Saturday, May 15, 2010

Loyalty from the Perspective of Human Capital

While this blog usually focuses on theory and modeling customer satisfaction and loyalty, it will, from time-to-time, discuss topics that are a little outside the normal discourse. Such is the case today where brief discussion of customer capital has some relevance to the topic of satisfaction and loyalty. This blog is the result of re-reading a book published in 1997 titled "Intellectual Capital" and was written by Thomas A. Stewart. Reviewing some of his concepts about how companies and customers can interact gave me some ideas that relate customer capital to loyalty. The idea is that both the company and its customers have knowledge that may yield greater benefit and loyalty when combined.

Successful companies will invest in employees because they know that employees are knowledge sources for the company. As employees become better trained and knowledgeable, they also become more likely to create knowledge assets, usually referred to intellectual property.

But when we examine the company from a broader perspective the question becomes can the company also form a relationship with its customers that might create knowledge assets? The obvious answer is yes. The combined resources of the company and its customers can very likely create knowledge that may provide new asset value to both. This seems to be an opportunity that many companies are missing.

It is clear that when a company solves a customer problem there may be some new knowledge created from the solution. However, these circumstances where new knowledge is created are more spontaneous that planned and rarely make it into any category of either the company or its customer that would identify the new knowledge as capital. Some of the more dramatic company-customer solutions may lead to a shared patent or copyright as well as a stronger relation with the customer. Another benefit of these new knowledge solutions might be another way to differentiate a product or service from the competition and lead to increased margins.

The bottom line is the company-customer interface is rarely seen as a place to create new knowledge capital even though the benefits are obvious and may actually lead to significant product and service breakthroughs. The challenge is to change the way we look at customers. Customers are no longer simply a source of revenue. They also bring the opportunity to create knowledge capital jointly with the company that can lead to a stronger customer relationship with the company as well as create barriers to competition that are built from the new knowledge.

Wednesday, May 12, 2010

The Other Side of the Coin

In the previous blog, it was noted that when high performance agents became at-home agents, their performance deteriorated. Customer satisfaction decreased. There appears to be another side to this situation. The inContact consulting firm has written a white paper titled "The Work-at-Home Agent model for Improved Customer Loyalty". Some of the statistics presented include:
1. A national poll conducted by inContact in 20007 showed that 46% of respondents (presumably businesses with call centers) said they were using at-home agents.
2. A study published by The Telework Coalition noted that the at-home contribution on improving the bottom line included 91% of agents were happier, had increased productivity, a higher retention rate, and reduced office space and operational expenses.
3. Frost & Sullivan report the median age of an at-home worker is 38 while the average age of an on-premises call center agent is 23 and further noted that 80% of at-home agents have some college-level education compared to 35% of agents in the on-premises centers.
4. According to a Gartner Group survey, at-home agents measured 40% more productive.
5. IDC Consulting has published results that indicate an on-premises agent costs $31 per our while an at-home agent costs $21 per hour on average.
6. The Interantional Telework Association and Council have published statistics the show there is a space savings that can reach $12,000 per employee per year. They also appear to indicate that there is a decreased cost of $25,000 per at-home employee compared to a traditional call-center agent.

These are strong statistics which suggest there may be an impact on customer satisfaction and loyalty. However, please note there were no statistics that compared customer satisfaction between at-home agents and on-premises agents.

The bottom line is that while these statistics are encouraging, there is no measured difference between the in-home agent and the on-premises agent for customer satisfaction. The Customer Institute will continue to search for studies that attempt to measure the satisfaction impact of the at-home agent. While this white paper has good content and meaningful statistics, it can only suggest that at-home agents may improve customer loyalty.

Saturday, May 8, 2010

Some Surprising Findings

Call centers represent one of the fastest growing segments of customer service. A recent blog by Carmit DiAndrea of Analytics & Client Services brought this to the attention of The Customer Institute. There has been a trend toward work-at-home agents and some of the data suggest the number of work-at-home agents is growing at the rate of 40% per year. Other studies indicate the attrition rate of work-at-home agents is much less than the typical call center. One of the prime reasons is that work-at-home agents eliminate the cost of work space. While this may be of interest to those who watch the financial aspect of call center operations, the point of this blog is that in one case study there were two surprises. These surprises lead to the question: "is this an anomaly or is there something to this that needs to be investigated."

The first surprise was the likelihood to recommend the company's services was somewhat lower for the work-at-home agent than the call center and the second surprise was that satisfaction with service provided was also lower for the work-at-home agent than the agent at the call center.

Let me enter a few caveats here; namely,
1. This is only one company that recorded these results and that company has chosen to remain anonymous.
2. The differences between the call center agents and the work-at-home agents were concluded to be different but there was no test to determine if the differences were statistically significant.
3. This was not a controlled experiment. Thus, there may be other factors that caused the differences.

The company tracked these two parameters metrics for one year and based on the data asked the following questions:
1. Why did these metrics drop when one call center sent their top performing agents home to work?
2. What would cause these top agents to struggle to perform at an average level?

While there were no clear answers to these questions, the following ideas were presented without any evidence that they may be significant:
1. How were the work-at-home agents selected? Is there a difference between agents in the call center and work-at-home agents? Does it take a different type of person?
2. Should the expectations be different for the call center agent than the work-at-home agent?
3. Can the type of training make a difference?
4. Should the management of call center agents be different than work-at-home agents?

The bottom line is that there appears to be a sea change in the work force for call centers. Some of the questions that need to be addressed are:
1. Do we need a new way to train managers to manage the work-at-home agent?
2. Do we need to train work-at-home agents differently than the call center agents?
3. Do we need new metrics for the work-at-home agent?
4. Should there be different hiring requirements for call center agents than work-at-home agents?

Since we know that call center agents have a direct impact on both customer satisfaction and loyalty, this topic needs more research. One case is not enough. We are interested in the outcome and will blog any further results that are published.

Saturday, May 1, 2010

Butterfly Customers

I recently found a book published in 1997 titled "The Butterfly Customer - capturing the Loyalty of Today's Elusive Customer." The authors Joan A Pajunen and Susan O'Dell describe what now appears to be a very different customer. They describe butterfly customers as customers who flit from one store or supplier to another with the intent of finding a lower price or some other feature. They have no loyalty to any particular company and are always in search of a better deal or a new inducement.

The reason I am attracted to this concept is that I believe I am a butterfly customer. According to the authors butterflies have developed from the proliferation of shopping environments such as shopping malls and the Internet. The small company or retail store might offer convenience but cannot match the pricing of large companies. (When I worked in industry I worked for a division of a company that held 3rd place in market share. The two companies that fought out the 1st and 2nd place could sell products for less than our manufacturing cost).

The authors provide eight characteristics of butterflies.
1. They will readily accept offers to be loyal customers.
2. They move across market segments. They will buy a luxury item and then go to a discount store to save a few dollars.
3. They are intelligent, educated and informed.
4. They are cynical and skeptical, and always read the fine print.
5. They would rather switch than fight - which may be a reason for the decline in customer complaints.
6. They consider word-of-mouth as the most reliable source of information.
7. They are not embarrassed to be butterflies.
8. They know their own worth.

The authors describe a butterfly that can be loyal. The "Monarch" is a butterfly who will return again and again once he/she trusts the company. There are five characteristics of Monarchs.
1. Monarchs always return sooner or later.
2. Monarchs often send someone in their place.
3. Monarchs always have an opinion which they will share if asked.
4. Monarchs share their homework and may share their information on what the competition is doing.
5. Monarchs are very forgiving and giving. They have elasticity in their transactions which translates that they will overlook a mistake or bad transaction.

The solution offered for building an environment to create Monarch butterflies has three dimensions; namely media, physical (bricks and mortar) and people. When these three dimensions are working together the customer can develop trust in the company. If any of these dimensions are out of sync, the trust may not develop. For example, a company that provides a media image of high quality and provides a quality product but has surly personnel will create dissonance in the mind of the customer. Loyal Monarchs can be found dealing with companies that provide consistency in these three dimensions.

The bottom line is that customers may, in fact, be changing as a result of the media. The concept of butterflies resonates with me. The concept of butterfly customers has not taken off in terms of the literature. It is always surprising how many creative ways are being developed to describe customers and segment the market and butterflies may be a new segment. It will be interesting to see whether or not butterfly customers do become a segment. In any case, the butterfly customer just may require a new definition of loyalty.

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