Tomorrow is Fine. Free is Fine. What Else Can You Do?

The Verde Group Customer InsightCustomer Insight: How Logistics Raises the Bar on Customer Expectations

Ask any customer shopping online when they want their order delivered, and it’s a good bet they’ll answer ‘tomorrow’.

Thanks to masters of logistics like Amazon and Zappos, customers have come to expect 2-day or even 1-day shipping, sometimes at no cost. They want things NOW and will choose companies based on that expectation. If you can’t deliver, you risk losing customers — even if you have a great product and competitive pricing.

A case in point. Prior to a recent business trip, I needed a new laptop bag. It was Saturday, and I was flying on Wednesday. I found a nice leather case I liked and identified several online retailers who carried it. Whom did I choose? The one who could get it to me by Tuesday and didn’t charge a premium for fast shipping.

Evolving logistics capabilities have impacted the customer experience in other ways. Consumers now want to know ‘where’ their order is every step of the way. And these expectations have spread across industries. If Uber and Dominos can tell you the exact location of their driver, exactly where the driver is, consumers expect that their package delivery company should be able to do the same?

Companies who can meet these constantly rising expectations are being rewarded with increased sales and customer loyalty. Those who can’t may suffer the consequences. Faced with the customer challenge of ‘why drive to the store when I can double-click and two days later it’s at my door?’, Toys ‘R Us had no answers.


Fast and Free Delivery Is Not Enough
With delivery speed and accuracy quickly becoming the norm, how can companies further differentiate the delivery experience? For that, they’ll need to get creative. Going back to my recent laptop bag purchase — supposing the retailer had included a small sample of leather protector in the box? Unfortunately, they didn’t, but adding a small gift or discount coupon can further endear customers to a brand while also providing an opportunity to cross-sell.

Post-delivery follow-up provides another opportunity to differentiate from the competition and add value. This generally takes the form of a post-purchase survey or a request for a product review. Most customers appreciate the touchpoint, and the post-sale interaction typically promotes brand loyalty.

However, when companies master logistics, they can take the Customer Experience to even higher levels. They know exactly when you received the product, how long you’ve had it, and when that product is due for replacement. This mastery of logistics and “big data” gives these companies an edge on their competition – it enables them to be more than a “one and done” with the initial transaction.

 

Where Do We Go From Here?
Customers now expect to get anything and everything to their front door FAST. This has created industries that didn’t exist just a few years ago — think of meal preparation companies such as Hello Fresh and Blue Apron.

The continued growth of online sales and the globalization of supply chains will keep driving logistics innovation. We’re already seeing trials of drones and driverless long-haul trucks. The automatic re-ordering and shipment of products based on a pre-set delivery cycle is certain to disrupt some industries — just ask Gillette, who late last year introduced cheaper razor blades to fend off competitors Dollar Shave Club and Harry’s.

And of course, there’s Amazon, ever the leader in logistics innovation. Amazon continues to surprise consumers with their innovations. In April 2018, they partnered with GM and Volvo to offer product delivery to the trunk of your vehicle rather than your front steps by remotely unlocking your vehicle through the car’s internet connection.   Granted, not all Amazon customers may want to take advantage of this offering, at least initially.  But for those who do (perhaps those with “front porch security concerns”), this is a potentially high value-add service.

Most companies now understand that there is a direct correlation between their logistics ability and their customer loyalty (NPS score). The challenge for these companies will be to develop and deliver innovations to their customers that represent relevant, timely and meaningful improvements.  Understanding which delivery innovations will materially shift customer spend and brand affinity will become a competitive advantage, particularly in those categories where product quality and price are weakly differentiated.

Want to learn more about the link between logistics, innovation and the customer experience? Check out a few of my favorite customer insight articles on the topic:

How Innovations in Logistics Fulfill the Experience Demand

The Amazon Supply Chain: The Most Innovative in the World?

Lori Childers is Vice President, Client Solutions at The Verde Group

The Four Biggest Mistakes Companies Make When Implementing a Customer Measurement Program

Transform your customer insights by avoiding these common errors 
Technology and analytics have provided companies the means to understand their customers in ways they couldn’t have imagined even a few years ago. Almost every large organization invests heavily in customer measurement programs, yet many don’t achieve the customer insight they’re looking for.

Why?

It turns out that a handful of common missteps are responsible for the unsatisfactory results:

#1. Unclear Measurement Goals
What are the reasons for undertaking the measurement program? Is it a desire to improve your customer’s experience? Are you trying to gauge the success of a recently launched product or service, or understand how you stack up against a competitor?

Companies need to establish clear objectives for measurement programs and ensure there is alignment across the entire organization. Extensive planning and engagement with key stakeholders are critical, as is a clear strategy for the use of the data captured. What decisions will be driven by that data, and who is accountable to take action?

 

#2. Not Enough Time Spent Establishing Ownership
Building alignment within the organization is fundamental to the success of any measurement program. But it’s not enough to just inform stakeholders, collecting their input into the objectives of the program, how it will be structured, and how findings can positively impact their specific business metrics — these are all are critical to the success of the program. And all require a lot of work upfront to get it right.

The most important step is to establish a link between the findings of the measurement program and business issues those findings promise to address. Stakeholders need to know how the program findings may help improve or transform their business.

 

#3. Measuring Customer Loyalty or Satisfaction in a Vacuum
Customer surveys only provide a single data set in any customer measurement program. A single data source provides an incomplete picture, and sometimes a very misleading one.

To truly gain customer insight, you need to establish multiple listening posts across the entire organization. This means gathering information from your sales team, the call center, your service teams, and your complaint management system.

All of this information should be reviewed and packaged holistically. The different data sources may corroborate some findings and create different perspectives for others. This provides a much broader understanding of your customer’s experience.

 

#4 Thinking You Know What Customers Want
Preconceptions can ruin a customer measurement program. Often programs are built in isolation and structured based on what is perceived as important to stakeholders.

Good programs need to be constructed outside-in. Speak to customers before building a survey. These upfront discussions provide customers with the opportunity to tell you their full stories, and many times it’s the qualitative insight you gather that proves most valuable.

This feedback also helps you understand and adopt the language your customers use to discuss your business, which may not align with your internal company vocabulary. For example, if your survey poses questions about the effectiveness of your claims department, but your customer refers to it as your customer service department, your findings will almost certainly be skewed or incomplete.

 

My Challenge to You
Customer measurement programs can provide you with critical customer insight that helps improve your business metrics and shape your company strategy. For these programs to be effective, however, you need to establish clear goals, cultivate alignment and ownership across your organization, and most critically, ask for your customers’ input as you’re building the program.

Paula Courtney is Chief Executive Officer of The Verde Group and a lecturer at The Wharton School

Making Your Customer Experience Research Matter

customer experience research The Verde Group

Find the difference between interesting and actionable insights

By now, the notion that customer experience matters to market success is nearly universal.

A 2016 Gartner survey found that 89% of companies expect to compete primarily on the basis of customer experience — up from 36% in 2012.

Most companies make significant investments in customer research to shape their customer strategies, seeking to understand gaps in customer satisfaction and to develop remedial actions based on research findings.

Yet many companies still struggle to establish a clear link between research findings and meaningful, sustained improvements in business fundamentals.

For some, after many quarters of customer analysis, Net Promoter Score (NPS) – the metric that most companies use to gauge the loyalty of their customer relationships – remains stubbornly static.  For others, changes in customer satisfaction show little relationship to customer revenue growth.

Why would this be the case?  The Verde Group has been analyzing customer experiences for over 20 years, and we’ve arrived at this conclusion: for nearly all categories, customer experience is a rich, complex and dynamic phenomenon that is easy to describe generally using traditional satisfaction research analysis, but is quite difficult to diagnose actionably using those same techniques.

This is why we focus our clients on a different analytic filter for understanding customer experience: the filter of dissatisfaction analysis.

As my colleague Michael Tropp discusses, customer dissatisfaction can be very powerful for interpreting customer experiences.  Rooted in human evolutionary psychology, the concepts are simple:

  • Events that cause us pain are far more influential on what we do than events that cause us pleasure.
  • When a customer says “No, I won’t” (as in “you made my interaction so hard that I won’t buy from you again”) they are far more likely to follow through on that statement than when they say “Yes, I will.” This makes dissatisfaction analysis highly predictive of future customer behaviors.
  • Because problem experiences so strongly correlate to market action, they can be financially prioritized in terms of damage to customer loyalty, revenue or brand equity.

That last point is particularly important.  The objective of dissatisfaction analysis is not to tell companies their customers have problems; they already know that.

And they probably have an overall sense of what those problems are because if they didn’t they’d be out of business.  But what most companies don’t know is which problems are most damaging to customer value and relationship equity.

Now, executives in the C-suite will have their opinions.  But that’s the issue: generally, a company’s problem prioritization is based on partial data, limited analysis and a priori biases.  What’s worse, those opinions vary greatly depending on which executive holds them.

The sales department thinks customers suffer most from one set of problems, but Operations targets a different set.  Marketing focuses on the pain points they think are most crucial, but the Service function has a wholly different point of view.

What happens?  Executive team CX debates don’t resolve, strategies don’t align, and tactics step on each other and undermine overall improvement efforts.

This is why a statistically rigorous, financially based prioritization of the customer experience is so valuable.  It moves the debate from bias to objective facts: which problems are costing us the most in terms of customer revenue and loyalty?  Such a ranking aligns a company’s functions with respect to experience strategy and provides a powerful way to link C-suite strategy to front-line execution.

Maybe dissatisfaction analysis validates what the company already suspected.  That’s a win; validation means the team can move from debate to action.  Or maybe the analysis slays a few “sacred cows”: customer issues that the team firmly believed were highly damaging to customer equity, but turned out to be relatively inconsequential compared to other customer issues.  That’s an even bigger win since now the team can redirect resources to solving what really matters.

And the biggest win of all: identifying problems that the company didn’t even realize they had.  These “silent killers” are the most powerful output of dissatisfaction analysis.

Quietly eating away at customer retention and revenue growth, undiagnosed they represent a serious drag on loyalty and earnings.  But brought into the light, they can be addressed and controlled.

Most companies want the same thing: to serve their customers well, to innovate for the future, and to grow their customer relationships profitably and for the long term.

But few companies truly succeed at analyzing the customer experiences on which those objectives depend.  Those that are willing to go beyond traditional satisfaction analysis to look hard at the dissatisfaction of their customers will find great returns in customer loyalty, customer value and competitive stance.

Jon Skinner is Executive Vice President of The Verde Group

 

To Change or Not to Change? That is the Question

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Consumers are creatures of habit, often seeking out their favorite restaurant, hotel or store, because they know they’ll have a positive experience. These positive experiences make them loyal — whether it’s a perfectly grilled steak, a service associate who helps you find that perfect gift, or the ease of pre-selecting your hotel room in advance of check-in.

However, if a consumer’s go-to business never changes, the experience might seem stale. Once-loyal customers might consider switching.

This point was driven home when I watched the movie Chef, about a chef who wants to transform the time-tested menu to impress a food critic. The owner disagrees, saying, “Look, if you bought Stones tickets and Jagger didn’t play Satisfaction, how would you feel? Would you be happy?”

The chef sticks with his 1990s-style menu and gets scorched by a terrible review from the food critic.

The Business Dilemma

So the question is: when is it time to change and when should you keep things the same? Can you do a little of both?

The same dilemma is faced by many businesses. To change or not to change? When is the right time? When sales decline? When complaints increase? When stock prices fall?

If you act too quickly, customers may be upset. If you wait too long, customers—and their money—could walk out the door. But how do you know when the timing is right to introduce change? And, should it be a completely new product/servicing offering or just a modification?

Many companies come to mind when thinking about waiting too long to change. Consider Motorola which, according to Forbes, once had nearly 50% of the cell-phone handset market. In 1995, they passed up chances to enter the digital market early, sticking with more primitive analog designs, because it felt sure that analog’s 43 million customers couldn’t be wrong. Within four years, Motorola’s market share had slumped to 17%.

In deciding whether it’s time for change, companies need to understand a multitude of factors but key inputs to this decision are:

  • Knowing where they are in the product life cycle curve
  • Understanding the current state (baseline)

Product Life Cycle

Lori BlogTheodore Levitts classic Product Life Cycle has been around since 1965. Understanding which stage a product is in provides information about expected future sales growth, and the kinds of strategies that should be implemented to protect sales. The product life cycle of many modern products is shrinking, as Tom Spencer found, while the operating life for many of these products is lengthening.

As explained in Using Market Research in Product Development, many companies recognize the importance of offering something new. For this reason, they allocate substantial sums to research and development to help them determine when it’s time for a change. Most companies spend between 2% and 5% of sales on R&D.

However, as stated by Paul Hague in the third edition of Market Research, not all products/services necessarily completely die and need to be replaced with something new. There are often opportunities for modifications and improvements which can result in a rejuvenation of the product life cycle. In fact, per B2B International, 90% of new product research is focused on product additions and modifications rather than on new concepts.

Product improvements by their nature are less drastic and are much more easily accepted than conceptually new products. As with our restaurant example, an entirely new menu was perhaps unnecessary but rather, some innovations and changes to existing items while keeping some old favorites breathing new life into the restaurant while still keeping the brand intact.

Baseline Measurement

In parallel with a product life cycle assessment, organizations should have a baseline measurement of areas of satisfaction and dissatisfaction. As my colleague Jon Skinner wrote , by knowing what issues upset customers the most (causing dissatisfaction and disloyalty) and by understanding what makes loyal customers return and recommend a business, organizations have better insight into whether it is time to pursue the introduction of something new (where “new” is adding/changing/or removing a product/servicing offering). It is important to remember that the issues that upset customers the most aren’t necessarily the most prevalent problems but rather, the ones that have the biggest impact on customer loyalty.

However, a baseline is not enough. Businesses need to take regular temperature checks and compare their results to the baseline. More formal, data-driven Voice of the Customer (VOC) research will reveal even more about customer experiences and expectations. This could include short surveys after every interaction, more detailed monthly, quarterly or annual surveys and staying on top of ongoing social media chatter.

By using an experienced research partner for product life cycle assessments, baseline studies, and temperatures checks against the baseline, businesses can make informed decisions about when it’s time to change, what should change, and what must stay the same.

Being true to your brand or what sets you apart from the competition is great. But when you risk driving your customer to choose another business, it’s time to change.

Don’t lose your customers because they’re tired of the same old menu. Know when it’s time for change and get ahead of the curve!

Lori Childers
Vice President, Client Solutions

To learn more about Lori Childers

 

 

Customer Experience Is Not Our Responsibility

Responsibility Reliability Trust Liability Trustworthy Concept

Recently a client asked me how to engage Human Resources, Legal/Risk and Finance in their customer experience journey.

When my client had approached these groups about their contributions to the customer experience, the response was essentially: “We are very in favor of focusing on the customer experience and are glad that our sales and customer service departments are doing so much in this area. However, this is not something we have any control over, so it is not on our priority list.”

This response is very common in organizations that are in the early stages of true customer experience transformation. Ironically, these departments may have more to contribute to the customer experience journey than most others.

Here are some ways these departments can put the customer at the center of everything they do, to build a more customer-centric organization.

Human Resources rewards the right people

By hiring, rewarding and setting clear expectations, Human Resources can engage people who contribute through their attitudes, strategies and day-to-day actions.

This goes beyond the “employee of the month” awards. This is about national awards on center stage that recognizes individuals from every department who have made a true difference to the customer experience.

What’s more, it means ensuring that every individual clearly understands their contribution to the customer experience and setting customer experience goals to achieve each year

Human Resources can

  • hire people who will make customer needs a priority
  • set personal goals and assess employees on their ability to develop and execute customer-focused business strategies
  • recognize and reward employees for succeeding in these objectives, through bonuses, high-profile awards and promotions (and make the difficult decisions with employees who do not perform well in this area)
  • add a customer experience element to your employee surveys

Legal/Risk balances customer ease

Legal and Risk departments have a long-lasting effect on how customer-centric an organization will be. As the watchdogs of an organization, they ensure that the company is not exposed to lawsuits and financial risk in the course of doing business. To achieve this, they create policies that sales, customer service and operations groups must adhere to when bringing on new customers and managing existing customer relationships.

Sometimes these policies unintentionally create problems and unnecessary effort for customers when doing business with your organization, as I stated in a previous blog. For example, policies such as requiring a receipt, original packaging and returns in 30 days may prevent a few from taking advantage, but also make it more difficult for many customers to do business with you.

Legal/Risk can

  • create policies for bringing on new customers and managing existing customer relationships that don’t create problems or require unnecessary effort by customers
  • shadow front- line sales, customer service and operations stakeholders to understand how these policies affect their workflow and the customer experience
  • enhance the customer experience by investigating the effect of their policies on the customer experience journey
  • incorporate feedback from sales and customer service in their review of policies
  • regularly update policies to make them more customer-centric

Finance empowers relationship owners

Because they tend to own the purse strings across all lines of business, the Finance team has a great deal of influence over the customer experience in every organization.

However, they need to balance the critical requirements for cash flow and cost control with the need to deliver a great customer experience. For example, the need to ensure reliable payments must be balanced against particularly arduous onboarding requirements for new customers.

They also need to provide flexibility with customer relationship owners to “make things right” when problems arise, as I wrote in a recent blog on how this can reduce churn and build long-term loyalty.

In addition, the Finance team must also work with HR to recognize and reward those in the organization that make an impact on the customer experience.

In short, they should

  • work closely with sales and customer service teams, to ensure policies don’t have negative effects, for example arduous onboarding requirements for new customers
  • financially empower customer relationship owners to effectively solve customer problems
  • work with HR to recognize and financially reward those in the organization who make an impact to the customer experience.

While almost every department plays a role in the customer experience, Human Resources, Legal/Risk and Finance have more influence over the customer experience than they might think.

One department, one improvement

If each of these departments made one significant improvement to the customer experience each quarter, there would be measurable improvements in customer loyalty, employee engagement and shareholder value.

What’s more, by communicating their progress to the entire organization, they can inspire others to focus on what they can do to deliver the ultimate customer experience.

Click to learn more about Graham Kingma 

2 Steps to Create Customer Service Heroes

Customer service. Customer experience. Focus on the customer. The customer is at the centre of everything we do.

Why do we hear this so much? Because time and again we see that selling something of value at a fair price is not enough. The customer must find the seller easy to do business with at every touch point.

Most organizations are relatively good at easily allowing you to buy goods and services from them. But only some understand that being easy to do business with must include service and support as well.

Examples abound:

  • Apple is extremely good at making sure you are looked after with very little effort involved.
  • Best Buy’s Geek Squad makes sales and after-sales support easier.
  • Zappos lets customers return purchases, no questions asked, for up to a year.
  • The Ritz-Carlton gives every staff member a no-strings budget to resolve any customer experience issue.

Personal experience confirms how this ease builds customer loyalty. Recently I purchased a suitcase that had a problem with the handle. When I notified customer service, I was asked to take a photo of the affected part and fill out a few pieces of information like my address and email it to them. Within 20 minutes, I was advised that a new bag was on the way. As a result, I am a customer for life.

Like me, you probably have a great customer experience story that solidified your loyalty to a brand. Most often the story stars someone who seemingly went out of their way to make you feel special and resolve the issue to your satisfaction. This person at the bag company was the key to being easy to do business with.

Where companies miss the mark

So why isn’t every company easy to do business with at every customer touch point?
Some of it has to do with policies and risk aversion.

Policies were created to reduce the risk of economic loss to an organization. The famous 30-day money-back guarantee that many of us grew up with was put in place to stop you from returning every single thing that you have ever purchased from a company. The policy was created to stop a very small percentage of customers from taking advantage of the organization.

But if you want to become a truly customer-centric organization, you can’t let risk aversion hold you back. You can accomplish your goals by employing only the most customer-centric people in this role and empowering them to make issue resolution enjoyable for the customer.

Customer services process

For example, let the customer tell you, online or by mobile, why they need help. Then have an expert who can quickly resolve the issue contact them, using a well-defined, step-by-step process that will resolve the issue on the first call.

This involves only two steps:

1. Hire, train and promote your most customer-centric people and remove those who are not able to deliver on the customer experience promise.

2. Allow and provide the budget and other tools for these people to make decision and resolve the individual customer issue.

If you ask most executives to cancel all customer-facing policies and leave everything up to the people in customer-supporting roles, they will shiver with fear, worrying that employees will give away the farm to avoid confrontation and dissatisfaction.

Fortunately, in my experience, this is not the case. I once started with an organization that had so many restrictive policies that employees were powerless to resolve customer problems. as an example, they were authorized to give a maximum 10 per cent credit to resolve an issue. This meant high-value customers would end up returning the item (at a significant cost to us) instead of taking the credit, which severely undermined their loyalty.

How we empowered heroes

After I got involved, we hired, supported and trained our customer support staff to be engaging customer advocates. We removed the small few who were damaging the customer experience. Then we did the unthinkable. We allowed anyone to give any credit they wished as long as they felt it was appropriate for the customer and the issue at hand. We provided quite a few examples of what “good” might look like and what a reasonable budget limit might be, but it was up to the individual to decide.

We collaborated with them to determine the best and most efficient resolution on the first call. Customer support staff discussed scenarios with each other in meetings and at breaks.

The result? Customer kudos poured in.

Our staff was elated that they were free from the restrictive policies that added stress to their jobs and prevented them from helping customers.

Because our supervisors received almost no escalations, they were freed up to coach individuals on what might be appropriate under what circumstances.

On our intranet, staff shared examples of where they gave credits and examples where they did not feel it was appropriate. There were so very few examples of customer support staff giving away too much for the issue and customer at hand.

The most difficult part? Convincing a small percentage of customer advocates that they actually needed to take advantage of the budget they had. They were so protective of the company that they were worried about making the commitment. Over time they came around.

Happy endings

So how did the new credit levels compare to the old ones? They went up about 15%, mainly because customers and customer support staff had other reasonable options to consider. Overall we were ahead in profits, returns were reduced and our customers liked our new easy-to-do- business-with philosophy.

The customer support team was now in charge of customer service. Our revenues increased, our lapsed customers decreased and employee morale had never been higher.

Graham Kingma
Executive Vice President, Verde Group

Click to learn more about Graham Kingma 

You may not know your customers as well as you think

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I’ve been married for a long time, certainly long enough to know my wife Alicia pretty well.  Or so I thought.

But last week while dining out, I learned something new.  At the end of our meal, the server ran my credit card and returned it to me, saying  “Here you go, Jon. Have a great evening.”

This made no impression on me whatsoever.  But Alicia commented “Boy, I hate it when a waitress uses my name like that.  It’s just so phony!”  To which I replied “No kidding?  I didn’t know you hated that!”

My point is not that after many years of marriage my wife still surprises me.  (Although she does.)  My point is a business point:  we all interpret experiences differently.  I don’t care one way or another whether a server calls me by name.  Others find it aggravating.  Still others are charmed by it.

We all interpret experiences differently.  This principle underlies all of Verde’s Customer Experience work, and is embodied in our “EAB” Model: Experience drives Attitude, which in turn drives Behavior.  What makes an experience good, neutral or bad is how we interpret the experience.  Two different customers may experience the same problem, but have wildly different reactions, depending on their temperament, personal history and circumstances.

Jon blog 3.1

Companies seeking to redesign the customer experience to drive more lucrative customer behaviors should keep this principle in mind: strategies and service interaction tactics need to be tailored to address the specific issues most damaging to specific customer segments.

Consider some of the segment-specific differences in problem experience Verde has discovered in our client work:

  • Gender. Verde’s retail experience work with the Wharton School of Business (Executive Summary) has identified some unexpected differences between the shopping experiences of men and women.  For example: the top problem suppressing share-of-shop for female shoppers (by 6%) is “I can’t get sales associates help when needed.”  But for men the top risk issue (5% share-of-shop loss) was “The item I was looking for was out of stock.”
  • Health Condition. Last year Verde conducted a major “Adherence@Risk” study, where we prioritized the specific patient problem experiences that decreased their likelihood of adhering to their medication regimen. We ran the study for a leading injectable product indicated across multiple conditions.  We found that for patients with one disease, more than 50% of all adherence risk was based on injection issues.  Yet for patients with a different disease, injection issues were completely immaterial. Instead, these patients pulled back their drug regimen due to problems understanding their condition and what to expect from the drug.
  • Line of Business. In a recent customer experience assessment for a Health Insurance client, Verde determined that 7% of policyholder loyalty in the “Small Group” segment was at risk due to “plan materials that were too detailed and insufficiently relevant” to the policyholder.  Yet this issue was isolated to the Small Group segment; the loyalty of policyholders in all other group segments was unaffected by this problem, even though the materials were fundamentally the same.

In each of the examples above our clients were surprised by these differences.  Of course they knew that different customers hold different attitudes concerning their service models and go-to-market approaches.  But they did not expect to see such pronounced differences in the specific experiences underlying those attitudes.

This client surprise is not uncommon when Verde presents its findings, and it is one of the most gratifying aspects of our work.  But it also reflects my surprise at my wife’s restaurant reaction. We think we understand those we spend a lot of time with: our families, our co-workers, our customers.  But we often understand far less than we think we do.

Don’t take for granted that you know what is happening with your customers.  Taking the time to really understand what matters to them is the first step to creating great customer experiences that deliver long-term, successful customer relationships.

Jon Skinner
Executive Vice President, The Verde Group

To Learn more about Jon Skinner

The 2015 Customer Experience Risk Study is now available!

 

The Verde Group, together with LoyaltyOne, partnered with Dr. Deborah Small from the Wharton School of Business to conduct a retail consumer study to assess the financial impact associated with poor customer experiences in the U.S. across key retail formats: Grocery Store, Mass Merchandise, Pharmacy, Department Store, and Specialty Apparel.

The study finds that retailers, in various industries, stand to lose significant revenue by not maximizing their customer interactions. Key insights for retailers are as follows:

  1. At-risk customers often account for over 10% of potential revenue. This figure is usually higher – the average mass merchant sees 25% of potential revenue at risk. Not addressing these critical experiences jeopardizes current and future spend.
  2. Retailers miss over 80% of problem occurrences. Even with staff or customer incentives to boost visibility, retailers must delve deeper to discover more than the negative CX that shoppers voluntarily share. For example, “Waiting too long in the check-out line” was cited as a problem impacting loyalty and a “most important problem” for customers of Mass Merchandise, Department Store, and Specialty Apparel retailers. However, it was the Sales Associates’ attitude or behavior (e.g. not being helpful) that was most impactful on loyalty for these particular retailer types.
  3. Take a customer-value lens to understand problematic experiences. Without customer insights, problems can appear to be equally detrimental even if high-value shoppers are disproportionally experiencing the effects of one issue over another.
  4. Measure on impact, as the frequency of issues can be deceiving. Some commonly reported problems aren’t as impactful as they appear, while other issues that retailers seldom hear about can be silently eroding valuable customer relationships.

Please click here to download the whitepaper and learn more about the study findings.

Paula Courtney

Chief Executive Officer, The Verde Group

Learn more about Paula Courtney

3 Steps to Firing Your Worst Customers

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As I wrote recently, customers who are loyal to your business and contribute to your bottom line should be rewarded with an outstanding experience.

But what about unprofitable customers, the ones who cost you money? Most businesses have customers who call in 10 times a month asking for credits, return items more often than not or perhaps demand too much of your organization’s time.

These bad apples not only require a disproportionate share of resources, but they also result in longer phone waits and return lines and restrictions such as limited return times for your profitable customers.

  1. Use Data to Identify Unprofitable Customers

To identify unprofitable customers, businesses must have enough data to track and evaluate returns and other drains on resources. Here’s a very brief example of how this analysis could work using only 4 data points:

Customer Purchases Returns Resources (@ $35/contact) Credits Contribution
Customer A $2,000 $1,200 $700 $250 -$150
Customer B $2,000 $100 $70 $50 $1,780

Each business will have a different formula for calculating the actual profit of each individual customer and should reflect the value of returned goods, for example jewelry retains more value than clothing and online self service costs less than human support.

Customer B is contributing significantly to the bottom line, but will face longer wait times and potentially more restrictions because of Customer A’s buying behaviour. It’s a lose/lose for your business. So what do you do?

In my experience of firing customers at a retail organization, I found the easiest part of the process was determining which customers were actually profitable. The formula was 14 fields long and provided a very holistic view to the customer contribution. The worst 100 customers, combined, pulled $180,000 off the bottom line. The formula was scrutinized by Finance, Merchandising and Marketing, who all agreed that these customers were bad for business.

The hardest part was convincing the organization that we must fire these customers. The idea was completely against the concept of “customer experience” and the “customer is always right.” It was even more ludicrous that I, the head of customer experience, should suggest such a thing. What if the newspapers caught wind? What if these customers told their friends?

  1. Give them a second chance. 

I was relentless in my pursuit, mainly because the extra investment in serving these unprofitable customers was standing in the way of us really showing our appreciation for our profitable customers. More than a year later we had the green light on two conditions: (1) that we tested the approach on the first 100 customers and (2) that we gave these customers every chance to change their behaviour.

We sent a very gentle and considerate letter, hand signed, to each of the 100 customers. We talked about their general purchase behaviour and suggested that perhaps we were not the retailer for them. We gave them the option of being more selective with their purchases in the future to maintain their account status. If the past purchase behaviour continued, we would be forced to close their accounts.

We waited for a response, but 100 customers were silent. Fast forward six months and we took a look at these customers one more time using our profitability formula. Eighty-nine had completely changed their behaviour and were now profitable.

  1. Fire the customers who won’t improve

We were stunned at the turnaround. The program had worked and we could now expand the program further. The remaining 11 had continued their spending behaviour and we called them to let them know their accounts were now closed.

These customers were upset — not at us, but at themselves. Was there anything we could do to give them another chance? We let them know we would call them in three months to discuss the matter, but for now their accounts were closed.

The 100 customers who had contributed negative $180,000 to the bottom line were now contributing more than $50,000 in annual profit, a swing of almost a quarter million dollars annually. More importantly, our service levels and return efficiencies increased and contributed to the loyalty of our existing, profitable customers.

Sometimes the best thing you can do is lose some customers to please the ones you want to keep. But before you start firing, give them a second chance. That way, you’ll turn many unprofitable customers into profitable ones and have fewer to fire.

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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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