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.
Wednesday, July 28, 2010
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.
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.
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.
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.
Wednesday, June 23, 2010
Innovation
Tradition can be a constraint. When working in industry many years ago, I worked for a company that had been in business for 125 years. Needless to say, the company was loaded with "tradition." The favorite response to any desire to improve the business performance was "but we've always done it that way." I would walk down the brick-lined halls and I could feel the walls quietly saying "we've always done it that way." In many ways industry has become filled with tradition in the ways that we measure customer satisfaction and loyalty. Different measures of satisfaction and loyalty arise and become popular only to fall into the abyss of time when another measure is announced. As Yogi Berra said, it is deja vu all over again. We have been using mail surveys, phone surveys and most recently Internet surveys to gather customer information. The response rate seems to relate to the importance of the product or service to the customer. Surveys at McDonald's will not get the same response as surveys on cat-scan equipment at the hospital. Usually the survey response for the retail industry (such as McDonalds) falls far behind the response rate of B2B.
Well, a small company in Windsor, Ontario, Canada has developed an innovative method for dramatically increasing response rates for surveys. The company, Tellbob, Inc. collects instant customer feedback for retailers, businesses and institutions on web-based terminals (computer kiosks) and hand-held mobile units. The customers are instantly rewarded with either a coupon that can be used immediately or some other form of reward. The kiosk-based technology and mobile units with touch screen technology makes it easy for the customer to answer questions and submit comments before printing out a coupon.
The system gives immediate feedback on questions shortly after the point of sale. The obvious benefit is that the data is up-to-date without the time lapse that results when the customer answers a survey at some later point in time (filling out a response card or answering an Internet survey). A secondary, but no less important aspect is the survey can be modified quickly to capture customer trends or major problems before they get out-of-hand.
The preliminary results reported by one of Tellbob's customers, Marble Slab Creamery, indicated a redemption rate of 85%. Wow!!!
The bottom line is that the customer can give immediate feedback in an easy to use way and is instantly rewarded. This is definitely a step forward for the companies that deal directly with their customers face-to-face. I like it.
Well, a small company in Windsor, Ontario, Canada has developed an innovative method for dramatically increasing response rates for surveys. The company, Tellbob, Inc. collects instant customer feedback for retailers, businesses and institutions on web-based terminals (computer kiosks) and hand-held mobile units. The customers are instantly rewarded with either a coupon that can be used immediately or some other form of reward. The kiosk-based technology and mobile units with touch screen technology makes it easy for the customer to answer questions and submit comments before printing out a coupon.
The system gives immediate feedback on questions shortly after the point of sale. The obvious benefit is that the data is up-to-date without the time lapse that results when the customer answers a survey at some later point in time (filling out a response card or answering an Internet survey). A secondary, but no less important aspect is the survey can be modified quickly to capture customer trends or major problems before they get out-of-hand.
The preliminary results reported by one of Tellbob's customers, Marble Slab Creamery, indicated a redemption rate of 85%. Wow!!!
The bottom line is that the customer can give immediate feedback in an easy to use way and is instantly rewarded. This is definitely a step forward for the companies that deal directly with their customers face-to-face. I like it.
Wednesday, June 9, 2010
Measurements Raise More Questions Than Answers
As we read some of the publications that are found on the web some of the information raises interesting questions. This may be one of the most boring blogs written for The Customer Institute. I am basing my concern on a chart that had some very interesting and, in my opinion, some worthwhile information. The chart was titled "The Impact of Problem Resolution on Loyalty." The chart showed information taken from five different industries and noted how the "loyalty" changed depending whether problems left the customer satisfied, mollified or dissatisfied. It also added the score if there was no problem. The group of customers that had no problem recorded the highest level of loyalty.
I actually liked this chart and the reason I am using it as an example is that it is a great example of making a very important point but then gets lost when the scales on the axes don't follow the content of the chart. The concern I have with this particular chart is that the scale used on the y-axis of the chart is labeled "Repurchase Intention." WOW!
How do you get from measures of loyalty to repurchase intention? While it is easy to say there is some relationship between loyalty and retention, it requires a GIANT leap of faith to then put it into a chart that does not indicate loyalty on the y-axis. Some of the questions that come to mind are:
1. Is the relationship between loyalty and repurchase intention synonymous? If yes, then it is ok.
2. If they are not synonymous is there a linear relationship between the two terms?
3. If there is a known linear relationship between these two variables, I have yet to see the data and research to support it.
The bottom line is that we must always pay attention to the charts that always seem so compelling. There is no guarantee that the charts represent the information correctly. I have witnessed past transgressions that included showing a linear relationship between customer satisfaction and loyalty. While the scatter plot of the data implied a linear relationship, the r-square for the linear relationship was so low that the assumption that a linear relationship existed took a lot of courage to swallow.
We need some carefully designed experiments to demonstrate the relationships between these terms that we live with every day. What is the relationship between satisfaction, loyalty, repurchase, etc.?
I actually liked this chart and the reason I am using it as an example is that it is a great example of making a very important point but then gets lost when the scales on the axes don't follow the content of the chart. The concern I have with this particular chart is that the scale used on the y-axis of the chart is labeled "Repurchase Intention." WOW!
How do you get from measures of loyalty to repurchase intention? While it is easy to say there is some relationship between loyalty and retention, it requires a GIANT leap of faith to then put it into a chart that does not indicate loyalty on the y-axis. Some of the questions that come to mind are:
1. Is the relationship between loyalty and repurchase intention synonymous? If yes, then it is ok.
2. If they are not synonymous is there a linear relationship between the two terms?
3. If there is a known linear relationship between these two variables, I have yet to see the data and research to support it.
The bottom line is that we must always pay attention to the charts that always seem so compelling. There is no guarantee that the charts represent the information correctly. I have witnessed past transgressions that included showing a linear relationship between customer satisfaction and loyalty. While the scatter plot of the data implied a linear relationship, the r-square for the linear relationship was so low that the assumption that a linear relationship existed took a lot of courage to swallow.
We need some carefully designed experiments to demonstrate the relationships between these terms that we live with every day. What is the relationship between satisfaction, loyalty, repurchase, etc.?
Saturday, June 5, 2010
On-going Validation that Satisfaction Matters
Thee was a short blog by Kevin Thomson on Webtrends on June 2, 2010. The author pointed out that investing $100 in the S&P 10 years ago would be worth $81 today whereas that same investment in stocks from companies that scored well in the ACSI index would be worth $372.13 today.
This tracks very well against an article published in the Summer 2007 edition of The Business Renaissance Quarterly by Bleuel and Stanley titled "Customer Focus: One Key to Financial Success" that demonstrated similar results. The authors reviewed 12 industries that were represented in the ASCI index. The authors compared the best and the worst (in terms of their ASCI index) in each of the industries and found statistically significant differences (at the 5% level) for the following financial measures:
1. Cash Flow (16.4 versus 3.4)
2. Price Growth (59.7 versus 34.6)
3. Earnings Predictability (76 versus 51.8)
4. Beta as a measure of risk (0.95 versus 1.23)
In addition there was a statistically significant difference between the average ACSI scores for the best companies versus the worst companies.
The bottom line from both of these examples is that companies that have a strategy that includes a strong customer service component tend to have better financial performance than those that do not.
This tracks very well against an article published in the Summer 2007 edition of The Business Renaissance Quarterly by Bleuel and Stanley titled "Customer Focus: One Key to Financial Success" that demonstrated similar results. The authors reviewed 12 industries that were represented in the ASCI index. The authors compared the best and the worst (in terms of their ASCI index) in each of the industries and found statistically significant differences (at the 5% level) for the following financial measures:
1. Cash Flow (16.4 versus 3.4)
2. Price Growth (59.7 versus 34.6)
3. Earnings Predictability (76 versus 51.8)
4. Beta as a measure of risk (0.95 versus 1.23)
In addition there was a statistically significant difference between the average ACSI scores for the best companies versus the worst companies.
The bottom line from both of these examples is that companies that have a strategy that includes a strong customer service component tend to have better financial performance than those that do not.
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