This is a brief blog and is based on an article that appeared on the web the day after I published my blog on "Can You Demand Employee Loyalty." The article was published on the net by PR-USA.net and is titled "Top Eleven Ways to Increase Employee Satisfaction and Loyalty from Allegiance, Inc."
Here is my take-away from this article (it is a condensed version of a longer article).
The positives:
1. Provides very actionable steps to take.
2. Appears to cover all aspects of employee connection with the company.
3. Includes measurement of employee engagement (rarely done).
The negatives:
1. Still treats employees as employees (does not appear to seek building a partnership between the employee and the company)
2. Not clear if there are more than 11 ways to increase employee satisfaction and loyalty - article only mentions top 11.
3. What is be missing in this condensed version on the web is any discussion of how these 11 were identified as the TOP 11 ways. (This is probably in the white paper that gives the full story).
In order to determine if this was really a condensed version I went to the website noted in the article to read the white paper. I found no website either for Allegiance, Inc. or for the white paper. So much for providing "the rest of the story."
I am always concerned when I see a headline that says "Top (anything)." I always wonder how they know these really represent the top and if so, on what basis. I think sometimes the marketing department and/or the PR department go a little over the top.
Monday, February 18, 2008
Friday, February 15, 2008
Can a Company Demand Employee Loyalty?
We know it is not enough to ask customers, "What's important?" The company must isolate the relative importance of different performance areas by determining the relationship between specific problems and customer loyalty. The key here is employees deal with customers successfully or not, and solve their problems effectively or not. So, a company must pro-actively pursue the achievement of positive, loyal trusting relationships with its internal customers. End of story!
Employees are advocates, ambassadors, champions and representatitves in delivering service and expertise to customers. A company must not leave this process to chance and hope good chemistry and good business happen. It must design operating structures and incentives to empower front-line staff to take the initiative to delight customers. Management also must take care to integrate and enervate employees in delivering value to customers, since they are most vulnerable to feeling dis-enfranchised and having low morale.
Employee Motivation
Congruent accountable organizations take seriously a number of unspoken questions. Why would employees be willing and wanting to delight the customer? Would each employee be willing to serve the customer, solve their problems and act in their best interests? The fact is, employees ask and answer the basic question, "what's in it for me personally," just as customers do. If you believe money is the only, or primary, motivator for employees to do good work, you are mistaken.
So, how can a company align its corporate goals with enlightened employee self-interest? What do employees want and how can a company earn their loyalty? Or, can a company just demand employee loyalty?
I like what Professor Robert Ewin, an associate professor of philosophy at the University of Western Autralia, noted in an article that loyalty is, among other things, an important motivation to duty. It brings into play virtues such as courage, gratitude, and justice, and involves the exercise of good judgement. Loyalty is, fundamentally, an emotional attachment. The loyal person is one who sticks through hard times, not one who cuts and runs as soon as it becomes clear times will remain hard and there may be no overall end payoff. Loyalty lies at the heart of all morality and also forms the basis of much immorality. It can make possible our trust in each other, and can be an integral part of what makes life worthwhile. However, exceesive loyalty, or loyalty to a wrong source, can lead to trouble.
Basis of Loyalty
Corporations and their managers seek loyalty from customers and employees for many good reasons. We have already discussed aspects of customer loyalty; what about employee loyalty? Companies normally expect a loyal employee to subordinate their own interests, at least sometimes and to some extent, to the corporation and/or manager. On the cynical side, if employees are loyal, they might do more for the corporation than good judgement alone would lead them to do.
The positive perspective is that loyalty to a company is based on pride in the products and quality of work produced. Such loyalty is predicated on the company's standards. It is because the company meets those standards that it receives the employee's loyalty.
A result of that loyalty and accompanying pride is the employees have a strong motivation to do their duty well. They even have a motivation to go beyond what duty requires if it properly furthers the ends of the company. Ethical management can seek loyalty furthering the interests of shareholders and customers because it opposes misdeeds and cover-ups. Personal loyalty will not be to an individual, but to the company position devoted to the corporations's proper ends which includes delivering excellent products and services.
Promoting Duty
How can companies encourage development of appropriate employee loyalty? The company can begin by ensuring every employee understands thoroughly their role in its activities and missions. Each employee must understand the overall mission of the company so they can understand the significance of their work and how it affects the excellence of the products and/or services. All tasks need to be understood in terms of personal contributions to the whole if an employee is to flourish and be willing to engage as part of the solution rather than withdraw or resist change. in that way, no one is viewed as merely a means to an end.
Because loyalty does involve subordinating one's own interests to those of the company, employees on occasion must be given credit for this and protected from exploitation. Companies expecting employees to delight customers must nurture those employees. It is inappropriate and unrealistic to expect employees will produce excellent products and/or deliver superior service because they have a job. What people seem to want most from their work is challenge, accomplishment, recognition, financial security and fun.
Companies can engender employee loyalty and trust in three essential ways:
1. Through congruent, on-going demonstration of commitment to employees as valued business partners. Loyalty develops when management commincates (speaking AND listening) with all employees forthrightly and frequently aabout the big picture.
People need to feel a sense of shared values, personal involvement, sense of purpose and appreciation for their contributions. They need to believe the company knows where it is going, then understand their role in that journey.
Behaviours and actions of senior expecutives speak much louder than words. Genuine shared decision making and plan implementation bujild confidence and credibility among employees. Front-line employees must be empowered to exercise good judgement within predetermined guidelines, and make independent decisions in solving customer problems and building loyalty and trust.
2. Through meaningful financial-, work- and family-related benefits supporting a collaborative work environment, such as profit-sharing, incentive plans rewarding indiviual effort, pay plans with similar formats, flexible benefit options and a quality work environment. Encourage employee involvement with ideas, then share monetary gains or savings achieved on a monthly or quarterly basis. Consider doing lifestyle surveys to determine what's really important to employees.
3. Through work by providing professional and personal challenge and development. Employees need a sense of being treated fairly and respectfully and a belief their careers are being supported. It's a pleasure to work where the customers smile, where they're excited about the good service and appreciate the employees.
Pleased and pleasant customers motivate employees to superior performance and high productivity. People want to be where the action is, where good things are happening, where there are resources and opportunities for the future. They want to participate in a thriving enviornment.
Professional challenge and develpment includes job enrichment, job rotation opportunities, lateral movement or an option to grow beyond a current level of competence.
Earning Loyalty
Loyalty is tied directly to the health and quality of the corporate culture. Organizations managing and treating people well, placing emphasis on future development and providing opportunities for growth, generate allegiance and respect. Building a loyal customer base must be integral to a company's business strategy. Customers are loyal to a company that continues to identify their needs, expectations and problems and then responds with the right products and services.
The same is true for employees. Involvement and commitment are hallmarks of loyal cusomers. Happy loyal employees, with excellent service attitudes will interact effectively with customers to build loyal relationshps, trust and synergy. The company must understand the inextricable link between customer retention and other aspects of the business. A company striving to earn customer loyalty and maximize profits cannot afford to base its decisions on intuition.
The company must be dedicated to continous improvement and accurate quantification of the relationships between loyalty and profits, such as critical incidents affecting loyalty; identification of customer needs; measurement, analysis and prioritization of specific corrective actions; implementation of corrective measures; and remeasurment to ensure actions were effective and meaningful.
Customer-driven empirical data quantifying the bottom-line impact of poor quality and customer problems and then identifying corporate priorities based on market and reveneue impact provides a solid basis for making strategic decisions. Firms sustaining economic success consistently seem to have corporate cultures equally valueing and balancing customer and employee needs.
THE BOTTOM LINE
A corporation that neglects its internal customers will surely falter and fail to thrive because employees ARE the corporation in the eyes of the customer.
Employees are advocates, ambassadors, champions and representatitves in delivering service and expertise to customers. A company must not leave this process to chance and hope good chemistry and good business happen. It must design operating structures and incentives to empower front-line staff to take the initiative to delight customers. Management also must take care to integrate and enervate employees in delivering value to customers, since they are most vulnerable to feeling dis-enfranchised and having low morale.
Employee Motivation
Congruent accountable organizations take seriously a number of unspoken questions. Why would employees be willing and wanting to delight the customer? Would each employee be willing to serve the customer, solve their problems and act in their best interests? The fact is, employees ask and answer the basic question, "what's in it for me personally," just as customers do. If you believe money is the only, or primary, motivator for employees to do good work, you are mistaken.
So, how can a company align its corporate goals with enlightened employee self-interest? What do employees want and how can a company earn their loyalty? Or, can a company just demand employee loyalty?
I like what Professor Robert Ewin, an associate professor of philosophy at the University of Western Autralia, noted in an article that loyalty is, among other things, an important motivation to duty. It brings into play virtues such as courage, gratitude, and justice, and involves the exercise of good judgement. Loyalty is, fundamentally, an emotional attachment. The loyal person is one who sticks through hard times, not one who cuts and runs as soon as it becomes clear times will remain hard and there may be no overall end payoff. Loyalty lies at the heart of all morality and also forms the basis of much immorality. It can make possible our trust in each other, and can be an integral part of what makes life worthwhile. However, exceesive loyalty, or loyalty to a wrong source, can lead to trouble.
Basis of Loyalty
Corporations and their managers seek loyalty from customers and employees for many good reasons. We have already discussed aspects of customer loyalty; what about employee loyalty? Companies normally expect a loyal employee to subordinate their own interests, at least sometimes and to some extent, to the corporation and/or manager. On the cynical side, if employees are loyal, they might do more for the corporation than good judgement alone would lead them to do.
The positive perspective is that loyalty to a company is based on pride in the products and quality of work produced. Such loyalty is predicated on the company's standards. It is because the company meets those standards that it receives the employee's loyalty.
A result of that loyalty and accompanying pride is the employees have a strong motivation to do their duty well. They even have a motivation to go beyond what duty requires if it properly furthers the ends of the company. Ethical management can seek loyalty furthering the interests of shareholders and customers because it opposes misdeeds and cover-ups. Personal loyalty will not be to an individual, but to the company position devoted to the corporations's proper ends which includes delivering excellent products and services.
Promoting Duty
How can companies encourage development of appropriate employee loyalty? The company can begin by ensuring every employee understands thoroughly their role in its activities and missions. Each employee must understand the overall mission of the company so they can understand the significance of their work and how it affects the excellence of the products and/or services. All tasks need to be understood in terms of personal contributions to the whole if an employee is to flourish and be willing to engage as part of the solution rather than withdraw or resist change. in that way, no one is viewed as merely a means to an end.
Because loyalty does involve subordinating one's own interests to those of the company, employees on occasion must be given credit for this and protected from exploitation. Companies expecting employees to delight customers must nurture those employees. It is inappropriate and unrealistic to expect employees will produce excellent products and/or deliver superior service because they have a job. What people seem to want most from their work is challenge, accomplishment, recognition, financial security and fun.
Companies can engender employee loyalty and trust in three essential ways:
1. Through congruent, on-going demonstration of commitment to employees as valued business partners. Loyalty develops when management commincates (speaking AND listening) with all employees forthrightly and frequently aabout the big picture.
People need to feel a sense of shared values, personal involvement, sense of purpose and appreciation for their contributions. They need to believe the company knows where it is going, then understand their role in that journey.
Behaviours and actions of senior expecutives speak much louder than words. Genuine shared decision making and plan implementation bujild confidence and credibility among employees. Front-line employees must be empowered to exercise good judgement within predetermined guidelines, and make independent decisions in solving customer problems and building loyalty and trust.
2. Through meaningful financial-, work- and family-related benefits supporting a collaborative work environment, such as profit-sharing, incentive plans rewarding indiviual effort, pay plans with similar formats, flexible benefit options and a quality work environment. Encourage employee involvement with ideas, then share monetary gains or savings achieved on a monthly or quarterly basis. Consider doing lifestyle surveys to determine what's really important to employees.
3. Through work by providing professional and personal challenge and development. Employees need a sense of being treated fairly and respectfully and a belief their careers are being supported. It's a pleasure to work where the customers smile, where they're excited about the good service and appreciate the employees.
Pleased and pleasant customers motivate employees to superior performance and high productivity. People want to be where the action is, where good things are happening, where there are resources and opportunities for the future. They want to participate in a thriving enviornment.
Professional challenge and develpment includes job enrichment, job rotation opportunities, lateral movement or an option to grow beyond a current level of competence.
Earning Loyalty
Loyalty is tied directly to the health and quality of the corporate culture. Organizations managing and treating people well, placing emphasis on future development and providing opportunities for growth, generate allegiance and respect. Building a loyal customer base must be integral to a company's business strategy. Customers are loyal to a company that continues to identify their needs, expectations and problems and then responds with the right products and services.
The same is true for employees. Involvement and commitment are hallmarks of loyal cusomers. Happy loyal employees, with excellent service attitudes will interact effectively with customers to build loyal relationshps, trust and synergy. The company must understand the inextricable link between customer retention and other aspects of the business. A company striving to earn customer loyalty and maximize profits cannot afford to base its decisions on intuition.
The company must be dedicated to continous improvement and accurate quantification of the relationships between loyalty and profits, such as critical incidents affecting loyalty; identification of customer needs; measurement, analysis and prioritization of specific corrective actions; implementation of corrective measures; and remeasurment to ensure actions were effective and meaningful.
Customer-driven empirical data quantifying the bottom-line impact of poor quality and customer problems and then identifying corporate priorities based on market and reveneue impact provides a solid basis for making strategic decisions. Firms sustaining economic success consistently seem to have corporate cultures equally valueing and balancing customer and employee needs.
THE BOTTOM LINE
A corporation that neglects its internal customers will surely falter and fail to thrive because employees ARE the corporation in the eyes of the customer.
Saturday, February 9, 2008
Curbing the "Cycle of Failure"
During the last few blogs, I have discussed a number of aspects of customer loyalty. I have shown customer satisfaction does not guarantee loyalty, described both the internal and external processes of developing customer loaylty, discussed the crucial role played by employees, and articulated the importance of have effective tracking systems. Finally, I have described some ways to build long-term relationships and trust with customers.
In the next few blogs I will explore the challenge of keeping employee loyalty high in the face of corporate downsizing and restructuring. This can be expecially critical for service-oriented companies and divisions because low morale and employee indifference can place their loyal customer bases and their business at risk.
Morale and Downsizing
In the wake of the recent rash of downsizing, employee morale has seldom been worse. The conference Board surveys continue to show that a large number of U.S. companies have taken signicant downsizing action in the last five years and indications show no sign of a let-up.
It is significant to note within a year after making downsizing cuts more than half of the companies surveyed had refilled the positions. Degration of employee morale and loyalty tend to be the first unintended consquences of a downsizing strategy. Although these consequnces do not register directly on the balance sheet, high employee morale and loyalty are often a critical corporate asset. Competitors can replicate most aspects of a company's physical assets, but what about the willingness of employees to go the extra mile and invest time and energy discovering creative ways to solve customer problems, meeting customer needs and maintaining on-going trusting realtionships?
The old implicit contract which encouraged employees to link their own futures with the future of the company is gone. Now, the company cannot count on its employees because employees cannot count on the company. Another consequence, equally difficult to quantify, is the forfeited knowledge and experience of employees whose jobs have been eliminated.
It is true that many orgaizations are significantly overstaffed. Too many people drain costs, inhibit speed and curtail innovation. A smaller number of well-trained employees, supplied with state-of-the-art technology and organized in self-managed, cross-disciplined work teams, can operate smarter, more quickly and more collaboratively when they have the authority to get a job done without constraints.
Sadly, many companies have no coherent stragic rationale for layoffs. Employees are regarded as expendable costs of production to be arbitrarily discarded. While this is not always the case, there is some truth to this in almost every downsizing effort.
The worst problem with indiscriminate layoffs is they often reflect a knee-jerk, crisis mentality reaction. More than 75 percent of all downsizing efforts in the U.S. and Europe resulted in little, if any, long-term improvement in profitability or productivity. Instead of invigorating the organization, downsizing created a phenomenon identified by Harvard Business School professors Leonard Schlesinger and James Heskett as the "cycle of failure."
The "cycle of failure"
The cycle involves a chain of consequences beginning with employee dissatisfaction and culminating in organizational inefficieny, poor service quality, high customer turnover and decreased profitability. Employee morale plummets when those surviving cutbacks grow mistrustful of management and fearful of future cuts. Normal attrition slows, cuts fail to remedy the previously existing inefficiencies within the company, and departments already having a bare-bones operation are severely penalized. As morale deteriorates, so does service quality which almost immediately translates into lost revenue.
The most powerful remedy for quickly conteracting the effects of downsizing is to devise, articulate and execute a clear, credible plan for renewed growth. Duncan Davidson and James Trice of Gemini Consulting Inc., in New Jersey, suggest three principles to guide companies successfully through the issues of downsizing.
Principle #1 First, seek a 20 to 50 percent share of narrowly defined, profitable market niches. Mastery of each segment and unrivaled insights into customers' needs and expectations leads to smarter, more effective product design, marketing and service and provides barriers to competitive threats. Employee morale will improve as satisfied customers appreciate the company's dedication to meeting their needs.
Principle #2 Second, know exactly where company money is made (by customer group, by channel, by product, by market). Do not try to achieve profitability by saving and cutting costs; focus on a strong return-on-equity strategy.
Principle #3 Finally, rightsize! Successful rightsizing is a continuous, proactive, collaborative process to synchronize constantly changing customer needs with strategic objects, work processes and organization structures.
The Bottom Line
The key take-away from this discussion is the lack of understanding of the REAL losses (knowledge, commitment and trust between employees and management) that occur during a downsizing.
In the next few blogs I will explore the challenge of keeping employee loyalty high in the face of corporate downsizing and restructuring. This can be expecially critical for service-oriented companies and divisions because low morale and employee indifference can place their loyal customer bases and their business at risk.
Morale and Downsizing
In the wake of the recent rash of downsizing, employee morale has seldom been worse. The conference Board surveys continue to show that a large number of U.S. companies have taken signicant downsizing action in the last five years and indications show no sign of a let-up.
It is significant to note within a year after making downsizing cuts more than half of the companies surveyed had refilled the positions. Degration of employee morale and loyalty tend to be the first unintended consquences of a downsizing strategy. Although these consequnces do not register directly on the balance sheet, high employee morale and loyalty are often a critical corporate asset. Competitors can replicate most aspects of a company's physical assets, but what about the willingness of employees to go the extra mile and invest time and energy discovering creative ways to solve customer problems, meeting customer needs and maintaining on-going trusting realtionships?
The old implicit contract which encouraged employees to link their own futures with the future of the company is gone. Now, the company cannot count on its employees because employees cannot count on the company. Another consequence, equally difficult to quantify, is the forfeited knowledge and experience of employees whose jobs have been eliminated.
It is true that many orgaizations are significantly overstaffed. Too many people drain costs, inhibit speed and curtail innovation. A smaller number of well-trained employees, supplied with state-of-the-art technology and organized in self-managed, cross-disciplined work teams, can operate smarter, more quickly and more collaboratively when they have the authority to get a job done without constraints.
Sadly, many companies have no coherent stragic rationale for layoffs. Employees are regarded as expendable costs of production to be arbitrarily discarded. While this is not always the case, there is some truth to this in almost every downsizing effort.
The worst problem with indiscriminate layoffs is they often reflect a knee-jerk, crisis mentality reaction. More than 75 percent of all downsizing efforts in the U.S. and Europe resulted in little, if any, long-term improvement in profitability or productivity. Instead of invigorating the organization, downsizing created a phenomenon identified by Harvard Business School professors Leonard Schlesinger and James Heskett as the "cycle of failure."
The "cycle of failure"
The cycle involves a chain of consequences beginning with employee dissatisfaction and culminating in organizational inefficieny, poor service quality, high customer turnover and decreased profitability. Employee morale plummets when those surviving cutbacks grow mistrustful of management and fearful of future cuts. Normal attrition slows, cuts fail to remedy the previously existing inefficiencies within the company, and departments already having a bare-bones operation are severely penalized. As morale deteriorates, so does service quality which almost immediately translates into lost revenue.
The most powerful remedy for quickly conteracting the effects of downsizing is to devise, articulate and execute a clear, credible plan for renewed growth. Duncan Davidson and James Trice of Gemini Consulting Inc., in New Jersey, suggest three principles to guide companies successfully through the issues of downsizing.
Principle #1 First, seek a 20 to 50 percent share of narrowly defined, profitable market niches. Mastery of each segment and unrivaled insights into customers' needs and expectations leads to smarter, more effective product design, marketing and service and provides barriers to competitive threats. Employee morale will improve as satisfied customers appreciate the company's dedication to meeting their needs.
Principle #2 Second, know exactly where company money is made (by customer group, by channel, by product, by market). Do not try to achieve profitability by saving and cutting costs; focus on a strong return-on-equity strategy.
Principle #3 Finally, rightsize! Successful rightsizing is a continuous, proactive, collaborative process to synchronize constantly changing customer needs with strategic objects, work processes and organization structures.
The Bottom Line
The key take-away from this discussion is the lack of understanding of the REAL losses (knowledge, commitment and trust between employees and management) that occur during a downsizing.
Saturday, January 12, 2008
Treat Employees as Customers
Although loyal customer relationships are strong and durable, an element of risk exists because the relationship is visible to competitors. Companies must rely on the implmentation of clearly-defined and understood systems and values.
Research shows that, for many organizations that achieve exemplary customer service and loyalty, employees are routinely and conscientiously treated with the same respect with which they are expected to treat customers. Indeed, employees are regarded as internal customers.
Managers know and heed the dictum,"if your not serving the customer, your job is to serve someone who is." Management must define service, product and service quality, and customer satisfaction and then articulate standards, expecations, outcomes and consequences clearly and specifically to employees at all levels of the company.
Employees judge the seriousness of the company's focus on service excellence based on the visible involvement of managers who set an example.
The bottom line is that the face of the company is an employee. Employees and the complementary business processes and procedures are the foundation of customer loyalty.
Front-line employees and staff support employees are only as good as helping customers and each other as policies and procedures allow them to be. Employees must be empowered to handle product problems and fix service failures at the point of occurrence. Superior service does not happen by accident - it happens when managers think and act service in obvious an subtle ways.
Customer Choice
Customers judge the success of their interaction with the company both by the outcome (whether or not their needs were met and satisfeid) and by the processes leading to that outcome (relationship). Given a choice, would the customer deal with the company again? Because customer choice is the essence of business, customer loyalty significatly influences that choice.
The best customer service companies empower employees to respond to customer needs and solve customer problems as they occur. Quick, friendly handling of complaints as they arise builds customer loyalty. The successful customer-oriented company measures, tracks and rewards customer satisfaction. They track repeat purchases, drive them and measure them. Things don't change if they're not measured.
The longer a company keeps its customer, the more the customer is worth. There's no magic solution to achieving customer satisfaction and loyalty: becoming the supplier of preference must be an absolute priority. Service excellence requires a complete organizational commitment that places the needs of customers before company policy and bureaucracy. A loyal, growing customer base is critical to any business strategy. Customer retention as a strategy for differentiation requires investment, training, internal feedback and solicitation of complaints, and high-level audits of performance.
Dr. Len Berry, professor of marketing at Texas A&M University, describes the need for "a continuing series of snapshots" that track the customer's perspecitve. He cites the need for companies to build the basic quality of reliability into their service. His research over 10 years consistently shows that reliability is the top of customers' most-wanted list. "Little else matters to your customers if your firm is unreliable" says Berry. He suggests that even at a 98 percent reliability rating, a large number of customers are still alienated. Companies must provide basic service and have the support system to keep it going.
Barry claims there are "no extravagant, unrealistic consumer expectations out there. They want you to do the damned service right the first time." He acknowledges that mistakes will happen but that the company can mitigate the damage with prompt, personal responses, conveying urgency and a desire for dialogue. Mistakes nothwithstanding, the service process is still the company's opportunity to delight customers and earn loyalty.
"one-third of all customer complaints result from customres who don't know how to use a product" according to John Goodman, President of TARP. If you add in people who bought the product for the wrong reason and those who had mistaken notions about what a product would do, he says, it could be even worse than that. Goodman suggests that companies have two ways to deal with ignorance and keep the customers satisfied; educate customers or "idiot-proof" the products. Proactive customer education and shaping customer expectations can reduce complaints dramatically. This means telling the customer exactly what the product will do, not what the advertisements say it can do.
Up-front education gives customers realistic expectations about whatever type of product or service they purchase. Shaping expectations is one of the most important aspects of keeping customers loyal. If customrs know what they want, know what they're getting and actually get what was promised, strong customer loyalty has been built.
Another opportunity for proactive education occurs after customers buy a product, but before they've misused or broken it. User support line provide a life-line to keeping customers and developing loyalty. The bad news is that the company responds to the customer after the problem has occurred.
The good news is that the company deals with customers at their most trainable moment, when they're in the middle of a problem and want a solution. Customer education and training contribute to stability, enhance the relationship and improve customer loyalty. Clearly it is in the company' s best interests to help customers run their businesses more efficiently.
Following up with customers benefits the company in two ways: it tells customers you are still there and that you care about them and it gives the company some indication of the success of its customer education efforts.
Performance improvement can engender a false sense of securiy because today's companies are chasing a moving target. What really matters is the ability of the company to improve at a rate faster than the competition and sustain that rate of improvement.
Whereas everyone agrees that the customer is king, many companies do not seem concerned with the satisfaction of other stakeholder groups such as employees, owners, suppliers and regulators. A company's ability to balance and mutually and sumulataneously satisfy the needs of its principal stakeholders may mean the difference between success and failure.
Research shows that, for many organizations that achieve exemplary customer service and loyalty, employees are routinely and conscientiously treated with the same respect with which they are expected to treat customers. Indeed, employees are regarded as internal customers.
Managers know and heed the dictum,"if your not serving the customer, your job is to serve someone who is." Management must define service, product and service quality, and customer satisfaction and then articulate standards, expecations, outcomes and consequences clearly and specifically to employees at all levels of the company.
Employees judge the seriousness of the company's focus on service excellence based on the visible involvement of managers who set an example.
The bottom line is that the face of the company is an employee. Employees and the complementary business processes and procedures are the foundation of customer loyalty.
Front-line employees and staff support employees are only as good as helping customers and each other as policies and procedures allow them to be. Employees must be empowered to handle product problems and fix service failures at the point of occurrence. Superior service does not happen by accident - it happens when managers think and act service in obvious an subtle ways.
Customer Choice
Customers judge the success of their interaction with the company both by the outcome (whether or not their needs were met and satisfeid) and by the processes leading to that outcome (relationship). Given a choice, would the customer deal with the company again? Because customer choice is the essence of business, customer loyalty significatly influences that choice.
The best customer service companies empower employees to respond to customer needs and solve customer problems as they occur. Quick, friendly handling of complaints as they arise builds customer loyalty. The successful customer-oriented company measures, tracks and rewards customer satisfaction. They track repeat purchases, drive them and measure them. Things don't change if they're not measured.
The longer a company keeps its customer, the more the customer is worth. There's no magic solution to achieving customer satisfaction and loyalty: becoming the supplier of preference must be an absolute priority. Service excellence requires a complete organizational commitment that places the needs of customers before company policy and bureaucracy. A loyal, growing customer base is critical to any business strategy. Customer retention as a strategy for differentiation requires investment, training, internal feedback and solicitation of complaints, and high-level audits of performance.
Dr. Len Berry, professor of marketing at Texas A&M University, describes the need for "a continuing series of snapshots" that track the customer's perspecitve. He cites the need for companies to build the basic quality of reliability into their service. His research over 10 years consistently shows that reliability is the top of customers' most-wanted list. "Little else matters to your customers if your firm is unreliable" says Berry. He suggests that even at a 98 percent reliability rating, a large number of customers are still alienated. Companies must provide basic service and have the support system to keep it going.
Barry claims there are "no extravagant, unrealistic consumer expectations out there. They want you to do the damned service right the first time." He acknowledges that mistakes will happen but that the company can mitigate the damage with prompt, personal responses, conveying urgency and a desire for dialogue. Mistakes nothwithstanding, the service process is still the company's opportunity to delight customers and earn loyalty.
"one-third of all customer complaints result from customres who don't know how to use a product" according to John Goodman, President of TARP. If you add in people who bought the product for the wrong reason and those who had mistaken notions about what a product would do, he says, it could be even worse than that. Goodman suggests that companies have two ways to deal with ignorance and keep the customers satisfied; educate customers or "idiot-proof" the products. Proactive customer education and shaping customer expectations can reduce complaints dramatically. This means telling the customer exactly what the product will do, not what the advertisements say it can do.
Up-front education gives customers realistic expectations about whatever type of product or service they purchase. Shaping expectations is one of the most important aspects of keeping customers loyal. If customrs know what they want, know what they're getting and actually get what was promised, strong customer loyalty has been built.
Another opportunity for proactive education occurs after customers buy a product, but before they've misused or broken it. User support line provide a life-line to keeping customers and developing loyalty. The bad news is that the company responds to the customer after the problem has occurred.
The good news is that the company deals with customers at their most trainable moment, when they're in the middle of a problem and want a solution. Customer education and training contribute to stability, enhance the relationship and improve customer loyalty. Clearly it is in the company' s best interests to help customers run their businesses more efficiently.
Following up with customers benefits the company in two ways: it tells customers you are still there and that you care about them and it gives the company some indication of the success of its customer education efforts.
Performance improvement can engender a false sense of securiy because today's companies are chasing a moving target. What really matters is the ability of the company to improve at a rate faster than the competition and sustain that rate of improvement.
Whereas everyone agrees that the customer is king, many companies do not seem concerned with the satisfaction of other stakeholder groups such as employees, owners, suppliers and regulators. A company's ability to balance and mutually and sumulataneously satisfy the needs of its principal stakeholders may mean the difference between success and failure.
Thursday, January 10, 2008
Customer Service REALLY is Important
Thank you Accenture. They just published the report "Customer Satisfaction in the Multi-polar World: Accenture 2007 Global Customer Service Satisfaction Survey Report." The survey included 3552 consumers in Australia, Brazil, Canada, France, the United Kingdom and the United States. The survey was taken in July and August 2007.
The results paint an obvious picture. Here are some of the key findings noted in the report:
1. Customer expectations are rapidly increasing. 52% of the repondents indicated they have higher expectations for service quality today than 5 years ago and 33% have higher expecatations than 1 year ago.
2. Customer defections are serious. Customer service is the leading reason why customers choose to find a new provider. One supporting statistic is that 77% of the respondents are willing to stay with a company that provides a positive service experience.
3. Service quality is poor. 88% of customers reported they have suboptimal customer service experiences. During the past year 59% of the respondents indicted they have switched service providers because of a bad service experience. From the positive side, 5% of the respondents describe service as excellent but only 3% report that their expectations are always met.
One very important conclusion that was drawn by Accenture is that companies seem to be refusing to recognize the expanding divide between what customers want and how companies actually meet (or don't meet) their customers' needs.
I like the following phrase in the report:
Internal statisfaction metrics don't convey the gravity of these declines in satisfaction as expressed directly by consumers reponding to this survey. Companies will need to ensure their reporting and metrics provide a reliabile view into this issue and how their responses are affecting it.
I wonder how many of the companies whose metrics are not helping them are committed to using NPS?
The results paint an obvious picture. Here are some of the key findings noted in the report:
1. Customer expectations are rapidly increasing. 52% of the repondents indicated they have higher expectations for service quality today than 5 years ago and 33% have higher expecatations than 1 year ago.
2. Customer defections are serious. Customer service is the leading reason why customers choose to find a new provider. One supporting statistic is that 77% of the respondents are willing to stay with a company that provides a positive service experience.
3. Service quality is poor. 88% of customers reported they have suboptimal customer service experiences. During the past year 59% of the respondents indicted they have switched service providers because of a bad service experience. From the positive side, 5% of the respondents describe service as excellent but only 3% report that their expectations are always met.
One very important conclusion that was drawn by Accenture is that companies seem to be refusing to recognize the expanding divide between what customers want and how companies actually meet (or don't meet) their customers' needs.
I like the following phrase in the report:
Internal statisfaction metrics don't convey the gravity of these declines in satisfaction as expressed directly by consumers reponding to this survey. Companies will need to ensure their reporting and metrics provide a reliabile view into this issue and how their responses are affecting it.
I wonder how many of the companies whose metrics are not helping them are committed to using NPS?
Saturday, December 22, 2007
Don't Be Stupid - You Can't Earn Loyalty
I have finally reached the point where I must respond to the never ending blogs and pronouncements about new ways to "earn" customer loyalty. The fact is you CAN"T earn customer loyalty. It is IMPOSSIBLE!!!
Start with the definition for loyalty as found in Webster's Encyclopedic Unabridged Dictionary of the English Language:
loyalty - 1. the state or quality of being loyal; faithfulness to commitments or obligations. 2. faithful adherence to a sovereign or to a government, or to a leader, cause or the like. 3. an example or instance of faithfulness, adherence or the like.
Under the heading of synonyms there are the following:
1. Loyalty, alligiance, fidelity all imply a sense of duty or of devoted attachment to something or someone.
2. Loyalty connotes sentiment and the feeling of devotion which one holds for one's country, creed, family, friends, etc.
I think those who use the phrase building loyalty really mean building trust. Again referring to the same dictionary for defintion of the word trust:
trust - 1. reliance on the integrity, strenth, ability, surity, etc. of a person or thing; confidence. 2. confident expectation of something; hope. 3. confidence in the certainty of future payment for property or goods received; credit. 4. one on whom or that on which one relies; God is my trust. 5. the condition of one to whom something has been entrusted. ...
Under the heading of synonyms there are the following:
1. certainty, belief, faith. Trust, assurance, confidence imply a feeling of security.
2. Trust implies instinctive unquestioning belief in and reliance upon something: to have trust in one's parents.
I hope that by examining these two definitions, the distinction is clear. Loyalty is derived from trust. Therefore, the way customer loyalty increases is through increased trust by the customer in the company's products and services.
The bottom line is that the words loyalty and trust need to be used correctly so that business plans can be developed to solve the correct problem. If it is the desire of a company to increase customer loyalty, then the challenge is to create programs and processes that will build trust with the customer.
Remember, you can't earn loyalty BUT you can earn trust!
Start with the definition for loyalty as found in Webster's Encyclopedic Unabridged Dictionary of the English Language:
loyalty - 1. the state or quality of being loyal; faithfulness to commitments or obligations. 2. faithful adherence to a sovereign or to a government, or to a leader, cause or the like. 3. an example or instance of faithfulness, adherence or the like.
Under the heading of synonyms there are the following:
1. Loyalty, alligiance, fidelity all imply a sense of duty or of devoted attachment to something or someone.
2. Loyalty connotes sentiment and the feeling of devotion which one holds for one's country, creed, family, friends, etc.
I think those who use the phrase building loyalty really mean building trust. Again referring to the same dictionary for defintion of the word trust:
trust - 1. reliance on the integrity, strenth, ability, surity, etc. of a person or thing; confidence. 2. confident expectation of something; hope. 3. confidence in the certainty of future payment for property or goods received; credit. 4. one on whom or that on which one relies; God is my trust. 5. the condition of one to whom something has been entrusted. ...
Under the heading of synonyms there are the following:
1. certainty, belief, faith. Trust, assurance, confidence imply a feeling of security.
2. Trust implies instinctive unquestioning belief in and reliance upon something: to have trust in one's parents.
I hope that by examining these two definitions, the distinction is clear. Loyalty is derived from trust. Therefore, the way customer loyalty increases is through increased trust by the customer in the company's products and services.
The bottom line is that the words loyalty and trust need to be used correctly so that business plans can be developed to solve the correct problem. If it is the desire of a company to increase customer loyalty, then the challenge is to create programs and processes that will build trust with the customer.
Remember, you can't earn loyalty BUT you can earn trust!
Thursday, December 20, 2007
Five Stages of Customer Bonding
Customer-driven quality improvement is critical to long-term profitability. Increased competition and concern over diminishing market share motivates companies to invest in their futures.
Customer loyalty develops from personal relationships and trust between the company and the customer over time. This includes keeping customers involved throughout the product lifecycle as well as developing products and/or services to meet changing customer needs and desires.
This bond results from effective one-on-one communication, mutually-beneficial interaction, the company's genuine interest and involvement in the customer's life and lifestyle, a combination of customer allegiance and company advocacy, and a shared sense of purpose. Several years ago Richard Cross identified five important aspects of customer bonding; namely, awareness, identity, relationship, community and advocacy. I think these five aspects are still applicable and hence have described them in some detail below.
AWARENESS
The art of earning customer "share-of-mind" involves creating an impression of personal identitication with the company's products and/or services. This first stage, awareness, represents the weakest aspect of a relatioinship because it is non-interactive and depends entirely on the customer's perception. Madison Avenue advertising agencies know that because nothing is required of a customer at this point, advertising must capture the atention and stir the emotions of prospective customers, without a clear understanding of who they are.
A company does not know the basis for a customer's positive or negative reaction to a communication or advertising message at this stage of the relationship.
IDENTITY
The identification stage occurs when a potential customer asks the question, "What's in it for me?" A customer idnetifies a product of service as meeting one or more important personal needs, such as self-fulfillment, status, or belonging. A customer may perceive the company as having values and preferences similar to his own and begin to form a relationsip with the company.
At this stage, customer and company interaction is limited to one-way communication, so the customer's perception is his reality because no feedback loop exists. Because an impression results from minimal information, the "relationship" remains extremely tenuous and a cusotmer can be easily swayed. Druing this initial stage of contact, the goal is to entice potentional "best" customers to take action relative to using a company's products and/or services.
RELATIONSHIP
At this stage, the customer receives the benefit of products and/or services tailored specifically to his individual needs (at least as nearly as the company can provide). Once a customer interacts with the company, repeated experiences of individual customer satisfaction take on significant importance.
Thus, customer satisfaction is an on-going process rather than a single discrete event. Customer satisfaction is not a goal, it is an obligation. Customers expect that products will work and that they will receive good service. Customer delight results largely from how a product is sold and is serviced as well as how the company responds to inquiries and solves problems.
Customer retention is critical becuse it typiclly costs five times as much to attract a new customer as it does to retain and existing one. (This statistic first came to me through stories by Tom Peters author of "In Search of Excellence" and several of his follow-on books). I do not have evidence that this statistic is true, but it seems reasonable and it seems to be used by many who tout the value of customer retention. In any case, focusing on product and service qualtiy provides an effective customer retention strategy and barrier to competitive threats.
One important aspect of a successful customer-driven marketing strategy is the use of comprehensive and accurate databases to frequently market products and services to specific customers. Because the process of relationship-building involves direct and intereactive communication, the customer learns that the company recognizes his specific interests and values his business.
Service, a second critical element of an effective customer retention strategy, relies on the premise that each employee within the company must recognize that if he if not directly helping a customer, then he is helping an employee who is.
As bonding occurs, the customer has an investment in participating, maintaining and perpetuating the relationship. A customer requires awareness and idnetification with potential personal benefits of the company's products and/or services prior to investing time and energy in a relationip with the company. By the time the intersaction develops to this level of satisfaction, loyalty and trust begin to accrue.
COMMUNITY
Customer bonding requires high levels of effective interaction. When the company integrates its products and services into the life and lifestyle of its customers, communal bonding occurs. The community relationship stage achieves an integration of values, preferences and priorities between customer and company where each derives mutual benefit. Companies that achieve this type of loyalty consistently delight their customers.
Depending on the type and frequency of interaction, loyal customers are more resilient to competitive threats and/or higher price points because of their perception of shared values.
ADVOCACY
At this advanced level of custoemr bonding, the company services as an advocate for the customer, and the customer shows an allegianfce to the company; word-of-mouth advertising flourishes. Because the company now can encourage buyer-get-a-buyer programs through appropriate incentives, it must be prepared to follow through professionally to make new recruits feel as valued as the advocates who recommended them.
The bottom line is that loyalty results from customer bonding and does not automatically follow from successive customer interactions without a plan to build the customer bond. Building the bond with the customer is one of the most often overlooked aspects of customer loyalty.
Customer loyalty develops from personal relationships and trust between the company and the customer over time. This includes keeping customers involved throughout the product lifecycle as well as developing products and/or services to meet changing customer needs and desires.
This bond results from effective one-on-one communication, mutually-beneficial interaction, the company's genuine interest and involvement in the customer's life and lifestyle, a combination of customer allegiance and company advocacy, and a shared sense of purpose. Several years ago Richard Cross identified five important aspects of customer bonding; namely, awareness, identity, relationship, community and advocacy. I think these five aspects are still applicable and hence have described them in some detail below.
AWARENESS
The art of earning customer "share-of-mind" involves creating an impression of personal identitication with the company's products and/or services. This first stage, awareness, represents the weakest aspect of a relatioinship because it is non-interactive and depends entirely on the customer's perception. Madison Avenue advertising agencies know that because nothing is required of a customer at this point, advertising must capture the atention and stir the emotions of prospective customers, without a clear understanding of who they are.
A company does not know the basis for a customer's positive or negative reaction to a communication or advertising message at this stage of the relationship.
IDENTITY
The identification stage occurs when a potential customer asks the question, "What's in it for me?" A customer idnetifies a product of service as meeting one or more important personal needs, such as self-fulfillment, status, or belonging. A customer may perceive the company as having values and preferences similar to his own and begin to form a relationsip with the company.
At this stage, customer and company interaction is limited to one-way communication, so the customer's perception is his reality because no feedback loop exists. Because an impression results from minimal information, the "relationship" remains extremely tenuous and a cusotmer can be easily swayed. Druing this initial stage of contact, the goal is to entice potentional "best" customers to take action relative to using a company's products and/or services.
RELATIONSHIP
At this stage, the customer receives the benefit of products and/or services tailored specifically to his individual needs (at least as nearly as the company can provide). Once a customer interacts with the company, repeated experiences of individual customer satisfaction take on significant importance.
Thus, customer satisfaction is an on-going process rather than a single discrete event. Customer satisfaction is not a goal, it is an obligation. Customers expect that products will work and that they will receive good service. Customer delight results largely from how a product is sold and is serviced as well as how the company responds to inquiries and solves problems.
Customer retention is critical becuse it typiclly costs five times as much to attract a new customer as it does to retain and existing one. (This statistic first came to me through stories by Tom Peters author of "In Search of Excellence" and several of his follow-on books). I do not have evidence that this statistic is true, but it seems reasonable and it seems to be used by many who tout the value of customer retention. In any case, focusing on product and service qualtiy provides an effective customer retention strategy and barrier to competitive threats.
One important aspect of a successful customer-driven marketing strategy is the use of comprehensive and accurate databases to frequently market products and services to specific customers. Because the process of relationship-building involves direct and intereactive communication, the customer learns that the company recognizes his specific interests and values his business.
Service, a second critical element of an effective customer retention strategy, relies on the premise that each employee within the company must recognize that if he if not directly helping a customer, then he is helping an employee who is.
As bonding occurs, the customer has an investment in participating, maintaining and perpetuating the relationship. A customer requires awareness and idnetification with potential personal benefits of the company's products and/or services prior to investing time and energy in a relationip with the company. By the time the intersaction develops to this level of satisfaction, loyalty and trust begin to accrue.
COMMUNITY
Customer bonding requires high levels of effective interaction. When the company integrates its products and services into the life and lifestyle of its customers, communal bonding occurs. The community relationship stage achieves an integration of values, preferences and priorities between customer and company where each derives mutual benefit. Companies that achieve this type of loyalty consistently delight their customers.
Depending on the type and frequency of interaction, loyal customers are more resilient to competitive threats and/or higher price points because of their perception of shared values.
ADVOCACY
At this advanced level of custoemr bonding, the company services as an advocate for the customer, and the customer shows an allegianfce to the company; word-of-mouth advertising flourishes. Because the company now can encourage buyer-get-a-buyer programs through appropriate incentives, it must be prepared to follow through professionally to make new recruits feel as valued as the advocates who recommended them.
The bottom line is that loyalty results from customer bonding and does not automatically follow from successive customer interactions without a plan to build the customer bond. Building the bond with the customer is one of the most often overlooked aspects of customer loyalty.
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