Customers as an indispensable facet of sustainability
It seems so blindingly obvious that it shouldn’t warrant pointing out: customers are an essential element supporting the short, medium and long term sustainability of your business. Despite this, many businesses simply do not appear to appreciate the true value of their customers, appearing more intent on achieving short term gains rather than investing in long term viability.
So says Jayne Mammatt, Senior Manager Governance & Sustainability at Ernst & Young, who points out that recognising the worth of customers depends on developing long-term relationships. “This can be achieved by creating and maintaining a level of trust with customers and by creating value for a customer so as to influence individual purchasing patterns,” she says.
The first step depends on defining and identifying customers across target markets. With this established, the business must understand customers needs and the factors which influence purchasing decisions. “This will assist in promoting your product to the intended audience,” says Mammatt.
She notes that there are a number of factors such as product quality, price, market position, promotional strategy which can influence the decision-making process. “The emphasis that a customer places on a particular factor varies across the identified market demographic,” she adds.
Most importantly, the business must determine what value it derives from selling the product or service and what value the customer gains through purchase. “This interaction must be mutually beneficial for the relationship to be sustainable; a customers’ primary need is satisfied by the purchase of the desired product or service, while they may derive further value through, for example, supporting a good corporate citizen or acquiring a brand,” Mammatt notes.
These secondary benefits may differ per customer for the same product or service, and should be understood and managed by the business to retain existing and attract future customers.
“For businesses, the value derived is about the bottom line. How much money did the business make? The business therefore needs to translate how making a profit relates to its customers,” Mammatt continues.
This could be interpreted as an expansion of the current consumer base or a conversion of a new customer into a loyal one. Both these options require a business to have an understanding of its targeted customer type.
Generally, the different types of customers can be classified into six categories:
· Once-off: a customer who is an infrequent purchaser of a product or service. For example, someone who makes major capital purchases such as cars, houses, fridges
· Discerning: a customer who compares products before making a purchase. Someone who shops around for the best price, quality or after sales service
· Slave: a customer who follows the latest fashions and trends
· Repeat: a customer who makes purchases almost on a daily basis
· Loyal: a customer who is a committed purchaser of a particular brand or of products from a specific business
· Wild Card: a customer who is a first time purchaser or an impulse buyer.
Once the steps outlined above are clearly understood, a business can determine its marketing strategy which will include:
· what to sell
· who to sell to
· how to sell
· how to attract and retain customers
· and how to enable mutual value for both the customer and the business.
The overall aim of this strategy should be centred on developing and maintaining a mutually beneficial relationship with a customer, with trust as its foundation.
Some companies within the financial services sector face a challenge in terms of trust owing to the negative public perceptions of bulking and other practices. In the United Kingdom where similar issues have emerged, the industry has acted by introducing the concept of Treating Customers Fairly (TCF), a set of guidelines for customer relationships.
TCF advocates:
· The disclosure of material information to customers;
· Honesty, openness and transparency;
· Acting with integrity and good faith;
· Honouring representations and assurances where these have created a legitimate expectation in the mind of the consumer; and
· Being reasonable about putting things right and treating like situations alike.
However, TCF does not mean:
· Creating satisfied customers;
· That the level of service offered by every firm is exactly the same; and
· That customers are not expected to make decisions or take responsibility for those decisions.
Again, while the principles of TCF apparently staggeringly obvious, the necessity to introduce this concept is perhaps indicative of the industry having lost its way where customer service is concerned.
“South African legislation does not enforced the implementation of TCF; however, current legislation such as the Financial Advisory and Intermediary Services Act, the Financial Intelligence Centre Act and the new National Credit Act allude to the type of regulations that may follow in the future,” says Mammatt.
As a result, she says TCF is fast becoming a focus area of the financial services industry, with many firms voluntary adopting it as it gives firms the opportunity to reassess their values, enhance their control processes and deliver ‘best-in-industry’ service to customers.
However, she points out that the principles of how to treat a customer fairly can be applied to all industries.
“Customers can make or break your business. They are at the very core of sustainability - but the decision to let them make or break is up to you. The overall aim of a customer-centric strategy should be centred on developing and maintaining a mutually beneficial relationship with a customer, with trust as its foundation,” she says.
The resulting improved customer service, increased sales and customer retention, all translate to increased profits for the business.
