2003
Making a customer promise is risky business
By
Suellen O'Neill and Zorana Bull
Living the customer promise at the front line and its importance to brand equity
Australian Customer Focus magazine,
October 2003
Companies must limit relationship damage before they can leverage their brand. Companies rebuilding their brands with service based messages need to recognise that by doing so they make the customer a very public promise.
The grinding reality is that one bad customer experience can be far more damaging than dozens of good customer experiences. One failure to deliver on the basics can negate all the success and effort that staff put into trying to provide exceptional experiences – bad for the customer and demoralising for the team. Why then do so many businesses set the bar at ‘delighting’ their customers? And why do they expect to be able to do this before they have ensured that customers (especially the most valuable ones) receive a minimum acceptable customer experience at the most common ‘touch-points’?
The point of real leverage for these companies rests more heavily on the need to eliminate the activity which is damaging relationships with customers. Once the damaging activity has been identified and dealt with, companies will have a much more solid platform from which they can become more sophisticated and effective in customer segmentation, targeting and servicing.
So how do you limit relationship damage?
Three imperatives will dictate the ability to limit relationship damage and reduce the risk it poses to the business:
1. being very clear about the minimum acceptable level of customer experience – from the customer’s perspective
2. pinning down those activities causing the worst damage by making use of the entire wealth of data that exists in the business
3. stop trying to fix everything and focus on what’s valuable to the business.
“Sixty per cent of customers who have their complaints resolved satisfactorily actually grow their business with us and are three times more likely to refer others to us…so there is real upside for us if we can get it right.”
CEO - Major Australian Bank
1. Being very clear about the minimum acceptable level of customer experience
– from the customer’s perspective
Very often, there is a reality gap between management’s vision of the differentiated customer experience and the capability of the front line to deliver it. Delivery of the customer experience is the responsibility of more individuals than just the front liners. While an inspiring vision is essential, translating this into a realistic, minimum acceptable customer experience requires both pragmatism and simplicity. This demands the vision to be expressed in language that relates to the day-to-day lives of front line staff.
The most powerful and simplest way to deliver your customer promises is to translate them into the actual experience and the words of the customer. What is it that you want your customers to experience, think and feel - when they speak to your sales and service people? Enter your stores? Log into your web-site? Receive a bill or some mail from you? The translation of customer promises needs to be carried out at all of the major ‘touch-points’ for all distribution channels.
Defining the minimum acceptable level of customer experience for each ‘touch point’ requires traditional measures, such as customer satisfaction, to be complemented with outcome-based measures. This more complete view highlights the success of the experience from both the customer and organisation’s perspective. This may not be easy to measure and may require a company to validate what management believe to be ‘the minimum acceptable’ with front line staff and with customers themselves.
By building up from this minimum level of customer experience, and making sure each description is bedded in the reality of the customer perspective, two common problems will be avoided:
2. Pinning down those activities causing the worst damage by making use of the entire wealth of data that exists in the business
Once the minimum acceptable levels of customer experience are understood, it is then possible to identify what data is required to target the activities damaging the customer relationship. These will often be directly contributing to customer churn or reduced sales force effectiveness. This data may not be readily identifiable.
Based on PA’s extensive work in this field we consistently find that organisations have the majority of the information already within their business. However the data is not being fully utilised to determine the key drivers of relationship damage, the impact of different ‘touch-points’ or channels, nor to determine what the root causes of churn really are. Although much of the data is available (or could be made so) organisations frequently discover that the information is not being converted to management information that can be acted upon. This casts a shadow over the value derived from traditional CRM systems that many organisations have invested heavily in.
However, it is well worth the trouble to tap into the existing data. Once a company has this data for the key points of interaction with customers, priorities to limit relationship damage become much clearer and the rationale for change is much easier to establish. By targeting the worst problems in this structured way, companies can:
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avoid falling into the trap of trying to ‘boil the ocean’ of problems
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get real, sustainable fixes built into the organisation and its processes
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prove to staff that ‘real’ problems which cause them daily difficulties are being tackled
3. Stop trying to fix everything and focus on what’s valuable to the business
The final imperative for businesses is to be very sure that the fixes they put into the organisation to limit the damage at the front line are both value-positive for the business and are targeted at both attracting and retaining customers who will be more valuable to the business in the future. This materialises in two areas:
Firstly, the cost of fixing an identified problem may be greater than the cost of the problem itself. If there is no clear rationale for undertaking the fix, resources may be better spent on another problem area. Typically, companies find themselves with a long list of potential ‘fixes’ as a result of auditing the relationship damage in the business. This list needs to be prioritised in terms of impact on value, taking care to ensure that the value being lost is appropriately quantified. Having a sound business case to justify the leap into execution of fixes is key to being able to extract improved returns from an improved customer experience.
Secondly, it is equally important to target fixes at customers who are profitable and likely to continue being so – and those who are likely to become profitable in the near future. Not all customers should be retained. Customers with high credit risk, fraudulent or inactive customers are all routinely ‘let go’. However, of those that remain, some will deliver significantly higher profits than others. It is critical to maximising profitability that a company can focus its damage limitation efforts to drive the most profitable customer outcomes.
In practice this means choosing for example not to fix a problem that is predominantly experienced by an unprofitable customer segment. It may also mean that changing a damaging process for a small but highly profitable customer group can have a disproportionately positive return. Some fixes may also be very profitable if they significantly impact the lifetime value of a large customer group, for example through reduced churn.
A company is considerably more likely to deliver on the customer promises it does make, by not over-committing in its vision or marketing, and by letting go of the need to ‘delight’ customers. By auditing the customer experience - from the customer’s point of view – and aiming to deliver a minimum acceptable level in a consistent way, companies will gain immediate competitive advantage.
Once the damaging activity has been identified and dealt with, companies will have a much more solid platform from which they can become more sophisticated and effective at customer segmentation, targeting and servicing.
The reality is that most customer facing staff are hard-working, sensible individuals. As long as companies can clean out the distractions, complex language, mixed messsages and general confusion, they can focus all the attention on what really matters… the customer.
The benefits of limiting relationship damage are immediate
The financial rewards of limiting relationship damage are achieved through delivery of a more consistent, acceptable customer experience across all major customer touch points. In our experience the benefits include:
- reduced churn as the most damaging root causes of dissatisfaction are dealt with by the company
- improved sales effectiveness as the worst service problems at acquisition and early on in the customer relationship are eliminated
- improved focus of resources and management attention on the experience of customers who deliver the most profit to the company
- improved ability to anticipate churn through sharper management focus on customer outcomes versus traditional service metrics
- improved staff morale as the worst causes of damage to customer relationships are progressively tackled by the ‘fix’ projects.
Sueellen O'Neill and Zorana Bull are Managing Consultants in PA's Project Managament practice.
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