Stem The Tide
Here's How To Ensure Customers Don't Stray
Many distributors complain about their struggles to retain customers and expand relationships. Here's how to ensure customers don't stray.
When a business professor from the Massachusetts Institute of Technology talks, folks tend to listen. And Professor Michael Braun, who studies customer attrition, has this unequivocal message when it comes to so-called "churn": "There is no such thing as 100% retention. It's a myth."
In the ad specialty market, that's certainly true, as customer retention for distributors has taken a hit in recent years. The Counselor State of the Industry survey shows that the average distributor retention rate of clients was 77% in 2012. The number marks a steady decline over the past decade – retention rates reached a height of 89% in 2003. Distributors cite many factors for the drop in client loyalty – the Internet providing access to easy information, the proliferation of cost-cutting distributors, online sellers willing to erode margins, and increased client demands for lower costs since the recession of 2009.
So, rather than scramble to maintain every customer, distributors should evaluate which clients are most profitable and focus retention efforts there, says Jill Griffin, an author and business consultant whose clients have included Dell, Microsoft and Ford. "You're much better off concentrating on people who show a propensity to spend with you," says Griffin, who is based in Austin, TX. "Those are the customers you cannot afford to lose."
Focus on the Best
Distributors unsure of who their top customers are can use simple formulas to evaluate which clients yield the biggest profits. "You want a formula where you can say, ‘This client generated $10,000 over the last few years, and it cost X to serve them,' " says Griffin.
Once top customers are identified, successful distributors maintain them by delivering outstanding service and quality product options. For Kotis Designs LLC (asi/244898), the standard rules of sales and service apply: Get to know your customers, identify their needs and deliver a quality product on time. But the Seattle-based distributor, which has grown at an average annual rate of 40% over the last decade, takes its service to the next level by being a consultative solution-provider.
"Constantly, unasked, we are coming up with innovative marketing concepts for our clients," says owner Jeff Becker, "and finding ways to supplement those ideas with apparel and promotional products."
A straightforward – but underutilized – way to increase retention of core customers is to ask them how you can improve their experience with you, says Griffin. You can do this through surveys or questionnaires, but it's particularly beneficial when reps regularly talk to customers about serving them better. Not only does Top 40 distributors Kaeser & Blair (asi/238600) take this approach; the Batavia, OH-based company also asks new customers about problems they had with previous distributors. "We find out what made them mad so we can avoid those mistakes," says Gregg Emmer, chief marketing officer.
As part of its service repertoire, Mason, OH-based Touchstone Merchandise Group (asi/345631) serves as a brand watchdog for larger accounts, ensuring that logoed products always conform to corporate guidelines. Recently, a regional office for a major corporation wanted to put the company logo against the backdrop of the city where the branch is located. Knowing that the design didn't conform to the corporate client's strict brand guidelines, Touchstone employees said they could not do the project in the manner requested.
To further improve customer service, Touchstone has a secure online system that features a design tool clients can use to customize and personalize apparel and other items available through a corporate program.
For Rama Beerfas, keeping customers informed throughout the order process is central to the service initiatives that have minimized customer attrition at San Diego-based Lev Promotions.
"I let them know when it's going to production, when it's going to ship and when they can expect it," says Beerfas, noting clients feel cared for when you keep them in the loop. "After they get their order, I follow up with a questionnaire asking them to rate everything about the transaction. First-time clients get a follow-up ‘thank you' gift as well, and at Thanksgiving all my clients get a hand-signed card."
Additionally, Beerfas distributes a newsletter to clients that contains tips to help them market their businesses better. Since Beerfas provides valuable information and takes the time to build relationships, clients see her as a trusted partner, strengthening her retention rates.
Becker shares Beerfas' views. "We visit our customers regularly," he says. "We listen to them, build relationships and communicate good ideas."
The Best-Laid Plans …
Despite outside factors like lower-cost competitors and client demands for price reductions, the line between losing a client and retaining (expanding, even) a customer relationship is often determined when an order goes bad. Despite a distributor's best efforts, it's inevitable that something will go wrong on an order at some point. Perhaps the mistake is your fault; maybe it isn't. Either way, if you want to keep the client, it's pivotal that you handle the situation correctly. If you do, you can potentially save the deal and build trust with a customer, increasing their loyalty to you.
To navigate the troubled waters successfully, start by accepting responsibility and letting the customer have their say – even if that means taking the heat at the outset. "Put yourself in the customer's shoes and respond in a way that shows you sincerely care about his or her issue," advises John Tschohl, a customer service strategist who authored Achieving Excellence Through Customer Service. "No matter who is at fault, apologize without assigning blame. Don't get into a fight … even if the person really gets under your skin."
Responsibility accepted, you can begin your most pivotal work: finding a viable solution. Recently, Mike Welker, senior account executive at Touchstone Merchandise Group, did just that for an important client with six-figure spending power. Things went awry after it became apparent there was an issue with getting the proper imprint to take on a 60,000-piece order of slap bracelets. Angry at Welker, the customer told him not to bother trying to fix the issue, adding that the organization would never buy from him again.
But Welker was committed to coming through. He contacted a trusted supplier and worked closely with the company to find a similar product that would work. The items were rushed in, and the client received the imprinted order on time. While Welker's margins suffered on this particular campaign, he preserved the relationship with the client. And, the following month, the customer placed a $15,000 order.
"When something goes wrong, it can actually be an opportunity," says Welker.
Like Welker, the team at New Berlin, WI-based Top 40 distributor CSE (asi/155807) makes it a top priority to rectify problems. In the rare instances when customers aren't happy with a product, they can return it, says Chief Operating Officer Mark Ziskind. In other cases, CSE may offer discounts or credit. And, of course, the distributor will pull out all the stops to ensure any rocky patches in an order are smoothed in the end.
"The test of your company is how you handle problems and recover from mistakes," says Ziskind.
While setting things right can earn a client's loyalty, failing to do so often opens the door for other distributors to steal your business. It's just the type of situation that CSE recently found itself on the positive side of. A telecommunications company called CSE, desperate for help. Another vendor had failed to deliver an order of about 700 decorated sweatshirts on time, and the company needed the garments the next day for a New York event. Could CSE help? Absolutely.
Because of its in-house decorating capabilities and quick access to crewneck sweatshirts, the distributor was able to decorate and ship the order overnight. Says Ziskind: "Whether it's fixing an issue, helping a client in the clutch, or something else, you win business by being nimble, adaptable and resourceful."
Dealing With Irate Customers
Of course, if something does go wrong, it's often incumbent upon distributors to quell and satiate difficult clients – before they head to the competition. Industry experts say there are several common mistakes that can really irritate clients. "Not outlining proper expectations upfront is a major reason clients get irate," says Danny Rosin, co-president of Brand Fuel (asi/145025).
Over-promising and under-delivering, failing to listen to the client or be empathetic, not having a historical rapport or existing relationship with the client and not owning up to mistakes can also add fuel to the fire in a heated situation. "Make the clients the priority – take great care of them," Rosin says. "Don't dwell on the problem."
Also, don't ignore the problem – it won't go away on its own. "Avoiding the situation is a no-no," says Rosalie Marcus, Promo Biz Coach, speaker and educator. Stay calm, and don't fight fire with fire. "If you feel yourself getting heated on your end of the conversation, end it and resume when you feel calmer," Marcus advises. Additionally, be careful how you respond in an e-mail, as the client can hold you to whatever is contained in the written communication.
Being transparent in communications is critical to a successful working relationship, according to Kevin Scharnek, president of 14 West LLC (asi/197092). Honesty is always the best policy. "Making customers aware of where things are in the process softens the blow" if anything does go wrong, he says. "You have to be open and honest 100% of the time and explain the circumstances."
Out-of-stock products, shipping issues and costs, and receipt of a product that doesn't live up to what was expected are also familiar reasons for client complaints, says Jim Franklyn, vice president of sales and marketing at InkHead Promotional Products (asi/231159).
"We rely 100% on the communication we receive from our supply chain partners, so if that winds up being inaccurate, it can have a domino effect. And that is not good PR for anyone," he says. "If we tell a client a product is in stock, and then a few days later we learn it's no longer in stock, that's not good. We train all of our consultants in ‘The Rule of Three,' which means that they never should have just one option for a client. Always have a backup plan."
Without options and a backup plan, clients will head to the nearest competitor.
–E-Mail: firstname.lastname@example.org; Twitter: @chrisr_ASI