Date Published: July 18, 2012 - Last Updated 5 Years, 106 Days, 5 Hours, 16 Minutes ago
Customer Experience (CE) has become the mantra of senior management looking to enhance revenue and margins. Forester reports that 86% of companies have an enhanced CE as a significant corporate goal.1 The CE is also a huge opportunity for call center directors if they create the capability to measure, guide and enhance it. In some cases, call center directors can become the Director of Customer Experience or even Chief Customer Officer (CCO). Therefore, call center directors should shift significant resources away from tactical call quality to collecting and analyzing broader Voice of the Customer information. This reallocation could easily create a ten-fold increase in the department’s impact on the company’s bottom line.
John Goodman at Call Center Demo & Conference 2012:
Pre-Session 7: Occupy the Best Business Case!. A recent study revealed that executives are 2-5 times more successful in getting service issues fixed when the CFO and CMO accept the business case. But most executives have difficulty building a compelling case for investing in great customer service. Securing the attention of upper management – and gaining their buy-in – requires speaking their language and quantifying the impact of their investment. Join John Goodman to uncover the key payoffs of great service for nine different corporate functions. Through case studies, learn how to quantify payoffs such as enhanced margins, reduced legal and regulatory risk, employee turnover, loyalty, word of mouth and social media “connection.” Leave with the tools you need to create a business case that gets results!
What is Customer Experience and Why it is Important to the Call Center?
Customer experience was first introduced as a term in 1998 by Pine and Gilmore in the Harvard Business Review.2 The CE includes all touches the customer encounters with the company. These range from the first awareness through advertising or word of mouth referral to buying, receiving and using the product or service, payment and possible renewal or repurchase.
The basis for the opportunity for the contact center director is the fact that the majority of organizations have not yet fixed responsibility for either the start-to-finish customer experience or the end-to-end Voice of the Customer (VOC) that mirrors the CE. Most companies are made up of functional silos where the customer is passed from sales to product delivery to support to accounts receivable with little cognizance of what expectations have been set or what events have transpired prior to the current set of functional interactions. Also, in many organizations, there are tacit assumptions that proper customer expectations are always set, and, if the product is delivered according to specs, the customer is always deliriously happy. Neither of these assumptions is usually true.
The following framework, based on my upcoming book (written with Brad Cleveland of ICMI), highlights the four phases of the CE.
Ideally, you want to deliver a great CE by doing the job right the first time (DIRFT) and completely meeting properly set customer expectations. In a great experience, even routine transactions, done well, can go beyond satisfaction and efficiently create emotional connection and foster positive word of mouth. The contact center is then the focal point for both customer access to information and service and actual service delivery. Finally, there is a requirement for feedback from the service activity back into improvements to DIRFT and delivery of added value to assure that you are doing the RIGHT JOB right the first time.
The feedback loop is the Voice of the Customer (VOC), which is the most neglected function in most companies. This is your biggest opportunity! This article will briefly outline the revenue, word of mouth, margin and other bottom line impacts of an enhanced CE and then the requirements for an effective VOC that can drive priorities based on those payoffs. The next article will show how to conduct a unified analysis that creates the economic imperative for action. The final article will provide a strategy for getting a seat at the Executive table and then exerting leadership in the management of the CE will be suggested.
Creating An Economic Imperative for Enhancing and Managing the Customer Experience
The top-line payoff of an enhanced CE is enhanced revenue, word of mouth and margins that are attractive to Marketing, Brand and Finance. Further there are cost savings a great CE provides to other departments like Risk, Legal, Warranty and HR. These impacts create 5 to 20 times the bottom line benefit as traditional efficiency enhancement activities. The following is a brief review each factor and how it can be estimated.
There are three ways a better experience impacts the top line:
1. Brand is excited by enhanced loyalty, which means more revenue per customer - Avoiding customer problems increases loyalty by an average of 20% and resolving an existing problem raises loyalty from 30 to 50% vs. if it is left unresolved.3 Also, the revenue payoff of resolution is usually 5-10 times the cost of winning a new customer. Finally, prevention of problems has a dramatically greater impact on the bottom line because it retains the loyalty of all the customers who would never contact the call center but quietly move to another brand.
2. Marketing becomes more successful when Word Of Mouth (WOM) is managed - A negative experience causes two to four times as much negative word of mouth (or "word of mouse"4 on the Web) as a positive experience. Every interaction, whether sales, information seeking or service, has the potential of generating WOM; and if even 20% of interactions are unsatisfactory, the overall stream of word of mouth referrals can be negative. We have found that challenging Chief Marketing Officers (CMO) on whether they get a higher ROI from advertising or from WOM based on a great customer experience is a very effective method of gaining CMO support for investment in the call center.5
3. Finance loves higher margins – Chief Financial Officers (CFOs) are always pressing product managers to increase margins; margin being the difference between cost and selling price. In more than a score of studies, like the survey of over 3,000 retail banking customers portrayed in the figure below, TARP found that sensitivity to price doubles when a problem occurs and then doubles again with multiple occurrences.
4. Risk, Regulatory Affairs and Legal have now understood that most legal and regulatory disasters stem form poorly handled customer problems that then become public – They have become advocates of and "aggressive customer service systems" that surfaces and resolves problems before the customer contacts their lawyer or a regulator. Such strategies can reduce risk expense by as much as 20%.
5. Public Relations has learned the same lesson as risk – investment in a sensitive, proactive service function reduces customer anger and the potential of escalations by as much as 60%.
6. Warranty has now understood that easily 20-30% of customer problems and warranty expense are caused by customer mistakes. A service system that proactively educates customers on avoiding problems can significantly reduce warranty expense. One appliance manufacturer reduced repair "truck rolls" costing over $80 each, by over 25% by spending two more minutes on the phone helping diagnose the problem.
7. Human Resources strongly supports investment in a proactive service system because up to half of all voluntary turnover is due to employees saying, "I'm not getting paid enough to take all this hassle." Proactive service can reduce customer problem and employee frustration. An effective VOC also allows development of more effective response rules for issues, reducing conflict when problems do occur.
Between the top line impacts (revenue, WOM and improved margin) and the reduced levels of problems and costs, every major department will support your contact center becoming an effective manager of the Voice of the Customer and guide of the CE.
What Makes an Effective Voice of the Customer?
In one major durable goods manufacturer, I asked, "Who owns the management of the Customer Experience and the Voice of the Customer?" The answer was that no one had end-to-end responsibility for CE and seven different groups had part of the VOC. This is the situation in at least two thirds of the approximately 100 organizations I’ve reviewed during consulting projects over the last three years.
My diagnosis as to why few organizations have no one managing the overall CE is that 1) a unified VOC is a prerequisite for CE management since if you do not have a unified picture of the customer experience you can’t manage it, and 2) creating such a unified VOC faces numerous operational and political challenges. These challenges include getting all units to collect data in a compatible manner across the silos, deciding who will do the very messy analysis across the disparate data sets and the fact that many units do not want to report outside of their silo except in a very general fashion. The opportunity for the call center lies in the fact that the call center has the unique skills and experience to take the lead and approach both the VOC analysis and the CE enhancement activities in a gradual, pilot test manner.
As noted, to effectively manage the CE, the VOC must provide an end-to-end, unified picture of the CE. This VOC allows the organization to:
- Understand the full customer experience including that of the large majority of customers who never contact the call center
- Set priorities across all the organizational silos and create the economic imperative for action
- Assign ownership of the implementation of the CE improvement projects to the function best qualified to lead the effort, and
- Measure the effectiveness and financial impact of the recommended improvements.
End-to-end means from the first pre-sale interaction to the final billing, assuring that all issues are identified and critical ones addressed. For business-to-business relationships or ongoing services like telecommunications or financial services, the CE has ongoing transactions, account maintenance and relationship management. Often the problems not complained about do the most damage. For instance, in studies at three different copier companies, TARP found that being misled by sales reps did four times as much damage to loyalty than machine breakdowns or repair delays but were seldom articulated as complaints for fear of alienating the sales rep. Therefore, the most damaging problems were exactly the ones not highlighted by the complaint system.
A VOC that provides a unified picture of the CE reduced the impact of gaps, contradictions and biases in any single data source. Many companies define their VOC as solely customer surveys. To eliminate single source bias, an effective VOC should include surveys, customer contacts (both service and sales) and relevant internal metrics describing what the company has done to or for the customer (such as warranty claims, missed appointments, invoice adjustments, late charges and missed shipment dates). Operations data can flag when a delivery will not be on time, before the problem ever occurs. Customer calls, emails and letters provide more actionable data because they are timelier than surveys, and indicate, at the issue level, the customer’s expectations and the problems most seriously affecting customer loyalty. Also, employee input is critical since it can explain the causes of problems and internal fire drills.
When there are multiple data sources reported separately, there are biases and contradictions, often resulting in paralysis. For example, an EVP of a major communications company lamented, "I get seven reports on quality at the end of each month. Three say things are great, three say they are ok and one says we’re having a disaster. Who is telling the truth?" The problem is that, as noted above, when you ask who is in charge of the broadly defined VOC (rather than satisfaction surveys) in most companies the answer is that many functions have a piece of it.
In reviewing scores of Voice of the Customer processes over the last decade using successful identification and impact on customer issues as the metric of success I have found that as many as 70% of VOC processes are ineffective.6, 7
There are eight factors associated with an effective VOC process:
- Unified ownership of the VOC process describing the entire customer experience by a single executive (hopefully this will be YOU!)
- Unified collection and the use of customer data from surveys, contacts, operations and employee input to support analysis and reporting of the end-to-end experience.
- Integration of the above data from multiple channels for a unified picture of the customer experience. This is a challenge since the above data sources have different categorization and varying representativeness of the overall customer experience.
- Timely reporting of customer data tailored to the stakeholder audience.
- Linking the VOC data to revenue and profit implications in order to set priorities and create an economic imperative for action.
- Formal processes for translating customer response into specific actions and targets.
- Enabling the company to track the impact of the action suggested by the VOC at both a process level (has the problem frequency been reduced?) and an outcome level (has customer satisfaction, loyalty and word of mouth improved?).
- Linking the fixing of issues identified by the VOC process to strong executive incentives.
The second factor in this list, unified collection and use of data, is a critical factor because most companies fall back on a few readily available, traditional data sources, surveys and complaints, as discussed below.
Beyond Surveys and Complaints: Including the Full Range of CE Descriptors
Many companies use only the two most readily available sources of VOC information: surveys and complaints (as opposed to customer contacts). There are several difficulties with only using these data sources:Operations exception data such as missed appointments and invoice adjustments – this data can provide hard, comprehensive information on all the small and large problems experienced by customers that the company systems are aware of, either because they had a process failure, such as a missed appointment or they had to correct a problem such as an invoice adjustment, warranty repair or received a product return. Each of these instances signifies an unpleasant customer experience.Quality inspection data – This is audit data from manufacturing quality inspections or process quality inspections. It provides an estimate of how many defective products or services the customer is being given.Call quality monitoring evaluations are usually used for evaluating compliance with scripts. However, while listening to a call, the QA analyst can also gain an understanding of the customer expectations and how they were met or not met by the company overall.Social media and other unstructured data such as the actual text of emails - CSR case notes of customer comments and recorded calls – This data, when either manually reviewed or more practically analyzed using speech analytics software, can often provide insight into causes of customer problems, expectations and the effectiveness of company responses and the extent of damage to loyalty and word of mouth (and word of mouse).Employee input can often be almost real time and can flag customer experiences that are not reported as complaints or contacts, and can provide the employee perspective on the circumstances that caused the problem.
In my next article, I’ll describe how to integrate the data to create the economic imperative. In the last article, I’ll suggest how to use these skills and data to become the Director of Customer Experience or event he Chief Customer Officer.
1. Burns, Megan, The State of Customer Experience, February 17, 2011
2. Pine, B Joseph: Gilmore, James “Welcome to the Experience Economy”, Harvard Business Review, July 1, 1998
3. Data derived from comparison of loyalty of customers with and without problems in the catalog, communications, packaged goods, technology, non-profit and financial services industries. The number of respondents in the 100+ proprietary surveys ranged from 1,000 to 8,000. 4. TARP coined the term “word of mouse” in 1999 in its first study of online support for the Consumer Electronics Association. 5. Goodman, John, “Treat Your Customers as Your Prime Media Rep”, BrandWeek, Sept. 12, 2005, page 16.
6. Goodman, John and Collier, Crystal, “Delivering Great Service By Listening and Adapting”, Quality Progress, March 2007, pages 22-272 Goodman, John and Grimm, Cynthia, “Eight Factors for an Effective Voice of the Customer Process,” Competitive Advantage (a publication of the Service Quality Division of ASQ), Summer 2004, p. 7.
John Goodman is Vice Chairman at TARP Worldwide. www.tarp.com