Customer Loyalty as a Key Support Strategy John Hamilton President Service Strategies Corporation......
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Transcript of Customer Loyalty as a Key Support Strategy John Hamilton President Service Strategies Corporation......
Customer Loyalty as a Key Support StrategyJohn Hamilton
President
Service Strategies Corporation
. . . evolving customers from highly . . . evolving customers from highly satisfied to intensely loyal.satisfied to intensely loyal.
Customer Loyalty as a Key Support Strategy
What makes customers really happy?
1. Customer service experience
2. Ease of doing business
3. Price versus value
4. Company reputation
Customer Loyalty as a Key Support Strategy
Whether surveying for Customer Satisfaction, Loyalty or both . . .
Customer Survey ProcessCustomer Survey Process
Customer Loyalty as a Key Support Strategy
• Whenever we survey a segment of our customer population about satisfaction or loyalty we are using statistics, or more specifically, Inferential Statistics.
• That is, we are inferring something
about the entire population by looking at a sample of that population.
Beginning with a solid foundationBeginning with a solid foundation
Customer Loyalty as a Key Support Strategy
• Population (Universe)– All Items of Interest
• Parameter– Summary Measure about Population
• Sample– Portion of Population
• Statistic– Summary Measure about Sample
PP in PPopulation & PParameter
SS in SSample & SStatistic
But first . . . Some key Inferential Statistics termsBut first . . . Some key Inferential Statistics terms
Customer Loyalty as a Key Support Strategy
• Most Service Vendors have a survey process to measure customer satisfaction– Periodic surveys - Perceptions
– Event/Transactional surveys – Actual experience
• Establish required sample size, target response rates and confidence level
• Quantitative results and verbatim feedback gathered
• Results are analyzed and communicated
Customer Loyalty as a Key Support Strategy
Common Errors in Customer SurveysCommon Errors in Customer Surveys
Since the usability of any customer survey depends upon the accuracy of the results, error control plays a critical role in the research process. •Sampling Errors Sampling Errors
The inaccuracy of the results of a survey when a non-random sample of a population is used to infer the satisfaction of the total population.–Only Closes cases–Exclusion period
Customer Loyalty as a Key Support Strategy
Respondent Influencing Errors – Respondent Influencing Errors –
•Leading the respondent• Leading question by telephone survey
interviewer.• Survey wording bias.
“We value our highly satisfied customers etc..
• Support representative pleading… “My job depends on your rating”
Customer Loyalty as a Key Support Strategy
Questionnaire Structure Errors –Questionnaire Structure Errors –
•Question Ordering bias .–Overall question
•Questionnaire Language error–Ambiguous - Are you satisfied or very satisfied with the
support you received?
•When respondents purposefully or mistakenly give
incorrect answers to survey questions
Respondent ErrorRespondent Error
Customer Loyalty as a Key Support Strategy
• Customer survey rating scales have “Satisfaction” set at the mid-point or just above
Example from seven point scaleExtremely
DissatisfiedVery
DissatisfiedVery
SatisfiedExtremelySatisfiedSatisfied
Customer Loyalty as a Key Support Strategy
“TOP BOX” IS SIMPLY A TERM USED TO DESCRIBE THE HIGHEST RATING ON A CUSTOMER SURVEY SCALE
• Definition from the “Support Center Practices” Certification program
• Highest rated measurement to better understand customer loyalty and retention– Question:Question:“Overall, how satisfied are you
with the support provided by your vendor ?”
Customer Loyalty as a Key Support Strategy
11
22
11
22
33
44
55
66
11
22
33
44
77
4-Point4-PointRating ScaleRating Scale
7-Point7-PointRating ScaleRating Scale
10-Point10-PointRating ScaleRating Scale
33
44
55
66
77
88
99
1010
Satisfaction
Top Box
Extremely Satisfied
Extremely Dissatisfied
Customer Loyalty as a Key Support Strategy
Now let’s look at the evolution Now let’s look at the evolution from highly satisfied customers to from highly satisfied customers to
intensely loyal customers. But, intensely loyal customers. But, first we must consider . . .? first we must consider . . .?
Customer Loyalty as a Key Support Strategy
SatisfactionSatisfaction = Meeting minimum expectation (32% chances of losing customer)
Loyalty Loyalty = Exceeding customers expectation and securing future commitment (0 to 3% chance of losing customers)
Customer Loyalty as a Key Support Strategy
It costs five to ten times more money to get a new customer than it does to keep the customers you already have John Tschohl, founder and president, Service Quality Institute.
5% increase in customer loyalty can increase profits by 25 to 85%
Harvard Business Review
Loyalty
Customer Loyalty as a Key Support Strategy
• Satisfaction scores for the automotive industry have ballooned up to 90%, while repurchase rates have remained mired below 50% .
• Bain & Company’s research has shown that in business after business, 60% to 80% of customers who defect to a competitor said they were satisfied on the survey just prior to their defection.
Loyalty
Customer Satisfaction
Repurchase Rates
Customer Loyalty as a Key Support Strategy
Loyalty
Average investor churn now exceeds 50% per year.
. . . and how about employee and investor loyalty?. . . and how about employee and investor loyalty?
Employee turnover rates of 15-25% are common.Cost of losing a service employee can be as high as $250K
Customer Loyalty as a Key Support Strategy
Customer Loyalty as a Key Support Strategy
Employee Sources of Job-Related MeaningRelated to Management’s Options to Influence That Source
Sources of MeaningWhat Management Can Do to Increase
Meaning, Thereby Increasing Inner Fulfillment
Stock options. Make the stock grow and split. (Very difficult.)
Career growth and promotion.
Provide for the company’s continued growth so that there are many slots to which one can be promoted. (Very difficult.)
The daily satisfaction of providing a valued service to customers.
Give employees all of the necessary tools and authority to provide a valued service to their customers.
The daily satisfaction of being a valued member of their organization.
Help employees align their daily actions to provide value to the organization and recognize them for doing so.
The daily satisfaction of fulfilling their own personal work-related needs.
Help employees see how daily satisfaction of organizational and customer needs is satisfying their own needs as well.
This concept was supplied by John Wright of Computer Associates.
Customer Loyalty as a Key Support Strategy
Customer Loyalty as a Key Support Strategy
In 2005, Walker Information conducted a U.S. and European study on customer loyalty in the software and hardware industry.
Customer Loyalty as a Key Support Strategy
Of all the major software and hardware companies evaluated as part of this Walker Loyalty Report, just 12 were designated as Loyalty Leaders. Earning high percentages of truly loyal customers, these companies also have relatively low percentages of customers in the high-risk category.
The 12 Loyalty Leaders are:
• Adobe
• Apple
• Cisco Systems
• Dell
• EMC²
• Hewlett-Packard
• IBM
• Microsoft
• Oracle
• SAP
• Sun Microsystems
• Symantec
Customer Loyalty as a Key Support Strategy
Walker Loyalty Walker Loyalty Reports Reports
categorize categorize Loyalty in four Loyalty in four
quadrantsquadrants
* Walker Information @ www.walkerinfo.com
Customer Loyalty as a Key Support Strategy
Walker Loyalty Walker Loyalty Reports Reports
categorize categorize Loyalty in four Loyalty in four
quadrantsquadrants
* Walker Information @ www.walkerinfo.com
High RiskHigh Risk. . . customers are . . . customers are
dissatisfied and are dissatisfied and are actively looking for actively looking for
alternatives.alternatives.
TrappedTrapped. . . customers feel . . . customers feel
forced to do business forced to do business with you now but will with you now but will
leave if they can.leave if they can.
AccessibleAccessible. . . customers are . . . customers are willing to give you willing to give you
opportunities to earn opportunities to earn their loyalty.their loyalty.
Truly LoyalTruly Loyal. . . customers like . . . customers like your company and your company and choose to associate choose to associate themselves with it.themselves with it.
High RiskHigh Risk. . . customers are . . . customers are
dissatisfied and are dissatisfied and are actively looking for actively looking for
alternatives.alternatives.
TrappedTrapped. . . customers feel . . . customers feel
forced to do business forced to do business with you now but will with you now but will
leave if they can.leave if they can.
AccessibleAccessible. . . customers are . . . customers are willing to give you willing to give you
opportunities to earn opportunities to earn their loyalty.their loyalty.
Truly LoyalTruly Loyal. . . customers like . . . customers like your company and your company and choose to associate choose to associate themselves with it.themselves with it.
Customer Loyalty as a Key Support Strategy
Hardware Customers / U.S. Hardware Customers / U.S.
High RiskHigh RiskServers/ Workstations 16% Servers/ Workstations 16%
Network Storage 18%Network Storage 18%
Net Equipment 21%Net Equipment 21%
Mass Storage 25%Mass Storage 25%
TrappedTrappedNetwork Storage 24%Network Storage 24%
Servers/ Workstations 25% Servers/ Workstations 25%
Net Equipment 27% Net Equipment 27%
Mass Storage 33%Mass Storage 33%
AccessibleAccessibleServers/ Workstations 4% Servers/ Workstations 4%
Network Storage 3%Network Storage 3%
Net Equipment 4%Net Equipment 4%
Mass Storage 2%Mass Storage 2%
Truly LoyalTruly LoyalServers/ Workstations 55% Servers/ Workstations 55%
Network Storage 55%Network Storage 55%
Net Equipment 48%Net Equipment 48%
Mass Storage 40%Mass Storage 40%
High RiskHigh RiskServers/ Workstations 16% Servers/ Workstations 16%
Network Storage 18%Network Storage 18%
Net Equipment 21%Net Equipment 21%
Mass Storage 25%Mass Storage 25%
TrappedTrappedNetwork Storage 24%Network Storage 24%
Servers/ Workstations 25% Servers/ Workstations 25%
Net Equipment 27% Net Equipment 27%
Mass Storage 33%Mass Storage 33%
AccessibleAccessibleServers/ Workstations 4% Servers/ Workstations 4%
Network Storage 3%Network Storage 3%
Net Equipment 4%Net Equipment 4%
Mass Storage 2%Mass Storage 2%
Truly LoyalTruly LoyalServers/ Workstations 55% Servers/ Workstations 55%
Network Storage 55%Network Storage 55%
Net Equipment 48%Net Equipment 48%
Mass Storage 40%Mass Storage 40%
The U.S. Hardware industry generates less customer loyalty than the Software industry, despite Hardware's higher scores in customer experience areas. This suggests Hardware companies have fewer barriers to switching, more competition, and/or less differentiation. Hardware products are more commodity-like than Software, which is why vendors seek to wrap the products into more consultative solutions for customers.
Customer Loyalty as a Key Support Strategy
Software Customers / U.S. Software Customers / U.S.
Software as a total sector in the U.S. maintains more truly loyal customers than does the U.S. Hardware industry. Europe's Software customers are less truly loyal than the U.S. customers and score similarly to Hardware in Europe.
Despite having more loyal customers, Software scores fall slightly below Hardware on company images, and even lower on customer experiences.
Within Software, CRM loyalty is slightly below the norm in the U.S., driven by concerns with total cost of ownership and product quality.
High RiskHigh RiskEnterprise 15% Enterprise 15%
Desktop 16%Desktop 16%
I nfrastructure 18%I nfrastructure 18%
CRM 22%CRM 22%
TrappedTrappedCRM 21% CRM 21%
Enterprise 21%Enterprise 21%
Desktop 24%Desktop 24%
I nfrastructure 24%I nfrastructure 24%
AccessibleAccessibleCRM 5% CRM 5%
Enterprise 5%Enterprise 5%
Desktop 3%Desktop 3%
I nfrastructure 3%I nfrastructure 3%
Truly LoyalTruly LoyalEnterprise 59% Enterprise 59%
Desktop 57%Desktop 57%
I nfrastructure 55%I nfrastructure 55%
CRM 52%CRM 52%
High RiskHigh RiskEnterprise 15% Enterprise 15%
Desktop 16%Desktop 16%
I nfrastructure 18%I nfrastructure 18%
CRM 22%CRM 22%
TrappedTrappedCRM 21% CRM 21%
Enterprise 21%Enterprise 21%
Desktop 24%Desktop 24%
I nfrastructure 24%I nfrastructure 24%
AccessibleAccessibleCRM 5% CRM 5%
Enterprise 5%Enterprise 5%
Desktop 3%Desktop 3%
I nfrastructure 3%I nfrastructure 3%
Truly LoyalTruly LoyalEnterprise 59% Enterprise 59%
Desktop 57%Desktop 57%
I nfrastructure 55%I nfrastructure 55%
CRM 52%CRM 52%
Customer Loyalty as a Key Support Strategy
How focusing on Customer Loyalty improved results at How focusing on Customer Loyalty improved results at
Cisco Systems*Cisco Systems* over the past few years. over the past few years.
* Wim Elfrink, Senior Vice President of Customer Advocacy, Cisco Systems
Keynote Speaker at AFSMI Conference – October 2005
Truly LoyalTruly Loyal2003 – 58%2003 – 58%
2004 – 67%2004 – 67%
2005 – 70%2005 – 70%
AccessibleAccessible2003 – 10%2003 – 10%
2004 – 12%2004 – 12%
2005 – 10%2005 – 10%
TrappedTrapped2003 – 15%2003 – 15%
2004 – 7%2004 – 7%
2005 – 7%2005 – 7%
High RiskHigh Risk2003 – 17%2003 – 17%
2004 – 14%2004 – 14%
2005 – 13%2005 – 13%
Customer Loyalty as a Key Support Strategy
A useful Customer
Loyalty Index is the percent of
surveys with top box selected on all three of these
questions.
Overall Satisfaction Very Dissatisfied
Dissatisfied Neither
Satisfied or Dissatisfied
Satisfied Very
satisfied
Please rate your overall satisfaction with the support center response to your recent support request.
1 2 3 4
Likelihood of Recommending
Very Unlikely
Unlikely Neither
Likely or Unlikely
Likely Very
Likely
How likely are you to recommend QuickSoft to a friend?
1 2 3 4
Likelihood of additional purchases
Very Unlikely
Unlikely Neither
Likely or Unlikely
Likely Very
Likely
How likely are to buy software products from QuickSoft in the future?
1 2 3 4
5
5
5
ReferenceReferenceWorkbookWorkbookPage 5-68Page 5-68
Measuring Customer LoyaltyMeasuring Customer Loyalty
SCP Support Manager Certification course
Customer Loyalty as a Key Support Strategy
The road to Customer Loyalty at Hewlett-Packard.The road to Customer Loyalty at Hewlett-Packard.
* ML Krakauer, Vice President & General Manager, Technology Services, Hewlett-Packard
Keynote Speaker at AFSMI Conference – October 2005
First time fix rate
Hold time
Quality (monitoring)
Time to resolution
Highly Satisfied
Each of these case attributes were
found to be highly correlated with high levels of
customer satisfaction.
Customer Loyalty as a Key Support Strategy
The road to Customer Loyalty at Hewlett-Packard.The road to Customer Loyalty at Hewlett-Packard.
* ML Krakauer, Vice President & General Manager, Technology Services, Hewlett-Packard
Keynote Speaker at AFSMI Conference – October 2005
Highly Satisfied
Highly Likely to Recommend
Highly Likely to Repurchase
Loyalty Index
The percent of customers that
scored a five on all three of these
survey questions make up the HP
loyalty index.
Customer Loyalty as a Key Support Strategy
• McKesson is a client of SatMetrix and uses a variation of the SatMetrix Customer Loyalty Index analysis. The CLI is based typically based on the answers to four questions:
1. How satisfied are you with this provider’s overall performance?
2. How likely is it that you would recommend this provider to a friend or colleague?
3. How likely is it that you will continue to purchase products/services from this provider?
4. If you were selecting a similar provider for the first time, how likely is it that you would use them?
• McKesson only uses the first three questions which are the same as the three questions used at Hewlett Packard and recommended in the SSC Certified Support Managers course.
Customer Loyalty as a Key Support Strategy
The SatMetrix CLI analysis separates customers into four categories.
• Promoter– High scores on each of the loyalty questions. They are committed
customers and are very likely to provide recommendations• Content
– Medium to high scores on each of the loyalty questions. Although they are likely to remain loyal, your company should develop action plans so that “Content” customers become “Promoters.”
• Disappointed– Average scores on each of the loyalty questions. They are
dissatisfied with one component of loyalty, and could be easily lost to competitors if your company does not address their needs.
• Lost– Low scores on each of the loyalty questions. They exhibit a high
level of dissatisfaction on the loyalty questions. At this point, it is better to concentrate your efforts on customers in the Disappointed or Content categories.
Customer Loyalty as a Key Support Strategy
• Customer driven, recognizing that our customers determine the definition of value Relentless pursuit of excellence, setting aggressive goals and measuring against progress Innovation, open-minded, willing to embrace new ideas and challenge our current way of doing businessSpeed, acting with a sense of urgency, a bias for action and a passion to win People, sharing respect for one another and a common sense of integrity in our work
Customer Loyalty as a Key Support Strategy
Customer Loyalty as a Key Support Strategy
The Idea in Brief
You only have to ask your customers one question: "How likely is it that you would recommend our company to a friend or colleague?" The more "promoters" your company has, the bigger its growth.
Customer Loyalty as a Key Support Strategy
Calculating your Net Promoter Score
Group your customers into "promoters" (extremely likely to recommend), "passively satisfied", and "detractors" (extremely unlikely to recommend). Then subtract the percent-age of detractors from the percentage of promoters.
Promoter Passive Detractor
10 9 8 7 6 5 4 3 2 1 0
Extremely likely
ExtremelyunlikelyNeutral
Customer Loyalty as a Key Support Strategy
Comparing Net Promoter Scores and Financial ResultsA more sophisticated approach is to use profitability-based segmentation to align customer experience with corporate goals and objectives.
-20
-10
0
10
20%
0 20 40 60%
IBMGateway
Compaq
HP
Dell
3 year revenue growth
Net Promoters
Wintel PC’s US only
0
5
10
15
20%
10 20 30 40%
Dollar/Thrifty
Budget
Avis
Alamo/National
Hertz
Enterprise
5-year revenue growth
Net Promoters
Rental Cars
-5
0
5
10
15%
-20 0 20 40 60 80%
America West
Alaska
TWA
Southwest
Continental
Northwest
USAir
United
American
Delta
5 year revenue growth
Net Promoters
Airlines US only
0
2
4
6
8
10%
40 50 60 70%
Airborne Express
FedEx
UPS
USPS
5-year revenue growth
Net Promoters
Package Delivery
Customer Loyalty as a Key Support Strategy
Market research on lost customers by major companies shows that 14% leave for better product, 9% for cheaper product, 68% because of poor service and/or service provider’s attitude, which can be easily avoided by designing, measuring and monitoring effective customer service process.
Why businesses loose customers!Why businesses loose customers!
New slide
Poor Service / Attitude
68%
Product Quality14%
Price9%
Needs Change5%
Other4%
Customer Loyalty as a Key Support Strategy
Re-purchase
Re-purchase
Decision to re-
purchase
Decision to re-
purchase
Post purchase evaluation
Post purchase evaluation
AwarenessAwarenessInitial
PurchaseInitial
Purchase
Re-purchase Loop
Each time a customer buys, he or she progresses through the buying cycle. The first-time buyer goes through five steps. The sequence of purchase, post purchase evaluation, and decision to re-purchase then form a re-purchase loop that is repeated multiple times, during a customer’s relationship with a company and its products and services.
Loyalty and the Purchase CycleLoyalty and the Purchase Cycle
Customer Loyalty as a Key Support Strategy
• Immunity– Inoculated against competitive threats
• The big “R’s”– Relationship and revenue– Reference-ability– Repeat business
Customer Loyalty as a Key Support Strategy
Loyalty is the commitment you Loyalty is the commitment you
must EARN from your customers must EARN from your customers
in order to maintain an ongoing in order to maintain an ongoing
profitable relationshipprofitable relationship