Creating a Voice of the Customer Process That Has Impact

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Creating a Voice of the Customer

Process That Has Impact

Customer Management Conference October 23, 2012

Moscow, Russia

John Goodman TARP Worldwide www.tarp.com

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Agenda

• The Opportunity: How the VOC leads to CE impact • Eight factors leading to an effective VOC

• Critical data sources and integrating them (surveys, contact centers, operations and employee input)

• Creating the economic imperative for action • Myths about service

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About TARP

• Founded in 1971—41 years of customer experience leadership

– White House Complaint Studies 1970s-80s (instigated 800#s and GE Answer Center)

– Assisted 6 Baldrige Winners and 43 Fortune 100 Companies

– Initiated concept of “word of mouth” (TARP/Coca-Cola 1978 Study) and “word of mouse” (eCare and Click & Mortar studies 1999)

• Credited with developing the approach for quantifying the impact of quality

on revenue, cost & WOM for companies like McDonalds, Toyota/Lexus, IBM,

Harley Davidson, Cisco Systems, Xerox, 3M, HP, Honda, Hyundai, Pepsi Cola,

Apple, Frito-Lay, Coca-Cola, Mercedes- Benz, Merck, Amway, Lexmark, Allstate, Cathay Pacific, Shell Oil and Qualcomm.

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Customers will: Use again

Buy other products Tell others to buy

+

=

DOING THE RIGHT JOB RIGHT THE FIRST TIME MAXIMUM CUSTOMER SATISFACTION & LOYALTY Improved

Product & Service Quality Respond to Individual Customers Identify Sources of Dissatisfaction Conduct Root Cause Analysis Feedback on Prevention EFFECTIVE CUSTOMER CONTACT MANAGEMENT

Context of VOC within the Customer Experience

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Building an Effective VOC: Six Big Ideas From

Strategic Customer Service

1. Staff doesn’t cause most customer dissatisfaction –

sales, products, processes and customers do 2. It is cheaper to give great service than just good

service, the revenue payoff is 10-20X the cost 3. People are still paramount – make the front line

successful with flexibility and clear explanations 4. Deliver technology that customers will enjoy –

delivering psychic pizza via any channel 5. Sensibly create remarkable delight

6. An effective Voice of the Customer includes all kinds of data describing the overall customer experience

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Recent Survey of CE & Service Strategy Executives

Overuse of “rearview mirror”:

Most companies primarily use

traditional survey & complaint data

Underutilization of early warning devices:

Only 25% use operational data – Chicago bank

Only 30% currently monitoring Social Media for VOC

Only 13% are using Speech Analytics

Survey Results: Data Collected by VOC

(Study Method- N=160, Nov 2011)

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About 33% produce an end-to-end view of the Customer

Experience using data that is integrated into a single picture

These 33% of companies were more than twice as likely

to have significant improvements in customer satisfaction than those who didn’t integrate multiple types of data

 Over 50%: 3 or more FTE Customer Experience Analysts

However, the size of the analytical staff had no

correlation with the impact of the VOC!

Survey Results: Analysis & Reporting

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CFO buy in to business case is critical

Where buy-in existed, 40% of VOC processes were very

effective in getting things fixed and 55% had significant increases in customer satisfaction

Where buy-in did not exist, only 8% of companies were

very effective and only 23% had significant increases.

Business cases can include four dimensions:

Loyalty

Margin – great experience and innovation

Word of mouth

Risk reduction (Liability, warranty, regulatory and PR)

Survey Results: Business Case

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Departments With Interest in an Effective CE 1. Marketing and Sales– retention and word of mouth from

customers and shelf space from channels 2. Finance – higher margin and lower costs

3. Operations – reduce costs, more accurate execution 4. Risk – better service reduces claims

5. PR, Legal & Regulatory – better online reviews and publicity 6. HR – less problems leads to happier front line and lower

turnover

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Why Most VOC Processes Lack Impact and Are Cost Inefficient

• No unified picture of the customer experience • Does not estimate revenue damage by granular

issue

• Doesn’t focus on root causes and why problem occurred or why responses were not effective

• Requires expensive additional surveys to indicate if action had impact

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Effective Voice of the Customer Process

1. Well-defined ownership of

process and issues

2. Unified data collection across whole lifecycle 3. Integration of multiple data sources 4. Visible, granular, actionable reporting 5. Clear revenue and profit implications 6. Formal processes for translating data into actions and

targets 7. Formal systems for tracking impact 8. Process supported by company-wide incentives

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Behavioral Basis: Employees Don’t Cause Most Dissatisfaction

- Fails to follow policy

The majority of customer dissatisfaction is NOT caused by employee error or attitude but by products and broken processes*

Customer 20%-30%

Employee 20%

- Wrong expectations - Customer error

-Fails to follow policy

-Attitude

Company 40%-60%

- Products and services don’t meet expectations

- Marketing miscommunication - Broken processes

Poorly designed products, processes, and marketing create unmet expectations. Customer expectations

must be set to avoid problems and surprises.

*Finding based upon TARP analysis problem cause data in over 200 consumer and B2B environments.

At least 30% of contacts are preventable

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1%-5% Complain to management

Most that complain (5-25%) go to front line person who can not or will not help

75%-95% Encounter a problem but don’t

complain

The Tip of the Iceberg Phenomenon

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Understand Impact of Problems

Mollified2 30% I Question/ Problem Experience II Contact Behavior III Contact Handling Customers Complainers 5-50% No problem experience 60% Problem experience 40% Experience suggests three strategies: Prevention, Solicitation of Complaints, and Response IV Market Impact % Definitely/Probably Recommend/repurchase

from same organization

Dissatisfied3 20% Satisfied1 50% 90% 93% 30% 60% 50% Non- Complainers 95-50% 15

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Economic Model of Service Impact

• Assume each customer is worth $1,000

• Average drop in loyalty 20%

• For every five customers with a problem,

one is at risk

(5 x .2 = 1)

5 Customers with

Unresolved Problems

1 Lost Customer

$1,000

5 Customers with

Problems Solved/ Prevented

1 Retained Customer

$1,000 _$1,000

= = = =

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Customer Expectation: Factors Driving Satisfaction

• No Unpleasant Surprises • If Trouble Encountered

– Accessibility – not average speed of answer, hours of operation

– Taking ownership, apology – Clear, believable explanation

– Creating an emotional connection rather than just courtesy

– Money is often not the best solution – Timeliness and keeping promises

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Creating A Data Foundation for The VOC

• Customer surveys

• Customer contact and interaction data: coded and unstructured – key source of why it happened

• Internal operations process and quality measures • Employee input – second source of why

+ = Total view of the customer experience Internal

process and quality data and

employee input

+ _{contact and}Customer

interaction data Surveys of

customer satisfaction and

loyalty

Take The Role Of Chief Customer Officer

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Estimating Number of Customers Impacted by Issue From Contacts to Different Touch Points

** For these channels, the consumer may have first complained elsewhere and then escalated their complaint to this channel.

100

Airline customers encountering a rude gate agent

2% to flight attendant 0.8% to consumer affairs/

customers relations** 7% to local supervisor** 5% to social media**

0.2% to executive by e-mail** 1% to frequent flyer 800#** 4% to reservations 800# 1% airline web site

3.5% Other

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Integrating Touch Point Data (Airline Example)

Source

Problem

Reports Multiplier

Total Estimated Instances

Best Estimate # Instances

Web Site 6 100 600

Social Media & Unstructured Data

20 20 400

Reservations 14 25 350

Executive Complaint ₂ ₅₀₀ _1,000

555

Consumer Affairs ₄ ₁₂₀ ₄₈₀ Survey _0.5% _100,000 ₅₀₀

# Customers in Month

Damage to Loyalty

Value of Customer

Monthly Revenue Impact

555 x .25 x $2,000 = $277,500

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= = = =

x x x

= 2,500 3,000 7,000 37,500 50,500 Total Customers At Risk

200,000 Customers with Problems 20% Dissatisfied Many Not Repurchasing Some Not Repurchasing 50% Satisfied Most Repurchasing

75% Do Not Complain 25% Complain 30% Mollified Some Not Repurchasing

2. Quantify the Damage of a Poor Customer Experience

Demonstrating financial impact with the CFO, CMO and the General Counsel

Three strategies: Prevention, Solicitation of Complaints and Improved Response

At $1000 per customer, $50,500,000 at risk

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= = = =

x x x

= 1,875 2,250 2,250 28,125 34,500 Total Customers At Risk

150,000 Customers with Problems 20% Dissatisfied 70% Repurchasing 75% Repurchasing 50% Satisfied 90% Repurchasing

75% Do Not Complain 25% Complain 30% Mollified 80% Repurchasing

Quantify the Payoff of Prevention of 25% of Problems

Demonstrating financial impact with the CFO, CMO and the General Counsel

Three strategies: Prevention, Solicitation of Complaints and Improved Response

At $1000 per customer, $34,500,000 at risk or saving of $15,500,000

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1 Based on multiple problem selection 2 Based on will not repurchase only

Set Priorities Based on Revenue Damage & Customers at Risk

Overall

problem experience

Problem freq

% Won’t recommend

% Customers potentially lost

(45%) (%)1 Will not2

Meeting promised delivery

dates 27 10.5 1.3

Product availability within

desired time frame 23 0.0 0.0

Meeting commitments/follow

through 21 30.0 2.8

Equipment/system fixed right

first time 20 22.2 2.0

Adequate post-sale

communications 19 10.0 0.9

Returning calls 16 33.3 2.4

Minimum customers at risk 9.4%

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Show The CMO That Negative Word Of Mouth Can Trump Marketing

10% delighted

70% satisfied

Tell two Tell one

=

2,000

7,000

-3,000

10,000 customers

Example calculation of potential impact

20% dissatisfied

Tell six

= -12,000

20% dissatisfaction can counter 80% satisfaction

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Great Service Is A Word of Mouth Management Mechanism

10% delighted

80% satisfied

Tell two Tell one

=

2,000

8,000

4,000

10,000 customers

10% dissatisfied

Tell six

= -6,000

10% decrease in dissatisfaction results in net positive WOM

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Problems Raise Sensitivity to Price, Hindering High Margins

10%

22%

46%

74%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

No problems 1 problem 2 to 5 problems 6 problems or more

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Broaden the Range of Solutions to Issues

• Welcome kits, calls and emails

• Enhance response with empowerment and explanations

• Create efficient emotional connection • Use technology to deliver psychic pizza

– JIT education – Anticipates – Simplifies

• Delight sensibly

• Create accountability – CCO Paper

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Enhancing Report Impact

• Simplify to three issues to any one audience

• Eliminate of masses of data requiring interpretation

• Tailor report to each function

• Provide action plan and process metrics impacted

• Humanize data with quotes, stories and recordings

• Act as consultant – suggest lead functional leader

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Grade 1 to 10, 10 being best

Practical Exercise: Evaluate Your VOC System

Grade VOC Process Owned by One Person

Unified Data Collection Plan

Understand Non-complaint Rate and Multiplier Integration of Multiple Data Sources

Actionable, Visible Reporting

Understand Impact of Word of Mouth Revenue and Profit Implications of Issues Calculated

Issues Translated Into Targets Tracks Do Issues Get Fixed

Tied to Company-Wide Incentives

If you rate less than a 75, you’re Total Score ___________ wasting 20% of your service budget

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Summary

• Create a unified VOC including operational data to identify best opportunities

• Understand root cause including customer caused • Quantify the revenue and WOM so CFO accepts • Take control of the VOC and then become the Chief

Customer Officer

• Proactively educate, connect, explain and deliver psychic pizza

• Outlined in detail in Strategic Customer Service published by AMACOM – on Amazon for <$20.