Category Archives: Customer Strategy

What Is The Price Of Customer Loyalty And Who Pays It?

I say that there is a ‘price’ attached to everything and it is always paid. What is open to influence is ‘who’ pays the ‘price’.  The question I wish to address in this conversation is this one: what is the price of customer loyalty and who pays it?

Let’s leave aside theory for those that specialise in it: the professors, the authors, the ‘gurus’. And look it this question in the concrete – through my lived experience.  In particular, let’s look at two recent events and experiences.

Churchill: The Price of Customer Loyalty is a 70% Mark Up

Recently, I got a renewal reminder through from Churchill regarding the car insurance policy I have with this organisation. The price was was around £320. And I was assured that I was taken care of, needed to do nothing, was in safe hands and this insurance would be renewed automatically.

In the early part of my business life I got a good look inside the insurance industry. What struck me was how the folks in the insurance industry did everything in their power to not pay customer claims including legitimate claims. Where paying out could not be stopped, the focus was on delaying payment as long as possible (money in the bank earns interest for the insurance company) and making an effort to get the customer to agree to a smaller amount than the customer was due.

With this in mind, and a niggle at the back of my mind suggesting that the previous year the premium had been less than £200, I started my due diligence on the insurance comparison websites. Guess who showed up among the most competitive insurance providers? Churchill.  Guess what the premium was? £187

Let’s take a good look at this from a loyalty perspective. The price of loyalty was to be paid by me as follows: increase in premium of £133 which amounts to a markup (on the £187) of 71%.

What did Churchill offer me in return for this extra premium? Nothing. The only difference between the £187 (on website) and the £320 (renewal) was that I got less cover! The £187 premium included free car breakdown insurance, the £320 premium did not.

What did I do? I took out a new policy for £187 and then rang to cancel the renewal. How did the call-centre agent respond? She asked me to allow her to match the best quote I had got elsewhere. I told her that Churchill had already done that. When I explained that I had taken out a new policy via the website she told me that it was normal for new customers to get a better deal especially if they sign-up online.

What else did she do? She told me off. For what? For taking out a new policy and messing up the internal system. What would she have liked me to do? Ring up Churchill, ask them to match the quote, get the renewal premium amended and continue with the existing policy.  It occurs to me that Churchill is true outside-in organisation which understand the customer and focuses on the customer experience. How else does one come up with this radical approach to doing business? Joking!  And sadly, the orientation is the default one despite all the talk.

Lesson for Customers: Never trust a commercial organisation to have your interests at heart. The standard practice is to sell you what makes most revenue-profit for the organisation this year.

Lesson for Enterprises: Given the radical transparency and ease of shopping facilitated by the internet it is necessary to pay attention to your pricing policies; not all customers are lazy, ignorant, or wealthy especially in the current economic climate.

 RAC: The Price Of Customer Loyalty Is A 12% Mark Up

We received a renewal reminder from the RAC. Like Churchill, the RAC assured me that I was in safe hands, had to do nothing, the renewal would take place automatically.  Given the comprehensive cover I have (UK, Europe, Number of People, Services) the sum of £342 did not seem too much.  As I was doing the Churchill search on the net, I did the same for car breakdown cover.

I chose only to look at two organisations: RAC and the AA.  RAC turned out to be just as competitive as the AA. Given my positive experiences with both organisations, I did not mind which ended up providing the cover.  When I plugged in my cover requirements from the renewal reminder into the RAC website, I found the same cover for £322. No big difference.

Seeing myself as a Customer Experience investigator, I chose to call the RAC. I selected the ‘going elsewhere option’ on the IVR. The agent answered the call, I told him the situation. He has helpful and investigated. What renewal premium did he offer me? Better than I was looking at on the RAC website. He offered me a renewal premium of £307. I took up the offer.

So let’s do the maths. The price of customer loyalty is still paid by the customer. It is just that in the case of the RAC the price is much lower: £35 representing a mark up (on £307) of 12%.

Lesson for Customers: Not all enterprises are out to get you to pay every penny. Some like the RAC settle for charging you modest amounts (mark up) in exchange for the convenience of doing nothing – saving you time and effort.

Lesson for Enterprises: Charging modest premiums in exchange for convenience is likely to be better received-experienced by your customers; I view RAC rather differently to Churchill – the latter shows up for me as greedy, the RAC shows up as fundamentally ok. If you do get caught like the RAC did then consider being gracious and generous like the RAC agent. Why? Because, it left me with the experience of gratitude to RAC rather than the experience of getting satisfaction at besting greedy Churchill.

Final Thoughts

It occurs to me that companies have made a mess of customer loyalty as they have viewed this in a selfish (transactional) manner. They have viewed loyalty in terms of getting more money from customers.  And by necessity the cost of customer loyalty falls on the customer: the customer pays to be loyal, stick with existing supplier.

So the opening for those who are up for a radical approach to doing business arises with grappling with this question: how can we create superior value for the customer such that s/he stays with us and is happy to pay a premium?  It occurs to me that Apple has been doing a great job of answering this question through its hardware, software, and ecosystem.  Which may explain why it’s value has rocketed over the last ten years. And why the market in used Apple hardware in eBay is more than all the other PC companies combined.

 

Customer Centricity: A Sunday Morning Religion?

It occurs to me that customer-centricity has become a religion in many ways. And as such is characterised by a particular philosophy-ideology, rituals and practices. We have many books-articles published on customer-centricity, customer experience, CRM, customer service etc.  We have many gurus expounding their particular philosophy of customer-centricity. We have many consultancies pushing their flavour of customer-centricity and associated paths to customer-centric nirvana. We have the IT industry pushing an array of systems under the customer-centricity and customer experience banners.  And, we have many conferences centred on the topic of customer-centricity in one or more of its flavours.

What difference does all this make when it comes to lived experience – the real world of business?  I say that customer-centricity has become the new game to play: a charade. And in this sense, customer-centricity shows up for me as a Sunday morning religion.  This was brought home to me, recently, when listening to the advice given by an engagement manager to a project manager. It went along the following lines:

“Looks like you have a happy customer. Ring up the customer and ask if he would be willing to give us a 10. If he is willing to give us a 9 or a 10 then send him the NPS survey.”

Am I faulting the engagement manager? Not at all. The engagement manager through his instruction has simply made visible the game that has become the norm under the religion of customer-centricity.  How many Christian’s who turn up on Sunday morning are actually Christians?  By that I mean how many embody-live the principles-values-practices embodied by Jesus Christ?  Please note, I am not attacking Christianity. I find that the same has occurred as regards Islam: rare is the person I encounter who calls himself a muslim and shows up for me as being as such.

I ask you consider, be with, reflect on the following sage speaking by a sage:

The intricate maze of philosophy of different schools claims to clarify matters and reveal the Truth, but in fact they create confusion where no confusion need exist. To understand anything there must needs be the understanding being. Why worry about his bodies, his ahankar, his buddhi, creation, God, Mahatmas, world – the not-Self – at all? Why not remain yourself and be in peace? Take Vedanta, for instance: it speaks of the fifteen pranas, the names and functions of which the student is asked to commit to memory. Will it not be sufficient if he is taught that only one prana does the whole work of maintaining life in the body? Again, the antahkarana is said to think, to desire, to will, to reason, etc. Why all these details? Has anyone seen the antahkarana, or all these pranas? Do they really exist? They are all conceptual divisions invented by teachers of philosophy by their excessive analysis. Where do all these concepts end? Why should confusion be created and then explained away? Fortunate is the man [person] who does not lose himself in the labyrinths of philosophy, but goes straight to the Source from which they all rise.

- Ramana Marashi

I say put aside customer lifetime value. I say put aside share of customer wallet. I say put aside big data. I say put aside data mining and predictive analytics. I say put aside CRM and CRM systems. I say put aside Voice of the Customer and Customer Experience. I say put aside customer loyalty programs….

Now ask yourself some really hard questions and answer truthfully:

  1. am I/we willing to put the needs-concerns-wellbeing of the customer at least on par with our needs-concerns-wellbeing?

  2. am I/we willing to sacrifice revenues and profits (‘bad profits’) that I/we are making from taking advantage of our customers?

  3. am I/we hungry (passionate) about coming up with products-services-solutions-experiences that simplify and enrich the lives of our customers?

The Effortless Experience: Sensational Headlines, Misleading Conclusion?

In this post I complete my take on the key assertion and the 4 findings put forth in the book The Effortless Experience.  Before I launch into this post let’s recap the following points from the first post.

Recap of the essential points from the earlier post

The four major findings put forth by the authors:

  1. A strategy of delight doesn’t pay
  2. Satisfaction is not a predictor of loyalty
  3. Customer service interaction tend to drive disloyalty, not loyalty
  4. The key to mitigating disloyalty is reducing customer effort

Let’s also get clear on the scope of the research that gave rise to these findings. The primary mechanism was post (contact centre) call surveys completed by customers. And the scope did not included the end 2 end customer experience:

An important disclosure before we reveal the results and their implications: we intentionally limited this study to service transactions and their impact on customer loyalty.

And my position?  I shared in the first post that these findings show up for me as a statement of the bleeding obvious. And it occurs to me that the headline grabbing finding “Satisfaction is not a predictor of loyalty” is misleading if not flawed.  Now I fulfil on my promise to share my rationale.

Dealing with findings 2, 3, and 4

How many studies do we need to get that satisfaction is not a predictor of loyalty?  Just look into your experience!  I can be satisfied, even delighted, with a physiotherapist and switch to a chiropractor. Why? Because by switching I reduce my travel time from 45-60 minutes (each way) to  15-20 minutes each way.  I can be satisfied with a particular restaurant and try out new restaurants that show up on my radar – usually as result of some recommendation.  I can be satisfied with a particular mobile telco and switch because of some promotion heavily promoted by a competitor …

Who does the customer turn to when s/he has a pressing issue which needs to be dealt with?  Customer Services and the folks sitting in some distant contact centre.  What does it take for a customer to make the call to these contact-centres?  My experience that many of us only call the contact centre if and only if we cannot address the issue through other means: internet, self-service channels, friends….. Why? Because, on the whole the experience of dealing with contact centres is effortful and painful.

It occurs to me that customers increasingly turn to Customer Services as a last resort and usually with the more complex issues/problems.  And on the whole the Customer Services function is not designed to help customers with these complex issues/problems;  contact-centres are staffed and run to minimise the cost of operations not to deliver a good customer experience.  As a result of the mismatch between the needs of the Customer and the design-operation of the contact-centre customers often have to force a solution out from the contact-centre.  That is to say that at best the interaction shows up as effortful. And there are many instances where the contact centre is unhelpful: quoting policy or making promises and not delivering on them as Customer Services has little power in the rest of the organisation.  Given this is it any surprising that “Customer service interaction tend to drive disloyalty, not loyalty” and “The key to mitigating disloyalty is reducing customer effort”.  Don’t take my word for it, read this post for my British Gas experience.

Dealing with the profound finding: “A strategy of delight doesn’t pay”

Take a look at delight.  What shows up?  For me, taken a phenomenological approach, the following shows up:

  1. I rarely find myself delighted in the course of interacting with companies of which I am a customer.

  2. When I do find myself delighted it is because someone who is a representative of the company , or the company itself, has ‘given’ me something that shows up for me as valuable and which I did not expect.

  3. Delight is contextual – the  content which shows up as delightful in one context does not necessarily show up as delightful in another context. For example, being upgraded from an economy seat to a business seat, in Virgin Atlantic, for a transatlantic flight showed up a delightful.  If I had been upgraded in the case of an hour flight the hassle would have probably outweighed the ‘delight’. Friendly-chatty service show up as delightful when I am relaxed and have plenty of time to spare; the same friendly-chatty service shows up as annoying-intruding-unprofessional when I am in a hurry and simply want the job done, the outcome delivered. If getting the job done turned out to be easier than I imagined, involved less effort on my part, then I tend to be delighted at how easy-effortless the experience was – whether conducting research, making a purchase, or contacting the customer services team and getting help with an issue.

  4. In service transactions there is something like a recipe for generating delight in customers. The recipe involves: solving the customer’s problem; doing so quickly not leaving the customer hanging and most likely worried; minimising the effort that the customer has to make; and last but not least the human element – how you treat the customer as a flesh and blood human being with or without respect, with warmth or with coldness/indifference, as a unique fellow human being or just another call to be handled asap to meet the call time metrics….

How do the authors of the Effortless Experience see, define and measure delight? They see it very differently to me.  They do not see delight in phenomenological terms: that which shows up in the customer’s lived experience – body and mind.  No, they have defined a strategy of delight as consisting of a number of tactics falling under the category Moments of “Wow”:

“Moments of “Wow”

- Willingness of service to go above and beyond

- Applying knowledge about customers

- Exceeding customer expectations

- Teaching the customer

- Offering alternatives

- Perceived value of alternatives”

So what the author’s research is testing, if it is testing anything, is the effectiveness of these tactics in generating delight and thus loyalty.  What if these tactics annoy customers rather than delight customers?  Just this week, I rang my broadband supplier as my patience had run out. The contact-centre agent was helpful. In between conducting the tests, and understanding the size of my home, she was telling me about a special offer (wireless range extender) that the company had on, encouraging me to take advantage of this offer, and telling me she would be happy to guide me through the online process.  Did this land as delightful for me? No! Why not? Because I just wanted her to fix my broadband so I could get my work done!  I didn’t ring to get advice. I didn’t ring to get a free wireless range extender. I range because the broadband was slow, had been slow intermittently over weeks, and that day I desperately needed the broadband to work because I had pressing work to get done and for that I needed a fast (enough) internet connection!

Now take a look at what the authors have placed under the category of Customer Effort:

“Customer Effort

- Number of transfers

- Repeating information

- First contact resolution

- Number of contacts to resolve

- Perceived additional effort to resolve

- Ease of contacting service

- Channel switching

- Time to resolve”

It occurs to me that many of the factors that are likely to lead to delight showing up in customers, as a lived bodily experience, in-around-after a customer service interaction have been placed in the Customer Effort category.

If I am correct, this exhaustive research, the millions of data points, and the subsequent profound finding “Strategy of delight doesn’t pay” is:

  • misleading at best;
  • has been misinterpreted and misreported by many in the media (including bloggers) who failed to dive into the fundamental grounds of this research;
  • does not prove that leaving customers feeling delighted does not generate an economic return.

I get that I make mistakes. If you see mistakes in the analysis that I have shared with you then please point them out to me by commenting.

The Effortless Experience: Is There Anything of Value Behind The Hype?

The Effortless Experience Promises the Roadmap to El Dorado

Over the course of 2013 I noticed a certain buzz about ‘customer effort’ and its associated metric, the ‘Customer Effort Score’.  So when I was invited to review The Effortless Experience (the book behind the buzz around customer effort) I took up the offer.

The central assertion of the book can be summed up by the following paragraph (page 3):

“Whilst most companies have been pouring time, energy, and resources into the singular pursuit of creating and replicating the delightful experience for their customers, they’ve ironically missed the very thing that customers are actually looking for – a closer in, more attainable, replicable, and affordable goal that’s been sitting right in front of them all this time: the effortless experience….”

That paragraph got my attention. Why?

First, because my experience contradicts the first half of the paragraph. It occurs to me that most companies have NOT been pouring time, energy, and resources into the singular pursuit of creating and replicating delightful experiences for their customers!

Second, the authors make a bold claim. Is there anything of substance to support this claim or is it as ungrounded as the first half of the paragraph?

The Effortless Experience: Four Core Findings

The authors claim that they surveyed over 97,000 customers and conducted a whole bunch of research through which they “ended up with a few million data points..” which they boiled down to four simple yet profound findings.  What are these findings?

1. A strategy of delight doesn’t pay

“…. there is virtually no difference between the loyalty of those customers whose expectations are exceeded and those whose expectations are simply met… loyalty actually plateaus once customer expectations are met.

2. Satisfaction is not a predictor of loyalty

“… we found virtually no statistical relationship between how a customer rates a company on a satisfaction survey and their future customer loyalty..

3. Customer service interactions tend to drive disloyalty, not loyalty

“.. according to our research, any customer service interaction is four times more likely to drive disloyalty than loyalty…”

4. The key to mitigating disloyalty is reducing customer effort

” … four out of the five drivers of disloyalty are about additional effort customers must put forth…..”

What showed up upon a closer-questioning look at these ‘profound’ findings?

If one reads the book carefully it becomes clear that one has to be very careful about these findings.  Why?  Because the scope of the findings is limited to only one domain, one piece, of the end-2-end Customer Experience:

“We wanted to know ….. exactly which elements of the customer interaction with customer service have the biggest effect on making people more (or less) loyal….

In the first of these surveys, over 97,000 customers – all of whom had a recent service interaction over the web or through calling a contact centre….. – were asked a series of questions about their recent service interactions….

An important disclosure before we reveal the results and their implications: we intentionally limited this study to service transactions and their impact on customer loyalty.”

Now you understand the scope of this “exhaustive study” is limited to interactions between the customer and the contact-centre. And you understand that the data was collected through post call surveys.

Take a look at the four findings again. And think back to your telephone interactions with contact centres.  Get present to the situation that led you to call the contact centre. Get present to the state that you were in just before you made the call.  Get present to your experience of being on the phone to the contact centre.  Now ask yourself if these four profound findings are not a statement of the obvious?

Looking into my own experience, the four findings showed up for me as being true to my lived experience. And yet nothing new. These so called profound findings show up for me as a statement of the bleeding obvious. In the next post (in this series) I will share my rational with you. I will also set out and explain my assertion that reducing customer effort in customer interactions with the contact-centre is a ‘strategy of delight’ and does generate delight in customers.  Until then, I wish you the very best and invite you to share your perspective by commenting.

Integrity: Is This Why Apple, John Lewis, and Amazon are Masters of the Customer Experience?

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