Peter Drucker said, “The function of business is to attract and maintain customers.” Based on our experience with all types of organizations including traditional businesses as well as non-profits, we would add in order to make a profit or to be financially viable or best serve their community. Therefore, if the reason for organizations to be in business centers on their customers or the community they serve, as your organization’s leadership team, managing and measuring your customer interface becomes one of your most important functions.

Making certain that your customers get what they want and come back for more is of critical importance to the long-term success of any organization. All factors that impact negatively on the customer must be identified and corrected if you wish to compete effectively and profitably now and in the future. To a successful business, customers are the most important ingredients, and it is quite challenging to conduct a business without them. Your organization’s leadership team has several critical functions as it relates to your customers. The leadership team must develop appropriate customer-oriented strategies, design and implement customer-friendly policies/processes, develop your employees as it relates to creating and sustaining customer relationships, and constantly monitor and continuously improve your progress on the issues that are defined as most important to your customers. What does your organization do to attract customers, and what are the costs associated with attracting and maintaining loyal customers?

There are two measurements that will help you understand and manage your customer relationships: customer satisfaction and customer loyalty. Currently, it seems the majority of leadership teams are focusing on customer satisfaction to determine their customer service measurements, therefore their level of success. This measurement is flawed and often falls short of actionable expectations. Satisfaction surveys are unable to predict customer behaviors because they are built on faulty foundations. Many organizations assume that high levels of satisfaction translate into customer loyalty when, in fact, customer satisfaction ratings are more closely linked to your customers’ perceptions of your products or services. Satisfaction is a measurement of, “I expected it and got it.” therefore, “I’m satisfied.” If this were translated into any grading system, satisfaction could easily translate into a grade of “C” on any report card. The desired score is obviously an “A” and A’s always equate to loyal customers. A’s imply that customers got more than they expected and their expectations were exceeded in some way. Based on what is truly important to customers, they received more value from you than from your competitors. Which measurement does your organization use?

Why do you want loyal customers? Often, the challenge that organizations face is one of focus. Ancient civilizations viewed our earth as the center of the universe-they believed everything rotated around us. Today, most executives focus on profitability as the most important factor to the survival of business. Is it possible that modern business theories like ancient natural science theories are built around an equally false center? The notion that there is no linkage between customer retention and profitability is being proven false. Recent studies that sought to find linkage between customer retention and profits have supported the fact that the old notion is indeed false. There is a direct linkage between customer retention and profitability.

Checkout future blog posts on how customers define perceived value.

Author Bio: Tammy A.S. Kohl is President of Resource Associates Corporation. For over 30 years, RAC has specialized in business and management consulting, strategic planning, leadership development, executive coaching and youth leadership. For more information visit www.resourceassociatescorp.com or contact RAC directly at 800.799.6227.

Category: Business Management
Keywords: Drucker, customer satisfaction, customer loyalty, profit, leadership, success, non profit, behaviors