Wednesday, July 28, 2010

Satisfaction Is Not Enough

There was an interesting thought by Dick Gorelick about satisfaction that needs some further discussion. His premise is that customer satisfaction is not enough. He starts out by stating that the majority of customers that defect are satisfied. It is a follow-on of the Harvard Business Review article by Jones and Sasser titled "Why Satisfied Customers Defect."

Mr. Gorelick surveyed print buyers for American Printer, an organization that services senior executives in commercial printing. He states that the problem is that customer satisfaction is a poor metric for predicting account retention or loss.In his survey he found that fewer than 3% of survey respondent's' comments mention products or equipment. He found that the important factors in a customer relationship are memorable and unique events and services - ranging from green pretzels on St. Patrick's Day to the personality of the receptionist.

The main point of his note is his conclusion that the "silent killer" of a customer relationship occurs when it appears that all is well with the customers based on feedback that indicated no pressing problems or deficiencies. His belief is that when a company believes that just "doing more of what we've been doing" is making the incorrect assumption that customer satisfaction is a static concept. Within this assumption is another incorrect assumption that competition is not getting better.

When competition increases the company that continues to provide the same level of performance will find a year-to-year erosion of the customer base.

The bottom line is that the real issue for business is customer defections and those defections will not usually be the result of product quality or defects. Customer retention occurs when memorable events continue.

Thursday, July 15, 2010

NPS One More Time

It is with great hope that this is the last blog regarding Net Promoter Score (NPS) written by the Customer Institute. This blog has two components. The first is a short discussion of one of the problems noted by the Customer Institute and the second is a brief discussion abstracted from an article by Craig F. Kolb, a marketing research specialist with Ask Afrika, a marketing research firm in South Africa.

A concern of the Customer Institute

One of the key concerns of the Customer Institute is to understand measures of customer satisfaction and loyalty. NPS is promoted as "the fundamental perspective that every company's customer's can be divided into three categories: Promoters, Passives and Detractors. On a scale of 0 through 10 the categories are defined as Promoters score 9 or 10, Passives score 7 or 8 and Detractors score 0 through 6. By asking one simple question - How likely is it that you would recommend [Company X] to a friend or colleague? - you can track these groups and get a clear measure of your company's performance through it customer's eyes."

The calculation of NPS takes the percentage of customers who are Promoters and subtracts the percentage who are Detractors.

Here is the problem. Consider three companies A, B, C. Each has a NPS of 70%. Consider each company's score is computed as follows:
Company A has 80% Promoters and 10% Detractors for an NPS score of 70%
Company B has 75% Promoters and 5% Detractors for an NPS score of 70%
Company C has 70% Promoters and 0% Detractors for an NPS score of 70%.

Of course many combinations are available that will yield an NPS score of 70%. The business problem (perspective) is that these three companies (A, B, C) are in very different conditions and yet the executives of each company believes their company is equal in customer perception with the other two.

Concerns by Craig F. Kolb

Mr. Kolb makes a number of statements and backs them up with references that will not be repeated in this blog. The statements are listed and those interested in checking the validity can refer to his article "Re-Evaluating the Net Promoter Score" dated July 14, 2010. The concerns are:
1. The Ultimate Question is far from being ultimate and is not the best predictor of customer retention.
2. The NPS does not relate to the percentage of customers switching away from each institution. A survey of 8000 customers were asked the likelihood of recommending question along with a rival set of question is and then followed up a year later. The ultimate question was outperformed by a simple repeat purchase intention question.
3. With NPS "promoters" are not equally loyal.
4. The relationship with growth is not clear with NPS. A study by Morgan & Rego in 2006 found that NPS was not predictive of company growth rates and customer satisfaction outperformed NPS as a predictor.

The bottom line is that NPS needs to be viewed very carefully. There are a lot of questions that must be answered before companies can use the NPS score without reservation.

Tuesday, July 13, 2010

Service is Important - Proven Once Again

American Express Global Customer Service Barometer provided some results from their latest survey conducted in the United States and eleven other countries. The findings are further verification that customer service REALLY is important and plays a critical role in the success of any company. Here is a list of the major findings of the report.

1. 61% of Americans will spend an average of 9% more when they believe a company provided excellent service.
2. 91% of Americans consider the level of customer service important when deciding to do business with a company.
3. 81% of consumers are more likely to give a company repeat business after a good service experience.
4. 52% of consumers will never do business with a company again after a poor experience.
5. The three most influential factors when deciding which companies they do business with include personal experience (98%), a company's reputation (92%),and recommendations from friends and family (88%).
6. 86% of consumers report they're willing to give a company a second chance after a bad experience if they've historically experienced great customer service with that company.

The bottom line is that the research continues to show that good customer service has a financial benefit. It is not rocket science to figure out how to provide excellent service. The Customer Institute believes that good customer service starts with the CEO/Chairman.

Saturday, July 3, 2010

The New Media Versus the Old Media

The Institute of Customer Service in the UK just completed a survey of UK consumers to examine customers perception of the space on the company's site to review products and services and leave a comment versus having a Twitter account and/or a Facebook page. The results are somewhat surprising as noted below.

1. Providing space for on site reviews or products and services is five times more important to UK consumers than a company having a Twitter account.
2. Providing that same space is three times more important than offering a Facebook page or group.
3. About 41% of the UK consumers view the on site facility as a standard element of any good corporate website and 54% of the consumers said they use such facility when it is provided.
4. When age is considered the younger consumers (18-24) expect a company to run a Facebook page compared to 13% of the 35-54 age group and only 7% for the over 55 age group.

Jo Causon, Chief Executive at the Institute of Customer Service commented: "Businesses must wake up to the fact that the relationship between companies and their customer has changed irrevocably." The research also found some more areas that will need to be addressed. Some of the findings suggest better followup to customers concerns are indicated. Some of the findings are:

1. While 55% of consumers expect a response the same day to an online complaint, only 29% actually receive one.
2. Even worse, they found that 12% reported having to wait at least a month for a response.
3. The study showed that 75% of UK consumers complain when encountering a problem with goods or services, yet only 15% of face-to-face telephone complaints are able to be dealt with on the spot
4. More than 52% complaints take over a week to resolve.
5. Worst of all, 26% of the complaints remain unresolved.

The bottom line is that providing customers with a way to complain is still important and even more important companies must find a way to reduce the turnaround time to resolve complaints. These data support the research at The Customer Institute that indicate the UK has lower customer satisfaction for support of technology equipment than the US, Canada, Australia and New Zealand.

While Twitter and Facebook seem to be taking hold of the company-consumer interface, they have not yet displaced what has always been the road to customer satisfaction when a complaint is offered. It may be just a matter of time.

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