Consumer Research: Poor research approaches give poor answers

March 4, 2010 by Adam Ramshaw

This post from the Harvard Business Review’s Daily Stat on 15 February 2010 shows a surprising lack of insight into how consumers actually respond to research questionnaires.  It reports a McKinsey survey where consumers were asked what they were more interested in: core benefits or bells and whistles.

If you believe the results, consumers are more interested in core benefits.

I don’t believe the results.

The issue here is the way the survey has been undertaken.  In this case, asking customers what they want is unlikely to give you an accurate answer to your question. Not because they will not tell you the truth but because they are unlikely to act in the same way, in practice, that they say they will act, in theory.

If you really want to know what consumers want then, in this case, it’s best to look at what they actually do.  On this issue (core benefits or bells and whistles) it would be a relatively easy piece of analysis to do: compare sales of the upmarket “bells and whistles” models with the downmarket “core benefits” models.  That way you can see what customers actually do rather than what they say they do.

Poor research design like this is a common problem.

For instance, we’ve seen loyalty program research that, when asking customers if they want points or discounts, found they overwhelmingly want discounts. Then those same customers go on to collect points, respond to points promotions, etc.

And there was the set of supermarket research that asked customers if they would buy “store brands”.  When you compared actual purchase data with customer responses, many customers with baskets full of the store brand product said they would never lower their standards that low.

If you naively believed what customers told you in either of these circumstances you could easily build the completely wrong customer experience.

Consumer research is fraught with this kind of problem and when designing your research approach you need to act defensively to guard against getting incorrect or inaccurate results.  If you don’t, you will get a pretty chart that looks nice in the report but the insights in it will be just plain wrong.

Another example of this type of not believing what customers say is the “how important is feature x” type of question.  Understanding how important a service feature is to the customer is critical in designing good service processes.  So questionnaires are often used to determine which features are most important.

The problem comes if the surveys are poorly implemented.  You’ve probably seen the bad ones; they look like this (paraphrasing):

Q1: How good is our price?

Q2: How important is price?

Q3: How good is our service responsiveness?

Q4: How important is responsiveness?

Q5: How good is our feature x?

Q6: How important is feature x?

Even before I see the results I know what the answers will be.  Everything is important: 9s or 10s out of 10.  So what do you know now?  Nothing more than you knew before because everything has the same high importance.  You’re back to square 1.

Even if the results are not all 9s and 10s they will be skewed by what customers want you to think.  For instance, no customer is going to tell you that price is unimportant, lest you decide to put up their price.

There are at least two better approaches than this:

  1. Some type of forced ranking: In this approach you force the customer to rank the importance of each feature using a points approach, ranking or a best-worst approach.
  2. Infer importance: If you design the survey in the right way you can infer what is important based on the answers you get from other questions or actual customer behaviour.  This takes a bit of additional analysis but is well worth the extra effort.

Both of these alternatives will deliver a much more accurate outcome.

So, when you next look at the survey questionnaire your agency has provided, act defensively, and think about whether the answers you get will be accurate.

Have you seen other poor research approaches?  Leave a comment and let me know.

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Loyalty Programs: Making sure you invest in only the right customers

February 25, 2010 by timwtyler

We do a bit of work on loyalty programs for some of our clients. I quite like the mixture of automation, pro activity, data-insight and self-serve that a well designed program provides to relationship marketers. But the mantra needs to be;

“Loyalty programs are the price you pay for rich customer data, you make money from the careful use of that data.”

Partly because of this, in retail, I favour a program structure that signs up all customers willing to provide their details but requires a threshold volume of sales be achieved to ‘qualify’ for membership, which triggers engagement / communications investment by the retailer.

This structure comes from a research paper that caused an epiphany for me when I first read it, breathlessly, in the Harvard Business Review. ‘The Mismanagement of Customer Loyalty’ was published in 2002 by Werner Reinartz and V. Kumar. This article introduced a retail customer classification that is extremely useful as you tune your loyalty program;

Loyalty may not guarantee profit, profit may not require loyalty

This taxonomy is particularly important because one of the program decisions you must make is how high to set your thresholds for participation & importantly, for rewards. Should you;

  1. Set thresholds low and reward as many customers as possible (making the CFO worry about your low loyalty program breakage rates, i.e. those points that expire without being used)? This approach will get you data from most customers as they remember to identify themselves when shopping, but risks making the rewards trivial and not motivating (or the program too expensive), or
  2. Shamelessly make it a ‘best customer’ program, set thresholds high so you can afford to reward the very best customer spectacularly (and make other customers jealous)? This runs the risk that only the very committed will bother to give you their shopping data.

Striking the right balance is where chasing butterflies comes in.

Butterflies are those customers who have no interest in a relationship with you. They flit in, buy and fly away to the next provider. Lingering is not in their nature, they are constantly looking for the next source of nectar. They can be very profitable, as long as you do not try to chase them and change their nature, wasting precious marketing funds. These are the one-time big purchase customers quite common in luxury goods retailing; accept they will not be besotted with your brand, no matter how large their initial purchase, bank the margin and move on.

Barnacles are very sticky, they engage in your program but spend little, so they are also a risk to profitability. But butterflies are the highest risk because they spend a lot… once or twice, so they tantalize.

But here is the quandary. Really good customers look just like butterflies early in the relationship with you. You want to chase new ‘true friends’ but not ‘butterflies’.

How do you recognise a new ‘true friend’ and distinguish them from a ‘butterfly’?

In program terms, this requires you to look back in time at the way ‘true friends’ behaved when they first joined the program to see if there is a behavioural difference between the two that allows you to recognise the butterflies. Do new ‘true friends’ start with specific products or channels? Then adjust program mechanics to avoid investment in customers likely to be butterflies. For example, look at the average one-off purchase of butterflies and set the thresholds for program qualification slightly above this to avoid spending money on (at least half of) them.

So at the risk of oversimplifying, these are my retail loyalty program ‘rules of thumb’;

  • make it really easy for butterflies to buy, but do not invest, in program terms, until they buy ‘x’ times
  • this will help deal with the low spending, low frequency ’strangers’ as well
  • set program qualification levels above the average ‘butterfly’ spend
  • identify barnacles and make them a few great points offers. Those that do not respond have small wallets, those that do are promiscuous with your competitors and therefore worthy of your attention.

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Customer Experience Management: is it a cost or an investment?

February 18, 2010 by Adam Ramshaw

How you answer this question seems to depend almost entirely on where you sit in the organisation: if you are inside the Customer Experience Management tent then you’ll answer “Investment”, if you’re outside it then you will probably answer “Cost”.  However, I think that it’s not so a much a question of where you sit in the organisation but which you think comes first: the customer experience budget or the business outcome.

Let me explain what I mean through the use of an example.  We currently have a client who are re-vamping their customer save team.  We’ve been helping them look at all aspects of the team: how it interacts with other parts of the organisation, which calls it should take, how it should report, etc.  One of the questions that came up is “We have x staff so which calls should we route to the save team?”

Let’s look at how we might respond to this question and what it means for the cost or investment view. Currently, the company perception is the save team will be the size that it is now and it therefore has a set cost.  The CEM Efficiency, percentage of callers saved is also known.  So the business outcome, customers saved, can be calculated based on the number of calls the staff can take.

CEM As A Cost

As you can see when you start the conversation with the CEM implementation cost, in this case the size of the team, you tend to form the view that CEM is a cost. With this approach your CEM initiative is constantly open to the question of “can’t we cut costs in this initiative”.  You will always be on the back foot.

However let’s look at this from the other direction.  Suppose we started with the business outcomes: the value of customers saved.

You can use a tool like our Return on Retention estimator to get a quick estimate of this value.  As you would expect different customers have different save values depending on their product usage and cost to serve.

Now we decide to set the CEM expense (size of the team) to meet the business outcomes that we want based on the CEM efficiency, i.e. percentage of callers saved.  If we want to save the maximum value we simply set the team size to be able to handle all calls from customers of a certain value or higher.

Our new approach looks like this:

CEM Is An Investment

With this approach we tend to form the view that CEM is an investment.  If we want to reap a business outcome of x then we need to invest in a team of size y.

This brings me to the key point that I want to make.  Whenever you are investing in customer experience management you need to start with the business outcomes that you seek and then identify how they will be achieved and how much it will cost.

If you start from business outcomes then you are on the front foot by providing an investment option for the company rather than trying to justify another cost.

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Marketing offers: The great ‘right offer’ versus ‘right time’ face off

February 11, 2010 by timwtyler

Some time ago I posted an answer to a question I was asked by a retail client; ‘if the offers are always relevant, does it matter to customers how often I send them?’ The post was on Strike a Chord…

At the time I talked briefly about the fact that relevance is not independent of the customer’s position in their buying cycle. What is relevant when they are ready to buy, is spam when they are not ready to buy.

The team at Genroe have just finished reviewing a (great) publication that points to how we should answer this critical marketing question.

Published in Marketing Science (and reviewed by Jim Novo on his blog) Khan, Lewis and Singh look at the relative payback of getting the timing of an offer right versus getting the content right. ‘Dynamic Customer Management and the Value of One-to-One Marketing’

Gold – in my modest opinion. As an advocate of ‘latency’ based campaign planning and targeting, especially in retail, I find this is a great piece of research (and no, not just because it supports my bias).

I commend the paper to anyone who has ever wondered about the unchallenged mantra of 1to1 Marketing – that individual-level marketing is more profitable than segment- level or mass marketing.

The paper contains some ‘interesting’ mathematics for the calculus-challenged like me. At the risk of over-generalizing, and in plain English, Khan and colleagues looked at the sales data from an online grocery and drug retailer and found;

  • Customised promotions gave better increases in revenue and profits than ‘one size fits all’ promotions (phew)
  • The benefits of getting the offer timing right were larger than the benefits of customising offers for individual customer differences. Specifically, allowing for different shopping intervals delivered a 7.8% profit lift over baseline, adding individual content gave an incremental 5.4% lift.  That means that “…more than half of the benefits from individual-level customization can be captured by accounting for temporal [aka timing] purchase cycle factors,” alone.
  • Doing segment-level targeting rather than individual customer targeting does lower returns, but, arguably, not enough to justify the additional analysis required for individual-level customization. In the study, they saw a marginal decrease of 2.3% when they moved from individual to segment level targeting… But to be clear; “…segment-level optimization is still based on individual-level information. Customers are clustered based on similarity in their individual-level parameters and transaction history measures.”
  • In many cases, ‘…offering no promotion is better than offering the wrong promotion.”

For most of our clients, it is considerably easier to determine when a customer is due back, than it is to predict what they will buy next. It is much easier to predict next visit date than to derive ‘next best offer’.

This research shows that this may not be as big a problem as us 1to1 marketers suspected after all.

Majority of campaign return comes from offer timing, for customer segments

The study looked at the relative impact of discount vouchers, free shipping and loyalty program rewards.  It is definitely worth taking a look at this chart, even if you do not study the paper; does it give you any ideas?

This chart indicates when to switch promotions to maximise conversions

, arguably,

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9 ways Contact Centres can help retain customers! (Part III)

February 7, 2010 by stewartwhite

This is the last in a three part posting that discusses ways call centres can help the business retain customers.  In the first two posts we discussed:

8. Acknowledging customer milestones or relevant occurrences

One of the most powerful tools for any organisation is the personalisation and acknowledgement of specific customer milestones or events that the customer has achieved.

Examples can be as basic as:-

  • Mr Smith thanks for your custom over the last 2 years we really appreciate it… or
  • Fay I’ve just noticed it’s your anniversary of dealing with us this month, thank you for being such a loyal customer… or
  • Happy birthday Ben for Wednesday as our records show that it’s coming up….

Or as complex as:-

  • Ms Dune as you have purchased over $1000 worth of goods from us in the last 2 months I would like to extend a…..  or
  • John I see that your last order was not dispatched on time, therefore I would like to extend a 5% discount to you on this purchase for the inconvenience caused…

Using customer data, insights, and acknowledging these to the customer gives the customer a great sense of belonging to your organisation and a strong sense that you care about their custom.

In these days of customers having many more choices of suppliers, competition increasing and price not necessarily being the only motivator, acknowledging the customers’ contribution to your organisation will keep them with you for longer periods of time.

As a side note a client was extremely excited about following these principals when we identified  that it was a gap in their operations.  However, they were very concerned as they didn’t have CRM systems or large data pools as an enabler to identify some of the key attributes of their customers milestones.  Our advice was to start small and to immediately introduce data capture content in each call.

Their first initiative was to open the call (where applicable) by thanking their customers for their past custom (obviously they had purchased before).

Over a 12 month period of time (and with the adoption of further data fields and information being captured) the life time value of their customer rose from an average of 9 months to 15 months, and it still climbing upwards.

You can estimate the increase in customer value using a tool as simple as the return on retention estimator to understand the positive ramifications and value that this is bringing to the business!

9. Putting yourself in the customers position

One word empathy!

The Australian addition of the Oxford dictionary describes the meaning of the word empathy as “the ability to identify oneself mentally with a person or thing and so understand his/her feelings or its meaning”

Think for a moment of a time when you have called a company with an issue that was making you quite grumpy.  Now how would it be if the person on the other end of the phone showed no interest in helping you with your issue or had no appreciation how the issue had affected you.

If you’re like me you wouldn’t be sticking around as a loyal customer.

In my dealings with many organisations there are often opportunities for the Contact Centre staff to be more empathetic towards the customer’s needs and in doing so reduce the likely hood of them moving away from the business.

Emotional Intelligence (EI) training is quite often forgotten as part of the overall mix of training modules, with many organisations concentrating on product, systems and other soft skills.

However empowering your people to be able to identify with a customer’s issues or concerns, and giving them the tools to be able to understand scenarios from the customers perspective is powerful stuff.

A customer that receives a genuine emphatic response from a business will have a stronger probability of staying with that business as they feel needed and respected.

In summary

By now you can probably appreciate my excitement about opportunities Contact centres can adopt to reduce customer attrition?

In saying so I hope that this article has given you a greater understanding of the initiatives that you can take to ensure that your customers remain loyal to you.

Don’t forget to include Contact Centre retention strategies in your overall business planning and in doing so make sure your strategies are relevant, measurable, and fun to be involved with.

You’ll be astounded at the results and I bet the rest of your organisation will be as well!

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9 ways Contact Centres can help retain customers! (Part II)

January 29, 2010 by stewartwhite

This is the second in a three part posting that discusses ways call centres can help the business retain customers.  For more information on really listening to the customer, speaking the customer’s language and offering products/services/information that the customer wants, see the first post.

4. Servicing your customer beyond expectations

Do you currently exceed your customer’s service expectations?

Using Service Level Agreements (SLA’s) and providing good old fashioned customer service are powerful tools to help retain customers.

SLA’s can be measured against a number of key attributes in any Contact Centre, including, Speed of answer, Issue resolution times and service provision.

All of these areas are where customer’s expectations can readily be exceeded by not only the measurement of success but also the provision of best practice service.

Imagine calling a company, not having to wait in queue to be answered, being served by a CSR that engaged with you, understood your needs, provided great service, sold you products that were applicable to you, and generated solutions to problems;  and the list goes on.

Wouldn’t that be a great experience every time you transacted with an organisation!

Does this happen with every contact that’s made to your Contact Centre?

If not start putting plans and strategies in place that will ensure it does, and if you are unsure of how to do this or were to start, talk to us here at Genroe as we are 100% confident that we will be able to offer you solutions.

After all a happy customer is more likely to bring in free referral business, generate good word-of-mouth publicity and remain loyal for longer.

5. Acknowledging signs that the customer is not happy and might attrite

Customers are pretty transparent when they are talking to your CSR’s if they are not happy with your company’s services.

Usually the language and syntax they use is quite probing, questioning and abrupt.

Also, customers that have reoccurring issues or are still waiting on satisfactory resolutions are likely candidates to become non-customers.

Being able to identify and acknowledge when a customer is likely to be thinking about leaving your business is a powerful tool to be able to decrease customer attrition.

Are your CSR’s trained and supported to recognise these situations and respond accordingly?

I recently worked with a major financial institution where there was an opportunity to support their CSR’s in identifying these types of scenarios.

Our solution was to provide a suite of training tools for their CSR’s to be able to recognise the possible attrition of customers by the use of their language and syntax during their conversations as well as trigger occurrences that the customers may have been exposed to that would also prompt the loss of their business.

The training program for the CSR’s was twofold:

1)      Identify language and syntax scenarios that rang alarm bells from  possible  “leavers” and how to turn these situations around

2)      Providing workable and appropriate save solutions that could be offered to the customer to decrease occurrences of possible attrition (read on to the next point to  learn more about Save Initiatives)

The results from this program were very impressive with a reduction in customer attrition by 2.5% through the use of these tools.

6. Offering solutions to stop them leaving (Save initiatives)

Reducing customer attrition through the use of tools such as “Save initiatives” is an exciting subject that could have its own article dedicated to it.

However I will give you a quick overview of a couple of scenarios that have successfully aided businesses which I have supported.

Firstly there are two types of save initiatives: proactive and reactive.

Proactive initiatives are undertaken before a customer has left your business and are orchestrated as a reaction to subtle triggers that the customer is displaying that lead you believe he/she may be looking to move away from your business.  For example, a customer that has recently met the average lifetime value of your customer base could be considered in risk of leaving so you may wish to acknowledge that customer for their custom.

Reactive initiatives are driven as a direct result of the customer advising that they are leaving your business.  For example, it could be an offer of a discount if they retain their business with your company.

Save initiatives can be as complex or as simple as you want or need them to be, but the implementation of any save initiative within a business and particularly via its Contact Centre operations is a positive step in helping reduce customer attrition.

Best practice organisations have comprehensive Save initiatives with dedicated budgets and empower their CSR’s to be able to offer services/products/discounts as needed to retain customers.

Companies that are starting out on Save initiative  journey can start with simple things like sending a voucher to customers that are reaching the customer average live time value or have not transacted with them for an extended period of time.

7. Following up when you say you will

How often have you not been called back by a Company when they advised that they would do so?

Recently I had a very positive experience from a Company that I was thinking about parting ways with as a customer. I had called to clarify some information and asked for advice. The CSR was very helpful and offered to resolve my query once she had reviewed my customer file and would get back to me by a nominated time.  At this stage the company had no inkling of my desire not to remain loyal to them.

Ten minutes after finishing the call I received a return call from the original CSR advising that she would not be able to come back to me with an answer in the nominated time as she had to review archived files and gave me another target time that she would call me back by with a final answer.

She did so within the nominated time period and not only provided the answers and information I needed, but also offered other solutions to my problem.

I must admit that my faith in the Company was restored and I still remain a loyal customer.

Ensuring that you call customers back, and within nominated time periods will mean customers will be content with your service and will stay loyal.

Tune in next time for the last instalment in this post when we will discuss acknowledging customer milestones and putting yourself in the customer’s position.

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9 ways Contact Centres can help retain customers! (Part I)

January 22, 2010 by stewartwhite

This is the first of a three part posting that discusses ways call centres can help your business retain customers.

These days many of my clients (and in fact businesses in general) are aware of the relevance and benefits of retaining their current customers. After all it costs 5 to 6 times more to acquire a new customer than retain an existing one!

However many businesses do not understand the impact that the Call Centre can have on ensuring that this strategic objective is realised.  When I talk to clients about their customer attrition problems I ask them if they are “making every call count”?

Most of them take a few moments to ponder the question and then nine times out of ten they respond by advising that they think they do, but are not entirely sure!

My investigations always offer up further opportunities for best practice success at ensuring that every contact with the customer through the Contact Centre is really helping to retain their current customers.

So here are 9 hot tips that you can instigate in your Call Centres ‘Business as Usual’ activities to help retain your current customers and ultimately increase your ROI values!

1. Really listen to the customerListen to your cutomers

How many times have you dealt with a Contact Centre where the customer service repetitive (CSR) has not really listened to your conversation or has interjected whist you have been talking?

From my perspective it happens all too often and is really an unpleasant experience.

Many Contact Centres have strong KPI targets set around average call lengths, which in turn can lead to the CSR’s rushing through calls and not taking the time out to really listen and understand the customers’ needs.

Occasions where the CSR is not really understanding the problem can be easily resolved by the proven process of the CSR repeating the callers concerns/issue or questions as part of the usual interaction.

This is called active listening and is the old story of getting your CSR’s to slow down, listen, repeat, confirm and respond!

Of course the other golden rules is to always train and encourage your CSR’s to never talk over a caller whilst they are dealing  with them!

2. Speaking the customers language

I worked with a FMCG company awhile back that sold and serviced highly technical products.  Over a period of time they noticed an increase in their customer attrition. They engaged Genroe to help them discover why their customers were leaving, and to implement initiatives to reduce these occurrences.

As part of the gap analysis it was discovered that the Contact Centre CSR’s were doing the customers an injustice when selling products and servicing their needs, which was driving customer attrition.

The injustice was in terms of bamboozling the customers with too much technical information, and in-house terminology. This meant the customers became confused and embarrassed during the call because they did not really understand what the CSR’s were talking about.

The golden rule in these cases is to make sure your CSR’s are talking to your customers in their own terms (unless dealing with a technically capable person) so that the customer  becomes empowered and understands what is being talked about.

The Company acknowledged this issue and agreed to implement our suggested initiative of “talking in real terms”.

Once in place the Company realised a direct decrease of 1.5% in customer attrition from this initiative alone, a winning formula in anyone’s books!

3. Offering products/services/information  that the customer wants

Here is a classic example I had the other day dealing with an accommodation provider.

I had shot off a “request information” email to a company asking if they could come back to me and advise the cost and availability of a one bedroom unit  &  a one bedroom + study unit for an intended stay.

I was very impressed when I received a return email in a matter of minutes (as I had emailed them outside of usual business hours) but was pretty disappointed when I opened it up and read the content.

They responded and advised the price of a two bedroom unit and did not even include availability information.  Needless to say I went elsewhere for my needs.

This scenario is replicated by many companies .  Often the marriage between what the customer needs, wants or could be interested in are mismatched and results in no transaction or total loss of the sale.

Getting the fundamentals right in terms of matching the customer’s requirements ensures reduced customer attrition.

See the second article in this series to read about servicing your customer beyond expectations, acknowledging that the customer is not happy and save initiatives.

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What’s not wrong with Net Promoter Score

January 17, 2010 by Adam Ramshaw

Late last year “What’s Wrong With the Net Promoter Score” by Augustine Fou was posted on ClickZ.  At the time I flagged it for detailed review and response because it contained a large number errors and mis-statements that I wanted to comment upon.  As it happens, when I went back to review the article I found lots of other people felt the same, judging by the volume of comments attached to the article.

Before I go further I should say that I’m not a blind supporter of NPS.  I only support it because it has been shown empirically to work.  I support it for the same reason that I use the telephone: I don’t know exactly how it works but it does, and I’ll continue to use it until it stops working or something better comes along.

Before we dive in you can check out Wikipedia for a quick refresher on Net Promoter Score.

There are so many mis-statements in Fou’s article that I could go though it line by line but that would be a little tedious so I’ll break it down into the same three summary points provided by Fou:

“NPS doesn’t tell me anything new”.  This is patently false.

Perhaps the key feature of NPS is that for the first time it tells us the most important thing: whether a customer is feeling loyal and how loyal all of our customers feel.  For the last 50 years companies have been trying to get a handle on exactly this question.  We’ve spent countless hours and millions (perhaps billions) of surveys to capture this one piece of information.  For years we tried measuring “customer satisfaction” but that has been show to be poorly related (and poorly correlated) to customer loyalty.

It also tells us this, in a simple to understand, practical, predictive way.  If we increase NPS then our revenue will probably rise, if NPS goes down then revenue will probably drop.  This cannot be said for any other single measure that I am aware of.

Lastly, all products lend themselves to word of mouth, but the percentage of the population interested varies dramatically by category.  NPS does not stand alone for all markets, true, but customers NEVER judge you in isolation, they always see you and your brand in the context of others. In fact the best comparison is to your own last NPS score, which brings us to the next point.

“NPS is based on flawed math”.  This is empirically false.

Fou states that NPS is based on a “seemingly arbitrary 11 point scale”.  At which point I would suggest that all scales are arbitrary (except binary?).  NPS is no more arbitrary than 1-10, 1-7, etc used for other surveys.

However, reliability and validity are the only criteria that are relevant in this discussion.  It is not the scale that is used but the fact that it works that is important.  The analysis behind the survey indicates that this scale, regardless of it’s theoretical underpinning, works and that’s enough for me.

With thanks to Satmetrix

The article also points to NPS being attitudinal rather than behavioural, i.e. “How many times did you recommend company X”.  For my part I have always consider that it’s not actually about whether you HAVE recommended a company, it is asking WOULD you lend your personal credibility to this company.  So it really has little to do with the actual event of recommending a company as it has everything to do with how you feel about recommending a company.

“Not actionable”. This is only true if you let it be.

Sure if all you ever did was run an NPS survey, take the number and report it, you do not have an actionable approach.  Incidentally, this is what occurs in a very great number of customer satisfaction surveys, “likeliness to buy” scores and countless other approaches.  The company gets the report and looks around at each other asking: “So what now” or “So does anybody know why it went up?”

Nobody should be naively using NPS without collecting additional information to allow a root cause analysis of what is different between promoters and detractors. In fact, if your customer segmentation does not systematically explain the difference between promoters and detractors it is probably not very useful for marketing and definitely not for CEM.

Using NPS as the key metric of loyalty, you can create closed-loop processes so that the right employee directly investigates the root causes that drive customer response to the NPS question.  Then you are acting directly on the drivers of customer loyalty.

NPS is a cross departmental strategy to focus the organisation on how it is treating and impressing customers, not a standalone ‘what is the meaning of the universe’ answer. This is a business indicator that has the customer in the centre and takes us back to Deming and his approach to building strong customer focused businesses.

At its heart this is why NPS is so useful: because it provides us with a clear proxy for customer loyalty that we can act on in a purposeful and methodically manner.

Finally, Fou’s article closes with a suggestion that a better approach than NPS is to use changes in search volume to gauge success.  Suggesting that search volume is a good indicator of customer loyalty seems a little light-weight.  This approach appears to be more of a way to fine tune the sales and marketing information process than understand the drivers of customer loyalty.

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Driving Customer Experiences to Improve Loyalty

January 8, 2010 by Adam Ramshaw

When trying to drive improvements in your customer experience one key is understanding exactly what drives change in the customer’s perception of their experience. Often identifying these customer experience drivers is the role of market research but they can also be uncovered by using customer loyalty surveys in the right way.

Once you know what drives the customer experience you then need to understand (or at least have an idea of) the way that the driver makes changes to the customer experience. There are four basic ways that a driver will cause change in the customer experience.

1. Linear Relationship

This is what most people assume will be the relationship between the driver and the customer experience. However, in practice, it is probably the least likely to occur. The relationship is simple: the more of the driver the “better” the experience. It can also work in reverse: the less of the driver the “better” the experience.

2. Hygiene driver:

These drivers show a marked change the relationship at the point at which the factor is acceptable but no further improvement for increases in the experience driver after that point.

We were working with one organisation in the IT space whose documentation was perceived by customers to be quite poor. We identified this up as a major issue for customers and a driver of customer loyalty. Using this feedback they worked diligently to improve their documentation over a 12 month time frame. When we looked again at the customer data we discovered that documentation was no longer an issue and no longer a drag on loyalty. It had reached an acceptable level, however, subsequent improvements in documentation did not increase loyalty.

Many drivers have this profile. Think of errors in bank statements for instance. Customers just expect no errors and just one is going to substantially decrease the customer experience, make two and you will be looking for a new customer.

3. Accelerating influence

This is the reverse of the hygiene factor. A small change in the experience has a major impact on loyalty. This often happens when a company has a very high value differentiator in their service. For instance, a company with a good web site support system where others had none might experience this type of reaction.

4. Overuse

We often see this type of response and it is caused most often by the company themselves. A company finds an experience driver that seems to work well, say update emails sent to existing customers informing them of new product information. This has a positive impact on loyalty.

So, if once a month is good then once a week, or once a day must be great. Wrong — at a certain point, customers weary of the tactic and it reduces loyalty.  In this case having a good customer contact framework can help you to identify the point at which overuse sets in.

Once you understand your customer experience drivers and the way that they influence the customer experience you can start to pro-actively design customer experience programs that build customer loyalty over time.

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Building customer loyalty through comms? You need a Customer Contact Framework

January 3, 2010 by timwtyler

Using the Value Map and calculating Marketing Allowable puts you in good stead as you manage your customer relationships. But, if you don’t know where you are going, any road will get you there – so we need to have some way of determining when the right messages will be sent to each customer – we basically need a traffic cop to make sure that the right message gets sent at the right time.

In our approach we call this the Customer Contact Framework or CCF.  The CCF is not one function but three different functions that continually interact to prioritise and control all aspects of the customer contact.

These 3 elements constantly interact to set priorities.

The CCF is critical to optimizing resource allocation because it controls who will be contacted, when and how.  If you do not manage this carefully you may over contact customers and waste resources – perhaps sending out messages at the wrong time, too often or not often enough.

We know from experience that there is an optimum ‘inter-communication period’ that maximises the return you receive from marketing communications. This graph shows the impact of changing intervals between emails on customer value found in a Wharton study for example;

X axis is days between emails, Y axis is customer value

Note how customer value plummets if there is too much email contact and it drifts downwards if there is not enough. Managing this is the job of the CCF.

The three elements of the CCF are:

Contact rules: the overarching rules that determine when to contact your customers.  For some organisations their entire CCF consists of just one or two golden contact rules such as “never contact a customer more that once every 60 days.”  While this is safe it is also far from optimal; it precludes wave campaigns for example. Such as when sending linked contact strings perhaps a direct mail piece followed by an outbound contact and a second direct mail piece; a 60 day rule is not useful and can be downright counter productive.

When constructing your rules think about them as an evolving set of guidelines.  Items to consider in your rule set include:

Rules that manage contacts for once-off occasions such as not contacting customers in the last week before a major election because of the high volume of election related direct material that customers are already receiving at that time.

Geographic rules that relate to state based variations in contact rules.

Rules for linking strings of contacts (campaign strings) and a governance hierarchy for this type of contact series, e.g. a campaign consisting of a string of three education contacts.

Rules that relate to annual or time of year events such as not contacting customers between Christmas and New Year because of low conversion rates at that time.

Rules that quantify the mix, number of days between, and maximum number of contacts, by medium, by segment, by cell, by campaign type (education, retention, cross sell, up sell, mandatory).

The second element of the CCF is the contact calendar:

The contact calendar is a segment by segment, cell by call plan for the contacts that a customer will receive over their lifetime with the company.  This contact calendar should include all stages of the customers life cycle: new, existing, exiting and exited.  Some of the contacts in the existing phase of the customer lifecycle may repeat but that is fine.  Where you have trigger based campaigns such as save teams or product offers make sure that you include them.

The way to construct one of these contact calendars is to follow the customer lifecycle for each segment and plot each of the contacts.  By doing this you are changing the way that a customer receives communications from your organisation from an adhoc set of contacts to a planned and managed approach – they receive the right contact at the right time.

This obviously supports your optimization efforts by ensuring  that you do not over or under contact a customer and that you receive the maximum value from each of them.

The last critical element of the CCF is the contact history.  This is a comprehensive history of every attempted, unsuccessful or successful contact that your organisation has had with the customer.  If should include the campaign and  campaign string details, channel and contact type.  It should include the outcome of each contact.  Using this information you will be able to fine tune the other elements of the customer contact.

So they are the three elements of the CCF that you need to create.  Using this approach we ensure we manage each customer contact and maximise the value received from it.

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