According to George Box "All models are wrong,
however some models are useful". We believe you will find this model
(graphic) which starts with customer satisfaction,
customer loyalty and customer retention useful.
A large factor in determining the likelihood of success and profits in an
organization is customer satisfaction. When there is customer
loyalty the customer retention rate is high and business
results tend to follow.
There exists an interaction between the desired results and customer
satisfaction, customer loyalty and customer retention. They may go by
other names such as patients, clients, buyers, etc. Without
the customer it is impossible for any business to sustain itself.
Achieving the desired results is
frequently a result of customer actions. Any business without a
customer satisfaction is at the mercy of the market. Without loyal
customers eventually a competitor will satisfy those desires and your
customer retention rate will decrease.
There are several levels of customers:
1. Dissatisfied customer--Looking for someone else to provide product or
2. Satisfied customer---Open to the next better opportunity.
3. Loyal customer--Returns despite offers by the competition.
Dissatisfied customers are an interesting group.
For every one that complains there are at least 25 who do not.
Dissatisfied customers by word of mouth will tell eight to sixteen others
about their dissatisfaction. With the web some are now telling
91% of dissatisfied customers never purchase goods or services from the
company again. A prompt effort to resolve a dissatisfied customer's issue will result in
about 85% of them as repeat customers
Depending upon the business, new customer sales may cost 4 to 100 times
that of a sale to an existing customer.
There has been less research on satisfied customers to determine what it
takes for a satisfied customer to change. Why take a chance on mere
satisfaction? Loyal customers don't leave even for an attractive
elsewhere. At the very minimum they will give you the opportunity to
or beat the other offer. Maintaining loyal customers is an integral
of any business.
One of the ways to help obtain loyal customers is by having products and
services that are so good that there is very little chance that the
customer requirements will not be met
Of course one of the difficulties is understanding the true customer
requirements. Even when you have the requirements in advance the customer
can and will change them without notice or excuse. Having a good
process for a dissatisfied customer is a necessity.
When I found this it was attributed to Sam Walton founder of Wal-Mart.
A customer is the most important person in any business
A customer is not dependent upon us. We are dependent upon him.
A customer is not an interruption of our work. He is the sole
purpose of it.
A customer does us a favor when he comes in. We aren't doing him a
favor by waiting on him.
A customer is an essential part of our business--not an outsider.
A customer is not
just money in the cash register. He is a human being with
feelings and deserves to be treated with respect.
A customer is a person who comes to us with his needs and his wants.
is our job to fill them.
A customer deserves the most courteous attention we can give him. He
the lifeblood of this and every business. He pays your salary.
him we would have to close our doors. Don't ever forget it.
Several surveys have been done on why customers do not give a business
repeat business. Reasons given by customers for not returning for
Other Friendships 5%
Employee Attitude 68%
These surveys would indicate that in addition to the technical training
and job skill training provided to employees, some effort aimed at
satisfaction and employee attitude is appropriate. Remember these
be the people normally thought as "Sales People". For
Supervisors, Secretaries, Accounts Payable, Engineers, Accountants,
Designers, Machine Operators, Security, Truck Drivers, Loading Dock, etc.
if not helping to cultivate Loyal Customers are hurting your customer
retention. 68% of lost customers are due to one cause, employee
In order to know how you are doing in this area there must be some
measurement. Data indicate that less than 4% of dissatisfied
ever bother to lodge a complaint. Most just take their business
Test this on yourself. The next time you get less than what you
at a store, business supplier, restaurant, movie theatre, hotel, or any
other business what do you do?
Cultivating the customer relationship is key in achieving the desired
business results. A passive system that depends upon your customers to
inform you without effort on your part is not likely to yield the
information necessary to improve customer retention.
Every organization wants to achieve some level of results.
too often not everyone in the organization has the same results in mind.
Having agreement on the desired results tends to focus efforts. Even
they do agree upon the basic description of the results how to measure
achievement of those results is in disagreement.
Understand what are the desired results.
Some common result areas:
Profit before tax
Earnings per share
Repeat business %
New customers %
First pass prime
Cost per unit produced
Debt to equity
Agree on how to measure the result area.
Is the measurement system capable of producing numbers that are useful for
the intended result area?
Do all of the affected people have confidence in the measurement system?
Can numbers be generated quickly enough to be useful?
Does the measurement depend upon the level of the result?
Generally measurements over a continuum (e.g. % completion) are more
useful than yes/no (e.g. done/not done) type measurement.
In future newsletter we will continue to build and discuss the Business
Every man knows more than you about something. If you don't learn
from him, it is your loss not his. Lonnie W. Adams, my Father
Le client n'a jamais tort.
The customer is never wrong.
Ce'sar Ritz (1850-1918)
In everything one must consider the end.
Jean de LaFontaine (1621-1695)
You don't live in a world all alone. Your brothers are here too.
The universe is not hostile, nor yet is it friendly. It is simply
indifferent. John Hayes Holmes (1879-1964)
In war there is no substitute for victory. Douglas Mac Arthur
Cary W. Adams
10A Bayou RD
Lake Jackson, TX 77566
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