Sunday, March 14, 2010

Know Your Customer

Every business knows that to survive and succeed it needs customers.  Unfortunately too many businesses treat their customers like secondhand citizens who are merely their means to an end….turning a profit.   Businesses frequently enact policies that negatively impact the consumer and cause such bad feeling that the client closes down the relationship and the business not only loses a customer, but also has its reputation tarnished.  A company’s success is contingent on providing excellent products (or services) and also making sure customer needs are satisfied in a positive and pleasant manner.

An exclusive hair salon in NYC recently found that many of its long time clients were cancelling their regularly scheduled appointments.  Each week they were serving fewer customers and most of these were first timers.  When they called the BizBuilding team to help them figure out and fix the problem business was already down by 40%.

The first question asked was did the salon recently alter its business model  or pricing?  The salon owner insisted that nothing had significantly changed.  Our  team decided to do a customer evaluation with former clients of the salon.  They all gave a similar response:  They loved the services they got at the salon and the stylists were all top quality.   Most of these consumers said when they left the salon after a haircut or color service, they felt special and looked great.

Then a few months ago the salon instituted a new policy:   there would be an extra surcharge of $60 ($75 for long hair) to get a blow dry after a service.  The customers were outraged.  They did not want to spend the extra money for a process they thought should have been part of the already expensive service.  When the salon owner finally acknowledged this change in policy, he explained that the blow dry process took too long and a stylist could see three more customers per day without having to do it.  The surcharge made up the margin.  He had not considered that his customers would have such strong feelings about this change in service practice and pricing.

The BizBuilding team came up with a solution that increased the profitability of the salon while satisfying the needs of the customers.  The salon hired two style assistants who were solely responsible for complementary blow-drying.   This freed up the  senior stylists to see more clients.  The increase in customers paid for the new hires and increased revenue.  All clients in the salon database were sent a letter explaining the new procedure and offered a 20% off discount.  They returned and business at the salon is better than ever.

Customer surveys and evaluations should be a standard part of business practice.  Understanding customers changing needs and if they are happy with the way you do business is vital to keeping a business lucrative.  Decisions to make strategic changes in the business practice must be reviewed with respect to consumer tolerance of these changes.  Ultimately having satisfied and happy customers is the best way to achieve profitability.

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