Do you run your business assuming that increasing customer satisfaction ultimately increases cash flow? If so, you could put yourself right into bankruptcy. Let’s face it, if you had all the money in the world, you could bring customer satisfaction up to an amazing new level.
According to Bob Fifer, CEO of of Kaiser Associates, a leading consulting firm, to increase customer satisfaction we can offer:
Higher quality – example Mercedes Benz
Broader selection – example Toys “R” Us
Superior brand image – example Federal Express
Or … any combination of the three
What we attempt to do by employing any of these strategies is to differentiate ourselves in the marketplace. The only trouble with differentiation, however, is that it costs money!
Knowing these facts of life, the trick is that we must differentiate our company without going broke. To do this we must only provide those elements of differentiation that the customer is willing to pay for and not the ones the customer is not willing to pay for.
This may seem harsh, or conversely may seem like good common sense and survival. Think of it this way — if you build in quality, add additional products and service plus buy or develop a great brand image, and then don’t raise your prices, you will go broke. If you do this and then raise prices above what the customer is willing to pay, you will lose your customer!
Sooner or later, all customers go to the place that includes the differentiation they want, but excludes what they aren’t willing to pay for. So that’s what we need to strive for in our petroleum and c-store operations. We need to offer those differentiating items that the customer is willing to pay for, and not offer any they won’t.
Let’s use an example from the auto industry. Honda came out with Accord in only four colors and two options packages. They almost destroyed the American car manufacturers who thought they needed to offer the buyer a myriad of choices. Honda put some of their savings into their pocket, but gave the rest back to their customers via a superior standard package.
Costco revolutionized buying with their warehousing concept. They understand how to offer the customer what they want, but don’t make them pay for what they don’t want. Who would have guessed that America would be bringing home large quantity goods in recycled, warehouse boxes!
Striking that right balance of offering exactly what the customer wants and eliminating what they don’t want is where the profits are. It is the part of running the business that requires the most judgement.
According to Fifer, virtually all of your staff are constantly thinking and geared up to add differentiation which equals added costs. Where we fail is that no one in our organizations is looking for the ways to eliminate costs (sources of differentiation) that the customer is not (or no longer willing to) pay for.
The essential question in your organization needs to be this: “What are our customers willing to pay for?” When every product or service is viewed in this manner, profitable customer satisfaction becomes easily achievable.
Notice that posing this question also covers what customers have come to expect. For instance, is our customer willing to pay for a clean bathroom? The answer, of course is yes. For if we have dirty bathrooms, we lose the customer.
For Costco’s concept of customer satisfaction to emerge, someone had to start questioning every aspect of grocery buying that we currently take for granted. If we use the paradigm that everyone that shops for groceries wants a pretty store with attractively displayed merchandise, Costco would not have opened.
Notice, however, that Costco still boxes your groceries for you. Someone in the organization made the decision that customers would not be willing to pack up their own purchases. Interesting areas of differentiation aren’t they?
Take a fresh look at your business starting today. For every asset and every cost, ask yourself, is my customer willing to pay for this? If you think the answer is no, they don’t need this and they won’t pay for it, do further market research. Make your eliminations in small stages. This will allow you to “test” your theories. If you are alerted to any customer backlash, you can make a quick about-face on any elimination that didn’t work as you thought.
As you enter into this process, you will find that you must know your customer intimately. Who is your customer? You can’t accurately pinpoint what your customers will and won’t pay for without knowing exactly who they are.
The key to profitable customer satisfaction is also getting the highest possible price for your products and services, without losing any desired customers! Considering that you likely have all types from the most budget-conscious tight-wad to those willing to pay top dollar, your company’s offerings must be able to match all your customers’ needs.
Not only does your price need to be right, but your employees need to be proud of your pricing. If your employees are apologizing for high pricing, you will soon lose customers.
In summary, look carefully at every minute piece of your customer satisfaction puzzle. Question whether your customer is willing to pay for that offering, or if you have lower priced alternatives. Offer only what the customer will pay for at its maximum price, and you will be plenty profitable.
