Changing From The Inside Out

Despite involving key stakeholders in process change based on customer feedback, when it comes to making a decision to invest in customer experience instead of minimising cost, a leap of faith is needed.

Getting buy-in at a management level in an organisation is probably the most challenging aspect of a successful change programme.  Typically, front-line teams will do all in their power to provide the best possible service for a customer.  Yet, when it comes to changing a deeply in-grained management policy that customer feedback has emphasised as a source of detraction, getting agreement can be surprisingly difficult.

Why is this?  It’s at the heart of becoming a customer-centric company.  This means making decisions and changing what doesn’t work, from a customer’s point of view.  Yet there’s substantial evidence that customer-centricity delivers long-term profitability.

Driving ProfitabilityThrough Customer Experience Improvements

Focusing on improving the customer experience will have both revenue enhancing and cost reducing benefits.  Linking customer experience metrics with profitability and customer lifetime value firmly reinforces the business case for change.  It provides a compelling counter-argument to the often cost-based justification for the on-going support of policies that drive customer detraction, leading to churn.

Working an example based on Irish cellular operators[1], the impact of improving the customer experience is dramatic. A 10% (i.e. 4,000 customers[2]) improvement in retention is worth €1.85m[3], assuming a 12-month lifetime.

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[1] Comreg quarterly report – September 2011

[2] Comreg quarterly report – September 2011

[3] Comreg Chairman End of Year Review 2010,

 

Satisfaction does not equal loyalty!

Satisfaction Does Not Equal Loyalty

Are you a satisfied customer?  What satisfies you?  Are you easily swayed towards offers from alternative providers?  Many of us may have changed from on provider to another, despite being ‘satisfied’ with our previous one.

Churn is a fact of life in the communications business, reinforcing the commitmnet to tracking and interpreting satisfaction.  However, customer loyalty is a much more significant measure than satisfaction. Communications is just one industry that has recognised that satisfied customers still leave.  Witness the explosion of loyalty programmes in insurance companies, coffee shops, our own staff restaurant, not to mention airlines, hotels, supermarkets and practically all other sectors.  Indeed, in the words of Fred Reichheld, it’s clear that customer satisfaction doesn’t connect to profitable growth anywhere near as clearly as business would like it to.

“While it may seem intuitive that increasing customer satisfaction will increase retention and therefore profits, the facts are contrary. Between 65% and 85% of customer who defect say they were satisfied or very satisfied with their former supplier. In the auto industry, satisfaction scores average 85% to 95%, while repurchase rates average 40%.” (Frederick F. Reichheld, “Loyalty-Based Management”, Harvard Business Review, March-April, 1993, 71.).

Best practice practitioners are focusing on using the ‘voice of the customer’ to drive loyalty.  NetPromoter Score (NPS) is perhaps the best known example of a ‘voice of the customer’ programme.  These programmes make an emotional (heart), as well as a practical (head), connection between a customer and provider based on the understanding that the company listens to and acts on feedback provided to improve the customer experience.

NPS is based on asking a customer to rate whether they’d recommend you to a friend and seeks an explanation for that rating.   In a key difference to more typical measures of satisfaction, particularly where transactional NPS is being measured, customers are asked for their view following an interaction with the company.  This means that potentially all customers can be surveyed, not just a sample.

 

So, what about the differences between satisfaction and loyalty?  Well, I’m familiar with an ICT business that has traditionally had satisfaction scores around 75%.  That’s pretty encouraging and represents a job well done in many ways.  It also compares well with satisfaction scores for telecommunications providers more generally, where scores in the low-70s are common[i].  However, there is a wide gap between NPS scores for telecoms companies, fixed or mobile, and satisfaction scores.

Satmetrix are experts in NetPromoter and provide NPS services to clients around the world.  They’ve recently published some new benchmarks for Europe.  What’s most notable is that mobile companies average around 3% for NPS and internet service providers, mainly fixed line telecoms companies, score -11% on average!

The key to NPS isn’t the score; it’s the movement in the score.  Connecting NPS to business metrics and using that correlation to measure the impact of change initiatives is key to making NPS relevant to an organisation.  If you’re only measuring NPS to get a score, you’re missing a huge opportunity to change how you operate and really benefit from the loyalty inherent in your customer base.

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[i] http://www.theacsi.org/index.php?option=com_content&task=view&id=205&Itemid=218

Customer-inspired Change

Customer-inspired change: Does this strike you as a lofty ambition?  Is customer loyalty and retention a challenge faced in your business?  I’d like to share some observations on what underpins a sustainable change programme, based on listening to customers.  What could be more important than ensuring that your customers remain with you and would even be prepared to advocate for your brand?  Imagine a sales force that you don’t have to employ and, provided you give them the experience they need, will ‘pay’ you to sell on your behalf?  Brilliant!

It’s not straightforward though.  Marshalling an entire organisation behind a single objective, no matter how common-sense it may appear, takes leadership, commitment, momentum and patience.

So where should you start?  There are three fundamental underpinnings to a change programme; executive commitment, measurement and probably most importantly, people.

Executive Commitment

Senior management commitment to change, based on customer feedback, means far more than backing a funding proposal, or launching an internal communications initiative.  It requires a fundamental shift of mindset.  Delivering sustainable change is unlikely to be achieved in a quarterly reporting period.  It’s a long-term position that must inform ‘the way we do things’ throughout an organisation.  For example, a financially-motivated decision to minimise cost in a particular reporting period may cause a negative customer expierence.  Where retention is the core objective, enabled by customer-centric focus, senior management may accept a short term cost increase countered by a longer term (and more profitable) payback in customer loyalty.  When it comes to implementing change and faced by competing objectives, executive commitment to a customer focused programme will be tested and must prevail for sustainable change to be delivered.

Measurement

A clear and consistent measure of customer loyalty is necessary throughout the business.  This is the ‘rallying call’ for your management teams and provides the focus for change initiatives.  Use a measure that’s easy to communicate, interpret and correlate with other business metrics.  What’s important is that it’s consistent and reliably delivers actionable data upon which to base business decisions.  NPS is very much in vogue at present, but is not the only metric available.  Ultimately, whichever measure is used, it’s likely to provide the same direction, making the actionability of the feedback paramount.

People

Change programmes are fundamentally about leadership and people, as opposed to technology and processes.  Where there’s a will, there’s a way.  So, where there’s a compelling vision, communicated by credible leadership, people will buy-in.  The corrollory of this is that management forces through changes without the support of the people in the business who interact with customers.  Both management and staff will share a risk in making changes, but if it’s founded on customer feedback, the motivation is there to deliver a great customer experience.  The key here is to ensure people are bought-in, understand the drivers of change and take ownership of the delivery of the vision.

Next time, I’ll share some observations on implementing change based on feedback, the commitment and structures necessary to deliver improvements and the importance of addressing issues quickly and comprehensively.