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Monday, November 24, 2014

A Final Word About 'Firing' Customers

It should be simple; some customers are costing you money, so fire them!  Activity-based cost accounting has dramatically shown that for most businesses 20% of customers generate all the profits, while 60% of customers help to cover fixed costs but are basically breakeven, and 20% of customers actually are a drain on profits.  With this ‘client topography’, it would seem logical that all any business needs to do is jettison its unprofitable customers and watch the remaining dollars flow to the bottom-line.

But, of course, the devil is in the details.  In particular, identifying costly customers and, for that matter, identifying currently profitable and potentially profitable customers has been challenging.  Some businesses naively believe they know their best customers because they must be the ones spending the most, or those in the highest tiers of a loyalty/points program.  In most cases these indicators are overly simplistic and may not be accurate indicators of truly profitable customers.


Then, How Do You Identify Costly Customers?

To properly identify those customers that you might want to lose, and for that matter to identify those customers who deserve extra effort to be retained (because they are most profitable) we have promoted a scoring system we call SLP2 (as in Satisfaction, Loyalty, Profitability and Potential).  Each component has its own source.  Satisfaction is scores generated through survey feedback capture.  Loyalty is a measure of historical buying behavior.  Profitability is modeled from servicing costs including: discounts required to close sales and demands for after-sales servicing.  Potential is based upon the share of category spending currently allocated to the brand by each customer.


We've Come a Long Way

When we first introduced SLP2 to the world some fifteen years ago, it was, to be kind, ahead of its time.  We were frequently told (either correctly or incorrectly), “We can’t access that information!”  And in fact, most marketers lacked the systems to precisely track individual customer’s buying behavior or to model profitability.  But that was before CRM software and the popularity of ‘big data’.  With today’s information capture systems, most services and many goods manufacturers can now access an entire history for every one of their customers!  Further, most corporations regularly track customer satisfaction, and many no longer shirk from asking share of wallet spending questions (to determine potential).


SLP2 has the potential for really making efficient and effective use of all that information.   Identifying the most valuable and the least valuable customers for the future of your business can take marketing and customer service strategy to a smarter and more profitable level. 


A Final Word About 'Firing' Customers

By the way, for all those who read to the end of this column, we at Customer Experience Partners, strongly recommend against ever “firing” any customer.  If possible, we recommend directing them to a product and service mix that turns them into at least a breakeven customer for the company. Should that fail we recommend finding a way to introduce and escort them to a competitor. It will save a lot of pain for everyone and avoid a lot of potential negative word of mouth. 



2:28 pm est          Comments

Monday, October 13, 2014

Not All Social Media Followers Are 'Equal'...

To succeed in business today (and in politics as well) it’s good to have a lot of Facebook likes and Twitters followers, right?  After all, a large and active social media base leads to greater awareness and consideration, and maybe more.  But, perhaps we should consider the practical consequences of attempts to aggressively build likes and followers.

The 'Business' of Exploiting the Social Media

Tell a dedicated employee that it’s his/her job to generate likes and followers, and it’s likely she will go out and find a way to get them.  Pressure him to produce even more and he will get you there as well.  Unfortunately, unless you have made it very clear why you want them, and what you expect those followers to do for your brand, the results may be deceiving and disappointing.

We found an investigation reported recently by Darren Samuelsohn of that casts doubt (or at the very least some skepticism) about the large numbers of followers reported by brands and personalities.  In particular, Samuelsohn found evidence that the number of followers presented by some of the biggest names in American politics are, shall we say, slightly exaggerated.   According to analysis from Politico, eager staffers have likely been using bots and click farms to find ‘followers’.  The result is astounding:

  • 46.8% fake followers for @BarackObama
  • 23.6% fake followers for @SenJohnMcCain
  • 21.9% fake followers for @HillaryClinton
  • 18.9 % fake followers for @Chris Christie

Bringing It Back to Products, Brands and Services...

But you aren’t aiming to be the leader of a country or even a member of Congress, so how does this relate to your business practice?

  1. You need to think quality, not quantity in your social media strategy.  Whether you have millions or hundreds of likes or followers, what you really should be looking for are more opportunities to cost effectively communicate with your customers and prospects.  
  2. Fake followers and users don’t actually interact with your Twitter or Facebook accounts so they aren’t sharing your comments or content.  In fact, they are actually making your ratio of followers to shares look worse!
  3. While you can buy fake followers fairly cheaply, they have absolutely no value, and actually impose a cost.  If your social media followers were ever subjected to careful investigation, the revelation of your fake followers could actually do more damage to your credibility than your accomplishments through your legitimate followers.

Authentic Ways to Build Your Social Media Following

There are any number of legitimate ways to build likes and followers.  The common elements among the approaches is that they involve some hard work and require that you provide some form of value.  That value can be: a chance to win a contest, a special deal or discount, having access to information about your brand not available to the general public, getting cool content to share, and receiving entertaining content that emotionalizes your brand or company.

Like so many other opportunities in life, the best social media followers aren't easily obtained.... the knack is in disciplining one's self to aim for quality over quantity.





2:15 pm edt          Comments

Tuesday, September 23, 2014

The Five Most Powerful, Yet Seldom Heard Words in Customer Relationship Management

Stories of dissatisfaction seem all too prevalent.  When things go wrong, it’s appropriate for customers to complain and today’s ‘enlightened’ management seems goaled to respond.  But less frequent are the stories of satisfaction.  Not because they occur less frequently.  No doubt, most service encounters and customer interactions end up with satisfactory if not delighted outcomes.  But, when satisfaction is delivered, there’s less motivation to act on it.  Appropriately, customers shouldn’t feel the need to compliment a business for simply doing ‘the right thing’.  But sometimes, when a customer is unexpectedly delighted, an acknowledgment is appropriate.
We write our fair share of letters of complaint; but we also try to send letters of compliment in situations of extraordinary outcomes.  Our complaints are almost always acknowledged.  But our compliments?  Funny thing, they’re almost never responded to!  So ask yourself, have you ever told a customer these five words, “Thank you for your compliment”? 

It's Not 'Rocket Science'! 

Acknowledging compliments should be one of the most obvious practices a business can undertake.  And yet, few businesses do so.  Why?  Well, first off, a compliment bears no troubling threat (“I’ll tell 100 people”, etc.).  Second of all, no one is in charge of compliments!  Larger, forward thinking organizations with Chief Customer Officers should probably institute “compliment departments”, but currently we know of none.
So why our concern?  It’s all about building relationships with customers, and these days nobody doesn’t want a relationship with their customers.  So, put yourself in the role of an enthusiastic customer.  He or she takes the time to reach out to a company or brand to exclaim their extreme satisfaction.  And then, what happens?  Nothing!  And lo and behold the bond with this customers has been weakened - if not destroyed!

An Example: We're Acknowledged

We were reminded of this issue because a month or so ago we wrote a note of compliment on a restaurant’s database counter card.  We noted that our server was extremely attentive, very knowledgeable and a real ‘host’ for the restaurant.  About a week ago (a bit late, but still exemplary) we received an email from Alyssia, the manager of the restaurant (Biggies of Hoboken), thanking us for our compliment.  Bingo!  The result?  We felt: listened to, appreciated, and acknowledged.  In short, we felt closer to this business; our relationship was strengthened - we'll definitely return.
Ever since our book, Aftermarketing, first published in 1992, we’ve recommended the following course of action for responding to compliments:

  • Respond as quickly as possible and use a medium of communication with a priority equal to or higher than that by which you received the compliment.  (Don’t respond by USPS letter to a compliment received by email.)
  • Restate the exact compliment you’ve been given.  This helps reinforce in the customer’s mind the praise they’ve offered you.
  • If you’re involved in a telephone call or on-screen chat, try to elicit the compliment from the customer again (further reinforcing the compliment).
  • Thank the customer for their business.  (If you have affinity merchandise, send something along to further bond with the customer.  A paperweight or other item can serve as a ‘conversation starter’ allowing the customer easier entry to telling others about their delight with your company/brand.)
  • Encourage advocacy.  If you have a user community or other channels for ‘privileged information’ about your company or brand offer the customer participation.  If not include some "insider news" about your company or brand - it'll give your customer something to mention to others (in the name of your brand).

Customers with compliments are everyday advocates asking to be reinforced in their zeal and commitment towards your brand.  Don’t let yourself down by failing to ‘close the loop’ with them!  Formulate your 'compliment handling process' today. 

9:48 pm edt          Comments

Monday, September 8, 2014

Loyalty Programs: Lots of Hidden Challenges

When thinking about ways to increase your customers’ loyalty it’s not surprising to consider adopting some form of a rewards program. Many have.  The fact is, whether effective or not, loyalty programs are being offered by just about everyone.  From your corner dry cleaner to American Airlines, marketers everywhere seem convinced that a loyalty program is a ‘must have’.  With such universal acceptance, we didn’t find the results of the 2013 Loyalty Census from Colloquy very surprising.  According to the investigation:

  • The average U.S. household is enrolled in 22 loyalty programs; (that's a 17% increase over 2010's 18 programs).
  • However, each U.S. household is ‘active’ in only nine programs!
  • And, the proportion of programs in which a household is 'active' appears to have peaked (2010's 46% exceeding 2012's 44%).
  • We all know that 'averages' are deceiving.  The Hannifin Loyalty blog reports that in one specialized segment of consumers, business travelers, the average number of loyalty program memberships is as high as an astounding 40 programs per traveler!



But Are We Asking the Wrong Question?


'Membership' numbers, active or not, can be a fickle indicator of effectiveness.  As opposed to mere ‘belonging’, a better question to ask might be how many programs are ‘top of mind’ for customers?  That is, how many programs are truly engaging members of the program?  More importantly, from the sponsor’s side, how many loyalty programs are actually influencing members’ behavior - increasing spending?
We use a
Value Equation as our model in considering how customers decide about repurchasing brands, products and services.  If they’re effective, the loyalty programs in which a customer is enrolled should become components in each customer’s value equation calculation for a brand.  The more effective the program, the more weight the program component should exert in urging repurchase.  This being said, here are several actions loyalty program owners should be considering:

  1. Is your loyalty program stimulating active engagement, or does your structure condone passivity - merely setting membership ‘hurdles’ but failing to involve members in your brand?
  2. Have you truly identified the behavior you want your program to influence?  While it sounds trivial, many loyalty programs suffer from weak or non-existent goals.  Be specific.  Do you want: to retain customers; to broaden the range of products they buy from you; to increase the frequency of their purchases?  The way you structure your program can help accomplish very specific behaviors.
  3. Do you recognize that your loyalty program is part of the total experience you provide your customers, not an isolated adjunct.  Whatever your loyalty program offers, however it’s conducted, all of the program's components contribute to the total experience you offer your customers.
  4. Are your program’s rewards significant, relevant and desired such that they actually possess motivating power?  Are your customers sufficiently familiar with your rewards so that they strengthen their emotional bonding to your brand?
  5. Does your program offer specialized rewards consistent with your typical customer’s needs and interests as determined by his/her status in their life cycle with your brand.
  6. Do your program members spend more and behave more positively toward your brand than they did prior to becoming members?  Is that increased spending more or less than the total cost of planning and executing the loyalty program?
  7. Are you certain your loyalty program is more than just a ‘mileage program’?  A mileage program will only perpetuate current purchasing.  A true loyalty program should impact many different aspects of your customers’ interactions with you.

All said and done, creating a loyalty program may be your easiest task; keeping it engaging and motivating is the real chore.  And, there's also the frequently overlooked implicit obligation of justifying your program by tracking its ROI.



7:13 pm edt          Comments

Thursday, July 24, 2014

Filling The Hole In Your NPS

Corporations large and small depend upon their NPS (Net Promoter Score) to evaluate staff, compare themselves to their competitors, monitor their progress over time, and more. As you probably know it's a survey-based process asking people how likely they are to ‘recommend’ a brand, service or company to others based on their own personal experiences with the brand, service or company.  The key NPS statistic is created by subtracting the number of "detractors" (respondents who score their willingness to recommend at only a 1-6 on a ten-point scale, or 1-6 on an eleven-point scale) from the number of "promoters" (those who rate their willingness to recommend at a high score of 9 or 10).  Hence the construct of ‘net’ promoters (the proportion of a customerbase likely to promote minus those unlikely to promote).

You Really Should Know

The NPS score is frequently criticized both because it only assesses ‘likely behavior’… and because it fails to further probe qualities of the likely behavior.  In short, it fails to provide enough information to help remedy the extent of failure it identifies.  In our work on word of mouth, we’ve addressed the NPS weakness by focusing on actual recommendation behavior; and what was actually communicated.  Here’s how we recommend NPS programs can be enhanced to make them much more useful.  They should be teamed with a 'follow-up' survey that focuses on:

  • Assessing the actual ‘reach’ of recommendations, by itemizing how many people the “promoters” actually did speak to and what they actually said.
  • Comparing how promoters’ messages, tonality and reach differed from those of detractors.
  • Identifying the type of emotion associated with the messages (i.e. “positive”, “negative”, “neutral”).
  • Describing how recommendations are actually being communicated: narrowcast (through private channels: phone, texts, emails, face-to-face) or broadcast (through public channels: Facebook, Twitter, blogs).

One Way You Can Objectively Find Out

While admittedly not the purpose for which we developed it, a tool like our Buzz Barometer® addresses all these missed opportunities and increases the value of NPS programs.  Our approach is simple; we would draw the email addresses of three groups of customers who had responded to a corporation's survey that included the NPS question.  One group would be those who had rated the brand a 9 or 10, a second group would be those who rated the brand a neutral 7 or 8, and a third group who scored the brand a 1-6.

We would invite customers in these three groups to respond to a secondary survey.  Our Buzz Barometer® questionnaire asks customers to report on their own word of mouth behavior (frequency, valence, medium, message summary, etc.).  All this information would allow us to produce qualitative and quantitative pictures that bring promoters (as well as detractors and neutrals for that matter) to life, to help the entire organization better understand the key drivers of promotion and detraction and how energetically these positions are being spread.

10:28 am edt          Comments

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Customer Experience Partners, LLC
Measurement, Management, Optimization
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