Customer Success

#80 – SAP & Qualtrics, eCommerce, Customer Success and more

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SAP acquires Qualtrics, eCommerce that complements retail stores. Welcome to the 80th edition of my customer strategy newsletter. The five topics this week are:

  1. SAP acquires Qualtrics – Some thoughts about the value of the deal
  2. Web stores need to complement physical locations – My latest experience
  3. Latest blog posts
  4. Notable items from other sites – Customer Success, strange customer stories
  5. Looking forward

SAP acquires Qualtrics – Some thoughts about the value of the deal

 

At the time I retired from HP we were using Qualtrics as our provider for double-blind benchmark research. We did not use their customer experience software, choosing mainly to develop our own and use feedback processes built into our CRM systems. So, while their software has a good reputation, I have no personal experience with it. I knew SAP well when I worked on the global alliance team at Compaq and have tried to follow their progress at a distance since then. Last week SAP announced they are acquiring Qualtrics. You can see details here.

To me at least, the obvious question is how Qualtrics, with expected revenue of $400 million in 2018 could possibly be worth $8 billion, even with a 40% growth rate that they expect to continue. SAP has borrowed the money to make the purchase, though their net income in 2017 was about $4.5 billion.

The most important point to bear in mind is that there is only one correct way to value an acquisition target: Discounted Cash Flow (DCF). If you think something else, like ‘earnings multiples’ is correct you are simply wrong. DCF uses all expected future earnings before taxes, depreciation, and amortization (EBITDA) forever to provide a value calculation. The variables that matter most are the growth rate and the interest rate (the discount rate) used. In general, the company being acquired projects much higher growth rates than the acquiring company believes to be realistic. This leads to a disagreement on the price.

The acquiring company resolves that disconnect by designing synergies into its integration strategy. The reason the majority of acquisitions fail is that the overall integration strategy is unrealistic. The lack of realism comes from underestimating the difficulties of cultural integration and overestimating the value of synergies or how easy they will be to achieve.

Culturally, German and US business cultures are about as far apart as it is possible to be. (Source: When Cultures Collide by Richard D. Lewis.) SAP has an American CEO, and that will help a little, but not much.

Synergies fall into several categories:

  • Growth synergies that the companies bring to each other. More growth requires more sales people and partners. The existing sales people cannot possibly just sell the other company’s products. They already have full-time job, and software sales are specialized.
  • Cost synergies are reductions in people, buildings and payments to suppliers. If cost synergies have been built into the plan German labor laws mean they will disproportionately affect Qualtrics people as they are mainly located in places where workers are not protected.
  • Dis-synergies also exist, meaning customers or partners who will leave SAP or Qualtrics because they do not want to work with the other company.

Since such synergies are frequently insufficient to justify the acquisition price acquiring companies, driven by management hubris, jump into the fantasyland: the calculation of the supposed value of preventing a competitor acquiring the company. Such calculations are meaningless.

So… digging out my DCF spreadsheet from my M&A course at Kellogg… I can’t get to an $8 billion valuation without aggressive growth rates and at least some cost synergies. How realistic are such growth rates? It will take 18 to 24 months to find out…

Web stores need to complement physical locations – My latest experience 

 

Someone (I don’t remember who) recently told me that water was the most critical thing on the planet because without water you can’t make coffee. This came home to me yesterday morning when our ‘bean to cup’ Delonghi coffee machine stopped working. The machine is (or was) about six years old and has been great. I quickly found a repair manual online, took it apart and determined that one of the two heating elements was no longer working. We once had a similar Delonghi machine fail while under warranty. They took more than a month to repair it. I decided to go shopping online. The situation required fast action.

I started by looking at some comparison tests on consumer sites and this took my choice down to a few models. I then used a price comparison site to determine a budget. Several of the major Swiss brick-and-mortar stores also have eCommerce sites and they were on the comparison lists, sometimes with prices that were close to the lowest. However, the main ones had one attractive feature that made all the difference. Their websites (Fust, InterDiscount, and Media Markt were the ones I looked at) all provided the stock status in each of their physical stores as well as proposing to sell online, usually with free shipping.

My need to have a new machine working the same day was paramount. I checked stock status at nearby stores for the models that interested me. I unboxed the new machine at home an hour later. Delicious experience. All too many companies that have physical locations run their eCommerce sites separately, essentially creating internal competition with lots of opportunities for disconnects. Intelligent companies have sites that complement their physical operations, making life much easier for people with urgent needs like mine.

Our latest blog posts

The top one on this is the first in a new series on a specific aspect of strategy creation: the process of asking new questions so you can get new answers. Older posts are still available on the blog page.

image Strategy: Ask new questions to get new answers – Part 1: Customers

First in a series about the first and most important step in determining a new customer experience or business strategy: getting an accurate picture of where you are today and what could possibly be done to improve your business. The key point is that you need to ask new questions to get new answers and insights.
image Invisible gorillas prove you need automated text analytics. Seriously! (7-minute read and videos about inattentional blindness)

We are awful at observation. Our brains just don’t work all that well. Various psychological experiments lead to the inevitable conclusion that our brains work hard to fit whatever we perceive to the list of things we already know about…
image Tips for communicating the purpose of cost reduction (7-minute read)

I was talking to a former colleague yesterday. He described a recent meeting where he learned that major cost cutting still continues where we used to work. The discussion made me reflect on the horrible mistakes and best practices I have seen when cost reductions are communicated…

Notable customer experience items from other sites

Neil Davey: What are Customer Success Managers and why are they so important? 

Customer Success Managers started in software and have become important players in other businesses. I suppose they started in software because software businesses tend to have high margins and could afford to make the investment without being certain it would work. In HP’s $4B software business we implemented them in two sub-businesses first. The huge improvement in contract renewal rates meant that we quickly decided to implement them everywhere. Their role is to make sure customers get the return they expect on their investment. Their services are provided without charge and they do not carry sales quota, at least in what I would call a ‘pure model’. Neil’s article for MyCustomer goes into detail and I think you will find it an interesting five-minute read here.

Strange site – Apparently the customer is not always right

Some of these are far from politically correct. I think it is simply a site where customer service agents of different types simply post stories about what they consider to be bad or unreasonable customers. Some of these are funny, some sad, some frankly difficult to understand. See what you think here.

Looking forward

I will need to go through my list of partner-related questions for the second blog in the ‘Ask new questions to get new answers’ series. Other than that, not much going on in the coming days. Your ideas for articles are always welcome.

Here are links to all of our books on Amazon.com. Kindle versions are available in all stores. Print versions are available from the major stores only. The thing that you can do to help us most is to write reviews of our books on Amazon.

Customer Experience Strategy – Design & Implementation

Net Promoter – Implement the System

Customer-centric Cost Reduction

“So Happy Here”: The Absurdist but Essential Guide to Better Business (Color edition)

“So Happy Here”: The Absurdist but Essential Guide to Better Business (Black & White edition)

Please share this newsletter with your friends and colleagues and encourage them to sign up for it here. I have put links to past newsletters on the subscription page. Finally, please feel free to change or cancel your subscription using the link below.

You can also email me, Maurice FitzGerald, at mfg@customerstrategy.net.

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NPS framework

Start-ups: Thoughts about implementing the Net Promoter System (3-minute read)

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Let’s face it; most start-ups fail. Some fail because they think they are doing what customers want, but they are simply wrong. Some fail for other reasons. All of these are very small companies, or at least they start very small. And in the case of technology, I think they all face a specific challenge…

Have you ever read Geoffrey Moore’s Crossing the Chasm?

Crossing the Chasm

 

Here is the essential point about the ‘chasm’. Customers who are buying before the chasm are mainly interested in the product or service itself. They want to hear about features. In technology, these buyers tend to be techies. The ‘crossing the chasm’ metaphor is about the move to the phase where your customers are more interested in the business benefits than in the features. In B2B, department managers and procurement people get involved. It is hard for start-ups to make the switch and Geoffrey Moore’s argument was that most companies fail at this point.

Collecting customer feedback before the ‘chasm’

Let’s suppose a small group of people have formed a company to develop and sell a software product that will help businesses to manage telecommunication costs. The product delivers reports that show how much individuals, departments, and the whole company spend. They have used personal contacts to sell the product to the first ten customers. Typically, these will be people who want to understand the technical details of how the software works and how accurate it is. Yes, their word of mouth to others like them is important. But word of mouth about what, exactly? The product! At this point in the company’s development nobody works full time on customer experience. The best approach is for the CEO to visit each of the ten customers and have a discussion that centers around three questions:

  1. How likely are they to recommend the product to someone in their position in another company?
  2. Why?
  3. How can the company improve the product?

Once you have spoken to all ten customers, write back to them to say what you have learned and tell them about the three improvements you are going to make. Once you have made them, tell them so, and repeat the exercise. Help the people who say they will recommend your product to actually do so.

Feedback and improvement after the chasm

After the chasm you are talking with and selling to people who want to get a return on their investment. Department leaders, finance people, procurement people and others may become involved. They have certain expectations about the way your support should work, the way your proposals should look, and even the layout of your invoices. Those expectations are set based on their experience with other companies. You will still want to collect feedback about your individual products, and you need to add overall ‘brand’ feedback so you can make meaningful comparisons with other companies as a whole.

Some personal experience

I have some experience with the environment that immediately follows the ‘chasm’. I helped a Swiss company with about 30 employees to implement the Net Promoter System and organized their first round of customer feedback. Their software is used to backup virtual machines. The majority of buyers at this phase were still techies and that it was tricky to separate their views from the more ROI-centric views of non-technical buyers.

I could not persuade the small support team to huddle formally on a daily basis, but they agreed to do so once a week. The 20ish people in the HQ location also set up formal Outer Loop discussions and progress reviews every second week. My customer lifetime value calculation was simply based on the value of an annual service contract and the renewal rates. The business was partly SaaS, partly perpetual licenses. They also agreed to set up a two-person customer success team, but I did not get to follow up on execution there. Personally I think customer success principles are critical in the post-chasm environment as their purpose is to ensure customers get the ROI they expect. And I should mention that the first interesting Outer Loop project centered on the numerous support cases where customers complained about features they thought the software should have, but which were in fact already there. The customers either could not find them or could not work out how to use them.

All of the above was done with a person who was formally the customer experience ‘lead’, meaning they did the work part-time. As your company reaches about fifty employees or so, you should probably have a full-time CX leader.

A difficulty: how to compare yourself to others

As a start-up it is difficult to know whether your customer experience is better than that offered by your competitors. There are no benchmarks available for start-ups. The only suggestion I have is that you should ask your customers to make the comparison with the most obvious competitor for you. If you have other ideas on the subject, feel free to post them below.

Conclusion

While I have picked high-tech as an example because I understand it best, the ‘chasm’ situation is the same for every B2B product and service, and for some consumer products. Early buyers/adopters are interested in the details of the product. Later-phase buyers much less so. Your feedback gathering and improvement processes should reflect the different phases. The Net Promoter System works really well for all phases.

 

(The image at the top of the article is copyright Bain & Company. Used with permission. Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.)

If you understand the basics and want to learn more about using NPS, please consider buying our book Net Promoter – Implement the System. Like all of our books, it is available in print and Kindle formats from Amazon.

 

NPS framework

The Outer Loop of the Net Promoter System® (5-minute read)

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The Outer Loop is where generic, systematic improvement opportunities get addressed. There are two types of Outer Loop activities:

  • The first are those that can be addressed within a single team or function. For example, if your French customers consistently tell you they do not want service center people to use their first names when speaking to them, that can be addressed within the service center.
  • The second category of improvement work is that which requires collaboration across different businesses and functions. If your customers tell you that you need to be able to deliver products within 24 hours, when your current minimum is a week, different parts of the company will need to work together to make the improvement. This is the core work of the overall company customer experience leader.

Prioritizing Outer Loop work

The essence of any business strategy is the concentration of your scarce resources on just a few things that really matter and help you to beat your competitors. When one initiative is complete, start a new one. For the cross-functional work, I recommend having three to five initiatives, no more. It will make the work relatively easy to communicate and to resource, and the team will see regular progress. The (separate) mono-functional teams should have the same limit. A business or function does not necessarily have to have an improvement initiative. You should not waste resources on things that customers don’t care about.

Useful sources of data for Outer Loop work

Here are the sources of data that are most useful for Outer Loop work:

  1. If you have it, the competitive NPS benchmark data should be the most important source. While it might seem subtle, the purpose of your work is not continuous improvement of everything; rather it is the improvement of a few things that make the biggest difference competitively, whether to catch up, or to provide differentiation.
  2. Relationship feedback data is generally the second-most important source to use. If your target customer base is a small number of large companies, it may be all you need.
  3. Opportunities that the Inner Loop process has not been able to address are in third place. The reason they are not at the top of the list is that they need to be prioritized in a broader context. While it may seem odd, there will be things a lot of customers would like you to improve but where there is no real benefit in doing so, compared to other potential actions.
  4. Operational data is necessary to establish the current state of things customers complain about. For example, your customers may complain about long delivery times for products, and your operational data may confirm that the most popular product was out of stock for two weeks, but it is available now. You may decide to discuss how that situation can be avoided in the future, or may just decide that it was a one-off event. Personally, I totally failed to fix one of these situations at HP, despite trying hard for years. Our manufacturing plants for servers shut down for a week at the end of each calendar year. The order management systems continued to provide customers with estimated delivery dates that did not take the shutdown into account. I tried to get this changed for four years in a row, without success. I believe the root cause of my failure was a corporate function that was being measured by these committed dates, rather than actual shipment dates. And don’t get me started on a metric where the ‘shipment date’ was the day something was put into a shipping container, rather than the day the shipping container actually left.

Managing improvements — the Huddle

The primary vehicle for the selection and ongoing management of improvement initiatives is the Huddle. The main mono-function Huddles should be weekly or more often, and can be very brief. The majority of their discussions and work need to be on things team members can do on their own. You can complement these by longer meetings on a less-frequent basis. Cross-functional Huddles are harder to coordinate and should be planned as monthly events. The same cross-functional team can have a longer session twice a year to work on the overall customer experience strategy.

Typical agenda for mono-functional Huddle

Like any other meeting, there needs to be an agenda and people need to prepare for it in advance. Here is a reasonable starting point:

9:00 Welcome — John
9:05 Check status of items on Huddle action tracker — Paul
9:10 New feedback from transactional surveys — George
9:20 Status update on Order TAT initiative — Ringo
9:25 Any Other Business and Close

Fifteen minutes can be plenty for a huddle too.

A great method for prioritizing work

Jim Dixon of Bain has published a great methodology[1] for prioritizing improvement work. It finally addresses the challenge of making customer journey mapping into something truly useful. Journey Mapping is a popular customer experience technique. Its main disadvantage is that it considers every customer touchpoint as equal. It also fails to distinguish between hygiene factors and things that give you a competitive advantage. Jim’s work solves both problems.

Hygiene factors

A hygiene factor is something like taking a shower: nobody cares if you have one, but everyone will notice if you don’t have one for a long time. Think about a real-world example: you don’t think about data security when using online banking. You would not recommend your bank because they did not leak all your personal information and passwords. However, you would certainly be very unhappy if they did.

Jim Dixon takes this into account by considering each touchpoint in terms of its relative ability to delight or to anger customers. The source for this information should be customer comments on the open questions in your feedback system. If Detractors say that long waiting times are the top reason for them being a Detractor, and Promoters never mention waiting times, waiting times only have the potential to anger, and are a hygiene factor. To an extent, this logic is built into the best of the customer journey systems. What Jim adds is competitive benchmarking. This gives you a way of visualizing and taking account of areas where your competitors have an advantage, as proven by your research. Here is the way to combine it all into a single chart. The diagram below is from Jim Dixon’s work.



Use in a Huddle

If an Outer Loop team were considering the graph to prioritize improvement work, the two red circles would take top place. This example does not have any green circles, which would be areas where you have a competitive advantage you may want to push even further. You would probably avoid taking any action on items in the bottom-left box, as your customers don’t care about them. Existing ‘bottom-left’ improvement work can and should be wound up to provide resources to work on the new priority areas. This process should be used to establish the initial ‘long list’. A further step is needed to get to the final short list.

Prioritizing initiatives

The graph below is a simple diagram that will help you to prioritize improvement initiatives based on impact and ease of implementation. In the example below, you would get to work on the ones in the top-right box right away. This one was used to prioritize actions after collecting feedback from Swiss business school students.

Ease-impact diagram


[1] You can read the Bain description here:
http://www.netpromotersystem.com/resources/toolkit/interaction-prioritization.aspx

(The image at the top of the article is copyright Bain & Company. Used with permission. Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.)

As is usually the case, this post is an edited version of a chapter in one of our books; in this case Net Promoter – Implement the System. Like all of our books, it is available in print and Kindle formats from Amazon.

 

NPS framework

The Inner Loop of the Net Promoter System® (5-minute read)

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Your research process produces feedback that individual employees and teams need to understand and react to. Let’s consider the simplest and most common use of the Inner Loop: ‘episode’ research. A customer has a query of some sort and wants it resolved. Let’s suppose they have filed an insurance claim. An agent in your team has just finished a call with a customer to let them know the payment has been made to their bank account, and closed the incident in your CRM system. The system automatically sends a feedback request about the whole claims experience to the customer. (The agent has of course told the customer to expect it.) Surprise, the customer says the payment was not received, but they were since able to find a different way to solve the problem on their own. First, this feedback needs to go directly back to the agent concerned. Personally, I feel it should go back without human intervention if possible. I don’t see a reason that the agent’s manager would need to know, depending on how the agent reacts of course. While I have picked an unsolved problem as the example, the agent should get all positive, negative and neutral feedback directly.

Follow up with the customer

Ideally the agent or his / her peers or manager should follow up with the customer to thank them for the feedback, no matter what it is. The call should happen within 24 hours, preferably much more quickly, before the customer forgets about what they have written. Unfortunately, most companies say they are not able to afford the ideal process and only call back the Detractors, at best. (I can’t count the number of Detractor responses I have given to Air France and Sabena surveys without ever being contacted in any way.) If you have made the (bad) decision that you can only afford to call the worst Detractors, start with just those who gave you a zero or 1.

There is no formal script for such calls. You need to apologize, then have a discussion. Apologizing works, and you must do it on behalf of the company. “I am sorry we screwed up.” not “I am sorry they screwed up.” Whatever your cost limitations, you must at least thank every customer who took your survey for doing so. Even if you use a standard email for this, it should come from the head of the appropriate department and give examples of improvements that have come from prior customer feedback. The department head’s email and phone number should be included, with an invitation to call or write. That won’t cost much and at least your angriest customers get a way of sharing their anger directly with you, rather than just spreading it across the Web.

No call-back script? Really?

It is obvious when people are speaking to you from a script. It comes across as insincere. You need a formal or informal expert system for the unscripted call-back dialog to be consistent and provide value. The best informal system is coaching from a supervisor, supplemented by discussions with team-mates doing the same type of work. Team-mates can help during live calls if you have an instant messaging system. “Let me just check whether any of my colleagues have seen this.” Then a short message to the WhatsApp or Slack group for the team, for example. I have also seen this work in a small software development team where the person taking the call would simply (and audibly to the person on the line) talk to a more expert person near them to resolve the situation.

Calling Promoters back

If a customer has told you they would definitely recommend you and that the latest transaction has made this even more likely, you need to have a ready way of activating them; meaning letting them actively promote you. In many businesses, you could simply thank the customer and say you would really appreciate it if the customer could write a product review on a specific website. You may also like to invite them to join your user group or give them a free ticket to a company event. Transactional feedback comes mainly from end users of products and services. In B2B situations, they will not normally be the ones making the purchase decisions. End users have a more direct impact in consumer businesses.

Why talk to Passives?

In businesses where the cost of change is high, Passives are the category that are most likely to leave you. This is the case for B2B companies that sell things on the basis of an annual contract, or who have dominant market shares in some area. While that may seem surprising, there is a certain logic to it. Passives usually represent about 40% of your customers. You tend not to talk to them much, if at all. The Detractors get lots of attention and often wind up happy. The Promoters are people we like to talk to because they love us.

The Passives? The typical attitude of most companies is “Well, they are not complaining, so I am sure everything is going just fine. No need to talk to them.” If you have any competitors, this is a disaster. You have to assume that your competitors are already talking to your Passive customers, and being particularly nice to them. If you seem to have forgotten about them, they will leave you. Of course you can try to stand that on its head, work out which of your competitors’ customers are their passives, and start to talk nicely to them.

Customer competition
If you don’t have the resources to talk to everyone

How should you prioritize follow-up if you do not have enough people to call everyone?

  • Your top priority should be the people who have provided long responses to the verbatim questions. They care. They have taken a lot of time to provide thoughtful input. You should take at least as much time to call them back and discuss their input. Anyone who provides lots of suggestions is a potential Promoter, regardless of current status.
  • The second priority is your Detractors.

Of course, if you don’t have the resources to call anyone back, you really should not be surveying.

Email and instant messaging for collaboration

Many teams use email to discuss and resolve complex customer situations where people outside service center operations have to get involved. It is not a great solution. Email makes it difficult for people who have just joined the conversation to catch up on what has happened up to then. The use of CCs in email chains may mean that no single individual has the full picture. Sophisticated instant messaging systems like Slack may help if you want to be able to view and search the entire conversations easily. It is tricky to find a good balance, as people who only need to contribute something to a small part of the discussion should not have to be notified of every additional message.

Next time: the Outer Loop.

(Image is copyright Bain & Company. Used with permission. Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS-related emoticons are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.)

As is usually the case, this post is an edited version of a chapter in one of our books; in this case Net Promoter – Implement the System. Like all of our books, it is available in print and Kindle formats from Amazon.

 

#63 – New NPS Benchmarks, don’t work for a cost-reduction company, Temkin Group posts

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New reference source of NPS benchmarks, don’t work for a cost reduction company (part 2). Welcome to the 63rd edition of my customer strategy newsletter. The five topics this week are:

  1. New reference source of NPS benchmarks
  2. More evidence that you should not work for a cost reduction company
  3. Latest blog posts
  4. Notable items from other sites – Both from Temkin Group this time
  5. Looking forward
New reference source of NPS benchmarks

Whether you use the Net Promoter Score or another system, one challenge is to know whether your score is good or bad. The best way to know is to compare your trends to those of your main competitors. (If you believe you don’t have any competitors, well… you have a different problem entirely.) But how can you make such comparisons? There are no comprehensive public databases of NPS benchmarks that have been collected in a consistent way. Yes, there is at least one site that will allow you to look at what companies publish as their own NPS number. But your number and their number will not have been collected in the same way.

The main source of NPS benchmarks up to now has been the Temkin group’s regular NPS benchmark report. This has changed. JD Edwards, ROI Rocket and Bain have teamed up and established ‘Bain Certified NPS Benchmarks’. In principle, and as originators of the Net Promoter System, only Fred Reichheld, Bain, and/or Satmetrix could possibly certify that an NPS benchmarking process is correct.

While the article does not say exactly how Bain certification works, it provides some clues. A minimum of 250 responses was achieved for each company covered. They interviewed between 3,000 and 100,000 consumers for each industry sector covered, far more than I have seen for any other study. They have collected data for “more than a dozen” industries. You will also see that their work with ROI Rocket on retailers proves the considerable spending differences that exist between Promoters and other respondents, as well as a variety of other factors.

OK, I think that is enough of an introduction. Reading the paper in detail will be a good use of your time. And by the way, the leading retailer, in terms of NPS, has a name that begins with the letter A. Read all about it here.

More evidence that you should not work for a cost reduction company

Some months back I wrote a non-customer-experience LinkedIn article suggesting that if you want to be happy, you should not work for any company whose main product/service is cost reduction. The reason I gave is that if you do so, you become the cost reduction. Take outsourcing companies as an example. Their business is offering companies cost reductions of about 20%. Examples include companies that propose to operate your IT infrastructure for 20% less than it currently costs you. These reductions can only come from three sources: capital costs – notably real estate costs, people costs, and paying suppliers less.

An article just appeared in 27/7 Wall St. that provides at least some proof for this. Entitled Worst companies to work for. it uses Glassdoor ratings as its source and excludes small companies. DXC is 12th worst. They have 150,000 employees and are the result of the merger of the former outsourcing division of HP with CSC. The main resulting business is IT outsourcing. Employees complain about absence of pay raises and bonuses, and ongoing layoffs. Alorica is 11th worst, has 176,000 employees and provides outsourced support desks for companies that want to reduce the cost of doing the work themselves. At number 8 (from worst), CompuCom has 11,000 employees and provides IT services.

There are other cost reduction and low-cost companies on the list. My message remains unchanged: If you work for one of these companies, you are a source of cost savings, unless you are at the level of the leadership team. Unless you are desperate, I suggest not working there.

 

Our latest blog posts

Here are the latest posts. Older posts are still available on the blog page.

image Improving response rates to survey requests sent by email

Way back in October last year I blogged about using direct marketing techniques to improve response rates to surveys. This post addresses five additional ideas that are specific to survey requests sent by email.
image How I got my two biggest promotions: True Stories

I was speaking to a business school student recently. She asked me about how I managed to get promoted during my career. That got me thinking… Luck and hard work…
image A legendary Mark Hurd speech to HP employees in Israel

Mark Hurd is CEO of Oracle and was CEO of HP before that. While at HP, he made many speeches about cost. His general philosophy was best illustrated by my favorite event; his speech to all employees in Israel. It was broadcast to the entire company, coming shortly after the company acquired EDS…

 

Notable customer experience items from other sites

Customer Experience Matters Blog: Introducing the Temkin Customer Success Index

Customer Success teams are common in the software industry and exist in some other industries too. For software, their work is to ensure customers actually use the software they have bought. The service is usually provided at no charge. Among other tasks, Customer Success people sit with users to observe them using the software and to determine whether they can achieve the results that were used to justify the purchase in the first place. When I worked at HP’s $4B software division we ran an A/B test where one business had a Customer Success team and another comparable business did not. The improvement in contract renewal rates made it easy to decide to expand Customer Success to all businesses. So… renewal rates were our main metric. Bruce Temkin’s team proposes a Customer Success Index based on a composite of five metrics in their latest blog. Read it here.

Customer Experience Matters Blog: Six Laws of Customer Experience (Infographic)

Two Temkin Group posts this week! (I have no connection with Bruce or his company.) The most-downloaded content on their website is a free eBook called The Six Laws of Customer Experience. It is supported by a simple infographic that I find to be both clear and useful. You can download it in various sizes here.

 

Looking forward

A relatively quiet time as summer starts. You may like to contact me if you would like me to talk to you or your teams, in person or remotely. A LinkedIn video conference or similar might be useful for one of your team meetings or training sessions.

Here are links to all of our books on Amazon.com. Kindle versions are available in all stores. Print versions are available from the major stores only, with the notable exception of Australia, where print versions are not available from amazon.com.au.

Customer Experience Strategy – Design & Implementation

Net Promoter – Implement the System

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“So Happy Here”: The Absurdist but Essential Guide to Better Business (Color edition)

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Customer Success

Customer Success Team – First of four types of team you may want to implement

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There are four types of teams you may want to implement to improve customer experience. I will cover the the membership and work of each in three blog posts. The teams are:

  • Customer Success teams
  • Customer Advisory Boards
  • Executive Sponsors
  • Project Sponsors

This week, I cover Customer Success teams.

Customer Success

Customer Success teams started in the software industry. They probably exist under various names in other industries that sell complex products. It is a concept that is useful and necessary where you have customer contracts that are renewed each year. Software companies sell a limited range of things. Licenses allow you to use software for the duration of the license, whether the application is in the Cloud or run locally. Implementation services help customers to get up and running. Technical support services are there for when things don’t work as promised. Educational services provide training to users.

While that may seem fairly complete, we often had surprises of two specific types at HP when customers told us they no longer wanted to use our software: first, they sometimes complained that the software lacked particular functionality that was in fact present. Second, especially with complex software, they blamed themselves if they could not get it to work as expected, and did not ask for help. Enter Customer Success teams.

Core role is to ensure customers get the ROI they expect

Customer Success teams work with your most important customers to ensure they do indeed achieve the ROI or ‘Time to Value’ that they expected when they bought your product or service. The simplest way of thinking about it would be to consider it to be usage support. There is no charge for the service. It does not replace or duplicate any of the paid services. For software, a Customer Success person goes to the customer site and sits with the key users, watching them use the software and suggesting how they can be more effective. If, for example, your business is building management services, your customer expected some specific benefits when they handed that work over to you. If the only people who visit the customer are measured on renewing the contract, they will tend to show up towards the end of the contract. Then it may be too late.

Compare renewal rates

When we introduced these teams at HP, we compared support contract renewal rates between similar types of customers that either did or did not have a Customer Success Manager assigned. (Support contracts include both the rights to use new versions of software and the ability to access technical support resources.) The effect of the Customer Success people was dramatic, bringing a spectacular improvement in renewal rates. I suppose I also need to mention that they occasionally discovered customers who had bought the software but never installed it, but had not said anything. Sales people tend not to worry too much about customers after they have been compensated for the sale, and we simply had not noticed.

Deep product expertise needed

Customer Success people should be deep product experts. A lot of ours had worked in software R&D. Each individual tends to only be an expert in one product, two or three at best. They are therefore assigned to your top customers for that specific product, rather than your top customers overall. As distinct from the people manning support helplines, the Customer Success teams are more expert than the customer’s own people. Their primary relationship is with the people using the product, rather than the ones who may have bought it. This is quite an important distinction that needs to be considered for the relationship surveys you have with your most important customers.

Renewal rates are the most important metrics

HP Software, like most large businesses on the planet, had about 40% of all customers in ‘the deadly zone of mutual indifference’. We did not talk to them, and they did not talk to us, or at least that was the case before Customer Success teams arrived. These were the customers most likely to be seduced by competitors showing up with attractive promises of a better life. The constant interaction with their Customer Success manager made it far less likely that these customers would switch.

If you are selling annuity contracts of any kind, it is easy to calculate the value of a one-point improvement in renewal rates. Start with your largest customers and work down. A reasonable starting principle is that one Customer Success person can handle ten customers. If, for example, you currently have an 88% contract renewal rate, calculate affordability based on a 92% renewal rate. Start with half of the relevant customer population for the first year, so you can evaluate whether it really produces the expected results. The Customer Success person should also participate in any regular meetings the sales leader for that customer may hold.

Don’t put them on sales compensation

I recommend that Customer Success people not be compensated on contract renewals or upsells for any individual product or customer they cover. Giving the entire team a collective incentive based on their overall improvement in renewal rates would be appropriate.

Customer Success teams discover issues that are specific to individual customers and generic things that apply to all customers. One approach to provide smaller customers some of the benefits of the investment is to record videos that show your customers how to do things that others find difficult. Make them available free of charge on your website or on YouTube.

Conclusion

Customer Success teams should be a great investment for any business that depends on contracts that renew from year to year. The ROI is easy to measure. Why not try it out on part of your customer base as a test.

As is often this case, this article is a modified version of part of a chapter in one of our books. This time it comes from Customer Experience Strategy – Design and Implementation. Feel free to give feedback below or by emailing me at mfg@customerstrategy.net.

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