Article by Bill Fonvielle
In recent weeks I have been having conversations with executives responsible for marketing or customer relationships in a variety of organisations. All of them gathered customer feedback on their customer experience but were unhappy with the methods they were using and the results achieved.
The concerns we heard from them revealed some themes. This is what they said:
- One CEO sought data to guide him on what to do differently. He could not find it and expressed frustration because the data was not actionable. As that is what he really wanted, he was dissatisfied.
- Head of consumer insights said it did not help her prioritise the actions: “It’s just a frustrating long list.”
- Another CEO made this point: “We would like to know how well our customers think we perform against our competitors. After all, they know how well we do and how well our competitors do. We need deeper insights”.
- A third CEO was irritated by what an agency had given her: “We need easy to understand presentations. This is complex stuff and often we do not understand the busy slides they presented”.
- A Head of HR focused on employee feedback: “We need help in getting the top team to take this seriously. Unless they do, the actions needed to improve probably will not happen”.
- A Head of Operations: “We need help in following through especially in communicating the actions and ensuring that they are implemented”, she said.
- A Head of Sales: “I knew it was not going quite right. Our salespeople game the method”.
One consistent theme with their customer feedback has emerged from all these organisations. They express dissatisfaction with satisfaction as the measure of customer affection.
These organisations are among the 30% of organisations that believe strongly (and rightly) that happy customers will remain loyal and loyalty drives profits and revenues. Their goal is to become even more customer-driven by using customer feedback to guide their actions.
The other 70% do not gather customer feedback at all.
Their concerns centre on two issues:
1. The data they are getting is insufficient for their needs.
2. Despite their efforts, their customers are not staying loyal.
So, is there something not quite right here?
Well, yes. They are right to be concerned. Here is why:
In the 1980s academics resuscitated something that 19th century shopkeepers had known. Shop owners knew that loyal customers ensured their businesses’ survival. The academics wanted to find out exactly what loyalty was worth, what drove it and its connection to success and survival.
Their research results were dramatic. Increase retention year on year by 5% and the net cash flows increase by between 20% and 120% depending on the industry. The figure for the advertising industry, for example, was 95% because advertising agencies spend millions each year pitching for new clients and may win only 20% of those pitches. Recovering this cost takes years, so retaining accounts is extremely important.
The 1980s research proved loyalty to be the primary driver of profit, and that the biggest driver of loyalty is the customer experience. They found that if the customers’ ideal expectations (what customers wanted the experience to be like) were exceeded or met, loyalty went up.
The problem was that, at the time, very few researchers and marketers understood how to pinpoint customer expectations, or measure a company performance against what could be a moving target. So they used satisfaction as a surrogate or measurement short cut. Thus, was born the whole customer satisfaction industry.
However, as companies have discovered, customer satisfaction does not predict loyalty very well. Satisfied customers can (and do) defect. Equally, dissatisfied customers can (and do) stay. This problem was highlighted in the 1995 HBR article by Tom Jones and Earl Sasser: “Why satisfied customers defect”.
Customers’ levels of tolerance can also change very quickly, especially right now. You need to know what those bandwidths of tolerance are. Most satisfaction and NPS methods do not give you that vital information because they use a single score as the representation of your current performance. What might have been “satisfactory” before, might now have a different tipping point, and you have no idea what that tipping point may be with a single satisfaction score.
Some customer satisfaction systems provide an “index” to focus on and compare with other organisations. NPS is a classic example. But this approach is flawed. The problem is that organisations participate in these surveys at different times, under different circumstances, and often with different types of people. Comparing one index with others is like comparing apples to pears.
Add to this a plethora of bias built in to customer satisfaction surveys that are focussed on what the company wants to measure, rather than what is most important to the customer (i.e. their expectations) . Finally, wrap it all up in complex data reports that leave a question mark over what changes will make the biggest difference.
It’s not surprising that many companies are now becoming increasingly dissatisfied with satisfaction.
Historically, pandemics have forced humans to break with the past and imagine their world anew. This one is no different. It is a portal, a gateway between one world and the next.
– Arundhati Roy
In the COVID 19 world, companies realise the need to keep clients (and client cash) is even more vital.
In a (pandemic) crisis, they are noticing that customers behave differently. While their needs may stay the same, their expectations of how those needs will be fulfilled change rapidly and measuring satisfaction is not going to cut it.
Companies still want to build and maintain customer loyalty, but they want to do so in a focussed, effective way.
So, what do you do about this? Here are a few suggestions.
Switch your measurement method from satisfaction to expectations
There are reliable ways to do this. At the same time everyone was getting into satisfaction, Bill Fonvielle, a Yale educated member of Mensa, applied his powerful logic to the original problem that the 1980s researchers struggled with: Can we accurately identify customer expectations, measure company performance against them, and set it in context of “acceptable performance” (tolerance)?
The answer is yes; Bill found out how and has been working with expectations methods ever since.
Today you can pinpoint expectations, measure how well your business performs against them and use this method to identify where you need to improve and in what order of priority. All this is driven 100% from the customer perspective, which keeps your focus on external reality rather than internal ‘naval gazing’. Read about the magic of expectations here.
Understand the tolerances
Bill’s method measures that critical tolerance level as well. You can tell very quickly what customers find is, and is not, acceptable. You can track it over time to see how it changes as the crisis evolves. This permits fast movement and agility to adjust to rapidly changing conditions. Companies that do this will survive; those that do not will not.
Find out how competitors perform
Customers will, if asked properly, tell you how well you perform compared to your competitors. That really matters. It gives you clear sight of how your customers see you in the competitive landscape on the things that are most important them, and reveals your true differentiators and gaps, rather than your assumed ones.
One pharma company that used Bill’s expectations methods, distanced themselves from competitors and increased sales by $80m.
Unlike the previous feedback methods that they had been using, the expectations vs. performance gaps showed where they were strong and weak compared to competitors and showed them precisely where to make improvements. Investing in this type of research gained them a ROI of about 200:1.
Today Bill’s underpinning method of gathering expectations and measuring performance is used is several contexts, depending on where you need to focus your attention:
- How well customers rate your customer experience.
- How well customers rate your salesforce or the sales experience.
- How well your employees rate your company, the employee experience.
- How well your internal functions relate to other internal functions.
Please connect with me here if you wish to know more.