Ignoring difficult customers in favour of pleasing satisfied ones is a sure-fire way to destroy your brand.
Much has been said about customer experience management and how builders can reap the biggest returns on their investments. Recently, this has led to more confusion than clarification, and it's time to set the record straight.
The issue has come up for debate following a recent Ontario Home Builders Association event, where one prominent consultant argued that home builders should not focus on satisfying their toughest customers. Instead, she argued, builders should devote their resources to making their happy customers even happier. Her rationale was that it's terribly difficult to turn disgruntled home buyers into loyal advocates for your business, while it's easier to turn moderately happy customers into ecstatic ones. While this simplistic view appears logical, it ignores the positive impact that strategic service recovery can have on the bottom line.
The truth is, home building is a local business, and it doesn't take much to tarnish one's reputation in a way that kills future sales. A customer management strategy that addresses only the moderately happy customers is not just ill-advised; it's dangerous to a builder's long-term success. Clearly, builders should focus their service efforts on the areas of greatest opportunity, but they also must have a process for dealing with those severely dissatisfied customers who can create a public relations nightmare.
In both Canada and the U.S., numerous builder exposés have been aired on local and even national news shows such as Dateline NBC. Clearly, a bit of service recovery would have saved many builders from this type of PR damage. On the Internet, things get worse. Dozens of builder-bashing sites have emerged, which I will not advertise in this article.
Last summer, Sprint Nextel, in the U.S., began dropping thousands of its cell phone subscribers who apparently complained too much. Their performance solidifies the argument that builders cannot ignore their worst customers. According to Sprint Nextel's own press release, 2008 first quarter revenues declined nine per cent compared with the same period a year ago and six per cent from the fourth quarter of 2007. "The declines are mainly due to lower average service revenue per customer and fewer post-paid subscribers," the company stated. Meanwhile, their competitors all saw increases in the same time period.
On average, builders can expect 7.5 per cent of their customers to make a negative referral. That's why I have always been a staunch advocate of stabilizing your toughest customers. At the same time, I recognize the value in appealing to your happier customers, too. The truth is, you need to strategically do both!
The best way to deal with tough customers is to establish a "SWAT team" that is ready to go into action when a potentially hostile customer emerges on the radar. Many police departments have a SWAT division trained to handle difficult and dangerous situations. Along those lines, every builder should have in place a SWAT (Special Ways and Tactics) team to effectively deal with hostile customers and to resolve disputes through informal arbitration.
Many builders who struggle with SWAT do so because they misuse it. SWAT is not designed to deal with every customer complaint. Rather, it should be reserved for your most difficult customers - those who have a high probability of tarnishing your company's reputation. Admittedly, it is very difficult to turn an irate home buyer into a raving fan. In these instances, the SWAT team's main goal is to gain psychological control over the situation and to stabilize the home buyer. It's about preventing certain situations from escalating out of the company's control.
No builder can turn around every disgruntled customer. In fact, marginally unhappy customers who are at a low-risk of becoming explosive may not merit a SWAT team's time; a single person can do the job. For some companies who have few unhappy customers, SWAT can be used for all major complaints, but this is only recommended for high performing companies. You must strike a balance between resources and the number of problem customers a builder can afford to address using a SWAT approach.
SWAT is a reactive solution, and you should always empower your staff to proactively resolve problems. That said, it still pays to care for your least satisfied customers. On average, home builders who successfully employ SWAT teams have been able to reduce their percentage of potential hostile customers to less than one per cent, while the rest of the industry hovers at 7.5 percent. The fact is, working with your toughest customers can yield a much better return on your investment than builder liability insurance. Ignoring hostile customers, however, is a disastrous approach and anyone recommending this strategy is misguided. Don't let them put your company in harm's way.
Paul Cardis is Founder/CEO and Christian Caswell is General Manager of Canadian Operations for AVID Ratings, a leading provider of customer delight research for the North American homebuilding industry.
