The profitable customer is always right

The Profitable Customer - Website Large

“The customer is always right.” Although this saying has been around for more than 100 years, pretty much everyone who works in customer service knows that while most customers are always right, certain customers are often wrong.

Consider the customers who return tools, jewellery or clothing after they’ve been used. The resulting costs will either drive up the price of goods or require the retailer to cut costs for continued profitability. Nobody wins.

In the days of mom-and-pop stores when this saying was invented, customers and employees got to know and trust each other. Back then probably more customers were right. In addition, retailers could easily identify the problems.

Loss of intimacy
But with chain, big-box and online stores, the retailer-customer relationship has lost its intimacy. As a result, restrictive policies have blanketed all shoppers, rather than targeting the problem few.

Take the example of the requirement to have the original receipt and packaging and return the item within 30 days. On top of that, customers may have to stand in a long line and complete a tedious form and show ID for an in-store credit. As a customer, it is difficult not to go through this experience feeling like you have done something wrong.

This can also demoralize employees who must apply the strict policies to both right and wrong customers.

Reward profitable customers
The solution? Implement a “Profitable customer is always right” policy.

By monitoring your customers’ buying behaviours, retailers can determine who is an unprofitable customer and take steps to discourage bad behaviour. Moreover, they can identify and reward profitable customers, allowing them to shop free of restrictive policies.

Online retailers have an advantage here because they can easily track shoppers’ behaviours. Brick-and-mortar retailers can monitor customer profitability through the use of a loyalty rewards program.

The obvious rewards are the points and other perks their customers expect. In addition, they can reward profitable customers with longer money-back guarantee times with no line-ups, no forms and no hassles.

Imagine the experience of returning an item to a store, only to have someone else handle the returns process for you (a perk of your loyalty rewards card), while you are free to browse the store for your next purchase.

Imagine if your preference was to return the item through a self-serve kiosk. This could be added as an additional perk of your loyalty rewards program.

What worked for Zappos
The end result is an opportunity to remove all restrictive customer-facing policies and make life easier for your customers and your employees. Zappos made quite a name for themselves with their no questions asked 365 day return policy. They differentiated themselves from the rest by assuming the customer had good intentions when shopping and returning items, especially important when buying shoes online.

They made the return process a positive experience for customers and an integral part of their brand experience. It worked well enough that even Amazon took notice. Zappos became part of the Amazon family of companies after a $1 billion purchase back in 2009.

Fire the few bad customers
Who is going to pay for the additional cost of providing exemplary service to your loyal, profitable customers? Your unprofitable customers will. By placing restrictions on unprofitable customers, you risk losing some. But essentially “firing” customers who are costing you time and money may be good business in the long run.

If you spend less time enforcing restrictive policies and more energy on removing customer experience roadblocks to strengthening relationships with profitable customers, you can improve your bottom line. Good customers will spend money with retailers that honour and respect them at every stage of the purchase experience. That includes the experience of returning that item that just didn’t meet their needs.

Graham Kingma
Executive Vice President, Verde Group

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Verde Update: New Product Partnership Launched with LoyaltyOne Consulting

Verde Group and LoyaltyOne Consulting partner to deliver innovative Customer Experience solution

I am pleased to share exciting news. Verde Group has partnered with LoyaltyOne Consulting, a global customer loyalty consultancy specializing in the design and development of customer engagement strategies for Fortune 1000 brands, to develop an innovative new customer experience (CX) offering to add to Verde Group’s suite of services. The new offering will link the specific customer experiences most damaging to a company’s financial performance to specific shopping behaviors to gain maximum return on revenue and market share.

We recognize that in today’s hyper-competitive retail environment customer experience excellence is critical to market leadership. The offering will integrate LoyaltyOne’s behavioral analytics expertise and strategy consulting practice along with Verde Group’s 20 years of customer experience measurement and our Revenue@Risk™ methodology. The output will be a highly actionable segment-specific roadmap to create authentic customer loyalty, based on the CX improvements statistically linked to customer spend and brand equity. The data insights will have enterprise wide applicability, from corporate CX strategy development to location-specific implementation of CX delivery tactics.

We have partnered with LoyaltyOne because they are well aligned with Verde Group’s goal to provide you with experiential insights, strategies and treatments to take your business to the next level of customer engagement. Our partnership will deliver a unique blend of experiential and behavioral data insights to allow you to make business decisions differently and more powerfully than you do today.

Thank you for your interest in Verde’s work. As our offering with LoyaltyOne develops, I look forward to sharing more details on how it may be of value to you and how we can work together to achieve and sustain authentic customer loyalty.

Sincerely,

Paula Courtney, President & CEO
Verde Group
71 Ontario Street
Toronto, ON M5A 2V1

www.verdegroup.com

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About LoyaltyOne

LoyaltyOne is a global leader in the design and implementation of coalition loyalty programs, customer analytics and loyalty services for Fortune 1000 clients around the world. LoyaltyOne’s unparalleled track record of delivering sustained business performance improvement for clients stems from its unique combination of hands-on practitioner experience and continuous thought leadership. LoyaltyOne has over 20 years history leveraging data-driven insights to develop and operate some of the world’s most effective loyalty programs and customer-centric solutions.

www.loyalty.com

Which “Silent Experiences” Are Killing Your Customer Loyalty?

Which Experiences Are Your “Silent Killers”?

In my last post, ‘The Complexity of Customer Simplicity‘, I pointed out that one of the chief obstacles for companies that seek to “simplify” the customer experience is the difficulty in knowing what customers want.

Customer simplification efforts need to address the issues that aggrieve customers the most. These are the problem experiences that drive customers away – the issues that make them defect, spend less or adopt fewer products or services.

Most companies are confident that they have a sound grasp on these issues. They have millions of dollars invested in call centers that listen to customers complain every day. They monitor social media for negative brand sentiment. They have thousands of front line sales representatives interacting with customers. How could they not know what matters most to their customers?

Here’s how: The issues customers complain about most are often not the issues that have the largest impact on their loyalty and economic value.

Lethal issues are often silent

Verde analysis of customer problem experience consistently reveals a critical difference between the problems that occur most frequently and those that inflict the biggest damage on spend and retention. Call centers and social media monitoring pick up the frequent issues, but miss the “silent killer” experiences: the problems that customers don’t complain about but that drive down their economic value.

This is a huge challenge for companies seeking to simplify customer experience. Based on 15 years of research in retail, financial services, pharma, manufacturing, telecom and insurance, Verde finds that the intersection of “most frequent” problems and “most damaging” problems is generally under 50%.

Look at the chart below, which illustrates the overlap between a company’s “most frequent” problems and their “most damaging” problems. The data is from Verde research conducted in the last 18 months.

graph blog

The data shows that if these clients relied solely on “transactional” sources of customer dissatisfaction such as customer service complaint logs, negative tweets and sales call sheets, they would be ignoring 75% of the dissatisfaction drivers costing them revenue and market share. That’s a big miss.

Be proactive about understanding your “Silent Killer” experiences

A company can’t passively rely on customer complaint volume to identify their “silent killers.” These problems can only be discovered analytically by assessing the complex interactions of specific customer problem experiences with customers’ intended or actual economic behaviors.

This is not a trivial undertaking. It requires a disciplined research approach and a strategically rigorous assessment of the issues potentially hurting customer equity. But when a company unearths these silent killers the benefits are immense.

How immense? As an example: one year after making mostly tactical adjustments to customer experience processes, one of the Verde clients in the chart above realized a 9% revenue improvement in a key strategic customer segment worth over $20 million annually.

That’s a pretty high ROI on research. Clearly, knowing what really matters to your customers is worth the effort of discovery. If you want to simplify your customer experience and enjoy economic gain from doing so, don’t just ask customer service or the twittersphere what to do.

Take the time to find those silent killers. You and your customers will both be very glad you did.

Jon Skinner
Executive Vice President, The Verde Group

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