Saturday, July 25, 2015
Here are some customer service statistics that demonstrate the power of a positive customer service experience. Note each statistic is provided with a reference for its source. These statistics were compiled by Gigi Peccolo, the Content Manager at OneReach, a consulting firm.
1. By the year 2020 (coming up fast!), customer service will beat out price and product as the key brand differentiator. (Walker Info)
2. It’s 6-7 times more expensive to attract a new customer than to keep an existing one. (White House Office of Consumer Affairs)
3. A 10% increase in customer retention can result in 30% increase in company value. (Bain & Co.)
4. If customers have a “very good” or “excellent” service experience, 97% of them are “very” or “extremely” likely to tell friends and family about it. (Survey Monkey)
5. 89% of customers will start doing business with a competitor after a negative service experience. (VPI Corp)
6. 82% of customers stopped doing business with a company after a bad customer service experience. (RightNow)
7. Over 65% of customers say that valuing their time is the most important thing a company can do to provide good online service. (NICE)
8. Three out of five customers would try a new brand or company in order to get better service. (American Express)
9. Over 90% of customers who have an effortless service experience with companies will buy from that company again. (CEB)
10. Only a paltry 1% of customers feel that their expectations of good customer service are always met. (RightNow)
11. 90% of customer service decision makers believe that delivering good customer service is essential to their companies’ success. (Forrester)
12. 58% of customers are willing to spend more with companies that provide a great customer service experience. (American Express)
13. 87% of customers share good service experiences with others. (Zendesk)
14. Nearly 50% of customers who had a negative service experience have told over 10 people about it. (Harvard Business Review)
15. 73% of consumers say that a friendly customer service rep can make them fall in love with a brand. (RightNow)
16. 74% of customers find a poor customer service experience annoying. (Synthetix)
17. 85% of organizations support multichannel customer service interactions. (Deloitte)
18. Over 60% of companies think mobile customer service is a competitive differentiator. (ICMI)
19. 90% of customers expect to receive a consistent customer experience across channels. (Synthetix)
20. 74% of customers have spent more in response to good customer service. (American Express)
21. 68% of customers say they’ve switched brands because of bad customer service. (Accenture)
22. U.S. companies lose approximately $41 billion annually due to bad customer service. (SmartCustomerService)
23. 78% of consumers have bailed on a transaction because of bad customer service. (American Express)
24. 81% of customers are likely to repeat business with a company after a good service experience. (Kissmetrics)
25. A 5% increase in customer retention can increase profits by up to 125%. (Bain & Co.)
Saturday, May 16, 2015
There's always a lot of argument about the way companies value their customer relationships as a percent of the value of the company. The value of customer relationships falls into the category of an intangible asset when looking at the balance sheet of a Corporation. Brands and trademarks are included in the valuation of the company along with the value of customer relationships as the two major intangibles.
MARKABLES is a cross-border venture of experienced trademark experts who deal with the challenges of trademark valuation from different perspectives. It is owned and operated by a privately held company located in Switzerland and specializes in company evaluations for M&A.
There really is no accounting data that can be used for evaluation of trademarks and customer relationships. The general methodology used to value intangible data is highly dependent on comparative data. One of the best ways of valuing customer relationships occurs when a company unit being bought or sold since it's value must stand up to the scrutiny of auditors. The process used for estimating the selling price of a company requires valuing the different assets of the company which also includes the intangible assets of the brand or trademarks owned by the company and the customer relationships of the company.
A study of 6000 mergers and acquisitions (M&A) worldwide between 2003 and 2013 revealed some interesting characteristics of the value of customer relationships and brands and trademarks. Since evaluations were done by experts and documented, the data which were accrued from the evaluations can be used to indicate how experts are valuing the two intangibles of brands and customer relationships.
The outcome of this analysis shows that the value of brands and trademarks has dropped as a percent of the overall value the company from approximately 18% in 2003 to about 10% in this 11 year period. On the other hand, the value given to customer relationships has increased from about 9% in 2003 to 18% in the same time frame. Thus while brands and trademarks seem to be declining at a rate of approximately 0.8% per year in terms of asset value of the company, customer relationships value and as a percent of the company seem to be growing at approximately 0.9% per year.
Monday, May 11, 2015
The concept of CLV or customer lifetime value has been used for many years to describe the value of a particular customer or customer segment to a company. It's easy to get caught up in the concept of what's good for the company because that's where profit comes from. However, it might be appropriate to look at EVC, a new concept, but often overlooked. EVC refers to the economic value of a product or service to a customer. For as CLV measures the value to the company of a product or service, EVC measures of value of the product or service to the customer.
Few organizations pay attention to EVC because even though it is a simple concept. The calculation has some challenging variables. The general formula for EVC can be stated simply as:
EVC = tangible value + intangible value
The tangible value is usually easier to calculate since it will refer to improved productivity, speed, or some other metric that is easy to measure. The intangible value usually refers to variables that are not easily measured, such as color, ego satisfaction, keeping up with the Joneses or satisfying a whim.
The reason the concept of EVC is a worthwhile metric is that it is one of the easiest ways to compare products and services between competitors and even within an individual company with multiple products and services. So long as the EVC of a product or service is greater than the competitor’s it will have a greater attraction for customers.
Another reason to use the EVC metric is to compare the value with the price of the product or service. When the price of the product or service exceeds the value of EVC, the attraction of the product or service will likely diminish in the eyes of the customer.
The bottom line is that the concept of EVC should become part of every company’s product analysis. It is not a measurement that is taken once and forgotten since the value is obviously going to change as the market changes and hence should be a part of every periodic product or service review. It's time to start measuring EVC.
Saturday, May 2, 2015
A joint study of approximately 900 small business owners presents an interesting insight into what small businesses are doing in the world of customer loyalty. The surveys were performed through a joint study by BIA/Kelsey and Manta in 2014. Some of the top level findings from the study are noted below:
1. 61% of small businesses now generate the majority of their annual revenue from repeat customers.
2. 62% of small-business owners are now spending the majority of their annual marketing budget to retain existing customers.
3. The survey reported that a repeat customer spends 67% more on average than a new customer.
4. Only 34% of small businesses have a loyalty program.
5. Of the small businesses that have a loyalty program, only 46% are in digital form, such as an e-mail list.
6. Only 29% of small businesses use a customer relationship management (CRM) tool to track customer information.
7. When asked about the purpose of their customer loyalty program the dominant answer was “improve customer relationships”. Only 39% of those with a loyalty program noted this as their primary purpose. The secondary purpose was to “grow revenue”, which occurred with 36% of the small businesses.
There appears to be a dramatic change over the last several years for small businesses. Surveys done in 2012 found that small businesses focused on customer acquisition seven times more than customer loyalty and retention. In the 2012 Survey only 6% of the small businesses surveyed spent more than half the annual marketing budget on customer retention.
The bottom line is that small businesses seem to be migrating to the concept that loyal customers provide a greater source of revenue from each loyal customer than a newly acquired customer. It is also obvious, that loyal customers lower the cost of customer acquisition and provide a more sustainable revenue flow. Customer loyalty programs work for small businesses just as well as they do for large businesses. It's about time that all the small businesses think about customer loyalty and make the decision to make it a strategic component of their business.
Saturday, April 4, 2015
Kiosks are one form of self-service technologies that are being introduced into the marketplace. We're seeing that self-service technologies can change the way customers act. Dr. Ryan Buell, an assistant professor at Harvard Business School is studying this interaction between operations and customer behavior. He has identified some interesting characteristics that appear between customers and self-service technology aspect of the kiosk. There are four additional researchers at the Rotman School of Management at Duke’s Fuqua School of Business and the National University of Singapore who are also examining these self-service strategies. The findings of these researchers show both positive and negative aspects of self-service technologies. Some of the examples that they give are:
1. Market share of difficult to pronounce items increased 8.4% when customers had no need to pronounce the item.
2. At one McDonald's they found the average check size was increased by 30% using the kiosk
3. By using self-service technologies fast food restaurants have seen an increased market share by 1 to 3%.
Some of the positive benefits of kiosk self-service technologies are:
1. Reduced labor cost
2. potential for increased market share
3. Reduced time to complete a service.
4. Possibly reduce customer waiting time when placing an order
Some of the negative aspects of self-service technologies are:
1. loss of flexibility - the kiosk can only do what it was designed to do and cannot adapt beyond its design
2. the use of the kiosk may be confusing to the customer and reduce customer loyalty
3. loss of the ability to delight the customer with special considerations
4. May not contribute to building long-term customer relationships.
The bottom line is that the kiosk has a place in business. There are service operations where self-service can be beneficial. On the other hand, the loss of the customer-employee interaction will often make the difference between having a loyal customer and the non-loyal customer. Research continues to support the notion that customer-employee relationship is one of the key elements for building customer loyalty. The challenge for every service business is to examine self-service technologies and apply them in areas that are appropriate for increased productivity while making sure that the customer-employee relationship is maintained.
Saturday, March 28, 2015
Peter Kriss is a senior research scientist at Medallia and the Director of Research for Vision Prize has recorded some quantifiable evidence that the customer experience provides significant performance improvements for companies. He focused the research on two different companies with different revenue models. One company was involved in a transactional-based business while the other was a subscription-based business.
The transactional-based business was focused primarily on how frequently the customers returned and how much was spent each time the customer returned. On the other hand, the subscription-based business focused on retention. In his research his team controlled for other factors that might affect repeat purchasers to remove any bias by those factors.
His results were truly amazing as noted below:
1. For the transaction-based business, customers who had the best past experiences spent 140% more than those who had the poorest past experience
2. For the subscription-based business, members who gave one of the top two experience scores had a 74% chance of remaining a member for at least another year, whereas those who had the poorest experience had only 43% chance of being a member a year later. The real difference was that members who gave the lowest scores were likely to remain a member for a little over year, compared to the members who gave the highest scores who were likely to remain a member for another six years.
The bottom line is obvious because the numbers tell the story. Customers that rated their experience high were much more profitable and loyal. While these two companies provide only anecdotal experiences, each presents a great case for considering the metric of customer experience as a way of measuring customer loyalty while providing increased profit.
Wednesday, March 11, 2015
Tim Keiningham, global chief strategy officer for Ipsos Loyalty has developed an interesting statistics regarding loyalty. Many companies rely on the NPS measurement to define their customer loyalty. However, Mr. Cunningham has some statistics that seem to provide some serious questions about the NPS measurement of loyalty. In effect, a report for a client with customers right in a five as loyal with the NPS criterion. However, more than 90% of the time the same customers had an NPS loyal score for another brand.
There is an interesting new book titled the wallet. How location rule which was co-written by Prof. Lerzan Aksoy and Mr. Luke Williams also of Ipsos. In this new book the authors give an example regarding a retail grocery chain. The authors note that while 53% of the customers gave high marks when asked would they would promote the store, only 43% listed the store as their primary shopping location. The authors point out that 57% of the customers with a solid satisfaction score still prefer competitors. It was further pointed out that customers often chose to shop elsewhere due to lower prices and one of the other stores had a location that was more convenient.
Rather than using the NPS score estimator of loyalty. The authors offer three performance indicators that may provide a better measure of loyalty. The authors suggest the following three metrics:
1. 1. Measure the percentage of customers that list them as their first choice
2. 2 The average number of brands used by the customer
3. 3. The share of the customer’s wallet captured by the company.
Dr. Keiningham references another study of a financial services firm that found 90% of the customers who would indicate they would promote a brand might not list it as their primary brand in the field.
The bottom line is that customer loyalty identified as a 9 or 10 on the NPS scale may not accurately reflect loyalty according to the following definition. Many companies believe loyalty means that their company will be considered first when an engagement opportunity occurs (the customer will spend his money with the company because they are loyal). Based on these statistics, that may not be true.