Finders keepers

Finding new business is a breeze - it's keeping customers that's the tricky part. So what should resellers do to keep customers loyal?

Research has shown that people are more willing to get divorced than tricky part. So what should resellers do to keep customers loyal? they are to move banks because of the upheaval and disruption involved - something that banks take as a sign of customer loyalty. But that doesn't necessarily mean customers are satisfied. It's more a question of better the devil you know.

Resellers too believe their customers are extremely loyal. Many prefer to keep dealing with the IT supplier that installed their system, wrote the software or is based just around the corner, because the fear and doubt associated with going elsewhere can often be overwhelming.

Others move regularly, seeking out the best deals. The trick is to make the first group want to stay for the right reasons and the second group realise that moving to another supplier can often be risky and costly.

The way to achieve this is through a customer loyalty programme. The trouble is that the first thing which springs to mind when you think of customer loyalty programmes is loyalty cards. But as Mike Boreham of Info Products says: 'If I could think of a way that a loyalty card would work with a reseller business, I'd implement one.

But we're just not that sort of business.' A customer loyalty programme for resellers is a far more complex and subtle thing.

A loyalty programme has to involve more than giving points against purchases or discounts against future spending. You have to analyse what it is that customers want and which products give them competitive advantage. The price needs to be good and the service has to be great. Satisfaction is key.

But the paradox of customer loyalty programmes, according to James Wickes of Ideal Hardware, is relying on customers to tell you that they're not satisfied. Those who are unhappy with the service are more likely to receive the close attention that will persuade them to stay. But as Wickes explains: 'A customer who appears to be satisfied is probably putting up with a moderate level of service and will be more tempted to swap supplier. However, those who complain when you ask if everything is okay are more likely to continue buying from you for the foreseeable future because you will be working harder to make sure they are happy.'

Alison Heath, sales director at Datrontech, adds: 'Complacency is the enemy of customer loyalty. You have to continually monitor what's going on with every account.' Customer loyalty is a particular problem for distributors that have several thousand regular customers to manage and monitor. Datrontech, which has about 11,000 customers, is successful at maintaining customer loyalty - it uses technology to analyse and report on buying patterns.

It then follows these up with personal meetings.

Heath explains: 'We analyse each account monthly and look at what customers are buying and how much they are spending. Then we compare the figures with the previous month's activity. Where there is a change in buying patterns we immediately react and have a meeting to see how we can improve the relationship.'

Heath says the meetings have two main objectives: to help Datrontech understand the customer and meet changing needs, and to help make the customer aware of what it is doing and what is available.

'So often customers say: "I did not know you did that", simply because they weren't aware of some of the services we provide. That's not through any failure to promote and push our services, but just because they're busy and don't have a chance to look at all our advertising and marketing material.'

Resellers face slightly different problems. They have a smaller customer base and more opportunity to lock in their customers, combined with greater challenges, keeping on top of rapidly changing technology and delivering the best solutions to provide their customers with the best that is available.

By comparison, a distributor's life is easy. There is also the advantage that most reseller customers are reluctant to change supplier and will even suffer degraded service before replacing their IT supplier.

Distributor customers, on the other hand, are more likely to trade with several distributors a time and switch every month in order to take advantage of the best prices and the most attractive promotions.

Info Products' Boreham believes most reseller customers are reluctant to move and want to stay with their IT supplier. He says: 'Even if they decide to replace the supplier, they will give a notice period and invite tenders. The incumbent is usually invited to tender again and stands a good chance of winning the contract.'

Boreham says: 'There is an inclination for most customers to stay with the IT supplier they've been dealing with. The longer the relationship goes on the more likely they are to stay. But that can make some resellers complacent, which is dangerous.'

Boreham knows that some customers have a policy to change suppliers regularly, but he says that resellers should get them to change their minds. 'Tell them the cost of moving is considerable, with hidden charges and disadvantages like having to work with the supplier for three months through the notice period, then having a three-month honeymoon period with a new supplier.'

Recent research by Ventura, part of the Next Group of companies which work on behalf of many retail organisations to provide outsourced customer service management, has profiled 'Britain's most disloyal customer' and found it to be someone aged between 25 and 44, male, of professional or management status and earning between #30,000 and #61,000 with a high proportion of disposable income.

The reason why so many of these customers defect is poor service, although the report also finds that those customers who stay with existing suppliers and work with them to improve service do better in the long run.

A Ventura representative says: 'From the reseller's point of view, existing customers are the most profitable because their turn on investment in marketing can be between three and seven times more than prospective customers. Reducing customer defection can boost profit by up to 85 per cent.'

So for both customers and re-sellers, stability is best. 'Understanding the value of a lifetime customer is important as it creates a competitive edge,' says the Ventura representative.

The problem facing resellers is that achieving customer loyalty is just the first step. Maintaining customer loyalty can be even more difficult.

According to a white paper on customer loyalty produced by CMG, the business law of gravity means organisations can easily sink to the bottom of the heap where they are overtaken by competitors with innovative approaches to the market. Once in that position, it is hard to reverse the trend and catch up again. This means resellers must constantly look for ways to improve performance and add value, as well as improving the quality of their customer service and support. This policy of continuous improvement means constant change - something many reseller managers find uncomfortable.

Heath says that customers today are aware of the financial implications of moving supplier. 'There is a host of issues for re-seller customers. There are things like the cost of building a relationship, which is just thrown away if they move.'

She says most difficulties can be ironed out if the reseller is flexible.

The thing is not to abandon an ex-customer once they have moved as there is no reason why a reseller cannot get them to agree to continue a healthy working relationship. You have an advantage over someone who has just taken over the account,' Heath says.

Developing a faithful client base should be the objective of all reseller managers. At Comdef 1997, an entire session and report was centred around this issue. The conclusion was that there is significant stability among resellers and their customers, although doubts were raised as to the reasons for the findings. Some said that customers stayed because there was no better alternative, rather than for more positive reasons. 'Loyalty isn't tested until there is a competitor,' one delegate commented.

A happy customer is a faithful customer

CMG chairman Ian Taylor says: 'It is going to be increasingly difficult for resellers to maintain customer loyalty.' He explains the reasons:

Markets are globalised. Customers need suppliers that can cope.

The internet removes the middleman which, in most cases, is the traditional reseller and local systems supplier.

The technology is essential for competitive advantage.

Most managers understand their systems far more than they used to. They are now capable of ordering direct and installing and maintaining their own systems.

Deregulation makes for healthier competition and a tougher world for resellers to compete in.

The key to success in customer loyalty, says Taylor, is for resellers to examine their own business processes to make sure their organisation is customer oriented. 'Processes are going to create loyalty when they enable customers to obtain the information they want immediately, to get support when they want it and responsive professional consultancy on the best IT for their individual business requirements,' he says.

The trick, he adds, is to ensure that the 'process suits the customer, not the organisation. The process must be effective, suitable and stable, not just efficient.'

Catch 'em and keep 'em

Resellers should: Use workflow technologies to move information around the company within a more logical set of processes.

Use document image processing technology to support digitised images of documents so that information can be shared easily.

Implement data warehousing technology so it is easier to identify patterns in customer behaviour and buying trends.

Develop an electronic commerce system so customers can order electronically and streamline fulfilment.

Use the internet for customer support.

Have an intranet and establish links with each client.