Customer Relationships

Whereas in the past companies could afford to ignore consumers’ needs and preferences, this is no longer the case. With thousands of options available to consumers due to such factors as increased competition and drastic improvements in technology, consumers become increasingly more educated and demanding. Organizations have to work really hard to keep their consumers satisfied and to build long lasting relationship with them. Otherwise they will move to a competitor.

It is also crucial for businesses to keep current customers satisfied since acquisition of the customer is very costly. It costs about five times more to acquire a new customer in comparison to retaining existing customers. Current (older) customers also tend to buy more from the enterprise and may refer their family and friends.

On average, businesses keep between 70-90 percent of customers each year. However, if retention of customers could increase by 5-10 percent per year, than a business could potentially double its profitability. These statistics highlight how incredibly important it is to keep current customers satisfied.

Small businesses have an advantage compared to large business when it comes to customer satisfaction. This advantage arises because small businesses can address each customer personally and provide higher customer service which will lead to greater customer satisfaction and loyalty.

This is relevant especially when it comes to addressing customer complaints. Addressing customer complaints is important because it increases the chance for repeat purchases as well as increasing the chance that a complaining customer will recommend the company to the friends and family instead of complaining to them about the company.

Generally, in large businesses only individuals with certain title have authority to make a decision regarding customer complaints. This leads to inefficiency and often results in a situation where customers have to communicate with various employees before their complaint can be addressed. This often leaves customer dissatisfied.

In comparison small businesses are more flexible where each employee may be given power to assist customers and customer complaints could be potentially handled faster and to greater satisfaction of the customer.

Customers are often willing to pay a premium for excellent customer service. Therefore, if costs increase due to attempts to increase customer service than it most likely will be offset or more than offset by the higher premium that customers will be willing to pay for superior service. However, ensure you are tracking this.

To ensure higher customer satisfaction, an enterprise needs to address complaints in a timely manner, provide basic products according to a customer’s expectations, provide adequate customer support and try to customize products or services for the specific needs of the customer.

Businesses can monitor customer service levels by playing customers’ roles anonymously. That is sending in employees to anonymously pose as customers and record their experiences. It is helpful to observe how customers are treated by employees and how complaints are handled as well as directly asking customers about their experiences via such methods as surveys, comment cards or questionnaires.

Further ways to improve customer satisfaction and customer service include addressing customers by the name, respecting their time, contacting customers who no longer use the  products/services to find out the reason why they have discontinued dealing with the company and trying to win them back. It is also helpful to remember what customers preferences are, which is increasingly possible due to technology.

Technology may be used to build a positive relationship with customers. Relationship may be supported by connecting with customers via email, a website, phone calls, mail, videos, twitter, face book or other social networking sites. There is customer relationship marketing (CRM) software available for fostering this relationship.

Web based companies have specific software available to help them build relationships with customers and improve the company’s performance. An example of such software is Enterprise Miner. Furthermore, sometimes it may be cheaper for a small firm to outsource certain media tools for customer interactions such as call centers or live chat support.

An entrepreneur also needs to have a good understanding of the customer profile. Customer profiles usually include demographic characteristics of customers, such as their age and gender. It can also include psychological, behavioural and sociological information. A customer profile also includes information regarding transactions history, responses to marketing stimuli and historical contacts with the customer.

To understand customers, entrepreneurs need to know the stages of the consumer decision making process. They include:

  1. problem recognition
  2. search for information
  3. evaluation of alternatives
  4. purchase
  5. post-purchase evaluation

Businesses need to take these stages into account when approaching a customer. The stage of the consumer decision making should influence the way customer is approached.

To compare different alternatives (the third stage of the consumer decision making process), a consumer selects evaluation criteria which are the variables that the consumer uses to compare one brand against another.

An evaluative criterion is used by consumer to generate an evoked set. An evoked set refers to the set of brands that consumer is willing to consider to purchase from.

After a purchase is made and the customer has moved into the post-purchase stage of the consumer decision making process, the post-purchase dissonance can occur. It refers to manifestation of the cognitive dissonance. Post-purchase dissonance occurs when customers have doubts or second thoughts regarding whether or not the purchase was a good idea or whether a different product/service would have been a better fit.

If businesses would like to have repeat purchases from such costumer, it is helpful to attend to such problems by softening or removing post-purchase dissonance. An adequate return policy can be helpful to correct this problem. Another idea is to send an after-sales letter which will again highlight the main benefits that this particular product or service brings.

For example, if the customer purchased a white car, an after-sales letter can highlight the fact that based on some research white cars are the safest colour for a car. This benefit of buying a white car could be included along side with general benefits of buying this specific car. Such an after-sales letter could be very valuable if the customer had second thoughts about buying a white car or buying this specific car instead of another.

To improve product/service acceptance and performance in the market, an entrepreneur can benefit from knowledge of psychological factors that affect consumers. One such factor is perceptual categorization. This refers to perceiving dissimilar objects as members of the same category.

It can be used to the business advantage. For example, for a start up introducing their brand to the market it will be helpful to make a product look similar to the same product sold by successful brands. This way a consumer can easier perceive it as another alternative during the consumer decision making process. This obviously has some disadvantages so needs to be carefully considered. Other psychological factors to consider include consumer needs (physiological, social, psychological and spiritual) and motivations.

Certain sociological factors also affect customers’ choices and, consequently, the success of the enterprise. Such factors include culture and social class of customers. Culture is very influential on consumer decision making and is changing. It is important for an entrepreneur to undertake a culture analysis to ensure understanding of influences which culture brings to the business’s particular target markets.

Social class refers to the divisions of people into particular groups within society based on such variables as their income, education, social status and wealth.