Words have value too!

A lot of time and energy is spent quantitatively analyzing the results of surveys. The survey may be based on metrics such as customer satisfaction, NPS, customer effort, or customer experience. This quantitative analysis may take on many dimensions of statistical methodology. However, the comments that are made associated with the individual scores are seldom included in the statistical quantitative analysis. There are several methodologies available for including the analysis of the comments (referred to as content analysis) with the numerical analysis.  It can be a worthwhile endeavor to compare the results of the quantitative and content analyses. 

A McKinsey study suggests that positive emotions correlate strongly with profits. The study indicated that after a positive customer experience more than 85% of the customers purchased more and after a negative experience more than 70% purchased less.

In this blog two different types of qualitative analyses are discussed; namely, descriptive measures of word usage and content analysis (which is also referred to as sentiment analysis).

Analysis of word usage includes grouping for individual words or word groups into categories. Words or word groups are usually grouped into three categories; namely, negative comments, positive comments or general comments. If the comment relates to a specific activity then those comments will be grouped by specific survey question(s). Within this grouping of word usage, descriptive measures provide a complementary presentation to the quantitative results. The descriptive measures are limited primarily to the number of comments associated with a specific question or questions on the survey.

The general hypothesis is that the descriptive measure of positive comments will be similar to that measured quantitatively. Obviously, the hypothesis is also extended to the negative remarks which should be reflected by the negative scores on the survey. This qualitative procedure does not interpret the intensity of any feelings implicit in the wording. In adition, the words will not pick up such subtleties as sarcasm or other emotions.

Content analysis (Sentiment analysis) is used to determine how customers feel with respect to a product or service. The primary purpose of sentiment analysis is to capture strong feelings that may be embedded in emotionally laden words. The two dimensions of sentiment analysis identify the feelings as being either positive or negative and the individual words or word phrases can be used to calibrate the magnitude of the sentiment.

Content analysis for product support is generally focused on the statistics associated with word usage (positive and negative). Typically the primary goal of content analysis is to validate the quantitative aspects of the survey metrics. Hence, the need for sentiment analysis is often limited. Only when word usage analysis indicates conflicting results with the quantitative analysis does sentiment analysis become a worthwhile addition to add to the perspective of the customers.

Too often surveys are conducted to understand the strengths and weaknesses of product support. The comments included with surveys are often reviewed individually but rarely analyzed in sufficient detail to provide verification of the quantitative measures taken.

The bottom line is that qualitative analysis is often overlooked when examining the relationship between customers and the products and services provided to them by the company. It may be time to reconsider what aspects of survey analysis should be included. It is likely that the best answer is both quantitative and qualitative analyses provide the greatest insight about the customers.

A note to remember is that feelings persist much longer than the score presented on the survey. An unkempt restroom at a restaurant can have a lasting effect on the customers that use it. It may be the only reason the customer never comes back. An emergency service provided beyond expectation may create a customer for life. Emotions are powerful.

Why bother with loyalty?

Some research suggests the customer loyalty may not be enough. A study was done by Timothy Keiningham, Lerzan Aksoy, Alexander Buoye, and Bruce Cooil that has some interesting findings. They performed a two-year longitudinal study of more than 17,000 consumers and examining purchases in more than a dozen industries in nine countries. According to the study, they asked a broad range of questions and purchase histories including satisfaction and loyalty measurements. Their analysis was based on the largest and most rigorous of its kind of survey at the time which indicated an interesting correlation; namely, the rank consumers assigned to a brand relative to other brands in the industry can be used as a predictor of “share of wallet.” They refer to the results of this outcome as the Wallet Allocation Rule (published by Wiley, 2015).  The details of survey methodology, survey questions, and statistical tools used in the analysis were not available.  This blog is based on their article published in the Harvard Business Review (which should be sufficient evidence that the methodology meets Harvard’s criteria for a valid survey).

Here are two of the findings that should be considered.

1.     Correlation between changes in satisfaction or intention to recommend and “share of wallet” was 0.1 – suggesting that satisfaction has little impact on changes in “share of wallet.”

2.     Correlation between changes in “share of wallet” score using their metric compared with a customer’s actual measured “share of wallet” was 0.8.

The Wallet Allocation Rule is proposed by the authors to be a better metric than customer satisfaction or NPS. In the survey they asked the consumers to assign a rank of the brand relative to other brands that the customers were using. The result was that ranking with respect to competitors was demonstrated as being more important than customer satisfaction when it comes to increasing “share of wallet.” The point they make is that the parameters which drive changes in “share of wallet” may not be the same parameters that drive the change in customer satisfaction.

This methodology is particularly useful from a sales perspective.  However, this methodology has limited usefulness when operating in a supportive environment with limited, if any, competition of other brands of products (such as occurs with product support).

The evidence from the survey provides a strong case that ranking in the marketplace has more value than customer satisfaction when compared with the competition.

A secondary consideration is the impact of ranking on loyalty. The implication of loyalty follows from focusing on the parameters that have the greatest impact on rank. If the consumers are increasingly drawn to a particular brand, it is not unreasonable to believe there will be a component of loyalty that will follow that move of higher rank with the brand.  The assumption that ranking has a greater long-term impact on loyalty that customer satisfaction needs further investigation. 

  

The bottom line is that “share of wallet” may be the best metric when focused on increasing ranking with respect to competition.  Although this study provides valid statistical support, its value is diminished when used as a metric for product support where “ranking” with competition has little meaning.

Whoever heard of bad loyalty?

Did you ever imagine that there could be an issue with customer loyalty? Could there be a time when customer loyalty may not be the best answer? When we think of customer loyalty we often think of it as a way to help a company survive difficult market conditions. We think of customer loyalty synonymously with the phrase customer retention. Many marketing personnel will support the notion that selling to a loyal customer is more cost-effective than creating a new customer.

One of my favorite phrases is that customers are what make paydays possible. So to think that customer loyalty might have a negative component is surprising. Tim Keiningham and Lerzan Aksoy wrote a note several years ago that discussed the negative component of customer loyalty.  This blog attempts to capture the essence of their note.

What we would like our loyal customers to be is customers who can clearly understand why it is important to support us during the good times and the bad. This clearly occurs most often when the customers can differentiate our company’s offerings of products and services from a competitor. They will know what the company stands for.

So, what kind of loyalty is bad loyalty? The authors have suggested that price driven loyalty is the lowest form of loyalty. They make the point that the company is not offering any differentiated value to customers. It also implies the price-driven loyalty does not bring levels of profitability that often occur when selling to loyal customers.  Many marketing studies confirm that the cost of selling to a loyal customer is usually less than the cost of acquiring a new customer. Hence a price-driven loyal customer is more likely to provide a lower margin/profit to the company.

The obvious conclusion is that price-driven loyalty is not really loyalty at all. Customer loyalty is created when the company can provide products and services that are differentiated from its competition. Thus the customer finds the value derived from this relationship better meet its needs.

The bottom line is that real customer loyalty is good loyalty only when the company provides consistent differentiation of its products and services from the competitors. The notion that price creates loyalty does not meet the standard for long-term differentiation. Yes, there is bad customer loyalty.

A win-win for Social Media

 Most companies in the US are using social media as an important channel for communicating with customers. One of the primary reasons for using the social media is to provide information regarding products and services. Several studies such as one done by Simply Measured indicates that only about one third of the companies that use social media provide a link for customer service. Other studies suggest there is an increasing trend to provide customer service through social media.

The purpose of this blog is to examine the relationship between social media and customer service. The conclusion suggests that the proper use of social media for customer service is a win for the customers and a win for the company. Hence, using the social media for customer service reduces the cost of customer service while simultaneously improves response time of customer service to customer requests.

The advantages for customer service using social media include the following:

1.                   1..     Companies do not need to have support personnel available 24/7. This will allow the company to maximize the use of support personnel and reduce idle time. This improvement in productivity should be sufficient to justify using the social media as a way to acquire customer concerns as well as accolades.

2.                2.         Companies can utilize self-help diagnostics to reduce the number of customer interactions.

3.                 3.       Companies can acquire data from the social media to improve customer satisfaction and customer loyalty.

The advantages for customers using social media to contact the company include the following:

1.       The customer can contact the company 24/7. Thus the customer is not inconvenienced by waiting until company personnel are available.

2.       The customer can resolve made his concerns through the use of self-help diagnostics.

3.       The customer can provide detail regarding the purpose of the call prior to the review by the company. This allows company respond more knowledgeably.

4.       The customers will frequently perceive the responsiveness to their concerns more positively than if they had to wait until someone is available.

Thus the customer and company each benefit by having a direct path through social media. As customers become increasingly aware of having customer service available through social media, other methods of communication will undoubtedly diminish. Companies need to examine how social media is being used by their customers. It is not unreasonable to expect that the trend for communication between the customer and the company in the social media will continue to increase.

The bottom line is that companies who provide customer service should be developing plans (if they have not already) to restructure the customer service strategy to include connection to social media. The signs are clear that customers will increasingly use the Internet to communicate with companies.

The companies who understand this trend and plan their customer service organization to address this change in the way we do business will have a distinct advantage over their competition.

Customer Experience versus Customer Service

One of the latest phrases that is being used is the customer experience. There is certainly a customer experience anytime a customer or potential customer interacts with the company. The following paragraphs outline some of the relationships between the customer experience and customer service and some of the differences between the two.

The first similarity between the customer experience and customer service is that they both address interaction between the customer and the company.

The second similarity is that both customer experience and customer service have metrics that provide management measurable perspectives that can be used for comparison and training purposes.

The third similarity is that both customer experience and customer service are major components of the business strategy of the company.

The first difference between the customer experience and customer service is that the customer experience is more proactive than customer service, which tends to be primarily reactive.

The second difference is that customer experience does not always have a customer service component; whereas customer service will always have a customer experience component.

The third difference between the customer experience and customer service is that the customer experience can be associated with every aspect between the customer and the company from initial contact with the customer to termination of the company customer relationship whereas customer service is most often limited to customers that have already established a relationship with the company.

Some will argue that the customer experience incorporates customer service.  While this is true, the customer experience is inclusive of all functions within the corporation. Hence the customer experience includes marketing to include acquisition of new customers, transforming potential customers into revenue-generating customers, providing products and services to the customers, developing and managing the financial relationship with customers, providing education and training on the use of the products or services for the customer, and finally to repair the customer relationship when one or more aspects of the relationship is not acceptable to either the customer or the company or both.  With this perspective of the breadth of the customer experience, the most obvious manager of the customer experience is the CEO. While the CEO may be involved to some extent with customer service, this is not a function that should require the complete attention of the CEO.

Using the argument in the preceding paragraph is clear that customer service is only one component of the customer experience and as such should be managed as a component of the company or as a component of one component of the business with its own metrics that support the overall business of the company.  It must also be managed tactically on a day-to-day and customer-by-customer basis while maintaining its perspective to support the overall business strategy.

The bottom line is that customer service is only one component of the company’s business strategy; whereas, the customer experience requires a broader perspective.  The customer experience requires metrics from every operation in the company that in some way interacts with the customer (from customer acquisition to termination of the customer relationship) while the customer service operation is focused primarily on customer support.  Someone in the C-level should have direct responsibility for setting and managing the customer experience.  Maximum company performance should be attained when the company assets are properly tuned to maximize the customer experience.

What Makes an Ideal Customer

Brian Woolf has authored two books on best customer marketing.  He is often referred to as the "Godfather of best customer marketing".  He says that as a general rule best customers:

1. Spend the most each year
2. Have the lowest defection rates
3. Visit the store most frequently each month
4. Buy items with a higher average price
5. Buy higher gross margin percentage items
6. Buy from more departments and categories
7. Have lower processing costs (larger order sizes, fewer questions about whre to find items, and fewer losses from bad checks).

The list is comprehensive and certainly defines the type of customer that is a good revenue source as well as a source of high margin.  It is possible that a non-loyal or unhappy customer could provide the same attributes of revenue and margin for reasons such as most convenient location, quickest shipping or the only one providing specific products or services not readily available from other sources.

This list seems to overlook a few VERY important "Rules" that in the opinion of The Customer Institute really define an ideal customer rather than a "best customer".  The following list of four customer relationship aspects do not require the previous list of 7 but, in the opinion of The Customer Institute, are sought by most companies.

1. An ideal customer will allow the company to make a mistake and understands that no company is perfect.  That customer will allow the company to correct the mistake and not penalize the company.
2. An ideal customer will recognize that ever company can only stay in business if they make a profit.  For that reason those customers will not challenge every price.   Yes, sales are important but in the long run the company can only survive by making a profit.
3. There is a bond of mutual trust between the ideal customer and the company.  Both the company and the customer know that the information shared is the truth and is accepted with that knowledge.
4. The products and services of the company fit the needs of the customer.  There is no attempt to sell either a product of service that does meet the needs of the customer.  There is no attempt to sell a product or service that does not satisfy the customer need and the customer knows that.

The bottom line is that the ideal customer is more than a source of revenue and profit.  The more important aspect of the ideal customer is one whose needs fit the products and services provided by the company.  In addition the values of the company are complementary with the customer and provides  the basis for an ethical relationship to exist.  Business is more than dollars and cents. 

Word-of-Mouth Works - A Different Perspective

Everybody knows that word-of-mouth is a major component of customer satisfaction. Most everybody thinks that most word-of-mouth is negative. There is been some interesting research done lately that gives a different perspective of word-of-mouth.

A shopper survey performed by Brick Meets Click suggests that positive experiences may occur more frequently than negative experiences. They asked 1000 grocery shoppers about their experience shopping online. For those who shop online – those who had extremely positive or negative experiences how likely they would share them with others. The results are not what I would have expected; namely, only 60% of those who had a negative experience indicated they would share that experience with others whereas 95% of those who had a positive experience indicated they would share that experience with others.

This information suggests that online shoppers are acting differently than those who are brick-and-mortar shoppers. There is no clear research at this point in time to explain the change from what has been the belief that customers are more likely to provide negative responses from negative experiences than those customers who have a positive experience. Until we understand the components that drive these responses will not be able to construct customer models that will create positive word-of-mouth and higher levels of satisfaction and loyalty.

The bottom line is that online shopping appears to have very different characteristics than face-to-face shopping. This is an exciting time when consumers are in flux in the way they shop and the way they perceive experiences while shopping.