Tuesday, August 3, 2010

Lead your Customers Where You Want to Go

Special Orders Don't Upset Us...

Do you remember that Burger King jingle?  How did it go: "Hold the pickles, hold the lettuce..."?

Have you ever fulfilled a customer request you wish they hadn't asked for?  Maybe they placed a special order that you knew would be incredibly difficult to provide.  Or you despised the manufacturer where you would have to order the part.  Whatever the reason, you didn't want to disappoint them so you took the order anyway.

Every company changes its offerings over time.  Retailers change distributors, service firms modify their portfolio, and wholesalers drop or add manufacturers as they suffer quality problems or change direction.

Many company representatives dread informing customers of product line changes because they don't want to upset them.  This is especially true if a loyal customer has gotten used to a product line that is being phased out.

You don't want a client to feel you're uninterested in assisting them.  And you also don't want to become resentful fulfilling a difficult request because your customers will pick up on your frustration.   Yet there is a way to charge so even disagreeable jobs are worth your while:

include an inconvenience factor in your price.  A difficult job should cost relatively more than an easy one despite its internal component cost.  When you make a sale you should be happy, not fearful.

You can phase out different products this way without losing clients.  If you want to discontinue offering a particular item, don't eliminate it so your clients can no longer get it through you.  The last thing you want to do is encourage your customers to go to your competitor.  But as your legacy sales become more dated and consequently more difficult, the price tag should grow increasingly more expensive until customers no longer want to pay for it.  But it should be their choice, not yours.  Even if they don't buy something from you right then, by not refusing them you're still positioning yourself as a one-stop-shop and keeping your relationship intact.

People want to feel they are in control, especially when they're writing a check.  It's when they feel out of control that emotions bubble and tempers flare.  So if you seek to preserve their dignity and subjugate your ego, you can tell a customer anything...as long as they decide how to use that information.  It's when someone else presumes to make a decision that affects them that people become emotional.

Case Study: Computer reseller

The computer industry continually struggles with product obsolescence.  Years ago even a basic computer system cost thousands of dollars, and new equipment and software took much more time to learn.  So customers commonly upgraded their existing systems at a fraction of the cost of buying new ones, and most got used to upgrading.

One company had lots of customers that had decades old technology that they insisted on upgrading.  In some cases these clients were captive to legacy software programs that ran on their specific machine, and the programs weren't offered on a newer system. 

As a rule, sales would price out the various components and labor and schedule the system for upgrade.  But the service technicians were often unfamiliar with the older technology so the work took much more time while the staff had to relearn old forgotten technology.  Sometimes they accidentally became surly and rude to customers while trying to patiently explain the difficulty of upgrading their old equipment.  Orders took much longer to fulfill which irritated clients.  Customers didn't understand nor did they care about the difficulty; they just wanted their machines upgraded and returned quickly.  Occasionally the company had to pay expensive rates for specialized technical support or even bring in senior staff to handle the extra time one of these monstrosities took.

These legacy upgrades became a sick internal joke.  The service manager complained to the sales manager insisting they were so cumbersome it was becoming unprofitable to continue to offer these services.  And the company's relationships with some of the clients that had legacy systems began to deterioriate.  The situation got so tense the President considered the request to discontinue upgrades on all older technology.

But where to draw the line?  How far back does 'older technology' go?  My team was brought in to construct a policy of refusal without losing clients.

But we recommended a different route.  Instead of discontinuing the complicated services, we asked, why not mark them up to include not only the cost of the components and time involved but also the inconvenience.  This way when sales tells a customer the exorbitant price, our rationale went, the customer will either opt to buy new, or pay the hefty fee.  The service and sales managers vehemently insisted the policy would infuriate customers and opposed its implementation.

We believed that putting the choice in the customer's lap would solve the problem.  At our urging, the company agreed to a trial period.  To their delight, sales discovered it could indeed steer their clients effortlessly by letting them choose.  As expected, most declined and bought new systems.  However, whenever they received a rare upgrade request they charged handsomely for it.  The company didn't have to worry about its profit in these cases and their relationships with their legacy clients were resurrected.  Their reputation as experts in this highly desirable niche field grew and the company broadened their geographic market eventually winning a large service provider contract with a tier one manufacturer.

Training Your Customers

By gradually increasing prices and making it inconvenient for a customer to do business a previous way while opening the door to a new smoother alternative, you can steer them in a preferred direction.  In this way your client can choose (rather than be told) whether to endure the added hassle and cost to purchase a difficult  service, or accept a more convenient, inexpensive alternative.  You can guide by incenting or disincenting along many dimensions of value, and in this manner we can lead our clients to the desired destination.

In a few weeks we'll expound upon this technique to explore other ways you can lead clients, and also use this technique with suppliers, employees, and even your own senior personnel.  You can truly have a peaceful and happy existence as an entrepreneur, and I look forward to showing you the way.  Because the old way lies misery, unprofitability, and discontentment.  And don't you prefer to choose the easier route?  :)

Update: The readership for this blog is growing spectacularly at 200% a month, much quicker than I ever anticipated.  Additionally I'm writing a monthly column at Young Entrepreneur Magazine, and I've also been a guest contributor for other notable blogs like this Denise O'Beery one.  And I'm also producing the first Ingenious Business podcast which I will finish and make available soon.

It's an exciting time for Ingenious Business - the blog seems to have struck a chord with businesspeople who were wounded but not killed by the recession.  These resilient entrepreneurs of Main Street want an easier way of doing business, and to their credit they are ravenous for proven innovative strategies like the ones I've been sharing

I've also received numerous requests to post more often.  So I'm in negotiations with some other top flight advisers, and shortly I'll start bringing in more original content featuring guest contributors and a few regulars.  I'm screening these contributors very carefully to ensure the content remains top notch.  These are all seasoned businesspeople and authors with great ideas and a fresh perspective.  So soon you will be able to receive more Ingenious Business without waiting days between posts.  And fulfilling another set of requests, I'm hard at work for those of you who desire premium value to boost your bottom line even more.  Thank you all!  All that's happening is possible only because of your support.  There's lots on the horizon so stay tuned.    Until then,

profitable business All! 

1 comment:

  1. Thanks for the post and tips on how to train your customers. I believe that it is a very smart idea to make your customers pay more for outdated services, or simply services that take more time to complete. I see this done all the time my top brand computer companies, many times it is better to just get a new machine rather than pay almost just as much to get the old one fixed. This actually can help a customer many times without them knowing it in addition to helping yourself or business save time and money.


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