Profit-Driven Customer Service

Tuesday, February 13, 2018—For the past decade, I've spent all my time thinking, writing and speaking about company profits, and the underlying dynamics that affect them. At WayPoint, we've developed the world's most advanced costing and profit analysis system, and we've overseen close to $100B of client activity. I've observed and analyzed both initiatives resulting in failures and those delivering profit rates beyond what most executives think is even possible.

So first let's talk about the strategic actions that delivers stellar profit rates and cash flow.

Well, high-profit companies are successful for only one reason – they attract and retain the most profitable high-volume accounts, and have few (or none) of the high-volume money-losers. Driving the ratio between money-makers and money-losers is the principle objective of their core profit strategy, and the most important factor for cash-flow and growth. Nothing else comes even close.

So you may be thinking, "Sure – we go after all the big accounts, too. What's the big deal?"

The subtle, but important, difference is that they don't go after or retain the large-volume, but money-losing accounts. They actively avoid the accounts that siphon off profits they've made from other customers. This means their people are totally focused on the best accounts, where their competitors are spread thin trying to appeal to everyone.

So, what – specifically – do they do to implement a strategy for attracting and retaining the high-volume, high-profit accounts?

In simple terms, they identify the high-volume accounts in their market, and split them into money-making and money-losing categories. Then they focus on the former and avoid the latter.

Our clients have a tremendous edge in the identification process, because WayPoint classifies customers, and its detailed cost and profit reports show why each customer's relationship is beneficial or detrimental, and what to do about it. (I've left a link for our website below, where you can find a lot more detail on how this is done.)

The target high-value customers care about just three things: product availability, price, and customer experience.

Availability and price are pretty much uniform throughout the market, but a company can really differentiate itself by providing second-level Concierge Customer Service. This is something beyond usual customer service and includes special treatment and services that sales can use to win top accounts, and builds loyalty so it's much harder for competitors to take them away.

Providing second-level Concierge Customer Service means providing extras for top accounts: personnel dedicated to helping them solve problems or help them pursue opportunities; first call on inventory; near-instant bid support; engineering assistance; on-site inventory; and many more ideas and innovations.

One crucial element of Concierge Customer Service – and the reason it's second-tier – is that it's exclusively for high-volume, high-profit accounts. This keeps costs and efforts focused on the accounts that deserve it and fund it, gives low-profit accounts a reason to improve so they can get it, and prevents it from attracting accounts that are bad for your bottom line.

Concierge Customer Service also recognizes an important evolution in sales. Customers have a lot less interaction with sales reps than they used to, so support for the "customer experience" has to be delivered by a different team. This is why Concierge Customer Service groups are commonly staffed by former mid-level sales reps. This has a big – and positive – effect on both costs and results.

I've gathered what I've learned across the past decade into my book, "Profit-Driven Customer Service: Tuning and Exploiting a Necessary Function So It Multiplies Profit". You can get the book on Amazon.

The book covers: how strategic Concierge Customer Service supports profits and cash-flow; the economics of Concierge Customer Service, so you can see why it pays rather than costs; and how to set up Concierge Customer Service in your company. It has chapters on policies and practices your people will want to know about, making it a handbook that everyone in a customer service role should have.

In the meantime, I hope this video has you thinking about how to begin to influence your customer mix by implementing your own strategic Concierge Customer Service capability. It's a proven path to record profits and cash-flow, and to a stellar reputation in your market.

WayPoint website: http://www.waypointanalytics.net/waypoint.asp?pg=2024

Profit-Driven Customer Service book: https://www.amazon.com/dp/1983837253

First two chapters FREE: https://media.waypointanalytics.com/media/CustomerService-excerpt.pdf