Tag Archive | Customer Loyalty

Research Tools to Monitor Planned Interactions Through the Customer Life Cycle

As we explored in an earlier post, 3 Types of Customer Interactions Every Customer Experience Manager Must Understand, there are three types of customer interactions: Stabilizing, Critical, and Planned.

The third of these, “planned” interactions, are intended to increase customer profitability through up-selling and cross-selling.

These interactions are frequently triggered by changes in the customer’s purchasing patterns, account usage, financial situation, family profile, etc. CRM analytics combined with Big Data are becoming quite effective at recognizing such opportunities and prompting action from service and sales personnel. Customer experience managers should have a process to record and analyze the quality of execution of planned interactions with the objective of evaluating the performance of the brand at the customer brand interface – regardless of the channel.

The key to an effective strategy for planned interactions is appropriateness. Triggered requests for increased spending must be made in the context of the customer’s needs and permission; otherwise, the requests will come off as clumsy and annoying. By aligning information about execution quality (cause) and customer impressions (effect), customer experience managers can build a more effective and appropriate approach to planned interactions.

Research Plan for Planned Interactions

The first step in designing a research plan to test the efficacy of these planned interactions is to define the campaign. Ask yourself, what customer interactions are planned based on customer behavior? Mapping the process will define your research objectives, allowing an informed judgment of what to measure and how to measure it.

For example, after acquisition and onboarding, assume a brand has a campaign to trigger planned interactions based on triggers from tenure, recency, frequency, share of wallet, and monetary value of transactions. These planned interactions are segmented into the following phases of the customer lifecycle: engagement, growth, and retention.

LifeCycle

 

Engagement Phase

Often it is instructive to think of customer experience research in terms of the brand-customer interface, employing different research tools to study the customer experience from both sides of this interface.

In our example above, management may measure the effectiveness of planned experiences in the engagement phase with the following research tools:

Customer Side Brand Side
Post-Transaction Surveys

Post-transaction surveys are event-driven, where a transaction or service interaction determines if the customer is selected for a survey, targeting specific customers shortly after a service interaction. As the name implies, the purpose of this type of survey is to measure satisfaction with a specific transaction.

Transactional Mystery Shopping

Mystery shopping is about alignment.  It is an excellent tool to align sales and service behaviors to the brand. Mystery shopping focuses on the behavioral side of the equation, answering the question: are our employees exhibiting the sales and service behaviors that will engage customers to the brand?

Overall Satisfaction Surveys

Overall satisfaction surveys measure customer satisfaction among the general population of customers, regardless of whether or not they recently conducted a transaction.  These surveys give managers a feel for satisfaction, engagement, image and positioning across the entire customer base, not just active customers.

Alternative Delivery Channel Shopping

Website mystery shopping allows managers of these channels to test ease of use, navigation and the overall customer experience of these additional channels.

Employee Surveys

Employee surveys often measure employee satisfaction and engagement. However, they can also be employed to understand what is going on at the customer-employee interface by leveraging employees as a valuable and inexpensive resource of customer experience information.They not only provide intelligence into the customer experience, but also evaluate the level of support within the organization, and identifies perceptual gaps between management and frontline personnel.

 

Growth Phase

In the growth phase, one may measure the effectiveness of planned experiences on both sides of the customer interface with the following research tools:

Customer Side Brand Side
Awareness Surveys

Awareness of the brand, its products and services, is central planned service interactions.  Managers need to know how awareness and attitudes change as a result of these planned experiences.

Cross-Sell  Mystery Shopping

In these unique mystery shops, mystery shoppers are seeded into the lead/referral process.  The sales behaviors and their effectiveness are then evaluated in an outbound sales interaction.

Wallet Share Surveys

These surveys are used to evaluate customer engagement with and loyalty to the brand.  Specifically, to determine if customers consider the brand their primary provider, and identify potential road blocks to wallet share growth.

 

Retention Phase

Finally, planned experiences within the retention phase of the customer lifecycle may be monitored with the following tools:

Customer Side Brand Side
Lost Customer Surveys

Lost customer surveys identify sources of run-off or churn to provide insight into improving customer retention.

Life Cycle Mystery Shopping

Shoppers interact with the company over a period of time, across multiple touch points, providing broad and deep observations about sales and service alignment to the brand and performance throughout the customer lifecycle across multiple channels.

Comment Listening

Comment tools are not new, but with modern Internet-based technology they can be used as a valuable feedback tool to identify at risk customers and mitigate the causes of their dissatisfaction.

 

Call to Action – Make the Most of the Research

Research without call to action may be interesting, but not very useful.  Regardless of the research choices you make, be sure to build call to action elements into research design.

For mystery shopping, we find linking observations to a dependent variable, such as purchase intent, identifies which sales and service behaviors drive purchase intent – informing decisions with respect to training and incentives to reinforce the sales activities which drive purchase intent.

For surveys of customers, we recommend testing the effectiveness of the onboarding process by benchmarking three loyalty attitudes:

  • Would Recommend: The likelihood of the customer recommending the brand to a friend relative or colleague.
  • Customer Advocacy: The extent to which the customer agrees with the statement, “you care about me, not just the bottom line?”
  • Primary Provider: Does the customer consider the brand their primary provider for similar services?

As you contemplate campaigns to build planned experiences into your customer experience, it doesn’t matter what specific model you use.  The above model is simply for illustrative purposes.  As you build your own model, be sure to design customer experience research into the planned experiences to monitor both the presence and effectiveness of these planned experiences.


 

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Onboarding Research: Research Techniques to Track Effectiveness of Stabilizing New Customer Relationships

As we explored in an earlier post, 3 Types of Customer Interactions Every Customer Experience Manager Must Understand, there are three types of customer interactions: Stabilizing, Critical, and Planned.

The first of these, “stabilizing” interactions are service encounters which promote customer retention, particularly in the early stages of the relationship.

stable

New customers are at the highest risk of defection, as they have had less opportunity to confirm the provider meets their expectations.  Turnover by new customers is particularly damaging to profits because many defections occur prior to recouping acquisition costs, resulting in a net loss on the customer relationship.  As a result, customer experience managers should stabilize the customer relationship early to ensure a return on acquisition costs.

Systematic education drives customer expectations beyond simply informing customers about additional products and services; education systematically informs new customers how to use services more effectively and efficiently.  Part of this systematic approach to create stabilizing service encounters is to measure the efficacy of customer experience at all stages of this stabilizing process.

Onboarding Research

The first step in designing a research plan for the onboarding process is to define the process itself.  Ask yourself, what type of stabilizing customer experiences do we expect at both initial purchase and at discrete time periods thereafter (be it 30 days, 90 days, 1-year)?  Understanding the expectations of the process itself will define your research objectives, allowing an informed judgment of what to measure and how to measure it.

Specific recommendations vary from industry to industry, however, typically, we recommend measuring the onboarding process by auditing the performance of the process and its influence on the customer relationship.

Performance Audits

Mystery shopping is an effective tool to audit the performance of the onboarding process.

First, mystery shop the initial sales process to evaluate the efficacy and effectiveness of the sales process.  Be sure to link the mystery shop observations to a dependent variable, such as purchase intent, to determine which sales behaviors drive purchase intent.  This will inform decisions with respect to training and incentives to reinforce the sales activities which drive purchase intent.

Beyond auditing the initial sales experience, a mystery shop audit of the onboarding process should test the presence and timing of specific onboarding events expected at discrete time periods.  As an example, a retail bank may expect the following onboarding process after a new account is opened:

Period Events
At Opening Internet Banking PresentationMobile Banking PresentationContact Center Presentation

ATM Presentation

Disclosures

 

1 – 10 Days Welcome LetterChecksDebit Card

Internet Banking Password

Overdraft Protection Brochure

Mobile Banking E-Mail

 

30 – 45 Days First StatementSwitch KitCredit Card Offer

Auto Loan Brochure

Mortgage/Home Equity Loan Brochure

 

In this example, the bank’s customer experience managers have designed a process to make customers aware of more convenient, less expensive channels, as well as additional services offered.  An integrated research plan would recruit mystery shoppers for a long-term evaluation to audit the presence, timing, and effectiveness of each event in the onboarding process.

Customer Perspective

In parallel to auditing the presence and timing of onboarding events, research should be conducted to evaluate the effectiveness of the process in stabilizing the customer relationship by surveying new customers at distinct intervals after customer acquisition.  We recommend testing the effectiveness of the onboarding process by benchmarking three loyalty attitudes:

  • Would Recommend: The likelihood of the customer recommending the brand to a friend relative or colleague.
  • Customer Advocacy: The extent to which the customer agrees with the statement, “you care about me, not just the bottom line?”
  • Primary Provider: Does the customer consider the branch their primary provider for similar services?

These three measures tracked together throughout the onboarding process will give managers a measure of the effectiveness of stabilizing the relationship.

Again, new customers are at an elevated risk of defection.  Therefore, it is important to stabilize the customer relationship early on to ensure ROI on acquisition costs.  A well designed research process will give managers an important audit of both the presence and timing of onboarding events, as well as track customer engagement and loyalty early in their tenure.

 

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3 Types of Customer Interactions Every Customer Experience Manager Must Understand

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Every time a customer interacts with a brand, they learn something about that brand, and adjust their behavior based on what they learn.  They will adjust their behavior in ways that are either profitable or unprofitable for the brand.  The implication of this proposition is that the customer experience can be managed in such a way to influence customer behavior in profitable ways.

In order to understand how to drive customer behaviors via the customer experience, it is first, is important to define the customer behaviors you wish to influence, and to align marketing message, performance standards, training content, employee incentives and measurement systems to encourage those behaviors.

It is impossible, of course, to plan every customer experience or to ensure that every experience occurs exactly as intended. However, companies can identify the types of experiences that impart the right kind of information to customers at the right times. It is useful to group these experiences into three categories of company/customer interaction:  Stabilizing, Critical, and Planned.

Stabilizing

Stabilizing interactions promote customer retention, particularly in the early stages of the relationship.

New customers are at the highest risk of defection.  As customers become more familiar with a brand they adjust their expectations accordingly, however new customers are more likely to experience disappointment, and thus more likely to defect. Turnover by new customers is particularly hard on profits because many defections occur prior to break-even, resulting in a net loss for the company. Thus, experiences that stabilize the customer relationship early on ensure that a higher proportion of customers will reach positive profitability.

The keys to an effective stabilizing strategy are education, competence and consistency.

Education influences expectations, helping customers develop a realistic expectations.  It goes beyond simply informing customers about the products and services offered by the company. It systematically informs new customers how to use the brand’s services more effectively and efficiently, how to obtain assistance, how to complain, and what to expect as the relationship progresses. In addition to influencing expectations, systematic education leads to greater efficiency in the way customers interact with the company, thus driving down the cost of customer service and support.

Critical

Critical interactions are service encounters that lead to memorable customer experiences.  While most service is routine, from time to time a situation arises that is out of the ordinary: a complaint, a question, a special request, a chance for an employee to go the extra mile. The outcomes of these critical incidents can be either positive or negative, depending upon the way the company responds to them; however, they are seldom neutral. The longer a customer remains with a company, the greater the likelihood that one or more critical interactions will have occurred.

Because they are memorable and unusual, critical interactions tend to have a powerful effect on the customer relationship. We often think of as “moments of truth where the brand has an opportunity to solidify the relationship earning a loyal customer or risk the customer’s defection.  Positive outcomes lead to “customer delight” and word-of-mouth endorsements, while negative outcomes lead to customer defections, diminished share of wallet and unfavorable word-of-mouth.

The key to an effective critical interaction strategy is opportunity. Systems and processes must be in a position to react to these critical moments of truth.

An effective customer experience strategy should include systems for recording critical interactions, analyzing trends and patterns, and feeding that information back to the organization. Employees can then be trained to recognize critical opportunities, and empowered to respond to them in such a way that they will lead to positive outcomes and desired customer behaviors.

Planned

Planned interactions are intended to increase customer profitability through up-selling and cross-selling. These interactions are frequently triggered by changes in the customers’ purchasing patterns, account usage, financial situation, family profile, etc. CRM analytics combined with Big Data are becoming quite effective at recognizing such opportunities and prompting action from service and sales personnel.  Customer experience managers should have a process to record and analyzing the quality of execution of planned interactions with the objective off evaluating the performance of the brand at the customer brand interface – regardless of the channel.

The key to an effective strategy for planned interactions is appropriateness. Triggered requests for increased spending must be made in the context of the customers’ needs and permission; otherwise the requests will come off as clumsy and annoying. By aligning information about execution quality (cause) and customer impressions (effect), customer experience managers can build a more effective and appropriate approach to planned interactions.

 

For additional perspectives on research techniques to monitor the customer experience in the stabilizing phase of the relationship, see the post: Onboarding Research: Research Techniques to Track Effectiveness of Stabilizing New Customer Relationships.

For additional perspectives on a research methodology to investigate “Critical” experiences, see the post: Critical Incident Technique: A Tool to Identify and Prepare for Your Moments of Truth.

For additional perspectives on research methodologies to investigate “Planned” experiences through out the customer life cycle, see the post: Research Tools to Monitor Planned Interactions Through the Customer Life Cycle.
 

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The Customer Loyalty Illusion

There is no such thing as customer loyalty.  Loyalty…true loyalty… loyalty through thick and thin – requires an irrational customer, one who will stay with the bank regardless of the bank’s performance.

Every time a customer interacts with their bank, they may learn something as a result of the experience, and adjust their behavior as a result of what they learn. What we perceive as loyalty is an illusion, rather it is actually the product of an ongoing calculation each customer makes conscious or subconsciously to either initiate or maintain a relationship with a bank.  This is the customer value equation.

Customer Value = (Results + Process Quality + Intangible Benefits) - (Price + Other Acquisition Costs + Intangible Costs)

The customer value equation is simply the sum of the benefits of banking with a given institution minus the sum of the costs of choosing another provider.  If this sum is positive, the customer will act as if they are loyal.  If this sum is negative, the customer will behave as if they are disloyal.

The first term in this equation contains all the possible benefits associated with the bank.  These include the obvious, such as convenience of location or hours, rates and fees, breadth of delivery channels, and customer service.  However, they also include less obvious intangible benefits, such as doing business with a local community bank, or the prestige of one financial service provider over the other.

The second term contains the sum of all the costs associated with the banking relationship.  Again, the obvious are rates and fees.  However, there may be other acquisition costs, such as, the effort of switching providers, as well as intangible costs such as potential risk of switching financial providers. These intangible costs are significant, and play a significant role in what we perceive as customer loyalty, where customers remain with a financial institution more out of inertia, than other reasons.

A common objection to the customer value equation as a model of customer decision making is that it assumes that all customer decisions are completely rational, something that flies in the face of modern research using fMRI machines to probe the biological underpinning of decision makings.  This research strongly suggests that many decisions are neither conscious nor rational.  However, the customer value equation model allows for this equation to be subconscious and the intangible terms on both the cost and benefit side of the equation allow for irrational benefits and costs to be inserted into the customer’s decision making.

The proposition that customers are not loyal, and that behaviors we use to describe loyalty are really the result of an ongoing calculation of benefits and costs at first may seem daunting, but embracing the proposition that customers adjust their behavior based on what they perceive about a provider, gives managers a valuable model to think about customer loyalty in ways that mirror customer decision making. Understanding the customer value equation gives bank managers a rational framework to make investments in product, positioning, price and place to best match their offering with their customers’ value equations.

How might banks use the concept of the customer value equation to manage the customer experience?


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Changes in Word of Mouth Advertising Based on the Customer Experience – Part 2

Previously we observed changes in customer purchase behavior based on the customer experience. 

Every time a company and a customer interact, the customer learns something about the company, and adjusts their behavior based on what they learn.

To explore this proposition, Kinesis conducted a survey of 500 consumers asking them to recall an experience with any provider that they found to be particularly positive or negative, and determined how these customer experiences influenced customer behavior.

Here is how respondents told us they changed their behavior based on the experience:

Change in Cust Behavior

 

This post specifically addresses positive word of mouth as a result of the experience.

Respondents shared positive word of mouth a median 4.3 times as a result of their positive experience, compared to negative experiences, which were shared about 20% more often (median 5.2 times).  In fact, they were more likely to share negative word of mouth across all mediums:

Word of Mouth as Result of Experience

Positive Experiences

Negative Experiences

Friend or family (Excluding Online or Social Media)

69%

80%

Coworkers (Excluding Online or Social Media)

42%

54%

Online Social Media

28%

47%

Online Reviews

20%

33%

Customers are far more likely to share negative experience using online mediums.  While they are about 1.2 times more likely to share a negative experience with a relative, friend or coworker via an off line medium, they are 1.7 times more likely to share negative experiences over positive via online mediums.

Again, every time a company and a customer interact, the customer learns something about the company, and changes their behavior based on what they learn.  And, as this study shows, they certainly will share this experience with others.   But what about the recipients of this word of mouth advertizing?  How does one customer’s experience influence the behavior of others?

Approximately 90% of respondents said their purchase decisions were influenced positively (93%) or negatively (85%) by social media or word of mouth reviews.

With customer trust at an all time low,  and social media providing a much more far reaching medium of person to person communication, positive word of mouth is becoming far more important in terms of defining the brand.  Increasingly social media is becoming the media.  With 9 out of 10 potential customers saying their purchase decisions are influenced reviews of others, it is increasing important that managers manage their customer experience to support and reinforce the brand.


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Changes in Purchase Behavior Based on the Customer Experience – Part 1

Every time a company and a customer interact, the customer learns something about the company, and adjusts their behavior based on what they learn.

To explore this proposition, Kinesis conducted a survey of 500 consumers asking them to recall an experience with any provider that they found to be particularly positive or negative, and determined how these customer experiences influenced customer behavior.

When asked to characterize the cause of the positive or negative experience, these customers’ descriptions were grouped into four common themes that mirrored each other regardless of whether the experience was positive or negative.  The most common themes for both experiences were: speed of service, pleasantness of personnel, efficiency of service, and the success of the outcome.

Causes of Positive & Negative Experiences

Positive Experiences Negative Experiences
Speed of Service/ Problem Resolution 72% 69%
Pleasantness of Personnel 70% 63%
Efficiency of Service/ Not Passed Around to Multiple People 60% 71%
Outcome Successful/ Problem Resolved/ Expectations Met 55% 49%

The speed of service was cited with about the same frequency (7 out of 10 cases) as a cause of the experience being positive or negative.  Pleasantness of personnel was mentioned 70% of the time as a driver of positive experiences compared to 63% for negative.  Efficiency of service (or lack thereof) was more commonly cited as a reason for the experience being negative (71%) compared to positive (60%).  The fourth most common theme mentioned as a reason for the success or failure of the customer experience is the successful outcome of the experience itself (55% for positive experience, 49% for negative).

Again, every time a company and a customer interact, the customer learns something about the company, and adjusts their behavior based on what they learn.  So…how did these experiences (positive or negative) influence customer behavior?

Here is how respondents told us they changed their behavior based on the experience:

Changes in Customer Behavior Based on Experience

Positive Experiences Negative Experiences
Change in purchase behavior (Buy more or less) 54% 57%
Told others (Positive or negative) 36% 43%
Considered change in purchase behavior 32% 38%
No change 14% 5%

Over half of the respondents said they changed their purchase behavior as a result of the experience, 54% of the customers recalling a positive experience told us they purchased more from the provider as a result of the positive experience, while 57% told us they purchased less as a result of the negative experience.

Furthermore, about a third of the respondents told us they considered a change in purchase behavior as a result of the experience; 32% considered purchasing more as a result of the positive experience, and 38% considered purchasing less as a result of a negative experience.

Finally, roughly four out of ten told others of the experience.  Thirty-six percent of participants told us they gave positive word of mouth as a result of the positive experience, while 43% gave negative word of mouth as a result of the negative experience.

Again, every time a company and a customer interact, the customer learns something about the company, and changes their behavior based on what they learn.  The two primary ways customers change their behaviors based on the customer experience is both their own purchase behavior and sharing the experience with others.

The next post in this series explores how customers share the experience with others and the ultimate influence this word of mouth advertising has on others.


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It’s the People: Keys to Customer Loyalty in the Grocery Customer Experience

77294463The business attribute with the highest correlation to profitability is customer loyalty.  Customer loyalty lowers sales and acquisition costs per customer by amortizing these costs across a longer lifetime – leading to some extraordinary financial results.  However, the question remains, what service attributes drive customer loyalty?

To answer this question, Kinesis conducted surveys of customers who had recently visited a grocery store, collecting impressions of a variety of service attributes.

In order to determine the relationship of these attributes to customer loyalty, we identified each customer as a promoter or detractor as a result of the experience, according to the Net Promoter methodology.  Net Promoter is generally accepted as a strong proxy measurement for loyalty, and serves as the basis for evaluating the relationship of these attributes to customer loyalty.

The 12 service attributes with the largest gaps between promoters and detractors are:

  1. No wait for service
  2. Employee made eye contact
  3. Employee offered friendly verbal greeting
  4. Employees attentive to customers
  5. Employees look presentable
  6. Name badges worn
  7. All items have shelf tags and price labels
  8. Employees offer further assistance or offer friendly parting comment
  9. Product knowledge of employees
  10. Quality and variety of products meets expectations
  11. Samples offered
  12. Walk customer to item or area (if asked for assistance)

It’s the People

The performance of the individual employees weighs heavily on customer loyalty.  Eight of the 12 attributes are directly related to employee behaviors: eye contact, friendly greeting, attentive to customers, name badge worn, offer further assistance or friendly parting comment, product knowledge, and walking customers to the item or area.

Every time a company and a customer interact, the customer learns something about the company, and adjusts their behavior based on what they learn.  When customers encounter an employee who cares about their needs, they learn that the company, through the employee, cares about their needs as well.  Customers respond to this information with an increased desire to positively spread word of mouth, a behavior strongly correlated to customer loyalty.

What are some of the ways your employees care about the customer’s needs?


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Own the Call: A Key to Customer Loyalty

What service attributes from your agents drive customer loyalty?

To answer this question, Kinesis conducted surveys of people who had recently called a contact center. Impressions of the customer experience with particular attention to the performance of the agent were collected across a variety of attributes. In order to determine the relationship of these attributes to customer loyalty, we identified each customer as a promoter or detractor as a result of the call, according to the Net Promoter methodology. Net Promoter is generally accepted as a strong proxy measurement for loyalty, and serves as the basis for evaluating the relationship of these attributes to customer loyalty.

It’s the People

Not surprisingly, the performance of the individual agent weighs heavily on customer loyalty. The average overall impression rating (on a 5-point scale) of the agent is 1.4 times higher in calls where the customer was identified as a promoter (4.9) compared to those identified as detractors (3.5).

Further evidence of the importance of the agent can be found in a comparison of the specific attributes ratings for promoters compared to detractors.

Promoter

As Result of Call

Detractor

As Result of Call

Took Ownership of Call 4.9 3.2
Confidence in Agent 4.9 3.3
Value as a Customer 4.8 3.6
Interest in Helping 4.9 3.8
Use of Understandable Terms 5.0 3.7
Job Knowledge 5.0 3.8
Professionalism 5.0 4.0
Friendliness/Courtesy 5.0 4.3

The agent taking ownership of the call and the confidence the customer had in the agent are both 1.5 times stronger in calls where the customer is a promoter as a result of the call, compared to calls where they are a detractor.

Own the Call

What does ownership of the call mean?

Ownership of the call was defined in this survey as the extent to which the agent appeared to be the voice of the company, took responsibility for the customer’s concerns, showed a desire to be of assistance, and advised of possible solutions and assured resolution.

Every time a company and a customer interact, the customer learns something about the company, and adjusts their behavior based on what they learn. When customers encounter a contact center agent who owns the call, they learn that the company, through the agent, cares about their needs, wants to help resolve the need, and will stay engaged until the need is met. Customers respond to this information with an increased desire to positively spread word of mouth, a behavior strongly correlated to customer loyalty.

What are some of the ways you take ownership of the call?


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Shareholder Return and the Customer Experience: A Case for Investment in the Customer Experience

I recently came across a very intriguing bit of research that suggests the benefits of investments in the customer experience in terms of shareholder return.

Great customer service processes and people are not built overnight. They take years of investment to cultivate. Unfortunately, for some publically traded companies, the short-term demands of Wall Street make such investment difficult. The demands of investors to meet earnings estimates for the next quarter can make it difficult for managers to invest in the customer experience – the payback is too slow and uncertain.

Stockholders have little patience nowadays with investments that do not show a clear and quick return. To ensure that managers are acting in the owners’ interests, management incentives are more frequently tied to quarterly financial performance than to difficult-to-measure variables like customer loyalty.

Given great customer experiences are not built overnight, they are constantly at risk of budget cuts by managers who would boost short term earning at their expense. Service initiatives have a tendency to come and go in large companies before they have a chance to prove their worth, resulting in customer frustration, employee cynicism and widespread service mediocrity.

Service gurus talk about the need for “investor loyalty” as a counterbalance to customer loyalty, but that requires a visionary, motivated and stable management team who can convince investors to look farther ahead.

Easier said than done, right? How does one make the case for investments in the customer experience in an environment that demands making the next quarters numbers?

Jim Picoult, founder of Watermark Consulting, has an answer. Jim has created a stock index based on Forester’s annual Customer Experience Index (CXI). Jim calculated the returns of two hypothetical portfolios consisting of the top and bottom 10 publicly traded companies in Forester’s CXI for a six year period ending in 2012. Each year he rebalanced the two portfolios based on Forester’s new rankings. The portfolio comprised of companies ranked in Forester’s top 10 yielded a cumulative return of 43%, compared to 14.5% for the S&P 500. The portfolio containing the bottom 10, yielded a cumulative return of negative 33.9% – it lost a third of its value.

Customer Experience Leaders Outperform the Market

Now, correlation is not causation, and there are a lot of factors at play here. But clearly the managers of firms in the portfolio of Forester’s top 10 were able to both deliver shareholder value and invest in the customer experience.

It all comes down to thinking of the customer as an asset in which to invest and realize a return.


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Turning Customer Advocacy on Its Head

The dominate notion of customer advocacy is not very customer centric. Its focus is on what the customer can do for the bank by referring friends, relatives, and colleagues for their banking needs. A more customer centric notion, with perhaps a stronger relationship to customer loyalty, turns this dominate notion on its head – making the bank an advocate on behalf of the customer. Customers who trust their bank to do the right thing are more likely to remain loyal.

My bank cares about me not just bottom line

Measuring customer advocacy is both simple and useful; just ask your customers if they agree with the following statement: “My bank cares about me, not just the bottom line.” I call this the customer advocacy statement. Research has demonstrated a positive relationship between agreement with this statement and loyalty to a financial institution. This makes intuitive sense; customers who agree trust the bank to do right by them and will remain loyal.

Here is how we ask the question. As part of a broader survey, we ask our clients’ customers to rate, on an agreement scale, to what extent they agree with the above statement.

Research without clear call to action elements may be interesting, but not very useful. How can a manager put this question to use?

The answer to this is two fold:

First, the response to this question can be correlated to a battery of service attributes. This will yield a means of judging the relative importance of each attribute in terms of the strength of their relationship to loyalty. Mangers now have a basis to make informed decisions as to which investments will yield the most ROI in terms of improving customer loyalty.

Second, investigate all cases where agreement to this question is low. These are customers at risk. A researcher can drill into the survey responses of these customers to determine what caused the low rating. Tracking the causes will inform management of potential causes of runoff that require attention.


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