How To Drive Customer Experience Innovation Using Transactional NPS

December 6, 2011 By 1 Comment

innovationI wrote recently about how engineers in process plants are never happy with the status quo. They are always looking for improvements and tweaks to the manufacturing process that can drive incremental improvement in profit and efficiency.

This post is about how you can use Transactional Net Promoter Score to do the same thing for customer loyalty, through its key driver; customer experience.

Two types of innovation

Lets start by identifying two key types of innovation: discontinuous and incremental.

Discontinuous innovation creates whole new genres or products: think T-Model Ford replacing the horse, the Sony Walkman creating a whole new product category, the IBM PC. Discontinuous innovation generates major leaps forward but is relatively rare and risky.

Incremental innovation slowly but surely improves a product or category. Incremental innovation is how the car went from the T-Model Ford to the F1 racing car we see today. All the key features of the T-Model are present in the F1 racing car, they are just much, much improved. A million small incremental innovations over 80 years has generated a product that is essentially the same but completely different.

The simple truth is that while discontinuous innovation is sexy, it is also risky and rare. Incremental innovation is less exciting but very low risk, and generates enormous value day in and day out.

Driving incremental customer experience innovation

So how do engineers drive incremental innovation? Not by focusing on the whole process but by breaking it down into sub-areas areas and focusing on the worst performing areas first. To identify the worst performing areas, and how to fix them, engineers then use systems that collect thousands of measurements from all over their manufacturing process.

This very same process can be used to drive incremental innovation in your customer experience. Simply swap the industrial manufacturing process for the customer experience (where we manufacture customer loyalty) and the Transactional Net Promoter Score process for the engineer’s temperature and pressure sensors.

From a practical perspective you can achieve this by breaking your customer experience down into distinct touch-points and sub-processes and then apply Transactional Net Promoter Score to collect data at each of the touchpoints.

Start with the worst

Now you have a series of customer experience manufacturing steps, each with it’s own customer experience sensor to collect data about what works and does not work. Using NPS you can now rank the customer experience manufacturing steps from best to worst; highlight the pain points and focus on those areas that most need attention first.

Put simply; the touch-point with the lowest NPS will be the one that is performing the worst, and the one that you need to start work on first.

If you have implemented Transactional Net Promoter Score correctly you will also have a range of other diagnostic information to let you know what is wrong with the touch-point and how to fix it. It is then up to you to apply the current quality system toolkit that your organization uses (Six Sigma, Lean Six Sigma, etc) to take this information and drive change.

Customer Experience a Process not a Project

Once you have improved the worst touch-point you can move on to the second worst touch-point and repeat the process. Now you can see that customer experience is not a project but a process. It is a never ending cycle of incremental innovation that can and will move you a long way from your Model-T customer experience to a Formula 1 customer experience.

More Information

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 Net Promoter Score (NPS) in your organisation give us a call. We can help you to implement an effective Net Promoter Score customer needs survey program for your business.

Net Promoter, Net Promoter Score and NPS are registered trademarks of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.

By Adam Ramshaw

Filed Under: Best Practices, Customer Experience Management, Customer Feedback Process, Net Promoter Score Tagged With: ,

Data Analysis 101: Seven Simple Mistakes That Limit Your Salary

November 24, 2011 By Leave a Comment

The idea that a picture is worth a thousand words relies on the picture being clear and meaningful. Presenting data in a way that tells a clear, unambiguous, story is on-going trek for me and this article is another step along the path.

This post over at Occam’s Razor by Avinash Kaushik provides some good insight into making that picture clear and meaningful.  If you have to present data to others, and that is basically everyone in business, jump over and have a look, despite the heading this is not about salaries.

Data Analysis 101: Seven Simple Mistakes That Limit Your Salary

Filed Under: Best Practices

Proof: NPS is much more sensitive than Customer Satisfaction

October 5, 2011 By 2 Comments

doctorRecent analysis of Net Promoter Score data from one of our clients indicates that NPS is almost three times more sensitive at predicting customer churn than customer satisfaction. In addition, Detractors are 1.5 times more likely to terminate than Promoters.

nib health funds is one of Australia’s leading and fastest growing health funds.  As an organisation, nib has embraced the Net Promoter Score process.  They have integrated transactional measurement of NPS into the Customer Care Centre and other key customer touch points using the CustomerGauge NPS data collection and reporting system (full disclosure: we sell the CustomerGauge system in Asia).

As a company, nib uses daily feedback from its NPS survey to coach Customer Care Centre consultants, perform service recovery and drive improvement in products.  In short, nib is working hard to listen to its customers and deliver the best possible service.

During this process we wanted to look more closely at nib’s data and see exactly how NPS linked to business outcomes for the health fund.  A couple of months ago nib generously agreed to provide us with some de-identified data that included customer response scores and termination information. This gave us a great opportunity to test the link between NPS and customer retention.

Background

Private health insurance is an interesting industry because you essentially pay upfront for a service that you hope never to use.  In Australia we also have a system where health insurance companies are not allowed to “risk rate” their pricing.   In simple terms it means companies must provide private health insurance cover and charge the same premium irrespective of your age and sex. All this means that the most important customer facing driver of business success in health insurance is customer retention.  While the idea of upselling to a higher level of cover does exist, keeping customers longer is key.

Results

With data from 20,000 Transactional NPS surveys and 12 months of termination history for those accounts we had a great set of information with which to work.

Also, the nib survey is a little different to the standard Transactional Survey in that it includes a “Customer Satisfaction” question as well as the “Would recommend” question. This made it possible to for us to look at the effectiveness of each question.

In summary we found that:

  • A one point increase in “Would Recommend” score results in a decreased of risk of termination by 7.8%
  • A one point increase in “Customer Satisfaction” score results in a decrease of risk of termination by 2.9%

This means that as a predictor of customer attrition the standard “Would recommend” question is 2.7 times as effective as customer satisfaction.

We also found that:

  • The risk of attrition for Detractor respondents is 1.5 times that of Promoter respondents

I don’t really have to spell out why this is important. You can see that Promoters are linked much more strongly to retention success.

To us this was great confirmation that the NPS approach works. For nib it means that they must keep delivering a great service for their customers, secure in the knowledge that NPS is a great way to determine which customers are happy and which are not.

We would like to acknowledge the support of nib and thank the health fund for allowing us to publish these findings.

More Information

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 Net Promoter Score (NPS) in your organisation give us a call. We can help you to implement an effective Net Promoter Score customer needs survey program for your business.

Net Promoter, Net Promoter Score and NPS are registered trademarks of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.

By Adam Ramshaw

Filed Under: Best Practices, Case Studies and Statisitics, Net Promoter Score

Customer Loyalty Programs: 5 items for your next grease and oil change

August 19, 2011 By Leave a Comment

We all know what we want from our customer loyalty programs; more, and more profitable, customers.  The trouble is that customers are notoriously fickle, changeable, arbitrary, and our lifeblood.

What worked last month may not work today.

So Loyalty Programs need regular check-ups to make sure they are still achieving their objectives – in just the same way you need to regularly check and service your high performance automobile.

In fact, I sometimes think all Marketing professionals should drive old exotic sports cars, to get a feel for how much tinkering is required to keep relationship marketing initiatives on the road!

So here are five things you should check when you raise the hood of your Customer Loyalty Program;

1. Is it still mechanically sound? Brakes, steering, fluid levels all OK?

It’s easy to assume that because there are no rattles that nothing has fallen off.  However, a quiet customer is sometimes an absent customer, so regularly run through the program operations. For example, though programs vary widely, make sure you are meeting member expectations in yours;

  • Point balances accurate and timely
  • redemptions being fulfilled in a reasonable time
  • web site availability close to 100%
  • if you have earn partners, what percentage of their points are ‘missed points’ claims from customers
  • how long are welcome packs taking to get to new members
  • is my cost per point for the program steady, in my comfort range
  • are my operator SLAs all being measured, reported and met…

Make sure ‘BAU’ does mean ‘Business as Usual’, not ‘Best Are Upset’.

2. Is the ignition system still tuned correctly?

Poorly tuned programs can cost you money by rewarding the ‘wrong’ behaviours. This comes about as prices creep, or sometimes just because the program has succeeded in distilling membership to your loyal and committed customers. When this happens, tier thresholds stop becoming aspirational and start rewarding customer’s regular behaviour.  Worse still, tier advancement and privileges become an entitlement in the eyes of the member, not a thank you for a stretch.

You end up paying more for business you stood a good chance of getting anyway.

Even if your program does not have membership tiers, reward thresholds are subject to the same ‘bracket creep’, and should be reviewed regularly.

Thank Mr Pareto and plot your members into a curve by their value and the percentage of your business they represent.  Make explicit decisions about what percentage of your customers you want to reward and by how much.  Then recalibrate tier thresholds and reward point values. Build in planned value ‘stretches’ where customer types change to encourage members on the ‘cusp’ to spend a little more to achieve the next level/reward.

This is the loyalty program equivalent of the ignition timing light in that exotic sports car.

3. What is your fuel economy?

It is not always easy to measure the mileage you are getting from your customer loyalty program. Proving which action caused customers to stay and spend is difficult. But you do need a fuel flow meter on your program or inevitably the accounting types will question why you don’t take the bus instead.

For Loyalty Programs the flow meter is generally the measure of customer churn and the potential value that a customer who leaves takes with them. Customer Lifetime value measures that look at member retention, segment population and average member value allow us to take a snapshot of the current value of current & future customer cash flow (in today’s dollars), just like a Balance Sheet takes a snapshot of the companies physical assets.

These snapshots, compared over time show the impact your relationship marketing investment is having on member value.

For a more direct measure, or if customer churn is not an issue for you, calculate the sales lift that is required to pay for the program operation and relate this figure to the relative spending of customers who have redeemed in your program versus those who have not in the last X months (determined by your customers shopping frequency). If the difference covers the sales lift required, you have evidence the program is paying its way.

4. Does the car still look good? Paint and body work perfect?

The more a member has to do to earn rewards in your program, i.e. the more valuable the customer, the more important it is that the rewards include status, recognition, and exclusivity. Would your Platinum members be proud to pull your membership card from their wallet? Is your program an MG or a Ferrari? Which image would your target customers prefer; driving cap or helmet?

What others are saying about the program and its image is growing in importance, so a social media strategy is now a critical factor in Loyalty Program success for the members most interested in membership as a badge.

5. And finally, the most important question; is it still fun to drive?

Are customers actively accumulating and spending your currency, joining in your facebook discussions, redeeming  a mix of your rewards (versus cash back)?
Some measures of customer engagement are important to monitor;

  • New enrolments
  • Redemption rates and time to first redemption
  • Points breakage rates and average life of a point
  • Dead spots in the reward catalogue (if you have one)
  • Participation rates in feedback requests

If these measures are falling, perhaps it’s time to think about that super charger or more comfortable suspension?

Getting Help

Genroe offer a Customer Loyalty Program Health Check that covers all of these areas and provides independent, practical advice on how to improve your customer loyalty program.  For more information, please contact us.

Filed Under: Best Practices, Customer Loyalty Management, Customer Strategy

Best practice organisational structure to deliver Customer Experience Management

March 27, 2011 By 3 Comments

Over the past week or so there’s been a really great debate on the organisational structure to most effectively deliver Customer Experience Management going on over at LinkedIn.   With more than 70 posts by wide range of experienced professionals in the field, it’s been one of the most interesting discussions I’ve seen on LinkedIn.

However, with 13 pages of content and so many comments it’s hard to get handle on what is being said.  So, I thought I’d summarise the post into a best practice organisational structure approach to delivering customer experience management.

There were some differing opinions, as you would expect but the key items of general agreement are:

  1. CEO/CxO Support – this is not negotiable.The senior leadership of the organisation must fully support the idea that a focus on customer experience management can driver higher share prices and profits.Further, they must walk the walk not just talk the talk.

    If that person does not believe that improved customer experience leads to greater profits the process is pretty much doomed to die a slow, unbudgeted, death.

  2. The organisation must have consistent, and simple to understand customer centric values that are genuinely held by staff and senior management.If you can ingrain this into the organisation then the rest of the process will be simpler.Think Disney or Apple.
  3. Operational Departments are responsible for implementing CEM.They have the critical departmental domain experience to understand their business better than anyone else.The CEM Department (see below) understand CEM and has the tools to support the Operational Departments in implementation but at the end of the day the buck stops with the people that know their part of the business the best.
  4. Operational Departments must have CEM KPIs.These are rolled down from the C suite and go hand in hand with the standard KPIs that they have.The key understanding here is that CEM KPIs are not just an interesting diversion they are  lead profit indicators.  That is the key importance of Net Promoter Score for instance.  It’s not just interesting, it leads revenue growth.

    It goes without saying that the CEM KPIs should be connected to remuneration in the same way that the other KPIs are connected to remuneration.

  5. The CEM Department should be an enabler or centre of excellence for customer experience management skills and systems within the organisation.The simple analogy is with the IT or Accounting departments.Accounting is responsible for counting the money, making sure it’s reported accurately, counselling the rest of the organisation on how best to use the money BUT NOT making sales.  Nobody thinks this is strange.

    CEM is no different.  It is a set of skills and systems that are used by the rest of the organisation to improve their individual CEM performance.

    The CEM Department staff should be viewed as consultants to the rest of the organisation: people with desired skills and the ability to add real value to the whole process.

  6. The CEM department should have CEM KPIs.These should be the same CEM KPIs as the Operational Departments.The goal here it to make the CEM Department and the Operating departments co-dependant.  Operating departments should be seeking out assistance from CEM to help them improve.

In terms of process implementation there are some gems of insight in the comments.

  1. If the CEM Department is large enough, consider having them hot desk around the organisation to become ingrained in the business.
  2. Where does the CEM Department report?  This varies but is generally either directly to a “C” level executive, even the CEO, or into Marketing.  Personally I am less keen on having it roll into Marketing.
  3. As noted above with the sharing of KPIs, the CEM Department is not solely responsible for the customer experience as this will relieve responsibility from the Operational Departments.
  4. The size of the CEM Department: This group does not have to be large.  It can be as small as an outsourced consultant to the CEO and up to 20 people for the largest of organisations.
  5. Cross-customer product silos can be of particular issue.  Consider banks who have mortgage, transaction accounts, personal loans, etc. all interacting with the customer.  These organisations have a particular issue and often the silos will need to report to the same person to allow a customer focus to override the product silo focus.
  6. Steering Committee: If you add a CEM Steering committee comprised of senior executives through the organisation you will also add a high level coordination function to the overall CEM initiative.

If you’re looking to implement a customer experience management project why not start by downloading our free 4 Steps to Great Customer Experience Management report.

By Adam Ramshaw

Filed Under: Best Practices, Customer Experience Management Tagged With: ,
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