Interview to Dr. Jorge Mongay, SBS Visiting Professor by Yahoo.

1. Are the European companies oriented to create and develop loyal customers?

The majority of companies in Europe show an orientation to “aggresively grasp” new clients,  increase and maintain their sales revenue as much as they can, but many of them are not really oriented in order to create and develop realistic “customer sustainability policies”. Most of the small and medium entreprises, (SME) which are the real engine of the economy not apply deep and rigorous  control systems in order to determine different levels of profitablity per client or type of clients.

Although a little percentage of companies are initiating processes and plans in order to retain customers, the field of customer loyalty still offers room for improvement for SMEs. In places like Spain we still need to improve our service orientation and the development of proffesionalism when setting up efficient mechanisms managing services and people. 

2. What is the key of sales and profitability? 

Firstly, companies must offer an excellent service to customers, which will take the company to obtain highly satisfied and loyal customers who buy again and again from us. Once this happens, these highly satisfied customers will tell their relatives, friends and colleagues how good the company is, creating a sense of “attachment to the company” instead of being simply “satisfied”. If this occurs, then customers become the best “salesmen” of the company, taking into consideration that their testimonial adds real credibility to their message. This fact is extremely important when marketing and selling added value services.    

3. Why is it so important to retain customers instead of getting new ones? 

Probably, if the market where a company operates in is a clear stage of growth then the first priority can be to increase and maximize market share searching for strategic positions for the future. But if the market is in a maturity stage, where everybody is selling pretty much the same product at similar prices and the market has reached its top, then the most adequate strategies will be those related to create and develop  “customer retention and customer sustainability”. Research shows that is significantly cheaper to retain a customer than finding a new one. The ratio is between 5 to 1 and 7 to 1 depending on the industry.

4. Why some companies fail when managing their customer orientation? 

Some managers believe that the company and its internal processes are much more important that the customers, some others believe that if they provide their customers simply with a “good quality products” then customers will come by themself as someting “magic”. Some others believe that customers are a “bad need” (here appears the syndrome: “we have to deal with them but they always bring us problems!”), some other managers increase dramatically expectations in their customers in order to sell quicker than others, and some managers are focused in cost reduction.  

To sum up, and not leaving importance to the former issues, I would say that  listen to the customer and detect its needs is going to be crucial in many markets in the next years. Those corporations which apply relationship marketing programs sucessfully will perform better financially.   

5. Should all the customers be equally treated?

No. They should not. Not all of them contribute in the same way to aspects like sales revenue, driven costs and net profits. Not all of them have been giving the same monetary flows in favour of the company and obviously not all of them are our clients since the same number of years, so consequently not all of them deserve the same treatment. In this way “discrimination policies” are really important. The companies will have to  reward efficiently those clients that are really good and profitable and eject those ones that are not contributing neither to profitability nor to the generation of value added for the company.  

6. The client is always the king?

Some of them should be “kings”, some others “princes” and some others should not be customers.  It is vital for an effective manager to be able to identify and clasify them. Research shows that 20% of customers contribute to 80% of profits. After this thought we should ask ourselves the next question: Why so many firms are still insisting in allocating the same resources, budgets, time and service to all their customers equally? Discrimination policies are an imperative today in order to improve profitability in many companies and at the same time I would say that those companies that want to treat all customers as if they would be “A” customers could end treating all customers as if they would be “C” customers.

Probably in the next years we might see a strategic re-orientation of many banking corporations where some customers could see how their bank reserves the right to cancel their accounts and give them back their money in case that they are not enough profitable.