This is the second of a series of four blogs devoted to the topic of customer retention. To read Part 1, click here.
Employees get excited when management demonstrates a serious commitment to listening to customers and staff’s suggestions for serving them. Building customer loyalty is everyone’s responsibility and everyone’s input is critical. Sharing information is as critical as collecting it: Empowered employees delight in delivering superior personalized service.
Author Peter Drucker points out that, “When people are held responsible, they act responsibly.”
How can you hire terrific, responsible employees?
- Articulate clearly your company values.
- Identify the aspects of a customer service attitude you desire.
- Interview and screen to elicit information about alignment of the person’s philosophical attitudes, principles, values and behaviors with your priorities. Look for employees who like to deal with people.
- Train employees about your corporate philosophy, product knowledge and productivity skills.
When was the last time you encountered a “service zombie?”
Management consultant Karl Albrecht writes about those apparently apathetic, unfriendly, robotic frontline service employees in a Quality Digest article. He suggests that when people are emotionally overworked, they adopt normal defense mechanisms to contend with emotional fatigue or psychological burnout. The contact intensity of interacting with an endless stream of people, handling work-related feelings and situations, and the stress of listening and solving customer problems on-the-spot results in a desire for people to disconnect, distance, or defend themselves. Obviously, customers interpret such behavior critically because they are quite entitled to be selfishly preoccupied with their own needs and concerns.
Managers must acknowledge the difficulties inherent in service systems involving these types of interpersonal dynamics. Employee training should include the development of problem-solving skills, dealing effectively with all types of people, listening and communication skills, and win-win negotiation techniques. Managers need to genuinely listen, appreciate and guide front-line workers with compassion, respect and wisdom.
If your employees believe you are providing fair, honest, consistent, intelligent leadership, you will earn their loyalty. Leadership demonstrating competence and personal commitment earns trust. True loyalty derives from adherence to strong principles and values, congruence between words and actions, and clear respectful communication within a collaborative environment that values the contributions of all persons toward common goals.
Vendors as customers
Many companies fail to recognize their key vendors as important customers. The Wal-Mart alliance with Procter and Gamble stands as an excellent example of a synergistic, strategic and profitable partnership. Vendors treated as valued customers can collaborate to solve problems, share in risks, investments, and gains. Strategic horizontal and vertical alliances with your primary vendors can significantly enhance your marketing muscle in terms of time, labor and cost savings.
You will realize enormous dividends when you care for, and keep, every one of your best customers. To accomplish this feat, understand and speak to them as individuals, offer them many advantages and give them good reasons to stay with you.
The strength of a business partnership is based on customer attitudes and repeat patronage. No matter how often a customer buys, there is no guarantee that the customer will choose you next time. Value is always perceived relative to alternatives available at the time.
A framework for retention
Seek first to understand your customers. This may require attitude re-adjustment within your company. Everyone needs to listen openly, with a view towards understanding your customer’s perspective and expectations. In effect, stand in your customer’s shoes, sit in your customer’s chair, experience your company from the customer’s perspective — top management included. Become your own mystery shopper.
To assess the worth of a group of repeat customers, calculate the cumulative effect of your marketing strategies and investments in acquiring and maintaining customer relationships and loyalty. Use a cash-flow analysis to measure the impact of improving customer retention in the same way you measure anything else.
Measure your specific customer satisfaction issues against industry and competitive benchmarks. The list of measurement criteria will be derived from substantive and personalized research about your customer perceptions, expectations and experiences.
Gather relevant data from customers. Listen to customers directly about their needs, problems and product/service expectations. Do not rely on management intuition and assumptions.
Ask former customers in what ways their needs were not met. Ask customers what problems they have not yet expressed. Identify critical incidents for each customer need or performance problem. Determine how effective each need was met, at each point of contact from your customer’s perspective using a five-point rating scale for each performance attribute and critical incident. Assess customer loyalty levels with a five-point scale, having customers rate you overall and indicate the likelihood they will continue to buy in the future.
To measure the impact of customer retention through improved quality and service, calculate the expected return on investment.
John Goodman, president of the U.S. arm of customer experience research firm TARP, suggests using five pieces of data:
- The profit value of a customer
- The number of customers who experience problems
- The percentage of customers who bother to complain about problems
- The impact of problems on loyalty
- The impact of your service system on loyalty
Understand the data
Sort the performance attributes and critical incidents into two groups — positive influence on loyalty, and impact of potential defections.
Correlate the low scores and high scores. Don’t be fooled! Satisfaction is quite a passive state. Understand the core process for each issue; know the real reasons why you succeed and the real reasons why you have a problem.
To assess your risk, conduct a gap analysis to determine the discrepancy between customer expectations and what you have delivered:
Step 1: Quantify your customer needs, expectations, perceptions and values.
Step 2: Measure the relative importance of each component of service:
Expected levels of service
Unacceptable levels of service
Perceptions of service provided by you and by your competitors, and
Customer’s priorities for improvement
Step 3: Calculate the most critical aspects of customer service, using a gap analysis, to determine the relative importance of improvement priorities.
Step 4: Deploy your resources quickly arid directly to the attributes and critical incidents that affect loyalty and retention.
Step 5: Measure the effects of your actions.
Step 6: Give the improvements a chance to work, and then communicate with your customers about what you’ve done.
Step 7: Measure again, evaluate again, and take corrective action.
Indication of priorities
The key here is to determine the relative importance of various critical incidents by determining the correlation between specific problems and customer retention.
Compute the cost or impact of a particular problem by multiplying the ‘frequency of the problem’ by the ‘percentage of customers who indicate they may not repurchase or recommend the product or service.’
By performing a number of these calculations, you will have a bottom-line, customer-driven indication of priorities.
Successful service companies must put employees and customers first, period! Service managers must understand the factors that drive profitability: Successful companies understand that they must invest in people, technology supporting front-line workers, effective recruiting and training practices, and compensation linked to performance for employees at every level.
The challenge is to create innovative measurement techniques to calibrate the impact of employee satisfaction, loyalty, and productivity on the value of products and services delivered to customers in order to determine the corresponding impact on profitability and growth.
The bottom line is that customer retention is not about feelings; rather, it is a dollars-and-cents issue.
There are some customers that are better fired than coddled. Yes, I said it. There are some customers that must be fired (of course in a very humane way), but this is a subject left for a future blog.
Look out for the next two parts in this series:
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 9, 2008.
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
Putting Performance and Happiness Together in the Workplace by Charles D. Kerns, PhD