global) shows that 67% of a sales people time is spent in non-selling activities. In one engagement in Kigali, Rwanda with a group of business bankers, the participants identified everything from checking client balances to picking up Know Your Customer (KYC) forms are activities that consume their time. This is also similar to experience as a national sales manager with a telecommunications company. Back then, our account managers spent more time in collections than in building long term profitable relationships.

 The last and perhaps most significant step in the sales wheel is sales management. Here sales managers - including senior management folks should be out doing ride-alongs with their sales team. During this time sales managers coach account managers on the selling and buying processes as well as remove any constraints in closing the sale. MHI Global in its 2014 Sales Best Practices Survey (SBPS) found that 96% of world-class sales organizations agreed with the statement that ‘Our management team is highly effective in helping our sales team advance sales opportunities’. And in another finding from MHI in previous years, there the presence of a coach correlated with great success in closing the sale.

However, the experts from Miller Heiman warn that, ‘Sales management can be viewed as an asset or a liability by the sales professional. Sales professionals quickly separate those managers who are able to help them win business through effective and regular coaching from those simply seeking data to satisfy requests from higher-level management. To be seen as an asset, sales managers must be masters of the customer-management strategies. They must also be knowledgeable about the market, job roles and business issues that customers face and be fluent in mapping product and service capabilities to customer concepts. Before the sales manager can be an effective business manager and coach, he or she must be respected and valued as a sales professional who reflects World-Class sales behaviors’.

And organizations that have applied the focus and task clarity that Row Moriaty talks about have not only experienced more than 20% growth over their peers but have had higher sales person retention rates as well as improved employee engagement.