To Change or Not to Change? That is the Question

iStock_000018873957_Full

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 

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

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

To Learn more about Jon Skinner

The Complexity of Customer Simplicity

iStock_000062387494Large

Last week I had to call my cable company to accomplish what I thought would be a simple task: getting a replacement modem.

I was quickly reminded why most consumers hate their cable companies. I’ll save you the gory details of the experience and just provide the bullet points:

• three days
• seven calls
• three transfers, including two disconnects
• at least two hours on hold
• four chat sessions
• a couple of hours on the website
• five emails and
• one trip to the closest retail service outlet for my cable provider.

And as of this morning, still no modem.

All this complexity, and frustration, got me thinking: why are so many customer experiences so unnecessarily complicated? Of course, customers clearly want simplicity in their interactions. But so do most Fortune 500 companies. This is what Verde sees in our work with clients, which are a pretty good representation of the Fortune 500:

Marketing wants customer experience simplicity.
Choice is good. But the exponential growth of options when consumers consume – brands, models, channels, retailers – raises the stakes for clarity and ease of consideration/purchase. Experience simplicity reduces cognitive overload and moves barriers to purchase out of the way.

Service Operations wants customer experience simplicity.
The more complexity in customer experience, the higher the service costs. And not just because complexity requires customer service staff to handle more calls; experience complexity also drives service cycle times, rep turnover and capital investment. Experience simplicity means fewer calls, easier calls, less rep burnout and more straightforward service technology investments. Oh, and service reps could spend more time on interactions with customers that grow their value instead of defending against customer defection.

The C-Suite wants customer experience simplicity.
The less energy customers have to spend managing their relationship with a brand, the more energy they have to invest in enjoying the brand promise. The outcomes: greater loyalty, advocacy, spend and commitment. Which means more revenue, more market share and superior competitive position.

So all of us – customers and companies, executives and front-line sales service reps – want pretty much the same thing: simplicity. So isn’t it surprising that more companies haven’t cracked the code on making their customer experiences simple?

Not really. Paradoxically, simplicity is actually pretty complicated. For any specific company there will be numerous reasons – cultural, financial, technical, operational – why customer simplicity is difficult to achieve. But at Verde we see three common reasons why companies struggle so hard to simplify customer experiences:

1. High quality simplicity depends on flawless integration of a complex set of business processes. 
From the outside looking in, I’d guess my less-than-simple cable experience resulted from the intersection of at least: poor hiring/training practices, inadequate technology infrastructure, sloppy marketing communications, unreasonable corporate goal-setting and short-sighted financial policies. If I was on the inside, my list would probably expand. Syncing all these processes up to deliver simple-yet-high quality experiences without sacrificing long term customer profitability is a very complex task.

2. Change is hard.
Even when companies have a good grasp of what is required to deliver a high quality customer simplicity, making the changes necessary to meet those requirements requires fortitude, focus and discipline. Very few meaningful changes in the customer experiences can rely on quick hit “silver bullet” solutions at a single point of the value chain. Staying on plan over time – and knowing how well you are progressing – is critical to simplifying customer experience.

3. Knowing what matters to the customer is really hard.
This is the big one. You may have noted our use of the adjective “meaningful” in my bullet above. Companies purposefully invest in a multitude of customer experience improvements every year, but many of these are not “meaningful”: they don’t matter to the customer and they don’t improve profitability or share. Consider for a moment the hundreds of experiences that comprise your customers’ relationship with your company. Which ones matter the most to loyalty and advocacy? Just as important: which ones don’t? Are you investing your energies and resources where you’ll get the highest return in customer equity?

Customer experience simplicity is complex. But all is not lost. There are specific proven ways to cut through all the complexity and align the organization against the experiences that really matter to loyalty and customer value.

Subscribe to this blog and go to Part II of this post, Which “Silent Experiences” Are Killing Your Customer Loyalty?, where we’ll share our thoughts on those tactics and provide some examples of companies who “cracked the simplicity code” and reaped significant gains.

Jon Skinner
Executive Vice President, The Verde Group

To Learn more about Jon Skinner

An Obsession with Success Metrics Won’t Create More Success – Find Out What Will

iStock_000028580136XLarge

I understand why companies like to focus on positive measurements — be they sales, profits or stock price. We all want to feel good.

But if you want to improve, you also have to identify what you need to do differently or stop doing.

In my last post, NPS: the danger of its singularity, I examined the Net Promote Score (NPS), a phenomenon in the world of customer experience measurement. But, as I explained, a sole focus on NPS can force you to overlook the complexity of company-customer relationships and the cause of your problems. What’s more, it measures an outcome, not the actions required to achieve it.

Stop, replace or adjust

Just as the mechanic must understand what’s wrong with your car in order to fix it, marketers cannot focus only on their successes. You want your car, and your company, to perform as well as it can. That means looking under the hood, with the help of computer diagnostics of course, to see what needs to be stopped, replaced or adjusted.

Diagnostics and measurements need to inform action. They need to look beyond the success yard stick of NPS. They need to identify problems, such as employee churn, customer churn, customer complaints, and customer problem experience.

Ultimately, the role of a good marketer is to figure out the measures that inform action. In the ideal world, those actions should drive more of those success outcomes – like improved sales, profits and market share.

Or they’ll stop buying

Customer problem experience is one of the best predictors of market impact. When customers experience problems, they are far more likely to take action than those who do not.

That action may be manifested as inaction or disloyalty. That is, the customer will stop buying from the company. They will buy less frequently and, depending on the problem severity, they will tell others about it – spawning more potential disloyalty to the company in question.

Based on over 250,000 customer responses from research conducted by Verde Group over the past four years, about 70% of consumers who choose to stop doing business with a company do so because they experienced a problem. Imagine being in control of that much risk.

Attitudes and behaviours tend to be consistent. Positive attitudes lead to approach behaviors; negative attitudes are associated with withdrawal behaviors. Negative attitudes, particularly when emotionally charged, can cause very negative withdrawal or disloyal behavior.

Ask about specifics

The measure of problem experience is not straightforward. You can’t simply ask a customer if they’ve had a problem. Most will say “no”. That doesn’t mean they didn’t experience something negative.

The best way to measure the extent to which your customers are experiencing problems is to ask them specifically about potential known problems. Have them answer “yes” or “no” to your list. Then use the output from that line of questioning to analyze the attitude-behavior link. Customers will answer differently. In the end, you will get a clear picture of the key experiences that are most likely suppressing market behavior and therefore, market value.

It takes guts to scrutinize problems. But that’s what leadership is all about.

Paula Courtney
Chief Executive Officer, The Verde Group

Learn more about Paula Courtney

NPS: The Danger of its Singularity

Metrics Ruler iStock small

After Fred Reichheld published The One Number You Need to Grow in the Harvard Business Review, many customer experience professionals thought they had to ask only a single question: “How likely is it that you would recommend company [x] to your friends and colleagues?”

Gone were the “overall” questions that had dominated customer surveys, as in “Overall, how satisfied are you with…” or “Overall, how would you rate the value of …” and the inevitable follow-up “Why?”

Soon this one question would become the de facto way to measure customer sentiment. Everyone seemed drawn to the simplicity of Net Promoter Score (NPS). And, it became a forcing function for many organizations. Finally, everyone was talking about wanting to improve the customer “metric”.

While we all want the simplicity of a single metric, whether it’s for business growth, weight loss or a happy marriage, we know it’s rarely that easy.

Believing that NPS is sufficient can be dangerous as it:

  1. overlooks the complexity of company-customer relationships
  2. is a description, not a cause and
  3. measures an outcome, not the actions required to achieve it.

Customer relationships are complex

Most experienced executives appreciate the complexity of the customer-supplier relationship. They:

  • Think about the hundreds of touch points customers have when they do business with a company.
  • Factor in the variety of products they can choose from and the various people with whom they interact
  • Lead complex marketing programs, campaigns and pricing strategies designed specifically for certain customer segments.

So why do many think a single metric, NPS, can sum it all up? Wishful thinking, I’d say.

Imagine this

A broker presents you with an investment opportunity, based on only one number, the company’s sales. Do you invest? No.

Or your doctor wants to assess your health. Can she do that with only one number? BMI, cholesterol, blood pressure or blood sugar? Humans are too complex to be assessed with one number.

So is the relationship between company and customer. While NPS is an important indicator, it’s not the only important number.

NPS is not a cause

Although Reichheld claimed that “willingness to recommend” was, by far, the best predictor of business growth, he never made a causal connection. Companies with high NPS scores had high performance, he observed. To many people, this implied causality.

But, that would be like watching videos of musicians with lots of tattoos and insisting their success was caused by the tattoos. You wouldn’t make that leap. You’d know that the tattoos were a common feature of the musicians, but not the cause of their talent or popularity. Similarly, high NPS scores are a common feature of growing companies, but not the cause of their success.

An outcome is not an action

NPS is a significant outcome of a good company-customer relationship. But NPS does not tell you what you need to change or do to encourage customers to recommend your company.

Experiences cannot be measured by a single number, any more than your BMI can give the full picture of your health. Descriptions and outcomes don’t tell you what you need to do to influence customer attitudes and behaviours.

What does? While there’s no simple “metric”, there are answers, too long for one post.
Subscribe to this blog or check back soon to find out how to measure experiences for ultimate market behavior.

See the follow up to this post: An Obsession with Success Metrics Won’t Create More Success – Find Out What Will

Paula Courtney
Chief Executive Officer, The Verde Group

Learn more about Paula Courtney