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/

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.

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.