If you don’t answer this question correctly then your customer efforts are simply putting lipstick on the pig

Yesterday British Banks Gave Up The Fight Against Compensating Their Customers
Yesterday the British Banks (HSBC, Barclays, Lloyds, RBOS…) that ‘own’ the retail banking market gave up, reluctantly, their legal fight against compensating the millions of customers who were ‘mis-sold’ payment protection insurance (PPI): ‘Millions in line for PPI redress’.

The British banks are notorious for delays especially when it comes to handling complaints and refunds.   Today the FSA has instructed these banks to accelerate compensation payments: ‘Financial Services Authority wants banks to speed up PPI payouts’.

Was it ‘mis-selling ‘ or deliberately ‘ripping-off’ customers?
Whilst the newspapers use the term ‘mis-selling’ consumer groups and others describe PPI as a ‘rip-off’ or ‘racket’.  ‘How the PPI scandal unfolded‘  makes it clear that “Britain’s banks have been aggressively selling ‘ineffective and inefficient’ – but highly profitable – payment protection insurance for more than a decade.”

This is what the Citizens Advice Bureau said about PPI:  “Payment protection insurance (PPI) is sold to borrowers with the promise of peace of mind and reassurance that credit or mortgage payments will be covered if their personal and financial circumstances change for the worse.  However, many CAB clients find that they cannot make a successful claim on their policy because of exclusion clauses and administrative barriers to making a claim.  Premiums for PPI policies can add 20 per cent or more to the total amount to be repaid on a loan agreement, thus increasing people’s indebtedness rather than preventing it.”

The one key question that lies at the heart of the customer-centric orientation
If you read widely you will see there are all kinds of views on what it means to be customer-centric and no shared agreement.  As such all kinds of people and companies are claiming to be customer-centric.  If you believe you are customer-centric then I put this question to you:

  • Is it ok for you to make money by taking advantage of your customers trust, ignorance, biases and other cognitive weaknesses?

If it is ok for your and your organisation to take advantage of your customer then you are not and will never be customer-centric.  Why? There are two ways to answer this question.

The blunt answer is that you are self-centred and selfish. Given that, it is simply not possible for you to be other-centred including customer-centred.

The polite answer is that long term relationships are central to a customer-centric orientation and these relationships rest on trust.   Trust, in turn, rests on the three key pillars: honesty, fairness and competence.   As Peppers & Rogers say in Rules to Break & Laws to Follow:

Customers may forgive honest mistakes but will never forgive dishonesty.

This point is articulated rather well by Nils Pratley in the following piece: ‘The moral of this PPI tale: don’t rip off your customers’.

Incidentally, dishonesty literally sucks the heart out of many of your employees: how many people genuinely want to exert the best of themselves in dishonest activities?

If you wish you can stop reading right here.  However, if you have the interest then follow me and lots explore/probe the customer-centric paradigm a little further using the Be-Do-Have framework.

Have: what you want to get out of your ‘relationship’ with the customer
What does top management (‘Tops’) really care about? They care about what they are measured and rewarded on. And what is that? Ultimately it comes down to exceeding analyst expectations on revenue, margins and profits. This and the behaviour that it generates are discussed in this HBR interview with Roger Martin.

Do: the actions that you take to get what you want
Things get a little trickier when we get to the Do part. What do you have to do to get the results that you want? You can make the numbers through a whole array of actions. For example:

  • locking customers into longer contracts for example by moving from 12 to 18 month contracts for mobile phones (e.g. telecoms);
  • take advantage of your customers ignorance and sell them products (e.g. PPI) that are not fit for purpose (e.g. banks);
  • deliberately making it difficult for your customers to work out which product is the best fit for their needs so that they buy the more expensive product (e.g. telecoms);
  • making it difficult for them to stop doing business with you and switch to another supplier (utilities, broadband, financial services, hi-tech..);
  • cutting the investment in customer service by making it more difficult for customers to contact you and if they do then having the call handled by someone in a distant country;
  • ensuring that your products do what they are supposed to do, that they are easy to use and have high resale value (e.g. Honda);
  • making it easy for your customers to do business with you (e.g. Amazon, eBay); and
  • standing for a set of values, practices and products that connect with a specific segment of the population (e.g. Virgin, Apple); and
  • viewing yourself as being in the business of ‘delivering happiness’ (Zappos).

Given the breadth of choice that you have,  limited only by your imagination, how do you decide what is the right course of action?   You may be thinking that brand values might help here. They can if they are lived in values. They are useless if they have been dreamt up for marketing (influence / propaganda) purposes.

The BE domain is the source of all guidance on what courses of action are ruled in and ruled out.  So let’s take a look at that.

BE: existence, stance, character and values
The BE domain is NOT concerned with the personality you put on for show – to seduce the people that you wish to seduce.  Nor is it concerned with what you say or your intentions.

The BE domain IS concerned with your authentic self.  Specifically it deals with the issues of purpose, stance, character and values as an integrated whole.  A different way of looking at this is to examine how you behave when you are under pressure: what are you willing to do or not to do no matter what the personal cost?

At the organisation level you face a fundamental choice.  To BE the kind of organisation that prospers through honest dealing and creating superior value for customers.  Or to BE the kind of organisation that does whatever it takes to make the numbers – treating people (customers, employees, suppliers..) as objects to be manipulated for one’s own benefit.

The default setting, as illustrated by the British banks in relation to PPI,  is that customers are seen as objects to be manipulated for the benefit of the organisation. Where concessions are made to customers it is because of regulatory pressure or because competitors force that move.  In Martin Buber’s view this is the ‘I- It’ orientation.

Are your customer efforts simply an exercise in putting lipstick on a pig?
You and your organization become customer-centric when you refuse to make money by taking advantage of your customers.   That means practicing and living honesty and fairness.  Until you do that all of your Customer experience, customer engagement and loyalty initiatives are simply an exercise on putting lipstick on the pig.  You might reap the rewards now yet sooner or later the pig will show through and you will pay the price.  Let me end by quoting from Peppers & Rogers once more:

If being fair to customers conflicts with your company’s financial goals, then fix your business model or get a new one.

The latest 6 secrets of good service

I have often wondered about the folly of companies pursuing the new stuff (Relationship Marketing, CRM, Customer Experience, Social Media….) whilst neglecting to provide good service.  Why?  Because I know that my social circle uses service as the key dimension to choose between one supplier and another.

At the weekend I read my weekly copy of Marketing magazine and came upon a piece that talks to this point.  Marketing teamed up with Lightspeed Research and Promise to undertake quantitative and qualitative research to figure out which brands customers are to recommend and which fail the grade.

The key point that this article makes is this “Brands spending millions on the above-the-line marketing are failing at the first hurdle when it comes to customer satisfaction”.

One of the paragraphs that jumped out to me because I have experienced this as a truth and so have many others is as follows: “The research reveals that even for product-driven companies, consumers comments are almost always focused on service. This means that the more inferior the service a brand offers, the lower the satisfaction score they are likely to get.”

The research found that the top 10 brands customers are likely to recommend in the future are: Virgin Atlantic, BMW, Mercedes, Samsung, Boots, Sainsburys, Eurostar, M+S, Toyota and VW.

The brands that ended up towards the bottom of the recommendation table are from the following sectors: utilities (Npower, British Gas, EDT, E.ON), telecoms (BT, T-Mobile, Talk-Talk) and financial services (Egg, HSBC, Barcalys, Lloyds TSB, NatWest, Virgin Money).  Ryanair was second to last – and that is to be expected.

Here is another paragraph that struck me as worth sharing:  “Promise recommends that all brands – regardless of sector – think of customers as human beings to interact with, rather than as an amorphous mass to be sold to.” That sentence says it all: companies need to balance out their obsession with selling (the direct route to the customer wallet) with good customer service (the indirect route to long term relationships, higher revenues and higher profits).  I still find it amazing that after ten years+ of relationship marketing and CRM that the point needs to be made that customers are human beings and should be treated as such.  I believe I wrote a post on that some weeks ago, here it is:  Blind to the Obvious Part III

Another finding that is worth sharing is that “While many marketers have increased their focus on social media …..word of mouth remains by far the most important channel for peer-to-peer recommendations.  Two-thirds (66%) of consumers make recommendations this way.  In comparison, just 15% of recommendations are made via social networking sites.”

Promise, as a result of qualitative research, has put forward a list of 6 things that brands need to work on to deliver high customer satisfaction:

1. Be customer centred – that is to say look at the situation from the customer point of view and work on the assumption that customers are reasonable human beings.  For example fit service around customers: “know what I said and calling me back when I have got the time.  That would show me I’m really valued”.

2. Have superstar staff – apparently spending millions on TV advertising is not that smart if the brand’s staff don’t know and can’t advice customers on the basics of the product.

3. Delight the customer – exceed the post-purchase expectations: “when my flowers from Interflora arrived at my wife’s doorstep wilted, I phoned them and they sent me £50 vouchers.  It was really good of them.”

4. Keep your promises – “I was on hold with my insurance company and then an automated message tells me it will call me back in 10 minutes – and you know what, they actually did.”

5. Sort out service recovery – my post on The Suites Hotel in Knowsley talks to this very point;

6. Build a relationship – being handed from one agent to another and having to start from the beginning each time is a real hassle for customers: “With BT you can never trace who you have spoken to and which country they’re in. There’s no relationship at all, it’s confusing.”

My take on this:  I continue to be amazed at how the obvious (what we all know) has to be restated again and again in one form or another.  Time and time again the critical importance of good service is highlighted.  Time and time again this insight is ignored by many organisations as if this insight is too painful and has to be repressed.

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