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Master Customer Service

This wiki was republished from Customer Service Mastery: The Top Ten Business Book Summaries on Customer Service

Here's what book summaries are included in this devtome publication:

  1. Clued In: How to Keep Customers Coming Back Again and Again by Lewis P. Carbone
  2. Customer Satisfaction Is Worthless, Customer Loyalty Is Priceless by Jeffrey Gitomer
  3. Enchantment by Guy Kawasaki
  4. Exceptional Service, Exceptional Profit by Leonardo Inghilleri and Micah Solomon
  5. Getting Naked by Patrick Lencioni
  6. In Search of Excellence by Tom Peters and Robert H. Waterman Jr.
  7. Managing the Professional Service Firm by David H. Maister
  8. The Ultimate Question by Fred Reichheld
  9. Why We Buy by Paco Underhill
  10. The Thank You Economy by Gary Vaynerchuk

Clued In: How to Keep Customers Coming Back Again and Again by Lewis P. Carbone

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The Ideal Model

Unlike many companies that have risen and collapsed over the past few decades, the Starbucks Coffee Company serves as the ideal business model. The company started out as a coffee bean store in Seattle in 1971 and has grown exponentially and developed excellent customer loyalty. In the 80’s, Howard Schultz, the CEO, visited Italy and went to an espresso bar. As he sat there listening to the conversations and the hiss of the coffee machine; he realized that the coffee beans he sold could be turned into a masterful work of art in every cup.

Since then, the company has grown into a corporate giant with over 20,000 locations in 62 different countries. In addition to this incredible growth, the company focused on customer retention. This has allowed the development of a loyal customer base that is willing to pay top dollar for coffee products that cost only cents to make.

Brand Management and Experience

Management of a brand focuses on the way that customers feel about the company and its products, while the brand experience refers to the way that the customers and the company view themselves.

Every company needs to figure out a balance and realize the difference between the two. Companies must define their corporate direction as well as the views that customers have about their products and services. These views and perceptions will influence the consumers’ purchasing habits. In order to be successful, your company has to create brand experience. In essence, a mental and emotional link between the company and its customers must be created.

When creating the brand experience, companies need to focus on gathering honest feedback and recommendations from their customers, and actually make changes to suit the wants and needs of the many. The result will be the desire that is instilled in customers to continue doing business with your company.

Gauging Customer Responses

When you are measuring the responses and feedback from customers about your business, they will typically fall into one of three categories: positive, neutral, and negative.

When customers are in the positive section, they have developed a bond with your company or product and often refer you to friends and family via “word-of-mouth” in person and on the internet. If customers are neutral, customers are not dedicated to your company, nor are they against you. The negative customers are the ones who have had bad experiences or don’t like your company and will spread their dislike.

You can use tools such as the “Experience Ribbon,” to determine your acceptance in the market with three easy steps.

  1. Consumer Views – Based on information from other consumers and marketing, people have preconceived notions of your company.
  2. Experience – After reading and hearing about your company, the customer has an actual experience in your store or business. The interaction with your business and employees will change their perception of you.
  3. Memory – Customers look at previous experiences that they had with your company, which has set certain standards in their minds. If consumers remember good things about their visit, they are more likely to return while any bad experiences may deter them forever.

Clues

It is important for your company to know about the types of clues about your business that consumers find in your business, service, or product.

  1. Functional – These clues are directly related to your product’s performance in relation to promises made. If your anti-dandruff shampoo doesn’t work, consumers won’t buy it again.
  2. Human – Clues that are inferred by the consumer related to customer service and employee attitudes.
  3. Environmental – Your offices or business location plays a big role. People notice colors, smells, art, lighting, and the layout to make decisions about whether to continue doing business with you.

It is important for you to analyse everything about your company to remove any negative clues that could drive customers away. Advertising accurately, training employees, and creating a pleasant and attractive business place will help you to retain customers and keep them coming back.

It is important to enter your business as a customer, and critically evaluate your company. It is also important to identify the differences between the ideal service and product you want to deliver, the actual service and products, as well as the perception of your customers.

Evaluating and Altering Perception

In order to accurately gauge the views of your customers, you can create short optional interviews. These can help you to find out what they think, how receptive they are to your product and business, as well as anything that they think can help you to improve.

After you have collected the information from your customers, you need to develop solutions and programs to remedy any problems in the business model or service. It is important to involve every member of your business so that the change is made companywide.

Customer Satisfaction Is Worthless, Customer Loyalty Is Priceless by Jeffrey Gitomer

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What Does Loyalty Cost?

A common mistake that companies make when evaluating customers is gauging customer satisfaction and not loyalty. Customer satisfaction can be as high as 99%, which means 1% are shopping elsewhere; however, the 99% does not mean that they are loyal to you. Increasing loyalty ensures good reviews and referrals.

Exceptional service is not always given, but customers expect it. In order to deliver this service, you need to know and understand your customer’s needs. They require consistency, reassurance, value, communication, and great customer service. Many companies feel that the satisfaction rate is enough and that customer loyalty is secondary.

Your company needs to build loyalty though understanding your customers, providing great service, and creating a great environment. Without repeat customers, your business will die.

Why You Lose Customers

Many things can cause customers to cease business with you. Results of several studies show that over 90% of customers who leave angry will never reveal why and will never return to your establishment. There is hope if you take the initiative to find out what the issue was. About 80% of unsatisfied customers return if their problem is fixed.

It is important to train your employees and let them know how and why the customer policies are in place. It is important to remind employees not to tell customers why the problem occurred, and instead, come up with ways to solve the issues.

If your employees don’t want to help customers, they often cite “company policy” since it’s an easy excuse. It is important for customer service agents to call the manager if there is an unruly customer or an issue they cannot rectify. Customers often calm down when talking to someone in charge since it makes them feel special and heard.

Improve Your Service

There are 12 easy things you can do to improve customer service:

  1. Realize that customers pay you and acknowledge their validity.
  2. Keep a smile and pleasant demeanor because it encourages customers to be friendly.
  3. Provide timely assistance.
  4. Strive to gain repeat business. If a customer goes to a supermarket today and spends $200 then returns weekly for a year, their value to your business rises from $200 to $10,400.
  5. Improve loyalty since it is cheaper and easier to retain existing customers than to find new ones through marketing programs.
  6. Satisfaction is not enough; you must strive for excellence and gain loyalty.
  7. Ask customers what they think about your business and what improvements they recommend.
  8. Understand the strength of “word-of-mouth.” Customer’s reviews of your business to their friends and family, in person and on the internet, can reach millions of people in mere minutes.
  9. Offer genuine answers and become a “friend” because it will help to build loyalty and trust.
  10. Stay away from words like “against policy” and “regulations” when you are helping customers because it fosters feelings of negativity.
  11. Never make excuses. If you need help with an issue or don’t know the answer, call over a manager or another employee who may have a solution to offer.
  12. Realize that the old adage “the customer’s always right” is true. Never tell them that they are wrong.

Be Friendly

One of the main clauses in any customer service agent’s contract mandates “friendliness.” This can be difficult for your employees to learn, but there are some tricks that for making employees friendlier. Practicing common responses, role playing, smiling, and keeping a positive demeanor all help.

When customers have problems, empathy is important. It is very helpful when your customer service agents “relate” to the problems customers are experiencing. It also helps to calm the situation since the customer will probably not “blow up” at someone who is empathetic. It is important to take responsibility for the problem, be professional, and take any measures you can to solve the problems.

Creating a memorable experience is easy if you solve their problems or go the extra mile to provide “extra” assistance. Sometimes, the problem cannot be solved, but the fact that your agents did everything they could will often solve the issue. When this occurs, store credit or a refund can be a great way to solve the problem, build loyalty, and keep the customers happy.

Maintain Your Standards

It is important to practice excellent customer service, but every employee must do it every day. It is important to look for new ways to conduct business, make the shopping experience more enjoyable, and solve any customer problems. A simple greeting at the entrance of the store can change the entire mood of a person’s shopping experience.

Language on Signs

When you post signs regarding company policy or other informative signs, semantics are important. A great way to subliminally improve the mood of customer is to place “welcome” and “thank you” mats at the doors. When you post signs that restrict customer behaviours such as “no smoking,” they send a negative connotation. A simple way to rectify this situation and make the signs positive would be to avoid words like “no, prohibited, and not.” You could replace the sign mentioned earlier with “please refrain from smoking” or “smoke free environment.”

Enchantment by Guy Kawasaki

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Enchant People

Enchantment involves influencing people to do things; contrary to popular belief, it does not have to be immoral or manipulative. Enchantment is about benefiting all parties concerned. Enchantment is a transparent practice that can occur wherever you are. Essentially, it is creating a desire for something or a desire to do something using marketing, social media, the internet, and even mass media.

“Likability” and “Trustworthiness”

The first thing you need to do in order to enchant people is to develop your likability and trustworthiness. Some things you can do to enchant people in person are smiling, wearing appropriate clothing, your handshake or greeting, and your speech. Some things to consider are:

  1. Do not impose your beliefs and values.
  2. Recognize everyone’s opinions and accept your differences.
  3. Break the ice by finding mutual interests.
  4. Be sure to present win-win situations.
  5. Avoid using words with negative connotations and denotations.
  6. Be honest and straightforward with your interests and goals.
  7. Do things for the other person without expecting anything in return.

Casting the Spell of Enchantment

After establishing your likability and trustworthiness with your target audience, you should be sure to mention how:

  1. Your product or service is multi-faceted.
  2. Your product or service can solve problems in new and effective ways.
  3. Your product or service offers both customer support and other secondary services.
  4. Your product or service can give the customer (the enchanted) more control.
  5. Your product or service is user-friendly and easy to use.

As you prepare to cast your enchantment, you should conduct a quick “pre-mortem analysis” to identify any potential flaws or problems that may arise as well as possible solutions. It is important to communicate your message as succinctly as possible to make it more memorable. Your message should also convey your end-goal.

When you finally decide to enchant your audience, you need to keep in mind the “wow” factor. Avoid the cliché press releases and sales proposals. Instead, try to lead off with a short story or tale to draw them in and captivate their minds. Allow your potential customers to sample your product or service to give them a small taste. Amazon does this well, with their “look inside” feature in the Kindle store. You can use the feature to read a few pages of any book you are contemplating purchasing.

Dominate the Opposition

Depending on what your service or product is, there may be some sort of resistance or opposition from potential customers or your competition. You will need to be prepared for any situation. Analyze the potential reasons that you may encounter opposition and address these issues. Use some of the following tactics:

  1. Show evidence of support from other people.
  2. Be sure to explain and defend the widespread reach of your product.
  3. Sometimes, exclusivity though the use of “limited inventory” marketing techniques is a great tactic to boost sales.
  4. Avoid the use of statistics and “boring” evidence. Use stories and images to support your stance.

Ensure Longevity of the Enchantment

When you begin the process, one of your goals is to create a long lasting enchantment that demonstrates the “snowball effect.” One of the best ways to achieve this is to get your customers to internalize your product. There are a few great tricks that you can use to achieve customer internalization.

  1. Don’t target the elite. It is better to target the much larger middle and lower classes; the will of the many is stronger than the will of the few.
  2. Create a community and following for your product or service. This can be done by using forums, blogs, user groups, Facebook fan pages, and more.
  3. Ask your users for feedback and reviews to make them more involved.
  4. Diversify your marketing team and your organization for increased market appeal and fresh ideas.

Utilizing Technology

The internet and technology have quickly become one of the main forms of marketing, social interaction, and communication, so it is only logical to make use of it to promote your products or services. The internet allows you to have a much wider reach and enchant a larger audience.

  1. Media – Using PowerPoint presentations, images, audio, and video can increase your product’s appeal. You can be as creative as you want with this method.
  2. Email – It is easy to create a mailing list with thousands of email addresses to increase your exposure to the market. You can send out promotional material and offer discounts to reach people on their smart phones or at home.
  3. Social Media – Using sites like Facebook and Twitter allow you to share quick posts with information about your cause or product and reach millions of people globally within minutes. You can even create a blog with information about your product, how it can be used, why it should be used, and so much more.

Exceptional Service, Exceptional Profit by Leonardo Inghilleri and Micah Solomon

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Serve Before Asked

Many companies focus on fixing problems after or while they occur, but in order to be truly exceptional, you need to get your employees to anticipate needs of your customers. There are four main things to take into consideration when doing this:

  1. Picture Perfect – Make your product or service as close to perfect as possible to prevent customers from looking for other options.
  2. Interactions – Be sure to train employees in the art of friendly customer interactions to avoid negative experiences
  3. Efficiency – Be sure to meet deadlines and attend to customers as soon as possible.
  4. Fix Problems – No matter how perfect your company is, there will be problems. It is important to develop a plan to deal with them effectively and painlessly.

Semantics

Language is one of the most powerful tools in your customer service agent’s arsenal. It is important to train employees to speak in pleasant tones, maintain a steady rate of speech, and minimize their use of words with negative connotations. Using the right words can defuse tense situations and make customers feel appreciated. If, for example, someone calls your office for a bill, a typical response is “You owe …” which has a negative connotation. A better alternative is to say, “The records indicate a balance of …”

In addition to words, there are certain things you can DO to maintain courtesy and respect:

  1. Answer phone calls within 2-4 rings to prevent customers from getting angry.
  2. Avoid screening your calls, because you could lose potential customers.
  3. Make yourself easy to reach. Don’t sign emails with “Do Not Reply To This Message.”

Fixing Mistakes

Employees must know that the company is responsible for solving any problems the customers may have. Using these four hints can help you to resolve many situations:

  1. Show repentance – Choose your words carefully and apologize for the problem, then ask forgiveness. “I’m sorry that this happened, I will do what I can to rectify the problem.”
  2. Clarification – It is important for you to ask the customer for details of the problem. Use questions that offer subtle solutions such as “Did you press the primer three times before starting the lawnmower?”
  3. Resolution and follow-up – After you have managed to solve the customer’s problem, a great way to ease the situation and make them happy is to offer them coupons for discounts or a free promotional item.
  4. Record – after resolving the problem, be sure to document the situation and resolution so that other employees can learn from your experience.

Know the Customer

In order to keep a record of customers, a database with their brand preference, demographic information, and other traits can be used. When using these systems you must remember:

  1. Simplicity – Focus on only the important data.
  2. Relevance – If customers have any problems or mention anything that is important to them, make a note of it for better service.
  3. Availability – Make the information available to all your employees who interact with customers.
  4. Preferences – Some systems record the items bought at their store so they can track purchasing habits. This is handy when you have repeat customers who didn’t buy any “X” this week. A quick question can cause them to remember it and make an extra sale.
  5. Requesting Information – Be sure to request customer information in a non-threatening manner and reassure them that it is optional.

Employee Requirements

No matter how many systems you have in place, nothing can replace a great employee who knows how to deal with customers. Some things to look for are:

  1. Someone who is genuinely nice and amicable.
  2. Someone who can be sympathetic as well as empathetic.
  3. Someone with a positive optimistic demeanour.
  4. Someone who works well with other members of your team.
  5. Someone who is responsible and conscientious.

If you are looking for great managers and executives, you should look for people who:

  1. Have vision and charisma.
  2. Are leaders.
  3. Can motivate employees.
  4. Can offer support and mentoring for others.
  5. Knows how to reward excellence and correct problems.

Exceptional Service Online

Since the advent of the internet, commerce has expanded exponentially. Providing service to customers doesn’t end because you are not face to face with them. You need to have some sort of system set up to deal with customer issues. A standard FAQ (Frequently Asked Questions) sheet is not enough. You need to ensure that you have a customer-service email address set up so that customers can ask specific questions about products and services that are not covered by the FAQ.

Greetings and Farewells

It may seem like a waste of time and effort, but a simple greeting like “hello” or “welcome to X” can put a customer in a better mood because they are personally acknowledged. A farewell such as “thank you for coming to X, enjoy your day” will make customers feel appreciated and will foster positive feelings about your company. It will also help you to get your company name to stick in their mind.

Getting Naked by Patrick Lencioni

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Getting Naked

While many businesspeople hide any shortcomings and flaws, people in the service industry typically benefit from “getting naked.” We are talking about showing vulnerabilities and being honest with people to develop relationships and trust.

A Short Time Ago In a City Nearby

At Kendrick and Black, a management-consulting firm in San Francisco, the Strategy Division’s Head of Sales, Jack Bauer, received some welcome news. He often lost contracts to a small company called Lighthouse whose founder, Michael Casey, was “leaving to spend time with family;” this was probably code for being fired. It turned out that K&B was purchasing Lighthouse and Jack was in control of the merger. He wasn’t prepared for this so he spoke with his boss, Marty Shine, who noted that the transition would be difficult because of the two different corporate cultures.

Learning About Lighthouse Several days after receiving the news, Jack went to the coastal town where Lighthouse’s offices were located. When he arrived, Amy Stirling, a partner at Lighthouse greeted him. She took him to meet the other partners at the firm, Dick Janice and Matt O’Connor; he didn’t bother asking about Michael.

Jack started by giving them a verbal resume and information about K&B. He made small talk about daily business then they all sat down to review the company’s financial records. Jack was surprised to find out that there were less low-paid junior consultants, higher consultancy fees, and that the employees spent more time with clients.

Two weeks later, Jack returned to Lighthouse and Amy wondered why he didn’t ask about Michael. In the end, Michael did leave to spend time with his family since his daughter and her family were in a terrible accident. As a result, Michael and his wife were taking care of their grandchildren. The partners went on to explain that Michael sold the company to K&B to secure the financial security of the partners.

Dick’s Approach

After the first few weeks, Jack couldn’t figure out what made Lighthouse successful, so he went with Dick for a sales call to meet a prospect. Dick asked some questions, discussed the issues, and started giving suggestions. After a while, the prospect asked to continue the following week and asked about fees. Dick just said they could figure it out the following week.

Jack was surprised because the way he did his job was essentially like a salesperson. He went the offices of prospects and made presentations, while Dick went into the meeting and started consulting immediately. Dick said that the reason for this was that Lighthouse focused on the issues from the beginning. This was part of the reason that they turned clients away. They didn’t want to waste any time on clients that couldn’t be helped.

Michael’s Principles

As Jack spent more time at Lighthouse, he saw the wisdom in Michael’s principles and how they differentiated the company from K&B. Amy told Jack a story about how Michael took a proverbial bullet for one of his clients. He was working with a committee on a proposal that was rejected and he took the blame for it. It turned out that taking the rap for the bad proposal really left an impression because in the months that followed, the client referred numerous new clients to Lighthouse.

After months of work and new experiences in business practices and humility at Lighthouse, the executives of K&B brought Jack back and asked for a plan of action. Jack had spent his time creating a new management system for Lighthouse based on the values of their company, but K&B decided to sell Lighthouse since the two companies operated with a different corporate culture. After the decision was made, Jack was offered a promotion but he turned it down and decided to stay with Lighthouse.

Getting Naked

By following the principles at Lighthouse and giving customers “naked service,” you build relationships that are more intimate than the normal consultant-client dynamic. There are three main fears that people have when it comes to giving naked service to their customers. There are also some things you can do to get over these fears and make your consulting more effective, which are discussed below.

Fear of Losing Customers

  1. Don’t sell your business and services; show clients what you can do.
  2. Be honest, even if that means telling people things that they prefer not to hear.
  3. Don’t be afraid to talk about the elephant in the room. Address issues head on, even if they are unpleasant.

Fear of Being Embarrassed

  1. Ask Questions. It is better to ask questions and look like a fool than to remain quiet and be one.
  2. Make suggestions that seem ridiculous, because you never know what might hold water or get someone else to come up with an idea.
  3. Admit your errors. Many people try to cover up their mistakes by playing the blame game, or just denying them all together. Admitting mistakes allows you to move on and may even spark an idea from other team members.

Fear of Feeling Inferior

  1. Take a bullet for your clients because it builds trust and strengthens relationships.
  2. Focus exclusively on the client and the work that the client does.
  3. Admit when you are incapable of doing something because of a lack of knowledge, or if it is something you are not very good at.

In Search of Excellence by Tom Peters and Robert H. Waterman Jr.

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“McKinsey’s 7-S Framework”

In an effort to determine what made American companies excellent, Peters and Waterman focused on seven variables, which were transformed into a matrix. When compared with other business, the “shared values” formed the center and the other variables were regarded as secondary. This served as the foundation for McKinsey’s 7-S Framework. The seven variables “shared values, systems, style, staff, skills, strategy and structure” were used to whittle down their initial 75 companies to the 43 with excellent management strategies.

The selection of the initial 75 companies was based on:

  1. 20 year growth trends.
  2. Current company health.
  3. Company reputation for innovation and excellence.
  4. Adaptability of the company to the dynamic market environments.

After the initial selection, they used the 7-S framework to weed out the lesser companies.

The Human Factor

After the analysis, they made a surprising discovery that the best management styles weren’t dependent on conventional “hard-headed rationality,” but instead were the styles based on identifying “detached, analytical justification for all decisions.”

The 43 final companies were great at analysing data and implementing solutions for problems, but they were also focused on keeping both their customers and employees happy. These companies weren’t considered mechanical machines. Instead, they acknowledged the irrational and erratic behaviour of every employee and customer, and strived to keep the constantly changing company running efficiently.

These companies found that people learned more easily with guidelines and systematic approaches to everyday tasks. Positive reinforcement and intuitive managements helped make these companies excellent. There are eight basic principles that formed their management systems.

One – A Bias for Action

The 43 companies were highly adaptive to changes and used several short-term teams to accomplish small tasks. The short-term teams were created as needed with employees whose skills best suited the individual tasks.

The excellent companies practiced “chunking,” which is simply breaking large tasks into several smaller projects. This allowed smaller teams to work on multiple sections of a project at the same time and submit their work to another team for compilation. This led to more productivity and higher efficiency.

These companies were also open to the idea of experimenting. This helped to motivate employees to find new ways to do things. One company, Hewlett-Packard, placed prototypes in the open so that other employees could test them. If they were not well accepted, the projects were augmented or terminated.

Two – Close to the Customer

The second strategy employed was to be in tune with their customers’ needs in order to provide quality products and services. Their commitment to excellent customer service resulted in slight financial loss in the short-term; however, the slight loss gained the trust and loyalty of their customers. This meant that the losses they experienced would be recuperated in future contracts with their customers.

Many companies that placed heavy focus on customer service were forced into a smaller niche where they could become the big fish in a little pond. These companies became leaders in their own fields because of their astounding customer service and loyalty.

Three – Autonomy and Entrepreneurship

The development of entrepreneurial spirit and autonomy within these companies enabled them to become innovative and profitable. These companies recognized that failure was acceptable and was to be used as a learning tool, because the result would be a product that recuperated any losses and earned high amounts of revenue.

One company that excelled in this principle was “3M,” which encouraged employees to develop 50,000 experimental products annually, resulting in over 100 products being introduced to the market every year.

Four – Productivity through People

The companies that were ranked as “excellent” placed heavy emphasis on the individual members of the company. They provided ample training and set achievable goals. They also focused on motivating employees to find the initiative to work hard for the company. They realized that without their employees, they would not be able to function, and that employee happiness and motivation was vital for success.

Five – Hands-On, Value-Driven

The 43 companies had a hands-on management style and were value driven. The company image, values, and culture were all clearly defined. They encouraged their employees to partake in the company beliefs and culture.

Six – Stick to the Knitting

They companies in question were not literally involved in knitting. This simply means that they focused on their strengths. They used every employee’s skills as needed to complete different tasks and remain consistent, rather than diversifying too quickly.

Seven – Simple Form, Lean Staff

The 43 excellent companies tried to keep their regulations and systems simple in order to improve productivity. It also allowed them to adapt to their business environments without difficulty.

Eight – Simultaneous Loose-Tight Properties

The last principle that they focused on was combining the company goals with the freedom of their employees. They developed strict controls for employees and projects, but allowed them to be flexible and easily adaptable. In essence, the companies allowed “co-existence of firm central direction and maximum individual autonomy.”

Managing the Professional Service Firm by David H. Maister

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Professional Service Firms (PSF’s)

PSF’s are different from most companies since they require much more customization, and there is a lot of customer interaction. PSF’s are always focused on hiring and creating excellent products and services and rely on good employees as their foundation.

PSF’s need to keep the amount of junior, middle, and senior staff relative to the type of service they offer. There are three main categories of PSF’s which determines the amount of each group of staff is required.

  1. Specialized Information - These firms will need many junior and mid-level staff to analyse and collect the data. They also need to hire staff with various specializations.
  2. Custom Projects – These firms will require mostly junior level employees who have experience and the ability to adapt and meet deadlines. They require less mid-level and senior staff for management.
  3. Template Projects – These firms perform the same tasks on a regular basis and require mostly junior level employees, few mid-level employees and even fewer senior members. Since the projects are routine, the level of creativity and innovation required is minimal and tasks are easily delegated.

It is important to accept projects that match the amount of talent you have in each sector. It is important to evaluate every opportunity for profitability and match the level of in-house talent you have to minimize expense.

Profitability

Profitability of a PSF is based on how well the firm can leverage the cost of senior employees since this group is paid more and generates the bulk of the profit.

In order to maximize profitability, you can reduce service costs by utilizing mid-level employees rather than higher paid senior staff. A good way to minimize expense and increase revenue is to employ a high turnover method to find the best employees. This can also save you money since you do not have to promote junior employees as often, and you will retain only the crème-de-la-crème.

While you will have many more opportunities to find quality talent, you also run the risk of decreased employee morale due to the lack of job security. On the flip-side, many junior employees will put their best foot forward in the hopes of increased security and promotion.

PSF Foci

It is important to ensure that your PSF focuses on quality service. The level of expertise, experience, and efficiency in your firm will determine your firm’s structure.

  1. Expertise – These firms have a low overhead costs and are highly profitable. The work is often very specialized and requires more senior staff members with good reputations and experience.
  2. Experience – These firms focus on developing a reputation for specialized excellence and customer relationships. They typically have the ability to work with few senior staff members and more junior members since the work they do follows a set of guidelines and procedures. They usually focus on promotion of junior staff members to build a solid company structure.
  3. Efficiency – These firms place emphasis on keeping down costs and systematic approaches to projects to meet strict deadlines. These firms require many junior employees and accept mostly fixed rate jobs.

Marketing and Quality

PSF’s often place emphasis on five practices for marketing.

  1. Broadcasting
  2. Client Acquisition
  3. Listening
  4. Client Indulgence
  5. Client Satisfaction

Through the marketing process, PSF’s gain new customers and retain existing ones. After the customer has been hooked, quality service and products are essential but not always linked. Some firms prefer to focus on exceptional service to retain customers (allows for extended contracts) while others focus on getting results in a timely fashion (allows for high volume).

It is important to place focus on the final goal as well as the service, however, intensive focus on either element can lead to detrimental effects. Too much attention to detail can cause you to miss deadlines or incur unnecessary costs, while too much focus on the final product can lead to a reduction in quality and service. It is important to find a balance in order to develop a good reputation for quality and efficiency.

Equilibrium

Profitability is measured by profit per partner, which means that a PSF’s assets are equal or more than the partner equity investments and non-partner staff. You can consider non-partner salaries as assets to be financed by fixed rate debt. Ensuring profitability and growth depends on managing your profit margins, productivity, and leverage.

One of the most notable reasons for lower profits is that many senior staff members make the mistake of taking on too much responsibility instead of delegating tasks. This will also result in lack of practical experience, decreased opportunities, and lower morale for junior staff.

The administrators responsible for workflow need to focus on administration, finance, marketing, client contact, and collaborating with colleagues. In a PSF, managers should focus on problem solving, motivation, coaching, and opportunity creation. In order to be an effective coach, managers need to influence and lead staff by example and effective motivational techniques. While this is more time intensive than delegating and telling staff what to do, it will ensure better performance and efficiency.

The Ultimate Question by Fred Reichheld

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Real Company Growth

Any company can grow, but true growth that lasts is a tricky thing to attain. It is important for your company to focus on customer service and loyalty to ensure that the growth is maintained in the long term.

Short-term growth that is sparked by product launches or limited-time promotions will make customers happy, but will not build loyalty. You need to find out what customers want, think, and feel to build loyalty and true growth.

Quarterly profit reports and spreadsheets don’t factor into real growth. It is important to distinguish between good and bad profits. Bad profits come from short-term promotions, sale of inferior quality products, and overpricing your products. These profits will undermine your credibility and will shatter customer loyalty.

A great example of bad profits is when cell-phone companies develop plans that waste cell-minutes, which is great for short-term profits, but detrimental in the end. Good profits come from incentives and cell-phone plans that cost less but develop loyalty through long-term contracts at the same rate. Sure, you may lose money in the first six months, but the following year and half will fix that.

Actions Speak Louder than Words

It is important to develop programs to build customer satisfaction and loyalty because bad experiences spread like wildfire through word-of-mouth on social media sites. Bad experiences with your company will cause your customer service representatives (CSR’s) to become overworked, stressed, and less effective.

The lack of loyalty programs and customer service leads to a high customer and CSR turnover rate. Industries such as television, cell phone, and credit cards tend to experience a 50% turnover rate in each three-year period. While these companies make a lot of money in the short term, they could make a lot more by sacrificing bad profits. These companies can lose up to 40% of their potential good profit earnings every three years.

Some companies that have excelled in developing relationships and loyalty are Amazon and Costco. Through Costco’s positive word-of-mouth, they have become a Fortune 50 company within 20 years using minimal advertising. Websites such as Amazon and eBay have focused on providing unparalleled assistance, and have developed a community of members who interact with each other and the company to make their experiences better.

Use the NPS to Measure Customer Loyalty Benefits

Companies that have excelled at developing loyalty are likely to see at least double the revenue-growth of their competitors who rely on bad profits. It is important to ask the “Ultimate Question” when gauging customer loyalty. On a scale of 1-10, how likely are you to recommend us to friends or colleagues? Use the data gathered to calculate your NPS (Net Promoter Score). After gathering all the responses from customers, you can calculate your NPS by taking the percentage of positive reviews and subtracting the percentage of negative responses.

This score allows you to determine customer satisfaction, and whether your customers are:

  1. “Positive” – The 9-10 range customers will give you positive reviews and recommend you to friends and family.
  2. “Mid-Range” – The 7-8 range are customers who will not speak ill of your company and may give you positive reviews, but are generally satisfied.
  3. “Negative” – The 0-6 range customers will likely post bad reviews and will not recommend you to others.

It is important to strive for a balanced, if not, positive NPS. In order to increase your score and increase profits, you need to spend less on marketing and follow a planned strategy for growth.

Personal Interaction

Many businesses forget how important it is to interact with the customers and provide excellent customer service. CSR’s are often required to meet a call quota per shift instead of striving to make each customer happy. Companies often reward CSR’s with a high call volume regardless of results, which leads to inferior customer service.

If companies focused on providing excellent service rather than call volume, the result would be happy customers, increased loyalty, more referrals, and ultimately good profits.

Key Customers

In order to evaluate your customers, you can create a grid with the NPS on the Horizontal Axis and profitability on your Vertical Axis. You should group your customers in the three categories mentioned above, and associate each group’s revenue accordingly. This will allow you to see which groups bring in the revenue and determine which groups need to be improved on.

It is important to reduce the negative customers and increase the positive customers to increase profitability and positive market exposure. Involve every department of your company to increase productivity and trigger a company-wide transformation. By working on this, you will see higher NPS scores and more positive exposure.

Your company needs to focus on increased loyalty, customer satisfaction, and highly ethical practices. Involving your employees will allow you to make the transition easier. The results will be better exposure to the media and customers.

Why We Buy by Paco Underhill

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The Science of Shopping

Paco Underhill has collected data about shoppers and their habits through the eyes of an anthropologist for over 20 years. The process involves mapping the shopping area then analysing hundreds of hours of video documentation while trackers in the stores gather information about customers. They look at personal mannerisms, attraction to items, and the length of time it takes to make a decision. Each shopper is evaluated with 25 observational criteria, and a selected few are interviewed.

This detailed and labor-intensive analysis allows Underhill to create the ideal store layout and environment. The purpose of all this work is to make the customer comfortable and make the shopping experience enjoyable to encourage more purchases. Transition and Space

When designing the ideal shopping place, it is important to determine why people shop and to understand people, their mannerisms, and needs. Body language, time spent looking at products, and why they go for specific items is important to consider. When people enter a business, a transition into a new world must be made. Items at the front of the store are often ignored since people are still mentally transitioning from one environment to another. Greeting them or offering promotional material is better than trying to sell products at this stage.

You need to observe the way that customers use their hands and how much space is needed to shop comfortably. If aisles are too narrow, people tend to leave them and purchase less. Spacing out your products and allowing ample space encourages people to purchase more. In addition, it is a good idea to place shopping baskets throughout the store to encourage customers to purchase more than they anticipated.

Store Design

When creating the ideal shopping environment, you should consider how to organize products and the flow of traffic. People tend to move to the right, so place the most important objects to the right hand side of the entrance to encourage purchasing. It is important to place related items near each other, such as corn chips and cheese dip. Placing new products at the front of the store will also help to increase sales since it is the first thing people see.

Signs are a great promotional tool in theory, but are not always effective in your stores. Choosing a sign that will grab customer attention and offer information is extremely important. Information should be offered in small amounts rather than big blocks of text since people tend to retain short messages more easily. When you have signs with large blocks of text, they should be placed in areas where shoppers typically stop to look at products on the shelves and will have the desire to read.

Know Your Customers

Depending on customer gender, the shopping patterns will be different. Women normally create lists, evaluate their purchases, and take the time to choose the best products. They also tend to ask store employees for advice and for locations of products. Men typically shop with specific items in mind and ignore things that they do not need. Men will seldom ask for help and prefer to use the posted signs and video displays to find what they need.

While women are the traditional shoppers, men have started shopping more and so the creation of male product areas can help your sales. Put the male hygiene and health care products closer to the home improvement section. Larger signs and contrasting colors can help your sales to the ever-increasing elderly shopper demographic.

In addition to catering to men and seniors, children are a great demographic to appeal to. They are highly responsive to products displayed in the media, brand names, and products that are endorsed on television. It is important not to underestimate the power of a child’s request to their parents.

Seduce Your Customers

It is important to create a seductive or enticing environment for shoppers by using:

  1. Senses – If customers can touch (interactive displays), taste (food samples), hear (music), smell (bakeries or delis) or see (live demonstrations), they often make unplanned purchases.
  2. Reflective surfaces – These encourage customers to try on and purchase items that they can wear.
  3. Talking – Socialization in shopping environments will encourage customers to make spontaneous purchases of new products.
  4. Personal interaction – If customers are greeted by name they feel special and tend to return more often.
  5. Deals – Offer bargains and discounts to encourage unplanned purchases.

Make Your Online Store more Appealing

While touch, taste, and smells only occur in stores, you can make your online store more appealing to customers. The internet allows customers access to a wider selection of products, large amounts of information about products, and convenience. You can use the many features of Web 2.0 to make your site more customer friendly and also provide assistance through email or service hotlines.

The Thank You Economy by Gary Vaynerchuk

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The Death and Resurrection of Manners

One quick look at how the world is changing is looking at the value of manners in our society. In the past, customer service was always face to face and the manners of businesspersons determined whether the business succeeded or failed. Corporations have long since replaced the need for personal interaction and manners with lower prices and better deals. When the internet came around, our communication decreased yet again and everything was available online.

Good manners have been making a comeback in the “thank you economy” since customers have demanded more quality. Many businesses are beginning to realize that people use the internet to spread knowledge of their companies. They have also begun to realize that good service and manners results in good reviews and better media exposure while bad service results in negative exposure. Word of mouth is back in a big way and the advent of social media has allowed one person’s opinion to spread like wildfire to the cell phones and computers of millions of people in a matter of minutes.

Social Media Myths

  1. Metrics are unreliable – They are reliable and will continue to improve.
  2. It is too new – While it is young, it is developing quickly and it is better to get in on the ground floor.
  3. It’s a trend – Even though the portals may change (MySpace to Facebook to Google+), the results are the same.
  4. My company has to control its image – If you are worried about your image, you are doing something wrong.
  5. My company is fine without social media – If you decide to ignore it, you will be left behind in “fine” when you could be doing “great.”
  6. It doesn’t work for us – you need to give it time and consider how you will use it to relate with customers.
  7. It only works for new companies – This is a lie, look at Nike.

Developing your Social Media Department

The Thank You economy is built on caring and service. The first step is to care for your employees and develop a good social media program using the following tricks:

  1. Begin the process by developing your interpersonal skills and set an example for your employees through practice and training.
  2. Make the financial commitment to your social media marketing campaign, even if it means shuffling the budget.
  3. Select leaders for the campaigns from your staff who are willing to put in the time and effort.
  4. Allow your employees to take the reins. Don’t micromanage, especially if you aren’t qualified in social media management.

Quality is Important

In the Thank You Economy, your good intentions are highly valuable and can attract many customers. If your company has a reputation for bad intentions, you will lose everyone and all the potential customers that they would have attracted. Social media campaigns should not focus on posting 100 posts daily since most people will never read that much. They should focus, instead, on a few posts per day with quality and engaging material. Quality over quantity.

Wow Your Followers

It is important to post engaging material but it is also equally important to shake things up a bit occasionally. An outrageous or unbelievable post or series of posts will catch customers’ attention and the posts will likely be shared which exposes you to thousands of new viewers.

A great example of how you can do something like this is if you have an electronics retailing or wholesaling business and you spend $1.5 million to offer every customer who turned 21 on the 21st of February a coupon for x% off on selected items in your inventory and mention the figures in your post. Readers and followers will be astonished, share the news with their friends and family, and speak highly of your company. Another simple thing would be to send out thank-you notes by mail to your top 50 followers since they will more than likely create posts, share the letter with their friends, and give you more exposure.

Marketing is More Difficult

Even though there have been many technological advances in the field of marketing, it has become tougher to market products and services. Part of the reason is that customers are all over the globe and the market has been slowly splitting into more segmented niches. You need to adopt the Thank You Economy and learn how to use social media to get the most bang for your marketing buck. Even though Social media marketing may not be as developed as you think it should be, you need to get in on the ground floor. You need to meet your customers more than half way and adapt to their needs or allow your company to fail.


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