Customer Loyalty and Employee Engagement
Posts tagged customer loyalty
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: 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 find themselves unable to prevent the installation of Bad Profits 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?”
- “How can I present an argument against short-sighted thinking like outsourcing, nuisance fees, and other bad profits?”
- “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.
A Tale of Bad Profits
May 15th
In his book The Ultimate Question: Driving Good Profits and True Growth, Fred Reichheld introduced the concept of Bad Profits as such:
Too many companies are addicted to bad profits—profits that come at customers’ expense and drain the value out of customer relationships. Whenever a customer feels misled, mistreated, ignored, or coerced, then profits from that customer are bad. Bad profits come from unfair or misleading pricing. Bad profits arise when companies save money by delivering a lousy customer experience. Bad profits are about extracting value from customers, not creating value.
Bad profits often boost short-term earnings; in the long run, they burn out employees and alienate customers. They also undermine growth by creating legions of detractors—customers who sully the firm’s reputation and switch to competitors at the earliest opportunity. Bad profits choke off a company’s best opportunities for true growth, the kind of growth that is both profitable and sustainable.
When people first hear about Bad Profits, they normally nod their heads in agreement. After all, the excerpt above reads like motherhood and apple pie – of course you don’t want to boost short-term earnings at the expense of long term customer value.
But if everyone so readily agrees that Bad Profits are undesirable, why do they exist? I don’t believe that anyone starts out trying to create Bad Profits. They are often born out of good intentions coupled with misaligned priorities and a lack of accountability to the customer.
I was recently chatting with the owner of a local company that repairs office hardware such as copiers, computers and whatnot. We got to talking about customer loyalty, and he mentioned that his company was currently experiencing an exodus of customers. When I probed further, he told me the tale of how a bad profit was threatening the future of his company.
Up until about a year ago, he had three managers in his company – a Sales Manager, a Customer Service Manager who oversaw the Field Technicians, and an Office Manager. Customer loyalty was high and revenues were respectable. Then the Customer Service Manager left the company.
The Sales Manager was well respected, and since he also had employees in the field, the Field Technicians were moved underneath him. On the surface this was a sensible, well intentioned decision.
But the Sales Manager’s priorities, goals and compensation were still highly stacked towards generating additional revenue. With the absence of the Customer Service Manager to hold him accountable, it did not take long for him to begin viewing the Field Technicians as another arm of his sales force.
And so began the installation of a Bad Profit. Field Technicians were quickly required to sell additional products and services when they went on service calls. The thinking was that since they were already in front of the customers, they might as well try to sell something.
At first this appeared to be a brilliant plan. Additional sales started pouring in from the Field Technicians, and the Sales Manager looked pretty clever for a couple quarters. That is, until clients’ service contracts started expiring. Suddenly contracts that they had held for years were not being renewed. Customers began migrating to other providers because their trust, satisfaction and loyalty had been depleted in the name of bad profits. Unfortunately, the company is now so dependent on this revenue that weaning the business off of the Bad Profits will be a long and painful process that may or may not be successful.
The worst part about Bad Profits is that once your company allows them in, they are very difficult to eliminate. To prevent Bad Profits you must constantly stay on guard against misaligned priorities, question ideas that seem too good to be true, and ensure that someone in your organization has the responsibility (and the authority) to act in the best interests of your customers at all times.