A recent survey from Industryweek found that most companies (44% of the survey respondents) are focusing on cutting costs this year. This is up from 36% last year. When a company is in a survival mode, cutting costs is usually the first response. The same survey found that some companies (18%) are focusing on improving customer service. This is down from last year’s 27%.
While the number of companies focusing on customer service is down — they are still the wise ones. Usually when a company focuses on cost cutting, customer service suffers. If not directly by what is cut, they will experience poor service indirectly as employee morale goes down. Employees will never treat customers better than they are treated!
As customers experience this shift they become less loyal. The recession won't last forever, though it may feel that way. When it does improve, companies may be surprised to discover that many of their once loyal customers have vanished. Getting them back will not be easy. Customers want value for their money and value includes customer service.
In the first ever industry wide customer perceptions survey, Measuring Customer Loyalty: A Benchmark Study of HVAC & Sheet Metal Customers' Satisfaction by New Horizons Foundation — An HVAC and Sheet Metal Industry Initiative, most customers surveyed were found to be "near" loyal. On a scale of one being extremely dissatisfied to 10 being extremely satisfied, the research found the average customer rating was 8.2. One must score 9 or 10 to be considered loyal. This score may be even more telling as contractors were asked to submit names of customers for the survey. Reason suggests that only the best customers' names were submitted. Had the survey included all customers, the average rating would most likely be much lower. This survey was done a few years ago and while it remains the only industry survey of its kind, if conducted today with many contractors focusing on cost reduction, the results could be even less positive.
The research does offer some valuable information for contractors to apply regardless of if they are in the HVAC industry or other areas of construction.
The research asked customers to rank what was most important to them of these choices: business relationship, customer service, flexibility, meeting the schedule, price, problem solving, quality of work and safety performance. The top three most important factors to the customer were (in this order of priority) quality of work, meeting the schedule and customer service.
The survey also asked contractors how they thought their customers would prioritize these factors and the contractors voted these as the top three: No. 1: meeting the schedule; No. 2: price; and No. 3: customer service.
It is interesting that both saw customer service as important. Contractors who think price was most important to the customer may be those now focusing on cost reduction. In fact, price was rated the lowest importance by customers among the eight factors in the survey. Cutting cost at the expense of customer service may backfire with customers that value service more.
Keep in mind that the economy may have changed these priorities and the survey may not now represent the customers' current feelings. The real point is that contractors need, even more today, to hear the voice of their customers. It is not what one thinks is important to a customer, but what the customer actually thinks that matters!
Value counts
Good economy or bad economy, people always want value. Value is defined as the ratio of usefulness to cost — what you got to what you spent. The survey I mention above shows this: "quality" and "meeting schedule" is about the usefulness the customer receives for the investment. Cost, in the value equation, is not only the money spent, but also includes the time and pain involved in the investment. Customer service includes effective communication during the project, poor communication adds to the cost of a project.
Value is always in the eyes of the beholder, both in usefulness and in all the costs. One owner may value weekly updates on the status of his job while another may value an excellent safety record. Most owners would be thrilled to have their project come in ahead of schedule. Some may not, if the original schedule deadline was set to match the arrival of special equipment or a critical event occurring. Having an empty facility waiting for the equipment may not be value added.
To determine what a customer values one must learn how to really listen to the customer's communications. This is more than what is printed in specifications; it comes from discussions in face-to-face meetings. It comes from asking many questions and "listening and understanding," not to rebuttal or sell. It doesn't happen once, but many times in frequent messages exchanged between customer and contractor. It comes from listening and responding to complaints. It comes from noting comments that front-line employees hear as they interact with the customer.
A challenge for most contractors is to really listen to the voice of their customers. Few have any formal systems to hear, collect, analyze and respond to the voice of the customer.
When I interview contractors about how they deal with complaints the answers are almost universal — "we just take care of the complaints." Very few contractors even have a defined complaint system. How does one know the complaint was handled correctly and quickly?
Research shows that responding to a complaint quickly and fairly will enhance customer loyalty. The opposite is also true. A formal complaint system does not require purchasing expensive software or writing volumes of standard operating procedures. It requires establishing a process for how any complaint, which comes to anyone in the company, is addressed.
The process answers these key questions: Who owns the complaint, what action was taken, who keeps the customer informed of the handling of the complaint, how do we know the complaint was resolved, and how do we know the complaint’s resolution was acceptable to the customer.
Besides addressing the complaint, the company needs a systematic way to determine if the complaint is a random occurrence or a trend. Have similar complaints been received? How often?
Acting fast and fairly to resolve complaints can help keep loyal customers, but customers don't really want to make complaints in the first place. It adds to the cost (pain) part of the value equation. Prevention should always be the higher focus. Spotting trends in complaints can alert managers to seek the root cause and implement countermeasures.
Customers' views and priorities can change and smart contractors will not only analyze complaints for trends, but will constantly collect other customer input to look for changes and new needs. Comments made in a weekly project meeting may indicate a changing priority. Requests for additional information on one job may indicate the need for that information to be provided on all jobs. Doing an effective post-project review that includes the customer’s candidate feedback can surface better ways to serve the customer.
Surveys can help understand customers. Asking what is important and how the company is performing to the important factors are key questions to ask in any survey. Because customers change in their feelings, one survey is not enough. They need to be done every two or three years, if not more frequently. Do you only look at the financial status of your company every few years? Your customers write the checks that produce the financials. Understanding them can improve the bottom line.
How surveys are administered is also important. Doing face-to-face surveys can give good information, but also misleading data. Human nature is (and research confirms) that customers do not give honest dissatisfaction information orally to suppliers. Service departments that call the customers for "happy checks" are missing real useful customer feedback. The problem is they don't know what they are missing because they aren't hearing the true voice of the customer.
Quality and meeting schedule are still very important to customers, and price may now be first among equals, but listening and responding to the customer is smart customer service. It is a strategy that few contractors are following today and it will pay dividends in keeping and gaining loyal customers. What do you hear from your customers?
Dennis Sowards is an industry consultant and guest writer for Contractor Magazine. His company is Quality Support Services, Inc. and can be reached at [email protected] or at (480) 835-1185.