The Future of Free Wi-Fi

This is a guest post by Michael Williams, PhD, Assistant Professor of Information Systems

If you spend much time on the road away from your office you realize what a challenge it can be to find a reliable Internet connection for your critical tasks. Sporadic and unpredictable availability at hotels, airports, and public areas is a frustrating experience for even an occasional business traveler.

For the past few years the hope for business travelers has rested on Muni Wi-Fi. Muni Wi-Fi is a concept of creating a wireless hot-spot across an entire city. Prominent pioneers in this effort include Philadelphia, Toronto and Paris. (See here for a comprehensive list of municipal wireless networks)

Unfortunately, however, due to technical difficulties, the credit crisis, legal challenges, and a lack of will several cities have stopped adding capacity, or even cancelled these programs entirely (e.g., San Francisco and Philadelphia).

The good news is that several retail outlets have stepped up their Wi-Fi programs and begun to offer free, or nearly free, service to paying customers.

As of this fall, there are still three main types of Wi-Fi offerings from retailers:

1. Free (no restrictions) Some retailers, such as Corner Bakery Cafe and Panera view free Wi-Fi as a means to attract and retain customers. These firms offer free Wi-Fi with no restrictions or purchase requirements.
2. Third-party managed. A second approach outsources the networking to a third party and allows them to manage the Wi-Fi offerings. For example, Starbucks Wi-Fi network is managed by AT&T and/or T-Mobile. Historically, Starbucks customers were required to complete a separate transaction with these companies to utilize the Wi-Fi at Starbucks.This summer, however, Starbucks modified their policy to allow for “free” Wi-Fi for customers who met certain requirements.
3. Fixed rate per hour. Finally, other retailers, like McDonalds, offer Wi-Fi for a fixed fee rate per hour.

It appears that these retailers are crafting their Wi-Fi strategy to match customer demands and match their overall business strategy. Thus, “third-place” outlets like Corner Bakery and Panera naturally see free Wi-Fi as a strategic fit, while McDonald’s is more likely to view Wi-Fi as a potential revenue stream to complement its lower-margin menu.

As we finish the summer and head back to the busy season of business travel, I suspect we will continue to find Wi-Fi moving towards more market-based offerings and less government-sponsored initiatives.

One can make serious arguments for the benefits of either but the latter seems to be the direction we are heading.

What do you think? Is government-sponsored wi-fi a thing of the past? Let us know in the comments.

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Related in the GBR:

Managing Organizational Knowledge by Mark Chun, PhD, Michael Williams, PhD, and Nelson Granados, PhD

Mapping IT Resources for Successful Implementations by Alex Petrov, PhD, Rick Perrotta, BSEE, and Michael L. Williams, PhD

IT Matters: Ethics, Information Systems, and a Steel Ax by Michael Williams, PhD

Retaining Customers (Part 1 of 4)

This is a guest post by Bill Bleuel, PhD, Professor of Decision Sciences.

This is the first of a series of four blogs devoted to the topic of customer retention. Here, I will talk about retention, what it is, and why it drives successful business operations. The three subsequent blogs will present a conceptual framework for issues, rationale, cost models, and examples for use in developing and maintaining a loyal and profitable customer-base.

Never, never, never take a customer for granted — I mean it!

Throughout the past year, I have written about customer satisfaction and its permutations (customer loyalty, customer partnerships, customer bonding, tracking and measurements and employee loyalty). Now I want to talk about customer retention: the key to profitability and longevity.

The importance of retention becomes evident once you understand clearly the relationship between customer loyalty and profits. Some large companies estimate that as much as 95 percent of their profits derive from long-term customers. Many other companies know that a mere 5 percent decrease in customer defections can boost profits any where from 25 percent to 95 percent.

The decision to cultivate a highly loyal customer base must be integral to all aspects of a company’s business strategy. You must know who your best customers are and what it takes to keep them. Then, you must meet, exceed and anticipate their needs better than the competition and give them reasons to buy more.

Retention depends on what customers actually do, not necessarily on what they say they will do.

Customer loyalty implies a conscious choice to remain faithful. A customer-driven approach to business examines products and services in terms of customer perceptions and expectations. Customer retention can be defined as the ability to consistently meet or exceed customer needs, wants and expectations throughout the life cycle of the customer-company relationship which results in repurchase loyalty and positive word-of-mouth comments.

Tracking System and Measurements

Several elements are required to build an effective tracking system:

1. It must be easy to administer;
2. It must provide reliable data;
3. It must focus on the customer’s priorities;
4. Simple reports should tell managers where and how to allocate their resources for maximum benefit.

A comprehensive retention program focuses on two essential measurements.

1. Identify where and how often customer expectations have not been met.

In a 1994 article in Small Business Reports, William Sherdan, author, management consultant, and adjunct professor in the Brandeis International Business School, recommended the development of a customer relationship timeline that identified each key event and interaction starting with the initial sales contact and ending with the loss of the customer. He used the information to analyze customer defection trends and identify warning signals. Once each issue is understood clearly, he figured, then he could develop solutions to resolve the core process problems.

John Goodman, president of the U.S. arm of TARP, a customer experience research firm, suggests that customer satisfaction and customer loyalty are the operational measurement standards of customer expectations.

In an article for National Productivity Review, he suggested presenting customers with a list of potential problems or questions, across a broad range of transaction types, then soliciting which and how many, problems or questions they have experienced.

The key points to remember are that:

1. You must evaluate each critical incident and determine accurately the nature and extent of problems where they occur; and
2. Whatever the customer says is a problem, is a problem.

2. Determine your company’s ability to handle customer complaints and inquiries.

This includes obtaining a baseline indication of the extent to which your existing recovery process reduces defections or helps retain customers who might otherwise defect to the competition.

Comparisons against industry baselines will improve your frame of reference. The financial consequences of problems and customer-response systems can be determined by measuring word-of-mouth behavior. This can also be used as an indicator of future profitability.

Pre-empt Defections

Customer loyalty provides strong protection against competitive threats. The strength of your business relationships are reflected in your customers’ attitudes, repeat patronage and their word-of-mouth endorsements.

Focus on the core causes of defections rather than triggers and warnings signals, after the fact.

Some of the best ways to pre-empt customer defections include:

1. Monitoring customer expectations, needs and desires,
2. Monitoring the gap(s) between customer expectations, benefits, needs and experience,
3. Removing the gaps and satisfying your customer’s expectations, needs and desires better than the competition, and
4. Removing the customer’s perception of gaps between expectations and experience.

From an analytical perspective:

• Compare the value of your products and services against competing offerings to assess, and thoroughly understand, defections.
• Determine the relative significance of antecedent factors and the possibility of different outcomes.
• Identify and compare the variables of your best customers as compared to next-best customers relative to defections.
• Compare your defection statistics with key competitors and the industry baseline.

The key point to be made here is that most companies do NOT measure the number of customer defections nor do they analyze why customers leave.

A Retention Tool

Active listening, for the sole purpose of understanding, is the most important aspect of effective business communication. A thorough and accurate understanding of your customers’ expectations, from their perspective, can give you the necessary information to avoid, or solve, problems.

Active Listening: This is the best consulting advice a company can get and it costs nothing!

Armed with this critical information you can delight customers, develop needed products, or make adjustments to enhance their interactions with your organization.

When you really understand your customers and earn their trust and respect you derive many substantial rewards:

1. You deepen the relationship and begin a partnership;
2. You earn the opportunity to serve them;
3. You learn how, what, how much, and when to sell to them;
4. You reduce the opportunity for your competitors to penetrate your customer base and even your potential customers.

Companies that manage customer relationships successfully over time, take an integrated approach to management which includes marketing, information technology, market research and quality operations (manufacturing and/or service) and financial operations.

A successful company recognizes that, after the first sale, it has an opportunity to begin a relationship which may develop into a partnership.

Pursue any activity that preserves or enhances the relationship with your most valuable asset, your customer. As management guru Peter Drucker points out, “The customer is the only reason for any business to exist.”

I couldn’t have said it any better!

Look out for the next three parts in this series:

Part 2: Assessing the Customer’s Perceptions and Expectations

Part 3: Investing in Customer Solutions

Part 4: Using Customer Data Effectively

This post first appeared on Dr. Bleuel’s blog, The Customer Institute, on May 7, 2008.

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Related Resources in the Graziadio Business Report

Cultivating the Customer Asset by William Bleuel, PhD

Customer Satisfaction Measurement by Charles W. Fojtik, DBA, and John D. Nicks, PhD

Calculating the Strategic Value of Customer Satisfaction by Chic Fojtik, PhD

How to Protect Your Business From Customers

This is a guest post by Tim Berry, GBR Editorial Review Board member and President of Palo Alto Software

What? You say, reading my title here. Why would I want to? Here’s a question I received in the www.bplans.com Ask the Experts forum today:

My business sells window coverings and recently got taken by a client who decided to forgo paying for the balance due for product that was installed in his home. We often deal in large-value custom orders and need to protect ourselves in the future. What kind of agreement or contract can we use, and were can we find an example of something that will hold up in court? Should we use a lien agreement?

Ok wait. Let’s talk about this. Have you considered the impact on your business of asking all your customers to sign something like that? You’re selling window coverings. You have competition.

You just reminded me of my post last month The Heat, the Kitchen, and Credit Cards. I was mad at a customer who stole from us, and customer service for the credit card helped me out.

The active point in that was about the heat and the kitchen. You’re in business. You’re dealing with customers.

You have to decide whether the occasional bad apple is worth baking all of the apples as they come in.

Here’s a good exercise:

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Ideas vs. Opportunities

This is a guest post by Tim Berry, GBR Editorial Review Board member and President of Palo Alto Software

Ideas are a dime a dozen. Opportunities are much more important. An opportunity is an idea that’s passed the test of planning. It has potential. You can implement it. An opportunity has some of the following elements:

• Industry and market potential: look at market structure, industry structure, growth rate, margins, costs, etc.
• Economics: capital requirements, fixed costs, cash flow, return on investment, risk.
• Competitive advantage: degree of control, barriers to entry, availability of sufficient resources.
• Management team: people who know the industry, the market, the operations, the logistics, the road to market.

The business planning process is about filtering the opportunities—a precious few, requiring focus, and planning—from the ideas.

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