Read the accompanying blog post on Customer Based Thinking by clicking here

Imagine you are

the General Manager of a DIY chain with many employees.

You will be out of the country for several weeks and have asked your staff to send you a weekly report every Monday morning.

What information and measures would you like to see in that report?

Take a moment to write down what you would expect to see..

No doubt you

will have written down such items as sales revenue, maybe by product line, costs, overtime, profit.

Possibly things such as customer complaints, refunds and stock levels.

WEEKLY REPORTSales RevenueProduct Lines

Total Costs

Overtime

Profit

Complaints….

Now imagine you need some DIY tools & materials.

The material may be available at several stores in your area. All equidistant from your home.

Take a moment to write down the criteria you will use to decide which store to go to?

No doubt you

will have written down such items as product range, availability, customer service, delivery options and price.

CRITERIA

Product rangeAvailabilityCustomer service

Delivery optionsPrice….…....

The point is, the two lists

won’t be the same.

The former is an example of business based thinking, or voice of the business.

The later of customer

based thinking, or Voice of the Customer.

WEEKLY REPORTSales RevenueProduct Lines

Total Costs

Overtime

Profit

Complaints….

CRITERIA

Product rangeAvailabilityCustomer service

Delivery optionsPrice….…....

Far too many organisations don’t consider the

Voice of the Customer

when thinking about what to measure and report on.

Many organisations

Hugely Underestimate the true value of a customer.

Consider a shopper, shopping every week at a major brand supermarket in the UK.

Assume a weekly spend of £100.

How much is the customer worth to the supermarket?

To Keep it simple let’s talk

about revenue. So, for one week’s shopping, the customer is worth £100, right?

Correct as far as it goes of course, but how many weeks a year does the shopper shop at the supermarket?

£100

Let’s assume 50, allowing for 2 weeks holiday.

50 times £100 is £5,000.

So for one year, the customer is worth £5,000 to the supermarket.

But How many years does the

shopper shop at the supermarket?

£5,000

It could easily be 20 years or more.

If we assume 20 then the customer is worth 20 times £5,000.

That equates to £100,000 in today’s money ignoring any inflation factors.

A Huge amountbigger than the original £100.

£100,000

But that’s not the end of the story.

If we have a good experience not only will we continue to use a supplier but we will also most likely recommend them to others.

On average if we have a good experience we will tell three other people about it.

£100,000

If we apply this logic to our

supermarket example, then that’s 3 other people that will potentially spend £100,000

Multiply £100,000 by 3 and that’s £300,000.

£300,000

If we have a bad experience with a

supplier, we will tell others of our bad experience!

On average we will tell eight other people of our experience, and potentially that’s eight people that will not deal with that supplier.

£300,000

Eight times £100,000 is £800,000, so the potential lost revenue from bad customer service is £800,000.

These may not be the numbers for your business, but check your own numbers to see

what the real value of a customer

is to you.

£800,000

Still not convinced about the value of customers and the need to satisfy them?

It costs typically

Five timesas much to attract a new customer as it does to keep an existing one.

Still not convinced?

91% of unhappy

customers will never purchase goods or services from you again.

Still not convinced?

In the average business, for every customer who bothers to complain, there

are 26 others who

remain silent, and just walk away…

But our customers are pretty happy with what we do,

aren’t they?

Let’s assume that we ran the following survey, in which we asked our customers to rank their agreement with the following three statements from strongly agree to strongly disagree:

1. I think that this product provides exceptional value.

2. I will recommend this product to others.

3. I will purchase future products from this company.

The survey results showed that the majority of our customers either

“agreed or strongly agreed”with each statement.

So that’s a good result isn’t it?

Strongly

agreeAgree Neutral Disagree

Strongly

disagree

1 7% 60% 20% 7% 6%

2 17% 58% 12% 6% 7%

3 26% 53% 15% 3% 3%

To be classified as a Loyal Customer, our

customer will need to score top marks in all 3 of these questions.

1. Only 7% or less could have scored top marks for all 3 questions,

2. It is likely that around 33% of our customers are not totally satisfied (scoring neutral or below).

The survey results would not give us a great deal of comfort, other than indicating some great potential for improvement!

A Loyal Customer is

one that scores 5 in all three areas:

Perceives

Value

Will

RepurchaseWill

Recommend

There is a Difference between business based and customer based thinking and we must do both because the true value of a customer is often vastly underestimated.

It is Not enough to just satisfy the customer on average

If we want our businesses to be Exceptional then we have to provide Exceptional service and value

That way we Maximise our revenue potential long term by retaining our existing customers, and generating strong referral business.

For more information on Customer Based Thinking you

can read our blog post by clicking here.

sigmapro.uk@sigmapro.com

www.SigmaPro.co.uk

SigmaPro is a leading global provider of Lean Six Sigma Training, Lean Six Sigma consulting and business improvement programmes designed to help organisations achieve breakthrough performance improvement. We employ state of the art, proprietary teaching and consulting methods including online, traditional training and eLearning, and we are proud of our

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