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YOUR FREE COPY Friday 27th June 2008 In association with Connecting with customers
Transcript
Page 1: The edge 03_connecting with customers_27062008

YOURFREECOPY

Friday 27th June 2008

In association with

Connecting with customers

Page 2: The edge 03_connecting with customers_27062008

Source: AMAZoN

The best customer service books 1) Customer at the Crossroads:

From Parable to Practice by erick Harvey

2) Raving Fans: A Revolutionary Approach to Customer Service by Ken Blanchard

3) Beans: Four Principles for Running a Business in Good Times or Bad by Leslie Yerkes

4) Lessons from the Nordstrom Way: How Companies are Emuuulating the #1 Customer Servuuice Company by robert Spector

5) Customers for Life: How to Turn That One Time Buyer into a lifelong Customer by carl Sewell

6 ) Love You, Keep you coming back and tell everyone they know by Jeffrey Gitomer

Best books for customer retention1) euLoyalty: How to Keep Cusuu

tomers Coming Back to Your Website by ellen reid Smith

2) Customer Retention: An Inuutegrated Process for Keepuuing your Best Customers by Michael W. Lowenstein

3) Customer Satisfaction is Worthless, Customer Loyalty is Priceless, How to make them Love you, Keep You Comuuing Back and Tell Everyone They Know. By Jeffrey Gitomer

4) The Loyalty Effect: The Hidden Force Behind Growth, Profits and Lasting Value

5) Customer Loyalty: How to Earn It, How to Keep It by Jill Griffin

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”Coming together is a beginning.

Keeping together is progress.

Working together is success.”

- Henry Ford

”Customers don’t expect you to be perfect. They do expect you to fix

things when they go wrong.”

- Donald Porter V.P., British Airways

”As far as customers are concerned you are the company.

This is not a burden, but the core

of your job. You hold in your hands the power to keep customers coming

back – perhaps even to make or break

the company.” - Unknown

”People

don’t want to communicate with

an organization or a computer. They want to talk to a real,

live, responsive, responsible person

who will listen and help them get

satisfaction.” - Theo Michelson,

State Farm Insurance

”Don’t try to tell the customer what he wants. If you want

to be smart, be smart in the shower. Then get out, go to work and serve the

customer!” - Gene Buckley,

Sikorsky Aircraft

In this issue4 Immigration Department reforms can our woeful public services ever please their long-

suffering customers? Kenya’s Immigration Depart--ment is making some remarkable strides in that direc--tion

5 Managing 10 million subscribers Safaricom’s Michael Joseph believes both the lows

and highs of providing customer service for nearly ten million subscribers have given the mobile carrier valu--able key learnings that Kenyan companies across in--dustries can grow and learn from.

6 Is relationship marketing for all? For several years now, even before the Internet explo--

sion, marketing has been evolving from a “transac--tional” approach to a “relational” one, but is this the right approach for my business?

13 Innovation is key to happy customers What sets great companies apart? SBS dean argues

that Apple, coca-cola, eABL are focusing on new prod--ucts to connect with changing consumer tastes and stay ahead of the game

14 Farm to fork: How Kenchic is using

traceability to assure its customers The global crisis over Bird Flu pandemic forced the management of Kenya’s leading fast food chain to hit a brainwave that led them to adopting global standards to assure millions of their customers that whatever they put in their mouth is safe

18 Connect marketing budgets to

quarterly profit forecasts In this economic environment when corporate budgets are being squeezed, chief marketing officers are kept up at night by worry, trying to justify their budgets, but they have to figure out how to show that value to skeptical ceos and cFos

20 The rise of multisensory branding The unique selling proposition is not considered the

King, but creating a multi-sensory brand is gaining currency as a key to improving connections with con--sumers

chief executive officer Linus Gitahi editorial Director Wangethi Mwangi

Group Managing editor Joseph Odindo Managing editor Nick Wachira

consultant editor Sunny Bindra Advertising Manager Julie Kisaka

creative Director Kamau Wanyoike Layout & Design Conrad Karume

Photo editor Joan Pereruan Illustrations Joseph Barasa

The book ‘Blue Ocean Strateeegy: How to Create Unconeetested Market Space and

Make Competition Irrelevant’ has had a huge impact worldwide.

Written by two INSEAD profffessors, W. Chan Kim and Renée Mauborgne, it sold more than a million copies within its first year of publication and has been transfflated into 39 languages, breaking Harvard Publishing records as the fastest selling book in print.

In the lead up to writing the

awardfwinning book, Kim and Mauborgne spent 15 years studyffing strategic moves by companies in more than 30 industries over a period spanning from 1880 to 2000. Traditionally competition has been at the heart of corporate strategy – country versus country, company versus company, and even business school versus business school.

The key question is usually how can a company outdo its rivals? Comffpetitive strategy and advantage were born from Harvard Business School, with the focus always on competifftion. The fundamental roots of this view of strategy can be traced to miliff

tary strategy. Even the vocabulary of compaff

nies can be traced to the military with words such as chief executive “officers”, “headquarters”, “troops” and “frontline” often applied withffin the corporate milieu. The rule of strategy has been that to gain share in a given market place you must take something from the competitor. In other words, you win, they lose. This is known as zerofsum gain.

In this traditional view of stratffegy, it is presumed that the structure is fixed – the environment and conffditions are already determined and cannot be changed by the efforts of a company. In academic terms this is known as the structuralist view or environmental determinism. “Strategy thus becomes a question of outpacing rivals to gain a greater share from a limited economic pie,” Mauborgne says. “But when we look at industry who do we admire most? Those who outpace rivals?

Yes, we admire winffners. But more so, we admire people who creffate new paradigms, busiffnesses and market spaces. These are what expand the pie of intellectual and creafftive wealth. In other words, creating a nonfzero sum game.”

Blue Ocean Strategy: How to capture uncontested market space

IDEAS@WORKINSeAD KNoWLeGe

Amazon.com bestselling books on customer service

B O O K S H E L F

IIBUSINESS DAILY | FRIDAY, JUNE 27, 2008

theedge:connecting with customers

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This shift from winflose to a winfwin is the essence of Kim and Mauborgne’s

Blue Ocean strategy.According to Kim and Mauborgne,

markets are made up of red and blue oceans. The red ocean represents the known market space where all the industries currently exist.

In this space all the boundaries are defined and accepted, with companies trying to outperffform each other. However, as the market space becomes congested, the potential for profits and growth decrease.

In contrast, blue oceans are untapped marffket space characterized by demand creation and opportunities for highly profitable growth. Kim says “Blue Ocean Strategy goes beyond compefftition by opening up a larger ‘pie.’ It challenges the traditional structuralist view of strategy that

regards industry structure as fixed and given. In contrast, Blue Ocean Strategy is based on a reffconstructionist view of strategy whereby compaffnies can shift the productivity frontier outwards by reconstructing market boundaries to create a bigger economic pie.”

The book gives practical examples and puts forward conceptual tools as well as lays the unffderpinnings for the reconstructionist theory. It argues key to creating new market space is the simultaneous pursuit of differentiation and low cost. That’s what allows a company to create a new value curve. For example, Cirque du Soleil eliminated animals and star performers from the show, which dropped its cost structure and created an all new element of artistic dance and music to achieve differentiation.

Kim and Mauborgne’s work is both “manageffrial and theoretical” and can be used at all levels:

Rediscovering the customer

From the dawn of business history, we know that the customer is king. Businesses exist to please customff

ers. That they also provide good careers for employees, and profit for investors, is incidenfftal. No business can call itself great without having a great bond with its customers.

This issue of The Edge, your authoritafftive management knowledge series, will take you back to that primal issue: how do you connect to customers? Is it through price, location, quality f or none of the above? And how do you ensure that you build a bond with your customers strong enough to weather all storms?

Kenyan business, for all its other accomffplishments, has a problem in this regard. Cusfftomers are rarely treated as kings or queens in these parts. Neglect, indifference and even outright abuse are the more common experiffences inflicted on our customers.

Why should this be the case, and what should we do about it? Who bonds well with customers, and how do they do it? What is the relationship between brand and customer loyalty? How do you manage the skyfhigh expectations of your customer base?

To answer these questions, we have gathffered a collection of minds, from thoughtful academics to handsfon practitioners in this entertaining issue.

As a new development, we include some interviews with some of Kenya’s leading busiffness people. These shed light on the daily challenge of managing customers f and the interesting ways in which different compaffnies are responding.

Read this issue , and put the crown back on your customer’s head!

FR

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SUNNYBINDRA

COnSUlTanT EDITOR

”If you want to be creative in your company, your career, your life, all it

takes is one easy step… the extra one. When you

encounter a familiar plan, you just ask one question:

What ELSE could we do?”

- Dale Dauten

”The single most important thing to

remember about any enterprise is that there are no results inside its walls. The result of a business is

a satisfied customer.” - Peter Drucker

”I don’t know what your destiny will be, but one thing I know: the ones among you who will be really happy are those who have sought and found how to serve.” - Albert Schweitzer

”If you don’t understand that you work for your

mislabelled subordinates, then you know nothing of leadership. You know

only tyranny.” - Dee Hock, CEO

Emertus Visa Int’l

”If you get everybody in the company involved

in customer service, not only are they ‘feeling the

customer’ but they’re also getting a feeling for what’s

not working.” - Penny Handscomb

”Well done is better than well said.”

- Benjamin Franklin

NICKWACHIRA

ManagIng EDITOR

Blue Ocean Strategy: How to capture uncontested market space

RED OCEAN STRATEGY BLUE OCEAN STRATEGY

Compete in existing market space Create uncontested market space

Beat the competition Make the competition irrelevant

Focus on existing customers Focus on non-customers

Exploit existing demand Create and capture new demand

Make the value-cost tradeoff (create greater value to customers at a higher cost or create reasonable value at a lower cost)

Break the value-cost tradeoff (Seek greater value to customers and low cost simultaneously)

Align the whole system of firm’s activities with its strategic choice of differentiation or low cost

Align the whole system of afirm’s activities in pursuit ofdifferentiation and low cost.

FRIDAY, JUNE 27, 2008 | BUSINESS DAILYIIItheedge:connecting with customers

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For years, industrialists, foreign investors and expatriates have complained of frustrations while

seeking services at the Immigration Deffpartment, which sometimes cost them millions of shillings.

To them, the hassle of acquiring visas, passports and work permits has been a key challenge that has complicated their businesses in the country––and may temper the recent upsurge in the Kenyan economy.

Most point out missed investment opportunities, lost business earnings and mistreatment by local officials, thanks to sluggish operations at the Nyayo House offices of the Immigrafftion Department.

Now, however, many are in agreeffment that the registration mess that had pervaded the office is slowly being cleaned up. New efforts appear to be bearing fruit, seemingly ending this nightmare for both employees in and the public they serve.

This is after a raft of customer service reforms instituted since 2003.

A spotfcheck by the Business Daily at Nyayo House revealed a more cusfftomerforiented approach by officers at the Department. Each of the more than 20 counters, which previously went unmanned causing long queues, have friendly staff serving the hundreds of customers visiting the offices daily.

The customer hall is now fitted with waiting areas where customers sit. A novelty: officers roam around the hall pointing out to customers the right counter at which to queue.

Now, it is possible to get a Kenff

yan passport processed 21 days afffter applying, thanks to the reforms. The department has in the past been laffbelled the most corrupt public office in Kenya, blighted by the existence of midffdlemen working in cohorts with some corrupt immigration officers.

According to Transparency Interffnational (Kenya) Bribery Index 2007, the department was ranked among the most corrupt.

Last year, the ministry pledged to isffsue passports within 20 days from the date of application as part of its Rapid Results Initiative (RRI).

And now, the Government will next month establish a population database of all Kenyans and foreigners through which, according to Immigration PS Emmanuel Kisombe, it will be easier

to identify suspected terrorists, human and drug traffickers and money launffderers.

“Our intentions are to see that customers get services within the shortest time possible and under very friendly circumstances because that is their right,” said Mr Kisombe. Investors have in the past claimed it took more than six months to process a work permit and that most of the time they were being forced to pay huge sums of money in bribes to immigration officials to acquire the documents.

The East African Community 2006/07 Business Index Survey launched this year says that getting a work permit in Kenya takes between one week and a full year. Registering and getting a business licence takes between 11 days

and two months, while export certificafftion for goods, including perishables, takes between one week and a month. The survey classifies the work permit application process as one of the key obstacles to doing business in Kenya.

The problem of delays and poor cusfftomer service had pervaded virtually all Government offices, signifying the rot in public service delivery. This gave rise to the phenomenon of middlemen who got the documents done on behalf of the “clients,” but at a fee for themselves and the corrupt workers .

The Immigration Department dealt with masses of paper. With rows and rows of shelves sagging under the weight of files and long, winding queues of waiting clients, there was need to have someone “trace a missing file”. Add to this the longftolerated misforfftune of having to part with a “token” for a file or passport to appear after beffing declared untraceable and you had offices few wanted to visit, except out of extreme necessity.

Unnecessary tripsNow, people seeking passports will be able to check their application status once an SMS tracking facility becomes operational later this year, sparing them unnecessary trips to the Immigration offices.

Currently, the official period for seffcuring a passport is three weeks, but it takes about three months in most casffes to get hold of it once requirements are met.

The Immigration Department chargffes between Sh50,000 to Sh100,000 for visas and work permit processffing depending on the permit class, but foreigners who lodge their apffplications through lawyers pay an extra Sh50,000 in handling fees. The Government last year issued 12,000 foreigners with work permits, the highffest ever issued in a year.

The Immigration department clearly has a long way to go, but it has made imffportant strides in placing its customer back at the top of its priorities.

This is a welcome development, and shows that with the right will and backffing, customer service throughout the public services can be transformed.

MWAURA KIMANI is a business writer with the

Business Daily.

Can our woeful public services ever please their long-suffering customers? MWAURA KIMANI is pleasantly surprised to discover that Kenya’s formerly notorious Immigration Department is making remarkable strides in that direction

‘Madam, please go to counter three:’ Nyayo House has finally seen the light

IVBUSINESS DAILY | FRIDAY, JUNE 27, 2008

theedge:connecting with customers

[email protected]

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How to keep 10m subscribers happy

Just over eight years ago, Mr Michael Joseph took over the leadership of Safaricom, a fledgling mobile phone

company owned by Telkom Kenya and his employer, Vodafone Plc .

Charged with turning a lossfmaking deffpartment into a profitable standfalone busiffness, Mr Joseph faced several challenges, including launching a GSM network after Kencell (now Celtel Kenya) had done it.

As part of Telkom Kenya, Safaricom had enjoyed a monopoly and was infamous for overcharging and bad service. Safaricom has since grown to become the most instantffly recognisable brand on the land.

From a starting point of about 20,000 customers, the company now commands about 10 million consumers.

The company today runs one of the bigffgest and most sophisticated customer servffice call centres.

But even with this success story, critics are quick to point out that while the compaffny’s brand profile has grown, its customer service is yet to reach worldfclass levels. For years, the firm has maintained that its customer service department is the single most important facet of its business.

However, Mr Joseph believes both the lows and highs of providing customer service to nearly 10 million customers has given the mobile phone company valuable learnings that Kenyan and international companies across industries can grow and learn from.

Mr Joseph discussed with Business Daieely’s ICT beat reporter Kui Kinyanjui the highs and lows of managing a complex orffganisation and outlined a new strategy to finally make the customer the most imporfftant part of the most profitable company in Kenya.

How has your company’s relationship with its customers changed over the years?

Our relationship with our customers has altered, mostffly matching the growth of the company. The call centres have been working since the beginning of our operations, and have since expanded to include more customerffacing units such as retail centres.

We have the call centres acffcessible via mobile phone and which serve various needs of our customers. These include dedicated lines for different customer categories.

Our retail centres, where our customffers can walk in for faceftofface service, are spread out across the country with six in Nairobi, two in Kisumu, three in Mombasa and one in Nakuru. We are also offering services in Kisumu and Eldoret via a Moffbile Bus.

We are also focusing on putting up adffditional centres in all major towns in Kenffya to become even more accessible to our customers.

How important is the Customer Care depppartment to Safaricom’s operations and strategy?

Customer care is Safaricom’s main funcfftion as our customers are number one to Safaricom, and in fact, the only reason that we exist.

Our key aim is to provide convenient, flexible and reliable services to all our cusfftomers. Our Customer care team is therefffore not only available to handle customer queries and complaints, but to also receive customer feedback on our products and services and to ensure that they meet exffpectations.

We therefore ensure our staff are comffprehensively and continuously trained and adequately equipped to manage our needs.

Retaining and delighting our customers is therefore our main objective in Safaricom. As the major customerffacing unit of the company, the Customer Care Department forms the vital link between us and our cusfftomers. We therefore strive to continuously maintain contact with our customers, enffsuring that they remain satisfied.

Typically, how much do you spend on

customer care in a year?Our customer care touchfpoints are many, including the call and retail centres spread across the country.

Our highest spend goes to improving the network, but customer care is the next priority as we realise we are in the service business.

We value our customers and the cost to serve is commensurate to the size of the Company.

On average we spend just under Sh1 bilfflion annually to ensure we serve our cusfftomers effectively.

The customer care line (100) has been cited as one of the most inacppcessible lines in the industry. Does it actually work? Can subscribers actually get through? Our customer service number for prefpaid subscribers via 100 is one of the busiest in our company.

Due to the exponential growth of our subscriber numbers and given that this service is free of charge, we do indeed have some challenges in terms of customffers being able to access it. We are fully aware of this challenge and are continuously working to increase the accessiffbility by significantly increasffing headcount and seeking innovative technology to increase our capacity.

F u r t h e r ffmore, we anffnounced o u r p l a n s to outffsource

certain elements of customer care to inffcrease callfhandling capacity.

We are also profactively seeking ways to address the issues that customers call in for through alternative channels e.g. through our extensive dealer network which comffprises over 1,500 outlets all over Kenya.

However, having said this, customers reaching our call centre representatives are served efficiently, within an average of three and a half minutes, and within good quality standards. Currently, we have 232 customer care representatives (CCRs) dedfficated to the Line 100, which equates to 50 per cent of our total staffing in the call centre. The call centre is open 24 hours a day, 365 days a year to assure our availabilffity to all customers.

But even so, last year you announced plans to start outsourcing the customer care facility. What progress has there been on that front?

Plans are almost complete to engage services of a partner who can deliver suffperior service to our customers. We are in the final stages of the evaluation process and will be awarding the contract early next month. Setting up the new call centre will take sometime, and we are therefore hopffing to begin services with this new partner by July this year.

INDU

STRY

STA

NDAR

D

As far as running a complex sales organisation, Safaricom boss faces a big task. However, innovative solutions such as call centres and outsourcing are helping the mobile carrier stay ahead of the pack as competition hots up

Kui Kinyanjui is a business writer

with the Business Daily

theedge:connecting with customers

FRIDAY, JUNE 27, 2008 | BUSINESS DAILYV

Mr Joseph

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Is relationship marketing right for my company?

Lluis G. RENART is Professor at IESE

Business School, Barcelona.

He is a visiting professor and member

of the advisory board, Strathmore Business

School

The answer, surprisingly, is not always ‘yes’. LLUIS G. RENART provides a useful framework to help answer the question

For several years now, even before the Internet exploffsion, marketing has been

evolving from a “transactional” approach to a “relational” one.

The transactional approach was appropriate in a world where: neither the supplier nor the customer have any memoffry (they start from zero in every transaction); the customer is anonymous, or almost anonyffmous; and every sale has to be profitable in its own right. In addition, if we lose a customer, there are plenty more potenfftial customers in the market who will be easy to acquire f and doing so is cheap and easy. Essentially, companies launch products onto the market and customers buy them. Compaffnies talk and customers listen. Products and advertising mesffsages are massfproduced and undifferentiated.

It gradually became apparent that this transactional approach is incapable of responding satffisfactorily to the problems facffing marketers today. At the same time, new possibilities have emerged, especially in the field of IT and telecommunications, opening horizons for a new type of marketing: relationship marffketing.

What’s new about relationssship marketing?There may be nothing new about it, for relationship marketing is what small traders have always done: serving customers face to face. But that is something most large companies stopped doing with the advent of the industrial era and mass marketing. Now, thanks to telecommunications systems, it is once again possiffble to conduct personalised refflationships on a mass scale, on an ongoing basis, and across geographies. In other words, a company can aspire to offer perffsonalised service to thousands of customers anywhere in the world, anytime.

The main characteristics of relationship marketing are:• Interactivity. The customer

takes the initiative in makffing contact with the compaffny, receiving and issuing comffmunications, and initiating transactions.

• Actions are addressable and, therefore, personalised. Comffpanies can address different messages and offer different products or services to differffent customers: precisely the product or service that best meets each individual cusfftomer’s needs and circumffstances.

• Memory. Each customer’s identity, data, characteristics and preferences, and details of previous interactions with that customer, are recorded in memory.

• Receptivity. Companies must talk less and listen more. And they must let the customer decide whether she wishes to maintain a relationship with the company or not, how the two will communicate with

one another, and whether she wishes to continue the relafftionship or terminate it.

• Customer orientation. The emphasis is on a marketffing and sales organisation made up more of customer managers than of product managers. The company must concentrate more on consumers, their needs, and the processes it uses to satisfy those needs.

• The emphasis is on “customer share” rather than “market share”.

• The company must be willing to treat its most valued cusfftomers differentially. This reffquires sophisticated customffer segmentation and classififfcation, with different action plans for different types of customers.

• One of the main criteria for discriminating between cusfftomers is customer lifetime value, that is, the estimated

value that each customer has for the company over the course of the customer’s entire estimated useful life.Why is relationship marff

keting becoming increasingly important? Because in today’s context of hyperfcompetition, companies have found that it can cost up to five times more to identify and recruit a new customer than it does to keep an existing customer satisfied and loyal. Because products are becoming increasingly unffdifferentiable, so companies are tending to differentiate themselves more through the service that accompanies the product and the treatment the customer receives. Consequentffly, relatively small increases in customer loyalty may generate large improvements in the botfftom line.

Is relationship marketing all wine and roses?

We must move away from the old ways of selling: Compassnies launch, customers buy. Companies talk, customers listen.

VIBUSINESS DAILY | FRIDAY, JUNE 27, 2008

theedge:connecting with customers

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Is relationship marketing right for my company?

No, it isn’t. All that glitters is not gold. And not every company that tries to make relationship marketing work for it is sucffcessful. Relationship marketing is very interesting and attractive in theory. In practice, however, it is prone to difficulffties, or even rejection.

Two of the largest British supermarffket chains (Asda and Safeway) recently chose to cancel their relationship marffketing programmes.

Apparently, they came to the concluffsion that the costs of operating such a programme (which in the case of Safeffway was around 60 million pounds a year) outweighed the benefits. Safeway, instead spent the money on attractive price promotions and other marketing actions aimed more directly at boosting customer satisfaction, and quickly saw an increase in sales and market share.

All this suggests we should exercise caution with regard to relational marketffing strategies and their supposed univerffsal applicability.

A sensible way to start would be to ask whether the concept and practice of relationship marketing is suitable for all

kinds of companies. Is relationship marffketing “good” for all companies? Or is it only to be recommended to some?

In the rest of this article we shall try to answer this question.

The eight stages of relationship marssketingMy proposal is that a company that wishffes to decide whether or not to design and implement a relationshipfmarketing programme should organise its thoughts around the eight stages of the design and implementation process. The eight stages of a relationship marketffing process to be considered and evaluffated are:

Stage 1: IdentifyAt this stage, the aim is to assess how easy or difficult it will be to identify the universe of customers who would be the target of a relationshipfmarketing strategy.

The assessment will be positive if the company has already clearly identified the target customers. Conversely, the score for this stage will be low in cases

where it is difficult, costly or even imposffsible to identify customers. Stage 2: Inform and attractAt this stage, the aim is to assess how easy or difficult it will be for the company to build awareness of itself and its products or services, and also how attractive its products are.

Often, a well established and well reffspected company may put this stage high on the scale if its products already have a substantial market share, even before launching a relationship marketing stratffegy. In other cases, the company may be in a situation where informing and atfftracting potential customers is difficult, expensive, and uncertain. In that case, this stage will be scored low.

Stage 3: SellHere, the company must assess how easy or difficult it will be to turn an identified and aware potential customer into an acfftual customer; in other words, how easy or difficult it will be to close a first sale with that customer or customer segment. And then, how easy or difficult it will be to get that customer to sign up to a relafftionship marketing programme.

Stage 4: ServeOnce a sale has been made, the compaffny may find it easier or more difficult to serve that customer. For example, defflivering a standard or massfproduced product that customers buy in a store and take home with them may be very easy. But customers will be more difficult to serve if they demand that the product be delivered to their homes. In some cases, the product may have to be installed, or even adjusted and adapted to customffers’ particular needs.

Stage 5: SatisfyThe aim at this stage is to assess how easy or difficult it will be for the company to keep its customers satisfied with the product or service they have bought. A customer’s satisfaction usually depends on the degree to which the company sucffceeds in meeting, or even exceeding, the expectations the customer had at the time of purchase.

In some cases, companies are highly confident that their customers will be reasonably satisfied. An example might be companies selling upmarket cars or home appliances.

In other cases, however, the degree of customer satisfaction may be unpredictffable, due to differences between customffers, variability of the products or services sold, or uncontrollable outside influencffes. For example, a long plane journey may be a pleasure or a misery, depending on the passenger we happen to have sitting next to us.

Consequently, if a company is reasonffably sure that a large proportion of cusfftomers will be satisfied with the prodffuct or service, it will give a this stage a high score.

Stage 6: Build loyaltyAt this stage, the company must assess its chances of turning satisfied customers into loyal customers. In some industries, and in some companies, the fact that a customer is satisfied with a particular product or service does not necessarily mean she will repeat her purchase in the future. In some products, such as wines, consumers tend to show “polygamous loyalty”. In other words, they have a relffatively long list of acceptable suppliers whose products they will buy, dependffing on circumstances, momentary fancy, special offers and promotions, etc.

Stage 7: DevelopAt this stage, the aim is to assess the exfftent to which, once a company has sold a product or service to a customer and the customer is satisfied and loyal, the company is likely to find opportunities to extend and deepen its relationship with the customer. Insofar as a company sees major opportunities to develop its relafftionships with satisfied and loyal customffers, this stage will receive a high score.

Stage 8: Opportunities to create a user communityIn a community, a web of relational ties between customers, the company, and its products and brands forms and grows stronger. Direct links between customers emerge and develop. Internet forums and chatfrooms mushroom. User clubs or fan clubs appear, in which people exchange knowledge, ideas and experiences of the product or service. Older customers volffunteer to teach and train new customffers. Markets are created for secondhand products, or products complementary to the main product, etc.

Final evaluationIf a company is wondering whether or not to design and implement a relationffship marketing strategy, a good way to start would be to analyse each of the eight stages just described and evaluate them on a scale of 0 to 10.

If the sum of the eight scores is over 40 and approaching 80 (the maximum), the company can be confident that it will benefit from adopting a relationship marketing strategy. Conversely, if the total is less than 40, the company may conclude that a relationship marketing strategy is unlikely to yield significant benefits in terms of turnover, margins or selling costs.

We have a long way to go before we can say that we have a reliable method for determining how attractive a relafftionship marketing strategy may be for different companies. But the procedure described in this article may be a first step toward explaining why relationship marffketing is not “right” for all companies, and also why a relationship marketing strategy may be more or less attractive to a company that is considering impleffmenting one.

FeedbackPlease send your com--ments and observa--tions [email protected]

FRIDAY, JUNE 27, 2008 | BUSINESS DAILYVIItheedge:connecting with customers

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Some years ago, I was asked to run a customffer care event for the

sales supervisors of a major vehicle distribution compaffny, one that sold everything from motorbikes through cars to big trucks. A few days before the workshop, I deffcided to go round their difffferent showrooms, posing as a buyer. For I wanted to see how I and they fared.

They were embarrassffingly awful. I was appalled. Their universal disinterest in me was matched only by their ignorance of the products they indifferently allowed their customers to buy.

Even when it came to multifmillionfshilling trucks they hadn’t the slightest idea about their features, never mind the benefits of those features when compared to those of their competitors.

Having been brought up in the fiercely competitive IT industry, I just couldn’t come to terms with how salespeoffple in my field put more effffort into selling a printer costing a few thousand shillings than the sofcalled salesman from this compaffny applied to fumbling over his highfend truck.

I kicked off the workshop by asking the participants to rate themselves on a scale of one to 10 on how well they cared for their customers. Their answers ranged from six to eight, with no excepfftions. I couldn’t believe it. And yet why not? Those who don’t know what they don’t know often imagine they’re doing pretty well.

This was when vendors, of vehicles as much as comffputers, were restricted in what they could bring in to Kenya, having to obtain both import licences and foreign exchange allocations. Deffmand greatly exceeded supffply in each case, but someffhow computer people still had to sweat infinitely more

The magic of managing customer expectationsRelationships between sellers and buyers are all too often confrontational and immature. MIKE ELDON wonders why, and recommends a better way.

than their transportation counffterparts.

I advised these motoring merchants to learn so much more about their products and what was good about them; to learn everything they could about competing products; and to relate what their products offffered to what their customers

were looking for. It sounds rather obvious,

but even in these days of infiffnitely fiercer competition the salesperson who follows this selffevident path is more the exception than the rule.

It is by going down this path that one graduates from being a productffocused and vendorf

focused character, one whose eye is much more on making the sale and pocketing the commisffsion, to being a consultant.

It’s not that consultants don’t protect their interests or those of their employers. But, in a spirit of winfwin, they also ensure their customers get a good deal.

Now the business of winfwin assumes a longer term view of selling. One’s ethics may well hold one back from making a sale today, or one may make a smaller or a less profitable one.

But one meanwhile earns the trust and respect of the cusfftomer, who will be far more likeffly to return tomorrow. Indeed central to selling is the idea of building relationships, and cerfftainly when it comes to higher value capital goods and servicffes, the area where I have been brought up.

Hence the concept of ‘acffcount management’, whereby a longfterm relationship is asffsumed and time and other reffsources are invested in nurturffing it.

Not every purchaser apffpreciates such an approach, mind you. Some prefer an arm’s length relationship, where purffchases are made transaction by transaction, each with their own tender.

Such people feel they get better value by constantly exffposing any incumbent suppliffer to competition and keeping up the pressure on both quality and cost.

For me these procurement purists miss the point, subfopfftimising around least cost per transaction.

But they are far from uncomffmon and it’s really hard to exffplain to them, in all their selffrighteousness, exactly what it is that they are missing out on. For the supplier, forced to act as a provider of a commodity where only cost minimisation matters, draws back, many of his highest value resources unutilised.

How refreshing therefore that over the last few years a

“I win, you lose” is a common atsstitude in selling.

MIKE ELDON is now a consultant,

after a long career as an executive in the IT

industry.

VIIIBUSINESS DAILY | FRIDAY, JUNE 27, 2008

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reaction has set in to this trend. A good number of major procurers, including here in Kenya, have been rationalising their suppliers, reducing them to a manffageable number of competent, reputable ones with whom they wish to engage in closer longerfterm relations. Anathema to the arm’sflength brigade, these folk talk unabashedly about viewing their suppliers as partners. And that, to the ‘consultant’ type of valuefadd vendor, is music to our ears.

For salespeople who have been accusfftomed to selling products rather than sofflutions though, for those who churn out minimalist quotes rather than thoughtffful, reasoned proposals, this is definitely territory ‘beyond the ten’. And as I have found over the years it is very hard to truly convert such people to become valffuefadd consultants, professionals who will be respected for their knowledge and their judgement. But it’s fun trying!

Generate delightAs I look back over all my years in this kind of selling environment, both in Afffrica and in Europe, I long ago concluded that one of the most powerful – and easiffest – ways of generating customer defflight is to manage expectations with great diligence. Most customerffacing people (whether their customers are internal or external) are awful, appalling, zero at this. You’d think it was so sophisticated, so complex, so time consuming.

No one has written more forcefully or convincingly about expectations manffagement than Tom Peters, in his Passion for Excellence.

He tells us about the shipment of IBM computers that was being rushed to a

customer in time to meet a very tight deadline. It’s winter in America, and the snow is falling. Everyone’s nervous, supplier and customer alike. So what do the good people of IBM do? They keep communicating. As Tom Peters puts it, they overfcommunicate, updating the customer at regular and predictable infftervals until the truck, against all odds, arrives.

Of all the advice that I have given over the years to customerffacing people, the one I have hammered most often is to overfcommunicate. I should also add that it is a source of great sadness to me that very few, pitifully few, have ever taken my advice.

They have suffered the consequencffes, of gratuitously dissatisfied customffers, but this has never seemed to make a difference. They’ve kept on doing what they’ve always done… so they’ve kept on getting what they’ve always got: anger instead of understanding.

It’s possible that before I slip away into some salesman’s heaven someone will explain to me why hardly anyone takes such advice to heart, but I doubt it. I have just come to accept this masochisfftic blind spot as a missing circuit in the make up of most human beings.

I know how much good the discovffery of ‘overfcommunication’ has done me. Most customers can live with a delay or a problem of some kind if they know about it in good time. But if it comes as a surprise they go wild. I do, and I think I’m quite normal.

Happily, I did manage to convince the excellent mechanic who takes care of my car that it is in his interest to practice good expectations management with me.

We used to fight all the time before that (for inevitably some unforeseen probfflem cropped up, or he got stuck in traffffic as he was bringing the vehicle back to me) but now we’re the best of friends. He’s thanked me several times for havffing introduced him to this magic, and I’d like to think that all his customers have benefited from his newffound commuffnications skills.

Related to this phenomenon, when one is dealing with a larger organisation, where there are several layers of manageffment, I have found that it is prudent for the vendor to take the escalation initiafftive when a problem rears its ugly head. It’s very much in their interest for engiffneers or a salespeople to alert their own bosses earlier rather than later in such situations.

And the boss should think about confftacting his or her counterpart to hear from the vendor before they do so from their own people (not infrequently with appropriate spin applied). It takes guts, but it pays dividends.

The beauty of this kind of bold and caring behaviour is that once you make it a normal part of how you operate you reach a point where you expect to be able to turn a crisis into an opportunity. Every vendor faces problems.

Customers, whatever they may say, do expect that. But if you perform well in solving these problems (and a good part of this lies in expectations manageffment, and at all the relevant levels) you can readily develop your relationship to a higher level than where it would have been had the problem not occurred in the first place. More magic.

Forgive me if I revert to the question

of how a customer treats a vendor, but after so many years of taking knocks from my customers I do have a request to make of those who confront suppliffers with unrelenting aggression. There is that kind of macho client who feels that unless they are forever bashing their suppliers they’ll go soft.

There’s really no need to see your venffdor as an adversary, as an unmitigated rogue. No wonder some salespeople beffcome inhibited, and retreat into a kind of soulfless ‘professionalism’ as a way of protecting themselves.

Timid operatorsBut, I sat to such timid operators, you must go beyond the logical to the psyffchological. You must reach out to your customer at a social and emotional levffel, and help them assume a relationship between two mature, solutionforiented adults who respect each other, and who assume that mutual benefit will emerge from working together. Yes, together.

Tom Peters published his Passion for Excellence over twenty years ago, but what he wrote is as powerful today . Let no one imagine that Peters was the one who invented the idea of taking care of one’s customers.

There were surely great experts in customer care in ancient times – and they may well have been in a minority then too. They certainly are today. But I’ve always wondered why.

The magic of managing customer expectations

[email protected]

FRIDAY, JUNE 27, 2008 | BUSINESS DAILYIXtheedge:connecting with customers

A car showroom: “Even when it came to multismillionsshilling vehicles they hadn’t the slightest idea about their features, never mind the benefits of those features when compared

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How ‘Semmelweis Reflex’ prevents us from knowing our customers

Dr. PADDY MILLER is a Professor based in Barcelona

at IESE Business School, University of Navarra, one of

the top schools in Europe. He has taught many leadership

and general management courses on the senior executive programmes at IESE as well as

at Harvard Business School and the Darden School in Virginia.

BYPROFESSORPADDYMILLERANDTHOMASWEDELL-WEDELLSBORg

You couldn’t get much closer to your customers than Johan Klein and his team of doctors at the evocatively named Wien Allgemeine Krankenffhaus, the Vienna General Hospital. They were in the business of delivering newfborn babies. The year was 1845 when Klein was appointed direcfftor of the hospital and he quickly got to work on a problem he had observed amongst the medical students. He perceived the knowledge of anatomy they demonstrated to be insufficient for the tasks they had to perform in the course of their hospital duties. Students studied the ins and outs of the human body, taught in a rather haphazard way, by professors using leather mannequins. Klein identified the students’ lack of detailed anatomical knowledge as deriving directly from this limited teaching method. Students were lesser physicians for it and Klein quickly implemented a programme where the use of cadavers in anatomy became cusfftomary at the Hospital.

Being close to their patients in both theory and practice was to be the cornerstone of Klein’s leadffership and it gained the Wien Allgemeine Krankffenhaus a reputation as a cuttingfedge medical inffstitution. Talented professionals began to leave their farfoff hometowns to come and study there as its reputation spread. Though this happened more than 160 years ago, Klein knew that in orffder to provide a clear and demonstrated superior service to customers your team needs to have a several attributes:• A profound firstfhand knowledge of the area it

is working in; • The tools and education to be able to address the

problems it faces; • A deep passion for its work in order to provide

the drive and motivation to keep working at the problems faced. The challenge, however, for managers when they

start getting those three elements synchronised and right is that they, as bosses, need to step back and let things happen. Because if you can’t do that you may run the risk of finding yourself qualified for the eternal “BossffromfHell” award much as Johan Klein found. Early success heralded subffsequent infamy.

While Klein had instituted some progressive teaching methods, obstetrics was still an area of grave concern. Giving birth was still an extremely dangerous business and the maternity ward had the figures to prove it. While most women gave birth in their homes, some women were admitted to the maternity wards – either due to complications or because they were poor – and the mortality rate was high f between 25 and 30 percent of them ended up in the morgue. The single most frequent killer was childbed fever – or puerperal sepsis – a then littlefunderstood illness reminiscent of blood poisoning

that struck the new mothers. Nobody understood the cause of the illness. Some blamed an imbalance of ‘humours’ in the body, referring to the prevailing theory of how diseases developed. Others believed it was a natural byfproduct of the pregnancy itself, since it seemed only to strike new mothers. The maffjority of doctors believed the disease to be a fact of life, something that they couldn’t – and therefore shouldn’t – do anything about.

In Klein’s hospital there was a young Hungarian physician, Ignaz Semmelweis, who thought otherffwise. He didn’t agree with reigning attitude and became obsessed with preventing childbed fever. The hospital had two maternity wards fDivision I

and Division II. Although following the exact same methods, the two divisions’ mortality rates from childbed fever were radically different. At Division I, where Semmelweis worked along with a number of male medical students, 13 percent – or one of every eight patients – would die from the disease. At Division II, run by female midwives and their students, the number of deaths from childbed fever was much lower at only 2 percent, or one fatality for each 50 patients.

Semmelweis was profoundly affected by the deaths caused by the fever. The remarkable differffence in the survival rates was also noticed outside the hospital walls, among the general public. Semff

Lessons in understanding customers, from a 19th Century hospital and two very different doctors

The Semmelweis Reflex kills creativity and prevents managers from understanding their customers.THOMAS WEDELL-WEDELLSBORG is an independent consultant

specialising in innovation and business creativity, and has

worked with companies such as Abbott Laboratories, Joost, MTV Europe and The Danish Parliament. He is the founder

of 13 MBAs, a professional network for Harvard, Stanford, Wharton, IESE, and nine other

top-tier business schools.

XBUSINESS DAILY | FRIDAY, JUNE 27, 2008

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melweis described how desperate mothersftofbe approached him, literally begging on their knees to be admitted to Division II instead of Division I. Stopping the disease became an obsession for Semmelweis and against the express will of his superior, Dr Johan Klein, Semmelweis started gathering data on the deaths and comparing the two divisions to find clues to the origin of the illffness. Gradually he came to a conclusion that what differentiated the two divisions were the hands and instruments of the physicians in Division I: they were unwashed and septic as they had been in contact with diseased cadavers while those in the other Division had not.

It is at this point one needs to empathise with Dr Johan Klein, soon to be candidate for the eterffnal “BossffromfHell” award. Klein had introduced many innovations to the hospital which contribffuted to great understanding of how patients funcfftioned and at the same time had gained an interffnational reputation for his institution. His instifftution had made great strides in medical practice and his achievements were acclaimed. One can understand his reluctance to entertain the ideas of young Semmelweis, a junior and a foreigner to boot. As a boss Johan Klein like many bosses today get trapped into what author Robert Anton Wilson has called the Semmelweis Reflex i.e. ‘the dismissing or rejecting out of hand any informafftion, automatically, without thought, inspection, or experiment.’

The Semmelweis Reflex is one of the leading creativity killers in modern organisations. Empiriffcal studies and common wisdom clearly agree on this one thing: bosses and colleagues tend to kill new ideas instinctively, judging them prematurely and often dispensing a death sentence based on the flimsiest of reasoning. Having implemented systems that work bosses tend to be ungrateful

when facing innovators who challenge the status quo. For what was Semmelweis suggesting? That contact with cadavers by professors and students in the anatomy class resulted in the transfer of the deadly childbed fever to the maternity wards. The implication was obvious – physicians were killffing their own patients and Klein was having none of it. Even when the mortality rate in Division I maternity ward dropped from 18 per cent to 2 per cent because Semmelweis insisted on doctors and nurses washing their hands in chlorine Klein reffjected the findings. Semmelweis had no theory for this phenomenon, said Klein, Semmelweis could not explain how it happened and therefore had no basis for changing medical practice.

History would show that a few of Semmelffweis’ older colleagues supported him, but their attempt at getting the medical authorities to set up a commission and examine the matter was thwarted because of political infighting. Johann Klein had been against Semmelweis’ investigation from the beginning, not least because it could be perceived as a direct criticism of the way he had run his hospital. Klein rejected the findings, and when Semmelweis’ employment contract came up for renewal, Klein didn’t renew it, but instead gave the post to a younger, less qualified doctor, Carl Braun, who also didn’t believe in Semmelffweis’ ideas. Under Braun’s tenure, the mortality rate from childbed fever immediately jumped up to its previous high levels. Braun would go on to publish an article where he listed no less than 30 different causes of childbed fever, including chilliffness, bad diets, and the state of being pregnant itffself. Contact with cadaveric material was number 28 on the list. Much a pity that PowerPoint was not available because it would have made a fine presentation to his boss.

In 1861, when Semmelweis finally published a book of his findings, he was again ridiculed by the medical establishment. Over the next four years, worn out by the relentless criticism, Semffmelweis started to become mentally unbalanced. He aged visibly and occasionally wrote raging letffters to prominent foreign obstetricians, calling them ‘irresponsible murderers’. In 1865, he was

convinced by his few remaining friends to come to Vienna, where they then forced him into the care of a mental institution. Semmelweis fought the guards as he was admitted, and was severely beaten as a consequence. 14 days later, still in the lunatic asylum, he died from his wounds. His death went largely unnoticed by the mediffcal community; at his funeral, not a single of his colleagues showed up.

What is to be made of Dr Johan Klein and this tale of hand washing? In our work with large gloffbal businesses we have found that the closer you get to understanding customers the more likely improvisation at the contact point between emffployees and customers is to occur. That bosses offften have highly creative solutions to the problems of the business that are questioned when employffees and customers put them to the test. It is for this reason that many managers reject the idea of improvisation at the lowest levels. The Semmelffweis Reflex kicks in. Organisations such as Procfftor & Gamble have worked hard to overcome this phenomenon and today more than 50 per cent of all marketing innovations within P&G come from people like customers outside the organisation. Johan Klein would turn in his grave.©PROFPADDYMILLERANDTHOMASWEDELL-WEDELLSBORg,IESEBUSINESSSCHOOL,BARCELONA,MAY2008.THISISANEXCERPTFROMTHEAUTHORS’NEWBOOK“CREATIVECULTURES”DUEFORPUBLICATIONIN2009.

How ‘Semmelweis Reflex’ prevents us from knowing our customers

Bosses often kill new ideas instinctively, dispensing a death sentence on the

flimsiest of reasoning.

Thinking you know everything is akin to doing business blindfolded. The savvy manager keeps a keen eye on what customers actually want.

FRIDAY, JUNE 27, 2008 | BUSINESS DAILYXItheedge:connecting with customers

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Since it opened its first unit in Nairobi in the 70s, Sarova Hotels, Resorts and Game Lodges has grown to be one of the leading

hotel groups in the country.As the tourism sector has continued to grow, so

has the number of units in the group’s stable. To date it has eight units, offering the largest number of rooms across all the major tourist destinations in the country.

In 2006, Sarova refbranded itself, taking on the prefix SAROVA. This saw the famous New Stanley Hotel become Sarova Stanley in an effort to build brand recognition and offer service asffsociated with the name.

In the past few years, the group has moved from the “one size fits all” blanket service and has customised products to address the various cliffents’ needs. In addition, customers get rewarded through the Sarova Zawadi loyalty system.

Sarova is looking to expand to other counfftries, and this is expected to propel the group to become a major player regionally.

The managing director, Mr Jaideep Vohra or JS Vohra , as the industry refers to him, took the helm at the group in 2006, and has continued to drive Sarova to new heights.

He has continuously invested in ensuring the customer is well looked after in any one of the units. Sarova hinges its customer relations upon “The first impression – last impression phifflosophy.”

Business Daily’s Wangui Maina caught up with Mr Vohra to talk about how Sarova conffnects with its customers, in a special interview with The Edge.

How does Sarova Group connect with its cuspptomers?Our customers – local, regional and international – are the very reason for our existence. We underffstand that and that is why we ensure that a stay at any of our eight properties is an individualised, enriching and fulfilling experience.

For this reason we have invested heavily in cliffent relationshipfmanagement systems that are executed by one of the most highly skilled and trained sales forces in the industry.

And we use our General Sales Offices (GSO) in key source markets in UK, France, US, India, Germany and South Africa.

What strategies have been put in place to enppsure the best customer service is given and when were they implemented?Our associates must be perceived to have been trained to deal with customers and have the auffthority to retain customers on behalf of the orffganisation. Providing effective customer relations can mean the difference between gaining and losing customers to the competition.

For this reason we invested over Sh5 million in 2006 in the Sandy Vohra Learning Centre where all levels of our staff undergo training, to become ambassadors of the organisation.

Where has Sarova Group come from, where are you now and where are you going with your customer relations strategy?Customer relations is a systematic interaction between a member of staff, any member, and the customer. You might serve the best product in the industry but as long as a customer encounters a rude doorman, bellboy or waiter then the experiffence is spoilt and the customer lost.

We have invested in a new advanced automatffed datafbase system that allows us to communiffcate efficiently with the client. The system allows us to address the unique needs and preferences of each market segment across the group.

Have you established who your customers are? Where is the Sarova niche?

It is important for us to be well informed of our clients’ needs and preferences.

To do this we conduct regular Mystery Guest surveys and have an infhouse Guest Satisfaction Tracking System. Recently, we also contracted an international marketing research company, AC Nielsen, to help survey customers and staff on a global platform.

Through research, the company has managed to identify niche markets which include families,

honeymooners, business and conference clients, which have enabled the group to plan its strategies to offer all a betterfcustomised service.What were the opportunities and challenges facing the company when you became MD?The challenges and opportunities have mainly been sector driven. The same challenges face the rest of the players. However, we are confrontffing these challenges headfon by ramping up our marketing.

The business within the hospitality sector is compelled to stick to a strict code of ethics for the development of the subfsector and as part of ensuring the image of the country is protected. Tourism investments must be made in cognisance of the need to attain sustainable development f something that we at Sarova have always impleffmented. Selffregulation is a formidable tool for decent business.

Looking ahead, where do you see Sarova going and what strategies are you putting in place?All energies are focused on rational, strategic growth as we bring on board new properties in the region.

Organisational change is inevitable as we move on, given the dynamically evolving sector we opfferate in. We do expect to list on the Nairobi Stock exchange in the foreseeable future.

One size does not fit all at Sarova

Wangui Maina is a features writer

with the Business Daily

Email :[email protected]

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Mr Vohra: Leading in turbulent times. FreDrIcK oNYANGo

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theedge:a new order for Kenya

Business Daily: What is the most imporpptant part of connecting with customers?George Njenga: Innovation. Throughout most of the 1990s (and long before) CocafCola appeared unstoppable— with an anffnual earnings growth of 15f20 per cent. Yet by 1998, it faced its worst ever downfturn in recent memory. Why? Because customer demands keep changing.

What was the problem? CocafCola had one big product (“Coke Is It”, in the company’s own words), and pelted it to every corner of the world. The result was that Coke fell behind Pepsico, which spotted the move away from carffbonated drinks quicker than Coke did. Even here in Kenya, East Afffrican Breweries’ new Alvaro soft drink entered the market with a splash. CocafCola has now introffduced ‘Burn’, an energy drink— a sign that Coke’s leadership is now learning that customer taste is changing fast. The heart of the matffter is to keep innovating to keep up with the changing needs of your customers. The days of pushing one triedfandftested product down consumers’ throats are gone.

Are there innovators who focus on customers in this way in the Kenyan market?Equity Bank introduced many fiffnancial products in a short space of time. Where other big banks were flounderffing, Equity shone bright. It proved that the sofcalled unbankable people need not be so. Now its colleagues in the industry are catchffing up. What did Equity do well for its cusfftomers? Simple: It treated the ordinary Kenffyan like a king. It spoke to the hearts of ordinary people, and gave them a message of hope. It put its trust in the ordinary man and woman of basic means. The result was a love relationship that keeps the world watching. And how will Equity Bank keep the bottom line imffproving, after its phenomffenal growth naturally cools? In my humble opinion, by keeping an obsessive focus

on the ordinary man. But remember, the ordinary man can change his opinion every five years. So it is a case of research, research, research f and then innovate.

How does this innovation happen?The customer value proposition is a product of both pricing and customer mechanics. A CEO should live this innovation by conductffing a periodic strategic healthfcheck of the organisation and identifying the one or two most important issues. Don’t keep tinkerffing with too many little details — put your

finger on the single most important issue facing your customer conffnection.

There are myriad suggesfftions on how a company will keep innovating for its customffer. But I keep arguing that Keep it Simple is the best way. For one, the CEO must lead and keep a strong desire to change the strategy and products as the market changes. This proffvides clear direction to all staff so that changing with customer and developing new tastes for him or her is a basic business mentality. Think of Steve Jobs for instance. iTunes and iPod took people by surprise — fanfftastic innovations. But most importantly, the two products kept Apple surviving after a

difficult period and opened great opportunities for rich partnerships. Apple put its mark on the PC indusfftry once more, just when cusfftomers were writing it off.

So the CEO must take charge of customer strategy?Absolutely. The CEO must keep focused alignffing customer relationships with strategy. It is essential to keep innovation true to your busiffness strategy— the fact that you have more customers is not necessarily success. This in turn calls upon the management to always keep a natural tension between creativity and value capture. Research and creativity is useless and expensive if there isn’t a clear orientation and balance towards value capffture. The innovation must “put your ducks in a row.”

Easier said than done?Indeed it is. But one way to keep the customer innovation stream running is to sweep away the dead old logs. People who do not realffise that change is essential and keep strumffming their old paradigms need to go. Pay them to leave f it will free up fresh thinking. Be strong against those who act to block or negate change. Motivate your employees for creativity.

Remember, too, that it is networks which include people both inside and outside the orffganization that are the major building blocks of keeping your customer happy. The cusfftomer is the key part of the network to build future value. The best companies do not keep customers outside the walls f they bring her in to tell them what she wants and what must be changed. P&G is not the world’s leading conffsumer products company for nothing —and

it gets more than half of its innovations from outside the company.

Innovation is key to happy clientsWhat sets great companies apart? SBS dean argues that Apple, Coca-Cola and EABL are focusing on new products to connect with changing consumer tastes and staying ahead of the game

GEORGE NJENGA, Dean of Strathmore Business School

FRIDAY, JUNE 27, 2008 | BUSINESS DAILYXIII

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BYWANJIRUWAITHAKA

To get inside a Kenchic Limited breeding farm, a visitor has to leave the vehicle outside the gate

and once inside take a shower and change clothes. That’s not all. Each chicken house has its own shower unit so when moving from one to the other it’s mandatory to shower and change each time. “Even vehiffcles delivering feed do not enter the farm. The feed is loaded onto a tractor that stays permanently on the farm which then takes the feed inside. All workers live on the site, but they too have to shower and change before checking the birds. Our farms are highly quarantined and biofsecure,” says Mr Anthony Wainaina, the sales and marffketing manager.

Kenchic runs a fully integrated poulfftry operation dubbed ‘Farm to Fork’ with hatcheries, breeder farms that supply dayfold chicks to farmers, and a processffing plant that supplies hotels, supermarffkets, butcheries and fast food restaurants including 33 outlets in the Kenchic Inn franchise network. The process is clearly documented and products coded to enffsure total traceability such that every cut of meat can be traced back to the egg it hatched from including the diet the bird was fed from day old to maturity, he says. Kenchic’s promise to customers? “When

it’s Kenchic, then you know it’s safe.”This system is expensive and Kenchic

is the only commercial poultry operation in East and Central Africa doing it but food safety has become such a big global conffcern that the management felt that it was necessary. “People are more and more conffcerned with where food is coming from, you only have to look at the carbon miles debate that is affecting Kenyan flowers and horticultural products,” says Mr Wainffaina. “We felt that we needed to go to the next level in terms of food safety and be in line with international standards. In the UK and USA, traceability is governed by legislature. In Kenya, we’re not there yet but we wanted to up the game and raise standards,” he adds.

Kenchic Ltd came into existence in 1984 after acquiring its assets from BAT Kenya Developments Ltd in 1983. It has five breeding farms on Namanga Road, hatcheries in Mombasa and Athi River which also houses the broiler farm and a processing plant in Tigoni, Kiambu. The company has 314 employees and around 40 contract farmers who grow its dayfold chicks.

All are located within a 100km radius of its meat processing plant in Tigoni as a way of reducing costs. Kenchic provides the farmers with feeds and vaccines and monitors the birds unff

til they are ready for slaughter. The birds are coded when they get to the processffing plant. “From the code we can later tell you when it was grown, what feed it ate, which egg it was hatched from, the month it was laid and in which house number as well as the parents it came from,” says Mr Wainaina. Kenchic can trace back three generations of its chicken stock called a grandparent

operation. Proper vaccination of all the breeder flocks is strictly observed with blood testing done both locally and inffternationally.

The company follows an allfinfallfout policy where dayfold chicks are placed in one farm all at the same time so that they all follow the growth stages together and are slaughtered at the same time.

“Producing in several farms is more expensive than having all our birds in the same location but it is crucial for purposes of tracking the birds and provides a cushffion. In case of a problem we can simply shut down the farm’s operation and take losses without losing our entire producfftion,” says Mr Wainaina.

The stringent measures such as showffering and changing clothes before hanffdling the birds is meant to ensure that they don’t get sick and so do not require medication.

“In Kenya we practise organic farming. We don’t use animal protein and all our chicken are grain fed using maize, soya beans, sunflower and cotton seed cake which also ensures the taste of chicken is consistent across birds,” he says. Kenchic does not pump its chickens with hormones and the reason they grow fast is gene sefflection. “A grandparent operation serves the purpose of helping us to pick birds that are good layers and have a high feed

The global crisis over Bird Flu pandemic forced the management of Kenya’s leading fastfood chain to hit a brainwave that led them to adopting global standards to assure millions of their customers that whatever they put in their mouth is safe

Farm to fork: How Kenchic is using traceability to reassure its customers

From the code on a chicken, the chain can tell when it was grown, what feed it ate, which egg it was hatched from, the month it was laid and in which house number.

Fast food chain confronts a global consumer trust crisis

Experts had been concerned that the deadly H5N1 strain would surface in Africa as a result of the migration of wild birds from Europe.

Although Kenya dodged the avian flu, the local industry was hard hit as sales plummeted. A year after the bird flu scare, the Rift Valley Fever outbreak threatened the Sh52 billion red meat industry. The company placed consumer trust to the heart of its processes and branding and adopted world stand--ards that would both ensure highest quality to keep off diseases and ensure traceability.

IN A NUTSHELL

Wanjiru Waithaka is a business writer

with the Business Daily

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conversion and meat yield,” he says. However gene selection which is done at pure breed level is not done locally as it is very expensive and only four companies in the world have the caffpability.

Kenchic has partnered with Aviaffgen, which supplies Arbor Acres broilffers while Hendrix Genetics provides its layers. “For them to give you rights to their grandparents operations they must be convinced that your standards of growing chicken are the highest,” says Mr Wainaina.

But it is costly to set up and run this operation which has resulted in Kenffchic products being sold at a premiffum in a market where many producffers compete on price which is subject to wild swings as a result of supply isffsues.

The post election violence early this year sent prices to a high of Sh280 per kilo in outlets like City Market which gets most of its supplies from small scale farmers. The prices have come down since then to between Sh200f250 per kg which is still higher than last year’s average price of Sh180 per kg.

In major supermarkets, a 1.2kg Kenffchic capon is retailing at Sh326 while the spring chicken is Sh240. There are 13 registered hatcheries in the counfftry. Major players in the poultry marffket are Kenchic, Muguku, Sigma and Kenya Bixa.

“Our prices are more expensive but what we promise our customers is stable prices and we haven’t had a price increase since last year,” says Mr Wainaina. This may change, however, if global grain prices continue on the upffward trend which together with record high oil prices have been blamed for the current global food crisis. About 70 per cent of chicken feed is maize, whose production has also been affected by the displacement of farmers in the Rift Valley, Kenya’s bread basket.

Bird FluManaging diseases is another conffstant challenge for poultry and liveffstock farmers in Kenya with at least two major food scares in the country in the last three years.

For the poultry industry, the chickffens came home to roost literally in Sepfftember and October 2005 with the Aviffan Influenza (bird flu) scare. Experts had been concerned that the deadly H5N1 strain that was sweeping across parts of Asia would appear next in East and North Africa as a result of the miffgration of wild birds from Europe. This led to a lot of people avoiding chicken dishes even though the World Health Organisation (WHO) has declared that properly cooked chicken poses no danff

ger to the consumer. Sales of chicken and other poultry

fell drastically during the period amid reports that Kenya was not fully preffpared for a pandemic and the industry was forced to lay off people.

Mr Wainaina says that part of the problem was that people in the poulfftry industry failed to engage the media and incorrect information was passed around leading to mass panic by conffsumers. With huge losses looming Kenffchic moved fast to quell the damage and almost overnight placards appeared in its franchise outlets assuring consumffers about the safety of its products due to its rigorous production standards.

“The thrust of our communication campaign was to inform consumers that the risk of contracting bird flu was minimal and as long as they cooked chicken well they were safe,” says Mr Wainaina. “We also wanted to corffrect the misconception that bird flu is spread by air. It is spread by physical contact with infected birds so the bigffgest danger was not to consumers but small scale farmers who keep kienyeji (freefrange) chickens.” Statistics from the WHO show that by June this year only 243 people had died from bird flu although it had forced the slaughter of millions of birds.

Although Kenya dodged the avian flu the local industry was hard hit as sales plummeted. Between October and December that year, Kenchic lost close to Sh26 million with estimated weekly losses at Sh5 million in January 2006 from local sales and Sh1.5 million

export sales to Uganda after Ugandan authorities banned imports of chickffen and poultry products. The ban has since been lifted.

There was a silver lining in those dark clouds however as Kenchic’s agffgressive communication campaign has helped the firm grow sales volumes by 25f30 per cent since then says Mr Wainaina.

“Most customers have become senffsitive to meat safety and we have beffcome the supplier of choice for big hofftels that are governed by international traceability standards. We came out of the whole challenge stronger.”

Today the company sells 100 tonnes of processed meat and 200,000 day old chicks a week. Another 30,000 chicks are exported to Tanzania, 40,000 to Uganda and 10,000 to Rwanda, Buffrundi and Ethiopia combined. The total size of the poultry market is estimated at over half a million tonnes a week.

Red meat scareA year after the bird flu scare, the shoe was on the other foot as the Rift Valley Fever outbreak from November 2006 to January 2007 threatened the Sh52 billion red meat industry. Many conffsumers only trusted beef from the Kenffya Meat Commission (KMC), which is known for maintaining high quality in inspecting and slaughtering animals and chicken sales boomed resulting in shortages and price spikes.

At the height of the crisis, Mr Marfftin Mburu, who had applied for a KMC franchise for his three butcheries locatff

ed on Thika Road, Ngara and Kasarani in Nairobi told the Business Daily that he was selling 60 chickens per day in each butchery up from 10 and on some weekends as many as 100 per day. The price had gone up from Sh300 to Sh550 a chicken.

Early in the year, the Government announced that Kenya had lost its 4,000 tones per year beef export quota to the European Union over its failure to control animal diseases.

The quota was taken over by Botffswana one of the leading beef exportffing countries in Africa. And in June, the livestock development minister, Dr Mohammed Kuti ,said the ban may reffmain in force until 2010.

“The beef crisis had the same effect as the chicken crisis which is to highfflight the safety of food,” says Mr Wainffaina. While chicken sales have recovffered from the bird flu scare, a long term challenge still remains as consumers still perceive chicken to be expensive and for special occasions which has left chicken consumption way below that of beef.

“Killing the myth that chicken is more expensive than beef is the bigffgest driver to our communication and marketing campaign and we’ve mostly been working with youth to change atfftitudes,” he says.

The current “We are kuku about chicken” campaign is targeted at youth who live fast lives and are more likely to go to a fast food outlet than older people who prefer nyama choma (roast meat).

Boarding schools also serve chickffen rarely and Kenchic has been doing the rounds in schools to try and get them to replace some beef meals with chicken. “The perception that chicken is for special occasions starts at an early age while people are still in schools. In many homes if beef is served every day, nobody raises a question but if chicken is cooked a few days in a row they want to know what is being celebrated.”

Mr Wainaina also wants to focus his Sh50 million a year marketing budgffet on a health consciousness platform ahead of competition as he predicts it will become a big issue in Kenya with chicken reaping the benefits.

Research in other countries has shown that as an economy grows reffsulting in higher disposable incomes, meat consumption increases, especially chicken.

Until in 1920, chicken meat was considered a luxury reserved for speffcial occasions according to the US Deffpartment of Agriculture. Chickens were strictly a byfproduct of egg production as cockerels and unproductive hens were culled from the laying flock.

Efforts to raise chickens for meat had been spotty and shortflived. In the mid 1920’s production of chickens for meat reached significant levels and the poultry industry in the US has evolved dramatically ever since. Chicken conffsumption surpassed pork consumpfftion in 1985 and beef consumption in 1992.

Farm to fork: How Kenchic is using traceability to reassure its customers

Inside a Kenchic fastfood outlet. The company supplies chicken not only to its restaurants, but to supermarkets and competing eateries. PHoToS: FreDrIcK oNYANGo.

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Marketers are happy speaking their own language, replete with jargon like “awareness,”

“share of requirements” and “customer satisfaction.” Such terminology works fine in the marketing department and with the advertising professionals who execute marffketing plans. But there’s a translation probfflem between that language and the language of profitability and stock price which is the mother tongue of corporate CEOs. “CEOs

want to know what a 5 per cent increase in customer satisfaction will do for the bottomf

line,” says Wharton marketing professor David Reibstein, adding that “we need to draw a connecting line” between concepts of the two languages. Reibstein offered a primffer on how to make those connections in his talk – entitled “Linking Marketing Metrics to Financial Consequences” – at the Wharffton Marketing Conference on October 15. He pointed out that marketing metrics has been the top research priority for the past six years of corporate marketing professionals polled by the Marketing Science Institute.

“In this economic environment when corffporate budgets are being squeezed, Chief Marketing Officers are kept up at night by worry, trying to justify their expenditures and their existence. They believe what they are doing has value, and they have to figure out how to demonstrate that value” to skepfftical CEOs and CFOs, Reibstein said.

An important step in that direction is quantifying the value of a firm’s key intanffgible assets, such as the value of a customer and the value of brand awareness. Reibstein started out his discussion about the value of customers by showing the contrasting financial history of two companies. Both Company A and Company B had the same stable profit for the last five years. Company A had spent far more on marketing than Company B and its revenues had grown faster, but not as fast as its marketing expenffditures. As a result, Company A’s returnfonfsales had dropped compared to Company B. Reibstein then asked his audience which firm had been doing a better job.

Most participants felt that Company B had been doing the superior job, and so did the vast preponderance of a group of

In this economic environment when corporate budgets are being squeezed, chief marketing officers are kept up at night by worry, trying to justify their budgets, but they have to figure out how to show that value to skeptical CEOs and CFOs

Connecting marketing budgets to quarterly profit forecasts

KNOWLEDgE@ WHArToN

CFOs to whom Reibstein had recently posed the same question. Company B got their votes by apparently “doing more with less” – in other words, by providing stable profitability with less marketing expendifftures than Company A.

But Reibstein applied an xfray, so to speak, to the financial data by next showffing data on the customer relationships developed by the two firms. It turned out that Company A had three times as many customers as Company B. “So it becomes really important how to value that asset,” Reibstein suggested. And, in fact, there is an equation for just that purpose. It calcufflates the cost to acquire the customer, the amount of the company’s product that the customer purchases, the profit margin of those purchases, the cost of retaining the customer, the actual retention rate, how that customer influences others and the cost of capital.

Lo and behold, the audience learned that Company A not only had a tremendous increase in the number of new customers, but its “churn rate” (the rate at which it lost customers annually) was much lower. So

The Coke Happiness Factory advertising campaign. Reibstein showed the results of research that calculated the value of customers of leading consumer brands such as BMW and CocasCola, taking into account, for inssstance, how likely a purchaser of a BMW is to purchase another BMW. By those formulas, BMW’s customers are worth a hefty $143,500 and CocasCola’s a respectable $1,200. PHoTo: coMPANY.

Brands are assets that we need to learn how to value

There are unfortunately many competing methodologies to value brands, but a stand--ard way is likely to emerge because the Fi--nancial Accounting Standards Board (FASB) is working on the problem.

The value of brands is intricately tied up with the value of advertising.

There is also no doubt that stopping adver--tising over the long-term will do irreparable harm to a brand.

We need to understand what it costs to improve levels of customer satisfaction.

IN A NUTSHELL

Studies show that 50 per cent of corporations’ value today is composed of intangible assets, up from just 20 per cent, 40 years ago

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when the formula to value customers was applied to firms A and B, the value of Comffpany A’s customer base was four times that of Company B. Maligned Company A was actually doing the right thing all along by spending heavily on marketing. “Valuing a customer base is something a straightforffward financial statement doesn’t do,” said Reibstein. “And that’s why financial stateffments can lead us astray. They require us to expense all marketing expenditures the year they occur, when actually, customer refflationships have a life for a corporation.”

Reibstein pointed to studies showing that 50 per cent of corporations’ value today is composed of intangible assets, up from just 20 per cent 40 years ago. And it is priffmarily these intangibles, not hard assets, that dictate a company’s valuation by the stock market. Among those intangibles, infftellectual property probably ranks number one in value, but Reibstein believes that the value of customers is likely number two. “A customer base represents a future revenue stream, and we sell ourselves short if we don’t articulate its longfterm value.”

Valuing customers also can be a useful way to set a hypothetical ceiling for marffketing expenditures. Reibstein showed the results of research that calculated the value of customers of leading consumer brands such as BMW and CocafCola, taking into acffcount, for instance, how likely a purchaser of a BMW is to purchase another BMW. By those formulas, BMW’s customers are worth a hefty $143,500 and CocafCola’s a respectable $1,200. An address earlier in the day by a top CocafCola marketing exffecutive had made the point that drinkers of Diet Coke are more loyal to that beverage than are drinkers of regular CocafCola. “So that would indicate you would spend more to acquire Diet Coke drinkers,” versus regufflar Coke drinkers, said Reibstein.

Reibstein then turned his attention to the value of retaining customers. In his comparison between hypothetical comffpanies A and B, Company A kept its cusfftomers for five years, while Company B kept its customers for only two years. That gave Company A a huge advantage. CFOs often worry endlessly about the cost of capital, but actually the retention rate of customffers is far more important, said Reibstein. He used a sensitivity analysis to illustrate his point, showing, for instance, that an improvement in customer retention rates from 60 per cent in 70 per cent has a more favorable impact on revenues than chopffping the cost of capital from 16 per cent to 10 per cent.

Brands are another asset that marketffers need to do a better job of valuing, said Reibstein. There are unfortunately many competing methodologies to value brands, but a standard way is likely to emerge beffcause the Financial Accounting Standards Board is working on the problem. Accordffing to one methodology, CocafCola is the world’s top brand with a value of $67 bilfflion, Microsoft number is two at $61 billion and IBM number three at $53 billion.

The value of brands is intricately tied up with the value of advertising, of course. The data that looks at the shortfterm impact of

advertising of sales “is pretty discouraging,” said Reibstein. For instance, a study on “adffvertising payback” showed that consumer packaged goods companies got back only $.54 of increased revenue for every dollar they spent on advertising. “Most firms that cut advertising don’t see an immediate drop in sales.” Yet there is also no doubt that stopffping advertising over the longfterm will do irreparable harm to a brand. “There’s not enough good research on how fast brands atrophy,” Reibstein noted.

His final example of the financial conseffquences of marketing effort concerned the issue of customer satisfaction. “We need to understand what it costs to improve levffels of customer satisfaction and what it is worth to a company to have highly satisfied customers,” said Reibstein, adding that it is possible to have paradoxical results in this area: In other words, consumer satisfffaction can go up, yet profits and market share go down. “That can happen if the company is so focused on consumer satisfffaction ratings that it gets rid of dissatisfffied customers.”

Connecting marketing budgets to quarterly profit forecasts

Still, in many instances it proves to be worth spending millions to increase customer satisfaction. For instance, Starffbucks Coffee faced a dilemma caused by its success. The long waiting time for service was reducing customer satffisfaction. Yet to increase staff to reduce waiting times would cost $40 million. An analysis of customer satisfaction found that unsatisfied Starbucks cusfftomers stuck with the chain for just one year, made 47 visits per year and spent a total of $200. By contrast, highlyfsatisfffied Starbucks customers patronized the chain for more than eight years, made an impressive 86 visits per year and spent more than $3,000 dollars over that time. The leverage provided by improving cusfftomer satisfaction was so powerful, it was easy to decide to spend the money on increased staffing. While not every use of a marketing metric may make marketffers so happy, as tools they are capable of conveying a powerful message to CEOs and CFOs.

Consumer satisfaction can go up, yet profits and market share go down.

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BYMARTINMIRUKA

Like me, you probably look with envy at Tusker, Equity Bank, Java House, etc and wonder: How is it they are making so much

money selling so much stuff to so many eager peoffple? Elsewhere, from Nike to Nokia, the world’s most powerful brands are also the world’s most powerful companies. What’s the magic with these companies and their brands? Why do they have such a deep emotional bond with their customffers?

Well, it’s not voodoo. It’s a science they apply. And it is essential for every visionary business leader to figure out this science. To understand the science we should start by asking: What do these decidedly happy chaps have in common? The answer: they get more people to buy more stuff for more money, more often. It is as simple – and as complex – as that.

At this point I expect a series of ‘how do they do that?’ questions. First answer: by keeping deffmanding customers very, very happy. How do they do that? By delivering products/services that meet customers’ practical and emotional needs, such that the customers end up loving the products/services beyond the tangible, practical features.

And how do they do that? They think outward when crafting products/services for customers and in their subsequent interaction and ‘commuffnication’ with them. The end result is that they create a deep emotional connection between their customers and their brands.

This connection is a combination of many, many things. In this space I may only share a few of these notfsofsecret secrets of how these worldfbeating envy brands go about it.

It starts with a credible, relevant offer.Many Kenyan companies build their companies and brands along this theory: ‘If you shout it out loud and for long enough, it will become a fact’. The resultant ‘communication’ is raucous chestfthumping rhetoric. It has even made watching local TV a selffinflicted punishment. (This has got to be one reason DSTV and GTV are getting more customers!) Ironically, this chestfthumping approach is most popular with those who do not have any credible, relevant and differentiated offffer for customers in the first place.

You do not create an emotional bond with cusfftomers by shouting at them and definitely not by dishing out rhetoric instead of providing a credffible, relevant offer. If you are in this category and wish to get out, try this for a start. Develop a credffible product/service f one that actually gets the job done, preferably better than any other. Then make sure it is relevant f the customers actually need it (in their opinion, not yours). This requires a lot of listening and outward thinking and many times an investment in brand strategy. But it’s worth

every minute and penny spent. Because it is the fundamental ingredient in developing any cusfftomer following, leave alone a fanatical one.

Stop talking to yourself.Congratulations! You have developed a prodffuct/service that is credible, relevant and conffsistent, and you are beside yourself. Can’t wait to go to market! Your challenge now is to avoid the temptation to communicate this incredible offering to yourself too! This weakness is why many brand communications in Kenya are inffwardffacing and consist of corporate and techniffcal rhetoric that means nothing even to the most willing customer.

Ever wondered who those adverts promoting data services by our mobilefphone companies are talking to? Or perhaps you have been lucky to catch that advert on TV where a local insurffance company is advertising their company hisfftory, vision and mission! Can anyone else smell money burning?

Customers do not make rational buying deciffsions. Yes, they think they do and will give you all sorts of rational reasons during research as to why they love your competitor’s brand more. But there are simply no rational purchases. None. People buy from people (read brands) they like. Unless you are a monopoly, you must get customers to like you and to do this, you first have to get them

to hear you, really hear you. To get them to reffally hear you, you must share with them only the most relevant stuff – simply, in a language they understand. Nike says ‘Just do it’. Skype says ‘the whole world can talk for free’. Simple. Save the corporate jargon for the club.

Customers are not stupidAfter you have switched your communication to be directed at customers and not at yourself, or worse, your competition, the next thing to note is this: The docile, loyal and humble customer is dead. Kaput, mummified! So unless you have a product for the walking dead, you’d do well to unffderstand your living customers. This new breed of customer is demanding, has attitude, is spoilt for choice and thinks she knows everything. And she mostly does.

It’s thus a very bad idea to try selling her a line that you would not buy yourself if you were in her space. Brand owners do this all the time f behaving like they are people and customers are aliens from Pluto. News flash: customers are sophisticated people with sophisticated needs f just like you. And they know when they have been had. And their payback is… you get the point.

In case you are asking yourself why so many local companies flush money down the toilet adffvertising even when they have nothing credible to say, I have a theory for you. For advice on how to

connect with their fleeing customers, our cornered brand owners seek guidance from external ‘inffdustry professionals’. Unfortunately, in an indusfftry dominated by advertising firms all equipped with a hammer named “mass advertising”, every problem is a nail! Go figure.

Free advice: If saying something means leavffing your customers feeling cheated, it’s okay and probably best to say nothing. For now the one option you do not have is to treat customers like they are stupid.

It’s about your people.Having done all the hard work above, it’s amazffingly easy to make nonsense of it all. Corporate leaders do it everyday when they treat their brand as a communication between management and customers. “These pesky employees dare interffrupt us in the middle of our expansion plans and advertising campaign! Do they have any clue how difficult it is to grow customer numbers?” Well, well!

We need not go too far for an example on what is wrong with this thinking. Before its successful revival, Uchumi Supermarkets could have probffably survived its poor financial position for a while longer. But low staff morale resulted in higher and higher ‘shrinkage’ and poorer and poorer customer service – and this ‘people factor’ pretty much guaranteed its quick demise. Your brand, in simplefspeak, is embodied and represented by the entire organisation led by the CEO. If you are selling a commodity you can dance around this truth with some luck, but for service companies, there is absolutely nowhere to hide.

In a service company, the ability to damage the brand is equal between the CEO and the security guard. In other words the delivery of your brand promise depends on one thing above all else, peoffple! Your body of staff, those humble brandfamffbassadors, hold your bottom line in their hands. 70% of customers are loyal to a brand because of their great experiences with the people and vice versa. Which way would you have it?

So put some time into it. Train every single person in your organisation to believe that the customer is King. Preach, threaten, cajole, trick and persuade. Then give them the tools, a strong relevant brand with which they are fully engaged and systems and processes that are aligned to the brand, to empower them to treat the customer like the king. Thereafter treat them with the priority and attention that someone you have charged with taking care of your king deserves. As local management guru Sunny Bindra often puts it: You take care of your staff, your staff take care of your customers, and your customers take care of you. All I can add is: “Katching! Katching!”I will finish at the start: In a nutshell, all your company needs to do to succeed is to deliver prodffucts or services that people fall in love with. To do this you need to understand and accept what your brand truly is.Your brand is your customers’ gut feeling about your product, service or organiffsation. In other words, it is not what YOU say it is, but what THEY say it is! Your task therefore, is to figure out how to tightly control what they say it is. Crafting a tight brand strategy is a good place to start.

Turning customers into disciples does not involve magic , but methodically applied insights such as listening to clients carefully and creating products they really want

Martin Miruka is the CEO and Lead Strategist at ATOMetdf – a Brand Strategy & Innovation firm based in Nairobi. [email protected]

Brands that we love: The art of creating fanatical customers

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FAILURES,BackPage»

Striking a chord with shoppers

BYWANJIRUWAITHAKA

Al Kags is an online branding analyst and founder of Multiple Choices. He is also a fan of Nakumatt. He was reff

cently challenged on a glowing tribute that he had given the supermarket chain on his website and responded by saying: “I love the fact that it is always clean and bright, that things are well kept, that they pay attention to the little things, that they have knowledgeffable staff, and that they have great customer service.”

To illustrate the last point he offered up the following illustration. “A few months ago, I went to Nakumatt Mega and found that a socket I needed was not in stock. The attendffant asked me to leave him my number and he would tell me when the sockets came. Surely enough, after a little more than a week, I got a call from him saying they had it and had kept one aside for me next time I came in. That’s why I shop at Nakumatt,” he concluded.

Mr Thiagarajan Ramamurthy, the operafftions director at Nakumatt Holdings Limitffed, says communicating with its customers has propelled the chain to its present level of success. The retail chain employs a wide variety of tools to do so including its Smart News monthly magazine, catalogues, emails and SMS as well as traditional advertising channels such as billboards, television and radio commercials.

Although the company has a dedicated customer service department with representffatives in each branch, all employees from shelf stockers to branch managers are responffsible for delivering good customer service in their respective roles. “The employees at the customer service counter in each branch are fully equipped to communicate with other branches and the headquarters. They can call anyone in the organisation from the manffaging director downwards when handling grievances, giving replacements or issuing credit notes,” he says. They work in consulfftation with branch managers who as profit centre heads are the ultimate authority at branch level.

No train, no gainMr Ramamurthy says that good customer service doesn’t happen by accident; it’s a result of focus and dedication at all levels of the business where each employee is trained and motivated to deliver good servffice to customers because everybody has a customer across the business. “We’ve had a customer service strategy for over ten years and a formal customer service policy which culminated in our current marketing sloffgan f You need it, we’ve got it,” he says.

The chain started as a single outlet in Naff

kuru more than two decades ago and is curffrently the fastest growing retail chain with 3,700 employees scattered across 19 branches countrywide.

Mr Ramamurthy attributes the growth to five key factors: strategic location of its stores, wide variety of products, consistent availability of these products, helpful emffployees who provide personalized service, and promotions and loyalty schemes such as the smart card which awards points that cusfftomers can exchange for products or school fees for their children.

Nakumatt has pioneered a number of services in the retail market including wedffding list service, 24fhour shopping, and mofftorised shopping carts for the disabled.

With rapid expansion the key challenge has been how to maintain the same standards of customer service in each branch. “We’ve used two main tools f training and motivafftion,” says Mr Ramamurthy. The chain mofftivates employees by promoting managers from within its employee ranks and having defined career paths.

The company has formal training throughout the year for all employees, as well as onfthefjob training and induction for new employees. “A handful of employees are also taken outside the country to give them exposure at trade fairs and in international retail outlets,” he says.

In the last six months, more than 700 emffployees have been trained in customer servffice, communication and conflict resolution. Another batch of employees has also been trained in supply chain management from sourcing to delivery, information technology and warehousing. The company uses external facilitators and has spent around Sh5 million

on training during this period. Nakumatt’s major suppliers such as Haco

Industries and the CocafCola Company also train its employees on their products to equip them with information on product features and after sales service.

Employees also get to weigh in on the areas where they feel additional training is required. In October last year a survey of all employees was done to identify areas they wanted to be trained in and customer service emerged tops. The chain has an annual trainffing schedule that is monitored on a monthly basis. One staff member in the human reffsource department cofordinates training with all line managers and reports to the head of corporate and legal affairs who presents the training report to top managers.Nakumatt is collaborating with Jomo Kenyffatta University of Agriculture and Technology (JKUAT) to develop future human resource talent. The two organisations have developed a curriculum for a 2fyear retail management diploma course. “We need people who unffderstand the basic concepts in retail so that when they come in it is easier to train them,” says Mr Ramamurthy.

This strategy has been necessitated by the rapid expansion in outlets and customffer numbers requiring new employees to be trained faster.“Customer footage has douffbled in the last four years from a million to two million transactions a month. Our loyal shoppers have increased from 100,000 to apffproximately 400,000 over the same period,” says Mr Ramamurthy.

The chain relies on internal research using its Oracle software to analyze its customers. Its research has revealed that its core niche in the market is 25f45 year old high spenders in

the middle to upper income segment. This group is the one that has driven Naff

kumatt’s entry into lifestyle products such as furniture and white goods which is the fastest growing product segment in its stable.

Nakumatt has an ambitious expansion strategy that is the brainchild of Mr Atul Shah, the managing director of the company. The chain plans to list on the Nairobi Stock Exchange next year and have a total of 30 outlets in Kenya employing 5,000 employffees within two years. The chain also plans to expand to the region with 6f7 outlets beginffning with Rwanda next month.

Nakumatt concluded a $3 million (Sh192 million) buyout of City Market Supermarket in Kigali Rwanda in April that will pave the way for the opening in July of a new outlet to trade under the name Nakumatt Rwanda SARL. The supermarket chain is also underfftaking an $18 million (Sh1.1 billion) Gateffway Mall development in conjunction with Virunga Property development for its second outlet in the country scheduled for opening by the third quarter of 2009.

Its success has seen it win accolades loffcally and internationally. Last year the chain was ranked 25th in Planet Retail’s top 30 list of grocery retailers in Africa and the Midffdle East.

Analysts at the global retail and food inffdustry intelligence provider said that Nakuffmatt is “an African retail player to watch” and the regional expansion would make the chain ready to match the ambitions of giants based in South Africa, like Metcash and Shoprite. Until now, those companies have been the only retailers in the region with the financial power for expansion plans of this scale.

INDU

STRY

STA

NDAR

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At Nakumatt, good customer service doesn’t happen by accident, but is a result of focus and dedication at all levels of the business where each employee is trained and motivated to meet the required standards

FRIDAY, JUNE 27, 2008 | BUSINESS DAILYXIXtheedge:connecting with customers

FreD

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“Joy has a texture’”.- Oprah Winfrey

BYDRgITHINJIgITAHI

I am returning from a trip to New York and I happen to have three hours to spare at the Dubai International Airport. I have to

do something. I avoid the coffee shop simply because, I hate the aircraft toilet. Instead, I decide to walk around the duty free shops with no intentions of spending on anything. My children need to understand that they don’t always have to receive new things whenever daddy comes from a foreign trip. Well, that was my intention.

I walk through one of those all popular cosmetics dutyffree shops and I stand fixffated on a particular shelf. I notice and pick up a bottle of the newly launched and wellfdisplayed Diesel cologne. It is marketed in a basic cologne bottle design, but wrapped in fabric. I feel the fabric and a whole new expeffrience runs through my mind…needless to say, I buy. It’s the allfelusive act that marketffers are paid to chase and which determines the power of brands and subsequently their value at the stock exchange.

In this particular case, it was triggered not by smell, a price offer or an “Everyday Low Price” proposition, but by the sense of touch. Statistics show that 40 per cent of all perfume purchase decisions are based on the design of the bottle.

Death of unique selling propositionsOnce upon a time, companies needed only to create unique selling propositions for their products to make them fly off the shelves. It was fast, reliable and it worked. But that was during a phase in which research and develffopment was the most important department. The whitefcoat wearing guys with protective goggles and passwordflocked offices generffated company revenues by creating unique products which no one had earlier created. Pharmaceutical companies still cling onto this model even in the 21st century, creating shortflived brands, which hang on patents and crumble once these expire or are even threatened.

As science shifted from a preserve of the privileged few to a way of life, unique sellffing propositions faced the fate of the dinoff

Extrasensory experience: A brand you can touch, smell, see, feel and taste

Dr Githinji Gitahi is the Nation Media Group’s

general manager for marketing and advertising. He has

gained wide experience in medical marketing across the continent.

Creating a multi-sensory brand is gaining currency as a key to improving connections with consumers

saur. No product could claim uniqueness any more, especially those driven by functionalffity. Products became similar. Aspirin, whose unique selling proposition was fever and pain relief, finally found itself with dozens of other products whose selling proposition was…fever and pain relief.

This realisation drove the everfinnovative marketing fraternity to start a phenomenon (referred to by Martin Lindstrom in his book Brand Sense) as the brandfselling proposition. A brand became the ‘thing’ that consumers could feel and experience but could not tangibly hold.

That changed company thinking: from creating unique products to making products unique.

This branding era has mainly been fought on visual and audio platforms such as the TV, radio, billboards and newspapers. This resulted in the creation of a multibillion media industry estimated at $244 billion in 2003. All this was directed at fighting for space in the consumer’s mind. The consumer’s ability to interpret and internalise, however, was threatened by a simffple issue: overload!

In Al Ries’ famous book, The Fall of Advertiseeing and the Rise of PR, he argues that on average,

“Although I knew Diesel the brand through visual advertising selling on the themes of machisssmo and ruggedness of the users, the sense that finally appealed to me was that of touch.”

XXBUSINESS DAILY | FRIDAY, JUNE 27, 2008

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Would a blindfolded customer recssognise your brand?

an adult in the US is exposed to about 86,500 ads a year; thus a 65fyear old American has watched over two milfflion commercialsff the equivalent of watching commercials every day, eight hours a day, seven days a week for close to six years.

How’s that for clutter?This visual and audio battle hit its

limit. And not in the year 2008, but earlier and many marketers noticed this for their brands a long time ago. Yet, of all the human being’s five sensffes (the sixth, intuition, is not covered here) only two have been exhaustively used. Despite the fact that I knew Dieffsel the brand through visual advertisffing selling on the themes of machismo and ruggedness of the users, the sense that finally appealed to me was that of touch.

In Lindstrom’s Brand Sense, the auffthor makes a strong case for engaging more than the two traditional senses of sight and sound and making a delibfferate attempt to appeal to others like taste, smell and touch. Can we smell food on a TV commercial or experiffence that ‘new car’ smell in a brand new Toyota ad on TV or even feel the smoothness of the skin shaved with a Bic razor? Not quite yet, but don’t let that stop the flow of thought.

Many brands have been known to engage more than the two traditional senses. Take for example a bakery store, which deliberately creates vents from the bakery to continuously deliver that smell of warm, freshly baked bread to the customer or a summer clothes store that installs a machine that constantly delivers the nice summer scent into the store to elicit a sense of nostalgia amongst its shoppers and therefore inffduce purchase of summer gear three months before the actual summer.

Research shows that a full 75 per cent of our emotions are in fact generffated by what we smell. This is a huge percentage and probably explains why pheromones are such a heated subject of discussion amongst the youth.

In transiting from two sensory interffactions to five, marketers need to ask themselves how their brands can deffvelop consumer connections through each of the five senses. It may be that the brands already do have these conffnections. It may be that these connecfftions are already being utilised to the full or that they are currently ignored. In most cases, it will not require reffdesign, but a shift in communication planning.

Often, we have seen perfume comffpanies put an olfactory engagement on their Press ads to ensure they go beyond the visualffespecially through perfumeffdoused peel ups, which once pulled off deliver the scent, which is the irresistible purchase driver.

But it’s always easier said than done. How does a marketer move from a conffsumer seeing and hearing to tasting, feeling and smelling the brand? It’s a

journey that begins with a process I will call ‘debulking’ the brand.

This process involves looking at all the brand’s features and benefits and wondering what each stands for and whether your brand needs it or not. If it does, is it intentionally amplified through your communication or is it a beneficiary of chanced kneefjerk reflexes?Anyone managing the life of a brand needs to go through a process of pinpointing brand identifiers. In orffder to initiate a multifsensory branding experience, one needs to undertake a sensory audit. Ask yourself the quesfftions, how familiar are you with the sensory components of your brand? Would blindfolded consumers recogffnise your brand?

The next step is to benchmark your brand. Not necessarily against the competition, but against other simifflar or nonfsimilar industries where multifsensory branding has been a

success. Look out for brands, which have achieved more than two sensory connections and learn from them on how it’s done.

Now it is time to dramatise. The goal is to bring to life the possible sensory touchfpoints identified.

Picking them one by one, they are converted to a concrete experience. Once the sensory experiences are brought to life, it’s important that a signature is developed. This can only be done through consistency, consistffency and consistency. More often than not, marketers drift away from their core attributes and end up on a tanffgent, which does little or nothing at all to reinforce the brand’s valuesffin this case, its sensory experiences.In developing the signature, marketers must be wary of missing crossfsynerffgy opportunities. Crossfsynergy occurs when there is a relationship between a headline and an image.

A good example is when you see an imffage of a car and then smell the odour of new leather. An image of oranges with an orange flaffvours or scents wafting is not necessariffly crossfsynergy. It is good but expected, therefore creating little impact.

Finally, strategy without implemenfftation is like a great recipe, which never gets cooked. No one ever has a chance to taste it and it is worthless.

Once a full multifsensory branding plan is put in place, get down and do it. Multifsensory brand plans may involve research and development and other departments too. Implementation will require a selling process for everyone to buy the benefits. Remember that multifsensory branding like most branding programmes requires continuous monffitoring and assessment. Is your brand ready to take on the leadership role in connecting with consumers through a multifsensory experience?

Web linkSee the articles on www. bdafrica.com

Debulking process: Use your five senses to develop your brand

1 Look at all the brand’s fea--tures and benefits and won--

dering what each stands for and whether your brand needs it or not. Is it intentionally am--plified through your communi--cation or is it a beneficiary of a knee-jerk reflex.

2 Benchmark your brand. Not necessarily against the

competition, but against other similar or non-similar industries where multi-sensory branding has been a success. Look out for brands, which have more than two sensory connections.

3Now it is time to dramatise. The goal is to bring to life

the possible sensory touch-points identified. Picking them one by one, they are converted to a concrete experience.

4In developing the signature, marketers must be wary of

missing cross-synergy oppor--tunities. cross-synergy occurs when there is a relationship be--tween a headline and an image.

5Strategy without imple--mentation is like a great

recipe, which never gets cooked. No one ever has a chance to taste it and it is worthless. once a full multi-sensory branding plan is put in place, get down and do it.

FRIDAY, JUNE 27, 2008 | BUSINESS DAILYXXItheedge:connecting with customers

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Once upon a time, business people knew what they were in business for: to win over customers. They knew

that happy, loyal customers were the beginffning and the end of the business. All other things were incidental to the main cause: get them in, and keep them in.

Business thinkers knew it too. Peter Drucker, the original management guru, put it well: “The purpose of a business is to create a customer.” Decades ago, another very influential fellow, not renowned for his management advice, went even further: “A customer is not an interruption of our work. He is the purpose of it. A customer is doing us a favour by letting us serve him. We are not doing him any favour.” That was Maffhatma Gandhi.

So if everyone knows it, why is everyone so bad at doing it? Walking around Kenya today, you would find yourself wondering who exactly it is that businesses are run for. For the owners? For the managers? For the staff? For investors? For anyone and everyffone, in fact, other than the person sustaining the whole thing: the CUSTOMER!

If businesses were truly run for customffers, would you ever observe the following phenomena:• Huge queues at ‘customer care’ centres,

with many counters clearly unmanned?• Indifferent, boredflooking receptionists

and switchboard operators?• Parking lots dominated by slots for direcff

tors and managers, rather than customffers?

• Customers forced to go from counter to counter to complete the simplest task?

• Chief executives who are too busy to do the lowly job of talking to customers?And yet we all know that those experiff

ences are common currency in Kenya. For all our oftfrepeated braggadocio about beffing a nation of great businesspeople, there is something we just aren’t getting about busiffness. That you build it around serving the customer f not to suit yourself.

Transacting feelingsPart of the problem is that we have forgotfften that every transaction with a customer is EMOTIONAL as well as ECONOMIC. We seem to think that our duty as organisations is to mind the customer’s pocket f not her feelffings. And so we spend all our time offering a decent price and a convenient location, and forget all about the feelings being exchanged every time we transact.

The simplest, most fundamental, most uniquely human way to transact a feeling is

to do it with a smile. But look around you: how many smileffilled interactions do you observe in your dayftofday life? And if you own or run a business, how many of your customers leave your premises without once being smiled at? How negligent, if not downffright stupid, is that?

The most essential way to connect with customers is just that: smile at them! Why so? Because smiling does two things: it makes the giver of the smile feel better; and it makes the recipient smile back. It’s as simffple as that. But in our drive to be ‘executives’ and ‘officers’ and ‘managers’, we forget that we are all just human, and that we are dealffing with humans.

Before we do anything more complicated, and make a huge investment in equipment and systems, let us remember just to smile at our customers and treat them well f and to do it repeatedly. Studies show that more than half of the effect of any faceftofface comffmunication comes from body language f and smiling is the single most powerful signal.

Does this work? The evidence is strong

Sunny Bindra is a popular columnist

who writes for both the Sunday Nation and the Business Daily. He is a

management consultant who advises the CEOs and boards of leading local corporations. A

member of Strathmore Business School’s

Advisory Board, he leads some of the School’s

flagship programmes for senior executives

and directors. He is the author of ‘Crown Your

Customer’.

We should never forget the emotional heart of the customer transaction, advises SUNNY BINDRA

The simplest, most efssfective way to connect with customers? Smile at them!

that bonding with customers makes a great deal of financial sense. Happy customers stick around, and reduce the business’s need to recruit expenffsive new ones. If they like your company, they buy other things from you. And finally they spread the good word about you, acting as your ambasffsadors. Retention, related sales and referrals f all driven by the smile.

Southwest Airlines is consistently the world’s most profitable air passenger carrier. It returns wonderful money to shareholders f by making happy customers the point of its business, day after day.

This ethos is reflected in its fundamental stateffment of purpose: “Dedicated to the highest standffard of customer service delivered with a sense of warmth, friendliness, individual pride and comffpany spirit.” Southwest pays a great deal of attenfftion to how it selects its employees, and how it motivates them to look after customers.

Here in Kenya, Equity Bank has upended tradifftional banking by latching onto a simple observafftion: that ‘unbanked’ Kenyans don’t trust or like mainstream banks. They fear that their meagre money will disappear in mysterious charges, and

Winning customers is more about love than war

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that they will be looked down on and mistreated in the banking halls.

Equity’s phenomenal success, when analysed carefully, boils down to doing some very basic things well: demystifffying banking for the unschooled and unsophisticated customer; and ensurffing that every customer, no matter how rustic, is treated with respect, dignity and courtesy.

The Equity model is now receiving international acclaim and being studffied in renowned business schools f yet it amounts to little more than underffstanding feelings. The most powerful thoughts in business are always the simplest.

The ‘Fish!’ phenomenon is founded on the simple idea that connecting with customers is best done by making work fun. ‘Fish!’ is based on the renowned Pike Place Fish Market in Seattle, USA. This little business is a prime example of the power of exceptional customer service. The fishmongers at this market work long hours in a tiring and smelly job f but you would not imagine this to be the case.

They are full of the joy of life, and seem to spend every working moment throwing fish around and making cusfftomers laugh. They are so good at this that Pike Place has become Seattle’s leading tourist attraction! This powerffful insight has produced a bestselling book and video that have enthralled executives all over the world.

And yet, I repeat: the fundamental point is about reclaiming our humanffity. The lessons of ‘Fish!’ are not about systems and models f they are about basic behaviour. ‘Fish!” employees are encouraged to bring a sense of fun into the workplace, and are required to give customers their full, undivided and enthusiastic attention when they deal with them. You don’t need an MBA to understand that f but the lesson is profound.

Be afraid of customers Customers are at the centre of many a competitive war in Kenya today. If you are a telecommunications cusfftomer, you will be bombarded by offffers for cheap (and even ‘free’) calls. Bankers are falling over themselves to offer you loans, all branded with the latest inane ‘Sheng’ slogan.

Manufacturers and fastffood venffdors routinely offer ‘buyfonefgetfoneffree’ promotions.

But who is actually playing the customer relationship game? Who has understood the emotional part of dealing with customers f that customffers respond warmly to being treated warmly?

That they like it when you smile at them, and remember their name? That they like to chat about their children, and about how cold it is? That they appreciate gestures of concern? These things seem to be alien to the business owner and his employees.

When a customer’s child smiles at your employee, what does that emffployee do? Ignore the little fellow, in all likelihood. When a customer walks into your establishment carrying heavy shopping bags, what do your people do? Carry on sending that SMS or staring into deep space, no doubt.

When a customer has finally had it and goes ballistic, what does your team do? Probably become sullen and unresponsive f and yet that angry

customer is just a lifetime customer in disguise!

We should learn more from Jeff Bezos, founder of Amazon.com. He came through a vicious competitive war with Barnes & Noble, America’s biggest bookstore.

In 1997, Amazon was dwarfed by B&N, and its demise was widely preffdicted. But Amazon came through this war, not by engaging in price cuts and titfforftat promotions f but by foffcusing obsessively on understanding the needs and fears and aspirations of its customers. “Don’t be afraid of our competitors f but be very afraid of our customers”.

That was Bezos’ famous rallying call to his employees. By following a steady

programme of incremental improveffments in customer experience, Bezos has delivered rapid revenue growth and steady shareholder returns, and is now the world’s largest online retailer.

Connecting with customers deffmands many things: products that do what they’re supposed to; systems that work; prices that signal good value; loffcations that provide easy access.

But the simplest connection is the one we forget most often: the connecfftion between people and their feelings. The business leaders who understand the power of feelings are going to race ahead of you. Don’t think about that f just feel it. Web link

See the articles on www. bdafrica.com

Winning customers is more about love than war

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