Project Management Institute

Return customers



The next time you're struggling to keep your clients happy, remember that small concessions can garner loyalty and big profits. A simple 5 percent reduction in the customer defection rate can increase profits 25 to 85 percent, depending on the industry, according to Frederick Reichheld, author of The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value [Harvard Business School Press: 1996].

Managing client expectations and retaining their business is critical for project success and company growth. In its customer research, Xerox Corp., headquartered in Stamford, Conn., USA, discovered that “very satisfied” customers are 18 times more likely to repurchase the company's products. If you take a look at what may lead to customer satisfaction, you can ensure your actions result in many happy returns.

When stakeholders do not have accurate information about what actually can be accomplished within the required timeframe and budget, they're forced to rely on their own, often sketchy mental image of a deliverable. If the customer's view is unrealistic, project managers are left to build the impossible. Instead, the team must give stakeholders all the options up front so they can make informed decisions and set clear requirements.

To retain clients, you must deliver what you promise. However, first you must ensure your customer really wants and needs what you set out to accomplish.


Managing client expectations means discovering your client's mental image of the product and modifying that vision for the success of the project.

Clients form their expectations based on past buying experience, advice, marketers’ and competitors’ information and your promises. There are five different levels of client needs:

img Stated. The client articulates requirements or a statement of work. These needs result from a mental picture about the solution based on customer beliefs, perceptions and technical knowledge. The picture may be skewed, partial or just plain wrong.

img Real. These variables represent what the client really needs. You may never make them explicit without asking thought-provoking questions.

img Unstated. These needs complement real and stated needs, and they are important in the context of a bigger picture. For example, the client must cut costs without jeopardizing quality or service.

img Delight. The client considers these requirements perks, and therefore low priority. However, responding to these needs makes customers extremely happy. For example, requesting an interactive training program for a new accounting system will add to the cost. However, the organization needs such a program to enable the quick and easy adoption of the system.

img Secret. These needs represent personal reasons for the project. Often, procurement officers and program managers would like to be seen within their organization as business-savvy to further their career. Giving them extra features or deliverables could achieve this. Although the organization pays for the project, these individuals make the decisions.

You can't blindly offer customers the world—some projects are simply not possible to the specifications or timeframe your clients assume. If you simply write down whatever customers specify as requirements, you likely will end up with their wants. To discover their needs, you must investigate further—inquire above the project level into the realm of business strategy. You will discover what your customers really expect when you understand the business process.

Managing client expectations means discovering your client's mental image of the product and modifying that vision for the success of the project. Simply stated, find out what your clients are not telling you, and educate them about what it takes to build the product.

Step 1. Build a Communication Channel and a Trusting Relationship.

Project teams often venture into requirements gathering, design and construction before a clear communication channel is established with the client. An efficient communication system involves aligning terminology and developing common understandings and assumptions. Unless all sides use the same protocols, information is treated as “noise” and disregarded.

To ensure you clearly understand the client's wants, needs and assumptions, use bilateral communication. By articulating back to the client your understanding of requirements, you can achieve alignment and consensus with less difficulty.

However, even if you understand the information the other party is sending, you must accept its validity. “If trust is the key overall relationship component, credibility is the day-to-day manifestation of trust,” says Bruce J. Bern-hardt, senior manager at WorldCom's Solution Development, Arlington, Va., USA. “On a daily basis, the project manager has the opportunity to earn or lose credibility in multiple modes of communication with the clients. Once credibility has been compromised, the client can not help but distrust all that follows, to the point of canceling the project.”

Step 2. Exchange Relevant and Meaningful Information.

To avoid misunderstandings, you must tap into your clients’ personalities, how they think, what is their background and what is the terminology and the company lingo they use. Listen to your clients’ war stories, commentaries, life rules and gossip.

Develop both formal and informal lines of communication. At any stage of the project, there should be consensus in the customer value proposition, integrated sales strategy and service delivery model.

The project team must communicate the available alternatives and why your approach is best. Turn your clients into collaborators.


Both the client and supplier must be able to articulate the value of the project to the clients, in their own terms. The sales strategy presented to the client and revised as the project passes through the life cycle must be validated and revalidated to avoid being obsolete prior to project completion.

A service delivery model defines how the interactions and interfaces will take place between the client and all supporting operational teams. Essentially, this model represents the client's experience working with the project team, including how well communications occur, status reports, the demonstration and approval of prototypes and individual features and the contract (charter) letter or spirit of the work. Overall, the service delivery model expresses how the relationship with the client develops during the project—which leaves a lasting impression.

Educate your clients about the project's processes, methods and practices to avoid misconceptions and unrealistic expectations. Single-page process flows are an excellent tool to provide the critical elements of each process. Change management can be documented to avoid scope creep and reprioritize new requirements. The project team must communicate the available alternatives and why your approach is best. Turn your clients into collaborators.

Take the case of Fremont, Calif., USA-based Accrue Software Inc. In July 2001, Eastman Kodak, headquartered in Rochester, N.Y., USA, needed a system to analyze massive volumes of data quickly and identify customer purchase patterns. The information is collected from the company's Internet channels that spread across 29 geographical and divisional sites worldwide. After careful research, Eastman Kodak chose software from Accrue.

True to the principle of educating the client, Accrue showed Kodak's team how they could use software to take their customer behavior analysis to a new level. The Accrue team started the project with product training for all client team members to ensure that a needs assessment was conducted using common terminology.

Step 3. Establish a System to Measure Success.

To gauge a project's success, you must develop a yardstick that both sides accept. If the project team meets that expected degree of achievement, the client will be satisfied. Without objective measurement criteria, you could hinder progress seriously.

For example, in 1999, the Georgia Department of Revenue (GDOR) needed a new system to process business tax coupons and checks. The old system was inefficient and required many people to service it in shifts. The average time from receiving a check to depositing it in the bank was approximately two weeks. Northrop Grumman was contracted to do the work.


If the answer to any of these questions is yes, you must take immediate action to resolve the situation and improve communication. Does your client:

Demand more than one status meeting per week?

Call your senior management directly?

Ask you for various documents in the middle of the project?

A joint IT team from GDOR and Northrop Grumman wrote the requirements and system definition. Because of time pressures—it was tax season—the joint team didn't create formal acceptance criteria. Unfortunately, the group that was to use the system and accept its delivery was not included in the initial requirements analysis. Needless to say, the group's expectations differed from the expectations of the IT team who created the initial requirements.

Feeling left out of the loop, users were reluctant to accept the system because there was no objective measurement for project success. Management from both sides worked hard through negotiations, changes and training to reach an agreement and deploy the system.

After the system was launched in production, the time between receiving and depositing a check was cut down to a few hours, or the same day. GDOR recovered the cost of the system development from the extra interest earned in just three months. While return on investment is a convincing measurement of success, the project delivery could have gone more smoothly by involving the relevant stakeholders in the measurement decision.

Step 4. Conduct Status Meetings.

Misunderstandings and misconceptions will be exposed during regular status meetings. From the status meetings, create and maintain project status documents. Communicate the key fundamental deliverables—project schedule, project plan updates, open action item lists and escalation status reports—to both your client and project team tactical level members. Additionally, deliver the same message to executive stakeholders.

These meetings shouldn't be your only communication, but they will provide a comfort level for the client. In mid-1990s, Washington, D.C., USA-based MCI, the third largest telecom company in United States, sought ways to automate parts of its sales process. Two teams were assembled to represent the client (MCI’s Business Markets Division) and the vendor (an internal MCI IT team). The project team gathered requirements, and development began. Although the teams had communicated constantly, there was no formal venue to address all concerns and issues formally.

Regular status meetings helped the teams communicate better and made the project more efficient. The resulting new software gave MCI’s sales force a clear edge over competitors in sales efficiency.

Every project has associated risks. Clients tend to think there is no other risk than working with an unresponsive vendor. All technical, organizational, marketing and other risks are blissfully forgotten.

In addition, share your risk management plan with your customers—it will tell them that you know what you are doing and are a step ahead, dealing with potential problems. Risks will evolve with the project life cycle. As you demonstrate the ability to identify and mitigate risk in the early stages of the project, both senior management teams will value your judgment and recommendations as the project progresses and “tough choices” have to be made.

Oversee Satisfaction

WorldCom's Bruce Bernhardt also insists that timely, direct access to client executive management is a must. “Meet and establish a positive relationship with client executive management before the challenges of the project create the anticipated need to escalate to that level,” he says.

When upper management maintains a close connection to the client on a higher, more strategic level, you and your team will understand the client's organizational needs, the big picture and the overall strategic direction. PM

Peter I. Dimov, PMP, is a manager of software development at InterImage, Arlington, Va., USA. He is an IT industry veteran with 15 years of experience managing and delivering systems for clients including IBM, Raytheon, Northrop-Grumman, ExxonMobil, MCI and Qwest.

Petya S. Alexandrova, PMP, is a founder and president of Digital Enterprises Inc., a Fairfax, Va., USA-based provider of project managing, consulting and software services since 1994.

This article is copyrighted material and has been reproduced with the permission of PMI. Unauthorized reproduction of this material is strictly prohibited.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.




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