What About the Customers in the Middle?

There is a general rule in the market that customers will generally only offer feedback when they either have a really bad experience or great one.  If you believe that customers rarely say a word when their experience falls somewhere in the middle you are missing some valuable information. The point here is that most of the customers will typically be in the middle and they are the ones that will drive the success or the failure of business.

Most companies maintain a well-oiled customer satisfaction measurement system. There may be additional dimensions to the measurement that will lead them to believe that they are also measuring customer loyalty. When companies measure customers that have either had a bad experience or good experience, their measurement is inherently biased. They have missed the opportunity of measuring their entire database of customers from this selection process.

Most customers will reside in the middle and will not have had either a bad or great experience.  They are generally ignored and not measured.  In order to understand the customer experience of your entire customer base it is necessary to include those customers in the middle.  ForeSee, a survey company, ran an experiment that compared customer satisfaction scores from satisfaction surveys (which probably measured responses from customers with a recent experience) and then compared the scores from a random sample survey which included all customers. They found that the random sampling does a better job of measuring the wider range of customer experiences rather than just a select group of customers that often respond to the surveys from good and bad experiences.

A boss I had many years ago reminded me not to expect what I don't inspect.  The bottom line is that measurement of customer satisfaction must be done properly. The process of customer selection must include the customers in the middle.  If you are currently measuring only the customers with bad experiences and customers with great experiences you may be missing out on some rich information that resides with the customers in the middle. 

Satisfaction Has a Legal Meaning

You may not be aware that the term "satisfaction guaranteed" has a legal meaning.  The Federal trade commission’s advertising rules are very specific about using the term "satisfaction guaranteed." Most courts when addressing cases regarding satisfaction have stated that satisfaction means "what ever a reasonable person would expect from a product or service."

The Better Business Bureau code of advertising and FTC rules both suggest that the term "Satisfaction guaranteed" should be used by a seller when advertising only if refunds for the full purchase price can be expected when requested by a customer. If there are any limitations or restrictions on a guarantee, those conditions should be clearly and prominently displayed for the customer.

Here are a few examples of a proper “satisfaction guaranteed” ad:

1.       We guarantee your satisfaction with our product/service.  If you're not completely satisfied, we will gladly refund the full purchase price.

2.       Return the product in its original package within (some limited amount of time) and we will fully refund your purchase price.

3.       If our service does not meet your complete satisfaction, your full purchase price will be refunded.

This is serious business. Businesses have been taken to court by customers and have been penalized a significant amount of money. The bottom line is that satisfaction is not only a wonderful word for marketing but also brings the responsibility of making the customer “satisfied".  There is a very strong trend in the market that customers are becoming more litigious. Not all customers are nice customers.

What Customers Say

There's been some interesting research performed Dr. Wes Schultz and Dr. Robert Cialdini that suggest the answers that customers provide might not always be correct. If you politely ask a customer a question regarding what they're thinking or what they may doing in the future, customers will most likely give you an answer.  According to the research, the answer the customer provides has a reasonable likelihood of being wrong.

In many satisfaction surveys customers are asked to provide reasons why they gave a specific answer or what they are likely to do in the future. Some of the confusion that may arise when asking for comments comes from the fact that the customer may currently be considering the response to the current survey while at same time being asked how he would behave in the future. While this has not  been specifically studied by Drs. Schults and Cialdini, it's the first step in recognizing that we often ask too much of customers during the time they are taking a survey.

These scientists performed a study of several hundred California homeowners and asked them to predict which of four messages would be most successful at persuading them to take steps to conserve energy and reduce their overall energy consumption. The four messages were 1. Conserving energy, helps the environment; 2. conserving energy protects future societies; 3. Conserving energy saves you money; 4. Many of your neighbors are already conserving energy.

The results of the study suggested that the message about what the neighbors were doing was the least likely to influence their behavior. The researchers, however, discovered that this was the most effective message when it came to changing the behavior of the neighbors. One conclusion was that even though most of the neighbors denied its effect, the desire to keep up with the Joneses was the real driving force.

While there is much to be said about the other experiments performed by these researchers, the bottom line maybe simple. One conclusion that might be drawn from this research is that people don't always act consistently with what they have said.  If this conclusion has merit, those who are performing customer satisfaction and loyalty surveys may want to reconsider both the design of the survey and interpretation of survey comments. In the end it may be more important to watch the way the customers act rather than to act on what the customers say.  We are sure someone's mother must have said at one time or another "it's not what you say but what you do that counts."

Customer Retention of Contract Customers

The customer Institute usually publishes information regarding a specific research topic. This blog will be different in that it is primarily commentary. The topic of this blog "customer retention" will focus on companies that have long-term contracts with their customers. Customers with long-term contracts are very different from customers that are dealt with one event at a time with no long term commitment.

A study was done by the customer Institute several years ago that examined the migration of customers between competing companies. The objective of the study was to examine the roles of customer acquisition versus customer retention. One of the most interesting outcomes of the study was that the impact of customer retention (increasing the rate of contract renewal) on market share was greater than the impact of customer acquisition.

One of the challenges that companies (with long-term contracts with their customers) have is remembering the value of that customer even when the long-term relationship has been legally consummated and now is the time to start supporting the customer. Companies can easily become complacent once that long-term agreement is signed.  It becomes very easy to give the long-term customer lower priority than the potential new customer. However, it is important to remember that the long-term value of the customer (with the long-term contract) is greater than the short term opportunity.

The bottom line is that companies who develop long-term contracts with their customers need to focus on  retaining those customers. Long-term growth in market share comes from increasing retention rates of those customers with long-term contracts. In other words, the long-term customers represent your greatest opportunity for growth and market share.

The Five Dimensions of Customer Behavior

There was an interesting article written by Danica Alann in the January 2012 issue of Quirk's Marketing Research Review titled "transcending brand and loyalty."   In the article she reflects on the research by Pinker, who wrote about how the mind works.

Adweek in September 2008 made the following statement:
 "Whatever the methodology, it's increasingly clear that customers desperately want goods and services, communications and marketing campaigns that dazzle their senses, touched their hearts and stimulates their minds - delivering a positive experience that will remember. Businesses will live or die not by the attributes they promise but by the brand experiences and  value they offer customers at every touch point."

There's been considerable research performed that has confirmed Pinker's five dimensions.  Those five dimensions are sensorial, social, behavioral, cognitive and emotional. A brief description of each of these dimensions is described below.
1. Social is the dimension of interacting with others. It is a dimension that creates a bond between the customer and the company.
2. Intellectual is the dimension of thinking. It is the dimension that causes me to reflect and try to understand and compare experiences.
3. Sensorial is the dimension of senses. It is the dimension that interacts with one or more of my five senses of smell, touch, sound, taste, hear.
4. Emotion is the dimension concerning my emotions.  It is the dimension that affects the way I feel or react to a situation.
5. Behavior is a dimension concerning my actions. It is the dimension that describes my physical reaction or responses to the situation.

In her article Ms. Allen translates these five dimensions into more consumer-friendly words of talk, think, since, feel and act.  These words make it easier to develop strategies that will best capture the customer dimensions most appropriate for specific products and services.

While not all five dimensions will have equal weight in any service encounter, all will be present. It is the challenge of the company who wants to understand its customers to determine how each of these five dimensions are working with their customers. For example food-service companies will obviously focus on the senses, such as sight and smell of their products. On the other hand, companies that sell products such as cars, boats, motorcycles and airplanes would probably be interested in the sight and emotional impact of the product on the customer.

The bottom line is that a better understanding of the dimensions of the customer should lead us to better metrics.  The remaining question is how to translate these five dimensions into an overall metric that best represents the customer.

Customer Experiences are Relative

Dr. Howard Lax wrote a blog on November 7, 2012 which he titled Customer Experiences and the Theory of Relativity.  The key point of his article is that we evaluate the world through the lens of comparisons. He makes an excellent point when he states that whatever the experience may be, our recall, reflection, and/or evaluation of the experience always is relative to some frame of reference.

These statements by Dr.Lax are consistent with the the preferred definition used by the Customer Institute which says: "customer satisfaction occurs when the perception of the reward from the purchase of goods or services by the customer meets or exceeds his or her perceived sacrifice. The perception is a consequence of matching past purchase and consumption experience with the current purchase."

There are simpler definitions of customer satisfaction, which are often used but which do not have the value derived from the definition above. Four other definitions that are often used are:
1. Customer satisfaction is equivalent to making sure that the product and service performance meets customer expectations.
2. Customer satisfaction is a perception of the customer that the outcome of business transaction is equal to or greater than his or her expectation.
3. Customer satisfaction occurs when the acquisition of products and/or services provides a minimum negative departure from expectations when compared with other acquisitions.
4. Customer satisfaction occurs when the marginal utility of a transaction is equal to or greater than preceding acquisitions.

There are several observations that follow from the Customer Institute definition; namely,
1. The comparison between past purchase and consumption experience must make sense. it is difficult to compare the purchase of the computer with the purchase of a wristwatch. Often we do not have a realistic context or frame of reference  for making a comparison, so there may be occasions when the customer will actually compare  "apples to oranges".  That's just the way we are.
2. When thinking about customer experiences, it must be remembered that there are no absolutes.
3. When evaluating customer perceptions, especially in customer surveys, it is critically important to establish measurement scales that accurately describe them.

The bottom line is to remember that customer satisfaction and customer loyalty measurements are all relative. There is no absolute scale for satisfaction, nor is there an absolute scale for customer loyalty. Surveys of customers and measurements taken from those surveys will always reflect the customers perception relative to their past purchase experiences. It is not unreasonable to conclude that much of the variability in customer's. responses to survey questions is often times due to these experiences.





















lax

Customer Communications

Customer language may not be what you think it is. We think we know our customers language when we communicate with them. That is not always the case. In communication with customers, companies believe that the customers understand what they are saying. Since communication is in two directions, the assumption is that the company understands what the customer saying and the customer understands what the company is saying.  The purpose of this blog is to examine the assumptions of the communications between the company and its customers.

Company Communication
Companies communicate with their customers from various organizations within the company. The sales organization has one type of communication. The customer support organization has another type of communication. accounts receivable organization will have another type of communication. The shipping department will have still another type of communication.

Each of the company organizations will have different vocabularies. In addition to these vocabularies there may be internal jargon that is unique within the company. It often occurs that internal company jargon will find its way to the customer. In fact, the employee may forget what it's like being without the specialized knowledge that they have acquired while working for the company.  The jargon may be unique for each organization within the company, as well as having jargon that may be used consistently throughout the company. One example of different vocabulary from one department to another is the sales organization may refer to a product by a name created for advertising purposes; while on the other hand, accounts receivable may refer to the product by its product number.

Unfortunately, customers may be communicating with more than one organization at the same time. The likelihood that the communication from the company to the customer from each of these organizations will be consistent and understood may not be at the level of company expects. Sometimes the hand-off from sales to customer service can create problems for the customer.  This particular communication problem may be as simple as matching expectations given by the sales organization to the performance being supported by customer service.

The final complexity occurs as companies expand into multiple areas that may have additional challenges in terms of culture and language.

Customer Communication
Customers come in all shapes and sizes for both B2B and B2C. Of course, the range of customer types for B2C is much greater than B2B.  In either case.a wide range of communication skills from the customers can be expected.

Customers have their own jargon.  Customers also have their own vocabulary and often their own definitions of the words they use, which may or may not track dictionary definitions. Many of the problems that occur between customers and companies arise from the communication and lack of consistent definitions between the two.

The Solution
Most companies do not realize this is a problem. Most companies believe their customers always understand the communication from the company. They also believe their employees always understand all customer communications. It is easy to conclude from the preceding discussion that these beliefs or assumptions are false.

The first step of the solution is to recognize that there is a communications problem.

The second step of the solution is to identify internal jargon and that must be eliminated from the communication to the customer.

The third step is to train all personnel that interface with customers to use a common language.

The fourth and most difficult step is to train all personnel that interface with customers to be aware of the communications variation from customer to customer and how to handle it.

The bottom line is that customer communication is imperfect. It is not just the company nor is it just the customer. The communication problem extends in both directions. If a company wants to increase customer satisfaction and customer loyalty it must first reduce communication errors.