Categorized | Articles, Featured

Vying for Customer loyalty?

Posted on 03 October 2009

In today’s environment, vying for customer loyalty is no easy feat. Gaining loyalty requires distinguishing ones products from the competition as well as balancing customer wants, needs, and expectations with a focused business model.

 

One issue is how to distinguish yourself (differentiate) from your competitors …meaning you have to attach a certain value to your brand even if it’s a perceived commoditized product that you’re selling.

 

Increasingly, Small and Medium Enterprises (SME’s) seeking to meet this challenge are learning to excel at marketing and repositioning themselves as customer relationship managers who not only provide products and services but repackage the products and services of their vendors/suppliers. However, customer demands are growing and using the repackaging of products exacerbates the difficulty of delivering a positive customer experience.

 

It’s the dilemma of…any product, any service, any time, any place, which is what a typical customer wants. The challenge facing most SME’s is how to balance these wants/needs with a value proposition which creates a positive customer experience.

 

While many SME owners debate the difficulty of meeting the needs of increasingly demanding customers, the pitfalls of cross-selling and the tricky business of measuring the value of customer relationship management, others have expressed optimism about the opportunities inherent in the mission of delivering value in a multi-faceted, multi-function and multi-channel world.

 

The biggest single shaping issue in today’s marketplace is commoditization. Commoditization is not new, as it has been with us for a long time, but the intensifying connectivity and communication among customers are accelerating and exacerbating it. How to escape commoditization?

 

One of the ways is through customer analysis. At the core of this analysis are two paths: 1) to have a customer focus or 2) to have a product focus. Most SME’s believe they have a customer focus. But increasingly, SME’s are trying to do both. A customer focused SME’s will offer complementary products from other vendors, or—heresy—competitive products. As for the product focus they will sell any product wherever they can. They can and will compete against their own vendors/suppliers.

 

One of the critical issues facing SME’s is what it means to have a successful customer focus. Some SME’s spend huge sums to explore the big question: Are there new market segments that can be entered, and, if so, can they do it profitably? And the other big question is, is there a possibility to create the killer business model that will allow them to create strategic competitive advantage?

 

The days of being vertically integrated, i.e. when a company designs, manufactures, markets, distributes and services a product are over. Three of those five functions are cost centers. They do nothing to add to profitability. The Internet allows SME’s to outsource those to a strategic partner that has actually converted them to a profit center (i.e. distribution through FedEx, UPS, etc.).

 

Customers want to go onto a website, make a purchase, obtain shipping information, and finalize the transaction in less than two minutes. Why is that important? Because customers who use the Internet today want to conclude a transaction, and they want to do it in a seamless, hassle free manner!

 

One of the big misconceptions about the Internet is that it’s a channel of distribution for existing products. However, if you attract customers to the Internet and you do nothing to change your back-office business processes, you will have another dilemma, how to overcome customer dissatisfaction with their experience.

 

There are three dimensions to differentiation: product differentiation, customer relationship, and operational efficiency and effectiveness. Now is the time to decide which is your main differentiator and which is your secondary. Because once you decide, you can deal with the other question of how to incent the sales force. If the sales force is confused about product differentiation vs. customer relationship, you’ll never get alignment. However, if they know that it is customer relationship, for example, then you will be able to cross-sell other products/services because they’ll know very well what the deal is.

 

One of the great value drivers used to be market information. Now that has become a commodity. You can get it on the Internet, and you can get it essentially for nothing. Today, the real value added is not the ability to obtain the information but the expertise to convert it for strategic competitive advantage.

 

SME’s must view customer partnerships from a business perspective of trying to get the customer in a position where there’s a cost, be it a dollar or psychological cost, to changing vendors. SME’s are not going to be perfect every day and always provide absolutely the best customer service. But they must provide linkage so a customer says…It’s not worth it to me to change.

 

Brand identification is key, whether you’re selling a product or service. I don’t think it’s particularly important which it is, because brand identification will be what you sell. And if you have brand identification, you can outsource anything else. If SME’s could outsource a few business functions (i.e. manufacturing, distribution, HR, etc.), they would become the happiest people in the world, because then they only have to orchestrate  the best providers with the best costs, and where they can enjoy maximum margins with the least amount of resources.

 

Branding is a complicated concept. There’s brand recognition, and then there’s brand experience. The essential key is brand experience, and it has to be consistent. If you’re a SME, and you are actually outsourcing to other suppliers/vendors, you have to do that in a way that is seamless and hassle free to the client and it doesn’t involve a hand-off to the vendor/supplier.

 

SME’s are facing some key challenges in today’s marketplace. Customer preferences and the way they do business, are rapidly changing. Maybe being in a commodity world is not a bad thing because it then requires SME’s to re-examine every single aspect of their business. It almost forces them into a discipline of paranoia where they really have to be on their game to be successful.

 

SME’s have to spend more face-to-face time listening to what customers have to say. They also have to listen to their employees and understand what’s going on inside their companies. They then have the opportunity to customize their business model to meet their objectives. SME’s have to be in a position to understand that they are around because of customers (market focus), and customers are not around because of them (operational focus). The concepts of branding and differentiation are key. This is supported by the fact that SME’s really have to excel at what they do, and provide customers with outstanding products/services and customer service which will repeat itself…time and time again.

 

Doyle J. Girouard is a business consultant and coach, frequent speaker, and author. With 13 years of knowledge and experience in the Travel Industry he assist DMC’s, Incentive Companies, and Hoteliers achieve strategic competitive advantage.

 

Doyle J. Girouard

CEO and Senior Managing Partner

The Cypress Group

Phone; 817-421-4774

Email; doyle@thecypressgroup.com

Blog; www.TravelKeyNote.com

Twitter: http://twitter.com/doylejgirouard

 

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