New "Loyalty Metric" Tries To Change The Conversation But Adds Nothing New

Last week, an article caught my eye claims that exceeding customer expectations (which 89% of executives believe creates positive impact to business results) actually has little effect on bottom line. Rather, that service interactions are four-times more likely to result in a negative outcome than a positive one.

The authors, the Corporate Executive Board’s Customer Contact Council, believes that exceeding customer expectation results in virtually no gain in customer loyalty. Further, that service and support centers have little stake in building customer loyalty at all. The Council believes that instead of Customer Satisfaction, one should ask a single question to determine the Customer Effort Score, a proprietary metric. This metric, the authors believe, more accurately measures the customer's reaction to a service event, by measuring the customer's effort during the event.

My View:

My reaction here is pretty blunt. I think this research is garbage, from professional and personal experience. Somehow this magic question (that the Council doesn't reveal presumably unless you buy the research) will unlock the driver of dissatisfaction. Good answers yield good results; bad answers get bad results.

I believe companies that position themselves as premier service organizations need to establish ways to measure all drivers of satisfaction...finding "Perfect Knowledge" of their customers needs. Effort put forth by the customer can be just one measure. If a company delivers well across all drivers, then the customer is loyal--resulting in retention, references for others, and cross-sell opportunities. If you fall flat on that one measure, the customer will be unhappy.

Personal example today: two of my home computers had to have some work done, and the settings for the wireless network were deleted. I called my cable operator that also maintains our internet access and told them my issue. He said he would walk me through the process. So instead of fixing it on his end, he walked me through the multi-step process and within 10 minutes both computers were operational. My effort--full participation which I wasn't expecting. My satisfaction? Complete.

At the end of the day, service providers need to understand their customers needs, deliver to those needs, measure how they are doing meeting those needs, and fix anything that is broken. The result from exceeding customer expectations is a multiplier of benefit...customers stay, tell others, and buy more!

To link to my response to the posting on another blog, go to http://experiencematters.wordpress.com/2009/05/29/meeting-expectations-is-not-the-goal/

Healthcare Company Objectives: To Be Prettiest Pig On The Truck

A bit of disturbing research was recently published by Forrester showing that customer satisfaction of the health plan industry is poor and heading lower. Should that surprise anyone? No...not with prices rising, co-pays and deductibles increasing, and coverages more restrictive than ever. Here are some of the results from the Forrester research from Bruce Temkin in his blog "Customer Experience Matters":

In Forrester’s 2008 Customer Experience Index (CxPi), we ranked 113 companies across 12 industries. I recently published a snapshot of the health plan industry looking at the results from the eight plans on the list (Aetna, Anthem (BCBS), CIGNA, Kaiser, Medicaid, Medicare, TriCare, and United Healthcare). Here’s some of what we found:

--Experiences are “very poor” and getting worse. As a group, the eight health plans ended up with a “very poor” rating of 51%; the lowest score of any of the 12 industries we examined. Making matters worse, the industry dropped three percentage points from the 2007 CxPi results.

--Kaiser led the pack. With an “okay” score of 70%, Kaiser led all health plans. All of the other plans ended up with ratings of either “poor” or “very poor.”

--Medicaid is as bad as it gets. With a terrible rating of 38%, Medicaid was the lowest scoring plan. It also ended up in next to last place across all 113 organizations in our rankings.

--Only Kaiser improved. When we compared the 2008 results with those from 2007, only Kaiser showed an improvement. CIGNA and Medicaid, on the other hand, declined the most.
Some big shifts in CxPi components. There were five double-digit changes in the scores for the three underlying elements of the CxPi: Kaiser’s improvement in being easy to work with and enjoyability, Anthem’s decline in enjoyability, and both CIGNA’s and Medicaid’s drop in being easy to work with.

My view:

The Health Benefit industry is headed toward a cliff, with people paying a lot of money and not feeling like they are getting the service they are paying for. There are lots of reasons for dissatisfaction, many of which are not related to the service itself, but many are--such as the "easy to work with" category."

Service has not been a priority for these firms in the past. Controlling costs has been. I have heard management at healthcare companies say that their goal is to provide service that is just good enough, but not great, thinking it will be too expensive to provide service that makes clients/employees happy. The phrase "prettiest pig on the trust" describes their goal...not a lofty objective.

Further, health plans are viewed as marquee benefits for companies. Can you imagine spending millions on a "benefit" that no one is happy with? Companies will soon see that the money spent is not worth the aggravation, and look for other ways to provide coverage...like cheaper Consumer Directed Health Plans....or no coverage at all.

That is, unless a company, like Kaiser, steps up and shows you can provide service at a satisfactory way, and make the case that it benefits the company to have good service for its helathplans. There is clear opportunity for health benefit companies to step up here....and differentiate based on service....Perfect Service!

Customer Service Reputation Can Be Tarnished/Enhanced In So Many Ways

I have been reading a couple of items recently about the customer service delivery of several companies written by users of the services--

First the good: Apple

Karn Bulsuk in his Full Speed Ahead blog http://karnbulsuk.blogspot.com/2009/05/lessons-from-apple-on-customer-service.html has written about his experiences with his new I-Touch which when ordered was special delivered to him ahead of promised date, and when it broke unexpectedly overseas, he was able to get it fixed with no questions asked. He was very impressed and summarized his experiences--

Apple has shown us that good customer service involves:

• Under promise and over deliver: Apple told me 3-4 days, but managed to get it done in less that time, which was a pleasant surprise because I didn’t expect it to be done so soon.
• Accepting the product as defective, without arguing with the customer or making them feel if you are cross-examining them.
• Have conveniently located offices, and design them well to make sure your customer feels comfortable.
• Listen to your customers: if you say something will happen or you will do something, make it happen.
• Smile.

Seems pretty basic, but now Karn's experience will be told to thousands of others. The result: Apple's reputation will continue to shine and people will continue to pay premium dollars for its products.

Now the bad: Nationwide

It appears that for whatever reason--purely for information or for sales lead generation--people ask questions on networking sites about experiences with different companies. The responses tend to be negative, since it is human nature to complain rather than to praise.

On LinkedIn, the networking site for businesspeople, a recent question was posted in one of the group discussion sections:

401k Platform Provider Issues: Who is having problems in the 401k market place ?
401k Platform Providers have issues from time to time. Whether its poor service, dropping or changing product lines, client neglect, or raising fees, employers can get poor treatment and seek to find a new 401k platform provider. Has anyone come accross a pattern of plan outflow from a particular 401k provider ?

There is no question about the intent of the questioner...who happens to be a broker from SmithBarney...although his motives are not clearly stated. He is prospecting.

In the first day of the question, he has three leads with more undoubtedly coming. Here is one response:

I find the Nationwide call center to be extremely unhelpful. I have heard they are taking steps to change it, but I've had many complaints from clients and participants.

Ouch...while the broker has gotten a lead, Nationwide has gotten a blackeye. Left unresponded, the perception from readers is that Nationwide delivers inferior service.

There are other examples which I will post upcoming....

My View: Companies that compete on services for competitive differentiation should care about what people are saying about their services, and deliver in such a way that leads to unsolicited compliments. Further, companies should encourage their clients to talk. And if one hears about any issues, companies need to address them forcefully. Nationwide management should address the comment with the LinkedIn poster directly (take care of the situation) and then post a rebuttal. This will muddy the "unanimous" feeling of the complaint while the company determines the root cause of the call center issue.

Great Read About Customer Satisfaction

Bruce Temkin from "Customer Experience Matters" blog recently hit a milestone with his 366th blog post. He summarized many of his recent posts in a recent article. This is one of my favorite blogs to read because Bruce takes the research he and Forrester gather and publishes his views about them. While not directly related to the Benefits Business, many of the lessons are universal.

Here are some snippets that I selected from Temkin's summary:

The maturing of customer experience. Forrester’s second annual Customer Experience Index that rated 113 organizations across 12 industries showed that there’s a lot of opportunity to improve. This also showed up when consumers rated Web, phone, and in-person interactions in Experiences That Satisfy Consumers, 2009, The good news is that customer experience management is definitely maturing which I highlighted in the following posts: Customer Experience Grows Up, Six Trends Reshape Voice Of The Customer Programs, and The State Of Customer Experience.

Customer experience correlates to loyalty. In Customer Experience Correlates To Loyalty, I found that customer experience correlates to three key elements of loyalty: willingness to repurchase, reluctance to switch, and likelihood to recommend. And the correlations got even stronger since 2007. I dug a bit deeper into the data in More Info On Customer Experience And Loyalty.

Building a customer-centric culture. Culture is a key ingredient for good customer experience — so I introduced the 6 C’s Of Customer-Centric DNA. And it’s also why I told execs that they need to Invest In Culture As A Corporate Asset. Other posts that looked at culture included: The Cultures Of Best Buy, Google, GE, And Semco, WL Gore Succeeds Without Employees, At Four Seasons, Customer Experience Is Everyone’s Business, and Execs Need To Focus More On Culture.

Managing through the recession. I’ve been writing a lot about how to manage in a recession. Here are some of the key posts in this period: Recession Strategies From IDEO And Potatoes, Jeff Immelt On Managing In A Downturn, Turn Hard Times Into Goat Stew, Recession Leadership: Be Real, Communicate, And Look Ahead, Retail Execs Discuss Leading In A Recession, Learn From Home Depot And Macy’s, But Not Office Depot, and Lessons From Condoms And Canned Goods.

Customer service is a critical experience. In Don’t Confuse Customer Service With Customer Experience, I made the point that customer service represents a critical set of customer experiences. That became crystal clear from consumer responses in Customer Service Trumps Price. Who’s doing well? Look at Customer Service Champs From BusinessWeek.

The Apple/Windows customer experience battle. As part of my Customer Experience Index research, I publish snapshots on the results in 12 industries. It turned out that my PC industry snapshotcaused quite a stir. It was picked up by major news outlets, a ton of bloggers, and drove many comments on my blog. I felt the need to clarify my view in another post about the results. Apple even created a Mac ad that referenced the results.

I encourage my readers to check out Bruce's blog regularly!

Companies Must Organize Differently to Deliver "Perfect Improvement"

When a typical company decides to undertake a "quality improvement" program, it creates "quality improvement teams" with members from different functional areas. The team members belong to the QITs in addition to their real job...which hasn't changed. Program progress, if any, is made outside of the true business. Often, these programs collapse of their own weight since people's "real" jobs will take priority.

In the "Perfect Service" approach, "Perfect Improvement" is imbedded into everyone's jobs. One of the taglines my team has used is: Perfect Service--The Way We Do Business.

So what is the best way to organize? I believe a three-way attack of satsifaction data is the best method.

--First, the Client Service team is responsible for improving that client's satisfaction. Each time their client's data arrives, the team must look at the results for satisfaction levels. When levels are less than stellar, the team is responsible for "fixing the situation," ie, assuring the issue is investigated, analyzed, and resolved for that client. Even if the problem is wider than just that client, the client team is responsible for insulating their client from future impact, until the overall "problem is solved."

--Second, the Operations Team responsible for each transaction that is measured is responsible for improving the satisfaction with their respective services. Whenever a client survey arrives for their service transaction, the Operations Team needs to understand the details of the result, and combine it with the results of other clients. The Operations Team is then responsible for "solving the problem." By reviewing their transactions across clients, this team is able to prioritize improvement efforts based on impact to overall client satisfaction.

--Third, Key Satisfaction Teams are organized to review and improve satisfaction scores of specific Key Success Factors (KSFs). Similar to the Operations Team, these teams are responsible for reviewing data across clients and transactions for their specific KSF. This team is then able to prioritize improvement efforts based on impact to overall client satisfaction.

This three-way or "cubed" review and analysis of data allows management to invest in those areas that will have the largest return on investment (in terms of satisfaction). Meanwhile, while business management is investing here, Client Service leadership is making sure the client is made happy right away.

Both Client Service teams and Operations teams are attacking the deficient results as part of their job, and evaluated based on their ability to move the satisfaction needle.

"The Role of Emotions In Buying Health Insurance"

Another expert has opined about the service experience in making health insurance decisions. McKinsey, in its latest quarterly newsletter, points out that a focus on customer satisfaction will drive customers to you. Here is the link to their website, but the research requires a premium membership: http://www.mckinseyquarterly.com/Health_Care/
Strategy_Analysis/The_role_of_emotions_in_buying_health_insurance_2352

The role of emotions in buying health insurance
Consumers shopping for health insurance today face more choice, complexity, and financial exposure than ever before. In an increasingly uncertain world, what they are really seeking is peace of mind in their choices. Insurers that address the emotional needs and biases embedded in the typical consumer’s behavior will be successful in creating and distributing effective products, earning the consumers’ trust, providing a more satisfying shopping experience, and, ultimately, helping consumers better manage their health.

Further, McKinsey points out that 140 million Americans have discretion in the purchase of health insurance, representing more than $750 billion in premiums. The key point of the research is that while companies view health insurance as an "expense" issue, consumers select based on "peace of mind."

My View
Service providers have an opportunity to step in, understand what will drive peace of mind, and then focus on delivering that service perfectly. I am not sure whether insurance companies will ever be viewed as the honest broker in the information/service delivery, but intermediary service providers can. And there is a lot of opportunity to take marketshare and find profitability in doing it well.

Retirement/Benefits Markets Suffering From Lack Of "Perfect Service"

There have been a number of articles in Plansponsor.com recently with implications about competitive positioning in the Retirement/Benefits marketspace. In each, I believe there are indications of a lack of overall servicing as well as opportunities to step up and dominate the space. To see these and other articles about the benefits market, link to http://www.plansponsor.com/.

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From Plansponsor.com on May 8: Interest in Integrated Service (TRO, TBO)Running Out of Steam
While cost savings and efficiency remain the most important reasons sponsors give for bundling (DC and DB plans) in 2008 (mentioned as the most important reason for bundling by 39% and 17% of sponsors, respectively), other key reasons vary by a plan’s bundled status. For example, fully bundled plans place great value on having a single point of contact, while semi-bundled plans place much greater emphasis on the opportunity to improve participant services, according to the report.

As a group, bundled plan sponsors question the ability of providers to deliver a consistent service experience across the bundled offering. Consider that bundled plan sponsors report considerably lower satisfaction levels with their DB providers in 2008 (63% vs. 77% in 2005), but higher satisfaction levels with their DC providers (85% vs. 77% in 2005). Intermediaries echo these sentiments, as only 13% believe that service quality is consistent across components of a bundled package.

From Pionline.com on May 12: Fewer DB execs looking to bundled providers
Fewer defined benefit plan sponsors are looking to outsource some or all of their plans to bundled service providers, according to a Chatham Partners survey.

My View:
This is a classic case of a failed value proposition due to a lack of execution. For years, there has been the promise of integrating retirement plans (DB and DC into TRO), then integrating all benefits (TBO), and then all Human Resource functions (HRO), and then all business service functions (BPO).

There is no question that companies want the simplicity and efficiency of a single-destination service provider. However, as these integrated solutions were sold, the services providers simply did not deliver an adequate product. The result is a blot on the entire concept.

The Opportunity:
Service providers that can fulfill the broken promise of excellent integrated servicing to companies and their employees stand to take significant share of the marketplace. I firmly believe that had companies focused their delivery on employee satisfaction, with the full commitment of a "Perfect Service" infrastructure, benefits integration would be the norm and those firms would be dominating the space.

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From PlanSponsor.com on May 12: Economic Crisis Accelerates Move To Consumer-Driven Health Plans
A recent study conducted by Workscape, Inc. and the Human Capital Institute (HCI) indicates that in the midst of the economic crisis...some employers are taking measures to mitigate increasing health care costs. Forty-four percent (44%) said they offer at least one high-deductible healthcare plan or consumer-driven healthcare plan (CDHP) to their employees.

My View:
The shift toward a consumer-driven healthcare plan model is inevitable (unless President Obama steps in with a massive overhaul). Shifting more of the "choice" burden to the employee, however, requires education, communication, and counseling/advising services that are just not there. Without access to vital information, employees will be unable to make critical choices that protect their health and wealth in the short-term and in particular the long-term. We have seen this pattern in the 401k plan where financial education and advisory/counseling services have evolved to meet the need...over 20 years!

The Opportunity:
Retirement and benefits companies can carve out an important niche by focusing on the needs of the employee of companies with HSAs and CDHPs. By servicing these employees in an extraordinary way, service providers will enable their company customers to responsibily achieve the utilization and then the savings these plans offer. Opportunity is there for the taking.

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From PlanSponsor.com on May 12: Employees Need More Health Plan Information/Services
The 2009 UBA Employer Benefit Perspectives Survey found 81% of employers felt their employees were aware of health cost crisis and emerging trends. The survey also found 77% of employers strongly agree that employees need tools to help them choose the most appropriate plan option for them. Nearly 74% felt that the employer should provide education on health care costs and ways to manage those costs, including 68% who say employees should be given hospital/physician cost and quality info.

My View:
Employers are spelling out the types of service that will make their health plans successful. Not surprising, the views are about the services surrounding the plans, not the plans themselves. As above, the trends toward consumer decision-making is clear, but the information/tools are not available.

The Opportunity:
Understanding the client service need, and then filling it completely, is a way to effectively compete. There are those competitors who will design the plans with the best features, coverages, options; there are competitors who will compete with the lowest prices. I firmly believe there is ample room for a benefits provider to compete with services targeting employees who need help planning for and using their benefits optimally.

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These examples show that companies that deliver extraordinary service, and develop a system that focuses on improvement of that service, can fill market holes. I believe it only takes a commitment and then a full-body resolve to develop this competitive advantage. And there is lucrative marketshare to be taken.

Brand Based On Extraordinary Service

There are few companies out there who are able to state unequivocably that they are the premier provider of services in their particular market. A lot of companies would like to position that way, but few are able to transform their reputation.

Several excellent blogs focus on "branding" and how companies can position themselves to be identified singularly.

"Customer Experience Matters" by Bruce Temkin at Forrester Research is an excellent source for all matters service. In a recent post "Is It Time For An Unconventional Strategy?" he points out how even small players in a marketplace can beat larger competitors by focusing on a niche. Here is the link....http://experiencematters.wordpress.com/

My Point: By focusing on extraordinary customer service, a company can win against the marketplace. But first the company must fully commit to owning the niche. Anything less not be enough to compete against other firms with more resources and power. That's why "Perfect Service" should be a roadmap for competitive advantage,

"Perfect Knowledge"--The Data Lives! (Part 2)

As I mentioned in previous posts, the client satisfaction data is the blood or the fuel that circulates through the system, firing up activity. (Sorry for the mixed metaphors....) I cannot stress this enough: the data tells you how you are doing, tells you where you need to work, and tells you if you are making any improvement.

Asking To Be Criticized

Getting that data is so important that companies need to ask for feedback often, and thank customers for providing the feedback...especially if it is bad! Most companies will shy away from receiving bad news, acting almost personally hurt if a customer tells them they are not satisfied.

Your customers must understand that part of the service "contract" you have with them is that they will provide you with their "truth" so you can improve it. If you do not get that truth, the whole service process will break down.

We should "invite" criticism. We reward customers who respond to surveys...no matter what they indicate. We celebrate a partner customer who feeds us the fuel for our service engine. Maybe we even award a customer with a certificate the points out a flaw in our process. Companies that desire top-tier service must open the floodgates of client evaluation.

When The Data Is Received

There are several tactical steps that must take place once a client response is collected:

1. Must acknowledge the receipt of the feedback. Since most likely the feedback is via internet or email, a thank you note should be sent immediately. In the message is the reinforcement about the importance of the survey and the next steps that will follow.

2. If the survey result is less than stellar (I used any score less than a 4 or 5 rating on any question on 5 point scale), a followup contact is made with the client. The purpose of the call is to seek more "context" on the score. This detail is carefully documented since it will be used by other teams for future root cause analyses. If the survey result is a "3 rating," this contact will be made by the "relationship or client manager" and the service manager responsible for the type of transaction.

3. Should the response on the survey be a 2 or 1 rating, senior management will attend the call. This is important because it indicates the seriousness to the client and team of the urgency the company has in understanding and resolving the issue.

4. The client manager commits to the customer that a formalized report will be created, with actions outlined, and presented to the client in the near future.

The result of this activity is that some aspect of service did not meet the client expectation, the service provider asked for and received this feedback in realtime, the service team quickly contacted the client for more information, and a commitment was made to present solutions quickly that will prevent a reoccurance.

This process alone will show your client your company is serious about satisfaction. Few, if any, of your competitors are going this far. But your company has just started because you have an asset that no other company possesses...realtime, detailed satisfaction data that you can use to focus everything you do.

Next Post: Perfect Improvement

"Perfect Knowledge"--Fuel For The Service Business (Part 1)

I am continually amazed by companies who say they value client relationships, but rarely measure (or measure annually at best) the levels of satisfaction of their customers. Further, when results come in, the reaction is predictable: if high, then the management team has done a great job; if low, the survey methodology needs fixing. In most instances, the client teams are told to work harder to satisfy the customer. Work harder...and then we hope to see improvement next year.

Predictably, these actions don't result in systemic improvement; instead random relationship events drive the results.

Companies that strive to be the best servicers in their markets must:

1. understand what aspects of service is important to their clients;
2. measure realtime how they are doing in meeting these important expectations;
3. establish a process to improve results, using the data as the most important "truth."

Understanding What Is Important To Clients

Top Service Providers should strive to achieve perfection. That is, they should want to fulfill their clients' definition of "the perfect service partner." When that is acheived, clients will stay at profitable prices (retention), they will tell others (references), and they will buy more (cross-sell). That is the magic formula.

But first, we must understand how customers define "perfection."

One method that I have used is simply to ask clients to define "The Perfect Service Partner." We are not interested at this point in how well we are measuring up to that standard, but to understand the categories upon which we need to be measured.

Survey techniques vary here--from answers to open questions to clients selectioning answers from lists. By having clients select those attributes that are important, and then weighting those selections versus one another, the result is a list of categories that we can use to measure our performance.

For example, the list will likely include:

• Timely deliverables
• Accurate processing
• Low cost

But the list may also include:

• Human contact available when I need them;
• Expertise in topics;
• Relationship manager knows my business/empathetic;
• Any issues will be addressed immediately;
• Professional.

Your company is not just evaluated on getting the job done, but is also being measured on how easy you are to work with, how reliable you are in extraordinary situations, how expert you are in handling each client's unique issues. Processing timeliness and accuracy is the commodity. Premium service is delivered person-to-person and the top service providers understand that and measure it.

With these categories, you should have an idea of what is expected. If you are delivering against these 10-12 categories in every interaction with your customer, you are likely doing very well. We call these categories Key Satisfaction Factors (KSFs).

Measure Satisfaction Often and Timely

For each client interaction, your desire is for the client to evaluate how well you did. There, however, is a practical limit to the granularity of this approach since throwing surveys at clients every day may get tedious and become an issue in and of itself. It is a good idea to discuss this approach with the client, and determining the frequency of survey that suits them.

How you survey will depend on your company's capabilities, but top firms focus on:

• ease of distribution
• ease of completion
• ease of collection
• ease of access to data

My team developed an email distribution of survey notices with a secured link to a survey page on the web. Simply by clicking on the link, the client is able to access the survey. The questions are simple to answer with a single click and when completed the data is automatically collected into our survey database for review. An email is generated to client service team alerting them to the completed survey.

The questions are easy to understand and complete:

For this transaction, was the information delivered within our committed timeframe?
5--Yes, perfectly
4--Yes, but slower than we want
3--Mostly
2--No, the information was late
1--We are still waiting

For this transaction, were we available to answer any questions if needed?
5--Always
4--Mostly
3--Sometimes
2--Infrequently
1--Never

An important point which will be discussed in the next Post is that analyzing data requires consistent questions across transactions and across time. Therefore, the wording of the survey is important.

Next Post: Analyzing The Data

Perfect Service--Creating Return on Satisfaction Metric

In a typical company, decisions are made through the daily push and pull of today's priorities. What drives these priorities? A lost sale, an itchy CFO, a budget commitment gone wrong, a competitor's press release.....just about anything. As I watch priotization processes at various companies, I am amazed at the lack of connection to a strategy or commitment to make tough decisions of what not to fund. A company committed to "Perfect Service" has a clear filter upon which to prioritize--the customer's voice.

By using client satisfaction as the key determinant for prioritization, the approach becomes straightforward: invest in activities that will make the client happier. The higher the impact on client satisfaction, the more priority the investment should get.

This is a key point: Satisfaction needs to be quantifiable and translated into new Return on Investment (ROI) measures. Traditionally, ROI has focused on impact on Productivity (how much cost eliminated) or impact on Sales (how much additional revenue). These commitments to improve return are understandable and assignable to the requestor of the funds. Client Satisfaction is often harder to quanitify...how much return does a company get with an increase in happiness? The answer is "Plenty" and the challenge is to prove it.

There has been a lot of good work on Client Loyalty that we can use to create this Satisfaction ROI metric. I am going to borrow from some of that work (and will reference the author if someone will remind me...)

Using a Client Loyalty scale of 1-5, we can assign values to each level of loyalty:

Score 5--Client is not only very satisfied with your services, but is also making decisions to expand the relationship when given the opportunity. Solid reference. Retention is assured.

Score 4--Client is very satisfied with your services, but has not yet expanded relationship. Solid reference. Retention is assured.

Score 3--Client is ambivalent about your services, and likely not buying any more at this time. Unlikely reference. Retention over the long term is questionable.

Score 2--Client is unhappy with services, and is definitely not buying any more. Retention is unlikely over the long term.

Score 1--Client is publicly unhappy and threatening. Not only is retention not likely, but client is going out of way to let others know of their displeasure.

Clearly moving a client up the metric scale is important, particularly when client retention can be impacted. However, if a company only uses client retention as the main gauge, it will focus on the wrong customers for priority--the clients with 1s and 2s. In actuality, companies with the most loyal and profitabile customers focus on those with 4s and 5s, since they are the keys to growth. The amount of time and spend to bring a 1-rated client to even a 3-rating is considerably higher than bringing a 3-rating to a 4 or 5-rating.

As a company becomes more sophisticated with these measures, the ROI can be calculated for each satisfaction rating.

For example, a 5-rated client will:
--generate profit streams for the next 3 years at 100% certainty;
--serve as a positive reference for at least 3 winning sales bids that will create streams of profitability;
--buy additional product adding 25% to revenue streams.

It is not hard to see how this client has a huge impact on current and future earnings and growth, and its importance is a multiplier against current earnings streams alone.

Another example, a 3-rated client will:
--generate profit streams for the next three years at 75% certainty;
--not serve as a reference;
--not buy additional product.

This client, while important, is not as critical to the company's future as the 5-rated client. The key strategy here is to focus on increasing satisfaction to become 5-rated. The investment here will yield significant return.

Last example, a 1-rated client will:
--generate reduced profit streams for the next three years at 10% certainty;
--not serve as a reference, and take opportunity to negatively impact sales;
--not buy additional product.

The investment in this turnaround will be painful, most likely will fail, and the return even by moving it two levels to a 3-rating will not be enough to offset the cost. Astute companies will identify these clients and resign them so as to focus on more profitable opportunities.

Building Blocks For "Perfect Service"

To satisfy your customer, you can't just hope it will happen...you have to do something differently! I love the title of the best-selling sales book "Hope Is Not A Strategy." The same holds true for customer service. Companies often say customers are important, and then try to incent employees to make it happen. Motivation is just part of the equation. The key point here is that a company must be designed to deliver superior service and not just to lean on employees to perform extraordinarily.

"Perfect Service" has three main building blocks:

1. Perfect Knowledge--It is critical to know how your customers are feeling about each contact or transaction performed on their behalf. By collecting information on the actionable details, you receive early warning signals when things are not going right. This data becomes the lifeblood of your organization, driving most decisions and evaluations within the company.

2. Perfect Improvement--The data is received and reviewed by several teams: client teams, operations teams, and "key success teams." The company's success is driven by improvement in these metrics, so when a poor review is received, action is swift by fixing the client situations (short-term) while you are solving systemic problems (long-term). Accountability for improvement is clear. Prioritization for service improvement is based on a "return on satisfaction" metric.

3. Perfect Guarantee--The ultimate statement of commitment is the 100% Unconditional Guarantee. What can you say to a guarantee that states: If you are unhappy with our services for any reason, you pay what you think the services are worth. To invoke the guarantee, simply call the president of the company. It doesn't get any clearer than that.

These building blocks are powerful tools designed to change how a company does business. An organization that uses these tools cannot help but pay attention to things that matter to the client.

Next posts will drive into details for each building block.

Commit To Delivering "Perfect Service"

This blog is targeted to management within Service Delivery companies who truly want to be able to say "Our company delivers the best service in the industry!" and then deliver on that promise. Sadly, I have found that most companies will say the words--even put it is some sort of company values or vision statement--but then never commit to deliver. It is not enough to say it; a company must be it.

"Perfect Service" is an approach to managing a Service Delivery company that transforms the focus of the company to totally satisfying the customer. And when a company begins that journey, magical things begin to happen:

--Customers begin to openly communicate with you;
--Satisfaction ratings begin to soar;
--Sales presentations begin to focus on tangible evidence of satisfaction;
--Conversations are less about cost and fees;
--Employee evaluations become simpler;
--And incredibly, costs to operate go down!

Over time, "Perfect Service" will retain and attract more customers--at lower overall cost and at premium fees.

The next few posts will walk you through the elements of "Perfect Service."