“We are customer-centric.” If I got a euro for every time I heard a CEO say that, I would be very, very rich. But there is one company that believes this is the only way in which companies can survive.

The Loyalty Group International was set up in Denmark 20 years ago and is involved in some 500 projects in 45 countries. It has now opened an office in Malta, to be run by Paul Aas.

Its chief executive officer, Mikkel Korntved, was in Malta recently to address members of the Scandinavian Business Forum, chaired by Mark Fenech of Fenlex. His message was very clear: Too many companies take their customers for granted.

Make customers feel relevant and important to you. No one likes to feel like a number

“Companies do not calculate the cost of customer acquisitions and how long it takes for a customer to become profitable. The business structure is not set up to focus on what happens after the customer has taken the decision and made the purchase. The key to success is reducing your defection rate: Find out why they leave and do something about it...”

Mr Korntved explained that companies need a deep understanding of their customers and why they like you.

“Create a matrix of how much they spend and how much they love or hate you, and plan for each of these four combinations. Sometimes you also have to understand that you cannot always give the customer what he wants.

“Thirty per cent of your client base loses your money. You have to consider whether you can turn them into profitable clients or find a way to avoid them,” he said bluntly.

“Customers understand that businesses need to make a profit. For example, banks wanted to discourage dormant accounts. The trick is to approach your customers and initiate a dialogue. Explain it to them. Have that conversation. Do it without alienating them.”

Once you have acquired a customer, the next step is to maximise your “share of wallet”. One common mistake is to assume that the customer knows what you are selling, he explained.

“They may not be aware of all the options that you are selling and may be quite open to the idea of additional benefits and features. And don’t forget that decisions are taken using both rational and irrational reasoning. Many companies only think about the first.”

Putting the customer truly at the centre of operations has an impact on the company’s approach to making a profit, he stressed.

“Companies want to grow their revenue and profits but they all too often do that by cutting costs or raising prices. But this formula can be deadly over time. Don’t latch on to the first solution that comes to mind. If you cut too fast or too clumsily, you could take away the muscle rather than the fat. Cost-cutting affects investment and hiring and demotivates employees. And if they leave, then you cannot put back the weight you gained,” he said.

“Offers and discounts are also very risky because it is very hard to get prices back up. Price cuts are a death spiral! And existing customers get very annoyed at paying full price. If you are going to have a sale, give benefits to existing customers, such as a sneak preview. Make them feel relevant and important to you. No one likes to feel like a number. The forgotten path to profitability is customer loyalty.”

Mr Korntved also stressed that the human element was very important, especially with those who come into contact with customers, no matter at what level.

“Don’t hire cheap as you won’t get the best people. Take hotels: Why would you hire a waiter who doesn’t speak English?

“If you consider the time it takes to train them and the high turnover, you soon realise that it would work out cheaper in the long run to get someone more appropriate,” he said, adding that seven out of every 10 customers don’t come back because of poor service.

“Here is an interesting statistic: 80 per cent of companies believe they offer a superior customer experience. But only eight per cent of clients do...”

“The rules apply whether you are involved in business-to-business or business-to-customer. People buy from people and that relationship can always be strengthened. This is what brings profits, not quick fixes.”