Sunday, March 27, 2016

How companies get to do repeat business?

I work for an IT services company that makes over 90% of its revenue from repeat business.   For the last few days or so, I was thinking about the reasons how certain companies get to maintain long-lasting customer relationship and generate repeat business.  I wanted to delve a little deeper into this topic.

To start with, let us analyze this from a customer point of view.  Why do we regularly shop at one particular retail store over others?  The potential answers I could think of were:
1. Good quality products
2. High availability
3. Low prices
4. Good customer service
5. Ease of shopping
6. Location proximity

We can see that there are a number of factors that can contribute in enabling repeat business. Now, the important question is how companies are able to consistently do this.  It is difficult to do well in all of the above points.  Is it not?

After a little deeper thought, I could classify the above points into 3 focus buckets - i) Product differentiation, ii) Operational Excellence, and iii) Customer Experience.   So, successful companies, that do repeat business, will need to have hardcore focus on at least one of these 3 points and do their possible best on the remaining two.  Let us look at examples of few companies and confirm whether this analysis is true or not.

The first company that came to my mind is Apple which is known for its product differentiation. Apple products are also relatively expensive when compared to similar products from other companies.  Though, many customers are willing to pay a premium for the experience these products deliver.

The next company is Walmart.  I think Walmart's core strength is operational excellence.  They are able to ensure high availability of various products at lower prices with close location proximity to customers.  Customers of Walmart may not be too cost conscious as most of them have good confidence on the low price commitment from Walmart.

One company that delivers great customer experience is Amazon.  They are known for making shopping experience easy and pleasant.  Customer care and service is of primary importance.  I have seen the maximum number of shopping innovations around product pricing, shipping options, buying modes, shopping cart and loyalty at Amazon.


The 3 focus points - product differentiation, operational excellence and customer experience applies to services companies as well.  We can see that there are many other companies that are successful in delivering repeat business by leveraging these 3 focus points appropriately.      

I invite you to share your thoughts and comments on the above analysis.



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Correlation vs Covariance
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