Copyright 1999 by Selling Power. Reprinted by permission of the publisher.

Retaining Wall

How to hang onto your customers by using all your company's resources in tandem

It's an old sales axiom. It costs a whole lot more to attract a new customer than to keep the ones you have. But that's not the job of the sales force, right? Retaining existing business is the job of customer service, not salespeople, right?

"Wrong," say Suzanne Baldino Jones and Mark Heisler of the Competitive Business Strategy Group (CBSG). Customer retention is the business of the entire company. Holding onto long-term customers requires that every part of the company work together and work smarter.

"Most organizations still departmentalize everything," summarizes CBSG senior partner Mark Heisler. "They segregate customers and separate sales from front-line services. They need to look at sales and service delivery as one process."

And here comes the hard part: "Service is much more than answering phones," Heisler emphasizes. "It is all the things that an organization does for a living."

CBSG managing partner Suzanne Baldino Jones knows that hard part. She has 25 years of experience managing service delivery. In several different industries, she learned a common lesson: "Our job was always to service whatever business the salespeople brought in. The salespeople made the promises, then handed them off to my side. But we did not know what they had promised or what the real relationship was." The result? "What should have been a seamless hand-off left the customer behind the eight ball instead."

At its core, the problem results from the evolution of a typical business. "Usually, you start out small with a sole proprietor," says Heisler. "As you grow, you start to separate responsibilities. To focus on customers, you create a new sales unit that is rewarded for seeking new customers. The service people deal with whatever immediate problems come up: they handle individual problems."

In short, nobody has the habit of looking at the company as a whole business. At one time the founder did. But now that the company is a success, the founder no longer has the time. "The service people are not trained as sales staff," Baldino Jones notes. "For example, on the sales side, you often look for objections. You can use them to sell better. But service staff are not trained to use objections that way."

The problem is even worse outside of customer service reps, who are at least used to talking to customers. "The rest of the organization also has interactions with customers," Heisler notes. "They are touching the customers in many ways."

Service problems drive salespeople crazy. Why are they still so common in many organizations? "In the initial sales process, you understand the customer's needs," Heisler notes. "But as customers live with you, their needs do not stay static. Customers grow and change. The rest of your company may not be focused on this; they are just processing the product."

CBSG learned all this on its first and fairly typical assignment. It began with a request from the company's sales force to fix the service unit. "It had a bad reputation with the sales force," notes Baldino Jones. "We found that the service problems came from both sides. Salespeople were making promises that the company's internal structures couldn't meet. And the two groups simply weren't working together."

CBSG helped the company change all its internal structures' training, paperwork and computer interactions and business processes. The company also reformed compensation and measurement systems. "There were no retention figures," Baldino Jones remembers. "They didn't even know how long they kept customers or whether they were leaving quickly out the back door." The company was not unusual. "Typically, IT systems are not designed to look at customer retention."

So Baldino Jones and Heisler start with the following customer retention basics at every company:

1. Share goals

"The first and most critical step is establishing shared goals," says Baldino Jones. "Sales and service is one process. If the service unit feels it is subservient to salespeople, they will say, 'who are they to dictate to us?' It must be an equal relationship."

Making shared goals effective throughout a company takes time and effort. "It depends partly on size, of course. For a mid-size company of 1000-2000 employees, it can take about 18 months to implement."

2. Understand the company you work for

"There is a responsibility on the sales side to understand their company's internal mechanisms," Heisler adds. "Then you can go out and sell that to the customer. Moreover, you can communicate to the rest of the company what the client's expectations are and what promises you have made."

3. Deepen the relationship

The logic is compelling and the idea of shared goals is popular in today's market, but practice is still lagging, according to Heisler. "In many companies, the executives in sales and supporting units may be linked through common goals. But the common goals are not being handed down. Below the top level, it is still them versus us."

4. Use the data you have

Baldino Jones says companies often have plenty of information on current customers but miss the opportunity to use it. "A lot of paperwork comes in from your regular accounts, either on paper or now through the Internet. The customer is always telling you something about its business," she notes. "But the selling company has to have a framework and process for understanding the message."

The key to it all is learning to listen to regular customers better, Baldino Jones says. "Companies are very good at listening to prospects. They are not so good at listening to current customers. Often, if you put in the right process, the paperwork will tell you where they are going."

Baldino Jones is emphatic on the importance of tracking existing accounts. "Most companies just don't do their basic research after an account becomes profitable. They need to measure current customers' retention, repeat business, account goals and referrals."

Customer turnover will vary by industry, necessarily. Heisler estimates that most companies lose 10-30 percent of their current customers each year. Learning how to really pay attention to current accounts-a process that might take two to three years-could boost retention to 95 percent in many cases.

5. Sell results, not problems

How can a salesperson or mid-level sales manager get top management to focus on these problems? "You must get executive support to make it work," Baldino Jones says. " It cannot be done from middle management. But a middle manager can point out the problems. For example, you can ask, 'What is our retention rate? Do we even know what it is?"

The next initiating step is to show what the problem costs in lost sales or excess turnover expense. "Top execs will say, 'don't give me this esoteric garbage. Tell me how it affects the bottom line.'"

Mark Heisler recalls a bank that was asked to extend a line of credit to a regular account. "No problem," said the account rep. He promised the account a satisfactory rate and term. "Just fill out some information for us." The requested information turned out to be 10 pages of questions that the account had already filed with the bank as part of it regular business. "So the customer called another bank," notes Heisler. "It offered similar rates, a one-page form and a same-day decision." The first bank had a fine product and a fine account rep. But its information department "touched" the customer with a very heavy hand. "The second bank made it quicker, simpler and easier to do business with them," Heisler emphasizes. "The difference had nothing to do with the product. It was how they presented it."