It was inevitable, I suppose.
It wasn’t too long ago that an American Express Gold card was considered the ultimate sign of corporate largesse. Gold card members could count on a level of service from Amex that the rest of us could only lust after, as we shamefully pulled our regular green Amex cards out of our wallets.
Eventually, I got my own Gold card, but by that time, everyone had a Gold card, and what everyone wanted was a Platinum card. I’m still waiting for one.
All of this brings me to the subject of my morning mail. Poking through the bills and junk mail was yet another AOL CD. No big deal, you might say, and I’d agree, except that this CD hyped AOL’s new service offering, named Titanium.
First came Gold, then Platinum, and now Titanium. Can Amex be far behind? I’m guessing I’ll get my Platinum card the week after Amex announces its new Titanium card.
Let’s call it Artner’s Law of Services: By the time a company offers you the level of service you want, they’ve established a better level of service that you can’t get.
Serving your best customers
No matter what size, all consulting organizations have a common goal: taking care of their best customers. While you might not be subject to the 80/20 rule, most consulting firms are disproportionately dependent on a few key customers for a large part of their revenue.
How do you keep your best customers happy? Well, one of the more popular ways is to create a package of services that you offer only to your best clients. The nature of the packages varies from firm to firm, of course, but they typically include some or all of these elements:
- Guaranteed aggressive response times
- Preferential rates on all goods and services
- Dedicated account and support personnel
- Escalation lists
- Access to the consulting firm’s senior management for problem resolution
- Marketing freebies
As you know, clients are becoming ever more demanding in the level of service they require from their consulting partners. Your best customers are probably also some of the most exacting. Since they spend so much money with you, they’re entitled to be.
What about the rest of your customers?
While it makes good business sense to create incentives for your best customers to stay loyal to you, what do you do about the rest of your customers? More specifically, what about the layer of customers directly beneath your best customers? How are they going to react when they learn that there is a package of services that they aren’t eligible for, even though they spend 90 percent of whatever your minimum requirement is?
Chances are, they won’t be happy.
Let me tell you a story to illustrate the pitfalls of creating a premium package of services for your best clients. In a previous life, I worked for a regional long distance carrier. Looking at our traffic and revenue statistics, we identified our fifty biggest customers, who accounted for almost 40 percent of our revenue. To try to ensure their loyalty, we created a program called Elite Care.
Elite Care was a package of services aimed at our highest volume customers. It included regular visits from dedicated field reps, dedicated access to our switch technicians, monthly reviews of their traffic and spending, and even the home phone numbers of the company’s senior technical team and the company president.
As a way to keep our best customers loyal, Elite Care was a great success. The problem was with the rest of the customer base. We ran into two main difficulties:
- Positioning on company literature: Since we were proud of Elite Care, we mentioned it in a lot of our sales literature, as well as in the company newsletter that went to all our existing customers. The result? Many of our midsize customers, who had previously been delighted with both our pricing and service, suddenly got angry, since they didn’t “rate” enough to be part of the Elite Care program. We started getting calls from our customer service department, saying that such-and-such customer was going to switch carriers unless they were upgraded to Elite Care, even though they were only doing half as much business with us as the normal Elite Care client. (Our customers were experiencing Artner’s Law of Services, and they didn’t like it a bit.)
- Abuse by sales reps: As you know, sales reps love to have as many arrows in their quiver as possible. Once they saw how popular Elite Care was with our customers, they started to pitch it to prospects. That was fine, so long as they limited it to potential customers that would be eligible for the program. However, they soon started throwing it in to any deal they could think of, justifying their actions by saying things like “While they aren’t doing enough volume now, by this time next year, they’ll be four times this size. If we don’t give them Elite Care, we won’t get them at all.”
Both of these factors caused what we called “Elite Care inflation.” One result was that we had to choose between increasing the headcount and resources we devoted to delivering our promises to the program, or risk not honoring our commitments. We chose to increase our spending on Elite Care.
The other result of this inflation was that, to our biggest customers, Elite Care didn’t look elite anymore. What started out as a program for our top fifty customers ended with ten times that many.
What did we do? We did the same thing American Express did. We kept Elite Care but created a “new and better” program for our original Elite Care customers and moved them into that.
So what should you do?
As I said at the beginning, creating loyalty incentives for your top customers is a good idea. Here are some things to consider when establishing your plan:
- Consider the impact on your entire customer base. Will you have different levels depending on customer spending? How will you position the packages to your customers? Can you propose something that will build loyalty in your top 20 percent, without alienating the other 80 percent?
- Make sure you can deliver on your promises. When thinking about these kinds of packages, the temptation is to add a lot of features that won’t be used much, in order to round out the offering. What happens if those features are very popular—can you provide them in the necessary quantity? If you overpromise and underdeliver, you’re worse off then you were at the outset.
- Be firm with your account reps. If you’ve designed a program for your top customers, you need to limit it to your top customers and resist attempts to broaden it. If you need to create a number of packages, depending on volume, then do that, but don’t devalue your top plan.
- Create a product around the top package. One way to sidestep the whole question is to create service-level agreements and then charge for them, as with any other service. In that way, your top customers might get the top level automatically, while other customers could buy the service if they didn’t qualify for it. Even here, however, you need to make sure your account reps don’t throw it in as a freebie to second-tier clients.
Bob Artner is vice president for content at TechRepublic.
Do you give the same level of service to each of your clients? Or do you reserve add-ons and special care for those clients who bring you the most revenue? Which is the best policy? To offer your opinion, post a comment below or send us a note.