16: Customer Retention

The author disdains the notion of "industry standards" as an excuse for poor service - and the expectation that customers will tolerate it because everyone does it. The same is true for employees - jobs that pay minimum wage, or managers required to work 60-hour weeks, because it's "industry standard."

To the author, industry standard is a spotlight on an opportunity for competitive advantage. Car dealerships used to make as much off service, such as oil changes, as they did from selling cars - but the waiting times were terribly long at every dealership: it was an industry standard So Jiffy Lube offered a ten-minute service and stole the business from them, for good.

Companies that rely on the excuse of industry standards are relying on one thing: nobody is willing to offer better service. As soon as someone does, the customers flock to them, and it's very hard to win them back.

Customers Vote with Their Feet

It's a popular notion that "customers vote with their feet" and cast their votes with dollar bills at the cash register. Ultimately, this is what businesses care about.

The problem is that customers will put up with a lot. They complain about Wal-Mart, but continue to shop there. This sends a clear message to management: their complaints are a lot of hot air, and the customers don't really care enough to shop elsewhere. This will continue so long as customers, in sufficient numbers, are willing to tolerate (and pay for) mediocre service.

But of course, this also means that the customer must be willing to give a little more for good service. They may have to pay a higher price, wait a little longer, drive a little further, and be a good customer in terms of giving fair value for the service you receive and not seeking to take advantage of those who are willing to accommodate you.

Cut the Catalogs

The author mentions the onslaught of catalogs that arrive at his home on a regular basis. Companies he buys from periodically, others he hasn't purchased from in years, and still others he's never done business with at all. By his reckoning, there are some companies that have spent more on printing and postage than he ever gave them in sales, or is ever likely to. The lesson here is that chasing after a non-loyal customer is a fool's errand.

The author defines four special subspecies of shopper and tells how to handle them:

None of these are the same as regular shoppers, who value your service and are willing to pay for it over and over. And none of them are likely to become regular shoppers, ever. So don't waste time.

(EN: This is interesting, but I sense the "occasional shopper" is harder to accurately identify - you'd have to discover if they have the potential to become regulars. If they only buy from anyone once in a while, probably not, If they buy from you once in a while, but also buy from others sometimes, there's potential there.)

A loose topic: employees are often aware of the revenue of a store, but not the expenses - so they often have the perception that the company is making lots more cash than it is. Service workers may not understand this - and he gives an example of how to explain it using a stack of pennies that represent revenue, then deducting expenses, to arrive at a very small amount of profit.

Another anecdote: a woman who lives in the outskirts, some 30 minutes from town, ordered glasses with a national chain store. On the original date she was told they'd be ready, she drives into town to find that they're not - it'll be another week. A week later, still not ready, so she cancelled the order and got a huffy response from the clerk. Her offense was not that it took so long, but that they set an expectation and failed to follow up (not even a call). It's noted that the store manager later called her to ask for her business back, and it was clear that the company had trained her, but the training was not given to the clerks who are the direct interface with the customer.

Another anecdote: a video store called regarding a late fee of $2, threatening to take action against the customer if the fee wasn't paid. The customer asked for an accommodation - "Are you saying that for two dollars, you're willing to lost the business of a 15-year customer?" The answer was: yes. The customer decided to call corporate about it, got the regional manager, who apologized, waived the late fee, and gave her "several" free rentals by way of apology. Again, the point is that training and empowering the clerks on the front-line would have prevented dmage to the relationship.

Stupid Customer Tricks

The author tells a few anecdotes from personal experience:

Customer Training

The author cites a few examples of shops that train the customer: a barbecue restaurant joint where the clerk asks a cryptic question "six or twelve" (the customer must be trained to recognize that they sell only ribs, in sets of six or twelve), a family steakhouse where they send out coupons every two weeks (training customers to eat elsewhere on other nights), etc.

In most cases, training the customer is an unintentional side-effect of standardized service: customers learn to say and do the "right" things to get prompt service, a better price, etc. In other instances, it shows that customers will learn to "game the system" to bypass standardized service in order to get what they want.

(EN: The author seems neutral on this notion, and I can see two sides to the issue. It's good for the "regular" customer because it enables them to get what they want more efficiently. It's bad for the "new" customer because the service is awkward until they learn the right things to say or do. And regardless, it's inevitable in instances where transactions are repetitive - even if you don't intend to train the customer, the customer will train themselves. An example from my own experience is a diner in NYC where one of the patrons, obviously a regular, ordered in the same verbal shorthand that the waitress used to call out orders to the cook. It wasn't necessary, probably not intentional, but the customer learned to speak the staff's language.)