Customer Based Thinking Slides

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These slides show the importance of customer based thinking, or "voice of the customer" when it comes to your business. They highlight the differences from business based thinking, and the potential pitfalls of not employing a customer based thinking strategy.business based thinking, business improvement, customer based thinking, customer management, customer satisfaction, customer service, voice of the customer

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Customer Based Thinking:

Customer Based Thinking

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Imagine you are the General Manager of a DIY chain with many employees. You will be out of the country for several weeks and have asked your staff to send you a weekly report every Monday morning.

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What information and measures would you like to see in that report? Take a moment to write down what you would expect to see..

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No doubt you will have written down such items as sales revenue, maybe by product line, costs, overtime, profit. Possibly things such as customer complaints, refunds and stock levels. WEEKLY REPORT Sales Revenue Product Lines Total Costs Overtime Profit Complaints ….

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Now imagine you need some DIY tools & materials. The material may be available at several stores in your area. All equidistant from your home. Take a moment to write down the criteria you will use to decide which store to go to?

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No doubt you will have written down such items as product range, availability, customer service, delivery options and price. CRITERIA Product range Availability Customer service Delivery options Price …. ….. ..

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The point is, the two lists won’t be the same. The former is an example of business based thinking, or voice of the business . The later of customer based thinking, or Voice of the Customer . WEEKLY REPORT Sales Revenue Product Lines Total Costs Overtime Profit Complaints …. CRITERIA Product range Availability Customer service Delivery options Price …. ….. ..

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Far too many organisations don’t consider the Voice of the Customer when thinking about what to measure and report on.

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Many organisations Hugely Underestimate the true value of a customer. Consider a shopper, shopping every week at a major brand supermarket in the UK. Assume a weekly spend of £100. How much is the customer worth to the supermarket?

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To Keep it simple let’s talk about revenue. So, for one week’s shopping, the customer is worth £100, right? Correct as far as it goes of course, but how many weeks a year does the shopper shop at the supermarket? £100

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Let’s assume 50, allowing for 2 weeks holiday. 50 times £100 is £5,000. So for one year, the customer is worth £5,000 to the supermarket. But How many years does the shopper shop at the supermarket? £5,000

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It could easily be 20 years or more. If we assume 20 then the customer is worth 20 times £5,000. That equates to £100,000 in today’s money ignoring any inflation factors . A Huge amount bigger than the original £100. £100,000

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But that’s not the end of the story . If we have a good experience not only will we continue to use a supplier but we will also most likely recommend them to others. On average if we have a good experience we will tell three other people about it. £100,000

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If we apply this logic to our supermarket example, then that’s 3 other people that will potentially spend £100,000 Multiply £100,000 by 3 and that’s £300,000. £300,000

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If we have a bad experience with a supplier, we will tell others of our bad experience! On average we will tell eight other people of our experience, and potentially that’s eight people that will not deal with that supplier. £300,000

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Eight times £100,000 is £800,000, so the potential lost revenue from bad customer service is £800,000 . These may not be the numbers for your business, but check your own numbers to see what the real value of a customer is to you. £800,000

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Still not convinced about the value of customers and the need to satisfy them? It costs typically Five times as much to attract a new customer as it does to keep an existing one.

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Still not convinced? 91% of unhappy customers will never purchase goods or services from you again .

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Still not convinced? In the average business, for every customer who bothers to complain, there are 26 others who remain silent, and just walk away…

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But our customers are pretty happy with what we do, aren’t they? Let’s assume that we ran the following survey , in which we asked our customers to rank their agreement with the following three statements from strongly agree to strongly disagree : I think that this product provides exceptional value. I will recommend this product to others. I will purchase future products from this company.

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The survey results showed that the majority of our customers either “agreed or strongly agreed” with each statement. So that’s a good result isn’t it? Strongly agree Agree Neutral Disagree Strongly disagree 1 7% 60% 20% 7% 6% 2 17% 58% 12% 6% 7% 3 26% 53% 15% 3% 3%

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To be classified as a Loyal Customer , our customer will need to score top marks in all 3 of these questions. Only 7% or less could have scored top marks for all 3 questions, It is likely that around 33% of our customers are not totally satisfied (scoring neutral or below). The survey results would not give us a great deal of comfort, other than indicating some great potential for improvement!

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A Loyal Customer is one that scores 5 in all three areas: Perceives Value Will Repurchase Will Recommend

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There is a D ifference between business based and customer based thinking and we must do both because the true value of a customer is often vastly underestimated. It is N ot enough to just satisfy the customer on average I f we want our businesses to be E xceptional then we have to provide E xceptional service and value That way we M aximise our revenue potential long term by retaining our existing customers, and generating strong referral business.

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For more information on Customer Based Thinking you can read our blog post by clicking here . s igmapro.uk@sigmapro.com www.SigmaPro.co.uk SigmaPro is a leading global provider of Lean Six Sigma Training, Lean Six Sigma consulting and business improvement programmes designed to help organisations achieve breakthrough performance improvement. We employ state of the art, proprietary teaching and consulting methods including online, traditional training and eLearning, and we are proud of our proven track record of success with some of the world’s biggest and best companies.

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