Customers Are Always Right, Right? Or Are They?
There is a reason why the mantra, “customers are always right” or, “customer is king” is pounded into the heads of salespeople all around the world. It’s because customers are the lifeblood of every business. So, whether customers have earned the right to be treated like kings, or are certifiably wrong, is inconsequential. The didactic mantra stays.
I must admit though, that I had a problem understanding this when I tried my hand at being a sales engineer at Sennheiser. When faced with customers whose greed continually sought an accounting of varied proportions - often beyond the realms of what was reasonable - I suggested they buy from another company. I simply couldn’t afford the luxury of piling on more value and discounts than what my regional manager had instructed me with.
If I had stuck to the mantra, I probably would have been left with enough change at the end of the month to treat myself to a cheeseburger at Macs. I wasn’t going to let that happen. I wasn’t going to settle for anything less than a double turkey club sandwich.
Needless to say, my regional manager wasn’t too thrilled that I had suggested his customers shop elsewhere. I urged him to look at it from a philosophical pragmatist’s point of view. Instead, he accused me of being a scourge of establishment at a time when I most needed succoring. I thanked him for the compliment though, and thought it best to fall on my sword. It was the least I could do for the man unto whom I had bequeathed so much sorrow.
Looking back now, I can see where he was coming from. And it got me thinking - which doesn’t happen very often – that customers actually possess a despotic hold over businesses. Unless you sell a product that cannot be found anywhere else in the world, you might as well hand over your profits to your competitors on a silver platter signed, “With Compliments.”
Because, if you can’t satisfy all of your customers’ insatiable desires, you can be assured that they’ll be on their next car ride to your competitors. Truth be told, your customers have never had your business interests at heart. They never have and they never will, which makes the notion of the customer always being right all the more confounding. Hurts, doesn’t it?
Customers Are King, Right? Or Are They?
To support my sober garb of eleemosynary veracity, a local newspaper here in sunny Singapore has just revealed that six months into its opening, and retailers at the brand-new Changi Airport Terminal 3 have already taken a hit in sales. As much as a 70% drop in sales.
One retailer was even quoted as saying that his business had to improve 200% just to break even. That’s a staggering percentage. Even more depressing was the admission - the handful of customers retailers were encountering were comprised mostly of airport staff.
Terminal 3 was setup to be an airport cum shopping destination. With 20,000 square metres of commercial space, there should be no prizes for guessing the brains behind this concept were absolutely serious about this venture.
I too would have thought it to be a novel idea, except for one minor detail - Singaporeans are already spoilt for shopping choice. Which means, unless Terminal 3 carves out a reason valid enough to propitiate customers, retailers can only look forward to more corporeal maceration of sales.
I Am Going To Tell You What That Annoying Trait Is, Right? Or Am I?
I believe I can attribute this power customers have over businesses to one factor. Though admittedly, not the only contributing factor, it is an outward exerting force that sets the momentum going in other causes. It’s called – seller selection .
Seller selection is a lurid, odious trait that all customers come pre-saddled with. It’s nothing to feel envious about. You and I possess it too. Afterall, we are customers ourselves, in one form or another. Seller selection is merely a customer’s defensive mechanism to unfulfilled wants, albeit a very powerful one.
Meaning, if a customer can’t buy a pair of shoes from you at a value that he finds reasonable, he’s off to another retailer whom he believes will give it to him. He wants the most bang for his buck. The most value he can stretch out of every dollar. And since you’re not the only shoe seller in town, his choice of finding another retailer is an easy one. That’s seller selection at work. It’s every customer’s ace in the hole.
So, how can you flip the switch and use this trait to your advantage? The solution is staring you right in the face. You practice buyer selection - where you decide whom you wish to sell to. Laugh if you must, but do make sure you get it out of your system. For it’s not a case of doing unto others, what others are doing unto you, but rather, a strategic decision that could render your competitors helpless.
Here’s the concept behind it. You select buyers, or suppliers who don’t have the power to sway your business adversely. Less power equates to less price sensitivity, which equates to your buyers paying what you stipulate. Not the other way round.
How exactly should you achieve this? By understanding your market and identifying who the power buyers are. Do the same with your suppliers. There are certain characteristics tagged to them, which makes them easily identifiable.
Be Aware Of These Power Buyer Characteristics
Since this post is primarily concerned about your buyers, let’s go ahead and pick out a few characteristics central to this group:
- They are the ones who buy in bulk - Differentiate the buyers whose purchases chew off a large chunk of their costs, from those that don’t. Buyers whose costs are only fractionally affected by large purchases are your ideal buyers. They may be identified as buyers with power, but they aren’t as price sensitive as the other group.
- Bargain hagglers - These buyers come in all forms, shapes and sizes. They maybe your everyday customer, to large companies that purchase from you. They’re considered powerful because they retain the ability to force you into slashing prices at will, ruthlessly diminishing your returns whilst your fixed costs remain stagnant. Not the ideal scenario for the long-term profitability of your business.
- How badly do they need your product? – If you’re selling an undifferentiated product, then you’ll need to pay attention to this. Buyer loyalty is made much more difficult because they’re able to make price comparisons instantaneously with their iPhones ( I do understand that not everybody owns an iPhone and to these folks I say, “Why the hell not?” ) and go where the price is lowest at the spur of a moment. Although, this point may be inconsequential if your production and operating costs are low because, you’ll still be able to churn a profit even after slashing prices.
- Are your customers looking for short-term, or long-term gains? – This ties in with the bargain hagglers. You can correctly assume, these buyers aren’t concerned about quality. They’re looking for instant gratification. You on the other hand, should be singling out buyers who are keen on long-term gains. These are your customers that are willing to pay good money for your product, because it’s quality that matters to them. Or, if the nature of the product you’re selling only produces gains after a certain period, then seek out customers who understand this.
In his book, On Competition , Michael Porter says,
“If the company lacks a low cost position or a unique product, selling to everyone is self-defeating because the more sales it achieves, the more vulnerable it becomes. The company may have to muster the courage to turn away business and sell only to less potent customers.”
Unless the economies of scale don’t apply to you, every strategy is worth your consideration. This includes buyer selection, even if at first thought, it sounds absolutely ludicrous. Don’t hesitate to fire customers who possess a negative, overbearing influence over your business. For what you’re in fact doing, is burning the boats – wrestling control from the grip of the power buyers’ hands, back into yours.
John H. Patterson, an early master of motivation wasn’t afraid to fire his best executives when power got to their heads. You need to be a Maoist in a power suit, where permanent revolution becomes your ultimate winning strategy, although it may not look the part at first glance.
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