A sales pitch can feel like a slap in the face.
This one did. It was a mailer from a car company advertising great deals on their new models. Apparently, the customer service department hadn't told the folks in marketing about my unresolved complaint.
Now they wanted me to trade up and buy a new car. Instead, their sales pitch confirmed my decision to never buy from them again.
Read this post if you'd like to avoid doing the same thing to your customers.
Bonehead Marketing
One of my college professors referred to this sort of advertising as Bonehead Marketing. It's marketing done with little thought, effort, or strategy.
The car company isn't the only organization to try selling when they should've been serving. There are plenty of other examples:
A cable company steadily increased prices year after year. This eventually drove customers away. The cable company only offered deep discounts when customers threatened to leave.
An insurance agent bought his practice from another agent. He never bothered to contact his new customers until he received cancellation notices. These customers were leaving for another agent who was much more proactive.
A magazine didn't offer a way for customers to contact them if they had problems receiving their subscription. It was a cost-saving move, yet the magazine had to offer increasingly steep discounts to entice subscribers to return after their subscriptions lapsed.
The Sales - Service Disconnect
There are several reasons why companies might experience a disconnect between selling products and serving customers.
Here are just a few:
- Departments are organized into silos that don't communicate
- Customer service isn't truly a priority
- Revenue collected is easier to track than future revenue lost
Let's look closer at each one.
The car company clearly suffered from a silo problem. They never would have sent that mailer (several mailers, actually) if they cross-referenced their customer list with a list of unresolved complaints.
Customer service also isn't a priority at the car company. They send customers ridiculously detailed surveys after each interaction. What they don't do is respond to upset customers or act on any feedback that's not shared in one of those surveys.
The last one is the kicker. The car company can tell if I buy a new car. The dealership will record the revenue from the sale and the manufacturer will note I'm a repeat buyer. But, how can they tell if I don't buy a new car?
Lost revenue is a much more difficult metric to track. Tying that lost revenue back to a specific service failure is even more difficult. Executives are under pressure to deliver financial results, so they naturally default to what looks like a more direct path.
Saving Future Sales
It's dangerous to assume a customer will buy from you again. Here are a few things you can do to avoid that trap:
First, focus on lifetime value instead transactional value. Chris Zane does a great job of covering this in his awesome customer service book, Reinventing the Wheel. Here's a quick overview:
Transactional service looks exclusively at the value of the transaction. For example, my complaint with the car company revolved around a major repair that was required when the car had less than 40,000 miles.
The transactional cost was several thousand dollars. The four-year warranty period had expired, so the car company wasn't legally obligated to compensate me. They saved a lot of money in the short run by denying my claim.
Lifetime value considers how much a customer spends over their lifetime. Here's the future revenue the car company is missing out on:
- One or more new cars
- The annual maintenance revenue for those cars (I was using their mechanic)
Companies can also save future sales by being proactive.
- Surprise customers with a small loyalty discount so you can avoid a steeper recovery discount later on.
- Contact customers to see how they're doing rather than contacting them exclusively when you have something to sell.
- Spend some money to fix problems that drive customers away rather than spend a lot of money trying to lure customers back.
Finally, corporate departments need to coordinate their efforts. Blindly sending un-targeted marketing campaigns to unfiltered databases is reckless.
(Side note: there's no excuse for sending a direct mail piece addressed to a deceased relative who never lived at the recipient's address. I'm talking to you, New York Times.)
A better approach would be to use customer service data to create better targeted marketing campaigns. For example, you could create specific recovery program for customers who all experienced a particular problem.
The bottom line is the sales will be there if you take care of your customers. Those sales might disappear if you sell when you should be serving.