Customer defection is one of the most overlooked and least understood problems facing small businesses today. Our economic environment and continuing price erosion are problems in just about every industry. This is causing customers to re-evaluate their loyalties for what are perceived to be “lower cost alternatives.”

Lost customers means lost revenues, negative word-of-mouth and a negative impact on employee moral. I thought I’d take a moment to look at some of the things that we could do to not only recapture lost customers but also keep them more loyal in the first place.

Winning Winback Strategies
Recognize that all customers are at risk. Even satisfied customers can be persuaded to defect to the competition. Do not take any customers for granted.
Consider that customer winback strategies can be more effective than finding new customers. Many experts believe that winback success rates are far higher than recruiting new prospects.
Make sure you fully understand both the revenue potential and the cost of doing business with all of your customers. Initially this may be a massive undertaking but once complete it is easy to maintain and extremely valuable when protecting your customer base from being plundered.
Calculate every customer’s life time value (LTV) and second LTV (after they are won back). This is a powerful way to identify customers that you may want to win back and how much you should invest in wooing them.
Apply CPR to customers that are threatening to bail. This kind of CPR stands for Comprehend, Propose and Respond.
Make an effort to comprehend what their issues are. What do they want? Why do they want it? Try to separate the emotions from the pragmatic realities. Sincerely make an effort to understand their side of the story.
Propose a solution that is reasonable to each party. Not a one sided solution. Truly a win-win. Rolling over and just giving in to unreasonable demands may be the worse course of action. This is why it’s so important to understand the numbers. How does your business look WITH this client as well as WITHOUT them. Their departure may be the best thing for both parties but the way it is implemented can make all the difference in the world.
Then take positive and decisive response. This means action. Try to communicate at the highest levels of the organization. Be clear and concise in your offer. Put it in writing. Don’t be afraid to apologize or admit where you or your company was wrong. But don’t respond to threats. This is a sign of a bluff. I recommend dismissing them out of hand. Finally when you have proposed the best solution give them a deadline so the deal doesn’t stay on the table forever. This weakens your bargaining power.
Make Your Company Defection Proof
While everybody is talking about customer loyalty today few are taking real action. Preventing customer defection is surely the prime motivation for building customer loyalty, but it also gives us the ability to proactively develop strategies to improve our value and service in general. Once you become a convert to customer winback efforts you can learn to prevent defection in the first place. Here’s some ways to improve your position with current customers or customers that you HAVE managed to win back:
Identify all of your products or services that could possibly be of value to your customers.
Motivate your customers to use as many of your products or services as possible.
Prove to your customers that your products and services offer value that they can not find anywhere else.

• Keep track of every sale and sort in a database
• Personally communicate with customers at regular intervals
• Establish some form of satisfaction rating system
• Sell peace of mind more than just product or service solutions
• Admit when you’re wrong and pick up the pieces quickly and effectively

I hope these ideas help you to improve customer loyalty and lessen customer defection. If employed consistently I know that they will succeed in producing greater effectiveness for your business in this difficult economy.

What’s your story?

Who are you?Where do you come from?What do you believe in?When you seek to influence others, you face questions like these. Whether you are proposing a risky new venture, trying to close a deal, or leading the charge against injustice, you have a story to tell. Tell it well and you will create a shared experience with your listeners that will have profound and lasting results.I’m not talking about just providing information. People don’t need more information. They are up to their ears with information. They want a relationship with someone they trust and believe in. They want faith, hope and an answer to their problems. Faith and hope needs a story to sustain it. A meaningful story inspires hope that your ideas indeed offer what is needed to solve their problems.The Path to Faith
Genuine influence goes deeper than getting people to do what you want them to do. It means people pick up where you left off because they believe! The story is the path to creating faith. Whether you tell your story through lifestyle or words, the first thing people look for before believing in you is trust. Annette Simmons in her book, “The Story Factor” talks about the six steps in story telling that we can use to build trust:

1. Who you are story
2. Why you are here story
3. The “Vision” story
4. The “Teaching” story
5. “Values in Action” story
6. The “I Know What You are Thinking” story

Before being influenced by you, your listeners want to know, “Who your are and why you are here?”
If you don’t take time to answer this they will make up their own responses which are usually negative. It is human nature to mistrust others. You need to tell a story that demonstrates that your are different. That you are trustworthy. That you deserve their faith. A story lets listeners decide for themselves whether they should trust you. If your story is good enough, people -of their own free will- conclude that they can trust you.The “Who You Are” Story
Stories about “who your are” must reveal something about yourself. Make yourself vulnerable. If your story reveals that you have learned to recognize your flaws, then people will believe you can be trusted to deal head-on with tough problems.The “Why I Am Here” Story
This story must reassure your audience that you have good intentions. However, before you tell them what’s in it for them, tell them what’s in it for you. If you don’t they will suspect that you have a hidden agenda.The “Vision” Story
Once people know who we are and why we are here, they are ready to listen to what’s in it for them. This is where you can differentiate yourself. Like the story of the the man who came upon a construction site and asked each of three workers what tehy were doing. The first responede, “I’m laying bricks.” The second said, “I’m building a wall.” And the thrid said, “I’m making a cathedral.” Your job is to take your vision and transform it into the audiences vision. A real vision story connects with people in a way that shrinks today’s frustrations in light of the promise tomorrow.The “Teaching” Story
Use a story when you want to get your message across, especially when you need to show not just “what” needs to be done but “how” it should be done. For example, telling your new receptionist where the hold, transfer and extension buttons are will not make her a great receptionist. But telling her that the best receptionist you ever knew was Mrs. Smith, who could simultaneously calm an angry customer, locate your wandering CEO and smile warmly at the UPS man.The “Values in Action” Story
Without a doubt, the best way to teach a value is by example. The second best way is to tell a story that provides an example. A story lets you instill values in a way that is memorable and keeps people thinking. “We value integrity” means nothing. But a story about a former employee who hid his mistake and cost the company thousands of dollars or about a salesperson that owned up to their mistake and earned so much trust that their customer doubled their order, teaches your audience the MEANING of integrity.The “I Know What You Are Thinking” Story
Tell a story that makes people wonder if you are reading their minds. I really isn’t that hard to do. If you do your homework about the group you are seeking to influence, it’s relatively easy to identify their potential objections to your message. If you address their objection first, you disarm them.Clothing truth in the form of a story is a powerful way to get people to open their minds to the truth you carry. The naked truth sometimes must be dressed up to be seen. New ideas need room to grow. Tell it like it is. But consider telling it in the form of a story.

I was at Sea World not long ago and had the opportunity to watch a trainer working with a seal. Now I’m not speaking of the kind of Seal that you might find in the Navy, I’m referring to the wet, pudgy, cute, whiskered kind.

I watched as the trainer used her fingers and thumb to simply touch the nose of the creature. This was the seal’s “cue” or signal to perform the proper behavior. The seal then opened its mouth for inspection by the trainer. This was the seals “response.” The trainer then tapped the seal on the head and said “good.” This was her way of showing “acknowledgement” for the animal doing the right thing. She then tossed the beast a whole fish – “yuck!” However if you’re a seal and you’re reading this, you know just how tasty that smelly old mackerel is. This was the seals reward.What does this have to do with business improvement? Good questions. Have you ever noticed that buyer’s are kind of like seals?They are if you think about it. They automatically react to cues just as the seal did. This is what their training and conditioning has taught them. Their training tells them, “this sales person is here to sell me something therefore I must resort to what will protect my interest best: object to their pricing, terms, program or package.”Let’s face it securing the business often boils down to the lowest price, in one form or another. Are you cheaper than the competition? If not you may be up for a battle of the wills. No matter what price you quote, many customers will automatically say its too high, maybe way too high. Like the seal, that response is so deeply drilled into them that just about every rep they meet gets the same reaction. The trick is to get beyond the knee-jerk reaction and into a reasonable conversation about their situation, needs, budget, and time frames. Until you achieve that level of rapport, price itself simply isn’t the issue.Some of you know my sidekick on the Small Business Hour, Matt Walker. Matt is a comedian. When people find this out they, as you can imagine, often say, “hey Matt say something funny.”This irritates Matt to no end, which is why I enjoy it so much when it happens. However, Matt, being the friendly guy that he is always manages to spew out something hilarious. How does he do it? He’s always ready with a joke.As Matt likes to say, selling is like improvisational comedy: You must be ready to improvise because encounters with potential customers constantly produce reactions and situations that you could never predict. If you prepare long before you meet with customers you will be more effective face-to-face. While you’re still at the office, force yourself to make a list of 10 great, potential responses when you hear that your price is too high. I mean it — 10, and 20 would be even better. It may be what you say. Or it may involve a particular tone of voice or even your body language. Developing and using the responses will make your selling technique more flexible, resilient, and confident.Another facet of the price objection is the explosion of options every client faces these days. There are more varieties of products, and more vendors to buy from, than ever before. Multiply varieties and vendors and it’s clear that the total number of available choices has grown logarithmically. This tsunami of data can lead customers to making comparisons between options that aren’t strictly comparable. Yes, the solutions on offer aren’t equal, but the conditioned prospect can’t look beyond Price A vs. Price B.As I noted earlier, “Your price is too high” is an objection we all hear. In fact, if you aren’t hearing it, then your prices are too low, you’re leaving potential profits on the table, or you just aren’t making enough sales calls. There is no single, sure-fire, works-every-time solution to this problem, but there are lots of great ideas. The more arrows in your quiver, the more options for handling — and the greater selling success you’ll experience. Then you won’t have to worry about all those trained seals out there.I hope that this “Business Update” has been helpful in assisting you to improve the performance of your organization. For more information on how the Small Business Advisory Network assists companies in improving their performance, please feel free to contact us at 310-320-8190 or email mark@markdeo.comMark Deo

Getting ready to head off to do my radio show, it was a typical Sunday afternoon as I ran to answer the incessant ringing doorbell.

Who could this be on such a beautiful day?I peeked out the small window at the top of the door and saw no one. Likely a neighbor’s visitor realized they were at the wrong house. Just about to trudge back upstairs, the doorbell rang again. Hmmm… funny business here. I opened the door and at first saw no one until I looked down and there was this miniature human of about eight years of age with a small box tucked under one arm. He looked up at me with the archetypical big eyes of an eight year-old that wants something. I brace myself for the inevitable cookie, candy or magazine pitch. You know the old, “Good afternoon sir. Would you help me to win a chance to summer camp this year,” and so on.This kid stares me straight in the eye and says: “This your place?” Stunned I blubber, “Yea.””You’ve got nice plants,” he says.”Yea they’re not bad,” I stammer feeling dumb.”They’re kind of like a forest. Did you grow them yourself?” my amateur Botanist asks.”Yes it’s taken several years but we pretty much planted all of them ourselves.””Who keeps them clean?” he inquires.”Well we have a gardener and we keep after it. Are you wanting to do yard work for people, or something?” Now I’m beginning to wonder what this is all about. Next this kid says something that completely blows me away.”Nah, I don’t do manual labor. But I bet you get pretty tired doing all that planting.”I laugh and figure OK, I’ll play along. “Yea, sometimes we do get tired.”Suddenly this kid beams with a huge smile. He thrusts the nearly forgotten box directly in my face. “You need energy then. You need to buy some cookies.”Now I’m rolling on the floor laughing. “OK, you’ve got me kid, give me a box.”I hand him the cash, he turns to go, then stops and turns back around to look at me. “Have you got any friends that need energy?”Naturally I relieve the kid of his entire remaining inventory of cookies and realize I probably just met the next Bill Gates.
After my interaction with the eight year-old genius, I was again reminded that sales is not about jamming your product down somebody’s throat, or laying on a pitch so thick it makes the prospect gag for fresh air. It’s about getting people interested in YOU by being interested in them. Smart entrepreneurs, professionals and technical experts know that the true secret of success lies not in how great your product or service is, but rather, in how skilled YOU are in building genuine relationships with others. Many people view great salesmanship as great showmanship. This is sometimes true. Showmanship is characterized by the development of sophisticated and polished presentation skills that almost unfailingly dazzle (but do not always win the business). Using enthusiasm and showmanship can help us to encourage more interest in our product or service and build greater conviction. But the art of salesmanship is often times the concealment of salesmanship. Some might even say the art of salesmanship is the absence of salesmanship.

The art of salesmanship is the concealment of salesmanship and is often characterized by well-prepared, interactive questions that elicit the “right responses” from the customer. This creates greater interaction with and feedback from the customer. Of course leading questions usually reveal what you think the issues and problems are, not what the customer knows they are.It often takes a lifetime in sales before one has the confidence to say almost nothing and communicate effectively. And that, as the wise old sage said is the “true art of salesmanship, and of life.” When you’re coming at things from their perspective or point of view, you’re selling from legitimacy. The switch is on, and you can solve or understand any problem. When you’re not, it’s off.Reflect on your own growth regarding the art of salesmanship. Pick out a single habit or practice that you know could be improved regarding legitimacy and customer communication. Work on it every day until it’s much better. Then move on to some new weakness.Stand aside from the situation and ask yourself, “If I were this customer, and knew everything that he knows about my competitors, my products and the application of my products in his situation, would I buy from me?”If the answer is yes, welcome to the world of legitimacy. All you need to do is get up to speed on the knowledge and communication skills needed to transfer your understanding and wisdom to the customer.If the answer is no, you’d better start adding value until you can say yes, because the only alternative to legitimacy is the old ‘razzle-dazzle.’

This weeks business update comes from Abe WalkingBear Sanchez, a business expert based in Colorado. Check out his website at: www.armg-usa.com

Current Credit Customers Keep Buying and Buying and Buying

Miami
The four day national business conference featured about 40 business speakers. One of the speakers was a sales management expert; I was speaking on B2B credit management.

I was telling the “Sales Management” speaker that as a corporate credit manager I’d print out a list for each sales person of their past-due credit customers. I’d might as well have called it the “Avoid” list.

“Don’t sales guys understand that the most profitable sale is the repeat? That it costs 8 to 14 times as much to find and sell new customers as it does to keep and sell to existing customers?”, I asked.

“Unlike you, Abe, most salespeople like people and want to be liked in return. They avoid anything they think of as being confrontational.”, he said. It’s a good thing for the smart aleck that I haven’t hit anyone since I quit drinking.

Hold or Hide
Believe something and it’s true, at least to you. In business there still exists an out of date and misguided belief that past due credit customers are bad; that past due credit customers can’t / shouldn’t buy. This “risk management” view of credit and A/R management results in credit managers spending much of their time releasing orders from the “credit hold / do not sell” list, and leads to salespeople crossing streets to avoid an oncoming past due customer.

The only credit customers that should be placed on “credit hold” are those few who for whatever reason can’t pay or who are trying to avoid paying. The vast majority of past due customers are good for the money and will pay. There are good reasons why most past dues don’t pay within terms.

Past due customers not only represent potential lost sales, they also represent an opportunity to elevate customer service levels. Listen to past due customers they’ll also tell you how to improve on your business processes.

Why Don’t They Pay When Due?
Many credit customers become past due because they’re disorganized or lazy about their A/P function. Some are playing games with paying vendors and suppliers; mistakenly thinking that practicing cash management (using vendors/suppliers as a form of short term financing and not paying late charges) is a good thing. Many more past due customers don’t pay because something is wrong.

There are also customers who don’t have the ability to pay when due, but can and will pay in the near future. A small percentage of customers can’t pay and have no idea when they will be able to pay. These are prime candidates for a bankruptcy filing. The smallest percentage of past due customers are those who are trying to avoid payment altogether; the best thing to do with these “avoiders” is to write them off and assign them to an enforcer; a collection agent or attorney.

The reason for contacting past due customers is not to collect, that what the enforcers do, but to “complete the sale.” The goals being to keep credit customers current and buying, and to identify and control the small percent that represents a potential for loss.

Four Steps in Sales/Completing the Sale
The same 4 major steps are found in both sales and in completing the sale (past due A/R management).

Step One: Contact the Decision Maker
In sales the decision maker is the person who can say “yes.” In past due A/R management it’s the person who can tell you when you’ll be paid and just as importantly why you weren’t paid when due.

The best opening in a completion of the sale call is “Our records show invoice number so and so, dated __day of __ for ___dollars still being open, can you please help me with this matter? Shut up and listen.

Step Two: Determine Need / Desire / Type
In sales we ask questions about the customer’s needs or desire so that we know their “hot button.” In completion of the sale we ask questions about why the customer hasn’t paid so that we can determine the account type.

Step Three: Push the Hot Button
In sales we want to point out how our product/service meets or exceeds the customer’s expectation, their hot button. In completion of the sale we want to resolve why the account is delinquent.

If a customer is disorganized or lazy we become a friendly squeaky wheel.
If something’s gone wrong, we fix it.
If a customer has a short term cash flow problem, we work with them and encourage them and continue buying from us.
If a customer has no idea when they’ll be able to pay we need to cut off further credit sales and move at once to improve our position on the account (liens, notes, personal guarantees, returns, barters).
If a customer is uncooperative, lies and breaks payment or other arrangements we need to cut off further credit sales and then get them out to a collector.

Step Four: Close and Follow Up
In both sales and completion of the sale, we want to repeat the understanding and then calendar the account for follow up.

Telemarketing to a Captive Audience
One of the best credit managers I’ve ever met was a woman in Evergreen, CO. The first thing you noticed in her office was a bulletin board covered with pictures of children. There were black kids, white kids, Asian and brown children. They were her customers’ children.

“I love my job” she said. “I get to come to work and call my friends all around the country on my employer’s long distance service.” By coincidence all her friends worked for her employer’s customers in the A/P department.

Calling past due customers can be enjoyable, if you make it so.
Early and cheerful contact combined with fixing things that go wrong, and the identification of potential losses leads to reduced losses, better cash flow, more repeat sales and higher customer service levels and customer retention.

The Author
Abe WalkingBear Sanchez is an International Speaker / Trainer on the subjects of Profit Centered Credit / Sales and bottom line enhancement. A hard hitting and fast paced speaker, Abe brings life and energy to a critical business function whose true potential has yet to be realized by most businesses.

TEC (The Executive Committee), “Inc.” Magazine Annual Business Conference, CU (Denver), CSU (Ft. Collins), Texas A&M, NACM, IDA, AWCI, ARWI, PEI, BCFM, RAB, STAFDA, WIMA, ISD, Pet Industry Distributors Assn., Rain Bird, American Lock, Southern Wholesalers Assn., IBM, Touchstone/2000 Software are but a few of the groups, schools, companies and associations for whom Abe has conducted programs.

Abe can be reached through:
A/R Management Group, Inc.
P.O. Box 457
Canon City, CO 81215
(719) 276-0595
e-mail: Abe@armg-usa.com
website: www.armg-usa.com

Copyright 2004 A/R Management Group, Inc. www.armg-usa.com All Rights Reserved.

While preparing for the “Attract More Business” workshop I began to think about the two schools of thought in approaching customers. The more conservative alternative has always been to propose benefits to customers in an attempt at building value. The more recent approach encourages discovering the customers “pain” and emphasizing their problems rather than your company’s benefits. Both approaches seem to hold merit but I began to think about how I could reconcile the two, when a recent experience came to mind.

I was talking to a successful business owner who was interested in hiring our firm to do business improvement coaching and consultation. I couldn’t help but tune-in to the negative way he spoke about his current situation.”Business has really been in the tank lately,” he told me. “This economy has hurt us and I don’t think we have that edge over the competition anymore. It doesn’t seem that our people are working as a team or that they’re even pulling in the same direction.”I nodded gravely matching his look of somber seriousness. “Our marketing isn’t working as well as it has in the past and I don’t even know why I bother to advertise anymore,” he concluded shaking his downcast head over slumped shoulders.I asked him some more questions and he proceeded to paint a picture as dark and depressing as any Edgar Allen Poe story. It seemed that no matter what I asked this fellow he had a negative response. I began to notice a trend.Finally, he asked if we could help him. I told him I thought we could and that it would take six months and a specific amount of money to bring about the desired change. When he heard this he said, “Wow Mark, that’s a lot of money and six months is a long time.”This is what I told him: “I understand how you feel. You have a difficult decision to make. You have to decide which is worse. Is it WORSE for you to invest the time and money. Or is it WORSE for you to wait and see if it’s going to get better all by itself, knowing that it very well may get WORSE.”Which do you think this person chose?He called me not long after this and told me, “Mark, I gave this a lot thought and I can’t afford NOT to do this.”In other words he made the decision to purchase our services based upon comparing the risk of purchasing the service versus the risk of letting his situation get worse.Ordinarily I would encourage this person to purchase our services based on the benefits or the opportunities we would offer his company. But because I noticed this person was more focused on the negative elements in decision-making I switched my orientation from benefits to risk. To this person, reducing risk is far more important than improving performance or creating opportunities.This is not true for every person because each person’s decision-orientation is different. It takes strategic listening to discover the other person’s decision-orientation. Only when we discover this can we adjust our language and unspoken communication to fit the other persons perception and orientation. Some may have heard of “mirroring.” This technique is similar but a hundred percent more powerful.Many communication specialists today have made a clear connection between language and persuasion. In essence what they all agree on is that different people respond in one of two ways: positive orientation or negative orientation.Dr. J. Mitchell Perry talks about this in his book, The Road to Optimism. He says that these two types of people display opposite and opposing traits in decision-making. Those that make decisions that “capitalize on their strengths” or those that “compensate for their weaknesses.” The person who compensates for their weaknesses will usually be looking at “what is wrong” and the person who capitalizes on their strengths will usually be looking at “what is right.” This has a bearing on how we approach them.The person who compensates for their weaknesses is typically the type of person who will do everything they can to minimize risk. The person who capitalizes on their strengths will look for opportunities. Understanding your customer’s orientation is critical in persuading them to see things from your point of view.Decision-orientation is just an example of the kind of communication technique, which we will practice at our upcoming workshop, “Attract More Business.” There will be very little lecture at this event. It will be very interactive and focus on applying and practicing new marketing approaches so that they create a dramatic impact in your business.