I found a very interesting column in the Appleton Post-Crescent, June 18th about customers that made a lot of sense. The author of the article is John VanDriest and he offers the following identity to the rungs on the customer loyalty ladder. He sees these very discrete steps of customer involvement that he believes can/will? eventually lead to a loyal customer. I have modified the words to make it more inclusive to both products and services.
First rung - Awareness: the customer thinks - I wasn't aware of this product/service
Second rung - Comprehension - the customer thinks - This meets a lot of my needs
Third rung - Interest - the customer thinks - This is better than others I am aware of
Fourth rung - Purchase - the customer thinks - I think I'll give it a try
Fifth rung - Repeat purchase - the customer thinks - I liked it the firsst time; I think I'll try it again
Sixth rung - Advocate - the customer thinks - This is my brand of choice
Seventh rung - the customer thinks and concludes -Not only do I use this product/service, I have told everyone I know about it. Hmmm, I wonder what else they have to offer.
This ladder seems to make sense, albeit it is very simple. The key is that it gives an interesting perspective on where to spend the efforts to move the customer up to the next rung.
Tuesday, June 19, 2007
Tuesday, June 12, 2007
The Value of Data
Sometimes we forget that our current knowledge base is built on previous work of some excellent minds. I am reminded of an article in the May, 2003 issue of the Harvard Business Review entitled "Diamonds in the Data Mine" that was written by Gary Loveman. Gary was a professor at the Harvard Business School and after some consulting took over the job of CEO for Harrah's Enterainment. Since becoming the CEO of Harrahs Gary has dramatically increased the value of the corporation. That translates into having the best financial performance among all the casinos in the US entertainment industry. For example when the local market in Laughlin, Nevada increased only 1% in 2002, Harrah's Laughlin property recorded a 14% gain in revenues.
Gary's secret was to change the focus of the business from getting the most out of a customer during a visit to a new focus of persuading customers to return. This was done very methodically by mining the vast database of customer information and using that information to develop compelling customer incentives and then focus on superior customer service. At Harrahs good customer service is a daily routine. One rule that Gary implemented (and which is often the first rule broken by many businesses) is that meeting budget at the expense of service is a very bad idea. His rule is that if you are not making your numbers you don't cut back on staff.
Gary also implemented a bonus system that was NOT based on profits. It was based on a score-driven customer satisfaction measurement. The bonus plan was aimed at hourly workers and provided them with extra cash for achieving improved customer satisfaction scores. If the overall rating rose 3% or more, each employee could earn $75 to $200. Since its inception, the reward program has paid out more than $43 million in bonuses. The key is that the reward is based on the overall score so that it depends on everyone's performance. Hence, a property could achieve high profits but miss a bonus because their customer satisfaction scores were mediocre.
The bottom line is that mining data will provide the insight into how to differentiate a brand from the competition. Understanding customer characteristics is the first step in building a successful business strategy that will be successful against the competition. Gary closes with his tactic that Harrahs will just keep drilling into the customer data and making sure the regular customers are more than satisfied. Seems obvious!
Gary's secret was to change the focus of the business from getting the most out of a customer during a visit to a new focus of persuading customers to return. This was done very methodically by mining the vast database of customer information and using that information to develop compelling customer incentives and then focus on superior customer service. At Harrahs good customer service is a daily routine. One rule that Gary implemented (and which is often the first rule broken by many businesses) is that meeting budget at the expense of service is a very bad idea. His rule is that if you are not making your numbers you don't cut back on staff.
Gary also implemented a bonus system that was NOT based on profits. It was based on a score-driven customer satisfaction measurement. The bonus plan was aimed at hourly workers and provided them with extra cash for achieving improved customer satisfaction scores. If the overall rating rose 3% or more, each employee could earn $75 to $200. Since its inception, the reward program has paid out more than $43 million in bonuses. The key is that the reward is based on the overall score so that it depends on everyone's performance. Hence, a property could achieve high profits but miss a bonus because their customer satisfaction scores were mediocre.
The bottom line is that mining data will provide the insight into how to differentiate a brand from the competition. Understanding customer characteristics is the first step in building a successful business strategy that will be successful against the competition. Gary closes with his tactic that Harrahs will just keep drilling into the customer data and making sure the regular customers are more than satisfied. Seems obvious!
Saturday, June 9, 2007
Online Impact on Customer Loyalty
A survey conducted by Zoomerang in May, 2007was based on 333 respondents aged 18 or over and who shopped on line at least once in the last year. The study was conducted for WebCollage, a New York-based company tthat provides integration services to manufacturers and their retail partners.
The general finding found that 71% of the shoppers indicated they would be more likely to visit and purchase from a physical store of a retailer whose website they used for research and which provided the shopper with complete and up-to-date product information.
Some of the detailed findings of the study were:
1. 91% of the shoppers iindicated it was either "important" or "very important" for retailers to provide complete product information.
2. 44% of the shoppers believed the website did not have complete information on the products.
3. 33% of the shoppers believed the information on the website was out of date.
4. 37% of the shoppers said they would visit competitor's retail website to find the information they needed.
5. 55% of the shoppers said they would go directly to the manufacturer's website to get the information if they believed the retailer's information was inadequate.
6. 82% of the shoppers said they were more likely to return to retail websites that were able to provide complete and current information.
The bottom line is that shoppers are rewarding companies who keep their websites current and complete.
The general finding found that 71% of the shoppers indicated they would be more likely to visit and purchase from a physical store of a retailer whose website they used for research and which provided the shopper with complete and up-to-date product information.
Some of the detailed findings of the study were:
1. 91% of the shoppers iindicated it was either "important" or "very important" for retailers to provide complete product information.
2. 44% of the shoppers believed the website did not have complete information on the products.
3. 33% of the shoppers believed the information on the website was out of date.
4. 37% of the shoppers said they would visit competitor's retail website to find the information they needed.
5. 55% of the shoppers said they would go directly to the manufacturer's website to get the information if they believed the retailer's information was inadequate.
6. 82% of the shoppers said they were more likely to return to retail websites that were able to provide complete and current information.
The bottom line is that shoppers are rewarding companies who keep their websites current and complete.
Thursday, June 7, 2007
Some definitions of Loyalty
There is a lot written about customer loyalty. Businesses spend thousands, and in some cases millions of dollars to find out how loyal their customers are. The question often asked is whether or not the customer loyalty is higher or lower than this period last year. This may also be asked as "how are we doing on customer loyalty?". This troubles me since I don't think most of those who ask the question have a clear picture of what customer loyalty means.
Let me offer a few definitions to demonstrate that a loyal customer can be defined in many ways.
Definition 1: A loyal customer buys all of the products and services that you provide only from you and no other vendor.
Definition 2: A loyal customer buys most of the products and services you provide from you. However, he does buy some (but not as much) from other vendors. He gives you the lion's share of his pocket.
Definition 3: A loyal customer regularly buys from you but may buy from other in between.
Definition 4: A loyal customer is one who buys from you (but will not confirm how much) and also encourages others to also buy from you.
Definition 5: A loyal customer is one who knows you can be trusted and does not try to "nickle and dime you" on pricing.
Defintion 6: A loyal customer is one who will allow you to make a mistake and still give you his business.
The first bottom line on loyalty is that you should decide on a definition of loyalty before you can measure it.
More on this topic later.
Let me offer a few definitions to demonstrate that a loyal customer can be defined in many ways.
Definition 1: A loyal customer buys all of the products and services that you provide only from you and no other vendor.
Definition 2: A loyal customer buys most of the products and services you provide from you. However, he does buy some (but not as much) from other vendors. He gives you the lion's share of his pocket.
Definition 3: A loyal customer regularly buys from you but may buy from other in between.
Definition 4: A loyal customer is one who buys from you (but will not confirm how much) and also encourages others to also buy from you.
Definition 5: A loyal customer is one who knows you can be trusted and does not try to "nickle and dime you" on pricing.
Defintion 6: A loyal customer is one who will allow you to make a mistake and still give you his business.
The first bottom line on loyalty is that you should decide on a definition of loyalty before you can measure it.
More on this topic later.
Wednesday, June 6, 2007
The Slippery Slope for Losing Customers
Rather than logging some more statistics about customer, this will focus on the premise laid out in the June 2007 issue of the Harvard Business Review. The article that I will relate to is titled "Companies and the Customers Who Love to Hate Them." This article caught me off guard. It presents a perspective on service that I had never considered.
The premise of the article is that companies often implement policies for good reason that help them and help the customers. BUT, before you know it, the policy has morphed into a penalty to the customer and may become a signicant revenue source for the company. For example, the authors use bank credit cards to make the point that the banks initially stopped customers from exceeding their spending limit on the card. However, to make it easier for the customer, the banks allowed the spending limit to be exceeded but charged a fee. Now the fee has become significant and the banks are ending up making more profit from fees than from the interest on the charges.
The customer now sees the over-spending fee as a negative and the customers don't want to pay them. The customer base has now become vulnerable and may be willing to change to get rid of the penalties.
The slippery slope for the charge cards is that the policies that helped customers stay within their spending limits and control their spending has now become a major revenue source that the bank credit card companies are not willing to reduce or eliminate and some have even increased the penalties to increase their income causing even more customer anger.
Another point in the article relates to complicated contracts developed by companies that are intended to provide customers with choices so that they can best utilize the products or services. Companies often want to create products that give the customer a lot of choices. That is what a lot of customers want. Every service customers may not have a requirement for 2 hour response time when service is required. Therefore, service companies will offer service contracts with various response time options. However, the slippery slope is that as the contracts get more and more complicated, the customer can lose sight of what is best. Customers end up getting either much better service than the need or they don't get enough service to meet their needs.
The slippery slope for service contracts is when the company offering service contracts loses sight of the customer needs and tries to create a contract that will apply to any and all possibilities. When this happens, the customer may end up spending either too much for service or not enough. To make matters worse, the company wanting to be more productive, will want a service contract to better schule his personnel and support assets. Now the customer can feel trapped. In one sense it is in the company's best interest to be able to forecast his service expense. On the other hand, the customer is trapped into a contract.
The bottom line is to beware of what you do as a company to improve your performance and help the customer. It may morph into policies and procedures that may ultimately reduce company loyalty.
The premise of the article is that companies often implement policies for good reason that help them and help the customers. BUT, before you know it, the policy has morphed into a penalty to the customer and may become a signicant revenue source for the company. For example, the authors use bank credit cards to make the point that the banks initially stopped customers from exceeding their spending limit on the card. However, to make it easier for the customer, the banks allowed the spending limit to be exceeded but charged a fee. Now the fee has become significant and the banks are ending up making more profit from fees than from the interest on the charges.
The customer now sees the over-spending fee as a negative and the customers don't want to pay them. The customer base has now become vulnerable and may be willing to change to get rid of the penalties.
The slippery slope for the charge cards is that the policies that helped customers stay within their spending limits and control their spending has now become a major revenue source that the bank credit card companies are not willing to reduce or eliminate and some have even increased the penalties to increase their income causing even more customer anger.
Another point in the article relates to complicated contracts developed by companies that are intended to provide customers with choices so that they can best utilize the products or services. Companies often want to create products that give the customer a lot of choices. That is what a lot of customers want. Every service customers may not have a requirement for 2 hour response time when service is required. Therefore, service companies will offer service contracts with various response time options. However, the slippery slope is that as the contracts get more and more complicated, the customer can lose sight of what is best. Customers end up getting either much better service than the need or they don't get enough service to meet their needs.
The slippery slope for service contracts is when the company offering service contracts loses sight of the customer needs and tries to create a contract that will apply to any and all possibilities. When this happens, the customer may end up spending either too much for service or not enough. To make matters worse, the company wanting to be more productive, will want a service contract to better schule his personnel and support assets. Now the customer can feel trapped. In one sense it is in the company's best interest to be able to forecast his service expense. On the other hand, the customer is trapped into a contract.
The bottom line is to beware of what you do as a company to improve your performance and help the customer. It may morph into policies and procedures that may ultimately reduce company loyalty.
Monday, June 4, 2007
One impact of employee loyalty
One statistic that seems to elude many in management is the cost of employee loyalty. Rather, I think it would be better to look at it from the perspective of employee disloyalty or disengagement. A recent study by Best Practices, LLC indicated that a reduction in turnover rates of 2% can translate into an annual savings of $3 million. This is just the tip of the iceburg when the turnover is in management. In that case the figure could increase to $40 million annually.
One component of this cost is the cost to replace an employee. The Metrus Group performed a study and found the cost to replace an employee ranges from 0.41% to 2.41% of the annual salary.
Now to add to the problem, when an employee disengages himself (herself), the number of errors committed will increase by significant amounts. The notion that employees who are engaged in the company business will be much more attentive to the quality of their work than those who have disengaged themselved and are just putting in the time with little concern for error control seems to be simple logic. The Metrus study further indicated that the top performing companies spent a great deal of effort to train their employees to understand how their performance contributed to corporate performance. 75% of the high performing companies hold their managers accountable for engaging their employees. Only 35% of the average companies hold their managers accountable for engaging their employees.
The Bottom Line - employee turnover and employee engagement are critical components for a successful company. That makes dollars and sense!
One component of this cost is the cost to replace an employee. The Metrus Group performed a study and found the cost to replace an employee ranges from 0.41% to 2.41% of the annual salary.
Now to add to the problem, when an employee disengages himself (herself), the number of errors committed will increase by significant amounts. The notion that employees who are engaged in the company business will be much more attentive to the quality of their work than those who have disengaged themselved and are just putting in the time with little concern for error control seems to be simple logic. The Metrus study further indicated that the top performing companies spent a great deal of effort to train their employees to understand how their performance contributed to corporate performance. 75% of the high performing companies hold their managers accountable for engaging their employees. Only 35% of the average companies hold their managers accountable for engaging their employees.
The Bottom Line - employee turnover and employee engagement are critical components for a successful company. That makes dollars and sense!
Friday, June 1, 2007
Tech Support in perspective
Once again the Aberdeen Group has conducted a study of tech support contact centers (Best Industry Practices in Service Contact Centers and Support Desks) and provided a brief look into the support center operation that warrants careful consideration by service managers. For example, consider the following data derived from the study:
1. 85% of polled companies felt that resolving customer issues in the call center is "very" or "extremely" important.
2. 14% of these same companies were satisfied with their company's ability to achieve this goal.
3. When the best-in-class companies developed knowledge management systems and coupled that with training and follow-up procedures they resolved 63% of calls (I believe this is the first call solution statistic) versus 52% average for first call resolution for all the companies in the study.
The bottom line for this study was to demonstrate that knowledge management, training and follow-up are the keys to improved perfromance of the tech support call center.
1. 85% of polled companies felt that resolving customer issues in the call center is "very" or "extremely" important.
2. 14% of these same companies were satisfied with their company's ability to achieve this goal.
3. When the best-in-class companies developed knowledge management systems and coupled that with training and follow-up procedures they resolved 63% of calls (I believe this is the first call solution statistic) versus 52% average for first call resolution for all the companies in the study.
The bottom line for this study was to demonstrate that knowledge management, training and follow-up are the keys to improved perfromance of the tech support call center.
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