I was having a chat with a corporate executive recently about problems in the ‘Big Box’ companies. Large businesses have the same problems as small businesses but on a much larger scale. The problem for the day in Corporate America was dealing with the costs of customer service.
In large businesses it is nothing to get 500 calls an hour from customers complaining about something..billing, product reliability, sales agreements, or just total dissatisfaction. The time it takes to deal with customers and the number of people a business has to employee equates to a huge cost for large businesses…or any business for that matter.
And where does that cost go to be covered?…yep. The price of goods.
Businesses are always going to have to deal with customers and most place into their business plan how the customers service portion of the business will be handled. Also, large businesses realize they will not be able to satisfy all customers so they write into their business plans the most disturbing part of their business model…..the acceptable percentage of ‘Disposable Customer Base’
Yes, they actually write in their plan an acceptable amount of customers they will not be able to satisfy and totally write off.
The ‘Disposable Customer Base’ mostly effects the Customer retention levels, or the number of customers they depend on for repeat sales.
Over the years I have seen this percentage as high as 40%…this means that out of 100 customers that buy a product or service 40 of them are expected to not return for a repeat sale due to not being satisfied with the product or service.
So, for every 100 customers they acquire each year they depend on 60 of them to buy from them again.
How many times have you been part of the 40 customers who they write Off? Could this be part of why the economy is in the shape it is in today? I think most of us have been part of this index for a long time.
The problem now is turning this around. The conversation I was having was what can be done to reduce the disposable customer rate or do away with it all together. The answer in what to large businesses can do lies with how Small Business handle this situation.
In small business there cannot be an acceptable percentage of disposable customers. For every customer that is gained some attempt should be made to keep them. Statistically, it is more cost effective to attempt keep a customer than it is to market for a new one.
When you amplify that cost of finding new customers to the large businesses you quickly realize why their marketing budgets are so high. Now that consumer spending is down big businesses will have to take a page from the small business’ play book and start working on retaining customers.
So what do small businesses do to retain customers that large businesses will need to adapt to doing to keep customers?
The good ‘ol press the flesh’, ‘eye-to-eye’ contact method of doing business is what small businesses have been surviving on for many years. Now large businesses are going to adapt to that method….but how?
Large businesses are dealing with thousands of customers each day. How would they be able to manage talking one-on-one..or even in small groups, with all of those customers?
This is part of the change all businesses will have to make. How they do it will be the challenge large businesses will have to face, but they will have to face it or run the risk of going out of business. There are some solutions I see they could make, what do you see?
