NPS is Just Part of a Much Larger Toolkit

The Verde Group Customer Experience Risk

The Net Promotor Score (NPS) is a loyalty metric that measures how willing customers are to recommend a company’s offerings to others. As an alternative to traditional customer satisfaction research, it’s widely believed to reflect revenue performance.

Virtually every Fortune 500 company uses the Net Promoter Score (NPS) to measure customer loyalty — if you don’t believe me, check out how they stack up here. Most invest heavily in improving their scores, and many tie executive bonuses to the results.

There’s only one problem. Customer satisfaction in general and NPS, in particular, are poor predictors of customer behavior. And that means that a good NPS score does not necessarily translate into customer loyalty, increased revenues, or a bigger market share.

The problem with NPS scores
While NPS can serve as a decent barometer of customer satisfaction, it doesn’t give you the bigger picture. It doesn’t provide the backstory of why a respondent would or would not recommend your company.

That story — particularly the negative experiences that frame it —  is what really helps predict future customer behavior. The simplicity of NPS can at times, overlook the complexity of company-customer relationships.

Some companies are lulled into a false sense of security by their NPS scores. If they see a year-over-year improvement, they celebrate, but don’t sense the potential dangers that could be lurking right beneath the surface.

This is primarily due to the fact that NPS is a description, not a cause, and measures an outcome without a deep understanding of the actions leading to this outcome. Alone, NPS does not tell you what you need to do to change the rating outcome.

For example, you can have great NPS scores and have flat or declining revenues. You can have a strong NPS result right now, but be ripe for disruption — think of what Uber and Lyft have done to the taxi business.

Because NPS scores don’t provide a complete picture of the relationship you have with your customer and their loyalty to you, you can’t afford to rely too much on those scores.

Still, NPS is not dead, despite reports to the contrary. As the American Marketing Association states, NPS does have its benefits — it’s simple, its findings are easy to understand, and it can be benchmarked.

However, the AMA acknowledges that employing NPS may create tunnel vision for companies, and recommends that it ‘shouldn’t stand alone.’

And that’s the key. NPS represents only a single data set in measuring the customer experience. Customer surveys are another, and inbound feedback provides still more. In isolation, each is incomplete, and almost sure to offer only a partial (and potentially misleading) picture. Taken together, they form a more detailed view of the customer.

However, companies need to dig even deeper to understand customer experiences, particularly the negative ones. Customer response to negative interactions is strong, and those customers with negative perceptions are more likely to take action, such as shopping somewhere else and telling their friends.

Get out your toolkit
With NPS only partially measuring customer sentiment, companies must ensure they have additional, complementary processes in place to help further develop the customer insights they require.

Use Multiple Inbound Data Sources
Call centers, sales, social media — all provide excellent sources of inbound customer feedback. Organizations need to take a broad, holistic approach when managing these different ‘listening posts,’ consolidating, assessing, and actioning the collected data as a whole.

Be Proactive
As I’ve written about previously, many customers won’t share their negative experiences when providing inbound feedback. Companies need to reach out to those customers through interviews or other live interactions — building trust through conversation to uncover, acknowledge and explore underlying customer issues.

Deeply Understand Problem Experiences
Companies need a purposeful and deliberate method of getting an understanding of problems. Our research shows that problem experiences negatively impact the likelihood to recommend a retailer.

We also know that one out of two online shoppers will experience a problem before they even make a purchase. Ongoing measurement and tracking of problem experiences is a valuable and impactful tool in understanding the drivers behind the NPS ratings.

Take Action
Once companies have discovered and acknowledged a customer problem or negative experience, they need to resolve it as quickly as possible. Customers expect a resolution and aren’t concerned if that fix falls within your company policy or is expensive.

Following up post-resolution is also critical. You need to confirm that the problem is resolved and the customer is happy — from their point of view. We see time and time again that when a problem is resolved to the customer’s satisfaction, loyalty and spend actually increase more significantly than if there were no problem experiences at all.

It appears the debate over the value of NPS will continue for some time. Is NPS the best way to measure customer satisfaction, or is it hopelessly flawed?

Our position is it’s neither. It’s just another tool used to capture and assess customer satisfaction. Used alone, it’s flawed and incomplete. Deployed with the rest of the toolkit, it can provide valuable insight into the overall customer experience.

Michael Tropp is Vice President, Business Development at The Verde Group.

 

 

Inbound Feedback is Only One Piece of the Customer Experience Puzzle

The Verde Group customer insightCompanies who rely solely on inbound feedback to gain a greater understanding of their customers’ experiences may be missing the opportunity to solve for the problems that are most related to customer loyalty.

Most organizations understand the importance of focusing on negative customer experiences. Customers who’ve had problems or are unhappy are more likely to change their shopping behavior, and also to tell others about their experience — both to the detriment of their current provider.

Many businesses rely on inbound mechanisms to capture that negative feedback. They’ve invested a great deal in creating multiple, effective ‘listening stations’ to gather feedback — call centers, sales team, websites, programs, market research and social media.

These companies believe that, with multiple channels harvesting customer inputs, they’re sure to understand customer issues and negative experiences throughout the customer journey.

Unfortunately, our research doesn’t bear this out. According to Verde Group findings, more than two-thirds of customers (67%) experience problems and never contact the company about them. Instead, they’ll choose to explore other options and often take their business elsewhere and you’ll be left wondering why you lost a perfectly good customer.

Even if customers do call in with problems, they may only identify issues they think you can fix. Worse, the ones they tell you about may not have a significant revenue impact on your business.

You may spend time and resources addressing issues that have a minimal effect on your bottom line while having no real window into the negative experiences that are making customers walk away — and taking their wallets with them.

Luckily, by looking beyond inbound customer feedback, companies can gain a better understanding of customer issues while also strengthening relationships with those customers.

Get proactive
Reaching out and asking for customer feedback can make a world of difference in the quality of the responses you receive. If they believe your intentions are genuine, many customers will open up about their experiences, both good and bad.

There are a number of ways to do this. Many companies will send out an email survey (or better, a personalized email) after a customer engagement. Some will initiate a call-back to the customer after a purchase is complete.

Even better, develop a plan to reach out to the customers you haven’t heard from in a while. They will offer a unique and valuable perspective compared to new customers or customers who have proactively contacted you.

Where viable, a more in-depth, personal interview can yield the most valuable feedback. A conversation gives the customer the opportunity to be more candid and detailed in describing their experiences with your company.

Feedback gathered from proactive outreach can provide your cross-functional partners with a wealth of information. Socializing these findings is a great way to drive customer centricity within your organization.

Fix and follow up
When a customer does share a problem or a negative experience, your next move is critical. You need to resolve the customer issue, and in such a way that the customer is happy with both the outcome and the interaction.

The fix may fall outside of policy, and in some cases may be expensive, but wherever possible, resolving the customer problem should be your prime consideration.

The next step is equally important — following up. From a customer perspective, there’s nothing worse than thinking your issue is resolved, only to find that it’s not.

Following up to confirm you’ve addressed problems to the customer’s satisfaction will ensure there are no outstanding issues, and create a lasting, favorable impression with the customer.

Many customer service centers send a survey for feedback immediately following an interaction. At times, this can provide a false positive. The customer believes that the problem was fixed only to realize a week later that it wasn’t fully resolved. Consider the timing of the customer service survey to ensure the customer has had time to fully implement the fix or solution.

Revisit your inbound efforts
While inbound feedback alone does not provide a complete picture of the customer experience, it is an excellent source of information. As part of your overall initiative, you should ‘re-tune’ your inbound process to ensure you’re collecting the best feedback possible.

One way to do this is by reframing the questions you’re asking the inbound customer. Rather than ‘are you satisfied?’ consider ‘what didn’t you like about your interaction?’ or ‘what could we have done better?’ You want to develop your questions in a way that provides actionable feedback. Feedback is useless if you can’t drive action to fix the issue.

Once uncovered through your inbound efforts, any issues identified can be managed with the ‘fix and follow up’ process you’ve already established.

The stakes are high
Even the best companies can’t avoid customer problems — it’s how those issues are brought to light and handled that makes the difference. It’s critical to capture feedback not only from customers who self-report problems but also from those who never report at all. Over time, dissatisfaction levels will drop as you tackle one problem after another and loyalty will rise.

Michael Tropp is Vice President, Business Development at The Verde Group.

 

 

Collecting Consumer Data: Is More Really Better?

The Verde Group - Customer Experience ResearchIt wasn’t too long ago that industry leaders would have scoffed at the idea of collecting too much customer data. In a rush toward realizing the value of big data and analytics, customer information was the key to higher revenue and increased market share, and more was better. Too much customer data? There was simply no such thing.

Times have changed
Today companies are experiencing firsthand the challenges associated with collecting, analyzing and actioning mountains of customer data. Big companies, especially when delivering an omni-channel experience in retail, collect data in many different ways — through various touchpoints, transactional data, marketing automation and primary research initiatives.

The challenge for these companies is how to bring all of this customer experience research and data together in a way that provides value and insights to the business.

Multiple stakeholders, multiple agendas
Consider call center teams, who collect and validate basic customer information, but can also confirm customer interest and readiness to purchase. Or social media engagement tracking, which tells companies how customers interact with their content and also provides a means to monitor brand image. Sales also collects client data (installed base, key customer contact, competitive information), especially in business to business (B2B) companies. Marketing has their own data points including website traffic, email open rates and communication preferences to name a few.

Often these and other groups within an organization will drive separate research initiatives to gather, analyze and action customer data, in many cases for their specific purposes and in isolation.

A significant expense
Collecting, housing, analyzing and actioning all that customer data is very expensive. With no centralized plan, companies can incur a considerable cost for overlapping initiatives. Even if separate groups share data, there’s bound to be overlap in the data collected, and each group will mine the data based on their unique requirements. The costs in dollars, time and resources add up quickly. Additionally, your company may be investing these resources into something that may or may not have a substantial impact on the customer experience and your business.

Lack of planning can drive lacklustre results
While it’s okay and often necessary to have individual customer initiatives, the absence of a centralized and coordinated plan often creates missed opportunities and confusion for companies. Inconsistent approach to research can yield conflicting insights and drive different action plans, and rather than improving the customer experience, they can confuse or even frustrate customers.

Organizations need to start with a company-wide understanding of their goals for increasing profitability and improving the customer experience and establish a consensus on how to target and measure progress against those goals. Without these two in place, they risk investing in initiatives that may have little to no impact on the customer and not meet revenue or market share targets.

Three ways to improve your customer data initiatives
How can businesses manage all this data and build a company-wide strategy that promotes collaboration, data-sharing, and the creation of common action plans? Here are four ways that organizations can get started:

  1. Establish common goals
    While each team will have unique requirements and metrics, it’s critical to establish common goals when it comes to customer engagement and the customer experience. These goals should align with the strategic vision for the company set out by the executive team.This helps to streamline the number of goals, creates clarity and also ensures executive support for the overall initiative. An effective way to determine those goals is by conducting strategic customer experience research — this helps clarify the current relationship between company and customer, and ultimately to refine and prioritize goals.
  2. Share data and minimize overlap
    Teams collecting data should work together to consolidate their efforts. Where possible, ‘no repeat data’ should be their mantra. Customer data must be centralized and fully accessible to the appropriate stakeholders.This includes defined business requirements – how to collect the data, when it should be collected and where it will be stored and how to access the data. Consistent screening questions across initiatives will enable cross-collaboration between studies.
  3. Collect the right data points
    Companies need to carefully examine the questions they’re asking their customers. Too often, in an effort to gauge customer satisfaction, they’ll ask customers about what they like, or what makes them happy. Many organizations invest a great deal of money and effort in measuring customer satisfaction and even pay bonuses based on the results.The problem is that customer happiness and satisfaction are very poor predictors of customer loyalty or future behavior. In fact, negative experiences are much more predictive of what a customer will do in the future. In fact, 60-80% of defecting customers categorize themselves as ‘satisfied’ on surveys conducted immediately before their departure. (source: Verde white paper).

    Another point to note is that attitudinal feedback (‘I’m angry’, or ‘I’m frustrated’) is much less valuable than experiential feedback (‘this is what happened’). It’s hard to do anything with the former, while the latter provides a precise readout of that particular customer experience.

Create common, actionable insights
With shared data and goals, companies can consolidate their findings and create actionable insights that are consistent across the organization. These can serve as a platform for individual functions to align behind broad initiatives based on the desired customer experience.

Michael Tropp is Vice President, Business Development at The Verde Group.

 

Three Ways to Optimize In-house Customer Research Teams

The Verde Group In-House Customer Research Teams

Customer research provides critical intelligence that companies simply cannot do without, and in-house research teams bring unique skills and domain expertise to the table. That said, in-house teams face a number of obstacles that challenge their ability to deliver consolidated, customer-centric insights to their business stakeholders.

 

The Advantages of In-house Customer Research Teams

In-house teams possess a deep understanding of their company, their competitors and their industry. They know the evolution of their businesses and customers, what has worked in the past (and what hasn’t) and have a robust knowledge of the competitive landscape.

Internally, they are steeped in the culture of their organization, including its strategic priorities and challenges. This cultural awareness means that in-house teams ‘speak the company language,’ allowing them to effectively message key insights across the organization.

Finally, most in-house teams have at least a high-level view into other ongoing research initiatives and hold relationships with the key players involved. This should offer the ability to coordinate and consolidate individual research efforts and connect the dots across various research initiatives. Unfortunately, it’s not as easy as it sounds.

 

The Challenges of In-house Customer Research Teams

Driving research programs is demanding, and in-house teams often face the following hurdles:

For example, performing data analysis is often an additional requirement, as is vendor management if the company employs outside research firms. Wearing these multiple hats can make the exacting work of conducting research even more difficult. These demands may also make it onerous for staff to invest in the updated training they may need to be fluent in the latest technical aspects of measurement and research design.

Especially in larger companies, separate research initiatives can create significant issues for the organization. These initiatives are usually driven by different teams or lines of business, often with diverging agendas and methodologies. Members of each team may not have a detailed understanding of the other research projects underway.

A deeper problem exists if there is no coordinated overall plan and no central point where all the research and analysis comes together. This can create a cacophony of results, with various stakeholders drawing their own conclusions (sometimes misleading conclusion), creating distinct strategies and executing non-aligned action plans all while expending resources on an insight that may or may not truly have an impact on the customer or business.

 

Three Solutions For In-house Customer Research Teams

#1. Coordinate research efforts
Where possible, research projects should have common design elements, and execution should be aligned. If every project is a one-off, then it’s difficult to tie research together operationally or analytically.

This presents an opportunity. By identifying common aspects of separate research programs and building that alignment into program design, companies can get more bang for their research buck. For example, a standard set of screening questions can be developed and utilized by various segments of the business. This can provide consistent cuts of data like demographics, customer segments, etc. that can be analyzed across studies

#2. Build a consolidated, customer-centric view
This goes beyond simply ensuring you’re not engaging the same customer too frequently. Invest the time to better understand the business challenges to provide insights and not just data dumps. An internal, consolidated customer view brings the sum total of your organization’s knowledge of that customer to your research, allowing for a more personalized interaction and potentially greater insights.

#3. Take a system-wide approach to managing all research
In-house teams should take a holistic view of all research initiatives. They need to gather all the insights from different research programs to understand not only their individual significance but more important, what do they mean collectively, what are the higher truths can be extracted from the combined research? A great place to start is with your customer journey. Step-by-step live the various touchpoints a customer has with your company and document the data points already being collected today. You’ll most likely find that there is no lack for data…but rather lack of people/systems bringing the data together in a usable way.

 

A Final Word

Customer research only truly matters when it drives action and improvements to the customer experience and therefore business profitability. The lack of an integrated view of research design and execution compromises the ability for companies to build a strategic, customer-centric view from their research initiatives.

Luckily companies can begin to overcome this challenge by driving a few key initiatives that will deliver a more holistic and valuable view of customer data.

The Problem With Not Fixing Customer Problems

customer research and not fixing customer problemsNobody likes to hear bad news, but successful companies recognize that negative feedback is a vital mechanism for improving their products and customer service.

So when they hear that there’s bad news that customers aren’t telling them, many companies assume it is product or service-related. They should be asking another question, though. Why aren’t customers sharing the negative feedback? The answer is critical to understanding the customer experience and potential loyalty risk.

Your customers won’t share feedback with you if they don’t believe you’ll take action.

Registering a complaint with a large company isn’t easy — often it involves wading through several phone menus, waiting on hold, then speaking with a customer service rep who may not be empowered to fix the issue.

As a result, many people just don’t go through the complaint process because it’s more of a headache to complain about the problem than the problem itself. And that’s how we end up with products that don’t work, services we don’t want, and ongoing charges that we don’t think we should be paying for.

If customers don’t think they’ll get a resolution to their issue, often they won’t bother to raise it.

A customer who does not bother to let a company know when they have a problem is a customer with serious loyalty risk.  In a 2017 Small Business services study, Verde found that customers who take the time to contact when they have a problem are 50% more loyal than non-contactors, assuming that they are fully satisfied with their problem resolution.  This is typical for nearly all customers across business verticals, both B2B and B2C

That’s good news for companies that make it easy for customers to register complaints and focus on positive resolution. If you are able to fix a customer’s problem and they’re happy with the result, generally they end up every bit as loyal as if they had never experienced an issue.

Citing the same 2017 SMB study, Small Businesses who experienced a problem were 80% less likely to be a Promoter of our client’s services.  But when their problem was fully resolved, all that lost loyalty was recovered.

So how can companies use this dynamic to their advantage?

Make it easy
Customers typically have many options when it comes to lodging a complaint — phone calls, online chat, email, web forms, and even social media. The instructions for each should be clear, and all options optimized for simplicity and speed of response. How many customers calling in for help have had to navigate multiple voice menus, then wait in an endless call queue?

Make an effort
When customers do take the time to reach out, your team needs to know that the objective is to understand and fix the problem. Train and empower everyone, particularly customer service, to focus on a positive outcome — when the customer hangs up they should be happy with the results and satisfied with the interaction.

Follow through and follow up
There’s nothing worse, from the customer’s point of view, than to think you have a problem resolved, only to find out it isn’t. Whether it’s a credit card charge that wasn’t reversed as promised or a missed service call, this event is often the final straw for even the best customers.

Companies need to ensure they’ve taken all the steps to fix the customer issue, then they need to take a final step. They should follow up with the customer to confirm everything is correct, and to make sure the customer is satisfied. This is what is known as a closed loop. Learn more about Verde’s full-service closed-loop tracking program.

Be honest and open
I’ve written about this in a previous post, but it bears repeating. An honest discussion with customers is often the best way to resolve their issues and retain their loyalty. Admitting that your company isn’t perfect, acknowledging your errors, and committing to fix them is a great beginning — just remember it’s all about the follow-through.

Michael Tropp is Vice President, Business Development of The Verde Group and WisePlum

 

 

 

 

The Problem With the Customer Satisfaction Survey

customer satisfaction survey The Verde Group

“Customers who had the best past experiences spend 140% more compared to those who had the poorest past experiences”
                                             — Peter Kriss, Harvard Business Review

Many companies conduct regular customer satisfaction research with the belief that there’s a direct link between customer satisfaction and revenue — improving the first will drive an increase in the second.

Many also rely heavily on the results of the customer satisfaction survey to build and execute action plans to drive future customer satisfaction. And so the cycle repeats.

It turns out that these companies could be making a very costly error. Customer satisfaction is a very poor predictor of future customer behaviors. Just because a customer says they’re satisfied doesn’t mean they’ll come back to buy a company’s products or use their services.

A different (and counter-intuitive) approach bears more fruit. Satisfaction is an attitude, and attitudes depend on what a customer experiences with a company or brand.  It is these customer experiences – especially negative ones – that are most influential on customer loyalty and value.

Consequently, customer experiences are much more useful for predicting future customer actions. If you want to know what your customers will do in the future, it’s not enough to ask them how satisfied or unhappy they are — you need to dig deep into their experiences that are shaping their attitudes.

Why are negative experiences (or problem experiences, as The Verde Group considers them) so influential?  It’s evolutionary: as human beings, we’ve evolved to respond more strongly to negative experiences than positive ones, which makes negativity a much more powerful motivator than happiness.

This is a significant consideration in evaluating the customer experience. When customers have a problem experience, they’re more likely to take action (they will shop somewhere else) and much more likely to tell others about their experience than if they’ve had a positive experience.

Simply put, it’s at that moment when companies are upsetting their customers the most that it’s easiest to predict what those customers will do in the future.

Traditional customer satisfaction surveys are simply not designed to gather the level of detailed feedback required to understand negative customer experiences.

For example, imagine a customer is asked to comment on something they’re not satisfied with, and their reply is ‘clerk friendliness’. The meaning is directionally clear but specifically ambiguous.

That ambiguity will make it difficult (if not impossible) for a company to create an action plan to effectively fix the problem. What exactly needs to change for the clerk to be more friendly?

If companies dig deeper, however, and truly understand the customer experiences that led to that attitude, it would provide the insight necessary to hire the right personnel and create training programs.

Embracing this paradigm means organizations need to take a completely different approach when evaluating their customer experiences.

An honest dialogue with customers is the most effective way to expose problems and the root causes behind them. Acknowledging that your company is not perfect — that you know you make mistakes and are committed to fixing them — is a great start.

But a link can be made between improving the customer experience and increasing revenue, with much more certainty than the link between customer satisfaction and revenue.

Retailers, in particular, are blessed with a wealth of customer data that can be integrated with experiential survey responses to establish which problems are driving loss of share and perhaps outright defection.

Armed with a much more predictive view of future customer behavior based on evaluating the customer experience, companies can create a clear picture of how taking particular actions to improve that experience will impact the bottom line.

Today’s shoppers still remain loyal to their favorite brands, but they are increasingly cost and experience conscious.

In order to maintain loyalty and share of wallet, retailers not only need to know what makes their customers happy but, more importantly, pro-actively address – and reduce – the critical problems customers face.

A problem-free shopping experience is the best way to create and keep a loyal customer.

Michael Tropp is Vice President – Business Development at The Verde Group