Humans value consistency – we are hard wired to do so – it’s in our DNA.
It is generally believed that modern humans originated on the Savanna Plain. Life was difficult for our distant forefathers. Sources of water, food, shelter were unreliable. Dangers existed at every turn. Evolving in this unreliable and hostile environment, evolutionary forces selected in modern humans a value for consistency – in effect hard wiring us to value consistency. We seek security in an insecure world.
In this context, it is not surprising we evolved to value consistency. While our modern world is a far more reliable environment, our brains are still hard wired to value consistency.
The implication for managers of the customer experience is obvious – customers want and value consistency in the customer experience. We’ve all felt it. When a car fails to start, when the power goes out, when software crashes we all feel uncomfortable. A lack of reliability and consistency creates confusion and frustration. We want to have confidence that reliable events like starting the car, turning on the lights or using software will work consistently. In the customer experience realm, we want to have confidence that the brands we have relationships with will deliver consistently on their brand promise each time without variation in quality.
Customers expect consistent delivery on the brand promise. They base their expectations on prior experience. Thus customers are in a self-reinforcing cycle where expectations are set based on prior experiences continually reinforcing the importance of consistency. This is the foundation of customer loyalty. We are creates of habit. The foundation of customer loyalty is built on the foundation of dependable, consistent, quality service delivery.
While we evolved in a difficult and unreliable environment, our modern society is much more reliable. Our modern society offers a much more consistent existent. Again, it’s a self-reinforcing cycle. Product quality and consistency of our mass production economy has reinforced our expectations of consistency.
Today’s information technology continues to reinforce our desire for consistency. However, it adds an additional element of customization. Henry Ford, the father of mass production, famously said of the Model-T, “You can have any color you want as long as it’s black.” Those days are gone. Today, we expect both consistency and customization.
In two earlier posts we discussed 1) including a loyalty proxy as part of your brand perception research and 2) determining the extent to which your desired brand image is reflected in how customers actually perceive the brand.
Now, we expand the research plan to move beyond loyalty and brand perception, and investigate customer engagement, or the extent to which customers are engaged with the brand through share of wallet.
Comparison to Competitors
The first step in measuring customer engagement is capturing top-of-mind comparisons of your brand to competitors. There are many ways to achieve this research objective, perhaps the simplest is to present the respondent with a list of statements regarding the 4-P’s of marketing (product, promotion, place and price) and asking customers to compare your performance relative to your competitors.
The statements you present to customers should be customized around your industry and business objectives, but they may look something like the following:
- Their products and services are competitive
- They are more customer-centric
- They have lower fees
- They have better service
- They offer better technology
- They are more nimble and flexible
- They are more innovative
Similar to the brand perception statements discussed in the previous post, these competitor comparison statements can be used to determine which of these service attributes have the most potential for ROI in terms of driving loyalty, again, by cross tabulating responses to the customer loyalty proxy.
The next step in researching customer engagement is to determine if the customer considers you or another brand their primary provider. This is easily achieved by presenting the customer with a list of providers, including yourself, and asking them which of these the customer consider their primary provider.
Finally, we can tie industry comparisons to primary provider by asking why they consider their selection as a primary provider. This is best accomplished by using the same list of competitor comparison statements above, and asking which of these statements are the reasons they consider their selection to be the primary provider.
Similar to the brand perception statements discussed in the previous post, these competitor comparison statements can be used to determine which of these service attributes have the most potential for ROI in terms of driving loyalty, by cross-tabulating responses to these statements to the loyalty segments.
Establishing and measuring loyalty proxies is important, but your brand perception research should not end there. Brand perception research should produce insight beyond loyalty. It should determine the extent to which customers impressions of the brand are aligned with your desired brand image. Additionally, perceptions of the brand among the most loyal and engaged customers should be compared to those who are deemed less loyal or engaged to identify opportunities to improve perceptions of the brand among customers at either risk of defection, or not fully engaged
In a subsequent post, we will address ways to measure engagement/wallet share.
The first step in measuring your brand perception is to define your desired brand. Ask yourself: if your brand were a person, what personality characteristics would you like your customers to describe you with? What adjectives would you want used to describe your brand?
In addition to describing your brand personality with adjectives, come up with a list of statements that describe your desired personality. For example, you may include statements such as:
- We are easy to do business with.
- We are knowledgeable.
- We are like a trusted friend.
- We are interested in customers as people, not just the bottom line.
- We are committed to the community.
So, we defined the brand in terms of personality adjectives and statements. Both will be used in designing the survey instrument.
The Survey Instrument
Unaided Top-of Mind
The first step in the survey instrument, is asking customers for their unaided top-of-mind perceptions of the brand. This will uncover the first thing that comes to customers’ minds about your brand prior to the effects of any bias introduced by the research instrument itself. There are many ways to capture unaided top-of-mind impressions. We like a simple approach, where you ask the customer for the one word that they would use to describe the company. This research question will yield a list adjectives that can be quantified by frequency and used to determine the extent to which customers top-of-mind impressions match the desired brand image.
After we have defined top of mind impressions of the brand, we recommend comparing brand perception to your desired brand identified in the brand definition exercise described above. This is a fairly simple process of presenting the customers with your list of brand personality adjectives and asking the customer which of these adjectives would the customer use to describe the company.
The next step in comparing the reality of brand perception to your branding goals is to ask the customers to what extent do they agree with each of the brand personality statements described above. As with the list of adjectives, this holds a mirror up to your desired image and measures the extent to which customers agree that you are perceived in the manner that you want to be.
Identifying Attributes with the Most ROI Potential
The value of these brand perception statements goes beyond just evaluating if you live up to your brand. Used in conjunction with the loyalty proxies discussed in the previous post, they become tools to determine which of these brand personality attributes will yield the most ROI in terms of improving customer loyalty. This is achieved with a simple cross-tabulation of agreement with these statements by customer loyalty segment. For example, if NPS is used as the loyalty proxy, then we simply compare agreement to these statements from promoters to detractors to determine which attributes have the largest gaps between promoters and detractors. Those with the largest gaps have the most ROI potential in terms of customer loyalty.
Customer loyalty is the business attribute with the strongest correlation to profitability. Loyalty lowers sales and acquisition costs per customer by amortizing these costs across a longer lifecycle, leading to extraordinary financial results. A 5% increase in customer loyalty can translate, depending on the industry, into a 25% to 85% increase in profits.
Many customer experience managers want to include a measure of loyalty in their customer experience research. Indeed loyalty and how brand perception drives loyalty is the foundation of any brand perception research. However, loyalty is a behavior measured longitudinally over time, and surveys best measure customer attitudes. As a result, researchers typically use attitudinal proxies for customer loyalty. Generally the two most common proxies are either a “would recommend” or a “customer advocacy” question.
- Would Recommend: A “would recommend” question is typically Net Promoter (NPS) or some other measure of the customer’s likelihood of referring to a friend, relative or colleague. It stands to reason, if one is going to refer others to a brand, they will remain loyal as well. Promoters’ willingness to put their reputational risk on the line is founded on a feeling of loyalty and trust.
- Customer Advocacy: A customer advocacy question asks if the customer agrees with the following statement, “the brand cares about me, not just the bottom line.” The concept of trust is perhaps more evident in customer advocacy. Customers who agree with this statement trust the brand to do right by them, and not subjugate their best interests to profits. Customers who trust the brand to do the right thing are more likely to remain loyal.
We’ve seen some loyalty surveys (particular those employing the NPS methodology), which only ask the loyalty proxy with little or no other areas of investigation. We believe this is a bad practice for a number of reasons:
- Customer Experience: Customers who have affirmatively taken the action of clicking on the survey want to give you their opinion (they want to participate in the survey), and based on their experience are expecting a multiple question survey. Presenting them with just one rating scale risks alienating them as they may feel they didn’t get an appropriate opportunity to share their opinion, and ultimately feel it was not worth their time to participate. Secondly, some customers may conclude the survey system is broken in some way as it only presented them with one question, resulting in customer confusion.
- Actionable Research Results: A survey consisting of one NPS rating is not going to yield any information from which to draw conclusions about how customers feel about the brand. It will produce an average rating and frequency of promoters and detractors, but no context in which to interpret the results.
Establishing and measuring loyalty proxies are an important first step in evaluating brand perception. Additional areas of investigation should include indentifying and comparing customer impressions of the brand to your desired brand personality, and evaluate customer engagement or wallet share.
These days, post-transaction surveys are ubiquitous. Brands large and small take advantage of internet-based survey technology to evaluate the customer experience at almost every touch point. Similarly, loyalty proxy methodologies such as Net Promoter (NPS) are very much in vogue. However, many NPS surveys are fielded in a post-transaction context (potentially exposing the research to sampling bias as a result of only hearing from customers who have recently conducted a transaction), and are not designed in a manner that will give managers appropriate information upon which to take action on the research.
At their core, loyalty proxies are brand perception research – not transactional. We believe it is a best practice to define the sample frame as the entire customer base, as opposed to customers who have recently interacted with the brand. Ultimately, these surveys are image and perception research of the brand across the entire customer base.
Happily, this perception research offers an excellent opportunity to gather customer perceptions of the brand, compare them to your desired brand image, as well as measure engagement or wallet share. An excellent survey instrument to accomplish this is a survey divided into three parts:
- Loyalty Proxy: Consisting of the NPS rating or some other appropriate measure and 1 or 2 follow up questions to explore why the customer gave the NPS rating they did.
- Image perception: consisting of 3 or 4 questions to determine how customers perceive the brand.
- Engagement/Wallet Share: consisting of 3 or 4 questions to determine if the customer considers the brand their primary provider, and to gauge share of wallet of various financial products & services across the brand and its competitors.
This research plan will not only yield an NPS, but it will provide insight into why the customers assigned the NPS they did, evaluate the extent to which the entire customer base’s impressions of the brand matches your desired brand image, as well as identify how the brand is perceived by promoters and detractors. This plan will also yield valuable insight into share of wallet, and how wallet share differs for promoters and detractors.
Such a survey need not be long, the above objectives can be accomplished with 10 – 12 questions and will probably take less than 5 minutes for the customer to complete.
In a subsequent posts, we will explore each of these 3-parts of the survey in more detail:
Previously we discussed the concept of “moments of truth” where some experiences in the customer journey have far greater importance than others. These moments of truth represent increased risk and opportunity to leave a lasting emotional impression on the customer; a lasting impression with significant long-term implications for both customer loyalty and wallet share. Perhaps the most common moment of truth is when something has gone wrong, the customer is unhappy or scared and the relationship is at risk. These events could be the result of: service delivery failures (unavailable service, unreasonably slow service, or other core service failures); customer needs and requests (special customer needs or customer preferences); or an adverse outcome (loan denial or loss of investment principal).
Also, in an earlier post we introduced a model to define emotional states with two dimensions:
1) valence (the extent to which the emotional state is positive or negative) and
2) arousal (the extent to which the energy mobilization of the emotional state is experienced on a scale of active to passive or aroused to calm).
Together, valence and arousal can define all human emotions. States of high arousal and positive valence are excited or happy; low arousal and negative valence are bored or depressed; while states of positive valence and low arousal are calm and relaxed, and negative valence and high arousal are angry or frustrated.
Not surprisingly, people are motivated to maintain positive moods, and mitigate negative affective states. People in negative affective states desire choices that have the potential to change or, in particular, improve their moods. For example, researchers have demonstrated a preference for TV shows that held the greatest promise of providing relief from negative affective states. People in a sad mood want to be comforted; anxious people want to feel control and safety.
Beyond solving the problem, the objective in dealing with an upset customer is to help relieve their negative affective state. If they are angry, attempt to calm them; if anxious, provide comfort. Time and time again, our research across many brands reveals that beyond resolving their problem as efficiently as possible, what customers want is empathy and reliability. We want to talk to someone who both understands how we feel and is reliable. They both have a solution to the problem and what they say will get done, gets done.
Strategies in CX Design
Anticipate potential needs for recovery: In designing tools to monitor the customer experience, managers must be aware of potential moments of truth and design tools to monitor these critical points in the customer journey. Some of these tools include: monitoring customer comments from comment cards or online forms to identify instances where the customer is either extremely happy or dissatisfied; monitor social media to identify common causes of moments of truth; survey tracking specifically focusing on the responses from dissatisfied customers; and mystery shopping to test the response to specific problem scenarios.
Decentralize decision making & empower front-line employees: In empowering frontline employees to serve customers, brands should arm them with statements of general principles and values rather than scripted procedures, which undermine empowerment. Reinforce these principles often so in the moment, when they are in a moment of truth with a customer in need, they have an appropriate framework from which to resolve the issue – and bond the customer to the brand.
Train the frontline: Training the frontline to handle problem resolution requires training not just in decision making, but also emotional intelligence. Can emotional intelligence be taught? Yes, but it requires a unique approach of self-discovery. Self-discovery is not a top-down process, however. Managers can foster it through feedback, encouragement to reflect on their own successes and failures, and anecdotes about other employees.
Specifically, tactics frontline employees can employ to handle upset customers include:
• Acknowledging the problem;
• Own the problem;
• Fix the problem;
• Provide assurance; and
• Provide compensation.
Customers experiencing a problem want to change their negative affective state. When dealing with an upset customer it is incumbent on the frontline to help relieve this negative state. Time and time again, in research study after research study, Kinesis finds that the two service attributes that influence customers in a positive way when they encounter a problem are empathy and reliability. Customers want to interact with employees who understand their feelings and are able to resolve the problem.
Previously we discussed the concept of “moments of truth” where some experiences in the customer journey have far greater importance than others. These moments of truth represent increased risk and opportunity to leave a lasting emotional impression on the customer; a lasting impression with significant long-term implications for both customer loyalty and wallet share. The purchase and sales experience is one such moment of truth. One study published in McKinsey Quarterly has determined that the purchase experience of financial services motivated 85% bank customers to purchase more financial products or invest more assets with the institution. (Beaujean et al 06)
We also introduced the concept of defining emotions using two dimensions of mood: valence (positive or negative) and arousal. Again, as we previously observed, modern research into brain activity during the decision process suggests that decisions are made within the brain before we are consciously of them. Emotions provide a short cut to acting on decisions, and rational thought appears to justify decisions after they are made on the subconscious level.
So…given that emotions play a key role in financial decisions, what are the emotions bankers encounter as part of the sales experience?
The emotions financial service customers experience vary by customer, financial need, circumstance and product/service sought, however the emotions a prospective customer may experience include:
• At Ease/Satisfied
So…what do we do with this enlightenment?
First, knowing that people are motivated to maintain positive emotional states and change/mitigate negative emotional states, it is important for the banker to recognize the prospective customer’s emotional motivation and offer solutions which will achieve either of these ends.
Kinesis has conducted research into purchase intent as the result of financial service sales presentation which may be instructive. Click here for this research.
Time and time again, in study after study, we consistently observe that purchase intent is driven by two dimensions of the customer experience: reliability and empathy. Customers want bankers who care about them and their needs and have the ability to satisfy those needs. Specifically, our research suggests the following behaviors are strongly related to purchase intent:
Interest in Helping
Discuss Benefits & Solutions
Promised Services Get Done
Friendly & Courteous
Both empathy and reliability require employees with Emotional Intelligence. These are employees with a positive outlook and a, strong sense of self-empowerment; self regulation; awareness of feelings (both their own and customers); master of fear and anxiety and the ability to tap into selfless motives.
Sales presentations are moments of truth with the potential to leave a lasting impression on the customer with significant long-term implications for both customer loyalty and wallet share – with obvious financial benefits for the institution. We’ve found that branches with above average frequencies of behaviors associated with reliability and empathy experienced a 26% stronger three-year branch deposit growth rate than branches with low frequencies of these behaviors.
Next, we’ll take a look at moments of truth in the context of problem resolution.