The owner (Gary) used the following process:
* observed and recorded sales staff in action
* established a returns and service claims system
* reviewed customer and staff transaction history
* Sales staff were spending too much time with difficult customers, and as a result were paying less attention to the qualified leads coming through the door.
* Returns and claims were often made by the same customers on a repeated basis.
* Introduced a new customer service strategy that would politely let the difficult customers go, and treat the ideal customers like gold.
* Implemented a staff training program on handling difficult customers, and prioritizing customer service.
1. Increased revenues by 30%
2. Reduced returns and claims by 15%
3. Increased conversion rate by 15%
Gary Wilson owns a successful computer sales and repair company called Sprint Computers, which has been operating for about five years.
Recently, he noticed that his sales team seemed to be run off their feet on the sales floor, but that conversion rates were staying level and revenue was dropping. Returns and service claims were on the rise, eating into overall revenue targets and costing the company money.
Gary thought that a 15% returns or claims figure was high for Spring Computers, even though the company has an accommodating return policy. The figure had been at 5% or 10% for the last few months. He was puzzled by the jump in claims. "I was struggling to figure out why this was happening, since I knew that I had hired a strong sales team and that my products were rock solid," Gary said. "We even have an incredibly accommodating return policy, and are proud of our high standards for customer service."
His Starting Point Before Revenues $20,000 / week Returns + Claims $3,000 / week Conversion Rate 25%
He decided to monitor what was currently happening, and set up a system to track and manage claims. He developed sales scripts, and chose to record himself and his sales staff in action throughout the course of the day. He also asked his staff to log all the sales they made in a day, and submit their log to him at the end of the week.
This showed him how his sales team was spending their time, and how many sales they were closing.
Then, he created a system for handling returns and claims that he could refer to and review on a regular basis to identify patterns and irregularities. "I didn't have a comprehensive returns and claims system in place, so I decided it was time to start one. I created detailed claim forms to gather information on who was making the claim, as well as why they were dissatisfied with the product."
After a two weeks of monitoring his staff and reviewing claim forms, Gary realized a number of things were happening in his business:
• Sales staff were spending at least 50% of their time working with dissatisfied customers, handling returns, and trying to make the customer happy. • The same customers were returning with claims on a repeated basis.
• Many of the dissatisfied customers had spent less than $200 in store, while the average sale was $1,000.
• New customers were returning their purchases because they had bought products that didn't match their needs.
"I finally saw the big picture, and realized how much time and money the people in my business were wasting on impossible to please customers. Their time on the sales floor was being eaten up with difficult customers, and our true customers were suffering as a result."
Sprint Computers needed a new customer service strategy, and to review customer service priorities with existing sales staff.
1. Reviewed customer service standards and staff expectations.
Gary started by reviewing current revenue and claims figures with his team to give them an idea of where the company currently stood. Then, he gave his staff an opportunity to offer feedback on the company's current figures, and suggestions on how to improve the situation. "I reminded my staff that their priority was to ensure that every customer was taken care of, and that new customers left with products they truly needed and were looking for," he said. "I decided that difficult customers would be referred to managers from now on to preserve the sales team's valuable time spent on the sales floor."
He said that staff was relieved that this issue was being brought to light, and that these difficult customers were being handled.
2. Created a step-by-step process for handling difficult customers.
Gary created a flow chart, or step-by-step process, for his staff to use when dealing with a return or claim, or a difficult customer in general. This was designed to optimize the amount of time his sales staff spent on the sales floor, and ensure that their time was not monopolized by difficult customers.
Here is the system he came up with:
a. customer makes a return or claim
b. customer is not happy, and is difficult to please with money-back or store credit
c. customer displays anger, or inappropriate behavior
d. staff refers customer to management
e. management uses script to diffuse situation, if possible
f. if management is not able to please customer, begins exit strategy
g. management suggests another computer store for the customer Gary also decided that when a customer had made more than three returns in a six-month time period, that they were likely candidates to be ‘let go' and encouraged to try the competition.
These customers were taken off the mailing list, and no longer part of the customer retention strategy.
3. Wrote scripts for handling difficult customers, and letting customers go. "I created a few scripts for my managers to use as reference when they need to diffuse a difficult customer situation, and when they need to suggest that customer find another computer store," he knew that using a script for challenging situations would help ensure that staff behave in a polite, appropriate manner, and that customer services standards are still upheld.
"Basically, I drafted the step-by-step process I established for handling difficult customers on paper, and included suggestions for body language, customer cues and phrasing. Once I got feedback from my management team and incorporated that feedback, I finalized the scripts and gave each of my employees one to use."
The company also needed to implement a system that would retain ideal customers, so a customer loyalty program was created.
"When I read about the 80/20 rule, I decided to create my customer loyalty program around it. I established a program that was exclusive to customers who spent within the top 30% of my business, and rewarded them for their continued business," Gary said.
The top 30% of Gary's customers were sent an invitation to join the Premium Customer Program, including customers who qualified, but hadn't purchased from the store in a while. He also advertised the program in store, detailing the benefits of the program and the minimum spend required for membership.
The Premium Customer Program at Sprint Computers:
• Membership by invitation only (once customer's total spend reaches $2,500)
• Yearly minimum spend of $2,500
• A variety of VIP Amenities, including overnight service and repairs
• Regular purchase rewards ($50 for every $600 spent)
• Access to friends and family discount events (2 per year)
Gary was nervous about firing customers at first, but once he saw the increase in sales and decrease in hassle, it was a lot easier. In the three months after implementing the new customer service standards and Premium Customer Program, Sprint Computers saw a 30% increase in revenue, and a 15% decrease in returns and claims. Gary's conversion rate was also boosted by 15%, which wasn't much of a surprise to me. Gary had to make some pretty big changes to the way he and his team handled customers, but once the systems were in place, he said, it was much easier to manage challenging clients and give good customers the bulk of the attention.
"My staff were much happier because they actually had the time to sell product instead of deal with complaints."
"An added bonus of our new Premium Customer Program was the return of a high volume of past customers we hadn't seen in a while, which created a surge in our revenues," Gary said. "The invitation letter must have reminded them about our business, and let them know their patronage is still valued."
With some staff training and a new customer service program, Gary managed to increase his conversion rate, number of annual transactions* and revenues.
The cost of keeping difficult customers is often too high for your business to afford, and you need to know when to let them go. Catering to consistently difficult customers will waste your time, and ultimately cost you money and conversions. Some people will never be happy, no matter what you do! Always give every customer a high level of service, but remember the 80/20 rule:
80% of your revenue comes from 20% of your customers. That 20% is comprised of easy-to-deal-with clients that are a pleasure to serve, and their patronage should be nurtured. Be careful not to sacrifice an opportunity to keep a ‘20% customer' because you're busy trying to make a difficult customer happy.
John D. Allen Strategic Marketing Specialist