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Sunday, 6 March 2011

Prices Too High? Try Improving Your Service Levels!

It is interesting to note how an almost chance conversation during the week can be emphasised and substantiated along the way.
In discussion with a CEO running a substantial £40million turnover company retailing consumer goods through some 35 off-High Street outlets, he made the point that his business is a discounter and unless they supply at the lowest price possible, then the competition will take business away.

He was bemoaning the fact that prices from China are escalating and he will have to start increasing his prices to the customer or reduce his margins to maintain his competitive advantage.  It was pointed out to him that as all import prices are escalating to everyone, he wasn’t alone; everyone else would have to take the same approach.

He was asked about his service levels to the customer and he said that in the market he was supplying, great service wasn’t expected. It seems that he exploited that myth and had people in his stores who also didn’t care about serving the customer.

We suggested that as his sales by volume are flatlining, that he starts to take the service aspect far more seriously. Prices will have to increase and the effect can be ameliorated by giving really good service which, frankly, doesn’t need to cost very much.

It needs better (and probably fewer) people, better paid and better trained plus a disciplined, committed and dedicated approach to making the customer want to come back again and again.  There is nothing wrong in running a business as a discounter and great service can offer competitive advantage.

In my Vistage group I have a member running a company serving professionals, whose sales by volume have increased significantly, year on year, right through the recession even though his prices are substantially higher than the competition. Feedback from customers almost never mentions prices but praises the excellent service given by his company.

I have just seen an email received yesterday by my wife, practice manager in a law firm, which reads, in part: “I really just wanted to thank you for everything you did for us,........., For my part to have someone who calls when they say they will, who does everything they say they'll do and that you can totally trust is priceless in today’s world and very rare......... Fantastic! I will recommend your firm very highly and very often. Thank you again”.

What a great way to end the week! In almost every case, price is actually a secondary feature of why people buy, whether it be business to consumers, top level or discounter, business to business or professional practice. In the end we prefer to deal with people we like, people who we can trust, people who make us feel important to them. How much does that cost? It outweighs price disadvantage every time.

For more information, visit www.vistage.co.uk and www.maa-uk.co.uk
To contact us, email to ivan.goldberg@vistage.co.uk

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