Customer Experience Comes From Focus--Here Is One Company That Is Headed For Problems

Here is a customer service effort that is doomed to fail. Here is the project's obituary.
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I was performing a competitive analysis recently on a large mutual insurance company, and came across these paragraphs in its 2009 annual report:

CREATING AN EVEN MORE CUSTOMER-FOCUSED ENTERPRISE

For many of our customers, “service” and “ease of doing business” have become key differentiators and qualities they’ve come to expect in a business relationship. During the past year, we conducted a frank assessment of how (the Company) stacked up in delivering these qualities and concluded that we can do better.

As a result, we implemented a company-wide Operational Excellence Program aimed at assuring that we achieve continuous improvement across the enterprise to enhance service and ease of doing business, while also empowering employees and eliminating wasteful activities.

Our goal is to provide the best possible experience for our customers and to operate as efficiently as possible so that we can provide the highest quality product at the lowest possible price and pass the efficiencies to our policyholders in the form of dividends.

The initial paragraph, written by the company's chairman, speaks about how the firm must strengthen its customer focus in order to maintain competitiveness. It appears that analysis shows it has fallen behind.

The problem begins in the second paragraph when the company's customer service focus begins to smell a bit like a productivity mission. I have observed many "Operational Excellence Programs" and none of them have been centered around improving the customer experience. By the end of the sentence we are introduced to the dual nature of the program--improve service and eliminate waste.

The last paragraph completely muddles the mission by stating that the goal is to provide the "highest quality product for the lowest possible price." And then to pass the financial rewards of all of this new-found efficiency onto policyholders in the form of dividends. Sigh.....

What began as a focused mission to improve customer service instead became an unfocused mess of enhancing products, eliminating waste, and, oh yes, improving service. Since the savings from this program will be passed onto policyholders, there is no question that victory will be declared as costs are slashed, and that customer satisfaction will remain at competitive disadvantage.

My View

This effort will undoubtedly fail. It is doomed from the start. The reason: a lack of focused commitment.

I have written before about a company's need to decide how it will compete, and then fully commit to that course. It is about a "full-body" effort to be the best at some aspect of its competitive landscape, and then to take advantage of that leadership to grow and profit.

It is clear that this Insurance Company is concerned that it is falling behind in its Customer Service standing. Is this bad? Only if the company is competing against other insurance companies on the basis of Service Excellence.

But what is also implied is that the company has cost concerns. Is this bad? It is, again, if the Insurance Company competes based on price and cost. Given the price wars going on in the insurance marketplace, this could be a big concern.

I am the first to believe that improving Customer Service should lead to lower overall costs over time. But to a company to want to be a competitive leader in service, cost leadership should not be the focus.

Even calling your Service Improvement Project an "Operational Excellence Program" is so internally focused that it is laughable. The project should be named "The Customer-Is-The-Center-Of-Our-Life Way of Doing Business."

Instead, the strategy should be to delight your customers so they stay at higher premiums and bring in more customers through unsolicited referenceability. It is not a short-term project that will yield efficiencies that will be available to pay out as dividends. It should be a revamping of the way of doing business. If there are any wasteful practices discovered, the funds should be reinvested in enhancing the service infrastructure to develop differentiable and lasting service leadership. Only when the business effort is successful should policyholders be paid.

That is, if the company really even cares to improve its service. My suspicion is that this is a cost cutting effort in the guise of customer service. I will be watching this company now from a different perspective.

Can Healthcare Insurance Companies Transform Their Poor Image? CIGNA Is Going To Try!

There is no question that the Health Benefits, Insurance and Delivery industries are in major flux...increasingly expensive and seemingly not making anyone happy.

For example:

My health plan with United Healthcare simply can't get my dependents right. I have twin sons and the insurance company struggles with their having the same birthday. I also have a junior Christopher and we are constantly letting them know we are not the same person, which was a real problem when we both had the H1N1 flu and needed medicine. Just silly administrative nonsense that gets in the way of a bigger discussion.

Much in the same way that my son tried to order a "Hi C" from the drive-thru at McDonalds and instead received an "Iced T." A nuisance, but almost understandable.

Apparently Health Insurance Companies are beginning to wake up and understand that they have to address this high pay-low service reputation or their very existence may be in jeopardy. For example, CIGNA has enbarked on a mission to improve the clarity of its communications, as one step in its overall service transformation.

According to Linda Ireland, co-owner and partner of Aveus LLC, a global strategy and operational change firm, CIGNA set up a Customer Experience team whose mission is:

To help individuals enrolled in CIGNA plans achieve their health goals with helpful information, trusted support and excellent service. To do that we must: communicate simply, consistently, and in ways they find personally relevant, compelling and easy to understand.

In her blog, Customer Experience For Profit, she writes:

What I like so much about the CIGNA approach is that
they’ve articulated why they’re changing, what the plan is, and what’s been done
so far. I like that the changes they’re working on should strengthen their
experience while improving financial performance – fewer questions and problems
will drive down the cost to serve customers. And I imagine there was
some candid fact sharing in the conversation that triggered this effort, about
how they got to where they are.

You can read the full text of her work at http://www.ceforprofit.com/2010/03/will-cigna-free-its-customers-of-insurance-ese/

My View

The CIGNA focus on its service experience seems to come at a good time. Not only is the industry on an unsustainable path, but its performance has opened the door to government intervention.

CIGNA's Net Performance Scores (NPS), a measure of satisfaction (more on that measuring technique in other posts), is very low.

In late March, 2010, Satmetrix released its annual Industry Benchmark survey. According to the press release, Blue Cross Blue Shield of Illinois was the only health insurance company profiled with a positive NPS, scoring 5% in a sector with an average of negative 13%. CIGNA ranked last among major health insurers with an NPS of negative 28%. Full reports are available for purchase on http://www.satmetrix.com/and http://www.netpromoter.com/. A summary of the press release can be read at :http://www.customerthink.com/news/satmetrix_releases_net_promoter_benchmarks_for_customer_loyalty
A negative score means that more people rate their satisfaction poorly than acceptable. In an industry of major dissatisfaction, CIGNA ranked the worst.

I hope the efforts that CIGNA is undertaking are truly meaningful, not only for their millions of insured, but also to establish a new benchmark for the industry. As a former employee of this company, I hope it works.

This is one industry that can use Perfect Service.

"The Appeals Practice"--A Growing Yet Short-Sighted Approach To Customer Service

My last post discussed two personal incidents that pointed out service lessons:

--don't just strive to be better than the competition; strive for perfection;
--service your customers always, not just when they threaten to leave.

The second "lesson" triggered some additional thinking about what seems to be a growing model of customer service, one that I will formally label "The Appeal Practice." This is the intentional business design to maximize the financial outcomes of the firm through excessive fees and reduced service, while enabling a "white gloves" team to do whatever possible to satisfy complaining customers.

In a recent Harvard Business Review blog, Peter Bregman (CEO of Bregman Partners, a global management consulting firm) discusses his recent poor service experience with his exclusive NYC health club. http://blogs.hbr.org/bregman/2009/10/the-price-of-a-poor-experience.html The lack of service to this member was clearly unacceptable. But what caught my eye was what happened next:

"A few weeks after I was refused entry into my gym, I canceled my membership. The way my situation had been handled put the gym, in my mind, in a category of cheaper gyms. The fees I was paying were no longer worth it to me. Once I canceled my membership, I received tremendous customer service — apologizing, putting me in touch with the general manager, offering to freeze my membership for another month without charge so I could think about it — but it was too late. I was already gone."

The health club business model (and Poland Springs in my earlier example) was betting that it could charge high fees, minimize service, and then recover enough to retain its business. In Peter Bregman's case, they lost. In my Poland Springs case, they may still have me as a customer, but likely it won't be for long.

My View

The "Appeal Practice" service model is as follows:


--Promise financial deals, exclusive image, and exemplary service to entice potential customers to purchase your product/service;

--After initial deal expires, deliver veneer of promised features/service while maximizing financials from client base through extra fees and streamlined service offerings;

--Most customers, once committed to the service/purchase, will not take the time to challenge, and the company will achieve short-term finacial success;

--For those customers who do challenge, provide extraordinary service and financial deals to retain them.

This practice is common, and growing. It is not, however, how companies that want to compete on delivering premier service should be designed. There is a lack of respect and trust between customer and company that makes this fail.

I commented on Peter Bregman's blog as follows:
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Peter--

I recently experienced (and wrote about) an interesting phenomenon that I believe is becoming common practice. I call this "The Appeal Practice." http://deliveringperfectservice.blogspot.com/2010/03/yesterday-i-had-two-experiences-that.html

"The Appeal Practice" is based on the model that a company can push outrageous financial practices (ie, raising fees, charging penalties, a la carte selling of basics, etc.) or deliver unresponsive services (automated services, denial of health insurance or prescription coverage, etc.)to maximize short-term financial outcomes.

Many customers will just go along with the offering, figuring the switching costs or time wasted in challenging is not worth the effort. These companies depend on those the passivity of customers for their practice to work.

However, to limit any potential negative impact, "The Appeal Practice" companies design elaborate safety nets to catch any customer who DOES have issue, or who wishes to terminate the relationship. As in the case of your Health Club, when you expressed a desire to leave, suddenly the service red carpet is being rolled out, including fees waived and new permissions granted.

This practice, which is increasingly being used by Credit Card companies and banks (for annual fees and late payment penalties), health insurance companies (for initially denying claims), hotels loyalty programs(for designating elite status), is spreading.

The result? The "passive" consumer is being served poorly and paying more for that service than the "complaining" customer.

The "Appeal Practice" maximizes short-term financial outcomes, yet clearly erodes any loyalty a customer may have for the company he or she deals with.
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Companies that deploy these types of service models are not interested in competing based on service, but rather are more interesting in the perpetuating a fraudulent relationship with their customers for as long as they can get away with it.

Lessons In Service: Strive For Perfection, Don't Screw Your Customers

Yesterday, I had two experiences that triggered some thoughts about what companies have in mind when they act.
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First--

Watching television with my wife and a commercial appears for "Simply Orange" orange juice. The advertisement was clearly emphasizing the freshness and goodness of the product, features of a typical "product focused" sale. What caught my eye was the "Orange Back Guarantee."

According to the product's website:

"If, after tasting, you don’t agree that Simply Orange orange juice tastes as fresh as biting into a juicy orange, you may make a claim under the Orange Back Guarantee.....On a 3”x 5” card, state why you think Simply Orange orange juice does not taste as fresh as biting into a juicy orange in 50 characters or less.."

What do you get back? A free bag of the competition.....ORANGES!

I have been focusing a lot recently on guarantees, and how they make a market statement as well as focus an organization to deliver. So what does this guarantee do for the product? Well, it clearly caught our attention, more for being unique than anything else. Second, without tasting the product, my mind assumes it is a premium offering....why else would they guarantee such a thing. Third, it was not a true comparative offer, such as "we are guaranteed better than the other brands," yet it tried to position itself that way by comparing its taste to the ultimate competitor...the orange itself...against "the perfect competitor!"

My View:

The commercial worked for us. If you asked consumers to describe the "perfect orange juice," they would likely say that it should taste like freshly squeezed oranges. So Simply Orange guarantees its product is the "perfect orange juice," not that it tastes better than its competitors. I like that.

When trying to differentiate based on a premium offering, companies should look ahead toward perfection rather than simply staying ahead of competitors. Perhaps that's one of the reasons the Health Insurance industry, with its low service reputation, lacks a breakout service competitor...in their minds, it is okay to just beat competitors; they feel they don't have to strive for perfection.

Wrong.

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Second--

Poland Springs delivers bottled water to our house. Each month, we get a bill in the mail for about $40, which I am usually diligent in paying. A year ago, I noticed that a "Fuel Surcharge" had been added to the bill for about $2.50. I didn't pay too much attention to that since the cost of fuel had been going up dramatically. But I did notice that when the price of fuel went down, the surcharge remained. Well, unfortunately, last month I was two days late in paying my now $42.50 bill, and I see an additional $15 late payment fee. Now my bill is $57.50.

I was furious. So I called Poland Springs to cancel my delivery service. Between a Fuel Surcharge and now Financial Penalties, getting water to our home was getting expensive and complicated. Not worth it....

The Call Center representative transferred my call to a trained specialist who obviously handled all discontinuances. Noting my long tenure with with Delivery Service, she immediately offered to waive the Financial Penalty. As well, when I queried about the Fuel Surcharge, she said she couldn't remove the surcharge, but would discount my water 50% this month which would be the equivalent of about 9 months of fuel surcharge. So my bill goes from $57.50 to about $25.

Mission accomplished. I stayed. But I am not happy.

My View

There is an ugly business practice out there that I refer to as "The Appeal Process":

---Squeeze and underserve your customers and hope customers don't notice;
---Focus on recovery for those customers who do notice.

Like many companies, Poland Springs has set up a game of pushing the revenue envelope as far as it can (adding fees and penalties) to supplement its commodity product offering. For some companies, the money made on penalties, interest, and other charges can rival that of the product or service itself. (One has to question at this point what business these companies are in...is Poland Springs a bottled water company or a financial company?)

But Poland Springs understands that it can only push the envelope so far, and it tries to catch fall out during a recovery process. In the time of a 5 minute phone call and without my asking, the discontinuance specialist waived the penalty and discounted my water 50%. I am staying with the service, but am now wary of the company.

A company that wants to distinguish itself in service must not put its customers in such a predicament. By offering deals only to those who complain, or who know how to play the game, a company is creating a trust gap. I am not going to feel good about a service provider if I have to read and understand all of the small print just to not be taken advantage. Examples abound:

Health Care Insurers--deny coverage or prescription at first, but will accept if appeals are made. Model hopes insured people will not appeal.

Banks/Credit Companies--charge fees for everything but are willing to drop them if challenged or if accounts are threatened to be closed.

Everything Travel--the guy next to me on a vacation flight has paid half for his seat and hotel room because he knew how to work the process.

The true premier service provider would not have forced me to go through the humiliating process of threatening to stop my service before offering me the discount. If I was truly valued for my tenure, the discount or penalty waiving should have been automatic. Now that would have been impressive. I would have felt special rather than cheap.

Good Lessons here!