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Retention, Growth and CX Expectations 

Hank Barnes | Jul 25, 2017 474 views 14 Comments

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In today’s tech markets, with more and more offerings delivered as a service, the focus is increasingly on retention and growth within existing accounts.   And, they are usually used in the same sentence and the responsibility of the same account representative.   Unfortunately, findings from Gartner’s Sales and Service Group, led by Nick Toman, from CEB (Now Gartner), show that we have some problems.

First, while growth is desirable, retention is required.  In the recent #CEBInfluencers day, Brent Adamson (also of CEB (Now Gartner) described it this way, saying sales management’s message is typically, for example, “We’d like you to grow that 11M account to 15M, BUT WHATEVER YOU DO, don’t let it go below 11M.”   Comp plans are often split between retention and growth, with the majority of comp based around retention metrics.

To drive retention and growth, the vast majority of sellers believe that the answer is to go above and beyond in efforts to exceed customer expectations.  They see exceptional service as the key stepping stone toward growth.

And, based on this new data from Nick’s team, they are wrong.  

The data shows that, while great service does support retention, it has no statistically relevant impact on growth.  None.

Source: CEB (Now Gartner)

Source: CEB (Now Gartner)

As I learned this information, it harkened back to discussions that have been going on for years in the Customer Experience community around expectations.  Some believe that exceeding expectations is the key to great customer experience.  Others, and I’m in this camp, believe that delivering on your commitments, while providing an expected level of service, and focusing on the value that customers acheive is sufficient.   This data, I believe, reinforces that view.    Going way above and beyond might be appreciated, but it is not going to return more value to you than just doing what customers expect (and want).

As a note, The whole idea of a different approach to service than exceeding expectations has been explored in a great book that Nick, Rick Delisi and Matt Dixon authored a few years ago, “The Effortless Experience: Conquering the New Battleground for Customer Loyalty.”  The ideas in it still apply and continue to attack conventional wisdom.



But is there an answer–something that you can do with accounts to drive growth without sacrificing retention.  There is.  It is helping customers improve.  How do you do that?   You provide unique perspectives that can help their business be ore efficient or effective.  You provide depth to those perspectives by outlining how those actions can be taken.   And you focus on the impact, the ROI, of those efforts.

The data shows that this improvement focus has the biggest impact on growth in comparison to product success and service, aggressive sales tactics, and confidence in the sales team.   But there is a kicker.  It also has a huge impact on retention, almost the same level of impact as a success and service focus.     So, rather than training teams to focus on exceeding expectations with basic services, reorient them to focus on helping customers improve.  While that my also exceed their expectations, it will do so in a different way–a way that an contribute to both retention and growth.

For more information and their top tips to drive account growth, go here (registration required).


Republished with author’s permission from original post.

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14 Responses to Retention, Growth and CX Expectations

  1. Andrew Rudin July 25, 2017 at 1:39 pm (207 comments) #

    Hi Hank: interesting graphic, though it seems so broad that it’s challenging to attribute much meaning. If the population of accounts were partitioned between accounts in which the vendor was chosen as the primary supplier, and accounts where the vendor was brought in as the secondary (aka backup or alternate), my hypotheses is that we would see quite different revenue growth results between the two groups when comparing gaps in service levels. One of the top questions in my mind: what was the growth opportunity in the first place? If there wasn’t one, there was possibly no foul in “over-delivering” service, but it’s a mistake to believe that measurable revenue growth can be conjured, short of simply raising prices.

    Part of the research question comes from the definition of “exceptional service,” and I’m unclear how it would be measured. I expect there is a gap between how vendors express it (“When we do X, Y, and Z, we’re providing our customers exceptional service!), and how customers perceive it (To us, exceptional service means getting, X and Y and Z.) Then, there’s the question of how product is bound up in all this. Is an 18% defect rate on raw material “exceptional” when other suppliers are delivering 19.5%? Or, is product quality ignored in assessing exceptional service. Furthering the measurement challenge, if vendor X delivers a 20% defect rate (higher than average), but they replace the defects sufficiently fast to prevent the customer production downtime, are they providing more “exceptional” service than the higher-quality supplier who takes longer to replace the defective parts.

    I know this gets deeper into the measurement weeds than you’d probably like, but it seems the whole “exceptional service” thing is super-messy to measure.

  2. Hank Barnes July 25, 2017 at 3:55 pm (35 comments) #

    Andy,

    I would have to cede to my new teammates from CEB to provide more color on the survey methods and details. The definitions for some of the terms (which is in the fine print of the graphic may help). For “product success and service” this was about account managers (specifically) that were focused on resolving issues and helping customers gain full value of the purchase. Additionally, it was about them being a “go-to” person for the customer.

    The definition of customer improvement (which was seen as a growth driver) was around three things: providing customers with unique, critical perspective on improving their business, laid out a vision for improving customer’s business, and outlined the ROI of the commercial relationship.

    The main point they make is that above and beyond service does not have a huge added benefit on retention, beyond just helping customers achieve what they think they paid for. Do that to a sufficient level and you have a good shot of retaining. Exceeding expectations in this area could be viewed as wasted effort–from a retention standpoint.

    So that part of things is not even about if there is a growth opportunity. Where they go further is that focusing primarily on helping customer achieve current objectives with great service does not have any significant impact on growth. You have to take customers to different places.

    And the kicker stat that I did not include in my summary is that 88% of the sellers surveyed (and there were 670 of them) “agreed” with the statement that “Servicing my accounts above-and-beyond customer expectations is the surest way to grow accounts.”

    Above and beyond service does help with retention, but it does not significantly help beyond just providing expected service. (and yes there are factors of product quality as part of customers getting the expected value from the product.

    Growth requires a different path.

    The link in the article takes you to a bit more information from the CEB team and I expect you’ll see more in the future on this.

  3. Nick Toman July 25, 2017 at 5:33 pm (2 comments) #

    Andrew, Thanks for the question. This data set represents a wide and varied sample that operated under the condition of “being an existing account” of a given supplier. Some were exclusive suppliers, some were part of broader ecosystem of suppliers rendering products or services to a given customer. While we’d likely see some marginal differences if we isolated varying circumstances, statistically-speaking, we did not find meaningful differences. In other words, we found that over-servicing doesn’t yield growth.

    In a separate but similar analysis, detailed in our book The Effortless Experience, we found a remarkably similar relationship between service provided in a post-sales setting (i.e., call center, technical support, etc.) and customer loyalty. Service minimizes disloyalty, but doesn’t promote loyalty.

    Those familiar with the Kano model will recognize that “upside” drivers often tend to be different-in-kind than “downside” drivers. This is precisely what we’ve found in two separate studies. Hope this helps provide some color.

  4. Michael Lowenstein July 26, 2017 at 5:24 am (1283 comments) #

    The cold reality is that service, however good or brand-building (or poor and brand-deflating), is only one component of the overall customer experience. CX researchers, especially those analyzing the emotional and memory aspects of experience, have understood that for years. That is one key reason why macro and comparmentalized measures like Customer Effort Score are so insufficient, and even misleading, as a basis for taking granular CX action

  5. Lisa Yetman July 26, 2017 at 7:37 am (12 comments) #

    Gentlemen, it seems to me that being consistent in what and how you or your company business provides to its guests and customers is actually the key to a great customer experience.
    Various companies and businesses use a variety of methods to attain their effectiveness in the marketplace – and everyone of these businesses finds one way that succeeds for them. Also, if you train your staff well in your company culture, everyone will know what is expected of them, which will -in turn – be passed on to those being served.

  6. Andrew Rudin July 26, 2017 at 9:40 am (207 comments) #

    Hank – thanks for the clarifications. But I’m still struggling to understand your previous comment, “Above and beyond service does help with retention, but it does not significantly help beyond just providing expected service.” Does that mean for reducing churn, “yes, do this.”? Or, “no don’t do this, because it will unnecessarily erode profit margins.”?

    What about for winning new accounts? As a sales rep, I had many accounts where I got a foothold as a second- or even third-tier supplier. It’s the rep’s job to exploit every weakness of the dominant vendor(s), and to drive fissures in that company’s relationships within the organization. One approach was to take very, very good care of the account, and to lavish time and attention on buyers and influencers. I wasn’t always successful, but the tactic is so common, vendors have vernacular for it: buying the business.

    Second, I have seen the terms over-servicing, and above-and-beyond service in this comment thread, which I take to be synonomous. But I don’t know what they mean operationally, and by transfer, I don’t know how to interpret what they mean in a research context. Does above-and-beyond mean any benefit or value that’s extended to a customer beyond what’s explicitly stated in the terms of sale or contract? Is it something that’s positioned as “no extra charge” to the customer when the costs of delivering it are actually built into the product cost (a fairly common practice). Or, are they unplanned services provided to customers that were implemented to mitigate a significant issue, such as a catastrophic product failure in the field? These terms are bandied about so frequently, we seldom stop to attribute precise meanings to them.

    And again, what’s above-and-beyond for a vendor might be expected service for a customer. How are these distinguished? It works vice-versa, too. When I had the dealer perform service work on my car this year, I noticed they also performed the annual state vehicle inspection (required in Virginia), which I hadn’t requested. A week later, I commented to the president of the dealership how pleased I was that this was done without my asking, and she told me it’s standard practice – actually, a response to past customer complaints. I had no idea. This stuff goes on all the time.

    Without an explicit definition for above-and-beyond, how do you tease this out in research and draw meaningful conclusions?

  7. Hank Barnes July 26, 2017 at 12:01 pm (35 comments) #

    Andy, a few things that I can add that reflect my perspective and interpretation of the results. Remember that this study was really focused on the role of account management (not truly customer service) in driving retention and growth.

    The discussion of above and beyond service, I’d describe as “going above and beyond what a customer expects to receive in order to get the value from the product or service they bought.” That wording is not great, but everything connects to helping the customer get the value they expected. And the point is that basically, providing “expected level of service and care” in achieving that objective is as effective as exceeding expectations. (Failing to deliver that expected value is a problem). But the added impact of exceptional service (in the context of expected value) does not significantly increase the likelihood of retaining that customer. So yes, it could be viewed as wasted effort, from a retention perspective.

    Going further, the point is that the sellers that were surveyed felt greater servicing of the accounts–going above and beyond to help them get value–would be the driver for growing the account. But the results showed that it was not. For growth it’s about presenting new ideas and new ways to improve. Now, if you aren’t doing what you need to retain, then forget the new ideas thing for growth as well.

    Finally, I’d suggest that the idea of expectations is always in the eye of the customer.

    I don’t know if I’m answering your questions, but am enjoying this dialogue. There are certainly a wide range of factors and considerations to consider beyond just these elements in any path.

    But what got me interested in this was past discussions I’ve had with people about the value (or lack thereof) of exceeding expecations. I remember a conversation years ago with Linda Ireland about a company that committed to sending in RFP/RFI/RFQ responses within 24 hours of receiving them. Their customers eventually told them, “That was nice, but we can’t respond as quickly. We don’t even look at yours until we get others.” So it was a wasted effort.

    The path I’d recommend would be this for companies:

    1. Do everything you can to make it as easy as you can for customers to attain the value they expect when they make a purchase commitment. You don’t need to focus on exceeding expectations, just help them get value (ok,ok, that may exceed their expectations in comparison to others in your industry, but I hope you get my point).

    2. To try to build more value in the relationship, help them find other opportunities to improve their business–so introduce new ideas that may build off of the value they have attained. This too, could be viewed as exceeding expectations, but the focus of the effort is different.

    There is a lot of devil in these details and in the language I know, but this path seems like a clear one to me.

    Hank

  8. Nick Toman July 26, 2017 at 2:30 pm (2 comments) #

    Here is a piece I published in HBR which may help highlight this phenomena in more detail. https://hbr.org/2010/07/stop-trying-to-delight-your-customers — yes, the title is “Stop Trying to Delight Your Customers” 🙂

    Regarding meeting expectations, vs above and beyond… while these are variable in nature, generally what our work would highlight is that customer expectations aren’t terribly grandiose. In b2b, the product should work as it was sold, and issues should be handled with minimal disruption. Generally speaking, customers appreciate above-and-beyond moments of delight, but those impressions don’t yield commercial growth. And yes, I can find outliers in my samples where the customer spent more because they LOVED the supplier, but statically speaking, there is no relationship. In other words, don’t build your strategy on this. There are more effective ways to engage customers that lead to both retention and growth of accounts. Much of that is detailed in our work on The Challenger Customer and Challenger Sale, and summarized in another HBR piece we published call The End of Solution Sales https://hbr.org/2012/07/the-end-of-solution-sales

  9. Hank Barnes July 27, 2017 at 4:22 am (35 comments) #

    Thanks for joining the discussion, Nick. Clarifying comments are much appreciated

  10. Andrew Rudin July 27, 2017 at 9:41 am (207 comments) #

    For me, I think this research would be more relevant if it focused on situations where it was possible to glean a larger “share of wallet.” Many commercial and consumer selling situations simply don’t hold that opportunity, so establishing “commercial growth” as a benchmark for guiding whether it’s efficacious to do something seems misguided. And including non-growth buying situations in the sample group likely incorrectly skews the findings.

    For example, if I subscribe to a monthly cloth diaper service, I can be “delighted” with what I perceive as “above and beyond” service. (what would this be? – tying the diapers with a gender-appropriate blue or pink ribbon? Not charging me for returning fewer diapers than were delivered? Providing rush shipments at no charge? . . .). Regardless of how overwhelmed I am with happiness, I’m still using six diapers per day times 30 days (disclosure: it’s been a while since I’ve had to deal with this so my number might be wildly off). Two things are certain: I’m not demonstrating my satisfaction by doubling my order because my newborn will never soil that many, and as an expression of my delight, I won’t voluntarily pay more each month. As far as I know, these are the only two actions I can make that would directly yield positive results for commercial growth. (note: my example assumes that the diaper service offers no ancillary products.)

    What signal would the diaper company CEO receive? Because there’s no evident “commercial growth” (measured by revenue) in my account, one conclusion he or she could make is that these amenities don’t matter to me – or anyone else – so therefore, discontinue them. That could be correct. But it might also be wrong. And the “commercial growth” signal doesn’t consider positive value of word-of-mouth. That alone might be a reason for maintaining these “above-and-beyond” practices. There are others that deserve mention: maybe the diaper company staff enjoys providing these niceties. Doing so makes them feel good and value their work. That’s no small benefit. Or, they make a company’s brand message (We love your baby as much as you do!) more visceral and tangible.

    I think that sometimes, the failure of something to produce an immediate “revenue reward” causes executives to reflexively throw up their hands and say, “not doing it!” But I don’t think that’s not necessarily the right – or best – conclusion.

  11. Bob Thompson July 27, 2017 at 10:26 am (222 comments) #

    My general take: Agree with the conclusions based on my own B2B experiences (large accounts at IBM). Bad service leads to disloyalty and (eventually) defection, while good or even great service is more about retention.

    Although I have to say I’ve had experiences where over-the-top service with one executive helped open the door (and huge growth) with others.

    Also agree that a more reliable path to growth is offering new capabilities (products and services) that help the customer achieve something (perform a job, meet a business goal). “Servicing” an account is not enough.

    Where I disagree with CEB is about the importance of delight — or exceeding expectations. Because delight is not just about customer service. You can delight a customer with a very low price, innovative product, or exceptional experience. It’s not just about throwing in freebies to fix a customer service problem. See http://customerthink.com/keep_delighting_your_customers/ for more on this.

    Looking at delight this way, I’ve found it to be a trait of top brands. And guess what, they are much more likely than laggards to build delight into their customer strategy overall, and CX strategy in particular.

    Getting back to this post and subject of B2B growth, I reached out to Gartner for more details about the study, so we know the context for the conclusions. Here are my questions and the answers from their PR rep.

    Q:Are the sellers mainly selling technology or other installed products (e.g. manufacturing)?
    A wide range of products and services – not specific to any one industry, product or solution offering.

    Q: Are the customers working mainly in large enterprises, or is it a mix of small, medium, large?
    A mix of market segments, but a bit more representation toward large enterprise and medium size accounts, versus small.

    Q: Of the 24 industries on the customer side, which are the big ones in the sample?
    A variety of industries including high-tech manufacturing (12%), financial services (11%), technology/software (11%), retail (10%), healthcare (7%), etc. Other industries represent anywhere from 6-3% of the remaining sample.

    Q: How was the study conducted?

    Account Growth Diagnostic:
    600+ B2B sellers
    Global sample
    Assessed seller skills and behaviors, account team structures and dynamics, and organizational account management practices that drive account growth

    Global Customer Survey:
    700+ B2B customers across 24 industries
    Global sample
    Assessed impact of seller behaviors and supplier actions on retention and growth

    Structured Research Interviews:
    60+ companies
    60-90 minute interviews
    Senior leaders; front line sales professionals and managers

    Thanks to Hank for a great post that has stimulated an important discussion.

  12. Hank Barnes July 27, 2017 at 10:31 am (35 comments) #

    Andy,

    I understand your comments, and think the context is important. The context of this research, as I understand it, was to explore what impacts retention and growth in B2B–so there was an underlying assumption in the study that both opportunities existed.

    Sure, there are situations where there is not a growth opportunity. And evaluating those against growth makes no sense at all. Agree 100%.

    Every study has hypotheses, qualification criteria, and the like. Exploring what account managers–people in sales roles tasked with working with existing customers–should do in a B2B context to achieve two goals—retention and growth–was what this was all about.

    And in that context, where those opportunities existed, I believe that they study showed some eye opening ideas.

  13. Andrew Rudin July 27, 2017 at 11:31 am (207 comments) #

    Hi Hank – thanks for taking the time to respond to my comments and for providing additional insight. Great topic!

  14. Christopher Ryan July 27, 2017 at 12:59 pm (88 comments) #

    Excellent article and lots of pertinent comments. Obviously, this topic resonated with readers. At first glance, the conclusion of the article seems counter-intuitive. But to echo a point Hank made in one of his responses to Andrew: sometimes you may be exceeding expectations in a way that is not particularly valued by the customer. For example, restaurant patrons appreciate prompt, efficient and courteous service – but do they really want a waiter that hovers and interrupts every five minutes?This type of “above and beyond” service may prove to be counter-productive.

    My takeaway is that companies need to first deeply understand exactly what their customers expect from a services perspective, and consistently deliver on these expectations. And then (to Bob Thompson’s point), figure out how to delight customers in any aspect of the experience you have control over.

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