Look in the mirror to bond with customers

August 2014 | EXPERT BRIEFING | BOARDROOM INTELLIGENCE

financierworldwide.com

The purpose of a business is to acquire, delight and retain customers. A profit is achieved when the first bit is done cost effectively. Judging by global anecdotal evidence that poor customer service is now endemic, this is a truism of which many businesses appear to have lost sight – or which is being obliterated by technology or economics-driven dehumanisation of workplaces. Combined with the impact of the internet and competition on consumer choice generally, this means that organisations which take their customers for granted do so at their peril.

This challenge to sustainability has not gone unnoticed and there is now extensive literature about customer loyalty, Net Promoter Score and CRM, etc. The profusion of publications on these topics put out by the likes of Harvard Business School, Forrester Research, Bain & Company, McKinsey and Accenture explains clearly how inculcation of ‘loyalty’ behaviours in as great a proportion of a customer base as possible should lead to significant added sales, referrals, brand enhancement and resilience when times are tough. The global software industry has also launched a raft of cloud-based applications for subscribers to measure the effectiveness of customer loyalty strategies.

Of late, customer experience has emerged as the relevant KPI. The extent to which a customer is loyal depends on how confident they are that their supplier will continue to perform and deliver experiences better than those from their competitors. Experience in this context is a linear concept defined by a series of transactions or events which will together determine whether a customer will stay or place their business elsewhere. The literature is long on the theory of ‘why’ and how to set up systems to measure experience but disappointingly short on ‘how’ to induce loyalty behaviours from customers.

Strategists must first see that there are two types of ‘experience’, both of which depend on the relationship between reality and expectations. First, ‘reality > expectations = positive experience’. Second, ‘reality < expectations = negative experience’.

Optimising customer experience requires effort to, firstly, understand customers’ expectations and then, secondly, to manage the reality so that, ideally, it exceeds expectations. Unmet expectations give rise to negative attitudes and behaviours so a throw-away (and possibly unsupportable) comment by a salesperson to push a sale through is as potentially damaging to the relationship as failure to comply with contractual terms and conditions.

When a proposition is put to a customer, their natural reaction will be ‘What’s in it for me or us?’ ‘Risk’ is part of the answer. A seller considers, accepts and takes on the risks of a new customer by choice but how many think about the risks to which the new customer will be exposed by accepting the seller as a new supplier? Failure to meet quality or volume commitments will affect their supply chain. Their reputation will suffer if the court of public opinion finds the customer guilty of a moral or legal breach brought about by an incompetent provider. The implications of social media in such a situation are frightening.

Customer experience professionals appear to agree that clients fall into one of three categories often called promoters, passives, and detractors. Promoters are the most valuable in that they typically display four desirable ‘loyalty’ behaviours by repurchasing, being more willing to buy new products and services, generating referrals and giving constructive feedback to help build an even better relationship. Detractors, on the other hand, tend to buy less than average customers, lodge more complaints and cost more to service. Research conducted by Satmetrix Systems Inc. indicates that detractors can also generate bad word-of-mouth to such an extent that the cost of the damage they do equates with or is greater than the revenue derived from their purchases. Customers are very definitely not equal, and measuring their loyalty helps to identify those whose business the firm can do without.

Customer loyalty is not to be confused with customer satisfaction. Satisfaction is rational, not emotional, and will only last until a competitor comes along with a better deal. Only sellers who consistently ‘delight’ their customers can be confident of enduring relationships with their promoters. Being a great supplier is the first step in meeting this challenge. According to the UK Chartered Institute of Purchasing & Supply, a good supplier is one which delivers on time, provides consistent quality, gives a good price, has a stable background, provides good service backup and is responsive to customers’ needs. They will also keep promises, provide technical support and training, and keep customers informed. To these attributes, also add a good reputation, shares thinking at senior level, good communication, the personal touch, treats all customers as equals, provides insights as a trusted adviser, over delivers, passes on savings, and keeps in touch between contracts.

Larger organisations are beginning to integrate supplier quality and supply chain risk management. Scorecards are often used for this purpose and suppliers are ranked according to their scores. It is reasonable to assume that the sellers who rank higher up the scale will sell more and enjoy a better customer relationship than lower performing suppliers.

From a customers’ perspective, their supply base is as important as a seller’s customer base is to it. To delight customers, sellers should look in the mirror and ask themselves questions such as: Is the organisation as good a supplier or service provider as it could be? Does it always understand and comply with the service level criteria in customers’ purchase contracts? Does the organisation routinely measure how it is performing against relevant service level criteria? Do we know which, if any, of our customers use supplier performance management systems? Do we know the KPIs against which our performance is being measured?

The first step for a seller in turning a customer into a promoter must be, as a minimum, to achieve preferred supplier status in the client’s eyes. If they are not sure how to do this, they should talk to the customers whose business they most value and ask them how they can earn preference as a supplier –and thus gain the competitive edge that will come with it.

Customer experience may be defined as “The positive – or negative – sum of all the experiences a customer has with a supplier over the duration of their relationship”. Every interaction, at whatever touch point, gives rise to one of those experiences. The key therefore to forging valuable, long-term customer relationships is to make as many of those experiences, if not all, as positive and memorable as possible. The surest way for a supplier to do this is to embed customer-centricity into the culture of their business. This means examining and, quite possibly, changing long-established internal attitudes and behaviours. To do this successfully takes a plan, commitment, patience, resources and time.

‘Consistently Excellent Customer Experience’ means that the customer never has anything but praise for the way they see the seller’s business, its product and service. For this to occur, the culture within the business must put customers first. Every employee at every customer touch point needs to be actively engaged with the business and to understand that the prime purpose of the business is to delight customers at every opportunity. They must also be empowered to ensure positive experiences at all customer interactions. This will happen only after the leadership team, from the board down, has demonstrated its attitudinal and financial commitment to a customer-centric culture by allocation of adequate resources and routine reinforcement by appropriate governance and management practices.

A move to customer-centricity may well mean a significant culture shift in the organisation. Such changes are assimilated into organisations more easily when leaders are actively engaged with their people and able to coach their teams through the changes involved using a process that reassures and motivates rather than threatens (like conventional performance appraisal methodologies). There are simple, easy to implement systems to enhance sustainable leadership effectiveness, employee engagement and desirable behaviours which lead ultimately to a number of operational benefits including more creativity, innovation, productivity and positive customer experience.

Finally, the normal way to measure customer experience is currently by way of touch point mapping followed by surveys using technology with which the customers are comfortable. The purpose of measurement is to drive continuous improvement. An ideal customer experience data capture and analysis system will provide both point-in-time scores and trends over extended periods. These data should be available to management in real time so that adverse trends can be corrected quickly. Survey results are supplemented with internal information to get a complete overview of customer experience performance. Before instituting customer surveys, sellers should make sure that customers are happy to invest their time in responding to them. Earlier remarks about supplier-related risks and supplier performance management will serve to launch these conversations.

Tony Addiscott is the founder of Addiscott & Associates. He can be contacted on +61 8 9447 9281 or by email: addiscott@westnet.com.au.

Tony Addiscott

Addiscott & Associates