Five Myths Every
Business Must Avoid
to Survive the Recovery
At a recent stockholders meeting, the Vice President of Sales
for a global manufacturer, reported: “The economy has been tough on
our industry. Sales volumes significantly declined and have not
nearly returned to pre-recession levels. The company has laid off
employees, cut expenses, and, unfortunately, has had to cut price to
remain competitive. Competitors have cut price as much as 40% on
some products. We’re ‘under-water’ on critical components our
customers need. But, we have no choice.“
Sound familiar? Could this be your company? Like so many
businesses during the recent recession, this company is having a
tough time bouncing back. Consumers’
wallets and businesses’ checkbooks continue to be tight. In fact,
the Price Index for personal-consumption expenditures, excluding
food and energy, had bottomed out in late 2009, but is showing signs
of being unstable again.
While sales and profits continue to struggle, employment will
remain stagnant and the economy will be slow to recover. It’s a
vicious cycle. Every company feels the trickle down effect.
Customers have reset their expectations. And, companies attempt to
cut price to retain customers, grow share and increase top-line
But is this really a viable business strategy? Focus on
short-term revenue hinders investment in substantially improving the
quality of your business for the future. Though not sustainable,
many companies still operate on this short-term view.
Business Must Avoid:
It’s time for you
to take a look at 5 Common Myths that keep companies ‘sprinting’ to
the finish line. If you want to survive the recovery, avoid these
failed strategies to stay ahead in the ‘marathon’.
Myth 1: Customers demand lower prices during a recession: When
customers stop buying, the first reaction is to drop prices to jump
start spending. When price is the carrot, buying behavior changes
and customers wait for even deeper cuts.
Myth 2: You have to follow competitor price moves during a
recession to stay competitive: Competitors use price wars to protect
share. You soon find that suffering profits can’t sustain the
business for long. Rarely does volume make up for the loss in
Myth 3: We’re good at what we do. Customers are privileged to do
business with us: Sorry to disappoint you. But, it’s not about
you! Companies with this attitude find that customers don’t stick
Myth 4: Customer retention initiatives are a cost that won’t pay
back: Companies that treat customer retention as a cost will
allocate only a few resources to protect their greatest asset.
Their efforts fail to improve retention or increase sales and,
therefore, support dwindles.
Myth 5: Customer retention is the responsibility of the Sales and
Customer Service departments: Service Recovery is not a customer
retention program. Only 1 out of every 19 unhappy customers
complains. That’s just 5%. And of the 95% of unhappy customers who
don’t even complain, more than two-thirds decide to buy elsewhere.
Recovery as a retention strategy just doesn’t work!
A Look in the
Do any of these myths plague your company? Where do you feel the
Does the number
of customer defections surprise you? What are these defections
worth in Revenue? Margin?
spending more on new customer acquisition? How much more does
it cost to win a new customer vs. retaining current ones?
customers really “price conscious” or are they really “value
Studies show that when customers believe they get more
“value” for their money, they are much more loyal and spend more
with those brands.
Why Invest in
“Value-Based” Customer Relationships?
Companies that take a long-term view of investing in
“value-based” customer relationships are rewarded with double-digit
growth and profitability that compounds over time. Does this mean
higher costs? More often, investing in “value-based” customer
relationships means reducing your costs or being able to charge more
for highly valued products and services.
“We’re not fighting
for the highest volume but for the best reputation, customer
satisfaction, and the best profit,”
says Dieter Zetsche, CEO, Diamler, on the prospects of surpassing
Toyota’s Lexus as the No. 1 luxury U.S. brand, Business Week, August
“Most marketers &
corporations are now looking to reduce costs in order to improve the
bottom line. While they do, it will be important to remember the
favorable economics of keeping and growing customers vs. finding new
ones.” Donovan Neal-May, Executive Director, CMO Council, Forbes.com.
VALUE is about how you make your customers successful. Don’t
forget that customers define VALUE and expect you to deliver VALUE,
at a minimum, to meet their fundamental expectations if the
relationship is to continue.
Keep in mind that a change in the economic climate causes the
needs of your customers to change, which requires a change in how
you respond to their needs.
Your tools – 5-VALUE Creating ImperativesTM
How do you effectively deliver greater VALUE in this tougher
environment and remain profitable to survive the recovery?
Integrate these 5-VALUE Creating Imperatives into
your business operations. Take a closer look at each imperative.
As you review these brief descriptions, challenge your current
thinking, culture and processes!
V - Voice: Give your customers one! Be disciplined
about listening to their challenges and needs.
A - Accountability:
Hold leaders accountable for customer voice and for action that
responds to customer voice.
L - Levers:
What is most important to your customers in how you help them
succeed? How do they depend on you?
U - Unbelievable
Create experiences that surprise & elate your customers! Focus on
those levers that drive your customers’ success and relationships.
E - Engage &
Customers & Employees are your two most important assets. Engage
them. Empower and trust employees to take good care of customers and
build collaborative relationships.
How well do you execute in each of these areas? How much
VALUE do your customers really feel? Each of these VALUE Creating
Imperatives requires a discipline to become part of your
organization’s DNA. These are critical to your success for
improving your customer retention and making your business more
profitable, no matter what the economic environment.
Be unequivocal about creating promoters who sing your
praises…customers who know you are committed to their success and
who are committed to your success!
Read other articles and learn more about
Vivian Hairston Blade.
[This article is available at no-cost, on a non-exclusive basis.
Contact PR/PR at 407-299-6128 for details and