Universal lesson: How Xerox turned a $273 million loss into a $978 million profit

Five years ago, Xerox was facing possible bankruptcy. Revenue and profits had declined, cash was going down, and debt was increasing. The company faced angry customers and defecting employees. On the day Anne M. Mulcahy (pictured at right) was named president and COO of Xerox, the company had lost half its share value. Looking back today, how Xerox changed its fortunes under Mulcahy’s leadership carries lessons for virtually any industry—including the newspaper business.

You can read the whole story in an article* by Mulcahy in the January 2007 issue of Leadership Excellence magazine, but here I want to emphasize several of her key points and how they apply to our business.

Mainly she covered five winning strategies Xerox used after deciding to focus on customers as the top priority in turning the company around. Let me paraphrase them and relate them to specific facets of newspaper industry.

Strategy 1:
Listen to your customers and determine their wants, interests and needs.

This may seem obvious, but I want to focus on the importance of newspaper circulation executives—not just call center reps—being in touch with subscribers. Leaders who make their offices adjacent to or in the midst of the call center can monitor easily and tend to be in tune with how well calls to and from subscribers are handled. This helps them understand things from the subscriber’s perspective and equips them to make informed decisions that serve subscribers more effectively.

One hour per week, every executive within the newspaper organization should listen to customers and the way customer service people talk to them. One easy way to do this is to record these calls and burn them to a CD that executives can play in their cars while commuting to work. Give these recordings to the whole executive team so they can spend time with the customers every week.

And while we are on the subject, it’s a good idea to get an hour’s worth of calls from your telemarketing vendors every week to hear what potential customers are saying about your product.

Strategy 2:
Invest in innovation.

Facing circulation decline, many newspapers argue that they don’t have the money to invest in customer service right now. Many push for outsourcing and reducing costs.

Yet according to Mulcahy, companies that retain an additional five percent of their customers will grow bottom-line profits by 25 to 50 percent. Furthermore it costs five times as much to win a new customer as it does to keep an existing one.

These views are consistent with what I have seen in decades of working with newspaper organizations on customer service, sales and retention projects. Newspaper companies that invest in proven, innovative customer service and retention training programs are earning a substantial return on such investment.

Strategy 3:
Make it every employee’s job to add value.

Xerox achieved its dramatic turnaround largely because it made sure that every customer interaction with employees—from top to bottom—was made positive by having meaningful person-to-person interaction and a genuine desire to help. This cannot occur without buy-in and support of value-based customer service and retention efforts at all levels of the organization.

Strategy 4:
Don’t sell quarter-inch drill bits. Sell quarter-inch holes.

How do we add value? Sell solutions. If you go to the hardware store to buy a quarter-inch drill bit, the assumption is that ultimately you want a quarter-inch hole. In my work training and coaching in newspaper call centers, one question rises to the top as a conversation-starter that has led to a six-fold increase in EZ Pay sales:

“What is your favorite section of the newspaper?”

We’re not selling newspapers. We’re selling the experience, the relationship, the part of the day subscribers enjoy with their newspaper. Asking them about their favorite section prompts them to remember the true value of their subscription. And it makes a dramatic difference in winning the save.

Strategy 5:
Exceed customer expectations.

Mulcahy cited data showing that 75 percent of customers who quit say they’re satisfied. She goes on to say that customers who say they’re very satisfied are six times more likely to stay on than those who are merely satisfied. And, she says, only 40 percent of customers who consider themselves satisfied buy again.

This confirms findings in a Harvard Business Review study showing that customers must be not just satisfied but very satisfied at the conclusion of every customer service contact to build loyalty and stability. According to the study:

• A customer who is merely satisfied resides in a “Zone of Indifference” where he or she has neither positive nor negative feelings toward the organization.

• By contrast, a very satisfied customer resides in “Zone of Affection” where he or she remains loyal to the organization and promotes it to others enthusiastically.

No matter what business you’re in, findings like these mean ‘good enough’ just isn’t good enough anymore. Effectiveness trumps efficiency. Value sells better than discounts and other gimmicks. We’ve got to dazzle them with service.

* Read Mulcahy’s article, “Customer Connection: You win when you listen to customers” in Leadership Excellence magazine, Vol. 24, No. 1. January 2007. Executive Excellence Publishing, www.eep.com.