Posts Tagged ‘Customer Loyalty’

C-Sat Surveys Can Cause Intra-Organizational Conflict

October 20, 2010

I’ve grown somewhat leery of customer satisfaction surveys in recent years.  While I still believe they can add highly useful information for a company to make improvements to the customer experience, I am also convinced that many companies aren’t doing said research properly.

My reservations aside, regardless of whether a company is doing C-Sat research properly, customer satisfaction surveys can also cause intra-organizational friction and conflict.  Because of the ways departments are incentivized and compensated, some will benefit more than others.  Moreover, because many companies either don’t  link their desired financial and operational outcomes – or don’t link them well enough – to the survey, many departments can claim that the research isn’t working.  C-Sat research is fraught with inter-departmental conflict because companies are conducting it with vague objectives and rewarding – or punishing – departments for their ability or inability to meet those vague objectives.

The key to reducing the conflict caused by C-Sat surveys is to have all affected departments share in framing the objectives.  Before the survey is even designed, all parties should have an idea of what is going to be measured – whether it is repeat business, reduced complaints, shorter customer waiting times – and what they will all be accountable for.  Stakeholders should also work together to see how – or if – they can link the survey’s results to financial and operational performance.  And the stakeholders should be provided information, training, and guidelines to aid their managerial actions in response to the survey’s results.

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Rankings – not Ratings – Matter in Customer Satisfaction Research

October 5, 2010

Companies spend countless dollars each year trying to measure and improve customer satisfaction. Much research has indicated that improved customer satisfaction brings about improved sales and share of wallet. Yet, the relationship is a weak one. Despite how satisfied customers say they are in customer satisfaction surveys, nearly 80% of their spending doesn’t relate to their stated satisfaction. Why is that?

In the Fall 2010 issue of Marketing Research, Jan Hofmeyr and Ged Parton of Synovate offer two reasons for this weak relationship between business results and satisfaction: companies don’t measure how their customers feel about competitors, nor do they recognize that they should be concerning themselves with the company’s rank, not its rating. For these reasons, the authors argue, models of what drives customer share of wallet offer little confidence.

Hofmeyr and Parton suggest some ways companies can make these improvements. Companies can start by getting ratings of the competition from the same respondent. If, for example, you are asking your customers to rate your company on a set of attributes that you believe are part of their customer satisfaction experience, if one customer gives a rating of “9” on a 10-point satisfaction scale, and another gives a rating of “8,” you are naturally inclined to treat the first customer as more likely to return and do business with you in the future. But that is only one piece of the puzzle, the authors say. What if you ask your customers to also rate your competition on those same attributes? What if the first customer assigns a competitor a “10” and the second customer a “7”? Basically what happens is that the first customer is very satisfied with your company, but even more satisfied with your competitor; the second customer may not be as satisfied with your company as the first customer, but he/she is most satisfied with your company over the competition. You’d probably want to spend more time with the one who gave the “8” rating.

In this example, the authors are essentially turning ratings into rankings. The ranking, not the rating, the author’s say, is the key to increased share of wallet. Hofmeyr and Parton’s research showed that if a customer shopped predominantly at two retailers, regardless of rating, as long as a customer rated one retailer higher than the other, then the top ranked retailer got an average of between 59% and 68% share of the customer’s wallet, while the lower ranked retailer got just 32% on average. If a customer shopped at three retailers, the pattern was similar: the top-ranked retailer got as much as a 58% share of the customer’s wallet; the second-place retailer, 25%, and the lowest ranked, 17%.

While it is important to have customers rate your company on satisfaction, it is just as important to have them rate your competition on the same evoked set and then order and rescale the ratings so that you can see where your company stands. By ranking your company with respect to your competition, you can much more easily determine gaps between satisfaction expectations and delivery so that you can increase share of wallet.

Former Customers Can Be Goldmine – Both in Marketing Research and Winback Sales

August 24, 2010

The other day, I stumbled across this May 28, 2010 blog post from MySmallBusinessMentor.com, which discussed how to re-activate former customers. While you should definitely reach out to former customers and try to get them to buy again, your former customers can also provide a wealth of information from a marketing research and process improvement standpoint.

If a customer has lapsed for, say a 90- or 180-day period, or a customer who used to buy once a month is now only buying every other month, reach out to that customer and mention that you noticed he/she isn’t frequenting your business as much, and ask if there’s anything with your company that they aren’t getting, or would like to see. It could be that they’re not happy with the product, or they found a similar, less expensive product from a competitor. Maybe they’ve “outgrown” your company’s products; or maybe they lost their job and can no longer afford it, whatever. You won’t know unless you ask.

For the purposes of marketing research, a lapsed customer can be more valuable than a loyal customer, especially when you consider that acquiring a new customer is six times more costly than retaining an existing customer. Taking the time to hear out a former customer can help you take corrective action to prevent other customer defections, improve your practices and product benefits, and even win back your lost customers.

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Help! Customer Satisfaction is High But Sales are Down!

July 28, 2010

Customer satisfaction measurement has been of great interest to service organizations for some years now. Nearly every industry that is both highly competitive and heavily customer-facing – like restaurants, hotels, and banks – know that a poor customer experience can result in lost future sales to the competition. As a result, these service-oriented businesses make every effort to keep their ear open to the voice of the customer. Indeed, customer satisfaction surveys proliferate – I once received five in a single week – as company after company strives to hear that customer voice.

And the effort may be futile. This isn’t to say that measuring customer satisfaction isn’t important – most certainly it is. But many companies may be overdoing it. In fact, some companies are seeing negative correlations between customer satisfaction and repeat business! Is this happening to you?

Reasons Why Satisfaction Scores and Sales Don’t Sync

If your customers are praising you in satisfaction surveys but you’re seeing no improvement in sales and repeat business, it could be for one or more of the following reasons:

You’re not Asking the Question Right

Often, a disparity between survey results and actual business results can be attributed to the two measuring different things. If you simply ask, “Overall, how satisfied were you with your stay at XYZ Hotel,” it only tells you about their current experience. If 80 percent of your respondents indicate “Satisfied” or “Very Satisfied,” you only get information about their attitudes. Then you compare satisfaction scores to either total sales or repeat sales from quarter to quarter. And you find either no correlation or a negative correlation. Why? Because the survey question measured only their perceived satisfaction, while the business results measured sales.

On the other hand, if you were to ask the question: “How likely are you to return to XYZ Hotel,” or “How likely are you to recommend XYZ Hotel to a friend or relative,” you might get a better match between responses and business outcomes.

Only Your Happiest Customers Are Responding

Another reason satisfaction scores may be high while sales are declining is because only your most loyal customers are taking the time to complete your survey. Your most loyal customers might have been trained to complete these surveys because they have been spoiled with special incentives because of their frequent patronage, and hence get better treatment than most customers.

Another, more dangerous, reason your happiest customers may be the only respondents is because the distribution of the survey is “managed,” being sent only to the people most likely to give high scores. There is a great risk of this bias in organizations where top executives’ compensation is tied to customer satisfaction scores.

Respondents Aren’t Telling the Truth

As much as we hate to admit, we’re not as honest as we claim to be. This is especially true in surveys. Entire books could be written on respondent honesty (or lack thereof). There are several reasons respondents don’t give truthful answers about their satisfaction. One obvious reason is courtesy; some just don’t like to give negative feedback. Still, even with the promise of confidentiality, respondents worry that if they give a poor rating, they’ll receive a phone call from the business’ representative, which they aren’t comfortable taking.

Survey incentives – if not carefully structured – can also lead to untruthful respondents. If you offer respondents a chance to win a drawing in exchange for completing your customer satisfaction survey, they may lie and say positive things about their experience, in the hopes that it would increase their odds of winning the prize.

You’re Hearing Your Customer but Not Really Listening

In many cases, your customers might say one thing, but really mean another. The customer could be quite satisfied on the whole, but there might be one or two smaller things, that if unchecked, can reduce the customer’s likelihood of repeat business. For example, if you sell clothing online, but not shoes, and your customer doesn’t find out until after loading everything else into the online shopping cart, assuming he/she doesn’t abandon the cart, the customer completes the order for the clothes he or she wants. When the customer gets the survey, he or she might indicate being very satisfied with the order he/she executed. But deep down, that same customer might not have liked that your online store doesn’t sell shoes. Whether or not the customer indicates the issue about the shoes, the next time he/she wants to buy clothes online, the customer may remember that you don’t sell shoes and choose to place the entire order with a competitor who does.

How Can We Remedy This Disparity?

There are a few ways we can remedy these situations. First, make sure the questions you ask reflect your business goals. If you want satisfied customers to return, be sure to ask how likely they are to return. Then measure the scores against actual repeat business. If you want satisfied customers to recommend your business to a friend, make sure you ask how likely they are to do so and then measure that against referrals. Compare apples to apples.

Second, reduce incentives for bias. Ideally, no executive’s compensation should be tied to survey ratings. Instead, tie compensation to actual results. If compensation must be tied to survey results, then by all means make sure the survey is administered by employees with no vested interest in the outcome of the survey. Also, make sure that your entire list of people to survey comes from similarly disinterested employees of the organization.

Third, encourage non-loyal customers to participate. You might create a separate survey for your most loyal customers. For the non-loyal customers, make sure you have ways to encourage them to respond. Whether it’s through an appropriate incentive (say a coupon for a future visit), or through friendly requests, let your non-loyal customers know you still care about their feedback.

Fourth, place reliability checks in your survey. Ask the same question in two ways (positive and negative) or phrase it slightly differently and compare the results. In the former example, you would expect the answers to be on opposite ends of the rating scale. In the latter, you would expect consistency of responses on the same end of the scale. This helps you determine whether respondents are being truthful.

Finally, be proactive. In the example of your online clothing store, you might have the foresight to realize that your decision not to sell shoes may impact satisfaction and future business. So you might be upfront about it, but at the same time, offer a link to a cooperating online retailer who does sell shoes, and allow the customer to order shoes from that retailer using the same shopping cart. That may keep the customer’s satisfaction high and increase his/her likelihood of future business.


 

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Don’t Confuse E-mail Selling with E-mail Marketing

April 27, 2009

In E-mail Marketing vs. E-mail Sales, e-mail marketing expert and independent consultant, Jeanne Jennings, discussed how some companies are confusing e-mail marketing with e-mail selling, and thus not reaping much of the benefits e-mail marketing can offer them.

Jennings points out that e-mail marketing is focused on longer-term objectives, while e-mail sales are geared towards immediate revenue, and that companies who send nothing but promotional e-mails tend to fatigue their lists, as well as limit their audience only to customers and prospects who are already at that stage in the purchasing cycle.  I could not agree more.

Jennings reiterates what we marketers must never forget: E-mail marketing – as any marketing –  is more than selling; it’s also brand-building, relationship-building, keeping your company at the top of your customers’ minds, and exchanging information between you and your customers.  Concentrating your e-mails solely on short-term sales can cost you greatly in foregone future repeat sales that often accompany good customer relationships.

The ideal proportion of your e-mail marketing messages that should be non-promotional vs. promotional varies by industry, product category, and other factors.  However, your company can reap great benefits from a healthy mix of these two types of messages.

Sending a promotional e-mail will likely succeed if a prospect is in the buying stage.  Another e-mail that offers news and tips on how to use your product may help increase product usage and create customer loyalty.  An e-mail that illustrates the benefits of your product or service may help a prospect who is still in the needs discovery phase of the buying cycle to think of your company when he/she is ready to buy.  Sending a confirmation e-mail after a purchase – coupled with additional information –  can trigger some impulse spending by your customer.

Another useful benefit of taking a long-term focus to e-mail marketing is that link-clicks are trackable.  You can track the behavior of someone on your e-mail list when he/she opens your e-mail and clicks on a link.  This can yield valuable clues about the type of content that interests the prospect, and can help you tailor both your non-promotional and promotional e-mails to the prospects’ preferences.  When you send your prospects and customers e-mail that interests them, they believe you have their best interest in mind, and they are more likely to buy from you.

In these recessionary times, companies need to make sales.  But hard selling, whether online or off, is a sign of desperation.  Companies whose marketing demonstrates  – in every channel – that they understand and care about their customers will more than make up for today’s lost sales tomorrow.