smith+co on
customer experience
Shaun Smith
  • By Shaun Smith
  • Jun 06 2008

How to survive and thrive during a downturn

How do you keep customers loyal in tough trading conditions?

If you cut back on the customer experience to save money just when the customer is being more demanding - as they are when their own funds are tighter - it’s the worst time to do it. If you need to defend your organization’s customer experience against knee jerk plans to cut customer service or other elements of the customer experience to save money in the short-term, here’s a useful fact to use in the counter-argument:

Retaining just two percent more customers than you do at present has the same effect on the bottom line as reducing expenses by ten percent.

That’s from Michael Lowenstein of Customer Retention Associates, based on his research. This is an important point to bear in mind if your organization is practising cost-cutting in the face of the consumer slowdown. Are you also reviewing customer retention? And have you researched the short-term savings from cutting customer-facing aspects of your organization’s work versus the loss of income through greater customer attrition that comes from a consequentially poorer customer experience?

You are ignoring fifty percent of what you can do to survive and thrive in the downturn if you are not targeting keeping customers and think the only answer is cutting costs.

Waterstone’s the booksellers are an example of how investing in the customer experience improves business results. They announced their results recently for the last year. Their sales have increased 4.5% like for like over the previous year. They had experienced three years of flat growth previously, in a market that was growing 4.5% p.a. so they are back in the game.

We helped with a culture change program called Get Selling that we at smith + co developed and ran for Waterstone’s. It improved the customer experience by developing frontline people so they are able to help customers buy what they really want.

Harley-Davidson is another great example of how you can’t retreat from your values and commitment to customers when times are bad, in the search for short-term savings, and of how investment in the customer experience delivers customer loyalty that holds your sales up relative to the overall sales decline among your competitors.

Harley deploys a four-step process that builds what we call ‘Loyalty by Design’. It’s a logical process for ensuring that your brand out-performs the competition during the upturns and downturns in the market and continues to mean something special for your target customers. Whilst it is simple in concept it is difficult in execution.

Yes, the market for large motorcycles is down 14% at the moment. But, Harley’s sales, though lower than this time last year, are still out-performing the rest of the market, due to its higher customer loyalty.

I’ve posted an article to the Customer Think website on how Harley-Davidson builds what it calls ‘ultra loyalty’ with its customers.