What exactly is the cost of poor service?
In the main that question is difficult to answer because conducting experiments in the business world is not easy. Companies do not easily take up experiments that say “lets provide great service to this set of customers and poor services to another set and then lets study the impact over the next three years or so”. Yet sometimes those experiments happen and we can learn from them. So let’s take a look at the UK telecoms industry and TalkTalk in particular.
This week this piece of direct mail landed in my letterbox and took me by surprise: TalkTalk (a well known brand) is offering unlimited broadband for £3.25 a month plus line rental. My first thought was ” So that is the cost of poor customer service!”. Before I dive into this deeper and share with you the financial cost of poor customer service allow me to tell you a little about TalkTalk.
According to the latest UKCSI survey “Among landline providers BT is the most improved (up 2 points), while Talk Talk is the only telecoms provider to show a significant decrease in satisfaction.”
TalkTalk has been plagued by problems and customer complaints including being billed for services that customers had not asked for and/or did not receive. And when the customers rang up and complained it looks like those complaints were not dealt with well. So some of the unhappy customers complained to Ofcom (the regulator). And after giving TalkTalk several warnings and time to clean up the mess Ofcom has hit TalkTalk with the largest fine ever imposed on a telecoms provider. Whilst the fine is large (£3m) it is nowhere near the maximum (£150m – 10% of turnover).
So the first part of the financial cost of poor customer service comes to £5.5m: £2.5 m is the sum that TalkTalk has agreed to the customers affected and the remaining £3m is the Ofcom fine. Yet there is more.
When I was teaching the value of marketing and service to a skeptical audience of engineering oriented analyticals I justified investments in these areas on the basis that it improves the customer experience and builds the brand. And those in turn allow you to charge higher prices, spend less on getting new customers and make higher profits. Was I justified in making that assertion? I decided to take a look at the broadband market and the current deals that are on offer from the major players. Here is what I found (disclosure – I have not done a detailed point by point examination of the functions, features, pricing.. yet where possible I have compared Apples with Apples):
Looking at the table it is immediately clear (at least to me) that if you deliver a poor customer experience though poor service then you pay a financial penalty in the form of a price discount – at least when it comes to the UK telecoms market. Take a closer look and you will see the following:
- O2 renowned for great customer service earns £100 more per customer per year – TalkTalk is charging 2/3 of the price that O2 is charging;
- BT the biggest player in the broadband market and not particularly know for great service yet it can earn £67.50 more per customer per year whilst only allowing the customer to download 10GB of data per month.
The Bottom Line
By providing poor customer service and not dealing effectively with customer complaints TalkTalk has delivered a poor customer experience and tarnished its reputation. The financial penalty has come in several flavours:
- compensation to existing customers;
- fine by Ofcom;
- higher marketing costs to get new customers; and
- having to substantially discount the price in order to lure new customers.
Service (how you treat the customer) in its many facets is critical to value you deliver to the customer. I spelled this out indirectly in the following post which is worth revisiting: “Thinking strategically about customer experience: the five components of customer value”. In a nutshell, in the informed customer’s mind there is more risk in doing business with a supplier that offers poor service and so the supplier has to offer a price discount and may be forced to do business with price sensitive customers rather than service centred customers.
Does your business focus on providing great customer service? Do you treat customer complaints seriously? No. Then you may be the next TalkTalk. Yes, then you may become the next O2. As always the choice is yours.
VoC Customer Experience Vendors Are Doing Well
A significant component of Customer Experience improvement is getting access to the voice of the customer. A whole software based industry has sprung up to provide access to that voice; according to The Temkin Group customer experience vendors are doing rather well: A Good Year for Customer Experience Vendors.
How much can you rely on the Voice of the Customer?
Which brings me to a key question: how much can you rely on what the customer tells you? My experience suggests that you have to be careful with how you interpret and use the voice of the customer. Allow me to illustrate using personal examples.
During the course of writing this blog I have expressed feelings and then made claims as to what I was going to do in the future. Did I do what I said I would do? Lets take a look:
- I made it clear how unhappy I was with Sky and was looking forward to ending my relationship once the 12 month contract was up: How to Convert An Advocate into a Detractor. Yet, I terminated the contract and then signed up again and so continue to be a customer!
- I wrote about how I felt let down by chiropractic clinic and was going to switch back to the previous one that had treated me well: Customer Centricity – A Tale of Two Clinics. Yet, I did not switch back and so I continue to use the non customer-centric clinic.
- I stated that I would be terminating my homecare agreement with British Gas and I did just that.
So on this sample of one, you can count on the voice of the customer being an accurate guide to customer behaviour (what the customer will do) only one third of the time.
Why have I continued with Sky?
When I wrote what I wrote, I meant it. Yet when it came around to terminating the two contracts I had with Sky I found myself doing something bizarre: I terminated the SkyTV contract yet continued with the Sky Broadband. Why is this bizarre? Because I had a perfect experience with SkyTV. My issue, my upset had been with Sky Broadband. Later I signed up for SkyTV again.
So why have I continued with Sky? Because I made a poor prediction of the future. Specifically:
- I had not taken into account the fact that pleasing my family and keeping them happy is more important than getting back at Sky and so I ended up subscribing to SkyTV;
- I had not realised that a part of me would not welcome the task and emotional issues (risk of it going wrong) associated with switching my broadband to a new supplier;
- That Sky would make me an offer that was so financially attractive that it just made good sense to take it up.
Why have I continued with Ascot Chiropractic Clinic?
First, convenience. I did not switch because it was too inconvenient to visit the Harrsion Clinic: it is out of the way whereas the Ascot Clinic is practically next door.
Second, the hassle involved in switching. The fact is that my chiropractor had been working with me for over six months and had got to know my body, my condition, really well. As such I did not want to have to start all over with a new chiropractor.
Why did I terminate the British Gas Homecare Agreement?
Compare to the Clinic and Sky I found it easy to terminate the British Gas Homecare Agreement. Why? First, the decision was entirely up to me and so I did not have to convince anyone else. Second, it was easy to find a new supplier.
What are the lessons to be learned
The voice of the customer will give you access to what specific customer like about you or do not like about you. It will give you insight into which of your touchpoints, processes, products and services are not working for your customers and how they are falling short. And which are working well and leaving customers delighted.
The voice of the customer is not necessarily a good guide to what specific customers will do in the future. The fact is that we are really poor at predicting what we will do in the future. This has been shown time and again through studies. This is a subject I intend to explore in the future.
BSkyB is the dominant pay TV company in the UK and is more commonly known simply as Sky. Over the recent years Sky has expanded into broadband and fixed line telephony; to use the broadband service you have to get your router from Sky.
Back in December 2009 I signed-up for the triple play (TV, broadband, telephony) with Sky on the basis that this would make my life easier. After a promising start things went downhill fast and I wrote about that in this post: “How to convert an advocate into a detractor – a personal experience”
By December 2010 I had a much kinder, more understanding, perspective on my Sky experience and I wrote about it in the following post: “The value of transparency or why I am no longer mad at BSkyB” As a result of this change in attitude, pressure from my children and an attractive retention offer from Sky I decided to continue to be a customer. And everything was going well until Tuesday 6th April when my broadband router stopped working.
I contact Sky Customer Services and find my competence being questioned
On Tuesday morning I found that I did not have access to the Internet so I went to check the router. I found that the on/off switch had developed a fault: it only worked if I kept it pushed in with my finger. So I decided to phone Sky Customer Services to get a replacement router.
Once I found the Customer Service number (no easy task as none of the statements have a contact number on them) and navigated through the IVR, I was greeted by a friendly female voice. I explained the problem with the existing router and asked for a replacement.
To my surprise the CSA asked if I was sure that the on/off switch was not working. I found myself feeling offended and replied that I was 40+ years old, knew what I was doing and if I said that the on/off switch was faulty she could take my word for it. Why did I become offended? Because it occurred to me that the CSA was questioning my competence.
Company policy takes precedence over doing right by the customer and cultivating loyalty
Once we agreed that a new router was needed, the CSA told me that it would cost me £28. I questioned why I had to pay this cost given that I could cancel my broadband contract (as the twelve month period had already expired), sign-up as a new customer, pay the same monthly charge, and get the router free of charge.
The CSA’s response was that it was simply Sky policy to make existing customers pay for replacement routers. And that if I did cancel my contract and signed up as a new customer I would not get the router free of charge. No matter what I said the CSA did not budge: she simply insisted that it was company policy. When I asked about the rationale behind the policy, she did not explain. When I asked her to put me through to the Retentions team she told me that she did not know if one existed. In the end, I agreed to pay the £28 as I felt I had no choice.
Amazon can guarantee next day delivery, Sky can only state that it is likely to take 3 – 5 days
Once I had provided my credit card details, the CSA told me that it would take 3-5 days to get the router to me. I was astonished: Amazon can and have got books to me the next day (guaranteed delivery) and Sky can only promise 3 – 5 days! I think I simply said “3-5 days!”. The CSA responded by telling me that I could track the status of the router via the website. My response was that I had no interest in tracking the router, I simply needed it delivered asap; allowing me to track the router deflects calls into customer services but it does not help me to get my router on time!
Sky does not keep its first promise which makes me wonder about the second one
I then asked the CSA if it was possible to speak to her manager – not about her but about the Sky policy including the delivery time. The CSA was helpful. She went to look for her manager, found her to be in a meeting, took down a contact number for me and told me that her manager would ring back between 9:45 and 10:15. No-one rang back.
How am I feeling at this point? Truth be told, I am cursing my family for wanting SkyTV and persuading me to continue with Sky; I am cursing myself for my stupidity in continuing to do business with Sky. And I start thinking about how to bring my dependence on Sky to an end because it is clear to me that Sky does not care about its customers and cannot be counted on to deliver on its promises. Will Sky deliver the router in the promised 3 – 5 days?
Wednesday 7th April, around 7pm Suzanne from Sky ‘calls into my life’
At around 7pm on Wednesday 7th April I got a call from Sky and found myself speaking with Suzanne. She asks me how I am and I ask her how she is. I am pleasantly surprised by her refreshing honesty: she tells me that she is well and will be even better when it is 9pm and she can go home. Wow, I am speaking to a real human being! I like her already.
Suzanne then runs through the SkyTV package. She compliments my choices and asks me what I watch. I tell her that the SkyTV is mainly for my children and list their favourite shows. After listening, Suzanne brings the conversation back to me and asks if I watch anything at all. I tell her and she replies that she likes one of the shows that I like. I feel comfortable talking with Suzanne – she occurs as genuine and actually interested in me.
Next, Suzanne runs through the services I have and tells me that she can save me £2.50 a month on the broadband if I sign up to another 12 month contract. I reply that no amount of money would entice me to commit to another 12 months with Sky. I say that whilst SkyTV is great, the rest of Sky particularly the broadband bit is absolutely terrible. Furthermore, I say that I simply have no confidence in Sky as a brand: I just do not trust Sky to treat me fairly, to look after me as a customer. Then I relay my previous days broadband router replacement experience.
How I fell in love with Suzanne and she changed my mind about Sky
All the while I was talking and sharing my frustration and disappointment, Suzanne listened – she stopped selling and simply listened. She did not argue with me, try to refute my experience or to change my mind. She simply said that she understood how I was feeling and could understood why I would not want to do business with Sky. Then she asked me to hold on for a moment.
She came back and told me that she was going to refund the £28 I had paid for the router – no strings attached – as a gesture of goodwill. At this point I found myself reluctant to take up her offer as I did not want to ‘owe Sky anything’ – that is how much I loathed Sky! Yet, I found a moral pressure to grant her request: she had treated me with respect and it was now my turn to reciprocate - so I gave her my credit card details. Then she surprised me again.
Suzanne asked for my patience explaining that she had asked her manager to do the refund. Why? Because Suzanne does not do refunds – it is not part of her role and she does not have the authority. I totally get that Suzanne has gone out of her way to help me! She did not have to do it, she could simply have wished me well and left it at that when I refused her broadband pitch. And I am grateful to Suzanne and I tell her that. I even tell her that she single-handedly (with the help of her understanding manager) has changed my perception and feelings towards Sky.
When it comes to delivering a memorable customer experience and cultivating loyalty there is absolutely no substitution for caring for your customers. And caring for customers comes down to employing people like Suzanne (and her manager) and allowing them the leeway to be great – to take the right actions, actions that build gratitude. Why? Because gratitude leads to loyalty.
A friendly CSA following the script (as set out in the Quality manual) and adhering company policies is not always enough. It is necessary to take the customer’s individual circumstances into account. In human affairs fairness and helpfulness are critical needs. Violate these rules and you almost guarantee losing the customer. For example, The first CSA I dealt with did everything by the book and was friendly throughout. Nonetheless, she left me feeling that she was a prisoner of Sky’s unfriendly customer policies and practices and so she was unable to help me with my problem.
Company policies and practices are some of the biggest obstacles towards delivering memorable customer experiences and cultivating loyalty. Take a good hard look at your policies and practices. Are they fair? Do they meet customer needs? Do they get the balance right between trusting customers and being taken for a ride? Do they balance the long-term against the short-term focus? Do they help or hinder your staff from delivering great service and establishing an emotional connection with your customers?
Make sure that your people who interact with customers are in a position to explain each and every single policy that impacts the customer in a way that occurs as reasonable in the customer’s world. For example: why does it take 3 – 5 days to get a broadband router when many companies can do next day delivery? Or why do Sky customers have to use routers supplied by Sky? Why can’t I use one of the three routers I have sitting at home?
PS: I have only been able to write and upload this post because I figured out a way of making the existing router work: glue, dice and tape to keep the on/off button pressed in – take a look at the photo below. Lets hope the replacement router arrives before this solutions gives way!
On relationship marketing
About ten years ago relationship marketing was in vogue. Marketing departments were abuzz with the talk and the promise of relationship marketing. And I noticed Seth Godin’s Permission Marketing in many a marketing department. Since then the word relationship has been jettisoned and today we are left with customer marketing, customer life-cycle marketing and CRM (marketing). Why?
I believe that many who started on the path of relationship marketing have collapsed two distinct categories of marketing into one. In one form of relationship marketing you use marketing to cultivate and grow relationships – the emotional bond between you and your customers. This form of relationship marketing I refer to as Relationship Marketing: it is the real deal – at least in my book.
There is a world of difference between Relationship Marketing and Customer Life-Cycle Marketing
In the second form of relationship marketing you use the ‘relationship’ – the customer life-cycle, the customer journey – to organise and execute your marketing to customers. This second form of marketing is simply a different, perhaps a cleverer, way of doing direct marketing. Whilst it may drive up response (because of getting the timing right) it does not necessarily increase the bond between you and your customers – that is to say that it does not strengthen the relationship and increase loyalty. This form of marketing is best described as Customer Marketing or Customer Life-Cycle Marketing.
It is a shame that so many marketers have settled for Customer Life-Cycle Marketing rather than Relationship Marketing. I get lots of direct mail and I throw most of it away before opening it up. I am on the Dell database (as I bought a computer from them many years ago) and they continue to send me a catalogue. When I receive it, I throw it away. I am a Sky (pay TV) customer and part of their customer marketing database. So I receive the magazine, I read it and then I put it in the bin. The magazine does not build any emotional loyalty between us.
Practiced correctly, Relationship Marketing packs an emotional punch, generates a memorable experience and drives up customer engagement and loyalty. Allow me to share an example with you.
Direct Recruitment: a great example of Relationship Marketing
About two days before my birthday I received some post, one looked like it contained a birthday card so I opened it eagerly. And this is what I saw:
On touching the card I realised it was a top quality card and I was immersed in trying to figure out which of my considerate friends had been the first one to send me such a fine card.
So I opened up the card and was greeted with a handwritten personal greeting from Sarah Owen who runs the Direct Recruitment agency. I was surprised and delighted at the same time. Sarah and I met back in 2007/2008 and each year she sends me a birthday card and each year it comes as surprise. No other company remembers and celebrates my birthday – arguably the most important day of the year for me.
This is a great piece of direct marketing:
- It offers me an opportunity to help a friend;
- It spells out the benefits for me of helping out a friend; and
- It compliments me in the very first sentence “..someone as talented as you….”; and
- The last sentence is a great finish “We really do value your recommendation, so thank you in advance for thinking of us.”
What Impact Did This Have On Me?
Frankly, I feel valued both as a human being and as a professional. And in return I value Sarah and Direct Recruitment. More than that I feel indebted to Sarah and I feel a desire to find opportunities to refer people to Direct Recruitment. I have absolute confidence in their professionalism. Indeed I have phoned Sarah to thank her.
The Lesson and the Opportunity
There is a wide open space to deliver knock-out customer experiences for your customers through Relationship Marketing. That means using marketing to build relationships by creating emotionally engaging customer experiences that matter to your customers. How about using special occasions like birthdays, Christmas and anniversaries (first time the customer bought from you)?
So few companies who claim to be customer focused actually take advantage of these opportunities. I wrote a post on that back at Christmas time: “With so much customer focus why am I not drowning in thank you cards?”
Finally, please do remember that there is world of difference between Relationship Marketing (as I have described here) and what too often passes for relationship marketing: Customer Marketing, Customer Life-Cycle marketing and CRM
On the one hand just about every large UK based corporate is professing their commitment to the customer. Some say they are committed to customer service. Some declare their commitment to customer focus. A few are bold enough to state that they are customer-centric. And many are busy improving the customer experience.
So how is it that deep in the festive season that not a single corporate – Sky, BT, Orange, Amazon etc – has written to thank me for being a customer over the last year? If the customer is king – as is so widely accepted – then does the king not even merit a thank you wrapped up in a Christmas card or email? Maybe I am just a poor customer and you are a good customer. Are you drowning in thank you’s wrapped up in Christmas cards?
Think what my experience as a customer would be if I received a thank you card at Christmas. Just a genuine thank you with no up-sell or x-sell message or offer. Is it possible that would have occurred as positive customer experience? For me definitely. How about you?
Interestingly, the only cards that I have received are from small recruitment agencies. Whilst they have followed the Christmas ritual they have not done so with heart. Or put differently personalisation and personal are very different. Business people confuse the two and at their costs. Enough on that - I will write a post to explain the difference.
It strikes me that customer-centricity in the UK is like the fresh fruit in the UK supermarkets: the fruit looks good yet when I bite into the fruit it is almost always tasteless. Now compare that with France where the fruit does not look as good yet is delicious.