Wednesday, December 31, 2014
Many companies are looking for ways to delight the customer or provide the customer with a ”WOW” experience. There are many marketing research organizations that provide all sorts of metrics to demonstrate how the customer experience is improving. There are companies that believe in creating strategies on the basis of improving the customer experience and is one of the best strategies they could have to improve their business performance. Is it possible they could all be wrong?
In a survey of nearly 100,000 US consumers who participated in online interaction with a business, the researchers Matt Dixon, Nick Toman and Rick DeLisi found “there is virtually no difference at all between the loyalty of those customers whose expectations are exceeded, and those whose expectations are simply met”. They go on to note that there is virtually no statistical relationship between how a customer rated a company on a satisfaction survey and their future customer loyalty. From a statistical perspective the survey found that the correlation coefficient was just slightly greater than 0.3, which when translated suggests that there's only about a 10% information transfer between satisfaction and loyalty. That means 90% of the information that causes loyalty to change occurs from areas other than customer satisfaction.
The Customer Institute continues to focus on dissatisfaction as a key driver of loyalty/disloyalty. Satisfaction may aid in the development of loyalty but dissatisfaction has been shown to be one of the greatest drivers for disloyalty. As an example, cleanliness of a restroom in a fast food establishment will be a strong dissatisfier that will have more influence than features, such as the quality of the food or the speed of service.
Since dissatisfaction is such a dominant factor in the customer relationship, the obvious conclusion is that the best customer experience would occur when all the elements that create dissatisfaction are eliminated. The study noted above suggests that a customer service interaction is roughly 4 times more likely to drive disloyalty then to drive loyalty.
The bottom line is that the most important aspect of customer loyalty is the absence of actions that create dissatisfaction. Another way of stating this is the adage “customers may stay when satisfied but will surely leave if dissatisfied. “ The statistics prove it!
Tuesday, December 30, 2014
Customer loyalty is not always based on rational thinking. Customers often make decisions based on feelings and emotions. Psychologist Joel Weinberger, an expert in unconscious processes, is also the founder of Implicit Strategies, a consulting firm. Some of their research indicates that when you ask customers such as "Why are you loyal to the store", you may not always get an honest answer. The customers are not lying but may not be aware of some of the psychological aspects that drive their loyalty.
Weinberger suggests that loyalty can be increased when a business creates a caring relationship with its customers, which is based on a mutual basis of obligations to take advantage of the possible effects of unconscious implications of the contact. The company needs to treat its customers with respect, fairness and consistency. Similarly the customer on the other hand, needs to be respectful to the company.
Weinberger suggests that unconscious motivations often drive loyalty. While this is a relatively new idea, some of the research being done in behavioral psychology and neuroscience suggest that we often times make decisions based on feelings and emotions. There are two implications regarding loyalty that come out of this research regarding decisions based on feelings and emotions; namely,
1. First impressions by customers may find one quality appealing and customers will use that impression to extend to other qualities not connected with the initial impression. An emotional aspect of this first impression is that if a customer has a positive predisposition of the brand, then we tend to have a positive predisposition to everything else associated with.
2. Customers often place more weight on the first piece of information they receive than information contained in a later point in time. Quoting Weinberger “in everything you learn about someone or something is filtered through the first impression". Hence, all aspects of the product or service will bedirectly influenced by the first contact.
The bottom line is that there are a few steps every business should take to accommodate these feelings and emotions of custoemrs that arise from the first contact/impression.
The first obvious step is to go out of your way to offer the best possible deal to first-time customers. You want to make sure that your first impression sets the perspective that you are a good company to do business with.
The second obvious step is to make sure that your customers know you and are familiar with you.
With that second step, and the third step, which is to make sure that you and your personnel are familiar with your customers; namely, build a relationship with each one.
One caveat to remember is the fact that the best deal you offer to first-time customer should be one that you can live with on an ongoing basis. Don't price yourself out of business.
The old adage that the first impression counts has been verified by the psychological research.
Friday, October 17, 2014
In today's business climate the connected customers are seen as people who are highly educated and technologically social and mobile. A study was commissioned by Kitewheel and was conducted by the independent research firm Strategic Marketing Research, Inc. in 2014 to study ongoing efforts by companies to reach their connected customers individually. The respondents to the study included 382 US
Friday, October 10, 2014
There has been some interesting work done by Dr. Daniel Kahneman, a professor at Princeton University in the area, behavioral economics. Dr. Kahneman received the Nobel Prize in 2002 for his work in economic sciences. One of the phenomenons that he has written about, and which has been given much attention is the peak – end rule. This rule provides some excellent guidance for building customer loyalty.
In essence, the rule explains how experiences are judged with the primary focus being on intensity of emotions at their peak moments coupled with the endpoint or resolution of customer experience. What is research has pointed out is the most positive or negative emotional intensity. In the end resolution of the service experiences have a disproportionate influence on the overall experience of the customer.
What makes this insight of Dr. Kahneman particularly attractive is that when we identify the customer’s peak moments during the customer experience and then focus on how the service experience ends we will create the most impact on how the customer feels about overall experience. When these moments from managed the company can plan on increasing the lifetime value of its customers.
Thus, there are two areas that must be managed well; namely, (i) the careful identification of the customer’s peak moments (those moments with maximum intensity of emotions) and (ii) the last touch point of the service experience (the last actions that occur before the experience ends). Many companies forget the importance of the closing experience. Even though there have been many very positive aspects with the customer during the customer contact, the manner in which the call ends can negate much of the goodwill and loyalty that was created through the service experience.
The bottom line of this neuroscience approach to customer loyalty is that we now have a way to focus on those aspects of the customer’s experience which will have the greatest impact on the overall memory of the customer experience and hence should increase our ability to create and sustain loyalty.
Saturday, August 30, 2014
A study of 1500 US consumers between the ages of 18 and 65, was conducted by the Marketing Store in partnership with research vendor IPSOS. The report was published August 26, 2014. The study was titled “Living Loyal” and it focused on customers who participated in loyalty programs for travel and retail. The categories considered for this study included hotels, retail women's apparel, supermarkets, airlines, and retail sporting goods. For more detailed information, the report can be found on the internet.
There were general findings from the study that support current knowledge about the retail market. In particular, the study found that customers have on average 10 loyalty cards. Of equal importance was the finding that nearly 2/3 of the customers indicated that being loyal to a brand is not particularly important.
One of the key findings of the study was that men and women approach loyalty from a different perspective. One of the most important aspects of investigating men and women separately was the strategic implications that can be drawn from the differences when it comes to designing loyalty progams.
The study found that men see loyalty primarily as a matter of honor or commitment. Loyalty from a man's point of view relates more to the organization than to individuals. It's as if the man is signing up to join a team. Men often use logos on their apparel as a way of identifying themselves with a privileged group (those who wear products with the same logo) thus demonstrating their loyalty.
Women on the other hand, attached loyalty more to individuals within organizations. Women appear to look for highly personalized communications with an individual or individuals within the company. While trust is not a concern for men, trust and devotion are particularly important for women.
When these differences are considered, the loyalty programs for men should aim at identification of the brand with some sort of membership that would suggest some type of exclusivity. On the other hand, the loyalty program for women should be designed to create some form of one-to-one communication between the company and the individual.
The bottom line is that loyalty programs that include both men and women must consider the way that men and women view loyalty. Even though many companies see the marketplace from a unisex perspective, genetics and chemistry demonstrate that differences do exist between sexes. The companies that recognize these differences and develop their loyalty programs with these differences in mind will win.
Monday, July 28, 2014
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
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
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
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
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
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
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.