Monday, July 28, 2014

The Rewards of Analyzing Your Customer

A recent report published by the Aberdeen Group presents some interesting statistics regarding the value of customer analytics. The author of the report was Omer Minkara.  Perhaps one of the most impressive statistics that was presented in the report indicated that the average year-over-year increase in customer lifetime value was 7.6% for those organizations that invest in customer analytics. The other side of the coin is that the organizations that do not invest in customer analytics see a lifetime value declined in customer lifetime value by 4.3% year-over-year.

There were a number of other specific statistics that have additional impact. They are noted below.

1.      The number of positive mentions through social media channels was 14.6% for those who invest in customer analytics and 2.9% for those who do not.

2.      The cross sale an upsell revenue was 11.6% for those with customer analytics versus

negative 2.3% for those who do not.

3.      Annual company revenue increased 10.5% for those with customer analytics versus 3% for those who do not.

4.      The return on marketing investments was 8.3% for those with customer analytics versus 4.9% for those who do not.

5.      The improvement in average cost per customer contact was 5.1% for those with customer analytics versus an increase in cost per customer contact of 1.7% for those who do not.

These statistics developed by the Aberdeen group are amazing. To see the dramatic difference between those companies who participate in customer analytics and those that do not paint a picture that is hard to ignore. Even if the sample size and rigor of the analysis that led to these statistics is even close to being true, one would wonder why companies are not jumping on the bandwagon of customer analytics.  Of course, the challenge that most companies face is how to acquire personnel with the analytic skills that will lead to the kind of statistical performance noted in the Aberdeen Group report.

There is a new book published through the Harvard business review press titled “Keeping Up with the Quants” written by Thomas Davenport and Jinho Kim. It is an introductory guide to understanding and using analytics in business. This book complements the report noted above and gives further justification for the use of analytics.

 The bottom line is the statistical improvement in performance that is consistently demonstrated by companies using customer analytics compared to those who do not is no longer questionable. Companies must learn how to take advantage of customer analytics.  Those companies, who either do not want to learn how to use customer analytics or don't know how, will find themselves at a distinct disadvantage in the marketplace.

Saturday, July 12, 2014

Social Media is Changing the Game

The results of the 2014 State of Multichannel Customer Service Survey have been released.  The same parameters of time and speed-of- answer are still prominent.  The survey sampled responses of 1,000 U.S consumers and noted the following statistics which are consistent with past data:
1.       The most important aspect of good customer service experience is “getting my issue solved quickly”.   (41% of responses)
2.       The second most important was “getting my issue resolved in a single interaction”.  (26% of responses)

These results have been consistent for more than 20 years; however, it is worthwhile to note the magnitude of the percentages as a way to gauge the impact of time on the overall experience.  The impact of not meeting the customer expectations for timeliness can be seen in the additional responses.
65% of the respondents indicated they have left a brand over a poor customer experience.  The reasons that they listed are:
1.       Making multiple contacts for the same reason (47%)
2.       Transferred from agent-to-agent (43%)
3.       Poor communication skills (poor manners) (37%)

There were a number of write-in responses that were the result of language difficulties.
Social Media Impact
Social media impact was considered on the survey and some interesting results were obtained.   The survey results indicated that 84% of those responding used search engines to try to resolve their customer service questions and more customers use the social media to give positive responses (52%) than to complain (35%).  The impact of social media can be seen by the high percentage of customers who are now using social media to get assistance.  These statistics suggest that companies should give significant attention to their web sites.  Satisfaction can be driven from the web site as well as through making contact with an agent.  

The bottom line from this survey is that time to resolve customer issues remains at the top of the list.  The second takeaway is that speed alone is not the answer.   A quick answer that does not resolve a customer problem will not be viewed positively by the customer and will cost the company additional money and resources to eventually resolve the problem.  One of the best management strategies used is to “kill the call.”  By killing the call the company is saying spend enough time to get the problem resolved.  It makes no sense to deal with a customer without getting a resolution.  A call back from the customer is expensive and does not create satisfaction.  The objective of each transaction between the company and the customer should yield two outcomes; namely the problem should be resolved and the customer concern should be alleviated.  In other words, fix the problem and fix the customer.  Of these   two, fixing the customer is more important. 
The social media component takes on equal importance based on its pervasiveness into our customer culture.  Whereas we would have been surprised if 20% would have used a search engine to resolve a problem 25 years ago, the percentage of customers with access to the internet today puts a high level of importance on the performance of the company website.  It can be as dissatisfying for a customer to have difficulties on the website as talking to an agent.  The business of customer service just got a bit more complicated.

Friday, June 27, 2014

Is Customer Loyalty the Same as Retention?

Tobin Lehman of New North poses an interesting question. He looks at both loyalty and retention and sees two very different pictures. It is worth noting since both concepts are important but play very different roles with respect to customers.

Loyalty looks at building a relationship between a business and its customers. For this reason, loyalty is a proactive program that seeks to say, as Mr. Lehman puts it, "scratch my back, I'll scratch yours." The point is that a loyalty program should be designed to reward customer behaviors that are in line with the company’s products and services.  The administration of these rewards essentially builds those customer actions into habits that encourage the customer to return.

On the other hand, retention is about customer preservation.  Once a customer becomes disillusioned with a company they will seek other sources for the products and services provided.  Many companies will offer customers who are the brink of departure discounts to salve the wounds that created the desire to depart and look for greener pastures.  Customer preservation comes from customer education.  Customers often see alternative sources when they lose sight of the value proposition that the company is offering. The primary objective of customer retention should be education of the customers.

The bottom line is that both loyalty and retention are equally important concepts that every business needs to manage. A strong loyalty program can bring in and create new customers. A strong retention program will keep those customers. The question that every company needs to ask is how well am I my managing both loyalty and retention.

Saturday, May 24, 2014

The Customer Satisfaction Conundrum

An interesting article written by Harvey Schachter dated May 4, 2014 points out the conundrum that we often face when reviewing customer satisfaction. Many people believe that if you focus on customer satisfaction success will follow. Mr. Schechter points to some of the research by Timothy Keiningham which shows this relationship between customer satisfaction and spending  is simply not true. He points out that the relationship between customer satisfaction and customer spending behavior is actually very weak. Quoting Mr. Keiningham “yes, the relationship is statistically significant, but it is not very managerially relevant.”

The article points to three factors which should be considered when evaluating customer satisfaction.

1.    The first factor in customer satisfaction is low price. Unfortunately, greater satisfaction gained by lower prices is not sustainable and should not be considered a long-term strategy.

2.    The second factor to consider is the size of the organization. He points out that companies with a lesser market share may, in fact, have higher customer satisfaction scores. An example would be that Burger King and Wendy's typically have higher satisfaction scores that McDonald's.  The point he is making is that as a company becomes larger the customer base becomes more diverse and it becomes more difficult to keep everyone satisfied.

3.    The third factor which is often overlooked is that single brand loyalty is no longer dominant in today's market.  When a company shares loyalty with other brands in the market, the better metric is to have your product or service as first choice. This will likely be a better measure of your performance than the customer satisfaction score by itself.

The bottom line is the customer satisfaction is not as simple as it used to be. No longer are customers uniquely loyal to only one brand. An example noted in the article is a study of the hotel industry by Deloitte that found that about 50% of spending by hotel guests does not occur with their preferred hotel brand. Certainly, it is important to maintain customer satisfaction, but the satisfaction scores by themselves are not sufficient to ensure sustainability and growth.

It is important to understand the basis of your satisfaction scores. You may want to consider how your product or service ranks in the choices be made by your customers when they are spending before you sit back and think that all is well because your satisfaction scores are high.

Thursday, April 24, 2014

Customer Zombies

Geoffrey James noted in a brief article that there are customer zombies. He sees a new zombie customer arising from sloppy selling. He noted that may be the result of qualifying a lead, failing to document the buying process, failing to cultivate the real decision-makers, failing to neutralize competitors, and/or failing to make a compelling case. On the other hand a blog from the food service community suggests that food customers can also turn into zombies.  Sales or service zombies can be found in either case.

A recent study from Colloquy found that more than 50% of customers who initiate a loyalty program failed to return.  Customers become zombies when they lose interest in the company, product or service. Customer zombies will probably exhibit the following characteristics:
1.      reduced physical contact
2.      reduced communication
3.      reduced spending
4.      reduced interest in sales promotions
5.      discontinued complaints

Of course, there are many more ways that customers can exhibit zombie characteristics. The two questions that need to be answered are;
1.      what creates customer zombies, and
2.      what do we do with customer zombies

Customers do not start out being zombies.  It takes effort or lack of effort to change a customer from one who was attracted to company, product or service. If the customer has expended the energy to seek out your company, there is potential life in the relationship between the company and the customer. When the company chooses not to build on that potential relationship or unconsciously take steps to diminish the relationship, the customer can easily take the first step to becoming a zombie. It doesn't matter if the customer has taken the first step of completing an application for a loyalty program. A loyalty program does not eliminate the possibility of a customer becoming a zombie. Zombies do not have relationships. The primary step that must be taken to eliminate the possibility of creating a zombie customer is to have an active program that starts building the customer relationship at the time of the first customer contact.
Unfortunately, some customer zombies are better off being eliminated. In other words, some customer zombies create more negative value to the company then any positive aspects of their purchases would counteract.  The best way to eliminate customer zombies is to lead those zombies to your competitors. In this way you will increase the value of your company and give your competitors a challenge they were not expecting.  It may sound harsh to suggest giving a zombie customer to a competitor, but it is the lesser evil than keeping the zombie customer for you and your company.

On the other hand, some zombies are worth investing in order to “bring them back to life.”  If the zombie customer reacts positively to a contact it may be possible to reinvigorate the relationship between the customer and the company.  The challenge for every company is to assess all their customers and decide what action to take as each zombie is identified.

The bottom line is that zombies can be found in every group of customers. The intelligent company will take the time to identify the zombies in their midst and take the appropriate action to either eliminate them or “resurrect” them. 

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.

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