David Mitzenmacher
Customer Loyalty and Employee Engagement
Your Customer Survey is Bad, and You Should Feel Bad
Oct 11th
Rob Markey is a loyalty rock star.
Not just because he’s the co-author of The Ultimate Question 2.0, one of my favorite business books of all time.
Not just because he heads up the Customer Strategy Practice at Bain and is one of the most important thinkers in the customer loyalty field.
All of these things are great, but what pushes Rob from pretty cool guy to loyalty rock star is the fact that he maintains a database of real customer surveys used by real companies. You can check it out by visiting http://www.robmarkey.com/survey-files/ (quick and painless registration required).
As you peruse through Rob’s collection of surveys, you will likely come to the same conclusion as I did – most customer surveys are awful.
Even companies that otherwise excel at customer experience have terrible surveys.
Five Guys asks customers for their receipt number, but then asks you for the time of your visit, order total, and 34 pages of other data that they should easily be able derive from information given on the first page.
It takes longer to complete the Starbucks survey than it does to drink a venti caramel macchiato.
Marriott, a company I love, asks over 80 questions, including an absurd matrix that asks you to rate on a scale of 1 to 10 whether the hotel was luxurious, sophisticated, or engaging (amongst a dozen more marketing words that mean nothing to the consumer).
And in the height of “do as I say, not as I do”, Forrester sent a 20 page survey to all attendees of a customer feedback management conference.
Overly long surveys tell your customers that you don’t value their time. This is especially true for surveys that ask questions to which you already know the answer. Don’t ask for my receipt number and then ask me whether or not I ordered breadsticks (looking at you, Pizza Hut).
The good news is that there is hope. And it starts with us, customer loyalty practioners.
We need to stress out about the length of our customer feedback surveys. It needs to keep us up at night. We should take it as a sign of professional failure if it takes longer to take our survey than it does to purchase, assemble, and use our products. Any time we are even considering adding another question to our survey, we should ask ourselves the following questions:
- Do we really need to ask this?
- Will we do anything with this information, or are we asking just to ask?
- Can we answer this question ourselves with data we already have?
- What can we remove to make room for this question?
- OK, seriously – do we really need to ask this?
And it’s not enough to simply prevent new questions from being added. We need to critically evaluate existing questions to determine if they are truly needed.
I once read that you should turn all of your clothes hangers backwards, turning them the correct way when you’ve worn the garment at least once. At the end of a year, any item of clothing that is still on a backwards hanger should be donated to a worthy cause because you’ve demonstrated that you don’t wear it.
Likewise, you should turn a critical eye towards every question on your survey at least once a year (if not quarterly) and ask your team a simple question: “When was the last time someone used the data that this question collects?”. If no one can offer up a concrete instance in the past 12 months, you should seriously consider removing the question from your survey.
Customer surveys don’t have to suck. Companies like Rackspace, Logitech, Intuit and Domino’s all manage to collect meaningful, actionable customer feedback without torturing their customers with page after page of needless questions.
If you remain diligent about what you are asking and why, your reward will be increased response rate, more actionable data, and clearer line-of-site for employees.
And then you’ll be a loyalty rock star too.
Can’t we just pretend?
Oct 5th
Note: This is a guest post from Alison Davidge
In periods of economic downturn and recession, the knee-jerk reaction of many companies is to cut costs. And if the organisation has not yet fully understood or realised the benefits of a mature customer experience programme, this is often an area that comes under scrutiny for cost saving reductions. The same is true of marketing; indeed, of any area where senior managers have an inaccurate perception of how these disciplines truly impact the generation of opportunities, sales and improved growth ratios.
Speaking to a contact recently about changes in their organisation, they asked me if it were possible to cut back on their customer programme but maintain the perception that they still gave this optimal focus. “Can’t we just pretend that we are being customer focused?”
The answer is simple and, to me, obvious. NO, you can’t “just pretend”.
First of all, have a little respect for your customers! Customers are not stupid or easily fooled. They are at the sharp end of the relationship and can quickly tell if you are serious about them or not.
Secondly, you either have a commitment to customer centricity or you don’t. Be honest about it. Companies like the cheap airlines don’t pretend – but they are successful because they are clear about what they offer, and it isn’t a world-class customer experience. That approach is acceptable to customers, as long as you don’t lie about it.
Finally, half-hearted programmes without leadership, employee engagement, customer interaction or taking action have one thing in common. They fail. YOU fail. And the company fails to reap the rewards of increased, more profitable growth.
So where does this idea of “pretending” come from? Why do they think that a structured strategy and programme are not required? I believe that this is often the attitude of those who have spent their careers in one company – grown from small beginnings. As the company expands, they forget that the personal touch they were able to add to each customer relationship is no longer possible when your client base is 1,000+. Which is why you need a structured customer experience programme, to help manage those relationships. I don’t believe that people are ignorant of the benefits of improving customers’ experience. People in business are not that half-witted…are they?!
Pretending, obfuscating, fabrication and downright lying about your commitment to your customers will only end in customers believing in you less than ever and damaging your brand. You can’t go back. Does anyone remember Ratners, other than for the fact that their CEO finally pronounced their products as “crap”? The net effect of this was to make customers feel deceived; the company collapsed.
Don’t try to lie to your customers about being customer-centric. They are the first to know if you are being dishonest. And have some personal integrity about what you do and how you act.
“To believe in something, and not to live it, is dishonest.” – Mahatma Gandhi
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Note from David: If you don’t already know Alison Davidge, you should. She’s one of the best and brightest working in the customer experience field today.
Alison is the Global Programme Director for Customer Loyalty at Temenos. Prior to that, she was Senior Manager of Net Promoter Programs at Satmetrix. Follow her on Twitter @Allie_Davidge for insights about loyalty, the net promoter system and customer experience.
Guest Post: The Customer Loyalty Pigeon Race
Feb 14th
Note: The following guest post is courtesy of Paul Long.
Pigeon: Press on the bar, get some food.
Human: Buy or service your car at a dealership with a rewards program, earn some points.
One of the most influential behavioral psychologists of all time, B.F. Skinner, discovered in his groundbreaking radical behaviorism experiments that the frequency with which the pigeon pressed the bar depended not on any preceding stimulus (as Pavlov had insisted), but on what followed the bar presses.
This was new indeed. Unlike the reflexes that Pavlov had studied, this kind of behavior was controlled by conditioning.
A behavior followed by a reinforcing stimulus results in an increased probability of that behavior occurring in the future.
So the pigeons in Skinner’s trials pulled the lever and got a reward, and they did it over and over. That’s just like the shopper who gets reward points; they come back again and again. Stop the reward, the attraction goes away.
More recent studies show that price cuts alone don’t breed loyalty, but that rewards programs can and do. They also provide something almost as valuable as a steady, increased income stream.
Rewards programs provide information. For a customer enrolled in a rewards programs they have to keep their contact info current so they can continue to receive rewards. And organizations can also track which customers are buying what services, and reward their best customers even more.
Invaluable, huh?!
Don’t take my word for it – or even B.F. Skinner’s – that your customers make buying decisions based on loyalty rewards programs. Check out this video that recently aired on the CBS television network.
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Paul Long is a loyalty marketing guru who applies his expertise in loyalty and rewards programs to help companies distinguish themselves from the competition. Read Paul’s blog and follow him on Twitter for practical advice on how to create customers for life.
Performing Driver Analysis in Microsoft Excel
Feb 10th
Many Net Promoter programs start as small pilot programs without large investments in systems and infrastructure. This can put Net Promoter novices into a catch-22 situation – they can’t obtain the budget for more robust tools until they demonstrate results, but it is easier to demonstrate results with more robust tools.
The good news is that many of the most important analytical exercises needed for a successful Net Promoter pilot can be performed using software that you probably already own – Microsoft Excel.
What is Driver Analysis?
Driver Analysis is a powerful tool that can help you understand the factors that influence loyalty. Driver Analysis attempts to identify the attributes that are most correlated with loyalty (as measured by NPS), and illustrates areas where you are under (or over) delivering. This information can then be used to prioritize the investment of capital, time, and resources into areas that will yield the highest return in customer loyalty.
Example Scenario
In the scenario below, I will take you through a quick exercise in which we will create a Driver Analysis table for a fictional business.
You are the Vice President of Customer Experience for Acme Pizza Company. You ran a pilot Net Promoter survey that asked customers four questions: (1) Likelihood to Recommend [aka "the Net Promoter question"], (2) Satisfaction with Speed of Delivery, (3) Satisfaction with Quality of Pizza, and (4) Satisfaction with Customer Service. Each question had a response scale that ranged from 0 to 10. As a result of the survey, you see that Acme Pizza’s Net Promoter Score is 10%.
You have a limited budget to spend, and want to know which of the three areas (Speed, Quality, or Service) you should focus on improving. You have an excel spreadsheet with your survey responses that looks like this:
Step One: Calculating Satisfaction
To create a Driver Analysis table, you first need to calculate the average satisfaction for each attribute. This is relatively straightforward – for example, to calculate the average satisfaction for Speed (found in Column C), you would use the following formula:
=AVERAGE(C:C)
Once you repeated this step for all three attributes, the end result would look like this:
Step Two: Calculating Correlation
Unfortunately, many people stop at the previous step. Looking at the information generated, they would make the decision to direct their efforts towards improving the quality of the pizza – after all, that is the attribute for which customers are expressing the greatest amount of dissatisfaction.
In order to make a more informed decision, it’s not enough to know how satisfied our customers are with each attribute – we need to understand how strongly each attribute is correlated with loyalty. This is done by calculating the correlation between the Net Promoter question (likelihood to recommend), and each individual attribute.
Calculating correlation in Microsoft Excel is much easier than you might expect. The formula is simply:
=CORREL(array1,array2)
To create our Driver Analysis table, we’d first calculate the correlation between NPS (Column B) and Speed (Column C) like so:
=CORREL(B:B,C:C)
We would then repeat this step with the other two attributes – Quality (Column D) and Service (Column E) – using the following formulae:
=CORREL(B:B,D:D)
=CORREL(B:B,E:E)
Our finished product would look like this:
The result of this formula is called the correlation coefficient (or r value for short) with can range from -1.0 to +1.0. This rating can be interpreted using the following guide:
- An r value close to 1 indicates that there is a strong relationship between the two variables
- An r value close to 0 indicates that there is a weak relationship between the two variables
- A positive r value means that as one variable increases in value, the other variable will increase in value. Likewise, as one variable decreases in value, the other variable decreases in value.
- A negative r value means that as one variable increases in value, the other variable will decrease in value.
Step Three: Analyze the Data
We now have a table that tells us how satisfied our customers are with our speed, quality, and service, and how strongly each of those attributes are correlated with overall NPS. Looking at our Driver Analysis for Acme Pizza, we can make the following observations:
- Customers are very satisfied with our speed of delivery, which has very little correlation with loyalty
- Customers are dissatisfied with the quality of our food, which has very little correlation with loyalty
- Customers are mildly satisfied with our customer service, which is highly correlated with loyalty
Using Excel’s built-in graphing functionality, we might choose to display this information visually like so:
Now that we have completed the analysis, we are able to see that we should focus on improving Acme Pizza’s customer service. Of the three attributes, customer service represents the best opportunity for positively impacting Acme Pizza’s customer loyalty.
Driver Analysis is a powerful tool that can help ensure that you are focusing your time and energy on the items that will have the biggest impact on customer loyalty. By performing Driver Analysis using Microsoft Excel, you can now generate actionable data without making large investments into additional systems and tools.
7,960 Footsteps: A Measure of Loyalty
Feb 8th
Customer experience professionals look at loyalty using a broad assortment of metrics. We measure Net Promoter Score, Retention Rate, WOM Mentions, Share of Wallet, Customer Lifetime Value, and countless other indicators that help us to better understand the level of loyalty our customers have towards our companies.
But what about counting footsteps?
I recently attended a training event held in San Francisco, California. The training was held at a Westin Hotel – not a bad hotel by any stretch of the imagination, but it wasn’t a Marriott. (I’ve previously written about the fact that I am a rabid promoter of the Marriott brand of hotels).
Rather than staying at the hotel where the event was held, I instead opted to stay at a Marriott located several blocks away, walking to and from the Westin multiple times each day. This decision cost me about 7,960 additional footsteps over the course of my trip.
As I walked to the event one morning, fighting my way through a sea of tourists as the clouds started to let down a light rain, it occurred to me that this was loyalty economics at their best – that I, as a Promoter of Marriott, had chosen to give them my business even when presented with an alternative that was significantly more convenient.
The business case for customer loyalty is simple: loyal customers will spend more money, buy additional products, refer more business, and share better feedback. When you go the extra step for your best customers, they’ll go the extra 7,960 steps for you.
Net Promoter: The Right Tool for the Job
Jan 26th
This past weekend I was lucky enough to have a few spare moments to spend in my garage workshop. I spend most of my time during the week working on strategic initiatives, so it’s a nice change of pace to run a hand plane across a piece of wood and see immediate, tangible results.
As I surveyed all of the saws, chisels, planes, and other assorted tools in my workshop, I started thinking about the reason for owning all of these tools – and the lessons that can be applied to the field of Customer Experience
Selecting the Right Tool for the Job
One of the most important (and most frequently overlooked) rules in woodworking is to always use the right tool for the job. The more cynical amongst us might suspect that this maxim was created by tool manufacturers to sell more products – but experience tells me that using the wrong tool can be dangerous to the user, inefficient, and damaging to both the tool and the work piece. This holds true even when comparing a superior tool to an inferior tool.
Consider, for example, the chisel. Considered by many to be the most important tool in woodworking, a well sharpened chisel is a thing of beauty. I recently had the good fortune of borrowing a friend’s Lie-Nielsen Skew Chisel – a remarkable piece of craftsmanship that retails for about $130. This tool is well balanced, maintains a sharp cutting edge, and stays true against the work piece.
But this $130 chisel is inferior to a $1 pry bar from the dollar store – if the job is prying something loose. While the expensive chisel might objectively be a better tool, it is useless when used for the wrong job.
What Does a Chisel have to do with Net Promoter?
Critics of Net Promoter often argue that NPS is inferior to other, more thorough methodologies. They argue that Net Promoter is fundamentally flawed, illogical, and not statistically valid.
This raises the question – If NPS is so deeply flawed, why then have CEOs at companies such as General Electric, Charles Schwab, Intuit, Zappos, Cisco and American Express adopted its use? Some critics claim that it is because CEOs simply aren’t smart enough to understand the complicated business of customer loyalty.
I don’t buy that. I cut my Net Promoter teeth at Rackspace Hosting, where Net Promoter is championed by CEO Lanham Napier. Now, a little bit about Lanham’s background – he studied Economics at Rice and earned an MBA from Harvard Business School. He started his career at Merrill Lynch, and was later hired on at Rackspace as their Chief Financial Officer. He earned the top job based on his remarkable performance as CFO and has since led the company to achieve over a billion dollars in annual revenue on an industry-leading churn rate of just 1.9%.
I share Lanham’s background to illustrate my point – does this sound like someone who is too stupid to comprehend customer loyalty? That’s what some market research vendors and career academics would have you believe, but I’m not buying it.
The more likely explanation is that Lanham, having evaluated the work that needed to be accomplished, selected Net Promoter (flaws and all) because it was the best tool for the job at hand.
The Job of Cultural Transformation Requires a Tool like Net Promoter
CEOs, Customer Experience Leaders, and other operating managers who want to increase customer loyalty understand that customer experience is the result of the actions of every single employee in the company – especially the front lines where most customer interaction takes place.
Inspiring customer-centric thinking amongst employees won’t come from thick binders produced by market research vendors, nor will it come from peer reviewed academic journals. A company cannot become truly committed to customer loyalty without capturing the hearts and minds of the culture.
In order for a company to truly become customer-centric, every employee must find customer loyalty relevant to the work they perform every day. They need a common vocabulary for discussing loyalty, a shared set of tools for increasing loyalty, a standardized dashboard for tracking loyalty, and a clear line of sight to how they can improve loyalty.
This requires making tradeoffs – leaders like Lanham understand that it is acceptable to forego the higher level of statistical accuracy that more complicated methodologies may offer in order to gain better buy-in and ownership from their employees. These leaders understand the trade-offs of taking loyalty out of the hands of the market research department – who might produce objectively “better” data – to ensure that loyalty lives in the operating system of the business.
Very few (outside of the publicist at Reichheld’s publisher) truly believe that Net Promoter is the “ultimate” business system – that is to say, the right tool for every job. But for the crucially important job of interweaving customer loyalty into the DNA of an organization, you’d be hard pressed to find a tool that is more sharp, balanced, and true than Net Promoter.
The Net Promoter System on a Napkin
Jan 25th
Therefore, since brevity is the soul of wit,
And tediousness the limbs and outward flourishes,
I will be brief- William Shakespeare, Hamlet
If brevity is the soul of wit, then simplicity is the soul of inspiring others. It has been my experience that creating a customer-centric revolution within an organization requires the ability to convey your vision as simply as possible. To that end, I thought it would be a fun exercise to attempt to explain the Net Promoter System on a single napkin.
Net Promoter on a Napkin
The end result of this exercise is posted above. Obviously, this illustration is overly simplistic, leaves out some key concepts, and is limited by my poor artistic ability. With all of those caveats, I still found this to be an incredibly worthwhile exercise. The next time you have a complex idea that you must communicate to a broad group, try drawing it out on a napkin first. The limited space will force you to ruthlessly edit out the fluff to let the essence of your idea shine through.
Net Promoter: Are You Playing Not to Lose?
Jan 16th
Playing Not to Lose is a pejorative used in sports to describe a coach, athlete or team who is so paralyzed by the fear of losing that they stop trying to win. All of their attention is focused on avoiding mistakes, causing them to miss opportunities to put points on the board towards a victory.
In my opinion, many companies are also guilty of Playing Not to Lose – by focusing their Net Promoter program exclusively on minimizing Detractors.
Don’t get me wrong – reducing Detractors is vitally important work. After all, having fewer Detractors than Promoters is at the heart of the Net Promoter Score metric.
But if the end goal of your Net Promoter program is simply to avoid Detractors, you don’t have a loyalty program – you have a complaint department. To take full advantage of the Net Promoter growth engine, you must focus on amassing an army of Promoters and then – here’s the important part – energize those Promoters towards taking actions that benefit both themselves and your company.
The following list, while far from exhaustive, contains four ways you can transform your Net Promoter program by playing to win.
Include Promoters in your Close-the-Loop Process
“Closing the Loop” refers to the two-step process of sharing a customer’s feedback with the employee(s) responsible for the experience, and talking directly to the customer to take appropriate action on the feedback provided.
Many companies using the Net Promoter system have a Closed Loop process in place for responding to feedback from Detractors – a vitally important activity. But few companies regularly and systematically close the loop with their Promoters.
Closing the loop with Promoters gives you the opportunity to thank them for their loyalty. No one likes to feel taken for granted, not even your raving fans. Let your Promoters know that you appreciate their feedback and their business. Ask questions to find out what you could be doing to make them even more loyal. Build rapport with your most important customers – your Promoters.
Extending your Closed Loop to include Promoters also has positive benefits on employee engagement. It allows your employees to hear praise, not just complaints. When employees hear first-hand how they have made a positive impact on a customer’s experience with your company, the end result is a more engaged and loyal staff.
Special Benefits for Promoters
American Express (a company of which I am a Promoter) has an advertising campaign that centers around the slogan “Membership Has Its Privileges”. The campaign is effective because it quickly conveys Amex’s value proposition– get an Amex card, and you too can get exclusive perks not available to the general public.
Likewise, being a Promoter of your company should come with privileges. Promoters are customers who engage in long-term economically positive behavior, and as such, are your most valuable customers. Reward them as such.
There are many ways that you can reward your Promoters – exclusive offers, opportunities to participate in focus groups, or simply a hand-written “Thank You” card are all ways that you can help your Promoters know that you appreciate them.
Spark Referrals
By very definition, your Promoters are customers who are extremely likely to recommend you to a friend or colleague. Yet many companies are often hesitant to ask their Promoters to do exactly that – refer new business.
There is no shame in encouraging Promoters to tell others about your company. Platforms like Extole and Amplifinity give your Promoters the tools to share their passion for your company with their friends and colleagues, and allow you to reward your Promoters for referring business. That’s a win-win situation.
Promoter-focused Analytics
Many companies incorporate text analytics and statistical analysis into their Net Promoter program to unlock the information hidden within their customer feedback.
These tools are often used to identify opportunities for improvement – but they can also be used just as effectively to find ways to increase engagement amongst your Promoters. What type of language do your Promoters use to describe your company? What attributes do your Promoters tell you are Critical to Quality? What do your Promoters value?
By understanding the underlying data, you can prioritize actions to further expand the love that your Promoters already have for your company.
The companies that are truly “winning” at Customer Loyalty – companies like Apple, Zappos, and USAA – aren’t simply trying to minimize Detractors. World-class companies are intentional about amassing and energizing an army of Promoters.
Accounting for Customer Experience
Jan 11th
A recent report by the Temkin Group found that only 17% of respondents believed that the executives at their company regularly prioritize long-term customer loyalty over short-term financial results. (Full report available here)
There are plenty of reasons why companies get stuck in short-term thinking, including competing priorities, pressure from investors to deliver quarterly results, and misaligned compensation plans. But I believe that much of the blame for under-investment in customer loyalty lies squarely on us – Customer Experience leaders – and stems from a lack of Finance and Accounting knowledge within our field.
Most Customer Experience professionals connect with their work on an emotional level. Since we are all customers ourselves, it is very easy to internalize the customer experience mission and make it personal. We aren’t just punching a clock – we are helping to rid the world of sub-standard customer service.
We spend much of our time in a bubble with like-minded souls – going to Customer Loyalty conferences, retweeting articles about Zappos, reading books about Nordstrom, and networking with people who eat, sleep, and breathe customer experience.
This emotional attachment to the mission of customer experience serves us well when it is time to inspire employees, transform cultures, and win customers. But it does us no favors in the board room unless it is balanced with the ability to articulate the value of customer loyalty in terms of cold hard cash.
Too often, customer experience initiatives are pitched on a “mom and apple pie” platform. The business case (if you can even call it that) consists of a Seth Godin quote, an infographic illustrating the cliché about dissatisfied customers telling 10 people, and a screenshot of someone trashing your brand on Twitter. Undoubtedly, the whole thing falls apart as soon as someone asks to see the underlying financials.
Likewise, well meaning Customer Experience leaders are ineffective because they show up to the meeting armed with anecdotes, not spreadsheets.
It is not uncommon to hear Customer Experience professionals at networking events ask questions like “How can I get my CEO/COO/CFO to understand the importance of our customer experience initiatives?” or “Why does my program budget keep getting slashed?”
To Customer Experience leaders who are currently struggling with these issues, I’d highly advise that you put down your tattered copy of Raving Fans and start reacquainting yourself with the dark arts of Finance and Accounting. Here are some great free resources from MIT’s Sloan School of Management to get you started:
Introduction to Financial and Managerial Accounting
Economic Analysis for Business Decisions
As you start to learn to articulate the business case for customer loyalty in financial terms, you might just discover that you and your CFO were actually on the same page the whole time – you just needed to learn to speak their language.
Elements of a Successful Net Promoter Survey Invitation
Jun 16th
One of the keys to success for your Net Promoter Score program is generating a high response rate. Unlike many other customer feedback frameworks, Net Promoter is designed to emulate a census, with target response rates of 50% of more.
The are many factors that contribute to your overall response rate, one of which is the execution of your survey invitation. Many new NPS practitioners don’t know where to start when creating a survey invitation. The chart below lists some of the factors that I have used in my survey invitations to generate response rates of up to 68%.
Click on the image to enlarge
Once your Net Promoter program evolves, you will no doubt develop your own best practices that work for your particular business and customer type. This chart is intended to give you a place to start.