Be Warned: High Customer Satisfaction Scores May Actually Spell “Danger” for Your Organization.

Organizations of all types and sizes rely on Customer Satisfaction Surveys to better understand their relationships, with most finding a comfortably high percentage of satisfied customers. Yet time and again, 60 to 80% of lost customers surveyed have claimed to be “satisfied” or “very satisfied,” just prior to defecting. Why? Because satisfied customers aren’t necessarily loyal customers.

Using satisfaction surveys as a tool, many organizations learn how “satisfied” their customers are with the relationship, only to find that these measures don’t translate into retention, profit or referral business.

The answer is simple. Satisfied customers aren’t necessarily those loyal customers who positively affect retention rates, profitability and top-line growth. This means that customers who have high satisfaction but low loyalty can be both expensive to acquire and quick to depart.

Customer Satisfaction Surveys: Answering a Question that Won’t Help Solve Your Problems

The fact is, satisfaction is the first step on a journey — the journey described in the Customer Relationship Lifecycle unique to your business. Satisfaction (hopefully) follows purchase or trial, followed in turn by loyalty and then advocacy. Measuring customer satisfaction (or loyalty) alone tells you only where you stand on a single metric in the continuum of your relationship.

And while knowing these metrics is good, what’s critical is understanding which dials to turn to improve them. In other words, how do you drive satisfaction for existing customers? How do you drive customer loyalty among those who are satisfied? And how do you drive loyal customers to advocate for your brand?

Whatever process you utilize — MCorp’s Loyalty Mapping®, of course, being one we consider fondly — we’ve found it critical to implement a customer listening program (VOC — “Voice of the Customer”) that both charts where you stand, as well as what it takes to drive customers through your lifecycle towards advocacy.

What you’ll get is an understanding of customer loyalty through metrics including NPS, satisfaction, loyalty and willingness to recommend. But it’s the ability to quantify what drives these metrics that will help you to justify and prioritize delivery on the specific activities that drive increased retention, greater share-of-wallet, and other customer behaviors that solidify the relationship between customer loyalty and financial outcomes.

Brand Promise. Sounds good, doesn’t it? But what does it really mean to make and support these statements, and what is the cost of less-than-perfect delivery? In truth, achieving the outcomes that delivering on this can accomplish requires near-flawless execution in making, delivering, keeping, and reinforcing the brand promise.

While appropriately positioning the organization and the development of a branding and messaging platform are critical first steps, there must also be steadfast, across-the-board organizational commitment to developing and implementing the structure, systems, and staffing needed to effectively deliver on the promise.

Our experience shows us that the benefits of making and keeping a brand promise are well worth it. Here’s a quick primer on our point-of-view:

Defining (and Making) the Promise. Your promise needs to be relevant, compelling, believable and achievable – and supported by the values that drive your organization – to make a deep connection with your target audiences. To define it, you must understand your organization, your customers and your competition.

Delivering the Promise. The responsibility for delivering the promise message falls primarily on the sales and marketing team, while management and employees in the field deliver on the elements of the promise on a daily basis.

Keeping the Promise. Your success hinges on the competency and commitment of line staff, IT, call center, outsourced vendors, etc. to deliver on the promise at each Touchpoint. So much of your relationship with customers, and of your ability to keep your promises to them, will depend on the precise coordination and structure of your systems and staff. Leverage the processes, procedures and systems needed to effectively communicate with each other, and your customers will experience the positive results.

Feedback: Have we kept our promise? The only way to know that you are making, delivering, and keeping the right promises is to continually get feedback from your customers. Utilizing Customer Listening Tools – including those in MCorp’s Customer Experience Mapping toolkit – can be qualitative, or it can be a formal, quantitative process for measuring gaps between customer satisfaction, attitudes, and needs. Finally, processes must be in place for easily and systematically collecting, reviewing, and acting upon this feedback.

Those organizations that successfully connect with customers and deliver on a relevant promise reap huge, quantifiable benefits in areas such as retention, loyalty, customer NPV (“Net Present Value”) and LCV (“Lifetime Customer Value”). The flip side for those organizations which promise one thing and deliver an experience that just doesn’t match up is the cynicism, increased churn, and reduced loyalty and satisfaction which can negatively affect relationships with both internal (employees) and external (customers, analysts, partners, etc.) audiences.

Customer Experience: The perfect framework to begin thinking about ways to plan, measure and improve customer interactions with your organization.

Even before the “Four Ps” of marketing (Product, Price, Place and Promotion) expanded in the 1980s to reflect the impending shift to a knowledge-based economy (People, Process and Physical Evidence), there was widespread recognition that how someone feels about an organization is driven in large part by how they’ve been treated.

Customer experience is the sum of all experiences a customer has with an organization, over the duration of their relationship with that organization.

Introduced in the late 1990s, the concept of “customer experience” was the perfect framework to begin thinking about ways to plan, measure and improve these. An organization’s ability to cost-effectively deliver an experience that positively differentiates it from the competition in the eyes of its customers boosts top- and bottom-line revenue through increased customer spending, greater loyalty, and reduced costs for service and acquisition. What’s not to love?

Customer experience: The next competitive battleground.

There’s no argument that understanding customer experience is critical. In fact, 95% of senior business leaders identify customer experience as the next competitive battleground. At the same time, over half state that “Lack of measurement is a significant obstacle to improving Customer Experience.”

ROI on improvements to customer experience can be elusive; oftentimes, the discipline and data required to measure and understand what works is short-cut, and investments are made without a clear understanding of return. One executive perspective is shaped by talk about “soft” metrics such as satisfaction and brand preference; another – the financial view – is rooted in profit and loss, short-term expense and cost containment.

That’s why assessment is so critical. Only by looking at experience through the lens of ROI can organizations reach the consensus needed to drive the top-down initiatives critical for driving customer experience change.

Measuring customer experience

At MCorp Consulting, we call this assessment process Customer Experience Mapping. Essentially, we track aspects of the experiential “journey” your customers take through the Customer Relationship Lifecycle unique to your business, and the touchpoints and interactions encountered along the way.

Experiences are defined at those the places where companies interact with and “touch” customers. Their touchpoints.

Future revenue is affected – either positively or negatively – at every single touchpoint (or interaction) between your organization and your customers.

Assessments are typically done through a variety of research and analytical methodologies, including in-person and phone interviews, surveys, and driver analysis to tie experience to actual and desired behaviors. This level rigor of also means that the process has the potential to be both involved and resource intensive.

So how can you assess and prove ROI before you start? In Part 2 of Proving ROI on Customer Experience we present four “experience investment” lenses to help you plan, measure and improve interactions with your customers, and prove significant ROI – before you invest.  (Continue to Part 2…)

Author: Geoffrey Miller

Summary: Spent: Sex, Evolution, and Consumer Behavior revisits the notion of conspicuous consumerism. What is interesting, however, is Miller’s refreshingly academic exploration of the concept of “fitness flaunting” – signaling your own traits and qualities to attract mates, intimidate rivals, etc.  From the perspective of a professor of evolutionary psychology, Miller argues that what you are displaying to others is less of a conscious consumerist decision, and more of an evolutionary outcome to ensure survival of the human species.

You’ll love this book if: You are already skeptical of marketers.

Marketers are often portrayed as evil geniuses, but in reality, they’re typically floundering around like everybody else. They try to keep up with the latest consumer psychology fads by reading the shortest available pop-business books by eccentric writers with extremely large or small quantities of hair.

You’ll hate this book if: You are looking for the “shortest available pop-business book” for getting consumers to buy your products.

You might also hate this book if you happen to drive a Hummer, which Miller mentions several times, and classifies (along with peacock tails) as “conspicuous waste”:

A highly visible expenditure of resources that brings no material benefit, but that simply signals the expender’s ability and willingness to waste those resources.

Words of Wisdom:

Thus, most BMW ads are not really aimed so much as potential BMW buyers as they are at potential BMW coveters, to induce respect for the tiny minority that can afford the cars. This explains why BMW sometimes advertises in mass-circulation magazines: it is an inefficient way to reach their target market of potential BMW buyers but it is a very efficient way to reach the BMW coveters who might respect the BMW buyers.

Why we think this book is important: Although often tongue-in-cheek (and unable to fully disguise his own opinions and preferences), Miller nonetheless convincingly makes the case for eschewing the narcissist temptations of modern consumerism for more enlightened ways of communicating who we are to our fellow humans.

1. Understand your relationship lifecycle
Understand the stages of your Customer Relationship Lifecycle, by researching audience needs, influencers, and barriers to progression at each stage.

2. Improve the customer experience
Map the touchpoints in each stage to gain an understanding of the experience they deliver from the customer’s perceptive.

3. Optimize your touchpoints
Ensure that touchpoints address specifically identified needs, influencers, and barriers—fix, add or remove them as needed to meet your goals.

4. Focus marketing and service spend
Focus your budget on those customers and touchpoints that are most effective at driving desired results across key brand, marketing, customer experience and business metrics.

5. Measure and improve
Continually measure your success across key metrics analyzing, monitoring, validating, implementing and improving the systems that drive success.

A waiter has taken flak from a table of elderly ladies during a two-hour luncheon. They’ve changed their minds, complained, reshuffled their orders, and made the server’s life miserable. When they finally ask for the check, he delivers it with the question, “Was anything all right?”

While important, few enterprises understand that it’s much more profitable to focus on better serving your best customers (profitable and loyal), while delivering the minimal service level required to serve the rest of your customers, without alienating them.  But how can you tell who’s who?

Let’s pop open your database and take a peek at The Good, The Bad, and The Indifferent. In truth, most businesses have a mix of all three.

• Your good customers are the ones who buy your product time and again. They tell their friends, family and colleagues about you, acting as spokespeople. You love these customers. If you could, you’d clone them.
• Bad customers may buy once, then disappear. They’re often cherry pickers – lured by cheaper rates and bigger incentives, they’re never satisfied. They’re never going to be. They cost more than they’re worth. Let them drift to your competitors, and be thankful.
• Indifferent customers may look like bad customers, but are really just good customersin disguise. It’s not their fault if you don’t know what they need. The trick is striating your data in ways that allow you to identify those segments that are profitable, those that are potentially profitable, and those that will never be profitable; and act accordingly.

Successful companies identify and satisfy their ideal customers, doing everything they can to please and retain them. Simply stated, you should target these customers, developing relationships with them, bringing them closer to loyalty – and advocacy.

Example: A telecom operator in South India, struggling with high customer churn, planned to develop a blanket rewards and relationship program with mobile subscribers – but realized that rewarding all subscribers may not be the answer.

Why? The bottom 28% of their subscribers were actually eating up half the profits generated by the others, in operational and servicing costs. Another 12% did not generate any profits. And 30% were only slightly profitable.

By deciding to focus on this top 30%, the operator saved 70% of his marketing budget, and was able to retain 98% of these high end customers in a market that was witnessing over 50% churn.

Bottom Line: It can actually be more profitable to lose bad customers than to gain new ones! The Bad and the Ugly cost more money to service than they generate.

Retaining the right customers is common sense. And one day, it will be common practice.

Book: Tribes: We Need You To Lead Us

Author: Seth Godin

Summary: Tribes: We Need You to Lead Us explores the idea that humans have always joined tribes, and the Internet now makes tribe assembly easier than ever. The business application here is that by providing opportunities for your customers to engage with your product or service, while giving employees the freedom to accomplish amazing things, you potentially set up a platform for a conversation – even a tribe – to form around your organization.

You’ll love this book if: You are open to encouraging employees and customers to openly and passionately dialogue about your organization – and learning from this experience.

You’ll hate this book if: You are not interested in creating a customer experience worth talking about, and you think it’s OK for your employees to be bored with their jobs.

Words of Wisdom:

The business world has a long history of conservatives tribes, of groups of people who relish the status quo. The big news is that this has changes. People yearn for change, they relish being part of a movement, and they talk about things that are remarkable, not boring.

Why we think this book is important: Engaged employees translate into engaged (and profitable) customers.