Many businesses understand the need for training frontline workers to be polite, empathic, and knowledgeable. But great frontline service is simply not enough. Everyone in the company is responsible for delivering the results the customer wants.
As a manager, you have the power and responsibility to strengthen the first link in the Service Profit Chain: the capability of your team members.
Most managers sincerely want to make changes that would “turn things around,” but good intentions often fall by the wayside due to the pressure for short-term performance. How can a cycle of mediocrity be turned into a cycle of success?
You can create the cycle of success by starting at the beginning.
Select for attitude, train for skills — skills can be taught, but it’s difficult to train someone to have the right attitude.
Invest in training—make sure new team members receive training in the skills and tools they need to perform their jobs well. Training should include an appropriate mix of interpersonal and technical skills.
Provide tools and support—once you’ve hired winners, you must give them the chance to “win” on their jobs. When you give your team the tools and support they need, they’ll perform better.
Allow latitude within limits—micromanagement is demeaning and frustrating to capable people. A degree of latitude gives them the power and responsibility to make quick decisions and to recover decisively from mistakes.
Reward for results—recognize and reward your people for their ongoing contributions to service. Tie rewards directly to goals. Rewards should reflect the culture and values of your business and should take into account what motivates your team.
An important part of our business is to advise our clients on how they can legally minimize their tax liability. We have specific expertise in this area and we know we do a good job without exposing our clients to the risk of non-compliance.
It concerns us, however, to see many business clients recklessly seek to minimize their taxes often at a cost to profitability and therefore at far greater cost in terms of the value of their business.
Let me illustrate what we mean. Suppose your profit was $1,000 and the applicable valuation earnings multiple was 3. If your average tax rate is 40% your tax bill will be $400. That hurts!
So what some people do is find a business-related expense they can incur in order to reduce this. Let’s suppose they can find $200 worth of deductible expenditures. Their profit drops to $800 and they save $80 in tax. The problem with this (often ill-considered) action is that unless that $200 was invested in something that would bring at least that amount back into the business at some time in the future, all that’s been achieved is to swap $200 for $80.
Not only that, the value of your business may also have dropped by 3 times the reduction in profit — (assuming a P/E ratio of 3).
The position that we take is that it makes much more sense to worry about the issue of tax liability after the profit has been made, not before. We believe that business managers should first concentrate on building profitability and value and only then on the issue of minimizing taxes.
As your tax advisers we can, and do, help you legally minimize your taxes. But as business advisers who are systematically helping you build the profitability and value of your business, we are able to contribute far more value to the relationship you have with us.
If you want any relationship to work, you have to get this right. Honest, two-way communication is the foundation for trust, respect, integrity and loyalty. And it doesn’t always come easy. It often requires courage.
Consider your own experience as a customer. Remember a time when you felt cheated or misled. The business may not have even been intentionally cheating you or jerking you around. But the point is, you felt that way. And you may have customers who have felt the same way about your business.
Think back to your bad experience. Would you have felt differently if the company had clearly stated prices, order tracking or delivery schedules that were available to you as a customer?
Would it have made a difference if someone had recognized the problem they caused you, accepted responsibility and offered an alternative?
Would you have more faith in the business if a representative of that business just plain told you the truth instead of trying to cover their tracks or avoid having to resolve the problem? Chances are you’re saying ‘yes’ right now.
If you want to create a lasting relationship with your customers, it would be wise to make sure you offer them the truth and an open ear. No one wants to feel ignored or dismissed, especially if they are already upset.
One of the best ways to let your customers know you are listening is to implement their ideas. Who better to know how you can better serve them than your customers? When they let you know what you can do to make them happier, truly listen and assess their ideas.
Follow this simple process to calculate the lifetime value of a happy customer. And share the results you get with your team—there’s no better way to impress upon them the importance of loyal customers and the value of customer satisfaction and retention!
- Identify an average customer of your business—if you serve different market segments, you may want to focus on one to start with and repeat the exercise for the other segments later.
- Identify the number of sales you’d make to this customer in the lifetime of your relationship with them.
- Multiply that number by the number of products or services they’d buy in each transaction.
- Now multiply that result with the average price that customer pays per product or service.
- From this, subtract the average cost of acquiring a new customer. This gives you the lifetime value to your business of your average customer.
A simple estimator for the cost of acquiring a new customer
Divide your annual marketing and advertising costs by the number of new customers you acquire in one year.
Try this exercise again based on a loyal customer.
Remember, they’ll be more likely to buy from you over a longer period, visit more frequently, and spend more with each visit. Plus they’ll refer other customers to you.
Adding value is the best way to gain a competitive advantage without sacrificing your profits.
Here are five quick tips for adding value to your customers business experience:
- Routinely ask your clients how you could better service their needs. Find out what they want and respond to their suggestions.
- Use a newsletter to keep past and current clients informed of your offerings. Include valuable information that will keep it interesting.
- “Try before you buy.” Offer your customers samples of your products or services to give them a taste of what is available.
- After-sales follow-up. Find out if the customer is happy with their purchase. Offer additional services such as training or a maintenance warranty.
- Let your customers or clients share their skills, tips, and experiences with one another. Host a monthly forum and feature a guest speaker.
Don’t compete on price. Instead, work to add value to your customers in other ways.