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."