We’ve all been there, with the customer who soaks up an inordinate amount of time and energy without spending enough for you to justify the level of resourcing.
And now it’s crunch time – how should you move a customer who had face-to-face sales representation to a less frequent cycle and/or telesales account management without losing his business?
Here are some pointers from behavioural economics on how to change your service mix.
You don’t know what you’ve got till it’s gone … aka “endowment effect”.
You can be sure that the customer took face-to-face (F2F) representation for granted when he had it and now that it might be taken away it’s seen as a catastrophe.
Endowment effect is our tendency to overvalue what we own. In your customer’s case he “owns” the level of service he has been accustomed to receiving.
Tell him they can have F2F representation again but he needs to meet the criteria and to do that he can work with your very smart, new telesales account manager who will help him to get there.
Will he like it? In all probability, no, because it will be seen as a personal affront to him.
But guess what? You’re in business and you are entitled to treat customers who spend more differently.
Procedural fairness explains our tendency to accept a judgment if it has been fairly considered and you know the rules.
If you’ve ever flown business class then had to go back to economy you will know which you prefer but you also know that what it takes to get back to business class is money.
Do your customers know what it takes to get F2F representation?
Share the decision and the objective criteria (for instance spend more than $5000 annually) to help them to understand that they are actually in control of their servicing level and that all it takes is increased spend.
This type of change reminds the customer that he is one of many, upsetting his sense of uniqueness.
Talk to the customer about what makes his business special and why you see a continuing relationship with him, albeit via a different channel.
We hate to lose more than we love to win. In this case the customer may react badly if he perceives the service mix as losing something, so do everything you can to frame the change as a gain.
Can he get more frequent attention via the phone for example?
Does he get the resourcing support of a whole team rather than from one individual?
Will shorter appointments save him time?
Highlight potential reasons why F2F may not have been the best method of contact from that customer’s perspective and consider how to use it in your justification.
A word of caution though, the change will most probably be seen as cost cutting, so don’t go too heavy on the “it’s better for you” angle unless you can demonstrate how he will get a better level of service.
With unpleasant news get it over quickly because we adapt more readily if we are not constantly reminded of what has changed.
Hand over the account (and do that properly by thoroughly briefing the new rep and telling the customer) and move on so the healing process can begin.
If you are still procrastinating about making the changes be aware that you are falling into the trap of loss aversion – you are more fearful of losing the business of some difficult customers than motivated by gains you can make by having your F2F sales reps concentrate on accounts with the most potential.
You may well lose some customers, so to get over that mental hurdle and do some number crunching.
How much does it cost you to service those accounts, what’s your margin and what’s the opportunity cost between those accounts and the potential accounts your rep could be growing?
Overcome your reticence with a good dose of fear busting.
By no means is changing the service mix an easy thing to do but it is an important aspect of managing your business.
If you want to take it a step further and fire a customer you may want to check out “Firing a Customer – what holds us back?”
Until next time, happy dropping .
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
