Four tips to help find out why customers leave
By Rod Jones
Every year we lose a few customers and justify these losses as situations beyond our control. While there are cases that fit this description, research indicates the opposite is generally true. According to research by The Forum Corporation, some of the reasons customers switch vendors are:
- 15%—better product
- 15%—lower price
- 20%—too little contact or attention
- 45%—the attention they did receive was poor in quality
- 5%—other
Meeting and exceeding customers' expectations is an elusive goal. However, we will never reach it unless we first establish and measure the factors that please and displease customers. This is especially critical for distributors since their interaction with customers is responsible for the largest share of the satisfaction equation.
Based on six years of research with manufacturing end-customers, Decision Technology has developed a ten-point measurement and implementation plan for suppliers. Here are a few tips that will help you get started or improve your existing measurement process:
Tip #1—Customers want performance measurement!
Research conducted by the Technical Assistance Research Program (TARP: Washington, D.C.) found that only 4% of dissatisfied customers ever complain. Customers want to be heard, but say they do not have the proper forum in which to speak out.
Last year Cummins Engine engaged in a formal partnership agreement with a major machine tool supplier and made satisfaction measurement mandatory. In other words, "If you want to be our supplier, you must systematically ask us to rate your performance." Another example is the QS/TE-9000 quality standard. It also requires suppliers to have an unbiased, benchmarked, ongoing customer satisfaction measurement program. The handwriting is on the wall—ask customers to rate every aspect of your performance!
Tip #2—Be careful what you measure!
Customers complain that satisfaction surveys measure what suppliers think is important, not what customers deem critical. The survey process should be started with customer focus groups to capture customer definitions of quality and satisfaction. Appoint a customer satisfaction council to advise in ongoing satisfaction issues. Be sure to invite customers who are candid and open to these meetings.
Tip #3—Don't use the sales channel to collect satisfaction data!
Traditionally, we look to the sales organization for reliable customer feedback. However, customers find it awkward to voice their complaints of the sales function through the salesperson. Utilize a third party method—surveys, focus groups or interviews. An outside firm would add credibility.
Tip #4—Implementation is everything!
Customers have a hard time seeing resulting change in suppliers' businesses. Be sure to link every metric to an internal system with accountability for change. Also, let customers know through the use of a newsletter the changes you have made as a result of the measurement process.
Measuring customer satisfaction will pay big dividends. According to research, companies with the highest customer satisfaction index in a given market will experience higher ROI and higher selling prices than competitors.
Hidden Complaints
The Effect on Sales
The Effect on Product Pricing
The Effect on Profits
Source: AMTDA's Tool Talk (June/July 2000 issue)
Consider the following facts:
American Machine Tool Distributors Association (AMTDA), 1445 Research Blvd., Ste. 450, Rockville, MD 20850 USA; phone: 301-738-1200