A collection of articles written by Customer 1st

Acts of God and How They Affect Our Customers

19th September 2011 | Posted in Customer Relationships, Customer Loyalty

Coming from an agricultural family, I always think of the farmers at this time of year. In particular, I recognise the impact that the weather can have on their businesses. My brother is a farmer, and currently he is worried about the lack of rain, which affects his crops and his animals. Last year, wheat prices increased dramatically on the global market—great if you have stored grain and are selling it, but not so good if you need to give animals winter feed in the summer due to lack of rain as a result of a lack of summer grass for the animals to feed on.

Fruits and vegetables are affected in the same way. If the rain does not arrive at the right time of year, crops are ruined very easily. So it begs the question, how do you keep your suppliers, the growers, and your internal customers happy when endeavouring to maintain a supply of these perishable products to your external customers, the end users? How do you keep all your customers satisfied and deliver the promise when the elements are against you? In previous blogs, I have discussed the importance of building relationships with customers, both internal and external, but the greatest challenge could be keeping them loyal when drastic measures are needed due to chance events. A bad crop means that someone in the supply chain has to lose out, but how should B2B organisations manage this uncertainty?

My brother keeps telling me that the farmers always take the hit in the supply chain compared to the retailers; it must be a tricky balancing act to ensure that all customers are satisfied, including and especially the end user, trying to keep prices in line with inflation when everyone is being squeezed so tightly as a result of the current economic difficulties. Surely the big retailers cannot increase prices too far or else they will be putting their loyal customers at risk of defection, looking around at cheaper options—something we are all doing in this economic environment.

So when the farmers emphasise that they often lose out and we, the consumers, say that we also lose due to higher prices in the shops, how should B2B organisations maintain high levels of customer satisfaction? This is an especially pertinent question when elements in the supply chain fluctuate beyond our control. We cannot determine the weather conditions, droughts, floods, or hurricanes. Organisations have to take risks every day, but how do they manage their customers' expectations and loyalty in such extreme situations?

Oil prices have continued to rise globally (although I noted a recent drop). They also affect the transportation of goods worldwide. More than ever before, I think that B2B organisations really need to think outside the box to maintain their customer satisfaction—for both internal and external customers—in a volatile marketplace.

As a consumer, I am interested to know what strategies organisations adopt in order to manage their customer relationships when unpredictable events occur and how this impacts the supply chain. I wanted to find out about the approach of the UK's biggest retailer, Tesco, and a recent question and answer session with Tesco's former CEO, Sir Terry Leahy, came to my attention. Knowing a little about Tesco's ethical policies, some of Sir Terry's answers seem highly relevant to the topic of this blog. There is some great advice here, I believe.

Loyalty World: In an increasingly brand loyal world, what role do brands have in helping to lead so-cial change, and creating social reform?

Sir Terry Leahy: I think brands are very important in modern life. It's a very complicated world out there and increasingly consumers navigate by what they know. They navigate by the things they can trust, and brands are something that people can trust. They know what they get, they know how they work, they're reliable and they can be relied upon and are reassuring. So, brands are very important to modern life, it's a way for people to navigate through a complicated and uncertain world.

Brands as social objectives, that's to some degree less clear. I do believe that business generally and brands in particular are a very positive force for social good, and they can play a role in delivering the wider social objectives of society. They are very good at listening to the changing needs of citizens, communities and consumers, and responding to those in fierce competition with each other, so they are very good at being agents for change. Not just economical change, but also for social change.

Loyalty World: So would you say that brands have a social responsibility, and it's something they have to have to be a well-functioning brand in this day and age?

Sir Terry Leahy: We all have a social responsibility; we all as individuals and as members of organi-sations are part of a wider society, and we have to take charge of that responsibility. This can be done effectively through firms and through brands. You would expect brands to represent best practice in values and moral behaviour and in so doing they become role models for young people in society, in terms of how they conduct themselves.

Loyalty World: When at Tesco, what were some of the main drivers of loyalty for the company over that time and what did you, Sir Terry, particularly focus on to drive loyalty and growth?

Sir Terry Leahy: The true source of loyalty is to create benefits for people. That's really what builds loyalty. Sometimes people concentrate too much on devices like a loyalty card, such as the Clubcard. These really are just methods by which you create loyalty. They don't create loyalty in themselves. The only way you create true loyalty is by your behaviour over time - Do you in a transparent, reliable way, create benefits for people? So the primary focus of our loyalty was obviously our customers.

The core purpose of Tesco was to create benefits for people in order to enter long term, lifetime loyalty. The whole experience has to be continuously improved in small and important ways, places, the range, the service, the quality, the convenience of the shopping, and we captured that sentiment in our advertising slogan: ‘Every little helps' and what that meant was, that we were going to understand people's lives, and we were going to make small, constant improvements to the shopping service and in that way add some benefit and be more useful to customers and that would build loyalty.

I love these particular questions and answers, and I have a lot of respect for Tesco, soon to break into the US, apparently. In the interview, much was spoken about loyalty, brand, and consumers, but my question remains, “What about the farmers, wine producers, and fruit growers, et al? When disaster strikes, does loyalty extend to them too?”

Source of the interview: Loyalty World, terrapinn@uk.terrapinnmedia.com