Genroe Blog
It’s not surprising that using a customer’s name during a transaction is good but what may surprise you is that it’s worth 9% points of customer satisfaction. New research, see chart below shows, just how important this very small personal touch is to your customers.
See the full story: Using the Customer’s Name in the Branch
Every year companies spend millions of dollars running business promotion competitions to improve new customer acquisition rates. While many of these competitions are successful on the face of it, just as many could easily provide greater returns. By changing your perception of competitions from being a tactical way to boost short term sales to a powerful tool in your customer strategy, you can reap large returns.
Business promotion competitions are called many different things, but they all have the same attributes. The cost of entry is either free, nominal, or included in the purchase price of the product. Prizes can be awarded on a random or judged basis with different types of competitions requiring different licences.
If you want to expand your use of competitions, start by using a customer value approach to planning and implementing them. The underlying basis of the customer value approach involves focusing on nurturing and building relationships with the right customers, resulting in a long term, mutually beneficial outcome for you and the customer. This contributes to significantly increasing company profitability by acquiring and retaining the right customers for the business.
Most of us know about the tactical, short term use of competitions, but what are some of the strategic advantages of running a customer value competition?
Most competition entrants are aware that part of the implicit agreement for entering a competition is providing some information about themselves. What’s more, people entering a competition will provide accurate and legible information on the entry form so that you can contact them if they win the prize. This makes competitions the perfect opportunity to do a little customer data gathering.
The information collected could be as simple as a name and address, improving your understanding of customer geographic profiles. However, just by adding a couple of additional questions focused on, say, customer’s changing needs, you can greatly increase the depth of customer information collected. Analysis of this information can reveal a goldmine of customer trends, which are expensive to collect through other traditional market research methods.
It always amazes me that some organisations will throw away this valuable customer information, and then pay a market research firm to collect it all over again.
Competitions can also be a subtle way of contacting existing customers to stop them from leaving at a likely chum trigger point. For example, when a competitor launches a new product, competitions can be used to reinforce your product’s benefits and dissuade your customers from sampling the competitive item.
Competitions can also be used to encourage customer behaviour that reduces churn, such as encouraging customers to use automatic direct debit payment methods.
Through targeted competition questions, active sales opportunities can be identified. For instance, a hardware company could ask existing customers, ‘Are you renovating or building a home?” Customers answering “yes” are likely to be shopping around for building products. Now you have recognised a genuine customer need and a means to contact them all the requirements for a nice, targeted, direct campaign. This approach can often be faster and cheaper than performing a mountain of data analysis on spending patterns.
Over time, your products improve and customers can forget why they bought from you in the first place. Having them enter a competition that incorporates the product benefits as the competition entry answer reminds the customer of benefits they may have forgotten or never knew about.
I’ve seen this type of competition generate an immediate increase in sales to existing customers, and it stands a far greater chance of success than just sending out a new brochure by itself.
We all know that it costs far more to acquire a new customer than to retain an existing one. Yet, many companies still penalise their current customers for giving them ongoing business while rewarding newly acquired customers. Running regular competitions for existing customers rewards them for their ongoing relationship with you and they don’t get irate when they see your company running acquisition focused campaigns.
Of course, whenever you run a competition there are some legal and privacy issues that you will need to address along with logistical hurdles such as, “How do I actually manage all this data?”
Don’t let that stop you from thinking a little laterally about competitions, especially the next time you’re looking at your marketing strategy and wondering how to improve you customer acquisition or retention performance.
In addition to calculating the lifetime customer value the Genroe Return on Retention Estimator also calculates impact of changes in customer attrition rates.
It always amazes me the trouble companies go to secure new customers and then just throw them into a bucket labelled “Customer”, never looking at them again.
Well that bucket has lot of leaks and companies are themselves the ones hammering in the holes. Many times you can improve customer retention by just plugging a few of those holes. Here is a recent case in point.
A friend of mine recently bought a mobile phone and signed up to a call plan. The initial sale was satisfactory and she was told that she could view the bill and pay by credit card on the internet. The phone worked, the quality of coverage and signal strength was good. In short things were going fine.
Then the first bill came in – or should I say didn’t come in. On notification that her first bill was ready she eagerly logged on, or tried to log on. Over the next several weeks she made a series of help desk calls and spent many, many, frustrating minutes on hold. She was eventually told that because she has a space in her second name (not that uncommon you would think) the system could not match her records properly and she would never be able to view her bills on-line.
“Ah-well I’ll just go back to the old paper way, please send me a paper bill so I can check it and pay”, she requested of the operator. “Sure that’ll be $5 to have the bill sent out” was the assured reply.
Well that that was the proverbial straw: at this point she politely paid the bill in full, without seeing it, and cancelled the account. The way she saw it, their system was faulty but she was being made to pay for it. The small cost of the posted bill was not the issue; it was just the culmination of weeks of glitches and poor customer service.
It beats me why so many organisations are desperate for new customers but then make it so difficult to do business with them? I’m sure that we have all heard of similar experiences where a company has done something to push a customer away instead of encouraging them to continue doing business.
Some companies have so many rules and policies that they make it virtually impossible for a customer to buy easily and conveniently: sabotaging the customer relationship and ultimately, company profits.
So how do you know how your customer’s are being treated? The best way is simply to become one. Climb into your customer’s shoes and start looking for all those glitches that offend customers and make their life difficult. How about:
If you have problems in any of these areas you can be sure your customers are as well.
I know it’s not a new idea but it’s one that really works.
For instance customer complaints are a big opportunity to find the glitches so it is important to get comprehensive details for each complaint. Ensure that you get back to the customer with an update on the issue and final resolution.
Implement an effective customer feedback process. I prefer transactional Net Promoter Score because I’ve seen it work wonders but if you like something else use that. Just use something.
Find out from them about glitches in your processes, systems and policies. Some employees will also have great ideas on implementing quick, easy and efficient ways to resolve these glitches. They are the ones who work within these constraints on a daily basis and can provide you with a practical insight into what turns customers on and off.
By the way don’t forget to provide your employees with feedback on what you are doing to resolve the glitches. Once they see positive actions coming from their suggestions, they will be encouraged to give you more suggestions.
Finally, become a customer of your competitors and test their processes so that you can evaluate their glitches. A competitor’s glitch could be something that may need to be fixed in your company too. It could also be the difference between retaining your customers and losing them to your competitor.
For more information on Net Promoter Score and how/why it works download our free Introduction to Net Promoter Score (NPS).
If you are thinking about implementing customer loyalty survey process in your organisation give us a call. We can help you to implement right program for your organisation for the long term.
Net Promoter, Net Promoter Score and NPS are registered trademarks of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.
The starting point when designing customer loyalty feedback programs should be understanding what your customers care about and how well you are meeting their expectations. Unfortunately, many attempts at customer loyalty surveys fail to include all three critical elements required to collect that understanding and so fail to provide useful information to the business.
By not including all three critical elements the results of many customer loyalty surveys are worthless. Don’t get me wrong, the results are often interesting but ultimately worthless because you get results but have no idea what to do with them.
For instance, have you ever heard these comments after you distributed your results internally?
Moving from interesting but worthless results to interesting and useful results is not actually that hard. In fact all you have to do is start with a customer satisfaction measurement approach that includes three critical elements.
It seems odd to me that many customer loyalty surveys never ask these key questions. They ask loads of detailed questions about the colour of this and the time it took for that. The problem is that at the end of the day you need to know how much customers like you as a business and match that to customer loyalty, i.e. profit.
Luckily this is a simple problem to solve because there are really only one or two questions that you can ask:
“How likely is it that you would recommend Company X to a friend or colleague, where 10 is very likely and 0 is very unlikely?”
This question has been popularised by the research done by Frederick Reicheld et. al. and the development of the Net Promoter Score. Analyzed correctly this has been shown to be a very good indicator of customer loyalty.
(For more information download our Introduction to Net Promoter Score)
“How much effort did you personally have to put forth to handle your request”
More recently this Customer Effort Score question has also been found to correlate well with customer loyalty. For more information see this post on “customer effort score”
In general my preference is to use the Net Promoter Score question as my experience indicates that customers consider a wider range of factors when scoring this question.
Now that you have an overall customer loyalty measurement you need to understand what drives customer loyalty for your business. To do this you need to include a set of questions that measure your performance on the different drivers in your business. The goal here is to understand how you perform on each driver AND determine which drivers are most important.
These are the most common questions you see in surveys, for example:
“How do you rate the technical competence of our staff?”
“How accurate was our documentation?”
“How quickly did we answer the phone?”
With this information and a little bit of statistical analysis (correlation and regression techniques) you can determine which elements of your business are most important in driving customer satisfaction.
So with the previous two question types you know your customer loyalty level, which elements of your business drive customer loyalty and your score on each element. Okay, you’re at the final hurdle you know what is wrong and what needs fixing but how do you fix it? This is where the last element comes in: how can we improve questions.
There are two versions of this question: general and specific
“Please tell us the one thing you would like to see changed about us?”
“How could we improve our responsiveness to you?”
Notice both types of question are open (no scores out of 10) responses. Using them you should get some good ideas about how to improve your business.
Well, now you have everything that you need to improve customer loyalty. The only thing left to do is get out and make changes to your business. Oh and then do it all over again next quarter – remember customer satisfaction is a journey, there is no perfect customer satisfaction.
For more information on Net Promoter Score and how/why it works download our free Introduction to Net Promoter Score (NPS).
If you are thinking about implementing customer loyalty survey process in your organisation give us a call. We can help you to implement right program for your organisation for the long term.
Net Promoter, Net Promoter Score and NPS are registered trademarks of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.
Increasingly organizations are becoming dissatisfied with running customer satisfaction surveys and turning instead to designing and implementing customer feedback programs. The reason is simple, after 10 years of running national customer satisfaction surveys the American Customer Satisfaction Index has, basically, not moved at all. This is despite industry reportedly investing USD800,000,000 each year on improving customer satisfaction.
So what to do?
It has become clear that it’s not just about satisfaction. In order to improve their businesses companies must to listen customer feedback and change what they do to improve customer loyalty. The real goal is to understand and improve the areas of the business that drive customer loyalty.
In my experience there are five key steps to implementing good customer feedback programs.
Before you make any investment you need to understand what the potential returns are going to be. The heart of Step 1 is linking your business goals (revenue, profit, market share, growth, whatever) to changes in customer loyalty.
That way you can demonstrate the benefits not just the costs of your customer loyalty program when you present them to your management.
Start by taking your key business measurements and link them to changes in loyalty. If loyalty were to increase by 10% how much would profit rise? You can download our free return on customer retention tool to make this task easy.
While customer satisfaction surveys are measuring satisfaction at finer and finer levels it is becoming clear that, as a metric, customer satisfaction is not a very reliable measure of loyalty. Customer satisfaction surveys were always intended to be customer loyalty surveys but they are in fact no such thing.
Research is now showing that, depending on your industry, unless your customer scores you in the “top box” in your customer satisfaction surveys, i.e. 5 out of 5 they have little real loyalty to your organization. Let’s face it customer satisfaction is now table stakes -–you have to do better to keep them loyal.
However, [research] has shown that there is one question, which is a good indicator of customer loyalty. That question is “How likely would you be to recommend us to a friend or colleague”. This approach is called Net Promoter Score® or NPS and has generated a lot of respect over the last few years.
It’s simple, straight forward and easy for your customers to understand. But most importantly the answer is closely correlated to [customer loyalty and business revenue].
Every business has a range of attributes that might impact on loyalty. If you’re in financial services it could be areas like service fees, line lengths in branches, product features, etc. If your business is a physical product they might be delivery times, stock holdings, and order quantities.
Starting with the one question above, add questions about these different potential drivers of customer loyalty to your customer loyalty marketing surveys. Don’t add too many. Maybe 10 or 15 and make sure that you use a rating scale to collect the customer perception of your performance.
Now comes the most important part: find someone to do some statistical analysis on your results to determine which of the drivers are most significant in terms of customer loyalty. There are a few different techniques but correlation and regression analysis are the most common.
For more information on what is important to customers have a look at the following blog posts:
Determining what might be important to a customer
How do you determine what is important to a customer?
Now you have the vital information that you need: you understand the state of customer loyalty and you understand which of your business attributes are most important to that loyalty.
Start by focusing on just a few of the most important drivers that you also believe you can change and start making changes in your business.
Perhaps you have found that line lengths in your branches are a key driver of customer loyalty. Work with your staff to identify ways to change your business processes and reduce line lengths. Make sure that you align staff compensation plans and bonuses so that the changes you make will be permanent.
Once you’ve improved the most important areas move onto the next areas.
Remember that the goal is to improve customer loyalty. Customer feedback surveys repeated at regular intervals will let you know how you’re customer loyalty programs are doing on both customer loyalty and the important drivers of customer loyalty that you have identified.
For more information on Net Promoter Score and how/why it works download our free whitepaper: Introduction to Net Promoter Score (NPS)
To understand what drives customer loyalty for your business and how to align your business to improve customer loyalty check out our Customer Feedback Survey Services
Net Promoter, Net Promoter Score and NPS are registered trademarks of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld
