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the paradox of excellence: don't let great service kill your business
by don gray and todd hendries
note: published in the rainmaker report by raintoday.com april 23, 2008
services are continuously improving as companies strive to exceed client expectations and secure their market leadership. yet, the marketplace has never been more volatile and customer and client churn has never been higher.
consider providers of information technology expertise. techtel, a leading supplier of demand-tracking studies, and fresh perspectives, a growth strategy consultancy, surveyed 600 buyers of it services.†
within three years, up to 9 percent of buyers are confident they'll be using a different supplier, another 6 percent are certain they'll switch vendors if performance doesn't improve, and a whopping 40 percent are uncertain they'll remain with their present provider.
likewise, in the telecommunications industry, churn rates are as high as 35 percent per year.†
conceivably, an entire customer or client base could turn over in just a few years. that's an expensive proposition considering that, according to research of industries spanning financial services to retailing, it can cost five to 10 times more to replace a customer or client than it costs to retain one.
the opportunity costs are enormous, too. according to bain & company, a top international consultancy, a mere five percent increase in customer retention can increase a company's profitability by 75 percent.
why are clients so eager to jump ship when products and services are delivered faster and more efficiently than ever, quality initiatives are more aggressive and customer support is usually at work 24-7?
the paradox of excellence
as we work with clients across a broad array of industries – from public relations firms to financial services to manufacturing – we regularly witness the answer to this question: it's called the paradox of excellence.
when you silently do your job very well, you become invisible, until bad news catapults you into the limelight. the longer you do a good job, the more your perceived value erodes as clients forget the pain you're relieving. when that happens, you are setting yourself up to lose business. worst of all, most of us don't realize what's going on until it's too late.
the paradox of excellence was identified by authors dave mosby and michael weissman and outlined in their book by the same name.
wal-mart vs. wells fargo
here's an example of this that everyone can relate to: wal-mart. it is one of the best-run organizations in the world, but they've gotten a lot of bad press because they allowed their great business practices to become invisible.
for instance, in the '80s and '90s they spent a fortune on information technology that measured the amount of time a bottle of shampoo stayed on their shelves – and made sure that it was shorter than any other retailer. multiply this times 120,000 items per store. they wanted to sell more and sell it faster than any other retailer to stay competitive.
for nearly three decades, they have been excellent merchandisers and astute retailers. yet, they've kept how they made it happen a secret. so when bad press erupted around predatory practices, it was too late to explain the other factors that created their success.
you want people to know the value you bring before negativity emerges, otherwise you just look defensive.
in contrast, wells fargo was trying to increase the average number of products used by its customers, even though they were leading the industry with an average of 3.3 products per customer. they realized what attracted customers wasn't the quality of their products or services, but how well they communicated the value of their offerings.
so, they focused on getting everyone who touched the customer to reinforce the fact that wells fargo wanted to be a single-source provider of all of their financial needs. the result: the number of products per customer jumped to 5.2 in merely two years.
professional service firms can learn a lesson from these organizations and take several steps to overcome the paradox of excellence:
we are all guilty of doing our jobs well without understanding why what we do is valuable to those we serve – and this can have dire consequences. to survive in today's ultra-competitive business environment, it is critical to make the effort to know what your clients genuinely value about you and consistently reinforce that value. because, when they don't value you anymore, it's too late.
† sarbanes-oxley compliance journal, november, 2005
don gray is a principal of the sales engineering group. he has more than 30 years experience in sales and marketing, international management, strategic planning, and sales process development and coaching. he is certified in a wide array of selling methodologies and has facilitated workshops on selling and business solutions worldwide.
todd hendries is a principal of the sales engineering group. he has more than three decades of sales, sales management, marketing and training experience, and has delivered more than 400 sales training programs worldwide. he is expert at helping organizations identify their market value proposition and integrate it with their sales culture.