Business 101: If you don’t ask, you don’t know

Perhaps the only thing more difficult than keeping customers satisfied and doing more business with you is finding out when and why they are not. While feedback from any customer is usually of the negative variety – people are generally more vocal when they have a problem – even that communication represents a small share of the total number of customer experiences.

So while you may think you are doing a fine job, you may not really know unless you ask the question. The cost of not doing so can be steep.

“If a customer has a bad experience – they get the wrong part, they feel they were overcharged, they didn’t like the way they were treated by the salesperson – the propensity is that you will never hear about it,” says Bruce Plaxton, president of BGP Marketing. “That dissatisfied customer will simply be resentful and take his business elsewhere.”

And they typically aren’t quiet about it. Plaxton says they are sharing their dissatisfaction with others. “They always are. Particularly the smaller customers. They sit around these truck stops and if they feel they’ve been mistreated, they let everybody in the world know,” he says. “There’s not much you can do about it at that point, and for the average distributor, that’s the core of their business – the small guy, it’s not the major fleets.”

Keeping customers satisfied also can help mitigate the inevitable little bumps in the road. Resolving larger issues quickly and effectively instills customer loyalty and gives them a reason not to look elsewhere for their parts and service needs.

“Our research has shown that a customer who is highly satisfied is a lot less likely to jump due to other factors,” says Brian Etchells, senior research manager for J.D. Power and Associates. “So, if you’re an independent, and maybe your parts prices aren’t as competitive as somebody who’s trying to low ball and get new customers, if your customers are really satisfied, they are more reluctant to changing [to a competitive source]. They are going to be more loyal to you and stay with your company.”

It’s also accepted wisdom that it takes far less resources and effort to keep an existing customer than to gain a new one.

To put a dollar figure on it, Bill Wade of Wade & Partners, says when customer dissatisfaction issues are identified and resolved, the clients his company has worked with “have shown pickups in margin over a year of 3 to 5 percent, which is a lot.”

No one disputes the value of getting a pulse on customer satisfaction. It leads to more customers through word of mouth, as well as increased revenue from the existing customer base.

But the methods for gauging customer satisfaction – and what to do with the data once you have it – differ. Some traditional methods include mail and phone surveys, one-on-one interview with employees and customers, analyzing sales and inventory data and secret shopper activities. The latter method is usually done by a third party which uses a pretend customer to simulate a transaction or sales inquiry, then reports back on how the scenario went and how it could be improved.

The easiest entry into collecting customer satisfaction data is mail and phone surveys to a randomly selected group of customers who recently have done business with your company. Both are useful, but the personal interaction of phone interviews with customers can yield more subjective insights, often more valuable than results based on numerical rankings. But only if they are done with respect to the customers’ time and done by someone who understands the business.

“Calling the customer is much more effective than sending him a postcard,” says Plaxton. “But it has to be done by somebody who knows what they’re listening to, rather than reading a questionnaire on a computer screen. It should be a true interview, they should listen to the nuances and ask follow-up questions.”

J.D. Power and Associates conducts telephone surveys of customers after two years of truck ownership. The studies they produce, which are typically manufacturer focused but include insights into the distribution network, gauge customer satisfaction on the truck they purchased as well as the aftermarket experience. Etchells says some of the criteria they look at include: setting up the service appointment, price, performance of the service advisor, quality of the service, the facility, explaining the service charges and service delivery. The questions asked on the parts experience mirror these queries, he says.

Chuck Udell, a senior partner with Action Design Group, even recommends extending the survey pool.

“A lot of people interview their current customers. I also want to interview the customers that were recently lost. I also want to interview people who don’t do business with us – we’ve tried, but they stay with our competitors,” Udell says.

Having the surveys and data gathering done by a third party is also recommended, as it helps ensure the data is unbiased and unadulterated, free from office politics.

Wade differs on the strategy of quizzing customers, at least initially. “We try not to involve customers in the initial steps. A survey without context is only going to stir up the water for no good reason. Secondly, if you go in there and really drill into them, you’re going to raise expectations for a quick fix. And the problems may not be fixable quickly. Before you go to the customer you need to have some sense of what the real problem is.”

His company starts the interview process inside the distributorship, interviewing the inside and outside salespersons, in a strictly confidential manner. The comments they gather are shared with management, but the source of the input is not. This allows a free exchange of dialogue, he says.

“What we do is go in and interview all of the sales guys and find out what they think the weaknesses are. Because, guess what? I’ve been doing this about 10 times and they’ve been right almost every time. So your answers are basically right under your nose.”

Customer interviews and even touching base with distributor suppliers where a problem is detected are included later, if necessary, says Wade. But more often than not, the big issues are revealed within the distributorship itself.

“A distributorship that doesn’t know it’s got a problem is going to die anyway,” says Wade. “Really, what the manufacturer is paying the distributor to do and what the customer is paying the distributor to do is to be that close to the situation. And if they don’t know that, there’s no saving them. That’s why I say that in 99 percent of the cases, the problem is known within the distributorship. You just have to pry it out.”

Other data mining that can happen without going outside the distributorship is taking a deep-dive look into some of the metrics that are typically captured as part of everyday business.

Udell says distributors can examine their own internal business statistics to get a feel for how effectively they are serving their clientele. Some of the analyses Udell recommends are:

  • CBA (Customer Buying Average) – the number of transactions divided by the number of customers;
  • ART (Average Revenue per Transaction) – the average volume of revenue per sale; and
  • ARC (Average Revenue per Customer) – multiplying CBA by ART for the average amount a customer spends. “It’s essentially how much money you’re making per account,” Udell says.

While these types of measures are more analytical than interactive in nature, Udell says they are in fact indicators of customer satisfaction and loyalty. They are also at the fingertips of most businesses. “Most distributors, but not all, that we’ve found can certainly do these measurements in-house off of their own computer system,” he says.

But regardless of the method chosen, it is essential to collect the data regularly, uniformly and proactively. “The whole process needs to be as immediate as possible and acted upon as soon as possible,” says Plaxton. “It has to be formalized and it has to be structured so that someone who can take corrective action can do so as quickly as possible.”

The collection of the data is just the first step. Knowing there are problems – either in processes or with individual customers – requires corrective action. But before rushing ahead with makeshift fixes, the data needs to be reviewed with a careful eye.

For instance, if you collect negative feedback that your pricing is too high, do not hold a fire sale.

“If you are getting constant price complaints and you realistically figure you are competitively priced in your market with other distributors and dealers, there’s probably something else going on,” Plaxton says. “That’s when you need someone to peel the onion back and see what else is going on. Price is the nice excuse for the customer [to take their business elsewhere].”

If you discover substantial problems, you will make matters far worse by not acting on them. If you went through the trouble to discover a problem, the customer expects you to go through the trouble of fixing the problem.

“One of the most important things is if you know a customer is dissatisfied, follow up and try and resolve the issue,” says Etchells. “Leaving the issue unresolved – if their problem isn’t fixed right the first time, if they’ve had to come back numerous times and it still isn’t fixed right – that’s going to drive them somewhere else. Make sure you’re communicating with them that you’re doing everything you can to get the problem fixed. Keep communication open and keep following up with them. Otherwise it sends the message that you really don’t care.”

If nothing else, particularly for distributors with multiple locations, what you find wrong also reveals what is right. Best practices manifest from locations that are doing the right things.

“The data can be tracked by distribution center, by inside and outside salesperson, etc.,” says Udell. “And you can ask yourself why are some locations or people performing better than others. Consistency is key. Discover the best practices and then distribute that knowledge to everybody in the organization.”

The rewards for doing so are high, but implementing and sticking to a process is not easy. There are many variables in day-to-day business, not all of which are under your direct control. Some problems may lie with suppliers and part availability, others may have to do with your unique competitive landscape.

It’s not an easy business.

“People need to remember the supply chain is a fairly complicated thing. It has a lot of people in it, and that’s the problem,” says Wade. “There are a lot of steps in there, and so making sure all of those steps stay clean and well connected is 100 percent of the deal. Anybody can do the rest of what we do. It’s keeping the chain un-kinked that’s really the key.”

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