Thursday, March 13, 2014

Does Your Business Have a Customer Culture?

Dr. Linden and Chris Brown are co-authores of a study on customer culture.  The results are published in a paper titled The Customer Culture Research Program and was recently noted the HBR Blog.  Their findings raise an interesting question; namely, what does it mean ot have a customer culture and what are some of its important aspects.

This study represented a multiyear research to meet a number of objectives. It's primary purpose was to design, test, implement, and evaluate a customer culture measurement tool.
After several iterations across more than 150 businesses the research identified “seven cultural factors that drive customer satisfaction, revenue and profit growth, innovation, and new product success .”  These seven factors are noted below:

1.     Customer insight is the factor that examines how well a company understands its current customers’ needs.

2.     Customer foresight is the factor that describes how well the company leads the market with new services before customers recognize their own changing needs.

3.     Competitor insight is the factor that describes how well the company monitors its competitors’ strengths and weaknesses.

4.     Competitor foresight is the factor that describes how well the company considers its competitors when making decisions about their own customers.

5.     Peripheral vision is the factor that describes how well the company's employees actively seek to understand the threats and opportunities observed in the market.

6.     Cross-Functional collaboration is the factor that describes how well employees are working across functional areas of the company to solve customer problems in order to deliver better service to the customers.

7.     Strategic alignment is the factor that describes how well the company's vision, values and strategy are understood by all staff members and employees.
These seven factors are key components for describing how well the company's culture is tuned to their customers. The research indicates statistical validity to these factors, so they should be considered highly relevant for describing how well a company has included the customer into its corporate strategy.

The bottom line is that the customer experience continues to be validated as a significant indicator of a company's success or failure.  As the authors of the study note if these seven factors are practiced, the company should be able to create superior values for customers and sustainable growth for their business.   The take away from this research study is that customer culture is not just a phrase to put in the business plan, but a concept that has real components.  The question to be answered is how well would your company would score in each of these seven factors.

Thursday, February 13, 2014

A Basic Assumption of Customer Satisfaction Reconsidered

One of the basic assumptions that have been considered sacrosanct is high levels of customer satisfaction lead to increased market share.  Some recent research suggests that there this assumption may not be universally true.  The research was published in September, 2013 Journal of Marketing titled “Reexamining the Market Share-Customer Satisfaction Relationship”.  The authors are Lopo L. Rego, Neil A. Morgan and Claes Fornell.  The authors have found “a consistently significant negative market share – customer satisfaction relationship.”

Some points of interest made by the authors are: (i) Customer satisfaction is generally not predictive of a firm’s future market share, but (ii) Market share is a strong negative predictor of a firm’s future customer satisfaction.

The research suggests that as companies grow larger their customer satisfaction lessens.  Success generally leads from an aggressive “take care of the customer policy” to a bureaucratic, procedurally structured organization that establishes a policy to have the “highest level of customer satisfaction in the industry benchmark.”  While these might appear to be the same, one is “customer focused” and the other is “system focused”.    

From this perspective there is a paradox that appears; namely, high customer satisfaction may influence growth in market share but as companies grow and systematize their customer interface, satisfaction may decline and ultimately have little or no effect or impact on market share.

The bottom line is that size, bureaucracy, policies and procedures can take the energy out of a customer relationship.  As a company grows, it must be aware that the customer relationship can be diminished when the individual customer is not as important as the metric of customer satisfaction.

Monday, December 30, 2013

Loyalty is a Two-way Street

Most companies involved in retail or commercial sales are always looking for customer loyalty. It seems that companies often forget there is another side to loyalty. The other side of the relationship is being loyal to your customers.

We are often reminded as we see companies advertising special deals for new customers we, the current loyal customers, get nothing for remaining loyal. Upon reflection it would appear the new customers are more important than loyal customers to the company as they advertise special deals for new customers only.

This is a problem that many companies are ignoring; namely, negatively affecting their loyal customers by not being loyal to them.  Loyal customers expect loyalty in return and when they don't see it demonstrated, there is a distinct possibility that their loyalty may be negatively affected. Although little research has been performed to measure the extent of this situation of providing additional value to new customers while ignoring old customers, we think there is an opportunity to increase customer loyalty by demonstrating company loyalty to their customers.   This may be demonstrated in several ways (some of which are being tested at the present time).  For example,

1. Say thank you to your customers with an occasional surprise gift or token (which may even be a marketing give away e.g. logo desk products such as pens, note pads, etc)
2. Occasionally give special deals/discounts to existing customers only.
3. Exchange products and/or services with your customers (especially B2B customers)
4. Find ways to assist your customers to increase or improve their business (customer meetings where your customers can network with others who are also using your products or services)

The bottom line is that companies must learn to see loyalty as a two-way street.  It is one of the best ways of building lasting company-customer relationships.

Friday, December 27, 2013

The Internet Impact on Customer Loyalty.

This blog is a continuation of the previous blog that look at the traditional measures of customer loyalty. Again the Customer Institute regrets the inability to identify the author of the following information.
The Internet is has changed many of the basic concepts of customer loyalty. The following list represents a number of the ways in which customer loyalty may appear from an Internet perspective.
1.       A loyal customer will still patronize your business but will know the alternatives better.
2.       A loyal customer will still provide recommendation but is more likely to be on a reputation-based website.
3.       The premium that a loyal customer is willing to pay is getting smaller. This becomes more obvious this product or services become more commoditized.
4.       There's much less face-to-face communication.
5.       The customer is less connected with the company and hence the personal bonds between customers and company personnel are becoming a thing of the past.
6.       The customer is easier to make the relationship since the transactions are less personal.
7.       Customers are willing to become part of the community to be willing to take this association to high levels of commitment such as the Apple cult and other similar communities.
8.       Customer reviews and testimonials are becoming more important.
9.       A new kind of customer has emerged. That customer may be a brand evangelist or happy wanderer with no loyalty.

The bottom line is that the Internet has become the great equalizer in the in the business community. There is no difference in the virtual real estate of a small start-up company with virtual real estate of established industry giant.  On the Internet these two very different kinds of companies can appear equal.  The companies of today and tomorrow must manage their websites will is in terms of appearance and in real time.

Saturday, December 21, 2013

Traditional Measures of Loyalty

The customer Institute recently uncovered the document with some excellent measures of customer loyalty. Unfortunately, there is no attribution to the writer of the document. The traditional measures of customer loyalty that are apparent in the market today include the following:

1. A loyal customer will patronize your business as opposed to all other alternatives.
2. A loyal customer will provide your business and natural, unsolicited, word of mouth recommendation to friends and strangers.
3. A loyal customer will be willing to pay just a small premium to patronize your business .
4. A loyal customer will recognize the business relationship as a meaningful personal relationship and not just a mercantile relationship.
5. A loyal customer will invest energy in the relationship both in the form of reputation validation , but also in personal engagement with the business.
6. A loyal customer will tell you when when something is going.
7. A loyal customer will not abandon you when something goes wrong, but gives you an opportunity to correct the shortcoming and to continue the relationship.
8. a loyal customer will wear your T-shirt or baseball cap and be proud of the Association.

The bottom line is that customer loyalty from a traditional perspective is based on relationship filled with positive feelings. . However, not every customer relationship will rise to this level of loyalty.  The traditional measures noted above change when customer loyalty is examined in the Internet age. This will be the subject of a future blog.

Friday, December 13, 2013

An Update on Customer Rage

 The WP Carey School of Business at Arizona State University has published the 2013 update of the customer rage study. The 2013 version is the sixth study wave. A general conclusion from the study is that if a company handles a complaint well, the customer is more likely to become loyal.  If the company does not handle it well they are likely to lose approximately 12 percentage points in brand loyalty than if the customer had never complained at all.

One of the key findings of the study is that satisfaction in 2013 study is no higher than the satisfaction reported in 1976.  A quote from one of the authors of the study notes “people are frustrated that there are too many automated response menus, there are not enough customer care agents, they waste a lot of time dealing with the problem, and have to contact the company an average of four times to get resolution.”
The top 10 highlights of the study are:
1.       The amount of people reporting customer problems went from 32% in 1976 to 50% in 2013.
2.       The number of households experiencing customer rage increased 8% since 2011.
3.       Yelling has increased from 25% to 36% and cursing from 7 to 13%.
4.       The product, most responsible for enraging customers is cable and satellite TV.
5.       Only 2% of the most serious problems involved dealing with the government.
6.       Customer complaint on social networking sites has increased from 19 to 35% since 2011.
7.       56% of customers who reported a complaint said they received absolutely nothing as a result. his is an increase of 9% since 2011.
8.       Customer satisfaction doubled from 37 to 74% when companies offered an apology along with  any other monetary action to resolve an issue.
9.       Despite the rise of the Internet, customers complained 11 times more by phone than through the web.
10.   Satisfied customers tell an average of 10 to 16 people about their problem and its resolution, whereas dissatisfied customers tell about 28 people.

The study was based on a phone survey of approximately 1000 households, and was performed by NOVO 1.
The bottom line is it appears Americans are becoming more dissatisfied with products and services and are expressing that the satisfaction more than the past. The answer is that companies must commit adequate resources to address customer problems. Research continues to show that companies who provide positive results to the customer experience have higher levels of customer loyalty and financial performance than companies who do not.

Saturday, November 16, 2013

What is Happening to Loyalty?

The research company fast.MAP partnered with the Institute for Promotional Marketing (IPM) completed a survey to understand what is happening to competitive loyalty programs in the UK.   Some of the findings from this study suggest that loyalty may be changing in the consumer marketplace. If this study is relevant outside the UK, then companies must be aware of the changes in customer loyalty and think through the impact of their strategy in the marketplace.
Some of the more dramatic findings are:
1.     8 out of 10 shoppers use all different types of promotional programs by brands other than the ones they would normally purchase.
2.     More than half of the different types of promotions being used in the market had been used by 9 out of 10 consumers.
3.     3 out of 10 shoppers are tempted by a free sample to swap brands. 96% of the shoppers were tempted to use a different brand by price promotion and 31% claim they are doing this often.
4.     1 out of 3 shoppers stated they often used reward or loyalty schemes for products they do not usually buy.

With these staggering statistics, customers appear to be less loyal than the past.  Brand loyalty can no longer be taken for granted. If these statistics are representative of the current market in other countries outside the UK, companies may be forced into price discounting as a normal mode of business. One possible explanation is that the current economic environment may be leading customers to shop strictly for price. If this trend continues, brands with a strong market presence will see their product prices becoming totally elastic with little or no differentiation for brand names.
The bottom line is customers will always be adapting to changes in the market, the economy as well as changes in technology and competition. In difficult economic times price becomes a significant variable. However, customers know value and understand the implications of good customer service versus poor customer service. A price war should not be the preferred answer for a company; rather, providing value-added offerings to the company product or service may be the key to survival and maintaining profitability.

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