5 Signs of Dysfunctional Customer Relations
Posted by Corey Smith on Nov 2, 2023 6:49:00 AM
I believe that one of the biggest challenges of running any company is ensuring that you have happy customers. There seems to be a constant effort to market or sell products & services but a lack of interest in keeping customers happy.
The most obvious evidence of this approach is the apparent need to offer special discounts for new customers.
Here are some mind-blowing stats about customer acquisition vs customer retention:
- It costs up to 7x more to acquire a new customer than to retain an old one.
- Increasing customer retention by 5% increases profits by 25-95%.
- 44% of companies have a greater focus on acquisition vs. 16% that focus on retention.
- For most industries, the average customer retention rate is below 20%.
- Loyal customers spend 67% more than new ones.
- Only 40% of companies and 30% of agencies have an equal focus on acquisition and retention.
- 89% see customer experience as a key factor in driving customer loyalty and retention.
- Existing customers are 50% more likely to try new products and spend 31% more than new customers.
These stats are why (and many other reasons) that HubSpot introduced The [Marketing] Flywheel.
Marketing Agencies Are Not Immune
It's truly amazing to me that marketing agencies (of all companies) struggle with this as much (if not more) than other companies.
Here is my short list of the top five signs a marketing agency doesn't understand customer happiness. You can certainly apply these to most companies:
- The inability to say no
- Reactive rather than proactive
- Blaming others - especially customers
- Low Net Promoter Score (NPS)
- Low Profitability
Inability to Say No
My Dad used to say:
If you try to be everything to everyone, you'll end up being nothing to no one.
I am truly amazed how often I hear the sentiment from agency leaders of, "I just want to make sure we do whatever it takes to make them happy!"
The problem is the "whatever it takes." The reason that can be a problem is that all too often your customers don't really understand what it will take to make them happy. They have goals but, like any human, they will shift their focus to less effective areas. When agencies jump to the thing that will hopefully make their client happy, they end up being spread so thin that their client will never really be happy.
(Oh, if you aren't familiar with that beauty from The Oatmeal, it's worth every minute to take a gander)
The much larger issue about the inability to say no is that the agency will try to do work that is outside of their area of expertise. I have plenty of experience in print and traditional media. However, every time our digital agency would take on those types of projects, we would fail and customers would be very unhappy.
To fix this problem you need to ensure that you understand clearly what you are good at, why you are good at it, and make sure you are doing that (only that) for your clients.
Reactive Not Proactive
This is strongly related to the 'inability to say no.'
Were you aware that the most common length of a search engine optimization (SEO) contract is about seven months? There are a lot of theories as to why that's true but I think it's because it takes about six months to realize that goals are not being met and the agency has a 30-day cancellation clause.
The reason goals are not being met is because the agency is being very reactive. Marketing is an easy place to be reactive. At the beginning of a contract, it's easy to find things to seem busy and productive by looking for the "low-hanging fruit". There are always errors to be fixed… always. It doesn't matter how good the previous agency was.
Agencies get lazy and stop looking forward to what can be done to be better. Find an agency that understands how to truly test. An agency that understands Growth-Driven Design is a great place to start (hint, we do).
Blaming Others - Especially Customers
This is a hallmark of a company that is truly a toxic place to work. It's always hard to say that you've done something wrong. It is, seemingly, easy to place the blame on someone else. Ineffective employees do this. Incompetent workers do this. Fearful people do this. Bad leaders do this. Politicians do this.
If you find yourself saying things like, "John is too junior of an employee, he will never get this right." or "This customer just doesn't get it, why won't they just let us do what we want!" Then you are starting down a bad path.
Remember, if something goes wrong, it's always your fault. Maybe you didn't make a good choice in your test. Maybe you didn't communicate something. Maybe it's as simple as you didn't set the right expectation in the sales process.
The sooner you realize it's your fault and only your fault the faster you'll be able to create lasting client relationships.
Low Net Promoter Score (NPS)
I have come to truly appreciate the NPS as a measure of client satisfaction. I won't go into detail about what it is. You can learn about it here. In short, it's a metric for how your clients trust you enough to whether or not they will refer you.
If your NPS is 0, it means you have the same number of clients that are willing to refer you (promoters) as those that aren't (detractors). Generally speaking, a good company is going to have a relatively high NPS… say above 70. For reference, Tesla Motors has an NPS of 96. Facebook has an NPS of -21.
If your number is low, change it by taking care of your clients. Be purposeful in how you make their lives better.
I know, when you are buying anything, you want to get the best deal possible. The reality, however, is you need your vendors to be profitable. If you are bleeding your vendors dry, then you are a bad client (but that's a different discussion).
Your agency should be profitable. When people are stressed about finances they make poor decisions. Web developers will launch a site that is incomplete to get a final payment. Marketers will half-ass a campaign to make the dollars spread.
If you are a customer, you should expect your agency to be very profitable. But, you should also receive plenty more value than the money you spend. If your agency is cutting corners in your campaigns, it's very often likely that they are doing that because they are short on cash.
If you are an agency and your profitability is less than 25-35% then you have some serious problems. You won't be able to properly take care of your clients. If you fix that, you'll be amazed how much easier it is to create thrilled clients.
Focus on Your Customer Experience
I have always hated the adage that "buyers are liars." That has come from sales people that often treat their customers as the enemy… someone to be conquered.
Customers are people.
Customers deserve to be treated well. They are exchanging their hard-earned money for your work. It's your job to make them happy. It's your job to make sure they get more value out of the dollar they spend with you.
If your customers are unhappy, remember, it's your fault.
Interested in a related read? Take a peek at my post titled Profits Over Customer Happiness = A Recipe for Disaster.
Written by Corey Smith
Corey Smith is the founder of Tribute Media and serves as the Managing Director for Tribute Media. He is also the VP of Web & Creative for Hawke Media.