Seek first to understand, then to be understood.
Effective listening to the complete voice of the customer is a foundational capability for customer-centric maturity. You can’t improve if you don’t listen!
For many companies, a Voice of Customer (VoC) program means asking customers to fill out a survey after a purchase or service interactions, or once a year to assess the overall health of customer relationships. But surveys, while an important element in a listening strategy, are not enough in today’s world.
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Increasingly, customers air their concerns on the Social Web, and expect their favorite brands to pay attention. Also, as more interactions move to digital channels, brands can listen to their customers’ “digital body language” online or in transactional systems.
What are your answers to these five key questions about your organization’s VoC program?
QUESTION 1: Where is Your Organization on the Customer-Centric Journey?
Customer-centricity is like art. We all know it when we see it!
Some think customer-centricity means attempting to satisfy every customer need. Others believe it’s about using CRM tools to enable more targeted marketing, sales automation, or cost-effective service.
And then there’s CEM, a welcome step towards delivering value that customers actually care about. And yet, mindlessly trying to optimize every touchpoint in the name of a great experience doesn’t make business sense.
Four stages of maturity
I see customer-centricity as a journey. To progress, most companies evolve through four stages of development.
- Stage 1 – Targeted: “We know our customers and what they buy, and can optimize marketing, sales and customer service activities to generate more revenue and profit for the company.”
- Stage 2 – Responsive: “We regularly get customer feedback, prioritize key issues and work to improve customer satisfaction with the products and services we sell, to minimize customer attrition.”
- Stage 3 – Engaged: “We focus on a long-term relationship and strive to make an emotional connection with customers, by providing delightful experiences that create advocates.”
- Stage 4 – Inspired: “We think deeply about what customers are trying to accomplish in their business and personal lives, and create new ways to add value before they ask!”
Effective listening is a line of demarcation between Stage 1 (Targeted) and more advanced stages of customer-centricity. From a customer point of view, you have to at least reach stage 2 (Responsive) to be perceived as customer-centric.
QUESTION 2: What Makes Your Customers Loyal?
It’s all well and good to listen to customers, but listen to what? Unless you know what truly drives customer loyalty, surveys may be a waste of time. Especially if customer feedback leads to changes that actually hurt customer loyalty and revenue.
Think that’s far-fetched? Consider Walmart’s “$1.85 billion mistake.” That’s what some experts say the retailing giant lost in an ill-conceived “Project Impact” to reduce inventory. The initiative was a well-intended response to customer survey input criticizing clutter in the stores. The unhappy result after spending millions of dollars in store refurbishment: a decline in same-store sales.
Walmart’s mistake was taking customer input at face value, without understanding what matters most to its customers. True, some customers complained about clutter. But it was Walmart’s broad selection (and low prices) that brought them back to shop, again and again. Moving away from that brand promise, perhaps reacting to a new competitor (Target), was an expensive mistake.
Consumers weigh many factors when making a purchase decision. Here are a few other examples of loyalty drivers:
- In a 2011 study, Walker Information found that 43% of IT industry customers were assessed as “Truly Loyal”—likely to increase their spending and recommend the IT vendor to others. The firm found that “product quality is at the top of the list” and “account management is becoming increasingly important to customers.” But, the purchase experience had actually decreased in importance.
- Chris Travell, VP of the Automotive Research Group at Maritz Research says that car makers continue to innovate but find it hard to get an edge with their products. But there are still large differences in the customer experience, so car manufacturers are focusing more attention there. Customers with the highest level of customer satisfaction are five times more likely to repurchase.
- GfK Customer Loyalty’s banking industry research found that drivers can change from year to year. In 2011, “Reward Customers For Their Loyalty” became a new dissatisfaction driver. Banking customers now expect to be rewarded; it’s not a good opportunity to delight customers or drive loyalty. In contrast, “Helps You Be Smart About Money” is a new positive loyalty driver, which suggest banks should invest more attention here.
- Business over Broadway’s methodology considers three types of loyalty: Retention Loyalty, Advocacy Loyalty, and Purchasing Loyalty. In the wireless telecom industry, both “product” (wireless coverage and reliability) and “experience” (customer service) had a strong and nearly identical impact on Advocacy Loyalty, with similar and lower impact on the other two types of loyalty.
The point of good loyalty research is to understand what drives genuine customer loyalty in your target market. Then you can build a strategy to decide where to invest, which will depend on your capabilities and the actions of competitors in your market. And, you can define customer listening programs to request feedback on what really matters.
QUESTION 3: What’s the Right Loyalty Metric for Your Business?
Loyalty experts agree that genuine customer loyalty is more than just repeat-buying behavior. A positive attitude is also important, because it leads to recommendation and referrals. That’s why it’s critical to correctly measure customer loyalty, so that appropriate actions can be taken.
In 2006, Fred Reichheld’s book The Ultimate Question proposed a simple method to measure loyalty, called the Net Promoter® Score. (Note: Net Promoter is a registered trademark of Satmetrix, Bain and Reichheld). Based on responses on a zero- to 10-point scale, customers are grouped into promoters (9 or 10), passives (7 or 8 ) and detractors (0 to 6). Subtract the percentage of detractors from promoters, and, voilà, you’ve got a Net Promoter Score (NPS).
With that, Reichheld asserts, you can get rid of those long surveys and expensive loyalty researchers. Just focus on improving your NPS, and your company will grow. Prominent brands like Amex, GE and Intuit have embraced the method, and many others have followed suit.
NPS critics contend that Reichheld went too far, dumbing down customer loyalty into a single, overly simplistic measurement. Indeed, other researchers can’t replicate Reichheld’s assertions that NPS is the “best” metric. Timothy Keiningham of IPSOS Loyalty found that the ACSI (American Customer Satisfaction Index) and NPS offer similar predictive capability, using Reichheld’s own data.
Loyalty researchers also agree that NPS has statistical shortcomings. Why go to the trouble of asking people for a zero-to-10 rating, then “throw away” information by categorizing their responses into three buckets? A simple mean (average) score would be more reliable (less statistical error). Many experts agree that a general loyalty metric would include a composite of intent to repurchase, willingness to recommend, and overall satisfaction.
But that doesn’t answer the question: What’s the right loyalty metric for your business? The honest answer is, you have to figure that out for yourself. Some businesses have been successful with NPS, and it has gained popularity especially with the executive suite.
But many others, including NPS adopters, find that the just-one-question approach isn’t enough. Additional questions are needed to provide actionable data. Any metric should be validated to ensure it is linked to positive business outcomes. Also, you’ll need to re-validate periodically because markets and customers do change!
QUESTION 4: Are You Implementing a VoC Command Center?
Nothing beats a face-to-face meeting to get customer feedback. But large enterprises with thousands or millions of customers won’t find in-person meetings a practical means of customer feedback. So, customer surveys are used commonly to collect feedback, often with the help of Enterprise Feedback Management (EFM) systems.
But surveys are just one of the six dimensions of feedback you can use to understand the health of your customer relationships.
In addition to surveys, customers and prospects “speak” explicitly to your business via information captured from web site forms; unstructured text in comments or emails; and audio recordings captured during call center interactions.
And that’s not all. Customer behavioral data from CRM and other transactional systems are example of implicit communication that can signal when a customer is likely to defect—a critical bit of feedback these days when retention is a top priority.
Of course, the hot new communications channel is social media, which can also be used as a source of real-time feedback on what customers and market influencers think of your brand. Dell and Gatorade have implemented control centers to monitor social media.
This is the right concept, but monitoring social media separately is just as limiting as only listening to customers via survey responses. We have enough silos already. The time has come to implement a next-generation VoC Command Center to holistically manage all of the feedback channels that your customers use.
- Structured feedback: Surveys, web experience data and churn signals are mostly data that can be easily processed with conventional information systems.
- Unstructured feedback: In their raw form, text, speech and social media need help from analytic tools to become actionable information.
There are robust solutions available for each of the six feedback dimensions. While each deserves special treatment, a next-generation VoC Command Center should pull them all together with capabilities to capture, analyze and manage feedback to a successful resolution.
QUESTION 5: Can You Close the Loop with Social Customers?
Each month over 50 million people visit TripAdvisor, according to comScore Media Metrix. This is just one of many sources of online reviews, which industries studies confirm really do impact hotel choices by travelers. Companies can’t afford to ignore social voices.
Like many hotels, Best Western International (BWI), has struggled with how to handle negative online reviews. Executives concluded that monitoring brand buzz at BWI headquarters was not enough. It was far more important to close the loop with a consumer who has posted a negative review, before it could do long-term damage.
BWI started by implementing an feedback management solution to deliver surveys, analyze responses and distribute feedback to Best Western hotel managers. But this only addressed solicited, survey-based feedback. Unsolicited social media feedback—on review sites like TripAdvisor but also Facebook, Twitter, and many more—started as a trickle a few years ago, but quickly turned into a torrent. BWI explored specialized solutions to monitor social media, but found solutions too expensive and, more important, not integrated with the feedback management system they had worked so hard to implement.
So BWI co-developed an integrated solution with its EFM vendor that enabled a hotelier to see feedback from both surveys and social media on one dashboard. Now if a guest posts about a bad experience at a Best Western hotel, the EFM system harvests and analyzes the social data, associates it with a specific hotel, then sends an email alert to the hotel manager. The manager can then read the review and respond directly to TripAdvisor via an integration.
This initiative has helped BWI improve the guest experience. In 2008, the hotel brand’s ACSI score (a measure of overall loyalty) was an anemic 70 vs. the industry average of 75. By 2012, Best Western’s ACSI score improved to 76, near the industry average which edged up to 77. In 2010, BWI was ranked the top midscale hotel brand in Brand Keys’ Customer Loyalty Engagement Index.
This article is based on Bob Thompson’s e-book How Customer-Centric Leaders LISTEN to the Voice of Customers, available for free download to CustomerThink members.