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Today's customers are tomorrow's profits.

In today's environment of scarce dollars, customers are in a position to demand -- and receive -- service excellence as the price of doing business. Organizations that are not tuned in to these service demands may not remain in business into the next decade.

What does it take to bring in and keep customers? Whether you are in a multi-national organization or a local business, the basics are the same. You give your customers the product and service they want and expect, cost effectively, in return for their business. Your product and your service must meet the expectations of first time customers, then continue to meet or preferably exceed, expectations for the lifetime of your customer-supplier relationship.

When you consider that it costs two to five times more to get a new customer than to keep an old one, it makes sense to treasure and nurture your existing customer base. Studies show that service, not price, is frequently the prime factor that affects customers' buying decisions. Customer loyalty is a high dollar value concept. Over time, today's customer could be worth hundreds of thousands of dollars in continued business. If today's customer chooses to move to a competitor, what is the long term loss of income to an organization? An experience of a few months ago underlined some of the implications of losing today's customer. It's a simple story, but the message is powerful: everyone in the organization has to be part of the service team. Everyone needs to have a service mentality.

We have recently joined the ranks of cottage owners. On the way north one Sunday to glory in our acquisition, we stopped half way for a cup of coffee at a family-type restaurant. The Sunday Brunch crowd had not yet arrived so the person in charge was not busy. When we asked for coffee, we were waved over to the take-out coffee table in a very cursory manner. After we asked for it, milk was provided grudgingly. Questions were answered in a less than friendly manner.

In the five minutes we were there, that restaurant managed easily to lose our business and our dollars -- and probably that of our friends -- for the foreseeable future. What is a cup of coffee worth? For someone in the restaurant business, over the years quite a bit. And you never know when the coffee order will grow into a full meal. Throw in the referrals from your satisfied customers and you have truly pyramided the dollar value of that simple cup of coffee.

After that experience, I reflected on the number of times I have been turned off doing business with a variety of organizations in the last year: car dealerships, restaurants, doctors, financial services to name a few. The decisions to take my business elsewhere were not based on product quality but on the lack of quality service.

The coffee experience certainly has application everywhere in business. We need to develop a system for understanding the economics of the relationship between the act of providing quality service today and business success tomorrow. Accounting systems simply do not show the dollar value of quality service and the future value of a customer base. And they certainly do not track the lost-dollar value of the customer who explored the possibility of doing business, but eventually decided not to.

Service strategies and policies are developed by senior management thinking globally, usually away from daily aggravations and realities. Daily contact with customers- the act of service- is done by front line people, acting and reacting to the situation of the moment. The challenge is to mesh the intent and the action. In the real world, if you are anticipating lots of business from Sunday Brunch and someone rolls in for a cup of coffee, your overall strategy for service excellence may not be apparent to your coffee-customer:

The act of service is either an investment or a cost to a business. The number of unfulfilled business transactions in one day is a cost, immediate and in the future. The hidden cost is the number of prospective referrals from a satisfied customer that won't happen. By assigning dollar values to the various components of this lost business, you can begin to calculate the dollar value of the business lost.

Conversely, you can calculate the dollar values of the opportunities available. Drawing in these potential customers could mean the difference between profit and loss. The perception by potential customers of the service you offer is frequently the deciding factor.

The cost of gaining new customers is relatively easy to track. But what does it cost to keep the present customer base? What do organizations need to-do to assure that present customers will remain loyal? And can this be written up on the balance sheet to truly reflect the value of service?

These are tough questions to answer because much of service depend s on what appear to be intangibles. But perhaps the wording of the questions needs to be re-thought.

Substitute investment for cost. Every single aspect of the operation needs to be re-framed from the point of view of customers' needs, internally and externally. Every system needs to be evaluated as a potential cost to service or investment in your greatest asset, the people who buy from you and those who provide the front line contact.

Anne Petite is Publisher of the Service Report, a ten times a year subscription publication directed to senior people in a wide variety of organizations across Canada. The Service Report offers cutting-edge information on service strategies and serves as a forum for exchange of ideas that our readers have found valuable..

Anne Petite is the author of The Manager's Guide to Service Excellence, published by Summerhill Press.
COPYRIGHT 1992 Canadian Institute of Management
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Petite, Anne
Publication:Canadian Manager
Date:Mar 22, 1992
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