How the AA excels at delivering the perfect service experience – 11 lessons (Part I)

Value (through the customer’s eyes) = f (Outcome, Experience)

Another way of saying the same thing is to say that if you want to create superior value for the customer (as perceived through her eyes) you have to focus on both the “Outcome” and the “Experience”.  By “Outcome” I simply mean that when a customer interacts with you then she does so because she desires a specific outcome – an end result.  By “Experience” I mean the customers subjective experience of her interaction/s with you in the process of getting to her outcome.

The AA excels at creating value for its customers and this shows up in customer satisfaction ratings

Companies that excel at the customer delight game deliver both the outcome and the experience.  One company that excels at delivering this delight is the AA.  The AA is one of the larger better known breakdown service companies in the UK.  And it looks like my recent breakdown experience (will share that later with you) is the norm rather than an exception – at least according to the following article: “AA takes top two slots in Which? car breakdown assistance survey”

What is a structure of a perfect service experience?

Allow me to share my recent AA breakdown experience as it is a useful guide on what kinds of behaviour work for us as human beings.

Last weekend my car failed to start: I tried once, I tried twice, I tried three time and then I simply used the other car.  The next day I did the same and gave up – the car simply would not start and I could not figure out why as it had been working perfectly.  It is Sunday, I know I need the car for Monday and it just does not start.  So I have a problem.  My desired outcome: the engine starts and I can use that car to drive around.  The job to be done: an engineer to come out, take a look and fix it so that it works and I have my desired outcome.  The time had come to call the AA – as I have taken out the home breakdown cover.

One of the most infuriating experiences is the experience of needing to contact an organisation and not being able to find the right contact number.  A great example of a company that falls into that group is Sky: each month I get a statement and there have been a few times that I have wanted to call Sky to discuss something but there simply is no contact number on the statement!  To get that contact number I have to log on to their website and hunt around for that contact number.  And when I do get that number I have to figure out which IVR option it is – sometimes I get it wrong.

With the AA I had no such problem.  I simply took out my membership card turned it over and rang the emergency breakdown number.  How much effort did I need to make? In answering this question what matters is my experience (my perception) and in my experience it occurred as no effort at all.

We have all heard “we are experiencing unusually high call volumes” no matter when we call accompanied by “your call is important to us”.  Does that make you feel better?  Do you believe a word of it?  Well I am delighted to say that I did not receive any of that rubbish when I rang the emergency number.  My call was answered in less than a minute and I remember being surprised at how quickly a friendly human voice was on the other end of the phone.

Once I was talking with the customer services agent (the young lady on the line) I simply had to give my membership number (which is written on my membership card) and tell her of my situation.  She then simply asked me for the car registration number which I provided.  Using that information she identified the make, model and age of the car.  This was all done in a couple of minutes – at most.  Then she read out the time and told me that someone would be with me within an hour.  The way that she said that occurred as deliberate and confident and that inspired confidence / trust in me: this organisation knows what it is doing and someone will be with me within the hour.  I responded by saying that as my broken down car was sitting on my drive my need was not urgent and so if the AA had to choose between getting to me and someone broken down on the motorway then I’d be happy for them to take care of the person on the motorway.  To my surprise, the young lady on the other line acknowledged my generosity and thanked me for it.  That made me feel good!

After my call with the AA lady I settled down to do some work on the computer.  Before I knew it (because I was immersed in what I was doing) the AA mechanic turned up.  I remember being surprised because the response seemed quick: I looked at my watch and it had only been some 35 minutes – the AA patrol man had turned up in half the time that I had been quoted.

I handed over my keys to the patrolman (“Andy”) and he got busy trying to start the car.  Then he asked me the following question “Did you start the car and then stop the car without really driving it?” I told Andy that indeed I had done that simply to rearrange the car on the drive – to free up parking space for guests.  Andy told me that by doing that I had most likely flooded the engine with excess fuel and soaked the spark plugs.  After a few attempts Andy got the engine started and told me to let the car run for about 20 minutes.  And he advised me how to avoid flooding the engine and thus stop my current problem from happening again.

At this point I felt foolish and bad about calling out the AA.  My issue was a non-issue: I could have done what Andy had done to get the car started.  And I felt foolish that I did not know how easy it is flood the engine in a car like mine.  If I had simply carried out a few sensible behaviours I would not have the issue in the first place.  So I apologised to Andy for having to call him out for such a simple non-issue.  To my surprise he replied that I should not feel bad as it is a common problem.  And he finished by saying “We are here to help you!” and the way that he said it (and the way he had interacted with me in fixing the car) occurred as authentic.  He was not following a script or mouthing some corporate slogan – he believed what he was saying.  I thanked him and he left.

In the second part of this post (Part II) I will cover the 11 lessons for crafting the perfect service experience.

What exactly is the cost of poor customer service? TalkTalk provides an answer

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.

Last words

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.

Thinking strategically about customer experience: the 5 components of customer value

How do you think about Customer Experience?

In my view too many people are thinking about Customer Experience tactically.  Or put simply: too many people are thinking of Customer Experience in terms of making changes to the interaction channels.

Being a strategist, I prefer to think strategically and have been looking for a way that helps me to do that when it comes to:

  • Attracting and keeping customers; and
  • Thinking about, organising and executing Customer Experience.

So how do you attract and keep customers?  And how should you think about (frame) your customer experience efforts?  I assert that the answer to both of these questions is the same: create superior value for your customers and keep doing it continuously.

Which begs the question: what is ‘value’ from a customer perspective?

Fifield: customer value equation

One of the most useful frameworks that I have come across is the one developed by Paul Fifield (by building on some work done by Osterwalder and Pigneur) in his book Marketing Strategy Masterclass.

  • Value = Benefit – Effort – Risk – Price

Maz Iqbal: customer value equation

If it was OK for Newton to stand on the ‘shoulders of giants’ I am more than happy to steal from Professor Fifield.  Yet, I believe that Prof. Fifield’s equation neglects a critical piece of the puzzle.  So I have added it in and thus my equation is:

  • Value = Benefit – Effort – Risk – Price +/- Treatment

Let’s take a closer at the six elements of this equation.

Value

The first point to make is that value does not reside in the product or service that you offer.  Value is in mind of the customer.  Put differently, customer value is the value that each individual customer perceives in:

  • what you are offering including any implied or explicit promises; and
  • getting the job done in the way that you are proposing in your offer.

This means that ‘value’ will occur differently to different customers.  So a customer who is housebound is likely to value the home delivery of their weekly groceries very differently to another customer who is able to and enjoys visiting her local supermarket.

Finally, it is worth stressing that ‘value’ from a customer perspective is much more than price.  And it certainly is not about being cheap.  Recent wine tests have shown that in blind taste tests customers rate the same wine differently: if the wine is priced cheaply then the wine is rated as being of an inferior quality even though it is exactly the same wine in the same bottle!

Benefit

Your offer must promise and deliver the benefits that the customer is looking for.  One way of thinking about this is in terms of the job that the customer wants done and the outcomes he desires.  The closer you offer is to the perfect solution for the job and the desired outcomes, the more benefit it deliver and the more value that you create for your customer.

Clearly, each customer will have a different perception of the importance of the job, the perfect solution and the value of that solution. To make this manageable you must segment your customer base into distinct customer segments.

Effort

Customers have been conditioned to want ease and convenience.   I would go further and say that ease and experience are so important to us that once we have found a supplier that delivers this we stop looking for other suppliers.

The desire for ease and convenience spans the process of finding, evaluating, buying, taking receipt of and using the product or service. This means that the organisation needs to pay attention to more than the product or service.  It needs to pay as much attention to interaction and distribution channels as it does to the product or service.

It is worth noting that real value, from the customer’s perspective, is only created in the usage process.  Too many suppliers neglect to pay sufficient attention to the customer’s actual usage process.  So they fail to come up with solutions that minimise the effort of using these product or service.  This is an area in which Apple has excelled and made its fortune.  Now compare Apples attention to detail (as regards the user experience) to this: How “wrap rage is hurting the customer experience”

As Fifield says “Generally, there will be greater customer value attached to those offerings, where the organisation has spent time, research, effort and insight into finding new ways of making the old jobs easier.”

Risk

The greater the level of risk that the customer sees in you the vendor and your offer, the lower the perceived value of your offer.

The perceived risk is much higher when the customer has a lack of knowledge and prior experience in how best to get his job done.  And in particular how to judge the expertise of the supplier and the quality of the offer.

It is worth noting that risk is always present: usually at a subconscious level.  Customer are particularly sensitive to things that can go wrong and which make them look stupid in their own eyes (self-esteem issue) or in the eyes of others (social standing).  It is the reason that advertising is not dead, will not die and why established brands do well despite doing poorly on other elements of the customer value equation.  We are risk averse and stick with the devil we know;  brand recognition matters – ask anyone who does not have an established brand.

Price

In some ways this is one of the more complex components of the customer value equation.  Why  Because it is not as simple as the price being too high.  From a customer perspective, it cover the following aspects:

  • Price being too low (wine example under Value heading) and thus leading the customer to think that the offer is of inferior quality or not fit for purpose (increasing the Risk component of the Value equation);
  • Price being too high;
  • Seeing the same product cheaper somewhere else;
  • Depreciation in value – how fast the resale value of the product will fall;
  • The time/effort trade-off in searching for the lowest price;
  • Buy now or buy later when price falls etc

Treatment

Treatment recognises that customers are people and as such the place a value in how they are treated as human beings.  Put differently, customers put a high value on ‘service.  In particular, they prefer to do business with organisations that leave them feeling ‘valued’.

I have placed a +/- in front of the Treatment component because if customers are treated well (especially by the employees of the company) then it make a positive contribution to customer value as perceived by the customer.  If the company fails to do that then the Treatment component becomes negative and decreases the value of the rest of the offer.

Two companies that excel in the Treatment component are Amazon and Zappos. Here is an example of the kind of impact this has on the customer:  “Great Customer Service Build your Revenue and Brand: My Amazon Experience”