The One Customer - Define

Company Of One: Why Staying Small Is the Next Big Thing for Business - Paul Jarvis 2019

The One Customer
Define

THERE ARE A HANDFUL OF restaurants I eat at where the staff remember my name and what I typically order. (They don’t even need to bring me the menu.) The owner comes out at some point to chat a little, not to see if I want another drink or dessert, but just to catch up. Sometimes, when a new item is added to the menu, they’ll bring over a plate of it, for free, looking for feedback. If my order is ever wrong, which is rare, they either provide more food or take something off the bill—without me saying anything other than that the order wasn’t quite right.

With service like that, I eat at these places very regularly. If friends are in town, that’s where we go. Sure, the food is great, but the fact that I’m treated well at these restaurants—like their most important customer—matters more in making me a regular and long-term patron.

It’s a great feeling when an employee or business owner goes out of their way to be helpful. There’s something quite memorable about a personal touch, or a business taking ownership of a problem and going out of its way to fix it.

This isn’t a chapter on simply being a good business to the people who pay you because it’s the right thing to do. There’s overwhelming evidence that treating customers well, as if they’re your one and only customer, drives value to your bottom line.

In short, helping your customers succeed and providing amazing service are good for business. A recent Harris Interactive survey showed that nine out of ten Americans were willing to spend more with companies that exhibited great customer service. The same survey showed that 79 percent of people bailed on a transaction or did not buy what they intended to because of a poor customer service experience. A study done by the White House Office of Consumer Affairs found that loyal customers, on average, were worth up to ten times as much as their first purchase. There’s also the hidden cost of negative experiences—Ruby Newell-Legner, a twenty-five-year student of customer happiness, found that only 4 percent of customers actually voice their dissatisfaction to a business: a whopping 91 percent of dissatisfied customers simply don’t ever return. And with online reviews and social media, bad customer service tends to be talked about much more than praise for good customer service—the internet loves to turn into a mob against companies that don’t help or that wrong their customers.

With these stats in mind, it’s puzzling that some growth-centric companies care more about new customer acquisition than retention or customer happiness. Just as Kate O’Neill found with her work for Magazines.com (Chapter 4), acquiring new customers costs far more than renewing customers (6 to 7 percent more, according to the White House study just cited). Making renewals is often a far more important metric to measure, but they won’t happen unless your customers are loyal enough to want to renew.

The obsession of some companies with growth and acquisition—with chasing a supposedly ever-growing number of users—becomes something of a vanity metric to tout on their homepage or in investor slide decks. But the cost of rapid user acquisition is incredibly high—so much so that it usually results in less overall profit. Being a profit-focused company of one (fewer expenses increase revenue just as much as more profits do), you can forgo vapid user expansion at any price and concentrate instead on retaining, pleasing, and helping your customers. In the long run, this approach costs far less and aids your company far more.

A company of one has one massive asset when it comes to customer service: it can be delivered in a way that doesn’t scale. A restaurant owner can remember my name and dinner order because she works the front of the house and has one location, with regular staff. Just like Charlie Bickford, who’s the CEO of Excalibur Screwbolts but still regularly answers the phone at his small office. Or Basecamp’s founders, who answer technical support requests. Relationships, when the company is smaller, can be built with regular and loyal customers, and those personal relationships can keep them loyal and happy.

As companies of one, we are very much in the people-serving business. It’s critical that we listen to each of our customers and take full ownership in making sure they are pleased with our service level and then successful in their own lives. Customer service is a huge differentiating factor in why people choose the places where they want to spend their money. If you serve your customers well, they in turn become brand evangelists for your company: basically an unpaid sales force that reduces your need to hire more staff.

CDBaby, a service that lets independent musicians sell their music on platforms for iTunes, has a policy that, from 7:00 AM to 10:00 PM, every customer support call will be picked up by a real person within two rings. They have no voice mail or routing systems, and the phone can be answered by anyone from the CEO to the people in the warehouse. (Everyone is trained to help customers.) CDBaby focuses on treating its customers like friends, and friends don’t route their personal phone number to an automated system that says, “Your call is important to us, please continue to hold.” Similarly, the folks at Basecamp try to answer every support request within fifteen minutes—regardless of the time of day or night.

Good customer service isn’t about simply achieving the norms of courtesy. Being prompt, answering questions, and treating customers with respect shouldn’t be rewarded—such service should be expected. Where companies of one can thrive and stand out is in exceeding those expectations, through personal touches, building reciprocity, and treating customers like they’re very important (hint: they are).

THE SECOND WAVE

Customer service over the last few years has gone through a bit of a renaissance. In the past, supporting and servicing customers were thought of as a cost, and in business it makes sense to cut costs as much as possible in order to increase profits. In this old way of thinking, automations were heavily leaned upon, from complex phone trees (“press 8, then 4, then 6, then 234, then the pound key to speak with an agent”) to customer message boards and self-help automated services like online knowledge bases. The problem with this kind of approach was that, however much money it saved a company, it actually created unneeded barriers between the company and customers with a problem, forcing them to attempt to solve it themselves, often to their great frustration.

Today’s second wave of customer service as practiced by some organizations—and it should be the customer service delivered by all companies of one—focuses on emotion and ease. A study from McKinsey showed that 70 percent of buying experiences are based more on how customers feel they are treated and less on the tangibles of a product. The feeling of being treated exceptionally well can only increase in the context of a second purchase or a subscription renewal, because the customer has already developed a feeling about how the first purchase went or how any support requests were handled.

This second wave of customer service bets that providing a positive emotional experience for each customer will create more wins and higher profits. If you treat your customers like they’re your one and only customer, they’ll reciprocate that love for your brand by not only continuing to do business with you, but telling their own networks to do so as well. Instead of treating customer service like a cost or expense, you can view it as an investment in retention and acquisition, because you’re essentially building a customer sales force through your support staff.

If customer happiness is the goal of customer service, your support center can become the main source of referrals. Referrals are a powerful way to gain new customers—research done by SmallBizTrends found that a staggering 83 percent of new business comes from word-of-mouth referrals. The best way to get customers talking about your business to people they know is to make sure they’re happy with what you’re doing for them and how you’re providing help if they need it.

You don’t get referrals by just meeting the standard expectations of customer service—people rarely find it worth mentioning to others that a company did just enough to help them but nothing more. You have to do much more than that to evangelize customers if you want them to talk about your company favorably. A great example is a now-infamous story from the tech world about a customer service call to RackSpace, an enterprise-level cloud hosting provider. The call center rep heard someone in the background of a support call mention that he was hungry and wonder about ordering something. She quietly put the customer on hold, ordered a pizza to be delivered to the address she had on file, and went back to assisting the customer with his problem. Twenty minutes later, still on the phone with the customer, she heard a knock in the background and told him to go answer the door, saying, “It’s your pizza.” The pleasant unexpected experience led to not only a very happy (and full) customer but also a story that would be shared thousands of times online. This is the kind of customer service that builds reciprocity: your customer gets something unexpected and then feels the need to help your business, not only by remaining loyal but also by telling others.

Referrals work because they build trust by proxy. A referral is credible because someone you trust is telling you that they trust a certain company or product. And since you trust the person telling you, that sense of trust is instant and immediate with the company or product as well.

Joel Klettke, an in-demand freelance writer, says that 80 to 90 percent of his good leads for potential clients come from word of mouth. When he’s recommended by someone else, he’s found that those leads come with healthy expectations for a project and the costs involved, as well as the assumption that he’s an expert (not just a paid technician). Joel doesn’t have to spend time or resources on sales pitches with these referrals, since they’re already sold on working with him. He just has to determine whether the project is a good fit.

In my own service-based business, all of my leads came from word of mouth as well. Early on, I decided that instead of spending time and money on marketing and outbound sales campaigns, I’d invest those resources instead in making sure every client was absolutely happy about having decided to hire me. Happy clients then did sales pitches for me, unasked, by telling everyone they knew that I was the person to hire for design work. For over a decade (until I moved away from services into products), these word-of-mouth referrals created a waiting list a few months long.

Even product businesses like Trello—a SaaS (software as a service) that lets you collaborate on projects online—have grown their reach and customer numbers, mostly through word of mouth. Trello has had 100 percent organic growth (i.e., no paid ads) to more than ten million users simply because people talk about its product, often, and in places visible to large groups of people, like social media or blogs. Trello has even developed fun games (that loosely relate to their product, like “Taco Out”) that help create shareable moments. With the core of their product being a free version, Trello can convert people who find out about it into customers with not much extra effort. Coupled with the ease of use and helpfulness of its software, Trello’s massive (unpaid) sales force of customers tells everyone they know about this software.

LISTENING AND UNDERSTANDING: A LITTLE GOES A LONG WAY

Kate Leggett of Forrester Research found that keeping customers happy and helping them succeed reduce churn, increase the likelihood of repeat business, and even help in winning new business. In other words, when your customers win, you do too. In truth, your customers don’t care if your business is profitable—but if you help them become profitable too, they’ll never leave you.

Helping your customers as individuals requires as much empathy and care as it does to sell whatever it is you’re offering them. You have to be able to understand your customers and their needs to serve them effectively.

Lady Geek, a London-based consultancy, developed an “empathy index” (published in the Harvard Business Review) that combines publicly available information and proprietary data to rank global companies based on how empathetic they are—toward both their customers and their own employees. The five most profitable companies on the index rank at the top of the empathy scale. For example, number-three LinkedIn (with an empathy score of 98.82) is not afraid to go where its users are, even if that’s a rival platform like Twitter, which ranks twenty-fourth (with an empathy score of 86.47). This approach illustrates that LinkedIn puts the needs, interests, and choices of its customers above its own business objectives—which pays off by increasing LinkedIn’s bottom line.

The more you understand your customers—their needs, wants, motivations, and desires—the more you can feel with them and the better you can serve them. This kind of customer service is more than just the lip-service corporate speak of “you matter to us.” This is customer service that takes specific actions and puts strategies into place that begin with listening and move toward understanding.

There’s a common misconception that empathy is for weak, nonprofit, hippie-lifestyle businesses, but in fact it’s a most useful tool to drive real profit. This comes down to several simple facts: the more you understand your customers, the more you can tailor and position products that provide real value to them, the more you can help them with support requests, and the more you can learn from them, because customers understand buyers better than you do. After all, they are buyers.

The first step in treating customers empathetically is listening to their needs; with this knowledge, we can drive innovations or new product ideas. MIT’s Eric von Hippel has produced a substantial body of research showing that a resounding number of profitable innovations within companies have originated with customers—more than 60 percent. With this research in hand, 3M’s Medical-Surgical Markets Division tried to fix its poor innovation record in the 1990s by creating some new products based on information from “lead users.” Within five years, the results were quite dramatic: the division was bringing in $146 million in average revenue from user-lead innovations, compared to $18 million in average revenue from internally led innovations.

Understanding customers requires not just providing exceptional handling of their support requests but then gaining a bigger-picture idea about the types of questions and requests that are coming in. Even in a company of one, it’s important to recognize the general theme of each request and to manage it in a way that makes patterns and clues in the data discernible later on. It helps to see patterns by organizing all feedback and suggestions in a central location. For example, if you find that support requests are primarily on a certain topic, maybe you could do a better job of teaching users about that topic. And if a handful of requests on a certain topic continue to come up again and again, perhaps that topic can be the basis of your next user-led innovation initiative.

Best Buy is a stellar example of a company that doesn’t just listen to customers but actually takes time to understand customer feedback and put it to use. The company shares customer reviews on its website with vendors to encourage them to improve their products based on what customers want. Best Buy also rewards many customers who provide feedback by giving them incentives and discounts on store purchases.

Sometimes empathy in larger companies takes the form of refusing to let bureaucratic red tape get in the way of helping a customer. A few years ago, an elderly man was snowed in and stranded in his rural Pennsylvania home during the holidays. When his out-of-town daughter found out, she began calling grocery stores in his area to see if any would deliver food to him, since he didn’t have enough to weather the storm. After calling several stores—none of which offered home delivery as a service—she called Trader Joe’s. The employee said that it was not Trader Joe’s policy to deliver, nor was it a service they typically provided, but given the extreme circumstances they’d gladly get food delivered to her father. After she provided a list, the employee even suggested additional items that would fit her father’s low-sodium diet. When it came time to arrange payment for the order, the employee said not to worry about it—the order and delivery would be free of charge—and to have a happy holiday. Thirty minutes later, the order was at her father’s house, having cost nothing. Empathy in business can sometimes mean just being a caring human being.

Like the pizza delivery story, this story captivates us because it reminds us that some companies are less interested in “business as usual” and their bottom line than in keeping customers happy and taking care of them as fellow human beings. Even though most companies say that customers are their top priority, it’s uncommonly rare to see that idea put into practice. But in going far beyond the extra mile, this kind of extraordinary service turns customers into loyal and raving fans. These are the kinds of stories that get shared, and being talked about far and wide can only benefit a business.

In short, customer happiness is the new marketing. If your customers feel that you are taking care of them, then they’ll stick around and they’ll tell others. This is the precise way in which companies of one can compete with behemoths in their market—by outsupporting them. It’s much harder to compete with bigger companies on aspects like volume, low prices, or logistics. But it’s much easier as a smaller business to compete on the personal touches—going the extra mile and treating customers like humans, not numbers. That’s a major advantage for any company of one.

SUCCESSFUL CUSTOMERS BUILD SUCCESSFUL BUSINESSES

Since financial success (i.e., profit) ensures longevity, most business owners naturally spend a great deal of time thinking about how they can make their businesses more successful. But what most business owners or even team leaders often fail to consider is their customers’ success. After all, your successful customer has the financial means to continue to support your business, which in turn increases your profit. So your customers’ success leads to your business succeeding as well.

When a company looks at customers as impersonal transactions or orders, it’s easy for that relationship to devolve into one focused on how much money can be made from them with the least amount of money spent. But a company that believes customers represent relationships that can be both mutually beneficial and long-term succeeds when its customers succeed.

Adam Waid, the director of the Customer Success Department at SalesForce Pardot, doesn’t want to take chances with helping customers find wins. In fact, Customer Success—devoted to providing training, implementation assistance, best-practice recommendations, and ongoing support—is the company’s largest department. This effort has made SalesForce Pardot the number-one most innovative company according to Forbes magazine, and its customers have seen an average 34 percent increase in sales revenue through the help offered by its Customer Success Department.

Cindy Carson, the director of Customer Success at UserIQ, believes that the most successful customers are those who start off on the right footing, with tailored onboarding processes. Her team even looks at each customer’s user case for their software to fully understand how UserIQ can benefit them the most; then they provide segmented training that highlights the specifics that will help each customer gain wins.

Growth often happens organically in a customer-first approach, based on realized profits, because even though you’re entirely focusing on customers’ success, the by-product is growth in your customer base from their slow and steady evolution into your sales force.

Jeff Sheldon, who runs Ugmonk, a boutique clothing line for designers, is obsessed with quality—in both the products he creates and sells and the support his customers receive. If a shirt doesn’t fit quite right or something is wrong with an order, he’ll ship a new shirt right away and not even require that the wrong order be sent back. Because Ugmonk takes care of them, customers take care of Ugmonk by routinely posting links to the company on social media, with photos of them wearing Ugmonk clothes. Sheldon receives a lot of free publicity from industry influencers and magazines talking about Ugmonk and his obsession with the quality of his products.

Focusing on customer success is a mentality and a way of doing business for a company of one that encompasses all aspects of a business. It begins before a product is even created, with planning to make sure everything is done correctly and is of the best quality. This way of doing business includes customer education (which we’ll talk about in Chapter 9) to improve their skill set and foster their success.

Some companies view some customers as too small to matter, especially when it comes to success. But if you take this shortsighted view, you may wrongly assume that your customer’s situation or size won’t ever change. After all, your own company of one, with its focus on being better rather than bigger, might also be thought of as “too small to matter” by the companies where you’re a customer. In adopting this kind of mind-set, you lose sight of your own customers’ long-term strategic importance and loyalty. A customer who pays $10 a month for a service and sticks around for ten years is worth a lot more than a customer who pays $100 a month but cancels your service after only a few months. Smaller businesses can also wield a lot of influence, since they can easily amass large followings on social media and massive mailing lists (both of which can scale your company with no need to grow).

Finally, to be the most helpful to your customers, you sometimes have to look beyond the problems they’re presenting to you. The underlying reason customers are asking for help is often not obvious: sometimes they’re looking for specific answers, but sometimes they’re asking for a certain feature without even being aware that’s what they’re doing. For example, when I was doing web design, clients would often want me to design a site that, in their words, would simply look great. Over time, though, I realized that wasn’t the main reason most customers wanted to hire me: what they really wanted was a site that would look great but also generate more revenue. When I changed my sales pitch and began speaking about how good design could help a potential customer achieve more profit, the number of projects I landed from sales calls more than doubled.

Listening to what your customers really need and want is key for companies of one.

WHEN THINGS GO WRONG (AND THINGS ARE GOING TO GO WRONG)

It’s not a matter of if, it’s a matter of when. Every business has so many moving parts, so many places to interact with customers, and is typically so reliant on at least a few suppliers or partners that mistakes can and will sometimes happen. Trying to avoid mistakes at all costs, or pretending that mistakes never happen, is not a viable strategy. More realistic is having a plan for when they do happen.

Just as the transparency discussed in Chapter 3 is important internally for both leaders and employees, it’s equally important to be transparent outwardly with your customers. That doesn’t mean sharing everything, but it does mean being open about your company’s relevant highs and lows, as they could have an effect on your customer relationship. If your business has been treating customers empathetically, they’ll tend to be more understanding when things go wrong—but only if you immediately work to fix or resolve issues.

You have to own your mistakes—even those caused by someone else—by taking personal responsibility for them before someone else blames you for them. The first step is apologizing like a real, empathetic human, not a corporate PR-sounding robot. Customers don’t expect perfect—they just expect problems to be dealt with fairly, empathetically, and quickly.

A few years ago, the vendor I used to collect payment from my customers had a software bug that double-charged dozens of people. They ended up paying $600 for a $300 product, which none of them were happy about (to say the least). It felt like the worst-case scenario: I was taking more money from my customers than they had agreed to pay for my product.

Although technically it was the software vendor’s fault, since it was their software that had a bug in it, I took full responsibility—because it was my company’s name on the store that sold the product. I immediately emailed every single person affected—even those who didn’t yet realize they’d been double-charged—and informed them of the steps I was taking to prevent the mistake from happening again (switching vendors, at great cost to my company in time and money) and my plan to return their money as quickly as possible. I ended the email with my phone number in case they had questions or concerns. Of the dozens of customers affected, only two asked for full refunds (the $300 double-charge refund plus the original $300 cost of the product).

Although I definitely had a couple of irate customers—and I couldn’t blame them for that—most people were understanding and acknowledged that software can involve bugs. And by taking a hit to my bottom line and absorbing the costs of switching vendors, I helped secure my customers’ confidence that I was working toward making things right. What I learned from this experience was the importance of treating my customers the way I’d want to be treated if the situation had been reversed. I couldn’t have done that by either “ostriching” (sticking my head in the sand and hoping not many customers would notice the blip of a double-charge followed by a refund) or saving money by continuing with the bug-filled vendor software. The long-term strategy of keeping loyal customers who were happy with my product trumped the short-term cash loss.

Some companies don’t allow employees to apologize in any way because they fear the legal consequences of admitting fault. Unfortunately, this approach can make customers angry, especially if all they want is to hear someone owning a mistake. This book is definitely not offering legal advice, but it’s worth noting here the 2015 New York Times report that doctors who are transparent about errors and offer apologies to patients are actually sued far less for malpractice than doctors who deny wrongdoing and defend mistakes. Two years after the University of Illinois adopted this practice of transparency, with full apologies, its malpractice filings dropped by half. A separate study by Nottingham University found that in most cases apologizing costs nothing—companies that simply apologize for mistakes and work to fix them fare better even than companies that offer financial compensation.

Acknowledgment of fault is powerful. It shows empathy, a willingness to own the problem, and a desire to then fix it. And as the studies cited here all found, apologizing effectively can cost dramatically less than a lawsuit or a refund. But an apology doesn’t work if you’re not genuinely sorry—most people can sense a disingenuous corporate “sorry.” Before you respond, give yourself time to understand the situation and fully listen to the complaint. This usually involves validating a customer’s wronged feelings, being transparent about what happened, and clearly detailing how you’ll fix the problem and ensure that it doesn’t happen again.

Companies of one need to turn complaints into opportunities to do better and use them to attempt to build closer relationships with the customers who stick around. A company that doesn’t both listen to and understand complaints does so at its peril. For example, in 2011 Netflix ignored its customers’ requests and split apart its DVD and streaming businesses, effectively increasing its prices by 40 percent. As a result of that strictly cost-saving move (and not listening to their customers), Netflix stock fell to half its previous value, the company lost 800,000 customers, and it was soon ranked as one of the ten most-hated companies in America, based on a survey done by 24/7WallSt.

These days, of course, most consumers take to social media to complain about mistakes or missteps by companies. A study done by Liel Leibovitz, a communications professor at New York University, found that 88 percent of consumers were less likely to buy from a company that didn’t answer support requests on social media. And for customers who took to social media to voice their concerns about a product they had purchased, 45 percent said that they’d be mad if they received no response and 27 percent said that they would completely stop doing business with that company. We have to pay attention to our customers in the places where they’re spending their time—on Facebook and Twitter.

YOUR WORD IS A CONTRACT

Nicholas Epley, a professor of behavioral science at the University of Chicago Business School, says that maintaining good business relationships with customers doesn’t require superhuman efforts. Rather, you simply need to do what you say you’ll do and customers will be grateful.

Nicholas says that people tend to evaluate each other based on two general dimensions: how interpersonally warm we appear to be, and how competent we seem to be. His work suggests that the way to be positively assessed by others is by making promises, and then keeping them. This advice is especially important to companies that serve customers, since customers who are treated with warmth, understanding, and competence turn into loyal customers.

As a company of one, you have to be very careful in what you tell your customers, or even potential customers, because your word is your social contract with them. It doesn’t do you any good to overpromise the effectiveness of your products or pitch false information, even unintentionally. In these days when almost all information is available online, you need to be clear about what your business does and how you do it. Is your data secure? Are your overseas factories safe and paying fair wages? Did your car rank well on Insurance Institute for Highway Safety crash tests? Are the companies in your socially responsible exchange-traded funds lobbying against environmental concerns?

Several studies, like one done by Luigi Zingales of the University of Chicago, have shown that businesses with a culture of keeping their word are much more profitable than those that go back on their word or only say things that don’t align with their actions. He finds that proclaimed values are completely irrelevant without proof that those values are backed by corporate actions.

What does it take for a company to keep its promise? And why do so many businesses fail to keep their promises? This “commitment drift,” as Maryam Kouchaki, Elizabeth Doty, and Francesca Gino describe it, is defined as systematic breakdowns in fulfilling a company’s most important commitments to its stakeholders. These researchers believe that commitment drift stems from several factors that are related to a business’s perceived short-term gains and that end up compromising the stated promise. To avoid going back on a promise, a business needs to put a few strategies into practice, from leadership to customer service reps.

The first strategy is to make fewer and better commitments to customers. A business that believes it should “underpromise and overdeliver” sometimes fails to even simply deliver on par with expectations. Next, a company that isn’t tracking its commitments—for example, through support system software or by noting promises from leadership—can easily forget what the original promise was. Finally, having actual processes in place to meet these commitments is required; assuming that such processes won’t be relevant until sometime in the future will only lead to broken promises. By focusing on these three strategies, companies can learn how to better keep promises to their customers.

The best approach is to treat every agreement with a customer (or even an employee) as a legally binding contract because, on a societal level, that’s what it is. If you promise to give someone something at a certain time, then do it, and do it on time. Whether it’s a quote or a deliverable or a customer service response doesn’t matter. If you aren’t sure whether you can deliver, either say that you can’t deliver or negotiate for a longer delivery time so that you can be sure you will.

Anytime you don’t keep your word you’re not just letting down one person or one business—you’re losing the opportunity to work with every single contact of that person or business, because you can be sure that they won’t ever send business your way. Or worse, they’ll tell everyone they know that you don’t keep your word. A broken promise balloons outward, like our ever-expanding universe: you ruin not just your relationship with one potential client or contact but your chance to work with everyone else they know.

Bear all that in mind the next time a problem pops up in your day-to-day business. If you want your company of one to succeed, it’s essential to do the right thing when it comes to owning mistakes and errors.

BEGIN TO THINK ABOUT:

· What you could do to ensure that your existing customers feel both happy and acknowledged

· Where you could exceed expectations with your customer service

· How you could create opportunities for word of mouth and referrals

· How you own and then fix mistakes

· What you could do to ensure that your customers end up with wins