by Prof. Rene T. Domingo (email comments to rtd@aim.edu)

It is always cheaper, easier, and more profitable to retain an existing customer than to get a new one or replace a lost one. Customer retention has suddenly become critical to survival for companies across industries, including banking, which are languishing and reeling from the current regional financial crisis. During times of high growth and relative prosperity, lost customers get little or no management attention since new sales from new accounts usually more than cover up for this attrition. Given this management complacency and euphoria, problems causing this churn are left hidden. Nobody investigates and analyzes the service problems or bad quality that drive customers and their friends (by word of mouth) away. What is also paradoxical is that current customers that companies have wooed in the past with vast marketing resources and huge advertising expenditures are easily lost with trivial failures in customer service, usually by the front-line employees. Management is usually oblivious to this gradual erosion of the company's market base until sales stop growing and customers are not replaced as fast as they are lost in an economic crunch. Like fast receding water that quickly exposes the real size and danger of the iceberg, declining demand and sales expose the real magnitude of the real customer service problems that may have been afflicting the company for years. It is usually too late to recover customers lost in a recession. They may have irreversibly decided to switch to a better and cheaper supplier or substitute product. Or recognizing the little value of your products and services, they may have opted to spend their meager income on more basic and urgent necessities.

What are the consequences of bad service? It has been estimated that about 96% of dissatisfied customers do not complain about the bad service they received. More than 90% of them will not come back to the offending establishment. Finally, each of them will tell their unforgettable experience to at least nine of their friends. The financial consequences of slow service and processing could also be staggering. In manufacturing, the quality cost, or the cost of not doing the right things right the first time, is estimated at 15%-35% of sales of any company. One major international credit card company I have studied in Indonesia was having a negative ROI of -7% because of system inefficiency in processing foreign billings and invoices. It took the company 3 months from time it pays the member-merchants to the time it collects the money from the foreign card issuer. Analysis showed that if they could streamline operations, and cut this time to one week, the company could have a potential ROI of 112% ! Indeed, there is money in efficiency. But few banks realized that if they continuously cut all processing times, it becomes a WIN-WIN situation - customers are happier, and the banks make more money.

Total Quality Management starts with leadership committed to quality. Bank senior executives should come down from their suites at least once a year and stay in the ground floor for one whole day observing and noting how customers are being served. They should regularly pose as customers, tellers, or security guards to get a feel of the situation. Then they can see the need to institute meaningful changes and systems based on this hands-on experience. One needs only to visit a McDonald's outlet and experience its prompt, friendly, and consistent service. Managers and supervisors here assist in serving food and disposing trash. Sure there are crowds, but there is no pandemonium. The high-energy counter personnel in these fast food establishments are definitely not receiving fat executive-level compensation. It's all a matter of setting up a customer-oriented system, training your employees to serve customers promptly, and managing the system well, especially by example.

Management should approach customer retention strategically. Superior customer service cannot be deemed an accident or some random act of some employees sometimes. It has to be consistently delivered corporate wide to all customers by all employees. In other words, customer retention cannot be just an idea, a wish, or vision or mission. It should be designed as a system that is easy to learn, maintain, transfer, repeat, expand, and replicate.

Incentives of managers and rank and file should be strongly linked to customer satisfaction and to the quality and speed of service. Include customer satisfaction in the performance appraisal and management reports. Employees should be trained to be multi-skilled and empowered to satisfy the customer and assist co-workers when necessary. Turf mentality and interdepartmental strife should be eradicated. Cross-functional teams should be organized to deliver total customer satisfaction. Enable and encourage your sales force to cross-sell all the company's products and services.

Information, especially about customers, should be shared across departments to speed up service and cut bureaucracy. Use information technology as an enabler to dramatically cut processing and waiting times. Develop knowledge workers who would their heads rather than money. Activities and processes whenever possible should be done concurrently or in parallel rather than in sequence. Create one-stop shops where customer's needs can be met completely without hand-offs. Observe, manage, and enhance all "moments of truth" or occasions in which the company or its employees directly interaction with potential or actual customers.

Formulate policies that take customer convenience into account, and not your employees' convenience. Align all policies to customer satisfaction, especially those that affect the customer ordering process. Extend office hours as long as possible. Entertain complaints as helpful suggestions from customers. Consider every customer complaint or problem as an opportunity to improve. Do things directly to cut unnecessary steps. Get materials and services from the source rather than middlemen to cut costs and delivery times.

In addition to direct sourcing, do direct marketing, rather than mass marketing, to specific customers segments with specific needs. Mass customize, rather than mass produce, your services. Develop an organization that is fluid, flexible, ready to adapt and change according to the customers requirements and competitive environment --- like water quickly taking the shape of its container. Harness all resources and reinvent your organization into a customer-driven one.

Finally, always assume that everyday, you are about to lose all existing, and long-term customers and let everybody strive to do everything possible to stop them from leaving and switching to your competitors. In other words, treat and serve existing customers like new customers, that is, excitedly and delightfully. Better yet, treat every customer as if he or she is your only customer.

Customer retention will be the key to survival during an economic crisis – whether domestic or global. As sales dip and volumes dangerously approach break even points, companies are fighting to retain market shares in a pie that has shrunk and will continue to shrink. Traditional and conventional marketing ploys to attract customers like discounts, promotional give-aways, and advertising, would be insufficient to retain customer loyalty. Only superior and total quality customer service will yield results.