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.

 

We Don't Do the Work

One of the most satisfying aspects of our work is the privilege to meet clients - it is truly an exciting opportunity to listen and work with the client to achieve their business objectives. Usually, we will run into clients 'know what they want' or others who will rely on our experience in the diagnostic process to get a solid understanding of the problem. And this can take a number of iterations to get to the issues, evidence that these issues exist, the impact of these issues on the business and the type of solution we can customize.

Now nothing could have prepared us for last week, when we ran into a client who was 'surprised' at the suggestion that the issues the sales team was facing could not be dealt with in isolation of how the sales team was been led. 'we don't do the work, our sales people do' was the emphatic conclusion of the sales leaders at the meeting. Implication is 'fix' our people and we will be fine. Specifically, the sales leaders complained that their team was focused on the 'flavour of the month' and not a balanced sales approach that looked at growth, retention, profitability and customer service.

Now this idea of 'fix' my team is not new. Sam Reese, the Chief Executive Officer (CEO) of Miller Heiman International (MHI) told of a similar story at the MHI Europe and Middles East (EMEA) conference in Prague a couple of years ago. According to Sam Reese, a top US investment banking client complained how non-performing his sales team was and asked Sam Reese if MHI could do the fix. Without much conversation, Sam Reese told the packed audience that he told the Chief Executive that if 'if you have no faith in your team, there is nothing we can do'.

The 'fix my team' attitude of our local customer and that experienced by Sam Reese is based on this idea that leadership is fine but it is the people who are the problem. And nothing could be farther from the truth. What we know, thanks to the work of Norris and Smith in 'Change the Culture, Change the Game', every team and organization has a culture, the culture is either working for or against you. Cultures are created intentionally to create a work environment of accountability for results. Leaders, based on thousands work around the world, are the high leverage point for culture for change. The actions of the sales people in our local example above, are driven by what they belief about the team. And this belief is driven by the experiences provided by the leadership. A team's result therefore is not created by a bad sales force but by the quality of the leadership in place.

A tough proposition but an accurate one if we want to change from a culture of non-performance to one of results and accountability. The great management guru, Peter Drucker opined many years ago that Leadership is defined by results and not attributes. And the folks at Bain in their turnaround bible, stated clearly that 'there is no running away from the fact that the continued malfunction in a business is due to management inadequacy'. So the 'fix' starts with us, those entrusted with the responsibility to make it happen.

It is the our responsibility to one,lead our teams to create the future (Direction), to envision the future and create a plan to get there. Like one sage said, when you find a man on top of a mountain you can be sure he did not just fall there. Two, leaders must align (Alignment) everyone to future - individual contribution and compensation and thirdly, we must ensure people volunteer their grit and sweat (Commitment) to make the future happen.




 

Making It Happen

During our staff meeting yesterday, our internal business partner made two suggestions for increasing the number of call outs to clients. Call outs are a way of contacting clients to set-up appointments for our Client partners - people who are the key sales and account management folks. One suggestion was that the head of the business should make certain calls if we wanted to increase the likelihood of getting the appointments - these will be calls to Heads of business and other executives. And the second was that we should get the local newspaper business directory.

The idea of the local newspaper business directory is a great one because it will have a considerable listing of all businesses in Uganda. But it was the reason that we did not have it at that time that stunned me. We had been waiting for our accountant to buy it. I later learnt that the initial idea for the purchase of the business directory was discussed over three weeks ago. And here is the sad part, our neighbours (who seat right across from us) had the 2014 edition of the business directory all the while but none of us asked for it.

This story leads me to the numerous excuses we encounter for lack of productivity. It is not uncommon to for people to wait to be told what to do or make excuses like the one narrated above. First lest be clear, if I had followed up earlier as part of the process of providing support to the team, we probably could have caught this earlier. So I take full responsibility for the excuse giving culture. So when People don’t get engaged and show full ownership or when we allow the urgent and important take over, I am right there. 

An employee who is fired up about what they do and the type of contributions they want to make will not wait to purchase a local business directory or go late to a customer meeting due to city traffic. Neither will a supervisor who is focused on the growth and health of the business waited to be surprised at a review meeting about the lack of a business directory.

 Supervisors and leaders have a responsibility to intentionally provide the right experiences that inform what people eventually believe is acceptable in the work place. We need to look out for those behaviours strengthen our work ethic and drive excellent performance. This is what will drive a culture of accountability; the alternative is to accept mediocrity by our inaction.

So in the example, above we spent some time - including walking to our neighbours to get the local directory – to emphasise to the team what is acceptable. Doing what is necessary to grow the business must be rewarded and celebrated but waiting for the accountant to do what you can do is unacceptable. Everyone on the team learnt that ownership and proactive behaviour are specific choices we make on a daily basis and these choices have consequences for ourselves and the business.

And the way we interact daily to achieve results for the business will constitute what we believe about the business. And it is this belief that drives team results. As Roger Connors and Tom Smith put it in ‘Change the Culture, Change the Game’, every organization has a culture, either you manage the culture or it will manage you. And the best culture to have is a culture of accountability and leaders must create that needed culture of accountability’. Put differently, the culture produces the results.  If you need a change in results, you need a change in culture.

In the new culture, our people must take the initiative to figure out what to do and ask ‘what else can I do’. People personally invest in making things happen and focus on finding solutions. I recall Amos Ntakky, a former colleague of mine who went from the office to Nairobi to pick up a part for Private Branch Exchange (PABX) in order for us to full provision services for a customer. Until Amos travelled, our customer had waited for over 3 weeks for a journey that was 90 minutes round trip.

And the idea that we can deliberately create a new culture of accountability is by far better than the cynicism of ‘all my people are bad’. When we allow our frustrations to respond that way, we create the equivalent of the Pygmalion effect in our teams - what managers expect of subordinates and the way they treat them largely determine their performance and career progress. Less effective managers fail to develop similar expectations and as a consequence, the productivity of their subordinates suffers. Subordinates, more often than not, appear to do what they believe they are expected to do.

We are reminded that a unique characteristic of superior managers is the ability to create high performance expectations that subordinates fulfil. In other words, when we create a culture of high expectations and accountability, our people fulfil them.