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However good your product or service is, the simple truth is that no-one will buy it if they don’t want it or believe they don’t need it. And you won’t persuade anyone that they want or need to buy what you’re offering unless you clearly understand what it is your customers really want.

Knowing and understanding customer needs is at the centre of every successful business, whether it sells directly to individuals or other businesses. Once you have this knowledge, you can use it to persuade potential and existing customers that buying from you is in their best interests.

This guide tells you what you need to know about your customers, how to use this information to sell to them more effectively, and how to win business from your competitors.

Why do your customers need you?

Every business needs a reason for their customers to buy from them and not their competitors. This is called a Unique Sales Proposition (USP). Your USP can be identified by completing the phrase “Customers will buy from me because my business is the only…”

Your USP can change as your business or your market changes, and you can have different USPs for different types of customer.
For example:

• A stationery shop could offer a free same-day delivery service for its business customers within a local area – an effective USP for businesses that need fast delivery
• The same stationery shop could offer a 5 per cent discount to businesses that spend more than £500 a month – this would be a USP for cost-conscious customers
• The stationery shop could also make sure it offers the most comprehensive stock of artists’ materials in the area – a USP for local professional or amateur artists
• All of these USPs can be effective because they are driven by what the customer looks for when making a buying decision.

It’s a good idea to review your USPs regularly. Can you tailor your products or services to better match your customers’ needs? Consider asking your customers why they buy from you. This will tell you what they think your USP is – this may differ from what you think your USP is.

It’s also useful to check constantly what your competition is doing. Remember – if your competitors are doing the same, your USP isn’t unique any more.

What do you know about your customers?

The more you know about your customers, the more effective your sales and marketing efforts will be. It’s well worth making the effort to find out:

• who they are
• what they buy
• why they buy it

If you’re selling to other businesses, you’ll need to know which individuals are responsible for the decision to buy your product or service. For information on targeting decision-makers, see our guide on how to target the right people in an organisation.

You can learn a great deal about your customers by talking to them. Asking them why they’re buying or not buying, what they may want to buy in the future and asking what other needs they have can give a valuable picture of what’s important to them.

Strong sales are driven by emphasising the benefits that your product or service brings to your customers. If you know the challenges that face them, it’s much easier to offer them solutions. See our guide on how to sell the benefits, not the features.

It’s also well worth keeping an eye on future developments in your customers’ markets and lives. Knowing the trends that are going to influence your customers helps you to anticipate what they are going to need – and offer it to them as soon as they need it.

You can conduct your own market research and there are many existing reports that can help you build a picture of where your customers’ markets – and your business – may be going.

The customer’s current supplier

Chances are your potential customer is already buying something similar to your product or service from someone else. Before you can sell to a potential customer, you need to know:

• Who the customer’s current supplier is
• If the customer is happy with their current supplier
• If buying from you would offer the customer any benefits – and, if so, what those benefits would be

The easiest way to identify a potential customer’s current supplier is often simply to ask them. Generally people are very happy to offer this information, as well as an indication of whether they’re happy with their present arrangements.

If you can find out what benefits they’re looking for, you stand a better chance of being able to sell to them. The benefits may be related to price or levels of service, for example. Are there any benefits your business can offer that are better than those the potential customer already receives? If there are, these should form the basis of any sales approach you make.

For information on selling your product’s benefits, see our guide on how to sell the benefits, not the features.

Ten things you need to know about your customers

1.  Who they are – If you sell directly to individuals, find out your customers’ gender, age, marital status and occupation. If you sell to other businesses, find out what size and kind of business they are. For example, small private company or big multinational.
2. What they do – If you sell directly to individuals, it’s worth knowing their occupations and interests. If you sell to other businesses, it helps to have an understanding of what their business is trying to achieve.
3. Why they buy – If you know why customers buy a product or service, it’s easier to match their needs to the benefits your business can offer.
4. When they buy – If you approach a customer just at the time they want to buy, you will massively increase your chances of success.
5. How they buy – For example, some people prefer to buy from a website, while others prefer a face-to-face meeting.
6. How much money they have – You’ll be more successful if you can match what you’re offering to what you know your customer can afford.
7. What makes them feel good about buying – If you know what makes them tick, you can serve them in the way they prefer.
8. What they expect of you – For example, if your customers expect reliable delivery and you don’t disappoint them, you stand to gain repeat business.
9. What they think about you – If your customers enjoy dealing with you, they’re likely to buy more. And you can only tackle problems that customers have if you know what they are.
10. What they think about your competitors – If you know how your customers view your competition, you stand a much better chance of staying ahead of your rivals.

Segment your customers

Only a percentage of the general population will buy your products or use your services, so the more accurately you focus your marketing on them, the less your efforts will be wasted. It is a good idea not to aim too widely with your marketing, to avoid spreading your resources too thinly.

This guide aims to explain the basics of how to sort your customers into groups and helps you understand:

• what your customers want
• what you can offer them
• the benefits of putting your customers into market segments

Understanding the basic segments of your customer base is a good foundation for winning and keeping profitable customers.

Benefits of segmentation

Segmenting your customers into groups according to their needs has a number of advantages. It can help you to:

• identify your most and least profitable customers
• focus your marketing on the customers who will be most likely to buy your products or services
• avoid the markets which will not be profitable for you
• build loyal relationships with customers by developing and offering them the products and services they want
• improve customer service
• get ahead of the competition in specific parts of the market
• use your resources wisely
• identify new products
• improve products to meet customer needs
• increase profit potential by keeping costs down, and in some areas enabling you to charge a higher price for your products and services
• group your customers by factors such as geographical location, size and type of organization, type and lifestyle of consumers, attitudes and behaviour

See our guides on how to target the right people in an organisation and how to know your customers’ needs.

Customer management

Because your individual customers have differing needs, it will be easier to give them what they want if you divide them into groups sharing similar needs, and treat each group differently.

You can then:

• customise your products and services according to the needs of each segment
• aim your marketing at each particular group, saving you time and money
• focus on your most profitable customers

Many businesses aim at the greatest possible number of segments, with the smallest number in each, but also try to keep the number of segments at a level that is easy to manage.

How you segment your customers will depend on whether you are marketing your products and services to:

• businesses or organisations – business-to-business or B2B
• individual consumers or households – business-to-consumer or B2C

B2B

If you are segmenting business markets, you could use the following groups to describe your customers’ organisations:

• What they do – industry sector, public or private, turnover, number of employees, location
• How they operate – technology, use of your products
• Their buying behaviour
• How they place orders, their size and frequency
• How they behave – loyalty and attitude to risk

B2C

If you are segmenting consumer markets, you could use the following groups of ways to describe your customers:

• Location – by towns, regions and countries
• Profiles – such as age, gender, income, occupation, education, social class
• Attitudes and lifestyles
• Buying behaviour – including product usage, brand loyalty and the benefits they seek from the product or service

Below is an example of segmentation for home computers that a computer manufacturer might use to optimise its products and marketing mix, and so command a higher price.

•  Users/segment Features provided to address needs
• Family General and educational software, basic games, DVD player, “safe” access to the Internet, email accounts for each member of the family
• Small or home office (SOHO) Business software, fax, broadband access to the Internet, high quality printing, document scanning and reproduction
• Specialist use Specialist software and hardware configurations for applications such as design or digital image processing, printing and storage
• Gaming Multimedia games, broadband Internet access, high quality display, sound, special peripherals like joystick, powerful processor
• For more advice, see our guides on how to manage your customer database, know your customers’ needs and identify your most valuable customers.

Approaches to segmentation

To segment your customers, you will need to use variables, such as:

• An organisation’s sector, size, location and buying patterns
• An individual’s age, gender, lifestyle, region, buying behaviour and attitudes

Some businesses use vertical segmentation – selecting particular industries or professions to whom their product or service is likely to appeal. You can also use horizontal segmentation, such as selecting only one job title across a range of organisations.

Market research

To find out about your customers, many businesses conduct market research. There are two main types:

• Original research – which involves contacting your customers, and which will give you detailed information about them
• Desk research – using published market reports and statistics covering general markets

The main ways of carrying out original research are by:

• Face-to-face interviewing
• Telephone
• Post
• Email or web surveys
• Focus groups

Once you have carried out your research, you can then adapt your marketing to reach customers and deliver the products and services they want.

Once you have identified the segments, you can profile customers within them. For example:

• Profile Example from market Variable used
• Engineering managers and project engineers in process plants Engineering services or products Behavioural
• Female drivers aged between 35 and 50 Motor insurance Demographic
• “Dinks” – dual income, no kids Travel/holidays Socio-economic
• Skilled workers in home-owning areas (ACORN) DIY products Geographic
• Frequent, high-value orders Wholesaler Behavioural

Niche markets

Segmenting your customers can help you to identify a niche market – a specific, well-defined area of your market that may be overlooked by competitors.

How to find a niche market

It is a good idea to look more closely at your markets, in order to:

• Identify whether there are any market segments that are not well covered at the moment
• Think of ways in which you can offer products or services to fit the individual needs of these segments

How to exploit a niche market

To maximise sales to any niche markets you might have identified you should:

• Do your research to find out if such a niche exists and how it could best be served
• Try to find out as much as you can and develop expertise in the niche market

Remember that going into niche markets can be a risky business:

• Make a business case before you try to enter a niche market
• Be on your guard for reaction from competitors already operating in the niche
• Monitor the market and be prepared to move to another niche
• Don’t put all your eggs in one basket

For more advice, see our guides on how to create your marketing strategy and know your customers’ needs. You can also find services for the marketing profession on the Chartered Institute of Marketing website.

Identify and sell more to your most valuable customers

Being in a position to focus on your most valuable customers might sound like a luxury. After all, many small businesses are grateful for customers of any kind.

But every business finds that some customers are more valuable than others. This can be for a range of reasons, from the size of their purchases to the relative ease of managing their account. Successful businesses are generally those that identify these customers, focus their sales efforts towards them and work to bring in new customers with a similar profile.

This guide outlines how to identify which of your customers are the most valuable to you. It also provides tips on selling more to these customers and attracting new high-value customers.

The benefits of understanding your customers

Understanding your customers helps you sell more – you can target them with appropriate offers. The more you know about them, the easier it is to spot opportunities to sell them new products.

Profiling existing customers also makes it easier to find new ones. You can look for similar prospects, and sell to them in a similar way.

You can use the information you have on customers to improve efficiency. Keeping a central record of customer details and sales reduces errors and speeds up transactions. For more information on using IT to improve efficiency, see our guide on how to create the infrastructure for growth.

You can also improve customer service. Better access to information helps you deal with customers more quickly. You can tailor product offerings and provide personalised treatment. The right information makes it easier to track down and resolve any problems.

Finally, understanding your customers helps your planning. You can predict what they will buy, and estimate how much stock you need. Linking customer management to purchasing can dramatically improve profitability. See our guide on how to manage your customer database.

Learn about your customers

Your customers are a hugely valuable source of information, so you should aim to collect data that lets you identify your customers and how they behave. This will vary depending on your customer profile. If you sell to individual consumers, you might want to know about their age, gender, income and so on. For businesses, you might want to know what industry they are in and how large they are.

You should also try to find out what they think about you and your products and services. For example, learn what they like and dislike and why they choose to buy from you.

If you have just a few important customers, it’s worth getting detailed feedback from them. Companies that sell to individual consumers sometimes use customer surveys. If you sell on-line, you can use your website to capture some information automatically.

Of course, as well as collecting the information, you need to store it. The most effective way is to use a central database. See our guide on how to manage your customer database.

You must ensure that you comply with regulations covering personal information. For example, you must ensure that personal information is stored securely. You may also be legally required to notify the Information Commissioner before you start collecting and using customer data. See our guide on how to comply with data protection legislation.

Make customer information available

Making customer information available to employees can make them more productive. For example, you could give sales staff access to financial systems so that they can check orders and payments. You need to decide what information different employees might need, and how to make it available to them.

Technology can help. For example, you can share correspondence and other information on your computer network. Using caller recognition, staff can view an incoming caller’s details and purchasing history before even answering the phone. Integrated IT systems help different parts of your business to share what they know – see our guide on how to create the infrastructure for growth.

It’s important for information to be accurate. You may want to update records regularly, taking care to delete duplicate entries. You could also give customers online access, so that they can update their own details themselves.

At the same time, you need to ensure that information is kept secure. As a minimum, you are legally required to protect personal information. See our guide on how to comply with data protection legislation.

You will also want to ensure that any confidential or important information is protected against misuse or accidental deletion. See our guide on how to keep your data secure.

Analyse your customers

The right information will let you build up a useful profile of your customers. This typically includes the following:

• Who they are – the age and gender of individual consumers, or industry and business size for corporate customers.
• What they think and believe, what interests them and what they think of you and your product.
• Their purchasing behaviour – which products they buy, where they buy them, when, and how they pay.

Profiling your customers in this way helps you group them into different segments, each of which can be approached separately. For example, you might produce customised products or services for different segments. You can also focus the way you market to different groups of customers. See our guide on how to segment your customers.

The right IT can help you collect and analyse your data. For example, linking customer records to your accounting system makes it easier to see how profitable different customers are. See our guide on how to manage your customer database.

What makes your customers valuable?

Analysing your customers allows you to identify those who best fit with your business priorities. These will depend on your strategy – for example, if you are launching a new product your aim might be to build sales as quickly as possible, whereas if you have cashflow problems you might value customers who pay quickly.

However, most businesses want customers who are as profitable as possible. Customers tend to be more profitable if they:

• Buy high-margin products
• Pay full price without negotiating discounts
• Place a small number of large orders rather than many small orders
• Do not cancel or amend orders
• Pay on time, without being chased for payment
• Do not require extensive after-sales service

Analysing your records lets you assess how profitable each customer is. If you haven’t looked at this before, the results can be surprising. In some businesses, just a few customers are responsible for almost all the profits. Some of your largest customers might be among your least profitable. You may even find that there are some customers you would be better off without.

You should also try to look ahead. For example, a business customer that is expanding might become more profitable for you in the future. It’s important to anticipate changes and how they might affect different customers. You can use our interactive tool to discover who your most valuable customers are.

Enhance the customer experience

Looking after your customers helps build customer loyalty. Selling more to existing customers is far more cost-effective and profitable than finding new ones.
Focus on your most valuable customers

• Tailor your products and service to meet their specific requirements. If a customer prefers delivery before noon, organise your delivery schedule to make sure that’s what happens.
• Don’t stretch yourself too thin. Make sure enough time is given to managing each of your key accounts.
• Offer gold standard customer care. Identify and resolve problems quickly. Always live up to your promises.
• Keep in touch. Let them know when service contracts need to be renewed or better deals become available.
• Build personal relationships with key decision-makers.
• Consider offering preferential terms – eg a bulk discount.

Technology can help you improve the service you offer. For example, you might be able to let customers track deliveries through your delivery company’s website. You can use your website to provide useful information, such as product details or instruction manuals.
For more information, see our guide on how to manage your customer care.

Market more effectively

The more you know about your customers, the more effectively you can market to them.

Advertising and other promotions can be more effective if they are targeted. Understanding your customers lets you tailor your marketing to different segments. You can ensure that each customer gets the right marketing messages, at the right time.

This also affects the type of media you use. For example, if you have a market amongst 15-24 year olds, you might consider marketing via text messaging, using “viral” emails or by sponsoring music events.

You can also sell more effectively. Understanding your customers helps you see what needs your product can satisfy. You may, for example, be able to up-sell, explaining why a higher priced product would suit them better. You may also find opportunities to cross-sell other products that fit their profile. For example, if you know why they are buying a particular product, you can tell which other products they may also need.

Technology can help automate some of these processes. For example, you can set up different mail shots or emails to go to different customer segments. E-commerce software can allow you to offer discounts to particular customer groups, or send selected customers “e-coupons” to use in your online store.

An important part of effective marketing is customer service. See “How to enhance the customer experience”.

Find new customers

Understanding who your most valuable customers are helps you focus your efforts to find new customers. Often, the most effective approach is to look for similar prospects.
At the same time, diversification is important.

It’s risky relying too heavily on just a few key customers. Even if you have many customers, you are at risk if they are too similar. A change in circumstances could mean that all of them reduce their purchases at the same time – if your three largest suppliers are based in the US, a change in the exchange rate could see them drastically reduce their orders.

As markets change, you should review your marketing strategy. Particular market segments may become less profitable as competition increases. Customers’ requirements may change, for example, as individual consumers become older.

Continually review how valuable your existing customers are. Over time, customers who used to be highly profitable might demand lower prices. Other customers may increase their turnover with you as they grow. See the page in this guide on what makes your customers valuable.

Keep an eye on customers’ future potential as well. It may be worth nurturing a relationship with a small customer with high growth potential. Working with your customers can also help you identify ways to develop new and improved products.

Manage your customer database

Organisations are increasingly using databases to manage customer relationships to increase both sales and customer satisfaction. A database can help you identify key trends and important information such as your most and least profitable customers. The coherent management of relationships with customers is called Customer Relationship Management (CRM), and it plays an important role in many small business’ sales and marketing strategies.

This guide will help you to understand both how to use a database for marketing and the concept of CRM. In particular, you will learn what kind of information your business should collect in a CRM database and how to integrate it with other systems in your business.

The guide also outlines the practical steps in getting a database started, such as what sort of system to acquire, how to find the right supplier or solutions provider and how to develop your customer database.

Database marketing and CRM – the benefits

Understanding what and how your customers buy from you is essential to the success of your business.
The benefits of this are:

• increased sales to new and existing customers through better timing, identifying needs more effectively and cross-selling of other products
• effective marketing communications, through a more personal approach and the development of new/improved products/services
• enhanced customer satisfaction and retention
• increased value from your existing customers – and reduced cost-to-serve

An effective marketing database and Customer Relationship Management (CRM) system will enable you to analyse the data, to find out who your most profitable customers are and what characteristics they share. This will help give you a clear idea of what sort of person or organisation to focus your marketing on. It may, for example, be possible to group customers according to geographic area or your own promotional and sales efforts.

You will also be able to communicate successfully with your customers by identifying similar groups of customers to target by a particular method, such as telephone, direct mail, email or face-to-face. You might, for example, want to reward regular, profitable customers with targeted special offers, or you might want to target customers from whom you haven’t had business in the past year. It can also help you measure the effectiveness of your marketing so that you don’t waste time and money on customers who aren’t responding to your promotional campaigns.

CRM is a sales and marketing issue, not a matter of IT. It is about developing a strategy and a set of tools for improving your customer knowledge, which is supported – not led – by the technology.

Set up a CRM system

There are a number of practical issues to consider in terms of introducing a marketing database or Customer Relationship Management (CRM) system:

• You will need to estimate the likely scale of the system
• You will have to strike a balance between your requirements and your available budget
• You should consider the need or the benefit of integration with other business systems

There are a number of choices when setting up a computer-based database. You could create a simple system yourself, perhaps by using a software package such as Microsoft Access, which could fit in with your current computer systems. This is the least expensive option.

Buying off-the-shelf software, perhaps one of the leading CRM packages specifically designed for smaller businesses, is another option. Software companies like Oracle, Navison, SAP, Peoplesoft, Microsoft, Onyx and Pivotal offer applications that integrate with existing accounts and transaction processing packages.

Scaled-down versions of off-the-shelf software, offered by most of the major application providers, may be suitable for smaller businesses. See the page in this guide on how to choose a supplier.

You could commission bespoke software. Consultants and software specialists can customise or design a software solution and integrate it with your existing software and/or your website. This is more appropriate for larger and more complex businesses.

Or you could opt for a managed CRM solution. Rather than buy a software package, many companies offer a service where they own the software and you buy the use of it, normally for a period of time. The supplier, often called an Application Service Provider (ASP), would normally provide expertise to develop and maintain the database.

Some suppliers also provide specific CRM services such as data mining – the analysis of patterns and relationships of data within a database. See our guide on customer relationship management.

Compiling your data

You can use information already held about your customers – whether on manual or computerised systems – to build a database.
Your accounts system may contain information such as:

• Invoices
• Letters
• Existing customer lists

Consider what kind of information would be useful. This might be:

• Contact information, eg company name, address, telephone and fax numbers, and names and job titles of relevant contacts
• What they have bought from you, when, and from which salesperson – so you can identify what they seem most likely to buy and then plan your sales and marketing efforts
• Their service history and any complaints
• Their account history, to assess whether they pay on time, and how profitable they have been – some customers may not actually be very profitable

Together, this information should give you an idea of who are your best and worst customers, and what they buy from you.

You might include areas such as the response to previous promotions. Your purpose is to establish the “how” and “why” of responses or sales.

The next stage is to decide an appropriate structure for your data.
If you are selling to business markets, you could compile information about:

• What they do – industry sector, public or private sector, turnover, number of employees and location
• Their buying behaviour – how they place orders, their size and frequency
• Names of contacts within a company

If you are selling to consumers, you could compile information about:

• Your customers’ buying behaviour, including product usage and brand loyalty
• Their age, gender, occupation and approximate income

When compiling information, check that you have complied fully with legal requirements, particularly those of the Data Protection Act 1998. You can learn about the Data Protection Act 1998 at the Information Commissioner website.

Developing the database

A good marketing database will include details of prospective as well as existing customers. People who enquire about your company should be included and “flagged” for approach in the future.

Only a percentage of the general population will buy your products or use your services. If you focus your marketing on them, your efforts will be more successful. Aim too widely with your marketing and you risk spreading your resources too thinly.
Not all customers have the same needs. It makes sense to build up a profile of your customers and group them according to their different requirements. This will give you a good idea of how likely they are to purchase what you are offering.

Having established this customer profile you should consider looking for additional prospects from outside “lists”. Lists of potential customers are held by brokers whose names you can find in local or marketing directories. Or you could become a member (for a fee) of the Direct Marketing Association at the Direct Marketing Association website.

You can specify exactly what type of person or organisation you want on your list, in terms of the:

• Size and type of the organisation – if you are selling to businesses
• Age, sex, income or lifestyle – if you are selling to individual customers

Lists are usually offered for:

• Rent – one-off use only
• Sale – providing unlimited usage

If the list is rented, most organisations forbid you from adding the names on the list to your database, except when you have received a response to your approach.

You should therefore consider making a generous offer to your prospective customer to encourage them to respond.

Keeping the database accurate

Data hygiene – the principles and practices that serve to maintain accuracy in computer data – is crucial for an effective Customer Relationship Management system. It is a good idea to “clean” your database regularly.

Wrong data is not only wasteful of your budget, but can adversely affect your business’ image through:

• Wrong addressing
• Duplicates
• Personalisation errors

Inadequate data organisation reduces the ability to communicate to the right customer.

Advanced data tagging and enhancement technology and services can provide the highest possible standards of data accuracy and consistency.

By adopting such methods, you can:

• Improve efficiency – businesses that do not employ data capture tools at the point of customer contact often suffer from capturing records that are misspelled, incorrect or are missing important details.
• Ensure compliance with your legal obligations, particularly those relating to the Data Protection Act 1998 and electronic marketing. Consumers can opt out of receiving marketing by telephone, fax, post or email, and it is important that people who have opted out are removed from your database.
• Improve campaign effectiveness – inaccurate data can result in the proposed message not reaching the targeted recipient, although you will still incur the cost of delivery.

If the information you have on record changes frequently, you might consider automating your update procedures, perhaps by means of integration with other systems.

Keeping a customer or prospective customer file up to date will invariably help with marketing costs, improved response rates, better targeting and more accurate communications by telephone, fax, post or email.

Learn about the Data Protection Act 1998 at the Information Commissioner website.

How to choose a supplier

The main decision when choosing a supplier depends on the type of solution required. You have a number of choices:

• General database software
• Off-the-shelf customer databases
• Consultants
• Database bureaux
• Application Service Providers

It’s a good idea to try to quantify the anticipated benefits of improving Customer Relationship Management for your business. It may help to calculate how it will affect revenues, profitability and the cost of servicing customers.

Fundamentally, this is an investment in your business rather than a cost. The return on that investment is not just increased sales, but satisfied customers who feel that they are being treated as individuals.

You may want to set a budget and research appropriate solution providers. This might be done by carrying out a cost-benefit analysis.

You might wish to bear the following points in mind:

• What the cost is per user or per licence
• How many software licences you need
• If buying a product, what the cost is of updates and in-house support costs
• If renting a service from a supplier, the set-up and subscription fees

You could also find out about the most commonly employed solutions:

• Within your industry
• Adopted by similar sized businesses in other sectors

You might find it helpful to prepare a brief. This could simply be a statement of your aims and objectives, rather than an attempt to solve detailed problems. Take into account the data you already have and the format it is in.

You might decide to target two to four potential suppliers, and request proposals from each.

Be prepared to invest time and money in the process.

Manage your customer care

Customer care is a crucial element of business success. Every contact your customers have with your business is an opportunity for you to improve your reputation with them and increase the likelihood of further sales.

From your telephone manner to the efficiency of your order-fulfilment systems, almost every aspect of your business affects the way your customers view your business. But there are also specific programmes you can put in place to increase your levels of customer care.

This guide outlines what customer care involves. It explains how you can use customer contact, feedback and loyalty schemes to retain existing customers, increase your sales to them and even win new customers. It also covers how to prepare for receiving a customer complaint.

What is customer care?

Customer care involves putting systems in place to maximise your customers’ satisfaction with your business. It should be a prime consideration for every business – your sales and profitability depends on keeping your customers happy.

Customer care is more directly important in some roles than others. For receptionists, sales staff and other employees in customer-facing roles, customer care should be a core element of their job description and a core criterion when you’re recruiting.

But don’t neglect the importance of customer care in other areas of your business. For instance, your warehousing and dispatch departments may have minimal contact with your customers – but their performance when fulfilling orders has a major impact on customers’ satisfaction with your business.

A huge range of factors can contribute to customer satisfaction, but your customers – both consumers and other businesses – are likely to take into account:

• How well your product or service matches customer needs
• The value for money you offer
• Your efficiency and reliability in fulfilling orders
• The professionalism, friendliness and expertise of your employees
• How well you keep your customers informed
• The after-sales service you provide

For customer-facing employees such as receptionists and salespeople, customer care is a core part of the job. Customer service levels should be a key criterion when recruiting for these roles.

Training courses may be useful for ensuring the highest possible levels of customer care. For further information about where to find training, see our guide on how to find a training provider/course.

The Office of Fair Trading (OFT) has launched the Consumer Codes Approval Scheme logo. The logo is awarded to trade associations that can demonstrate that their code of practice meets high standards of customer service. Find out if your trade association has an approved code of practice on the OFT website. Find your trade association on the Trade Association Forum website.

Understand your customers

In business-to-business trading, providing a high level of customer care often requires you to find out what your customers want. Once you have identified your most valuable customers or best potential customers, you can target your highest levels of customer care towards them. Another approach, particularly in the consumer market, is the obligation to treat all consumers to the highest standard.

Collect information about your customers

Information about your customers and what they want is available from many sources, including:

• Their order history
• Records of their contacts with your business – phone calls, meetings and so on
• Direct feedback – if you ask them, customers will usually tell you what they want
• Changes in individual customers’ order patterns
• Changes in the overall success of specific products or services
• Feedback about your existing range – what it does and doesn’t do
• Enquiries about possible new products or services
• Feedback from your customers about things they buy from other businesses
• Changes in the goods and services your competitors are selling
• Feedback and referrals from other, non-competitive suppliers

Manage your customer information

It’s important that you draw up a plan about how customer information is to be gathered and used in your business. Establish a customer-care policy. Assign a senior manager as the policy’s champion but make sure that all your staff are involved – often the lower down the scale you go, the more contact with customers there is.

You can manage your customer records using a database system or with customer relationship management software.

You should be aware that collecting and using customer information may require you to register with the Information Commissioner and comply with data protection regulations. For more information on data protection, see our guide on how to comply with data protection legislation.

Measure your customer service levels

Where possible, put systems in place to assess your performance in business areas which significantly affect your customers’ satisfaction levels. Identify Key Performance Indicators (KPIs) which reflect how well you’re responding to your customers’ expectations.

For instance, you might track:

• Sales renewal rates
• The number of queries or complaints about your products or services
• The number of complaints about your employees
• The number of damaged or faulty goods returned
• Average order-fulfilment times
• The number of contacts with a customer each month
• The volume of marketing material sent out and responses generated
• Time taken from order to delivery

Your customers and employees will be useful sources of information about the KPIs which best reflect key customer service areas in your business. Make sure the things you measure are driven not by how your business currently runs, but by how your customers would like to see it run.

There are important areas of customer service which are more difficult to measure. Many of these are human factors such as a receptionist’s telephone manner or a salesperson’s conduct while visiting clients. In these areas it’s crucial that you get feedback from your customers about their perceptions of your customer service.

Customer surveys, feedback programmes and occasional phone calls to key customers can be useful ways of gauging how customer service levels in your business are perceived.

Customer feedback and contact programmes

Customer feedback and contact programmes are two ways of increasing communication with your customers. They can represent great opportunities to listen to your customers and to let them know more about what you can offer.
Customer feedback can provide you with detailed information about how your business is perceived. It’s a chance for customers to voice objections, suggest changes or endorse your existing processes, and for you to listen to what they say and act upon it. Feedback is most often gathered using questionnaires, in person, over the telephone or by post.

The purpose of customer contact programmes is to help you deliver tailored information to your customers. One example is news of a special offer that is relevant to a past purchase – another is a reminder sent at the time of year when a customer traditionally places an order. Contact programmes are particularly useful for reactivating relationships with lapsed customers.
Do your best to make sure that your customers feel the extra contact is relevant and beneficial to them – bombarding customers with unwanted calls or marketing material can be counter-productive. Newsletters and email bulletins allow you to keep in touch with useful information.

Customer loyalty schemes

While good overall service is the best way of generating customer loyalty, sometimes new relationships can be strengthened, or old ones refreshed, using customer loyalty schemes.

These are programmes that use fixed or percentage discounts, extra goods or prizes to reward customers for behaviour that benefits your business. They can also be used to persuade customers to give you another try if you feel you have successfully tackled past problems with your customer service.

You can decide to offer rewards on the basis of:

• Repeat custom
• Cumulative spend
• Orders for large quantities or with a high value
• Prompt payment
• Length of relationship

For example, a car wash might offer free cleaning every tenth visit or a free product if a customer opts for the deluxe service. A mail-order company might seek to revive the interest of lapsed customers by offering a voucher redeemable against purchases – response rates with such vouchers can be improved by setting an expiry date.

You can also provide key customers with loyalty cards that entitle them to a discount on all their purchases.

Employees who deal with customers’ orders should be fully aware of current offers and keep customers informed. Sometimes brochures and other marketing materials are the best way of getting word out about a new customer incentive.

Don’t forget though that your customers’ view of the overall service you provide will influence their loyalty much more than short-term rewards will.

• Use customer care to increase sales

Your existing customers are among the most important assets of your business – they have already chosen you instead of your competitors. Keeping their custom costs far less than attracting new business, so it’s worth taking steps to make sure that they’re satisfied with the service they receive.

There are a number of techniques you can employ, including:

• Providing a free customer helpline
• Answering frequently asked questions on your website
• Following up sales with a courtesy call
• Providing free products that will help customers look after or make the most of their purchases
• Sending reminders when services or check-ups are due
• Offering preferential discounts to existing customers on further purchases

Existing customer relationships are opportunities to increase sales because your customers will already have a degree of trust in your recommendations.

Cross-selling and up-selling are ways of increasing either the range or the value of what you sell by pointing out new purchase possibilities to these customers. Alerting customers when new, upgraded or complimentary products become available – perhaps through regular emails or newsletters – is one way of increasing sales.

To retain your customers’ trust, however, never try to sell them something that clearly doesn’t meet their needs. Remember, your aim is to build a solid long-term relationship with your customers rather than to make quick one-off profits.
Satisfied customers will contribute to your business for years, through their purchases and through recommendations and referrals of your business.

How to deal with customer complaints

Every business has to deal with situations in which things go wrong from a customer’s point of view.

However you respond if this happens, don’t be dismissive of your customer’s problem – even if you’re convinced you’re not at fault. Although it might seem contradictory, a customer with a complaint represents a genuine opportunity for your business:

• If you handle the complaint successfully, your customer is likely to prove more loyal than if nothing had gone wrong.
• People willing to complain are rare – your complaining customer may be alerting you to a problem experienced by many others who silently took their custom elsewhere.
• Complaints should be handled courteously, sympathetically and – above all – swiftly.

Make sure that your business has an established procedure for dealing with customer complaints and that it is known to all your employees. At the very least it should involve:

• Listening sympathetically to establish the details of the complaint
• Recording the details together with relevant material, such as a sales receipt or damaged goods
• Offering rectification – whether by repair, replacement or refund
• Appropriate follow-up action, such as a letter of apology or a phone call to make sure that the problem has been made good

If you’re proud of the way you rectify problems – by offering no-questions refunds, for example – make sure your customers know about it. Your method of dealing with customer problems is one more way to stay ahead of your competitors.e long term.”