How to become a Variable Cost Company? Simple prescription
“…it will not suffice to have customers that are merely satisfied. Satisfied customers switch, for no good reason, just to try something else. Why not? Profit and growth come from customers that can boast about your product or service – the loyal customer. He requires no advertising or other persuasion, and he brings a friend along with him.” W. Edwards Deming, Quality Statesman
Acquiring good customers, earning their loyalty and retaining them for the long haul has been declared the only mantra for developing sustainable competitive advantage. Particularly, since we operate in a market landscape where technology ensures that your competitors (and you!) can replicate any and every new development in a jiffy.
For those that need further convincing, here are some statistics:
- Only 4% of customers with problems actually complain
- On an average, a customer with a problem tells at least 9 others about it
- On the other hand, a customer with a good experience shares it with 5 others
- It costs 5-7 times more to acquire a new customer than retain the happy ones
- 50% of dissatisfied customers walk away taking their business to a competitor.
A satisfied customer is worth retaining because over a period of time, he buys more at a higher price as he is less likely to get swayed to competitors’ “discounts” and even less likely to ask for one. What’s more, he will refer your product or service to others.
So what should the core competencies of a world-class organization be? I strongly recommend two……..
Have you already guessed the two?
- Process to understand customer needs, faster than your competitors can
- Process to translate those customer needs into a finished product or service, faster than your competitors can.
You are welcome to outsource all other processes. Become an (almost) variable cost company!
