Which came first? The happy, loyal employee or the happy, loyal

Business has always sought to give the impression that it puts customers first. Even before Tom Peters came along and started banging the drum about customer focus, company chiefs were insisting that the customer was king. Of course, as anybody knows, the opposite has long been the rule for vast numbers of organisations. Banks and other financial services groups are, of course, notorious in this regard. Though they have made great efforts in recent years to shift their focus from products to consumers, they are still finding it difficult to escape their past. Yes, they do set up customer service departments. But often they staff them with relatively junior employees who lack the clout to really deal with customer complaints. Anybody taking up even a relatively trivial matter with their bank is unlikely to emerge without having spoken to at least one person described as a manager of some kind. Add to that cost the compensation and you have a serious waste of resources. There is also the matter of the effect on employees. Through not being given the tools to deal with customer complaints, let alone be proactive and – in keeping with the parlance of this time – set out to delight rather than merely satisfy customers, those hapless souls in customer service departments must feel under great stress. The same is true of organisations that are so intent on putting their customers first that they forget that the best way of achieving that is to create an environment in which employees are obviously enthusiastic and well-motivated and not under so much pressure that they greet every new customer as a hurdle to be negotiated on their way through the working day. Hal Rosenbluth, chief executive of the $3bn global travel company Rosenbluth International, is so convinced of the importance of living up to the adage “our people are our greatest asset” that he has written a book called The Customer Comes Second. His firm view is that customer satisfaction is dependent on employee satisfaction. Lately the debate has moved on from merely satisfying customers to finding out more about them so that their needs can be anticipated. The chosen tool for this is the loyalty card. According to the proponents, such a device – when linked to the introduction of ever more sophisticated point-of-sale computers – enables retailers and their suppliers to discover just what customers are buying and when, in return for points that can be redeemed for discounts. Since various surveys suggest that few people bother to count up their points, it looks as though this is a low-cost route to that much talked-about and slightly risque-sounding concept, customer intimacy. However, the evidence is not that supportive. Customers now have so many of these cards that some commentators have started to term them ‘promiscuity cards’. And just a few weeks ago, database marketing expert Fred Newell told an audience gathered at Ashridge Management College that the UK retail sector had one of Europe’s highest incidences of customer loyalty schemes and one of the worst records for customer churn. It is strong customer-relationship marketing rather than points and programmes that builds loyalty, he explained. Companies that get serious about this rather than going about it in such a way that they, as PA Consulting’s Gavin Barrett has pointed out, destroy rather than enhance shareholder value soon find that some customers are more valuable than others – and the profitable ones are not always who they might think they are. To consultants such as KPMG’s Brian Parry, the answer is simple: drop the low-value customers. He told a recent conference that, although it goes against the grain, it is a waste of resources to maintain marketing efforts for customers who are not key to a company’s success. Precious resources would be better spent on capturing and retaining more high-value customers. But that can be a high-risk strategy. It also assumes that low-value customers will always be that way and cannot be converted into more profitable ones. Banks, once again, provide an obvious example. There are countless tales of middle-aged professionals being courted by bank managers anxious to sell them pensions, savings plans and investment advice. Not infrequently, the professionals are able to tell them that they already have such things under control, with other providers. The bank would have been far better served offering such advice when today’s successful lawyer or accountant was a struggling trainee. For people who are supposedly well-versed in assessing risk, they are not very good at spotting potential. In essence, companies have to decide on their strategy in this area and stick to it. With Internet commerce on the rise, it is worth remembering that the successful catalogue companies are those that absolutely abide by customer service on the grounds that people who pay before they see the goods are putting a lot of trust in the organisation. Garry Snook, founder of the mail-order bicycle and accessory supplier Performance Bikes, tells the story of how one of his managers was exasperated by a customer who wanted to return a bike after he had apparently used it for the summer. The company agreed to accept it provided he send it back. After a couple of days the customer said he had lost the box, so could they send another: it did. When he said he could not get the bike to a courier service, they offered to pick it up. In short, the customer was taking the company for a ride, so to speak. But to Snook, it was all part of being in business. Confident that not everybody would seek to take advantage of him in this way, he said: “I could not see the problem”. In other words, the company’s reputation, and hence its continued success, was dependent on living up to its promise. Roger Trapp is management editor of The Independent and Independent On Sunday.