6 Learnings ; Customer Attrition
It is always great fun to meet people in their own setting. One of our customers manufactures and sells capital equipment that generates steam. Steam, as you know, is an energy and motive force in process industries. Our customer, therefore, deals with some of the largest process industries in the country.
I happened to be interviewing the President of a dairy that is a supplier to the likes of Nestle, McDonald, and others. I was seeking insights on behalf of our customer, the capital equipment folks.
The interview was chugging along splendidly, the dairy had benefited from our customer’s equipment, the equipment was delivered and commissioned on time, functioned as promised and the experience was “satisfying”. So after the Dairy President, a gruff, grizzly industry veteran was done extolling the benefits of our customer, I asked him, what I thought was a pro forma question with a foregone answer “ Since you are so obviously happy, is this company, my customer your “gold standard” when it comes to capital equipment and project execution?” To my utter surprise, “err, no” came the answer, ”Our “gold standard” is, and he named a Swedish company that makes packaging equipment”
Not even a competitor!
So the obvious, baffled “Why?” from me.
And the Dairy Head listed a host of things; he thought the Swedes did better. Small things, details perhaps, but nonetheless apparently important enough to have made a deep experience impression on him.
My follow on question, therefore, had to be “So if you had a vendor, for steam generating boilers that matched or bettered the experience the Swedes’ provided in packaging equipment, would you switch vendors for your next boiler purchase?”
Without a blink, pat comes the “Yes”.
So here we have an organization, that is apparently doing all the right things, delivering as promised, creating a frictionless experience, delivering “value”, has a happy customer and yet the customer was ready to willingly migrate.
Now imagine, if the Diary did come across an option that came close to their expectation of the “gold standard”, and they did indeed migrate, what would be the reaction at the selling organization’s end?
They would be utterly baffled. They would never even know the real reason why they lost business.
Worse they would draw the wrong conclusion “Customer was happy/delighted and yet we lost the order, must be the price or the delivery or the extra widget the competitor gave away”
What can we take away?
- Because a customer gives you business and is currently happy with you, it does not automatically make you his “gold standard”.
- Your customer’s “gold standard” may not even be your competition or even from your industry. Customers have frames of reference that you may not even know. (E.g. customers who use Amazon’s same-day delivery, for example, may have a shrunken perception of waiting time for other business transactions too!)
- If the customer gets a choice that she thinks matches her “gold standard” in terms of experience, she will most likely switch even if you are functionally competent.
- Insights such as these only come when you seek deep connections with customers and build a better understanding of customer expectations.
- If you do not have these deep connections when you lose business, you are blindsided and end up more often than not chasing the wrong goal and you tend to confuse effort with effectiveness.
- “Gold standards” are largely experiential and are moving targets.