Chasing after the wrong customers can be costly, especially for a small business. After all, why should you overspend trying to win back dissatisfied customers when you could just as easily ask satisfied customers one simple and profitable question?
That’s what co-authors Christopher Frank and Paul Magnone ask in the upcoming book Drinking from the Fire Hose: Making Smarter Decisions Without Drowning in Information (due September 1, 2011). The following are some insights they recently shared with me.
Q: What’s the “fire hose” analogy in your book title?
A: Businesses today face a blast of information—from sales figures to customer reviews. The volume of this data can be overwhelming, especially for a small business. Many owners say they are confused about what data is most important for making critical decisions. Others say they aren’t sure how best to organize incoming data so it can be absorbed and used efficiently.
Q: Why target very satisfied and uncommitted customers?
A: Changing the minds of dissatisfied customers requires enormous resources, which is an impractical expense for a small business. A more profitable approach is to focus on customers who already enjoy what you sell or are on the fence about it.
Q: But unhappy customers can go viral, yes?
A: Of course. You certainly should track their complaints and resolve them quickly, particularly those that illuminate a problem in your company that you didn’t know existed. But spending too much to win them back isn’t an efficient use of dollars. Instead, treat these customers as a resource to uncover inefficiencies in your products and services. If they return, great. If not, use your resources where they will count most.
Q: Why bother with uncommitted customers?
A: They are powerful because they can be won over. They are “swing voters,” and by definition they are on the fence. Also, when these customers are suddenly satisfied, they tend to rave to others about their positive experience. The key is to engage this independent, swing-voter customer in a dialogue that has a positive outcome for both of you.
Q: So what’s the magic question?
A: It’s simple really, and you ask it after a customer’s experience with your business: “What is the one thing I could have done differently to improve your experience?”
Q: Why just one question?
A: One question creates the right learning environment. All very satisfied and uncommitted customers can become motivated to think of one answer. And once they get going, they will likely give you three or four things to improve. Another way to position the question is through what’s known as “Start, stop and continue”—“What do you suggest we start, what do you suggest we stop and what do you suggest we continue?”
Q: How does one cope with the “fire hose” of answers?
A: Part of the “fire hose” problem today is knowing what information is valuable. The other part is figuring out what to do with it. Our suggestion is to set up physical or electronic folders. Since virtually all businesses can be divided into four or five components that are a direct result of customer actions—operations, sales, returns, billing and customer service—you can use these as folder labels.
Q: What do you do with the incoming remarks?
A: All incoming customer replies can go into their respective folders for review. Or you can design a card that asks the same question. Then leave the cards on a counter in your store or attach one to the bottom of each invoice and urge customers to return it completed with payment.
Q: How do you determine customer types?
A: Keep your metric simple. You can categorize your customers based on a range of factors—their satisfaction, willingness to repurchase or willingness to recommend what you sell to others. Or you can segment based on how often customers make purchases or the size of their transactions.
Q: Should you reward respondents?
A: We’re not in favor of providing cash or discounts to motivate responses. Not only is it costly, it’s unnecessary. What matters most to customers is that you took the time to ask them about what’s on their minds and that you are working on their recommendations.
Q: Don’t you risk causing good customers to think about problems?
A: No, because you’re not asking them to come up with moments of dissatisfaction. You’re asking how you, the business owner, can take steps to make their experience more rewarding. Which is why the question must be posed in a positive way.
Q: How does this work in reality?
A: We recently visited a small movie theater called Big Picture in Seattle, Washington. The theater redefines the movie-going experience by providing audiences with swanky lounges, popcorn in champagne buckets, and the delivery of drinks, cocktails and other amenities to your seat.
Q: Did you pose the magic question to moviegoers?
A: Yes. By asking them for one way the theater could improve their experience, we were able to discover what extras they wanted. In most cases, the requests were relatively small, like lowering the lights before the film to create a hip, cool ambiance, delivering drinks to their seat mid-movie, etc.
Q: What happened?
A: Based on their answers, the owner made changes immediately that night, which audience members said they appreciated as they left after the movie. They had a unique, memorable experience. You know the best part about this type of research and marketing? It didn’t cost the small business owner a cent, and it reinforced the value the small business was delivering. Furthermore, it created a differentiated experience for the customer, distinguishing this business in the customers’ mind creating a positive ‘fly-wheel’ effect for repeat customers and word of mouth.
Christopher J. Frank is vice president of business-to-business and communications research at American Express. Paul Magnone is director of global business development and alliances at Openet. For more about the authors an/or to purchase a copy of the book, visit www.firehosethebook.com.