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November 1st: Torsten Jacobi, CEO of Creative Weblogging, joins host Anita Campbell. Sponsored by Six Disciplines. Show details.
Tuesday, August 16, 2005
The Rising Tide of Customer Defection

Editor's note: The following guest column comes to you courtesy of business author Laurence Haughton. He writes on a topic some think is a trend: customer disloyalty. Laurence examines it and explains what is behind it.

By Laurence Haughton

Right now somewhere between 32 and 94 per cent of all customers are thinking about ditching their current supplier for the competition.
  • About one-third of all insurance clients are looking around.
  • Over half of all cell phone customers are on the edge (the same is true in financial services).
  • Four of five apparel buyers are ready to switch.
  • And 94 out of every 100 diners who bought a burger last week may not come back this week.

And the stats are no better in professional services and B2B.

  • 55 per cent of enterprise software buyers are real antsy
  • 61 per cent of executives who outsourced something say, "Going forward, we'd love to find someone else to outsource with."

Some think this is a trend ... a sign of the times. "People aren't as loyal as they used to be," one businessman said. "And Wal-Mart has taught consumers all that matters is the lowest price."

There's certainly some truth in those observations. Competition is crazy, customers are fickle, and everybody is too busy to think about the long term value of a good relationship.

But in my research for my book "It's Not What You Say... It's What You Do: How Following Through at Every Level Can Make or Break Your Company" I uncovered a deeper reason, what I think is the root cause for the rising tide of customer defection (and potential defections) across all sectors.

A lot of customers just don't like their suppliers!

40% of Yellow's clients didn't like them

When Bill Zollars took charge at Yellow Trucking he asked the folks at headquarters, "What do our customers think of us?"

"They like us," Yellow's top managers assured him.

But Zollars wasn't so sure. He knew from his years at Kodak that head office executives can often be way off in their assessments of what customers are actually thinking. Zollars needed a fact-based, accurate benchmark of Yellow's customer sentiments so he could quickly make the right moves and radically improve Yellow's revenues.

Bill Zollars is one of the few big company CEOs who still thinks like an entrepreneur. So instead hiring an outside consultant firm to conduct a 12 month customer satisfaction survey, Zollars suggested his executive team roll up their sleeves and dig into several boxes of customer invoices.

"Find out," he told them,

1. "Did we pick everything up on-time?"

2. "Did we deliver everything on-time?"

3. "Did we keep everything in-tact (no scratches, dents or breakage)?" and

4. "Did we send the customer an accurate invoice?"

Zollars' thinking was simple. "Those are the four basic expectations a customer has when they hire a trucking company," he explained. "And if you fail to follow through on what customers expect they can't possibly like you."

Needless to say the results of this simple study were like a cold slap in the face. In 4 out of ten cases Yellow had failed to follow through on one or more of the fundamental things their customers expect.

"How can they say 'our customers like us,'" Zollars thought. "We let them down 40 per cent of the time."

Zollars knew what he had to do. He engaged executives and employees at every level, from headquarters to the loading docks and everywhere in-between, to implement an aggressive initiative to fix their follow through.

1. He made sure everyone was crystal clear about "just what was expected."

2. He took steps to make sure Yellow had the "right people" at every point of contact.

3. Zollars and his top managers got "enough buy-in" from everyone to overcome the law of inertia.

4. And Yellow reorganized their management to generate more "individual initiative" from every driver and at every depot.

Using those four building blocks Yellow soon reduced that 40 per cent of dropped balls and unforced errors to under 4 per cent. Revenues and profits shot up and Zollars set a new goal, to take the 96 per cent of customers who now "liked" Yellow to the point where they "liked Yellow a lot."

Is customer defection a trend?

Is customer defection a megatrend, caused by circumstances beyond any businessperson's control? Definitely not.

As Bill Zollars told the teams at Yellow, "...if you fail to follow through on what customers expect they can't possibly like you." And (as nobody should need to tell any businessperson) customers who don't like you are more likely to defect.

* * * * *

Prior to becoming a bestselling business writer, Laurence Haughton worked as a management strategist, researcher, and consultant -- advising clients in media, technology, distribution, and professional services. Find out more at www.laurencehaughton.com. Please be sure to read our accompanying review of Laurence's book. Also read Rob the BusinessPundit's review.

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