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How to win a customer for life—for only $12

Tuesday, July 30, 2013

I recently had a problem with a headset purchased nearly a year ago from Headsets.com. The automatically adjusting speaker volume resulted in numerous aborted calls. When I called to complain the rep said, “Mr. Bingham, your headset is just barely out of warranty.” I waited for the bad news. And then he surprised me by saying, “But I can imagine how frustrating that must be with such an important piece of equipment. I want you to be happy and I’m going to send out a replacement via FedEx. You should have it the day after tomorrow. Use the enclosed return label and send back the defective unit in the same box.” Later that day I received a shipping notification and a personal follow-up from the rep, and exactly as promised I received the replacement headset.

Such excellent care went above and beyond the minimum they were contractually required. But that wasn’t necessarily what won my loyalty. 

Within the box was a handful of Tootsie Rolls and a paper survey, the kind that everyone sends and surely nobody ever reads. Because they had done very well in meeting my needs and even exceeding my expectations, I gave them very high marks on the survey. Deciding to have a bit of fun with them, I answered their open-ended question, “What other suggestions do you have for us to improve?” with the tongue-in-cheek, “I don’t really care for Tootsie Rolls, but Jolly Ranchers, on the other hand…” 

Two days later I received another FedEx shipping notification. I was convinced that somehow their systems had screwed up and sent the notification in error, or I was going to have to waste my time calling them to return a duplicate headset. The package was much lighter than before. And it rattled. I opened it to find a very large handful of… Jolly Ranchers. 

Some employee read the survey, purchased a bag of Jolly Ranchers on their way home from work, and shipped a handful the next day. I had to laugh, as even though I know very well how this game is played, I felt an intense loyalty to them—I won’t even look anywhere else for phone/headset equipment. Not even for a better price. 

Rudy Vidal, CCO Council board member and originator of the Extreme Customer Loyalty initiative at Panasonic, found that the difference between second- and top-box loyalty scores was that customers felt they unexpectedly got something more. As he put it, “it didn’t matter if it was a new car or a lollipop!” 

Or in my case, a Jolly Rancher. Of course, the replacement headset may cost some in terms of time/effort to get warranty service from the manufacturer. But the real clincher for me was the fact that someone not only read the survey and took action—they showed thoughtfulness. The Jolly Ranchers probably cost $0.50, and shipping was $11.50. Of course they did everything better than right with the return. But they won my loyalty for $12. 

What are you doing to show your customers you are actually listening and responding to their needs and desires?

View Curtis Bingham's profile on LinkedIn

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Categories: Chief Customer Officer | Customer Centricity | Customer Loyalty

Loyalty is Dead. Long Live Engagement

Tuesday, July 23, 2013

Customer loyalty is dead. Long live customer engagement. Loyalty is an emotion notoriously difficult to measure, typically only by proxy, such as via surveys that capture the stated intention to recommend or repurchase. But it is tricky at best to overlay stated intent on actual behavior, which can be very different. Consequently, loyalty as a business metric is often misleading and worse: difficult to correlate with other business management metrics used by executives to assess strategic decisions. This, in turn, makes loyalty problematic for justifying increased resources and credibility among customer executives. 

Long live customer engagement. Customer engagement is an effective leading indicator of loyalty and profitability. It is easier to measure, easier to influence, and more strongly correlated with revenue and profits than loyalty measures such as Net Promoter (NPS), Customer Loyalty Index (CLI), or others that are poor proxies for revenue. Effective engagement activities create emotional attachments that draw customers closer to protect them from competitors, encourage repurchase while lowering price sensitivity, gather insight to refine strategy, and ultimately promote evangelism. 

Customer engagement is the sum of activities that build positive connections between a company and its customers and result in greater involvement that positively impacts revenue.

Jeb Dasteel, CCO of Oracle, found that Oracle’s most engaged customers are 7% more satisfied, and 33% more profitable than similarly-sized, non-engaged customers in the same industry. A 2008 study by PeopleMetrics on the impact of customer engagement on financial performance showed that companies with high customer engagement enjoyed 13% higher revenue growth, as compared to 36% revenue losses as customers disengaged.

It is easy to identify engaged customers because they participate in discrete customer programs. Their transactional behaviors are easily observed and their relative profitability is easily calculated. Validated by such clear correlations with profit, customer engagement activities then clearly warrant greater priority, with a commensurate increase in funding. 

Customer engagement activities might include mail or email notifications, post-purchase follow-up calls, participation in online communities, executive or industry advisory board participation, etc. 

The CCO Council recently undertook an effort to characterize customer engagement and create a framework for its members to follow in adopting this new metric. Some of the key recommendations from this effort include:

1. Investments in customer engagement activities should be made according to their impact. The ROI of customer engagement activities can be plotted along an increasing trajectory with the least valuable (but likely necessary) activities being tactical and impersonal and the most valuable activities being those that are both strategic and personal. Personal activities increase engagement, and strategic activities drive longer-term business value. 

2. Engage customers selectively. The most impactful customer engagement activities are typically the most resource-intense. Programs should therefore be carefully matched with those customers most likely to engage further.

3. Simple measurement approaches are sufficient to realize the strategic intent. Participation in select high-value activities and the crossing of thresholds to levels of involvement are two simple measures that can demonstrate engagement. 

Engagement coupled with strategic business opportunity can provide a powerful guide to customers with greater business/revenue potential. Coupled with transactional satisfaction measures, engagement can further highlight those in need of rescue.

Customer engagement is a more easily measured and more accurate metric than the outmoded customer loyalty. It is also a powerful leading indicator that enables executive decision-making to drive increased revenue and profitability. Long live customer engagement. 

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Categories: Chief Customer Officer | Customer Centricity | Customer Insight | Customer Loyalty | Customer Retention

Has social media grown up enough to prove its own value?

Tuesday, July 16, 2013

This past March was published one of the very first quantitative analyses that I'm aware of that correlated the effect of customer engagement via social media with the firm's bottom line. In the article entitled, “The Effect of Customers' Social Media Participation on Customer Visit Frequency and Profitability: An Empirical Investigation", academics examined the effect of customers' participation in a firm's social media efforts and found that social media engagement resulted in not only a stronger bond between the brand and the customers, but also discovered that engaged customers visited the store 5.2% more often and generated 5.6% greater revenue than the control group with similar shopping history, identified before the social media effort began. As well, engaged customers as measured by frequency of posting had a stronger preference for premium products and lower price sensitivity, making them more profitable than their non-engaged counterparts.

The researchers examined a large retail wine seller and gathered information on customers' demographics and spending habits including wine purchased from other outlets. They created a control group consisting of customers with similar purchase habits and who are not participating in social media. One of the challenges that could easily get lost in a company's social media experiments is whether the relationship is actually growing or the firm has actually provided greater accessibility to promotional coupons. In this study, the researchers weeded out "price buyers" who were using social media solely for the purpose of obtaining coupons. The social media customers and the control group did not have significant differences in their purchase behavior prior to the firm's social media experiment. Thus, they effectively isolated the effect of social media on a material segment of their customers.

However, these results are sometimes masked by the law of averages. To duplicate these results in your company you should carefully segment customers, observe their behavior, and compare such behavior with an appropriate control group. Even more importantly, it appears that done properly, social media can be an effective tool for engaging customers.

As we see in this study, engaged customers spend more and more often, may have a higher predilection for premium products, and are therefore more profitable.

What can you do to engage customers in your business? How can you go beyond preaching at them or pushing coupons to engaging them in a dialogue, and truly understanding what they need?

View Curtis Bingham's profile on LinkedIn

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Categories: Chief Customer Officer | Consumer Spending | Customer Centricity | Customer Insight | Customer Loyalty | Customer Retention

Do you have an executive empathy program?

Tuesday, July 02, 2013

I’ve been working with chief customer officers for nearly a decade now and one of the things that perpetually hampers CCOs and other customer executives in their efforts to become customer focused is the struggle for CEO buy-in. There are a number of reasons for this lack of support, including the distraction of other priorities; a lack of awareness that a problem exists or of its severity; or the inability to outweigh the seemingly guaranteed ROI of more traditional investments. However, they all boil down to the same root cause: becoming customer centric is not a sufficiently high priority in the CEO’s mind.

Embarking on an executive empathy program is a sure-fire way to elevate customer centricity to a strategic imperative.  The purpose of the program is to bring the customer into the boardroom, both figuratively and literally, by using data, customer anecdotes, and first-hand experiences to show executives the nature and scope of customer issues and, most importantly, the negative impact on the business of maintaining the status quo. Solid data is a prerequisite for this program. Without data showing the frequency, severity, and impact of customer issues, priorities will not be realigned.  Assuming this data is in place, here are seven recommendations to expose executives to customer issues and create more passionate support for your efforts on behalf of the customer and business:

  1. Play selected audio excerpts from call center calls during executive committee meetings
  2. Either video customer interviews or invite customers to record their own videos describing their challenges with your products, services or interactions and play them back in executive meetingsSimulate customer interactions to highlight convoluted or broken processes
  3. Select a customer with a complaint representative of a systemic issue and ask an executive to call the customer, listen to the issue, and commit to address it during the month.
  4. Have the executive write about the experience, the issue, and the resolution on an internal blog.  Engage each member of the executive team each month
  5. Bring a strongly dissatisfied customer into the executive committee meeting to tell his or her story personally
  6. In advance of an executive retreat, assign each executive to shadow a front-line employee for a day, withholding judgment of personal skills and committing to come away with one key issue or process that harms customers or hampers front-line employees from serving customers; share, prioritize, and commit to resolve during the executive retreat
  7. Assign executives sponsorships of key accounts, with responsibilities to meet face to face with decision makers to discuss key indicators of relationship health, uncover dissatisfiers, and commit to fix within one month.

There are many more ways in which executive empathy can be cultivated. How else are you doing so?

Logic makes people think, but emotion makes them act.  Show compelling data to get their attention. Tell the customer stories using powerful and compelling vehicles to make them act.

If you’d like to talk further about any of these ideas, please feel free to drop me a line.

View Curtis Bingham's profile on LinkedIn


Categories: Chief Customer Officer | Customer Centricity | Customer Insight