It’s About Service…Stupid!

By Bill Fonvielle and Rowan Jackson

Some years ago, both of us were at a conference of our then employer in a hotel near Boston. One of the speakers was Professor Thomas Jones of MIT who told us this story.

Driving home after collecting his BMW from a regular service, Prof Jones noticed the ashtray was missing. When he got home, he asked the garage to deliver it to his house and was told: “Sorry fella, you’ll have to come here to collect it.” Unimpressed, the Professor (of Service) thought to himself, what would other brands do? He called Jaguar, Mercedes, SAAB and Lexus to find out. “Well of course Prof Jones, we’d deliver it to you.” they all said. He put the phone down thoughtfully. Yes, they would say that, wouldn’t they; talk is cheap. 40 minutes later, the doorbell rang, and a young man handed him his ashtray. “Where are you from?” said the Professor, “Lexus” said the young man.

Guess what car Prof Jones drives today?

Some years later BRMB Mintel research showed that customers make decisions about staying loyal to brands more on the service that they get than on the advertising of the product. Advertising came 7th below a list of product and service quality factors. An example: Richer Sounds only advertises in the HiFi press, relying more on the excellent word of mouth reputation for service it has built up over the years. This reputation has produced repeat years in the Guinness Book of Records as having the highest sales per square foot of any company in the world.

Knowing this, some companies have very small advertising budgets and instead invest that cash in improving their customer experience so that they deliver exceptional value.

Bill researched these companies, a deep and wide multi-national project that identified what the behaviours are of those (very) few “exemplar” companies that reliably and consistently deliver an outstanding customer experience. These companies need to advertise less than competitors, as their customers do their marketing for them.

In thinking about this it is surprising that a very recent study found 82% of execs say they can’t cite a recent example of frictionless CX at their firm. Despite the majority of companies spending more than a quarter of a million dollars in assessing the customer experience they provide, few can recall any significant improvements and many aren’t following through on the data they’re seeing.

Why is it, 30 years or more after the concept of the customer experience was first discovered, that most companies are still seemingly getting it wrong?

Everyone knows the basic idea: loyal customers drive up profits, a no-brainer you might say. So, let’s look at three issues that we know cause difficulties.

In one of our earlier articles, we talked about the Value Equation and the three elements that customers use to define value:

• the quality of the product
  
• the quality of the service
  
• the price they pay

In experiences that we have with our suppliers, we consumers make judgments on those three all the time.

• Is the product fit for purpose? Does it conform to specifications and is it the right grade?
  
• Is the price I pay fair? What incentives do I get for buying it? How is the price related to usage?
  
• Is the service reliable and on time? Do the people in the supplier know what they’re talking about? Can they empathise with any situation that I describe to them? Do they respond in the timescales that I expect?

Whether we buy face-to-face or on the Internet doesn’t really matter. These are the expectations criteria we use to judge if we got value for money. That judgement involves us comparing what our ideal expectations are to what was actually provided.

Our problem comes when we first look at how we execute the value equation. Where do companies tend to put the emphasis? The clue is in the Professor Jones story; despite everything research shows, companies seem to believe that it’s the product that matters. And yet it was a service action that caused the good Professor to switch to Lexus. He got something that exceeded his ideal expectations.

In 1988 Bill did a study into the customer experience (yes 1988; only it wasn’t often called the customer experience in those days). The research topic: “Why do customers switch?” was simple enough and useful to know, you would think.

The answer then, and still today, is that 70% of switching is due to poor service quality. Three elements make this 70%:

• Poor service or a bad experience (48%).
  
• Lack of contact or individual service (20%)
  
• Employees not sufficiently knowledgeable (2%)

Of the remaining 30%, 15% is due to poor product and 15% to price issues. Intuitively we hear people say: “yes that sounds right”.

So, let’s turn that round.

If service quality is so important, why do so many companies still focus on the product as the key component of their customer experience and in their promotion?

Why do so many advertising agencies promote the product when it’s the service that matters much more? You may well say: “customers don’t buy the service, they buy the product”. Erm no. They buy the whole customer experience and that includes both the product and service quality. I do not buy a car, I buy a means of travel from A to B.

In many cases, the product is nearly a commodity. Retail banking is a good example.

If I need to open a retail bank account, I have a wide choice. Which one do I go to? In the UK, probably First Direct; their prices (fees) and products are nearly identical to the rest, but their customer service is legendary. In its early years First Direct was growing by 30,000 new accounts per month from referrals alone, with no advertising.

Some of my business colleagues are still First Direct customers decades later. First Direct’s secret? They built from scratch an integrated, consistent, differentiating, valuable customer experience intentionally.

Let’s look at what “intentionally” means. First Direct have had, since 1986 and still today, a hiring policy that says: “We will never hire anyone from another bank.” Instantly you see how intentional they are about their customer experience. No employee brings behaviours and values from a competitor. First Direct’s leaders are simply saying we cannot invest time and money in training out these bad habits brought from other banks. Their goal is to exceed customers’ expectations by delivering outstanding service, something competitors do not, so they start from a different base.

Talking to their customers I can see that it works. They are the most passionate bunch I’ve ever come across. It’s a bank, folks! Yes but, they all say, and then explain why they love it so much.

So, let’s just summarise. Here are the two actions you can take:

1. Understand the true nature of what your customers’ expectations are, precisely. Having understood them, you now have the blueprint of the experience your customers expect from you. Then you can then assess how well you perform against them. That gives you insight into what prioritised areas of your business you need to improve, driven by your customers. Customers don’t buy a product, despite what your ad agency will tell you, they buy an experience and that includes both product and service.

2. Look holistically at your customer experience. You cannot deliver an outstanding experience without exceptional, well-trained staff who execute processes efficiently. The business of the experience runs throughout your whole company, not just in marketing and sales. It covers all aspects of your operations. That is why exemplary companies deliver an integrated holistic experience to their customers. That’s why we call it the business of experience (BoX).

The benefits?

In a recent webinar Forrester explained the benefits of insight-driven businesses as follows:

Insight-driven businesses are set to earn $1.3 trillion in the next 10 years. They are not just data savvy, but experts at creating a unified view of the customer and employee. These companies:

1. Optimise their customer and employee insight across the business.
2. Uncover the “why” behind the data that they collect.
3. Create, grow and learn from customer and employee relationships.
4. Measure and demonstrate the business impact of customer and employee insight.
5. Communicate customer and employee insight to all of their employees.
6. Ensure that customer and employee insight is permanently in the minds of the c-suite leadership team.
7. Use customer and employee insight to drive internal performance improvement.