I caught a neat little article that – while written specifically to the restaurant industry – is applicable to any business. In fact, it ties nicely to a whitepaper we wrote a while back titled, “When the Waiter Brings Bad Food: Measuring the contribution of the Service / Support Organization in an environment of intervening external influences.”
I wanted to call out this part of the article:
” “Own” the dining experience – No, waiters are not the ones cooking the food, and they are in limited position to actually transform the culinary element of the dining experience. But as the face of the restaurant’s service effort, they are the ones linked to the dining experience, and they are the ones the customer immediately holds accountable for the quality of the meal.
“Waiters need to assure they indeed accept that accountability. A pivotal element of delivering a quality customer experience is “thinking like the customers” and understanding what it will take to satisfy them. Food is important, and if waiters do not sympathize with diners who received a bad plate and share in the ecstasy of those who enjoyed their meals, they will be unable to customize their service offerings to the reality of the situation.
“Waiters need to own customers as their own customers, and they need to serve as customer advocates when communicating with the rest of the staff. They might not be making the food, but they are the ones entrusted with keeping the customer happy, and they must do what it takes to get the entire restaurant committed to that quality experience. If the chef drops the ball on a meal, the waiter should not feel immune because he did not make it but should instead demand satisfaction because his customer has been let down.
“Waiters must look at their roles not as middlemen between the culinary artists and patrons but as facilitators between a customer’s desire for a great experience and the restaurant’s success I creating that aura of excellence.”
While this is all accurate (and I’m confident that any service organization already does feel ownership for delivering an excellent customer experience), the fact remains that service organizations can only do so much, yet often take the heat for poor customer feedback (as noted in the above mentioned whitepaper). Service and Support organizations are often blamed for not being able to adequately address customer problems, deal with floods of incoming incidents, or drive cross-sell opportunities. Before blaming “Customer Service,” the business should understand why – the genuine root causes, not symptoms – customers are requiring reactive service in the first place. Instead of relying on service centers to be the “catch all” for customer issues, I think we’d all agree that business needs to place more emphasis on isolating the reasons why customers need reactive service and deal with those situations proactively. Managing to reactive service levels is a business decision, and the dollars spent there can either be allocated to dealing with issues, or be allocated to proactively creating promoters. Which has the better ROI?
The full article is here: 5 Ways to Be a Better Waiter, Deliver a Better Restaurant Experience.
We’ve previously written about how Hippos – HIghest Paid Person’s Opinion – can damage ROI. It’s worth calling out a recent McKinsey study titled, “A Rising Role for IT”, may have inadvertently shined the light on this through a footnote that I think is worth calling out:
“…respondents say their companies are shifting decision making to incorporate more data and analytics in almost all corporate functions, with the highest share (60 percent) citing marketing and sales as where this is likely to occur. 3”
“3 In our November 2011 survey “What marketers say about working online: McKinsey Global survey results,” we asked respondents (all of whom represent the sales and marketing functions of their companies) which types of data their marketing departments’ typical decisions rely on, and only 14 percent say their data is limited and that decision making relies on management expertise and experience”
We also see the included graphic, which shows that the greatest percentage of respondents feel that the biggest barrier to adoption is “Company culture prioritizes experience over data.”
True, small sample sizes and perhaps a lack of “trustworthy data” in this study (of which we’ve also written) might cloud the results, but at least for this group of respondents it seems ego may be a barrier. What am I missing – am I reading this too fast or do we see an opportunity to manage our corporate culture and defer to our customers to optimize decision making?
I used to be a proud VP Marketing. These days ‘marketing’ seems to be all about spamming people with as much noise as possible. Many Marketing organizations plod along with ~5% open rates, ~3% conversion rates, and little-to-no ability to report the real business value (results) they bring to the company. And then they complain that Sales doesn’t take action on the great leads they throw over the wall.
In other words, times have changed yet most Marketing organizations haven’t.
So when I write “Marketing is Dead” I’m not saying that the marketing discipline is no longer needed. Marketing is more important than ever exactly because of all that noise and the need to get noticed. Marketing needs to evolve. How?
Ask yourself 2 questions:
- Where do the best actionable leads come from?
- What is my own process when I buy something?
For most business, the answer to both these questions is essentially the same: The best “leads” come from personal referrals and references. Likewise, when I buy I talk to colleagues that I trust.
So the obvious key is to create an army of Promoters. Get people (customers and partners) talking positively about your business. I was fortunate to participate in a Net Promoter program in which the client executives wanted to understand how their Customer “Insights-to-Action” program was helping the field. Here’s the summary from 800 sales people after just 3 months:
Enhanced Customer Relationship
Met New Contacts:
Identified New Late-Stage Sales Opportunities:
I’m not aware of any other marketing campaign that resulted in a 29% direct-success rate. And that doesn’t even count the “soft” side whereby Sales was able to increase their wallet-share in key accounts and generate more references and referrals.
Marketing needs to take the lead in creating, developing, and engaging Promoters – people that love the company and speak to their friends and colleagues about their experiences. How?
- First, prepare mentally. Recognize that unless you personally are paying the bills your own voice and opinions don’t matter. Don’t be a Hippo (HIghest Paid Person’s Opinion). Your customers matter more. Then, before you start, commit to action and not just measurement.
- Now begin by identifying customers that are “with” you and those that aren’t. Whether you use the Net Promoter model or not, segmenting customers into those that are “with” you and those that aren’t can only lead to good things… if Marketing is prepared to act.
- Engage those customer contacts that are “with” you. Find out what they like and why, what they’d like to see improved and why, and what they know about their industry (and who they know) that can help your firm.
- Open dialogs with the folks that aren’t “with” you. Find out Why? You’ll discover that the problem here generally isn’t with Sales or Support or Services or Product – it’s most often the interplay with all of them: gaps in customer experience that are a result of missing customer expectations. Marketing, Sales, and Competition (industry dynamics) set expectations. Know how the company delivers on those expectations and understand where and why
expectations are missed.
- Act. Use customer quotes and hard evidence to amplify the voice of the customer so everyone can hear exactly what you are hearing. Quantify the benefit (here are several posts on ROI) of addressing those gaps, and work collaboratively within the company to create more Promoters.
You can swing for the fences, trying for that 3% conversion rate by sending 10,000 emails that lead to 3 new deals one year later. Or you can face facts that you win customers over one at a time, and can be a part of the team that wins 15 new deals in 3 to 6 months.
Which metric would you like to report:
1. I sent 1000 emails to prospects, which led to 30 new names that we can contact.
2. I identified 30 Promoters that will help us with references and referrals.
3. I helped engage 30 Promoters that enabled the company close 15 new deals worth $3.2 million.
I hope someone can help me to understand why Marketing doesn’t get more involved in creating and engaging Promoters. Why isn’t it part of Marketing’s job to help with that?
We’ve all seen those customer satisfaction surveys in one form or another. “Bank X has a 96% Customer Satisfaction rating!” “Please rate your satisfaction with your most recent experience…” Companies spend millions of dollars on those every year. Are they getting their money’s worth?
Certainly not. Here’s why:
|1. Focusing on Scores
Companies often use “customer satisfaction” to prove how great they are. Isn’t it annoying when that car dealer asks you to give all top-box scores?
|Instead, Focus on Improvement
Who cares what happened in the past unless you learn from it. Use customer feedback to know where the organization is performing well, and where it can improve. Since nobody is perfect let the people who know what they want (our customers) provide the needed guidance.
|ACTION: Stop reporting aggregate scores. Instead, report changes in scores over time (assuming you are collecting your data accurately and consistently), by customer segment. Is there improvement in the areas of the business that matter most? Then, ask yourself, “What am I comparing, and do I know why those changes happened?”|
|2. Reporting “Satisfaction”
What the heck is “satisfaction”
anyway? “Gee, that product is sure
satisfying!” I don’t think I’ve ever heard that word used in real conversation.
|Instead, Report Behavior
Deliver customer experiences that matter and let customers do the shopping and talking. Good companies do the talking themselves. Great companies know that their customers will come back for more, and will also refer others.Are you reporting and acting on improving those metrics?
|ACTION: Make sure your sales and marketing set the right expectations about what you can actually deliver. If the truth hurts, then spend your time and resources helping improve. Provide trustworthy and conclusive customer feedback to the rest of the organization, since your customers’ opinions are what matter most, not yours. Start by changing your internal dialogs from, “I think that we…” to “Our customers love that we…” or, “Our customers leave us because…”|
|3. Focusing on Transactions
It’s true that individual customer interactions are important. But who cares if a caller was happy with their service call if the call should have been avoided in the first place.
|Instead, Focus on Relationships
Don’t all businesses want repeat customers and word-of-mouth referrals? Stop reporting within your organizational silos, and understand the relationship from your customer’s point of view. A focus on a transaction might help you check an item off your to-do list, but it’s not likely to bring that customer back for more.
|ACTION: Want to stand out? Deliver customer experiences that meet expectations. Start with delivering what you say you are going to deliver. Think RyanAir – the no-frills airline that ensures its customers know that all they get is a ride to their destination in exchange for the lowest price – and check out their great financial performance. Not everyone has to be the Ritz Carlton or the iPhone. But if your sales and marketing sets that expectation, then you better be sure you are delivering it.|
By the way, more of our “Top Tips” can be found in our resources
section at http://waypointgroup.org/news/index.html
with a direct whitepaper link http://waypointgroup.org/news/VoC-Assessment-Whitepaper-WaypointGroup-20100416.pdf
Keeping it Real with Customers: Nationwide on your Side
Presented by Jasmine Green, Chief Customer Advocate, Office of Customer Advocacy, at NACCM 2010
Empower the front-line with empathy.
Initially born out of the CEO being tired of getting customer complaints, Nationwide started their journey by creating a single place to resolve customer issues. They were getting so much data, but being excellent at handling individual complaints wasn’t enough – Nationwide needed to get to root cause and something with this wealth of information. Some of the specific initiatives include:
- A “Top 5” report that is reviewed regularly at the executive level, providing the ability to drill into the major improvement opportunities.
- Nationwide now looks both at the Kudos and the Complaints, and also tie to employee feedback to be able to recognize employee performance and prioritize the right opportunities.
- They pass exactly what the customer says on to others in the organization: No filtering. Nationwide has found that the verbatim is critical – don’t water it down, making it more real.
- Jasmine has rolled out a comprehensive training program across all 32,000 associates for service recovery, and have shifted culture to one of respect internally that then is passed on to the customer. Empathy is emphasized – treat customers like your friend and make them feel special.
They recognize that their front-line associates are critical to providing an excellent customer experience, and therefore Jasmine view her responsibility as being on the job 24×7, not 9:00a to 5:00p. Measuring employee engagement is a big part of making it work, and correspondingly they also increased accountability of the front-line and further empowerment.
Key to their success has been the ability to tie improvements to the bottom line and show the business benefit (ROI) for various initiatives. Focusing on retention has made them able to establish the ROI for everything they do.
Note: This presentation by Kunal Gupta of Burke at NACCM 2010 echoes the sentiment you’ll often read here on the Waypoint blog. Followers of this blog know that everything we do is linked to profitable growth (money!), so I especially enjoyed Kunal’s presenation. Read on for a summary of what everyone should be doing in their VoC program:
Show me the money.
If you think of yourself as a CFO, where should you invest? It is critical to measure success in business terms: metrics aren’t sufficient as executives speak the language of business.
The Good: Marketers have had it good for a long time! Customer-centric initiatives haven’t really been questioned. But – the Bad – because the metrics weren’t linked to the bottom line, marketers rarely got a seat at the table. This results in the Ugly: credibility is likely to erode. Executives want you show them the money. So any metric you present needs to articulate a “return on marketing” as a financial metric.
Example: In 2009 the Manufactures Alliance – companies > $1B – found that less than half their members have linked customer satisfaction to business results. Those that did measure this found higher profits (22%) higher sales (22%), and increased assortment of products purchased (9%).
Traditional customer satisfaction starts with the customer and measures satisfaction. But Kunal contends that it is more important to improve the satisfaction of your profitable customers. He recommends reversing the causality: segment customers into profitable vs. unprofitable, and then focusing satisfaction improvements accordingly.
Since this makes sense to most, why do companies not establish this financial linkage? Excuses include:
- Scarcity of organizational data to support the effort: More and more data is being collected every year. If you cannot put it to use then stop collecting it.
- Inconclusive past evidence: ACSI has found that a 1% increase in satisfaction, shareholder value improves by an equal amount (1.02%). Reichheld found that a 12% increase in NPS doubles growth rate. Etc etc…The point is there has been quite a significant body of work published that proves the case.
- Lack of leadership support: Churn is inevitable, but you can minimize churn by keeping customers happy. The cost of acquisition of a new customer varies by industry, but is much larger tan retaining an existing customer. Executives care about customer centricity.
- Organizational aversion: It’s not about the math – get some c-level support by sharing some alarming statistics (internal or external) for not being customer centric. Then enumerate the benefits, including the ability to compute ROI. Cross-functional participation is critical.
So where to begin?
- Start small. Success breed momentum.
- No black box – make it transparent and focused on business, not statistics
- Remember that the “art” is as important as the “science” – make sure the message is supported by the data.
Some example data to present
- Average customer revenue by level of loyalty: “High Loyalty” customers often buy more.
- Contribution of Customer Loyalty to higher cross-sell rates
- Analysis of projects that require investment against the projected revenue impact
The bottom-line: If you believe that happy customers are worth more, go out and prove it.
What would it be worth to you and your company if you knew:
- The total value of a customer that was a fan of your company (a Promoter) compared to the value of a Detractor
- Which customers were most likely to churn (hint: if you’ve been reading this blog you know it’s not always as simple as identifying Detractors)
- Which customers are most receptive to spending more with your company
- The optimal improvements your company can make to increase the percentage of Promoters in your business, and how to engage those customers to “promote” your business to friends and colleagues
- What is causing Detractors in your business, and the ROI on fixing the highest priority items
Every company needs these assets. Assumptions aren’t enough: real data should validate any assumptions since we can’t afford investment in the wrong areas. Yet we continue to find most companies trying to execute based on a handful of conversations with a few customers, or even just operating “business as usual” without regard to the cost of missed opportunities.
Some might think it’s because we don’t want to believe that our customers know more about our company’s revenue than we have ourselves. I don’t believe this is the leading reason. Instead, I propose this is simply because no one organization has been made responsible for obtaining these insights in the typical corporation.
So, I ask you, the hundreds of regular readers of this blog and would sincerely appreciate your comments… why doesn’t every company have the 5 assets listed above?
Congratulations for working on goals for improving your Net Promoter Score (or other customer loyalty metric)! Most companies measure customer loyalty (or satisfaction as a poor proxy), but unfortunately many use the scores simply for internal or external marketing (the perils of which are briefly described here).
Since we know that Net Promoter is all about improving customer loyalty, a natural next step after acquiring an initial baseline is to determine appropriate goals for the organization to drive the improvement effort. A few lessons-learned on doing this:
- Identify and prioritize the right improvement opportunities. What segments are impacted and what is the financial gain that will be had by improving loyalty within them? By focusing on the segments and opportunities that matter most, you should be able to estimate resulting loyalty and revenue gains to drive your priorities.(By the way, a note on competitive benchmarking: Especially if you are in an industry in which your customers work with both your company and your competitors (i.e. you don’t have 100% share-of-wallet) then your customers are in the best position to tell you how you are doing relative to your alternatives. And even more so for your Promoters! Use this to help prioritize.)
- Goal-setting depends on the level of effort to improve. So determine the level of effort (cost and time) by understanding what is driving customer loyalty (or taking away from it). Are the issues that are creating Detractors requiring major changes in product(s) or business model? If so, you may want to set smaller steps along the way, working on “low hanging fruit” to acquire short-term wins while planning the longer-term fixes.
- Get organizational buy-in to the program and process. Improving the % of Promoters in your business is almost always a cross-functional effort, and there is little point in setting targets unless the requisite teams are with you.
- Set appropriate measurement cycles. You have the baseline, now how long before customers “feel” the change that you are working? In many case it can take some time before customers experience the change.
An example: A software client had issues in the installation process for a major product which was creating detractors in a key segment of their business. Before setting improvement targets, the 2 key questions they had to answer were
- What is the ROI on improving the installation experience for this segment? What is the anticipated loyalty improvement (measured in revenue gains), and what will it cost?
- How long before the effect takes hold? That is, how fast will customers adopt the change?
After completing the investigation above, appropriate priorities were set, a scorecard was established, and the improvement initiative is underway. The key element here is organizational adoption. Showing the installation engineering team the revenue growth that will be had by improving this metric created the “winning team” atmosphere that kick-started the process.
I’m excited to announce that Waypoint Group has been accepted into the Net Promoter® Loyalty Partner program. Our employees have been Net Promoter Certified Professionals since our founding, and now we’ve taken that extra step to certify the entire business.
According to the official NetPromoter.Com website, “Achieving success with Net Promoter requires much more than calculating the Net
Promoter Score, or NPS®. It demands expertise, tools, and a management process for integrating customer feedback into decision making at all organizational levels. The philosophy behind the partner program is to ensure that companies using Net Promoter in their services are well qualified and can work seamlessly with the program developers and joint clients.”
While simple in both measurement and description, we’ve learned quite a lot about how to make Net Promoter work for an organization, such as
- Driving a focus on improvement (because just “change” isn’t enough, let alone “measurement”)
- Acquiring and reporting your results in a non-controvertible manner (because I still remember the book, “How to Lie with Statistics”)
- Compensation pitfalls, strategies, and execution tactics (because messing with people’s comp is filled with landmines)
- Directly connecting customer feedback with hard-dollar ROI and business results (because customer feedback is a means to the end – profitable growth in the business – and not an end itself)
If you want to keep your rate of profitable growth consistent with the past then keep doing what you are doing. If you want to increase that rate of growth, you will need to do something different. Consider Net Promoter as a vehicle to help you get there.
Insanity: doing the same thing over and over again and expecting different results
- Albert Einstein
Net Promoter, NPS, and Net Promoter Score are trademarks of Satmetrix Systems, Inc., Bain & Company, Inc., and Fred Reichheld.
Net Promoter is so simple in explanation that it’s often confused with “customer surveys.” The fact is that calculating a Net Promoter Score IS easy – just add the “Recommend” question to your existing customer surveys and you are on your way…right?
Of course we all know it’s not about the score: how you use it to drive growth is most important. Here are a few tips we’ve learned to help the process:
- Net Promoter isn’t market research, or even customer research. Net Promoter is a segmentation strategy.
Promoters nearly always spend more with you (have higher LTV Lifetime Value), not to mention they can be a valuable source of referrals (especially in B2B businesses!) and advice, and are generally less costly to serve. If this isn’t the case in your business then you may be missing the boat. Do you know what the typical sales are for your Promoter customers vs. your Detractors?
- Once you know which customers are “with you” and which are not, and when you are armed with simple customer sales and value arithmetic, you can define an action plan for working with them. Engage your promoters (here’s a great B2B example) – they love you and want to buy more from you! And, by the way, do you know what creates a promoter?
- Not to be priggish here but here’s a little secret: the telephone seems to be the best piece of technology available for driving growth through this process. It may not be sexy, but there’s nothing like individual customer dialogs.
- Don’t forget about “grey zone” – the customers NOT responding to your survey. Especially for B2B businesses where you should have a reasonably strong relationships with your customers, you should target a response rate of AT LEAST 30%, and 50-60% and higher is a sign of a healthy business. We almost always find that it’s actually REPONSE RATE that can be the best predictor of PROFITABLE growth rate increases (here’s one example of many many many). It’s an evolution… good communications and relationship building will get you there over time.
- One final thought: if you aren’t prepared to act on the Voice of the Customer then don’t send a survey. Why are you surveying your customers in the first place if you’re not ready to do something? Some will say they need to learn what’s needed and “sell” it to the executive team before you can commit to action. But your customers shouldn’t be treated that way – don’t ask for their opinions unless you are ready to do something. And related to item #3, perhaps you want to start with just a few telephone calls before diving into a large survey process that might not lead anywhere…
As the linked examples in this post illustrate, expect to get a DIRECT ROI of least 10x on your investment in customer insight work. Otherwise I think I would generally advise doing something else.