CCO Council Blog

By Curtis Bingham

Once upon a time, Netflix was an innovator and a giant slayer.  They offered a great product, enormous selection and a unique delivery system for DVDs.  By allowing customers to rent DVDs online and have them mailed to them, they put Blockbuster and video stores in general, out of business.  Next, Netflix wowed customers by offering a selection of movies to stream online via the same account.  No hidden fees, problems were addressed early and customers were loyal and excited about the product. 

They were once a company that “got it right” with their customers, but in the last three months, they have managed to squash 7 years of good will with some bad decisions that were poorly executed by the company.

I do a great deal of writing about companies and Chief Customer Officers that get it right, creating superb customer experiences that drive loyalty which in turn drives revenue and profits. While this can be instructive on how to be successful, sometimes it’s better to know what NOT to do to avoid complete and utter catastrophe.  Netflix is a study in both extremes, and whether or not it survives its own blunders time may only tell.

Early last summer Netflix announced a price increase…not just any price increase, but one that raised rates as much as 60% depending on the plan a customer was subscribed to.  The reaction was immediate and pervasive.  Angry customers blogged, tweeted, Facebooked and used every communication vehicle they could find to voice their disgust.  Netflix was silent.  After a short period of being ignored, the customers did what dissatisfied customers always do: they voted with their feet and left Netflix in droves. Still Netflix did nothing. 

Customers are never fans of unjustified price increases.  Netflix showed a complete disregard for their customer base when increasing the price of the service without a justifiable increase in value.  Price increases of this magnitude force customers to reevaluate decisions that used to be automatic.  They used to happily pay their bill every month and now they were determining if it was worth the price.  Many decided it was not.

Months later, CEO Reed Hastings came out with an apology, but it was several months overdue and it included a new bombshell: instead of the traditional online and DVD service found in the same convenient site, he was splitting the company into two entities.  Netflix would only stream video and Qwikster would continue in the spirit of Netflix’s original intent of DVD rentals.  Neither site will communicate with each other, so you will have to have separate queues for your movies and your credit card will be charged twice by two different companies.  Wait…what?  So, he is sorry for the price hike, but the price hike remains AND he is taking the most convenient part of his service and making it considerably more complicated?  How does this make things right for the customer? Does this sound like a company that cares about customers?

Companies are in business to create value for customers.  The price they charge is derived from the value provided.  When the value erodes, the price can’t be expected to remain the same or even increase without a backlash.  In 3 months, Netflix managed to destroy their service value and instituted a price increase.  Netflix is paying for these blunders both in a dropping stock price and in reduced Wall Street guidance as they lower customer acquisition expectations for Q4.   

Where is the customer in all of this?  Leaving, but it doesn’t have to be that way. 

Netflix could institute some changes to quickly bring departed customers back and save face with current disgruntled customers.  How?  By taking it all back.  Clearly, they have a strategic direction to split the company into two entities so they can pursue different customer segments.  Not all people who stream videos also watch DVDs and vice versa.  However, they can make the two services talk to each other to maintain consistent history, ratings, and recommendations. They could also go back to a single charge for those who use both services.  Small changes, but they reflect the biggest issues customers have with splitting the services up.

The largest gesture Netflix can make is to own their pricing miscalculation.  Reed Hastings belatedly apologized for the mistake and admitted it was quite a gaff, but he didn’t make it right.  Take action and correct the pricing scheme.  Grandfather current customers and make it an offer to those that left that they can return for their pre-June pricing plans.  It would energize the customer base, regain a percentage of lost customers and it would be a positive PR boost to a company that desperately needs one. 

Will Netflix do this?  Sadly, no.  They have stated publicly that they won’t recover the customers they lost.  Instead, they are rolling out announcements regarding new content agreements to justify their price hike.  This just increases the customer disconnect and will make them only too happy to jump on a number of very promising competing services such as Amazon and Apple that have gladly stepped into the breech. 

John Woods said “The purpose of a business is to create a mutually beneficial relationship between itself and those that it serves.  When it does that well, it will be around tomorrow to do it some more.”  Will Netflix be around tomorrow?  It is too early to tell.  However the prognosis is not good. 

By Curtis Bingham

In my mailbox today I found a fantastic personal story from my good friend, Jeff, about how treating a customer complaint as a gift ended up winning back a customer, and saving the company money.  I’ll let Jeff tell the story in his words:

“I drink Coca-Cola each day and I have my favorite Sunoco gas station where I go to get a fountain drink. The Sunoco station was out of the soda I like so I went to the nearby Mobile station, which is the only other nearby source for fountain drinks.   I don't like the soda here because the syrup mixture is way to strong for me.  As I entered, I mentioned to the manager that the mixture of syrup at his store is awfully strong.  He said he would look into it.

This morning he told me that he’d mentioned to the vendor that a customer had brought an issue to his attention and asked them to take a look at it.  I was surprised as in my experience most people forget about the customer issue or blow off the customer and go about their daily business.  The service rep discovered that the syrup mixture was double what it should be! In the back of the room, the machine pumps a specific amount of water & syrup into the tubes connected to the dispenser.   The mixture had been very wrong for quite some time, costing the company double what it should have in syrup consumed. What’s more, the nozzle had to be replaced because it was getting all "gunked up", also costing the vendor in repair and replacement costs.  When asked by the service rep, the manager of the Mobil station said, "the customer 'gets it'.  He knows what the product is supposed to taste like."  

I thought to myself, "how often to we ask our customers what they want or what the product "tastes" like?  Or how often do they listen to a customer’s complaint or recommendation?  How many customers went elsewhere because of this problem? This manager listened and reported back to me on my initial comment.  I felt great that I had been heard.  I felt I had a better relationship with the store manager, and with the store that I had shunned in the past.  I’ll be going back.”

A simple, but powerful lesson:  customer feedback is a gift.  Listening to customers not only helps us better serve them, but can often save us money.  How well are you listening to customers?  How easy do you make it for customers to contact you to voice their concerns?  How do you close the loop with customers, letting them know they’ve been heard?  How do you thank them for their feedback?  The next customer complaint you field might just mean a customer saved.

By Curtis Bingham

“Why aren’t families dying to get into my schools?” asked the superintendent of public schools in one Rhode Island school district. According to a recent article in the Providence Journal, enrollment in public schools has dropped by 26.4% over the last decade, a precipitous drop.  This gap equates to a $3M funding cut this year.  The biggest cause?  An exodus from public schools to charter schools.  Charter schools are free from some of the bureaucracy of traditional public schools and by involving parents in the education of their children are better serving their customers. Parents are voting with their feet.

The public school system is a classic example of an organization in need of a chief customer officer (CCO). While the stated goal of providing children with a solid education is certainly appealing, the practical reality is that the organization is fundamentally flawed: the school systems are not interested in their real customers-the children and their parents.  If you examine every initiative proposed by teacher’s unions, they are all about the teachers, and never about the customers.  Unions, with rare exception, never work concordantly with the education administration and with the customer.  Instead, they are constantly fighting for shorter hours, fewer extracurricular activities, increased pay and benefits. Picture an organization like this where you have miserably unhappy employees.  How can you possibly have happy customers? The kids always suffer.  

Just like the superintendent passionately defended her schools and teachers, companies can claim they are customer-centric in every board meeting, press release, or marketing campaign. But what happens on the outside is merely a reflection of what is going on inside.  Miserable employees and happy customers simply cannot coexist! Unless you have a monopoly in a market or on a product, if customers are dissatisfied you run the risk of losing your customers to the business equivalent of charter schools: more nimble competition that is gleefully stealing away your customers. 

Task someone with championing the customer cause, maintaining your customer focus and managing the well-being and progress of customers. Learn why customers are defecting, and what it takes to get them to buy or pay more. Or better yet, hire a CCO so this important job doesn’t get lost in the whirlwind of an overburdened day job.  Whatever you do, don’t let your business fall prey to charter schools.

By Curtis Bingham

A number of years ago I was creating customer strategy for a credit card processing company and as a result of some intensive customer analytics, I found a rather large customer segment that would gladly by two, three, even five times their current rates because they valued the company’s product and service so highly. I recommended they charge one- to two times more to compensate for the extra value received, which translated into $20MM annual incremental revenue. 

However, the CEO focused on one other finding from my research: the selection of merchant services vendors was a once-and-done decision. Companies would select, conduct competitive analyses, perform due diligence, and choose a provider and having done so would almost never again review the rates, fees, or other statement items. The CEO decided to raise all fees AND charge an annual “Membership Fee” of $70. 

There are three things wrong with this. First is that it is just plain wrong and unethical. Second, it penalizes everyone rather than capturing the value in play. Everyone is forced to carry an additional burden rather than just those who truly value the service. Third and worst of all, this decision emphasizes short-term revenue at the expense of long-term customer relationships. 

As we all learned as children growing up, the foundation of a lie is that it works only as long as you don’t get caught. If your strategy is dependent on not getting caught, Murphy’s Law will inevitably prevail. If your customers don’t notice, your competitors will point it out with great glee! Consequences have a nasty tendency to catch up with us when we can least afford them.

There is a huge amount of research and tremendous anecdotal evidence proving that loyal customers generate anywhere from 5%-33% greater revenue than non-loyal customers. Trust is the foundation for this loyalty. If you destroy trust, customers feel they’ve been abused and taken advantage of. In the end, you sacrifice loyalty, revenue, and customers—it is just that simple.

The question for you is, “What are you doing to customers that you’re hoping nobody notices?” Just because you can do something to your customers, doesn’t mean you should.

By Curtis Bingham

I have a couple of printers in my office made by HP, who is probably the market leader in this category.  I see them everywhere, and have generally been pleased with their performance and ease of operation.

But that mindset has come to a crashing halt based solely on a service experience I had recently with a CSR from HP technical support, which dates back to a printer problem I’ve been incubating for more than a year.  I called HP technical support to inquire about the status of this complaint. I’ve spent nearly 15 hours with HP tech support and on my own trying to find a workaround so that printouts from my Mac look the same as from my PC.

After summarizing the issue, Jason, the HP CSR I spoke with, told me, “We don’t have to make printers work on the Mac. All we have to do under warranty is make sure that they print on the PC.”

I replied that I’m only trying to get the device to print to the advertised specs.

“You’re comparing apples to oranges,” Jason replied.  “What works on a PC may not work on a Mac. We’re not responsible for all the different settings and configurations.”

I said I’m simply trying to get it to print to specifications – this isn’t an issue of arcane configurations.

“Well, you’re limiting yourself by using a Mac,” Jason said.  I asked, “Are you telling me that you don’t support Mac? “Full bleed printing works just fine on my Canon printer from the Mac.”

“You can’t expect us to copy Canon drivers,” said Jason. “We don’t do that.”

“I’m not expecting you to copy Canon drivers,” I countered.  “I’m only expecting you to support the advertised specifications for your printer.”

I asked for a supervisor, and was denied. I asked for his employee ID number and was denied. I asked for his last name and was denied. I threatened to escalate to HP’s EVP of worldwide service, with whom I’ve had previous discussions and he said, “You just go ahead and do that.”

Sadly, these are the types of exchanges that take place every day, throughout the world. I ended the call right there in a tight-lipped but courteous way. As I hung up the phone, all I could think of was that this entire episode would not have happened if HP had a Chief Customer Officer! 

How can I be so sure?  From my experience working with CCOs – and no one has spent more time with these individuals than I have – training CSRs to be sympathetic, responsive and respectful to customers in all customer interactions is one of the first things they tackle.  Believe me, if a CCO was on the job at HP I would have had a far more positive experience with this agent.  I still may have a problem with printer from my Mac, but at least I would have known that the CSR did everything he could to soften the blow.

CCO Council research has shown that less than 10 percent of Fortune 500 companies have CCOs, which means of course that most CCOs work for small- to mid-sized businesses (SMBs).  While you would expect just the opposite to be true – that the largest companies with the most customers would be at the leading edge of CCO adoption -- there are reasons to explain this dichotomy.  I will explore this phenomenon in a future blog post.

For now, though, I’m going to leave my HP story right here.  I still have a problem printer from my Mac on the HP device. No one from HP has called or emailed since my chat with Jason, but I haven’t called the EVP I know. 

So here’s a challenge for HP: do you have anyone monitoring social media content like blogs to pick up on negative sentiments on your company such as this post?  If I do hear from HP based on this entry, then I’ll reassess my opinion of the value of social media.

In any event, someone from HP should attend my keynote interview at the Next Generation Customer Experience Conference May 23-25 in Los Angeles entitled “The Case for Creating the Chief Customer Officer Role.”  It’s not too far from HP’s headquarters in Palo Alto.

For everyone else, please let me have your thoughts on this blog, and feel free to share your own customer experience examples, good or bad, with the largest organizations.  HP can’t be alone among corporate titans who could use a CCO to improve overall customer relations.  

By Curtis Bingham

FOR IMMEDIATE RELEASE

Oracle’s Jeb Dasteel Awarded
2009 Chief Customer Officer of the Year Award

Announcing the formation of the Chief Customer Officer Council

LITTLETON, MASS., July 8, 2009 – Customer loyalty is the Holy Grail for many businesses, yet in most organizations, nobody is accountable for loyalty improvement in the executive suite.

“The key to business success, particularly in a down economy, is anticipating customer needs and continuously deepening customer relationships,” according to Jeb Dasteel, Chief Customer Officer (CCO) of Oracle, who was named the 2009 Chief Customer Officer of the Year last month at the first ever Chief Customer Officer Summit.

“Through a string of 55 acquisitions, Oracle has achieved nearly 100% customer retention,” Dasteel said. “We’ve gotten really good at listening to customers, prioritizing feedback, and driving customer strategy at all levels. The award is a great honor and a testament to Oracle’s executive leadership that has provided such visible support for the customer focus we’ve tried to achieve.”

Dasteel has been with Oracle for 11 years, five of which have been spent running Oracle’s Global Customer Programs and as CCO for the last year.

“Several years ago it became clear to us that the Chief Customer Officer role was a missing piece of Oracle’s strategy. Our CCO has become a key part of the Oracle transformation. The pay-off has been tremendous as we become more of a trusted partner to our customers,” said Charles Phillips, President of Oracle.

“Jeb Dasteel has made exceptional strides in improving customer relationships, driving profitable customer behavior, and in creating customer-centric cultures,” noted Curtis N. Bingham, founder of the Chief Customer Officer Council that awarded Dasteel. “Unless you’re Disney where the customer is injected into the cultural DNA, you need someone to champion the customer cause. Otherwise, opportunities are squandered, customers leave, and innovation is squelched.”

Most companies have neither the process nor the executive-level accountability to devise and execute customer strategy in order to increase loyalty and attendant profits. “In fact, less than 25 of the Fortune 1000 companies have a Chief Customer Officer,” said Bingham. “CCOs are the ultimate authority on customers and drive customer and corporate strategy at the highest levels of the company.” The three greatest responsibilities of a CCO are: 1.) Creating customer strategy based on in-depth customer insight, 2.) Driving profitable customer behavior, and 3.) Creating a customer-centric culture. CCOs are typically hired to resolve chronic customer crises, protect revenue derived from an organization’s current customer base, and establish competitive advantage.

Announcing the CCO Council

In June 2009, the 16 CCOs gathered at the Chief Customer Officer Summit agreed:

• Increased transparency in product roadmaps, service agreements, and pricing is driving increased loyalty and stronger customer retention as well as acquisition
• Improved customer intimacy, particularly during down economic times, is an extremely potent competitive barrier
• In the current economy, CCOs are finding they must enable customer-facing functions to have different value discussions with customers and prospects. Decisions are being made at a higher level, requiring additional executive-level insight. Customers are trading downwards, requiring stronger value propositions than before.
• The Customer Experience is made up of multiple touchpoints, and the greatest ROI can be obtained by identifying those touchpoints with the greatest emotional attachment for customers and resolving issues there first.

The CCOs all saw huge value in collaborating with their peers via the newly formed Chief Customer Officer Council to improve customer relationships and advance their careers. Bingham founded the Chief Customer Officer Council based on the needs of more than 50 Chief Customer Officers with whom he has worked since starting in the field in 2003. Curtis is the author of the forthcoming book entitled The Key to Customer Strategy: The Rise of the Chief Customer Officer to be published by HRD Press in late 2009.

The CCO Council is dedicated to elevating the role of the CCO in establishing business strategy, helping its members grow professionally, and most importantly, helping drive solid, customer-focused results in member organizations. Each year the Council recognizes with an award the CCO that has made the greatest strides on improving customer relationships, driving profitable customer behavior, and in creating customer-centric cultures. As well, the Council recognizes the CCO that has had the greatest impact on his or her peers in helping others achieve similar results.

Curtis N. Bingham is President of Predictive Consulting Group, a firm that helps companies increase customer acquisition, retention, and customer profitability through customer strategy. He is also the founder of the Chief Customer Officer Council.

Contact:Curtis N. Bingham
(978) 952-0047
Predictive Consulting Group, Inc
Founder, Chief Customer Officer Council
curtis@ccocouncil.org