SOCAP International

Moving Your Organization Toward Consumer Experience 3.0

  • Cover Story

Quick Takes
4 Steps to the Ultimate Customer Experience
The message of Customer Experience 3.0 is this:
  • The prerequisite to mobilizing technology is creating the economic imperative for a great customer experience—and there is plenty of data to support it.
  • Technology and Big Data can then support moving service from firefighting mode to proactive education and anticipating needs.
  • Consumer affairs must partner with the CIO to develop a tech-enabled, end-to-end process map and then work with marketing to assure that proper customer expectations are set, especially on the website.
  • Finally, technology will enhance the VOC by going beyond complaints and surveys to include the operational data that quantifies how many customers had each good or bad experience.
The more things change, the more they stay the same. This observation applies to customer experience and consumer affairs in a number of ways. While technology has revolutionized the customer service arena in the past few years, the “2013 National Rage Study" by Customer Care Measurement and Consulting found that after 30 years of effort, the consumer service experience is actually worse now than that found in the original White House-sponsored study in the 1970s. Consumers have more problems and lower satisfaction with the outcome.

Customer experience is a top priority for 86 percent of executives, according to Gartner. With all this focus, why have customers’ experiences gotten worse? There are three basic reasons. First, the finance and marketing departments generally have not understood the revenue, word of mouth (WOM) and cost implications of a poor customer experience. Second, technology has outstripped both consumers’ and service executives’ ability to manage it. Products have become more complex, with smartphones being ubiquitous, autos containing multiple computers and even water faucets controlled by speech commands or motions. Third, most companies lack leadership that spans the end-to-end customer experience.

The Payoff of Enhanced Customer Experience

The new executive focus on customer experience is a huge opportunity for consumer affairs directors. Done right, customer experience can open the door for the consumer affairs director to become the chief customer officer. To get the gig, you’ll have to develop a new way of operating and communicating that quantifies your revenue and WOM impact, and uses the voice of the customer (VOC) to move the entire company from firefighting into a preventive mode of service. This approach could easily create a 10-fold increase on the impact of service in the company’s bottom line.

You must first overcome the resistance of chief financial officers (CFOs) to service, which they view as excessive. Bottom-line figures can help break down this resistance. There are three top-line/revenue impacts and two cost-saving impacts of an enhanced customer experience which can be quantified.

Top-line/revenue impacts:

  1. Enhanced revenue from problem avoidance or management: Avoiding customer problems prevents damage to loyalty. The average damage to customer loyalty is 20 percent per problem. Therefore, the revenue impact of avoiding five problems is equal to wining one new customer. (Calculation is five customers times an average decrease of 20 percent in loyalty = one whole customer at risk who is retained if the five problems are prevented.) Resolving an existing problem raises loyalty from 30 to 50 percent versus if it is left unresolved. The cost of winning a new customer is almost always five to 10 times the cost of handling a problem to a successful conclusion. In a business-to-business environment, it can easily cost 10 to 20 times as much to win a new customer as it is to resolve the problem.
  2. WOM: A negative experience usually causes two to four times as much negative word of mouth (or as I call it on the web “word of mouse”) as a positive experience. Great service can foster positive WOM, which reduces your marketing expenses. When you demonstrate its impact, chief marketing officers (CMOs) will invest in service to foster positive WOM.
  3. Margin: Sensitivity to price rises exponentially when problems occur, doubling on the initial occurrence and doubling again with multiple occurances.
Most companies lack leadership that spans the end-to-end customer experience.

Cost savings impacts

  1. Reduced service costs: In most companies, 30 percent of service contacts are preventable if there was better communication up front. An effective VOC can reduce or eliminate many of these contacts by highlighting problems that can be prevented by policy changes or proactive customer education. The VOC process, by analyzing satisfaction and escalation by type of customer issue, can also identify response rules that are not working, resulting in frustrated employees, which can cause up to 50 percent of voluntary turnover.
  2. Most legal, risk, regulatory and PR disasters started as unresolved complaints: An effective service system can reduce the cost of these disasters by between 10 and 20 percent via problem prevention and early warning of emerging issues.
Done right, customer experience can open the door for the consumer affairs director to become the chief customer officer.

A clear business case is the key to getting support for enhancing the customer experience. The next question is how to enhance the customer experience efficiently. The answer is the intelligent application of technology.

Technology as an Ally

Technology can enhance a wide range of aspects of customer experience, but in most companies technology has a bad reputation due to the damage done by phone trees and poorly designed websites. Consumers continue to be befuddled by complex products because they seldom read directions.

On the other hand, everyone is impressed with great technology like iPhones and Amazon. While Amazon has gotten much attention for its proposal for drone delivery, its basic strategy has always been one of anticipation and prevention. Amazon knew that once the book was ordered, the next question would be, “When will I receive it?” The company proactively sent the email, “You will receive your order on Tuesday,” which eliminated a phone call and impressed customers with their service.

This strategy is what I call the “Psychic Pizza strategy.” Your doorbell rings and the pizza you were about to order is delivered. By being proactive, the company can reduce service costs while dazzling the customer. The biggest payoffs of proactivity often come not from customer service but from more honest, clearer marketing—more effectively setting customer expectations and providing information. A 2012 study by the American Society for Quality of 600 U.S. companies found that companies believe the biggest single quality issue is setting proper customer expectations. Consumer affairs can partner with technology to address both expectations-setting and enhancing the end-to-end customer experience.

There are at least five areas where technology can partner with consumer affairs to enhance the customer experience and the bottom line.

  1. Set proper customer expectations via emails, videos, websites and new customer portals.
  2. Provide just-in-time education on enhanced product functions.
  3. Confirm imminent service delivery and warn customers about impending process failures and unpleasant surprises like late charges, thereby eliminating service costs.
  4. Deliver service effortlessly via the customers’ preferred channel, often creating an emotional connection.
  5. Gather VOC information to make a compelling business case for an enhanced customer experience.

You can find examples of each of these points in the online companion article “Using Technology to Improve Customer Experience.”

Once you have the economic imperative and technology in place, what could possibly be a barrier to success? The answer is people.

The consumer affairs director should volunteer to become the director of customer experience coordinating (not managing) the end-to-end customer experience.

Leadership Is Key

There are two major deficits in most companies that lead to poor execution at both the strategic and tactical levels. First, no one is leading the customer experience across the end-to-end experience. Second, while the term empowerment is bandied about, the front line is neither empowered nor flexible. Both of these vacuums are opportunities for the consumer affairs director.

The consumer affairs director should volunteer to become the director of customer experience coordinating (not managing) the end-to-end customer experience. This coordinative, internal-consulting role is non-threatening to other functions. The key to being a successful consultant is to make the client successful and look good. The consumer affairs director should take on this role, providing VOC data and advice to make marketing, operations and finance more successful.

The second opportunity is to create empowered flexibility at the front line by developing flexible solution responses for the top half dozen tough problems encounter. Ron Zemke, who wrote “Knock Your Sox Off Service,” found that if you trained staff on a limited number of solution spaces, they could confidently use them as guidance for other situations. The key to success on this strategy is to get supervisors to encourage use of the empowerment and flexibility. The best way to do this is to show supervisors that it is more fun catching people doing things right than punishing them for doing things wrong.

In most companies, 30 percent of service contacts are preventable if there was better communication up front. An effective VOC can reduce or eliminate many of these contacts.

Implications and Actions

There are five prerequisites that must be in place if the chief information officer and consumer affairs director are to successfully partner to enhance the customer experience and maximize the bottom line. These are:

  • A process map of the current and ideal customer experience should be developed jointly by consumer affairs, technology and other key departments. These maps provide the context for all customer experience and technology implementations, assuring they are coordinated.
  • Key operational databases must be able to flag and communicate process failures that impact customers.
  • A common customer identifier must exist across all databases and transaction systems—not just CRM platforms, but also operational and financial databases to feed both “Psychic Pizza” actions and the VOC processes.
  • The CFO must accept and support the business case that an enhanced customer experience will enhance revenue, margins and profits.
  • The marketing and sales departments must accept that proactive communication of potential problems is a delighter and that creating proper customer expectations produces long-term loyalty.

Achieving these prerequisites will be an ongoing journey, not a quick action unless you have a really progressive CFO.

Consumer affairs directors should focus on four parallel strategies to maximize the customer experience and profits.

  1. Use process mapping to assess how well the product and the marketing strategy creates reasonable customer expectations and where Big Data can be used to proactively warn customers of potential problems—the best defense is a good offense.
  2. Aggressively encourage customers to seek assistance when they have questions or problems—a silent, unhappy customer is a less profitable customer.
  3. Create an empowered service system that genuinely empowers the front line to handle a problem in a flexible manner as well as to educate the customers and to create inexpensive emotional connections.   
  4. Build a VOC process that gathers information from across the entire customer lifecycle and produces a single, unified picture of the customer experience with estimates of the revenue and word of mouth impact of problems and opportunities.
SIDEBAR
Technology as an Ally—Case Studies
Up to 30 percent of all customer dissatisfaction is caused by customers making simple mistakes or having incorrect expectations. Technology can go a long way to rectifying or preventing it from happening.
  • Zipcar provides short videos on basic transactions such as extending the rental for two more hours. The videos—just 90 seconds—are fun and entertaining.
  • ServiceMaster’s American Home Shield maintenance unit sent an email to customers with hot-water repair orders, warning them that they might not have hot water for two days. Customer satisfaction went up 20 points due to the clear communication.
  • An auto finance company highlights a new users portal to educate consumers on using the website.

Consumer affairs can partner with IT to provide just-in-time education on product functions and how to avoid mistakes.

  • Auto companies use wireless links to the car to learn which functions of the entertainment and navigation systems are not being used. They can then push short videos on how to use two additional functions, creating higher perceived product value.
  • An insurance company emailed a tip sheet of the top 10 mistakes benefits administrators made in account administration. Mistakes and calls from those companies went down 30 percent.

Technology can be used to confirm service delivery and warn of impending problems, eliminating unnecessary service costs. A company’s operational databases, when tied to the CRM system using a customer identifier, can highlight process failures and automatically communicate impending problems to the customer, such as flight cancelations and late charges.

  • When New Jersey Natural Gas makes an appointment for a home visit, they obtain the customer’s preferred communication channel. At 2:30 PM the day before, they email or text a confirmation that the technician will call at 8:15 AM with an approximate time of arrival. This eliminates multiple confirmation calls from the customer and reduces the number of times the customer is not present when the technician arrives.
  • Southern California Edison, using smart meter data, identified 30,000 customers whose bills were projected to be significantly higher than expected. Ten days into the billing cycle, the system sent an email with the subject line, “Your bill is going to be higher than you expect and we’re concerned.” Over 50 percent of customers opened the email. Compared with a control group, satisfaction increased double digits. Customer calls decreased and those calls that were received were of shorter duration and much more pleasant. Energy usage also dropped among those receiving the email.
  • A financial services company sends a text message to customers the day before a late charge will be imposed. Proactive warnings on how to avoid problems create double digit lifts in customer satisfaction because consumers perceive that the company cared enough to warn the customer rather than just collecting the extra fee.

Websites, online communities and speech analytics can deliver service effortlessly via the customers’ preferred channel, often creating an emotional connection.

  • Smart companies place the answers to the top five issues prominently on their homepage, the first place most customers go. Additionally, companies further leverage their website’s impact through highly visible website maps (a functionality Godiva Chocolate provides), as well providing a robust “Contact Us” page that clearly explains how to use each channel (a key component of USAA’s website).
  • Intuit’s online community provides answers to a high percentage of customer/member queries, thereby reducing workload for the customer support unit. The community members get recognition for providing answers. The fact that such recognition works even with accountants shows that gamification can work almost anywhere.
  • Chick-Fil-A and Harley Davidson dealers post pictures of customers and their family members, creating an emotional connection and customer delight—people love seeing themselves on the web.

The technology department can help the service and quality functions create an effective Voice of the Customer process that supports quantification of the revenue damage of problems and the payoff of an enhanced experience.

  • At the Cheesecake Factory, if a customer has a problem, an adjustment is made to the bill along with a coded reason. Customer survey data and other input such as mystery shopping results are tied to the data in the billing system so that there is a complete record for each of the 80 million meals. This integrated database supports quality improvement, training, recognition, product development and incentive insights analysis.
  • MyStarbucksideas on-line community generates thousands of ideas stimulated by recognition and gamification, highlighting pictures of the most prolific idea generators.

John Goodman and David Beinhacker

Bios:

Goodman_headshotJohn Goodman is vice chairman of Customer Care Measurement & Consulting. His latest book is “Strategic Customer Service” published by AMACOM. His new book, “Customer Experience 3.0” will be published this summer. He can be reached at jgoodman@customercaremc.com, and has weekly ideas at Twitter jgoodman888.

 


Beinhacker_David_headshotDavid Beinhacker is Chief Research Officer at Customer Care Measurement & Consulting (CCMC). CCMC's customer satisfaction and loyalty surveys and analytics are used by leading Fortune 500 companies from every industry to get a better ROI for their investments in the customer experience. Learn more about CCMC by visiting www.customercaremc.com or e-mailing david@customercaremc.com.