Relationships

Happy couple

Valentine’s Day classic blog – How to stay married – to your customers of course!

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It was Valentine’s Day a few years ago, and I was puzzled by the results of some HP customer experience research. The data source and volume were impeccable. However, the results seemed to prove something that differed from everything that I had learned about customer improvement work. Putting the data and the date together caused a flash of inspiration. I discovered something unexpected about how to keep your customers. I used to think it applied only to B2B situations, and now understand that it applies to any business that depends on contracts that need to be renewed annually.

We were trying to determine whether NPS worked for us

We were about a year into the implementation of the Net Promoter System under Meg Whitman’s leadership as CEO of HP. The time had come to work out the relationship between our Net Promoter Scores® relative to our competitors, and our revenue growth or decline. We had eight years of double-blind benchmark NPS® data for HP and about a hundred competitors, and were able to match it against corresponding revenue data for most businesses. We found that NPS was a great leading indicator of revenue. One HP business decided to investigate it in more detail. That business mainly had multi-year service contracts with its customers. The question they wanted to answer was “Which customers actually leave us?” They used their own relationship survey to understand the different behaviors of the NPS Promoters, Passives, and Detractors. What they found surprised us. I believe the findings apply to all businesses that have ongoing contractual relationships with customers.

From surprise to human relationships

Remember Valentine’s Day had come around when I was dealing with the surprise. Here is how I rationalized it in terms of human relationships:

Happy couple

The happy-happy couples

We all know couples who seem to be made for each other. I call them the happy-happy ones. They agree on everything. They have been together for years. We admire and envy them. In Net Promoter System terms, they are the Promoters. They are like the customers for whom everything is going well. All major project milestones are being achieved early. The customers are getting more than the financial benefits they expected. They have been working with the same account team for years. Life is wonderful. The customers talk positively about us to people they know, and bring us new business.

Angry couple

The couples who seem to fight a lot

Most of us also know couples who bicker constantly, needle each other, and occasionally provoke major arguments. In many cases, we are surprised to note that they have been together for years and show no signs of separating. Why? Because they are communicating! They stay together because they have invested a lot in the relationship and changing seems too scary. In Net Promoter System terms they are the Detractors. They escalate to the CEO. They get lots of attention. They get price rebates because they are angry. And, in the words of HP’s former head of Global Account sales (Jan Zadak) “I love escalations! The customers always wind up buying more stuff.”

When there are ongoing service relationships or investments in technology, the cost of change can be high. Imagine you have built all of your business processes around the way that SAP software works, but you now have a dispute with SAP. You will probably try to work it out. One of Meg Whitman’s catchphrases as CEO of HP has been “Run to the fire. Fix it in 24 hours or escalate it in 48.” I suppose it is also a guy thing that comes to the forefront in male-dominated industries. Men want to solve problems, and are willing to devote all their time to fixing a customer escalation, no matter what else is happening in the relationship.

Indifferent couple

The couples in the deadly zone of mutual indifference

Have you ever been in one of these relationships? I have, in the distant past. You get home. You think to yourself, “She is not saying anything… everything must be fine.” If you had that sort of relationship, how did it work out for you? Communication is the lifeblood of couples and of businesses with contractual relationships. Think of it this way at the very least; if you are not communicating, your competition may well be doing so. In the absence of communication, someone else smiles at your partner or customer and offers them flowers. They leave you, and you are surprised. Why didn’t they complain about something? What happened? In NPS terms, these are the Passives. Across most industries, they are 35 to 40 percent of all your customers.

What did the HP data show?

This particular multi-billion-dollar HP division had about a 15-point NPS decline over three years. Their revenue declined with the expected time lag. However the surprise was where it declined. Revenue with Promoters rose slightly. Revenue with Detractors stayed flat. Revenue with Passives declined close to 20%. Someone else was smiling at our Passives and sending them flowers. For the sake of completeness, I have to add that the particular business has since more than recovered the decline. I believe this data, these conclusions, and this couples metaphor are representative of all businesses that depend on renewable single-year or multi-year contracts. They are not helpful for pure product businesses.

The message

It is simple. Communication matters. Customers want to be remembered. If the only times your customers have contact with you are when you want to sell them something or when something is wrong, they will leave you. This insight could help your personal life too.

Your customer experience listening and improvement system is a crucial part of maintaining ongoing communication with the customers who are not escalating, and who are not active references for you. Just as you would never consider delegating communicating with your partner to someone else, you should manage your listening and improvement process on your own. Don’t delegate it to a third party. That would communicate something you don’t want: “I am too busy to listen to you. Talk to this person instead. That is a good use of your time, but not of mine.”

 

Piotr Sadowski has posted a Polish version of this article on LinkedIn here. And you can still find a slightly different version of the article in French that I posted a couple of years ago, also on LinkedIn here.

This is an edited version of a chapter in our book Customer Experience Strategy – Design and Implementation, available in paperback and Kindle formats from Amazon stores worldwide.

In the meantime, please feel free to comment below and sign up for our newsletter here to stay up to date. The artwork is by Peter FitzGerald, and you can reach me at mfg@customerstrategy.net.

Concorde

The start of a long story: How I learned about ‘customer-centric cost reduction’.

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Such a contrast

I was looking out my office window near Charles de Gaulle airport in 1982. The phone rang just as I was watching Concorde take off on its daily flight to New York. In hindsight, the contrast was complete. The roar of the afterburners was the symbol of no-expense-spared extravagance. The phone call was the start of the opposite: my first participation in a major corporate cost-cutting exercise.

I was a cost reduction expert

I was no stranger to cost reduction. I graduated as an Industrial Engineer in Ireland in 1977. There was amazing demand at the time, and my entire class had signed employment contracts before our final exams. High-tech did not exist in its current form. Following a student project and summer work at Imperial Chemical Industries, I had an ICI mentor; R. T. O’Kelly, an Englishman known universally simply as RTK. He advised me not to start my career at ICI, but to choose a company that was growing quickly and would let me work in other countries. Remember this was before high-tech. A few weeks later, I signed my contract with Blue Bell Apparel, the parent company of Wrangler Jeans, among other brands. A week after starting, I found myself in rural Commerce, Georgia with a stopwatch in my hand. Industrial Engineers were measured on saving at least 15 times their pay. I got good at it while I lived and worked in the USA, Ireland, France, Italy, Spain and Scotland, all in the space of seven years. I became an expert in warehouse automation, which turned out to pay very well in high-tech, but that is another story.

McKinsey Overhead Value Analysis

The Parisian phone call in 1982 was from my boss, asking me to attend an introduction to McKinsey’s Overhead Value Analysis of our company, for which I was to be a project lead. The work was my first and purest customer-centric cost reduction exercise. Keeping customers at the center of your cost-reduction work is challenging, at best. Employees who are worried about being able to feed their families don’t care much about customers.

Communication and perceptions of fairness

Communication of customer-centric cost reduction is also challenging. A coherent customer-centric message about priorities will be something like this: “Since we must preserve or increase spending in departments A, B and C to ensure great service to our customers, we will need to cut even more in departments X, Y and Z, which have no direct customer impact.” This is a much harder message to deliver than “In the spirit of fairness, everyone’s budget will be cut 20%.”

It took me years to understand how to keep customers loyal while cutting costs

Over the following years I learned different methods of cost reduction and how to maintain or improve customer loyalty as you design and implement the reductions. It is not easy. I have managed programs that made things much worse for customers too. I did not do it deliberately. I just had nobody around me with relevant experience and advice. It is not easy. That is why I wrote Customer-Centric Cost Reduction; to save you a lot of the pain I went through.

McKinsey Overhead Value Analysis description

Overhead Value Analysis or OVA is rather ancient and excellent McKinsey cost reduction methodology. Back in 1982, times were suddenly tough for Blue Bell Apparel, the parent company of the Wrangler brand. I have to say I don’t know whether this was due to the market, or a proposal to take the company private. In any case, the corporation wanted to reduce costs. OVA is no longer mentioned by McKinsey on their website, though it may exist under a different name.

The OVA process

Using OVA was my first and most meaningful experience with a process in which the Golden Rule was applied: “Those who execute have to do the planning.” This avoided the all-too-common issue where plans are prepared by one team, passed to another team for implementation, and the second team rejects them, protesting that the first team understands nothing about what they (the second team) do.

After deciding which overhead functions will be targeted, each team leader is given an overall objective: find ways of reducing the work by 40%. The actual objective is a 15% reduction. McKinsey’s experience at the time was that companies who target 40% wind up achieving 15% on average, either because some reductions are too extreme, or because some are really cost shifts, moving work from one department to another.

I continue to admire this design. The 40% target means teams have to think differently about their work, while the underlying 15% real-world goal means that solutions that are quick to implement can be prioritized. This is what happened for us in practice. A little more than 15% savings were achieved while the McKinsey team were engaged. There were additional ideas among the 40% list, such as moving to a smaller distribution center, that took more time, and were achieved up to two years later.

Who was overhead?

While it may seem odd, the definition we used was not what you might expect. I worked in the leadership team for France, the Benelux and Italy, based in Paris. The team leaders who led the work were explicitly told that they themselves would not be eliminated. Everyone else was overhead, with the exception of the sales people who actually called on customers.

The first step

After we were all introduced to the program, the first step was the analysis of how everyone spent their day. The methodology was quite clever. It used individual face-to-face interviews. Each person was asked what work they did, what was the output, who received the output, and what proportion of their time was spent on each activity. Everyone’s time added up to 100%, no matter how many hours a day they worked. At its simplest level, the output of an individual OVA analysis would look like this today:

OVA

The most interesting step

Personally, I found the second step to be the most interesting. We then spoke to the people who received the deliverables mentioned in the tables from the first step. The questions were easy: Do you use the deliverable? How often do you get it? How often do you need it? Who else uses it?

There was one painful example: a person in Italy spent all of her time preparing a weekly sales report. This was printed and sent to the regional sales leader in Paris. When we spoke to him, his answer was “I don’t use it. Is it sent to anyone else?” Unfortunately for the Italian lady’s job security, it was not. This had been going on for about two years.

The 40% reduction goal

The following step was to examine all the work and deliverables, looking for opportunities to reduce them by 40%. The McKinsey team placed the emphasis on trying to completely eliminate all deliverables that were not absolutely necessary, then decreasing the content or frequency of what remained. I found this a realistic approach.

Suggestions were categorized by impact and ease of implementation. Since the true objective was a 15% reduction, things that would make life easier in one department but create additional work in another were quickly eliminated. The 40 to 15 gap also meant that we did not have to pay extreme attention to avoiding different departments proposing the same reduction ideas. There was a little of that, and the targeting method meant that it did not matter.

Learnings

OVA was my first experience with a major corporate cost-reduction effort. I embraced the process and learned a lot. I also learned what happens in an organization when almost everyone (correctly) feels their job is at risk. New rumors circulated every day. Good people were proactive and got jobs elsewhere, rather than taking the risk of staying.

Only the sales teams were happy, since they were explicitly the ones to benefit from the reductions. Since they were also the people who spoke the most to customers, they were able to keep the customers on our side, and we continued to have the top market share in Europe.

I also learned about the positive power of what I can only call paternalistic management. For example, the division leader, David Hayes, tried his best to find out about the personal situations of each employee who was on the redundancy list, before it was communicated. He learned that one of the Parisian warehouse workers had difficult family circumstances and lived in a small trailer in a trailer park. We found a different person to let go; one who would have an easier time getting a new job in the area. My own personal paranoia made me suggest eliminating my own job, a proposal I accompanied by a request to move to a new green-fields distribution center project in Spain. That experience is a whole other story.

Conclusion

There are various ways of ensuring customer loyalty during a cost reduction exercise, and of ensuring the support of at least part of your workforce. We explore them in more detail in our book Customer-Centric Cost Reduction, of course. Your comments and suggestions are welcome, as always.

Relationship by orgchart

How do you know whether your latest relationship survey score is better than your last one?

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This is not a stupid question!

Last week I had the pleasure of speaking to an LA-based reader and head of customer experience for a very large company. He was one of the early readers of our book Net Promoter – Implement the System. He has a great understanding of the different types of customer research. They have been getting in-depth feedback from their top 150 customers for some years. They represent about two-thirds of the company’s revenue, so this matters a lot. Net Promoter Score trends for your largest customers are good predictors of their loyalty and therefore of future revenue trends. In this particular case, the score had declined by a point compared the most recent survey, and he had just been invited to talk to the leadership team about the results. He wanted to be sure he was not missing anything.

Relationship research principles

There are a number of principles that are essential in relationship research. The first one is to ensure you are talking to the correct people. Let me illustrate this with a painful example. When HP and EDS merged, I was in charge of strategy and customer experience for Europe, the Middle East and Africa. I was also the business leader in charge of EDS integration for the geography, quite a challenge given the two companies had about the same number of employees. HP had some CX challenges with Vodafone. I went to their HQ in Newbury and tried to cut the conversation short. “I know you love EDS and want HP to improve a lot. Let’s make it simple. We will copy what EDS is doing.” The Vodafone reply was stunned surprise. “They are even worse than you. What are you talking about?” I proudly put the EDS Voice of the Client executive interview transcript on the table. They looked at it and said “But these people have nothing to do with the contract EDS has with Vodafone. Why were they interviewed?” (The real answer was that EDS had strong incentives on the results, so the account teams gamed the research.)

Survey correct people

Your research should cover the people who matter in a client organization. Ideally you will interview executives face-to-face. Video conferences, including Skype, are second-best, followed by phone interviews. I don’t believe in email / web surveys for your largest customers, but they are OK for medium to small ones. If you use Salesforce or Siebel, you probably have a ‘relationship map’ that shows the people with whom your sales people interact. If you have a Customer Success team, you may have additional contacts. You need a representative sample of decision-makers, decision-influencers, and in some cases end users too. This mix is one of the reasons you should not report a score by account outside the account team and their direct manager. The various people are not all equal. If you sell IT hardware, software and services, for example, you may interview ten people, but the CIO and procurement manager may have 90% of the decision power.

Understand trends from same respondents

Once you have a good contact list, it is critical to understand the trends from the same respondents over time. What score did they give you last time, and what is it now? Which Net Promoter System category were they in then and where are they now? What comments and suggestions did they make then, and what are they saying now. Did we address the issues they raised the last time? Treat the repeat respondents separately from the new ones. An organization chart like the one at the top of this article may help.

Follow trends in the open text responses

Assuming you record the comments and suggestions made by each interviewee, it is important to track how they change over time. Ideally you should use text analytics software for this, to remove human bias. Software will only give you a good result if you have a reasonably large amount of data, so manual analysis by a neutral person may be needed for individual customers, with automated analysis for the data across all customers. This will also be a good way of picking up trends in comments about your competitors.

Favor supplier surveys

While I am a fan of interviewing customers, there is a better solution: customers’ own supplier surveys. Many large companies have ‘supplier performance reviews’. The process is that the people who purchase or consume products and services from the largest suppliers are surveyed. A report is prepared for each supplier, comparing them to other suppliers and to their prior results. The reason I like this type of research is that the customers have ‘skin in the game’. The procurement department and others probably have incentives to improve supplier performance. This makes the last point I want to make far easier to execute.

Joint improvement initiatives

In an ideal world, you will agree improvement initiatives with your customers and staff them jointly. There are too many negative surprises with the alternate process where you execute without any customer involvement, then they inspect at the end. At the very least, try to get a customer representative to attend your regular progress review calls or meetings. This has a positive effect on the overall relationship too, especially when your competitors do not take the same approach.

A note about how to aggregate scores

You may want to produce an average NPS number across all of your top customers in three different ways. First, just consider all customers to be equal. Second, weight the results by the amount of money they spend with you. Third, weight the numbers by how much each customer spends with all vendors in your market. If the three results are similar, just use the unweighted average, as it is easiest to calculate and communicate. If the three numbers are very different, you will at least have some interesting discussions. What if the customers who spend most in your particular market all seem to hate you?

Conclusion

Relationship research is important and predicts customer loyalty. You can be sure a score is a good one if you interview the correct people and act on their suggestions. Asking people for improvement suggestions and then doing nothing with them will be a disaster, no matter what your score. And always remember that your relationship with your customers may not be as good as you think. You are competing for attention, and your competitor could win!

Note that this article has been written based on content in two of our books: Customer Experience Strategy – Design and Implementation, and Net Promoter – Implement the System. All of our books are available on Amazon. The drawing is by Peter FitzGerald. Feel free to comment and disagree below.

Happy couple

Valentine’s Day classic blog – How to stay married – to your customers of course!

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It was Valentine’s Day a few years ago, and I was puzzled by the results of some HP customer experience research. The data source and volume were impeccable. However, the results seemed to prove something that differed from everything that I had learned about customer improvement work. Putting the data and the date together caused a flash of inspiration. I discovered something unexpected about how to keep your customers. I used to think it applied only to B2B situations, and now understand that it applies to any business that depends on contracts that need to be renewed annually.

We were trying to determine whether NPS worked for us

We were about a year into the implementation of the Net Promoter System under Meg Whitman’s leadership as CEO of HP. The time had come to work out the relationship between our Net Promoter Scores® relative to our competitors, and our revenue growth or decline. We had eight years of double-blind benchmark NPS® data for HP and about a hundred competitors, and were able to match it against corresponding revenue data for most businesses. We found that NPS was a great leading indicator of revenue. One HP business decided to investigate it in more detail. That business mainly had multi-year service contracts with its customers. The question they wanted to answer was “Which customers actually leave us?” They used their own relationship survey to understand the different behaviors of the NPS Promoters, Passives, and Detractors. What they found surprised us. I believe the findings apply to all businesses that have ongoing contractual relationships with customers.

From surprise to human relationships

Remember Valentine’s Day had come around when I was dealing with the surprise. Here is how I rationalized it in terms of human relationships:

Happy couple

The happy-happy couples

We all know couples who seem to be made for each other. I call them the happy-happy ones. They agree on everything. They have been together for years. We admire and envy them. In Net Promoter System terms, they are the Promoters. They are like the customers for whom everything is going well. All major project milestones are being achieved early. The customers are getting more than the financial benefits they expected. They have been working with the same account team for years. Life is wonderful. The customers talk positively about us to people they know, and bring us new business.

Angry couple

The couples who seem to fight a lot

Most of us also know couples who bicker constantly, needle each other, and occasionally provoke major arguments. In many cases, we are surprised to note that they have been together for years and show no signs of separating. Why? Because they are communicating! They stay together because they have invested a lot in the relationship and changing seems too scary. In Net Promoter System terms they are the Detractors. They escalate to the CEO. They get lots of attention. They get price rebates because they are angry. And, in the words of HP’s former head of Global Account sales (Jan Zadak) “I love escalations! The customers always wind up buying more stuff.”

When there are ongoing service relationships or investments in technology, the cost of change can be high. Imagine you have built all of your business processes around the way that SAP software works, but you now have a dispute with SAP. You will probably try to work it out. One of Meg Whitman’s catchphrases as CEO of HP has been “Run to the fire. Fix it in 24 hours or escalate it in 48.” I suppose it is also a guy thing that comes to the forefront in male-dominated industries. Men want to solve problems, and are willing to devote all their time to fixing a customer escalation, no matter what else is happening in the relationship.

Indifferent couple

The couples in the deadly zone of mutual indifference

Have you ever been in one of these relationships? I have, in the distant past. You get home. You think to yourself, “She is not saying anything… everything must be fine.” If you had that sort of relationship, how did it work out for you? Communication is the lifeblood of couples and of businesses with contractual relationships. Think of it this way at the very least; if you are not communicating, your competition may well be doing so. In the absence of communication, someone else smiles at your partner or customer and offers them flowers. They leave you, and you are surprised. Why didn’t they complain about something? What happened? In NPS terms, these are the Passives. Across most industries, they are 35 to 40 percent of all your customers.

What did the HP data show?

This particular multi-billion-dollar HP division had about a 15-point NPS decline over three years. Their revenue declined with the expected time lag. However the surprise was where it declined. Revenue with Promoters rose slightly. Revenue with Detractors stayed flat. Revenue with Passives declined close to 20%. Someone else was smiling at our Passives and sending them flowers. For the sake of completeness, I have to add that the particular business has since more than recovered the decline. I believe this data, these conclusions, and this couples metaphor are representative of all businesses that depend on renewable single-year or multi-year contracts. They are not helpful for pure product businesses.

The message

It is simple. Communication matters. Customers want to be remembered. If the only times your customers have contact with you are when you want to sell them something or when something is wrong, they will leave you. This insight could help your personal life too.

Your customer experience listening and improvement system is a crucial part of maintaining ongoing communication with the customers who are not escalating, and who are not active references for you. Just as you would never consider delegating communicating with your partner to someone else, you should manage your listening and improvement process on your own. Don’t delegate it to a third party. That would communicate something you don’t want: “I am too busy to listen to you. Talk to this person instead. That is a good use of your time, but not of mine.”

Breaking news: Piotr Sadowski has just posted a Polish version of this article on LinkedIn here. And you can still find a slightly different version of the article in French that I posted two years ago, also on LinkedIn here.

In the meantime, please feel free to comment below and sign up for our newsletter here to stay up to date. The artwork is by Peter FitzGerald, and you can reach me at mfg@customerstrategy.net.

CAB

Customer Advisory Boards – One of four types of team you may want to implement

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Following on last week’s article about Customer Success teams, here are a few words about Customer Advisory Boards.

If your business has some very large customers whose success depends on your products and services, Customer Advisory Boards can be a great help. ‘Very large’ means they spend at least $5 million annually with you. The purpose of CABs is to allow your customers to give you advice. I have seen them implemented well, and implemented poorly. The difference between the two happens when a company forgets who is supposed to be giving the advice. (Hint: the customers.)

Members should view each other as peers

Members should be senior executives with similar job responsibilities. The closer the members’ profiles are to each other, the more they will enjoy getting together. Indeed, they are likely to continue their conversations between any meetings you may organize. I suggest having no more than about eight members. If you have more large customers, organize multiple boards, ideally by industry.

Three main benefits for the customers

The benefit of receiving advice from key customers should be obvious, but what is the benefit to them? Here are the top three reasons the customers will want to be members:

  1. The opportunity to meet their peers in other companies. Ensure you provide long, indeed very long breaks so they can interact informally. Don’t let any agenda item interfere with the break times.
  2. The opportunity to give you feedback about what they want you to improve. After holding an initial meeting, you should ask them to prepare such feedback in advance, presenting it at the following meeting. I suggest asking for a volunteer among the members and letting them do the work on their own.
  3. The opportunity to participate in creating new products and services that address their problems and business opportunities.

Avoid this mistake

Avoid treating a Customer Advisory Board as a captive audience for your marketing team. You should not be trying to sell them anything during the meetings. Ensure you treat them as an ongoing community, with regular phone, email and face-to-face interaction. Always bear in mind that they will enjoy meeting each other more than they enjoy meeting you. Ensure space for that to happen, especially as it will build a community around your products.

That’s it, short and sweet. Keep your boards simple too.

Next time: Executive Sponsors and Project Sponsors.

Hygiene factors

What B2B customers and resellers want – A perspective that goes beyond research

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While I have been pushing a scientific approach to building and implementing a customer experience strategy for a long time, let’s put that aside for a moment. After working in this area since 1981, there are a few things I believe are high priorities for most B2B customers. You probably won’t discover some of these points directly in any formal feedback system, though they may be at the heart of many different improvement suggestions.

Remember me

Customers all want to be remembered. This means remembering everyone with whom you have had contact, and what that contact was about. Think about your favorite local restaurant. You appreciate it if the owner greets you at the door and says, “Welcome back Mrs. Smith. It is good to see you here again.” It gets better if the waiter asks, “Would you like the same drink as last time?” You feel that you matter to them.

At its most trivial this means not asking customers for the same information repeatedly if they phone you for support. If your phone routing system asks them for a contract number to route them correctly, you should not ask them for the contract number again. If you have gone through a diagnosis process with a generalist and found that you need to pass it to a more specialized person, the diagnosis information should go with the call. If the person has already phoned with the same problem, or indeed any problem, you should know about it and potentially check that all is still OK. If you have the person’s phone number in your database and the person calls from that number, you should not need to ask their name.

You must participate in the customer’s investment process

Your company probably has a standard format for proposing solutions to customers. If your customer is a large company, they are certain to have their own investment approval process. The person you are selling to has to decide, then propose any substantial investment for further approval at their end. Your proposal needs to fit their process. You should find out what their process is, and make it as easy as possible for them to use it to get your proposal approved.

Continuity of project management

If yours is a service business that relies on project execution, ensure the same project manager is in charge from the start to the end of the engagement. Let’s suppose you have three project stages: proof of concept, pilot, and full roll-out. Different people are needed for each stage of the project. If you have a completely different team for each stage, each new team leader has to get to know the customer organization, and the customer has to get to know them. Customers find full team changes deeply frustrating. The best solution for this is to keep the same project manager in charge the whole way through.

Reduction of your organizational complexity

If you are a large company, you are a complex company. Large customers are complex too, so they will have some empathy for you. A fundamental role of your account team is to reduce the perception and consequences of that complexity for customers. The account manager should be the broker between your different businesses and functions. If you have multiple businesses, each with a separate sales team, you will fail in this complexity reduction and never become a true strategic partner. You will be condemned to have their procurement department as your main contact point. This is not good for your margins.

Your company is always “We”

No matter what your customers complain about, apologize on behalf of your company. The worst type of thing you can say is “Ah yes, another complaint about shipping. Those people have a lot of problems at the moment.” Replace the thinking by “I am sorry you had this experience. We have had a few shipping problems recently and are doing our best to improve.”

What resellers want

If you use resellers to sell complex products, the resellers’ top priority will probably be that you supply accurate, price-competitive quotations quickly. Let’s suppose the reseller is selling to Nestlé, and that you have a global discount agreement directly with Nestlé that gives them a price reduction everywhere in the world. The quotation you give the reseller needs to reflect that. Let’s further suppose that this deal is in Indonesia and that you have had to give a further 15% price reduction to Nestlé in Indonesia the last three times you did business there. You should give the reseller the quotation with the additional reduction without being asked, though with the necessary explanation. Otherwise you, the reseller and Nestlé all waste time.

The second thing resellers want is for you not to compete with them. Unless you have a formal business model that says you work 100% through resellers, their expectation is not realistic. Your most important customers will want to do business directly with you. The best you can do for resellers is to provide them with clarity on your business model, letting them know when they can expect you to show up, and when it is less likely. If you do business in many countries, it is also probable that you have countries where you have no direct presence and will use resellers. Sometimes you will have an exclusive agreement for a country with a single reseller. Be clear about that too.

Remember that cost reduction is not strategic

While your selling proposition to customers may be cost reduction, cost reduction is not strategic for customers. While that might not seem to make sense, try to think about it this way: the strategic decision is what to do with the money that has been saved. How will it be invested? Once you are helping customers with their investments, you access people that are higher up in the organization and develop a true strategic partnership.

Customers get used to positive experience, then expect more

With relatives in Chicago and California, the difference in weather between the two is common subject of discussion. In addition, the Californian relatives have moved there recently. I have observed this phenomenon with others who have moved to much better climates. Personally, I moved from wet and grey Galway, in the west of Ireland a long time ago, and learned to appreciate the existence of summer. However, for me, and for others who have gone through the weather-improvement experience, its impact is strongest at the start, and fades over the years. Nicer weather becomes “the new normal”. So it is with customer experience. No matter how great the improvements you implement, customers will get used to them. Your competitors may also copy them. You need to repeat the whole strategy development exercise and come up with your “next big thing”.

Conclusion

I hope you enjoy these points that are based more on experience than on what comes out of customer research. Feel free to agree or disagree below. As is usually the case for my blog posts, this is a slightly-edited version of a chapter in one of our books, in this case Customer Experience Strategy – Design and Implementation. And the drawing at the top is included in a new book of business cartoons by Peter FitzGerald that should appear within the next week on Amazon.

 

#22 – Benchmarking, Bain NPS podcast, Temkin Customer Service report

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Welcome to the 22nd edition of my customer strategy newsletter. The five topics this week are:

  1. Comparing your company to others: benchmarking
  2. Questions for the Bain Net Promoter System podcast
  3. Latest blog posts
  4. Notable items from other sites
  5. Looking forward

Comparing your company to others using public ‘benchmarks’

One of the more common questions I am asked is “What is a good Net Promoter Score?” The simplest answer is “Any score trend that is better than that of your main competitor.” However, it is not easy to find your competitors’ scores. And all scores are not equal. So… what can you do?

A few words about the the word ‘benchmark’ are in order. The Merriam-Webster dictionary includes “something that serves as a standard by which others may be measured or judged.” This implies a consistent way of measuring something. I have to observe that there are various sources of ‘benchmark’ NPS data, but there is no single standard for how it should be measured. Bain has recently started a ‘certified NPS benchmark’ initiative, and I believe JD Edwards is the only company to have been certified so far. I believe you can trust NPS benchmarks from Satmetrix and Temkin, though they use different methods and are not free. Temkin does publish overall NPS ranges by industry free of charge, and you can find them here. If you sell to US consumers, you can at least try to understand where you are compared to your industry.

There are two other sites that provide what they call benchmarks. In practice, most of the content is data that companies themselves have provided. If you choose to use them to compare yourself to the competition, please do your best to understand where each number comes from. They are not well documented. The sites in question are npsbenchmarks.com and indexnps.com.

If you are not covered by any standard benchmarking report and can’t afford to fund a benchmarking effort of your own, I suggest using your relationship survey NPS scores for the comparison to others in your industry. They will be closer to benchmark results than transactional / touchpoint survey results.

The one thing you do not get from most benchmark studies is potentially the single thing that would help you most. This would be a summary of the verbatim comments and improvement suggestions for your competitors. If you can get these, your sales and marketing teams will be delighted.

Questions for the Bain Net Promoter System podcast recording

As mentioned last week, I will be recording a Net Promoter System podcast this coming Monday. The host is Rob Markey, co-author of The Ultimate Question 2.0. Thanks to those who have submitted about 20 questions by email and in the LinkedIn NPS Forum so far. More questions are still welcome, up until Monday morning, Geneva time. Send them to me by email at mfg@customerstrategy.net.

 

Our latest blog posts

The first two posts of three planned articles on deep customer relationship research are shown below. My Tropicana post surprised me in that it attracted both positive and negative attention. At least nobody has contradicted what I stated about the control distributors and supermarket chains have over farm prices. Older posts are of course still available on the blog page.

image Customer relationship research / surveys – Third of three articles

This is the third and final article in my series on deep relationship research, particularly for B2B. The main subject this time is how to overcome objections from inside your own company to the whole process. These objections usually come from sales teams.
image Customer relationship research / surveys for B2B – Second of three articles

The second article in the series covers who to interview in a customer organization, how to perform the interviews, and how to track and report results.
image  Why I became disloyal to Tropicana – A story about brand image

I have been fiercely loyal to Tropicana since late 2005. Reading the results of an orange juice comparison test in a Swiss consumer magazine changed my mind, and I don’t expect to buy Tropicana products anytime soon. Read on to understand why.

 

Notable customer experience items from other sites

Net Promoter System podcasts – my three favorites

Since I will be recording one on Monday, I thought it would be a good idea to provide you with links to my past favorites. I think my all-time favorite is the one with Horst Schulze, formerly of Ritz-Carlton, explaining what he did to create the legendary service culture of the hotel chain. I also liked the one with Lee Cockrell, formerly EVP of operations for Disney’s Orlando resort. It includes some of his experiences in Paris too. Finally, I loved the one with VimpelCom executives Anton Telegin and Natalia Macpherson. They talked about what it took to get that Russian telco’s leadership to believe in and sponsor their NPS work. Note that the link to the VimpleCom podcast takes you to the iTunes podcast library and you can find it as ‘Ep. 74’.

Temkin Customer Service Ratings

Temkin Group has just published its latest report on Customer Service based on a survey of 10,000 US consumers. It covers 295 companies across 20 industries. As usual, you have to pay to read the full report. However, I think you will find the free tables here to be interesting reading.

 

Looking forward

Thanks to those who have bought and read our books up to now. If you like them, please recommend them to friends and colleagues. No matter what you think of them, please post your thoughts on Amazon. This will help us to improve and will help others with their buying decision.

Please also share this newsletter with your friends and colleagues and encourage them to sign up for the 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.

To change your subscription, click here.

 

Love

Customer relationship research / surveys – Third of three articles

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This is the third and final article in my series on deep relationship research, particularly for B2B. You can find the first article here, and last week’s article here. The main topic this time is how to overcome objections to the process from within your own company. I conclude with some advice about relationship research when you don’t have enough resources to interview all relevant customers face-to-face.

Common objections to relationship surveys

Relationship survey interviews with large customers can be difficult to arrange. Contrary to what you may expect, the difficulties are almost always with your own sales teams rather than with the customers. The objections usually take the form of “I already work with my customer every day. I understand what they think and want in great detail. You can’t possibly tell me anything new.” These objections become stronger if you decide, despite earlier advice, to publish a score by customer. If you make the further mistake of deciding that these scores should be part of the formal evaluation of the sales leader at the individual customer level, you may as well forget about the feedback process. The sales person will prevent you interviewing anyone who is not ecstatic about everything.

Your CEO may be paying an inappropriate amount of attention

If the account-level score exists and is (at least formally) not part of the sales team’s annual evaluation, you can still have problems. One of our HP CEOs regularly read the interview reports for low-scoring customers only, and then phoned the sales representative to discuss it in detail. This did not happen where the scores were good. At one point, I wanted to get an account manager to agree to have some of his contacts interviewed specifically for software, not knowing that he had just ‘benefited’ from one of these CEO calls. His answer: “OK, and I will do all the interviews for you. What score do you want?”

A sales leader cannot possibly understand everything that everyone is thinking

A sales leader’s claim to understand everything that every key contact is thinking cannot possibly be correct. In our interviews, we have constantly been able to surprise sales teams by showing them changes in customer views, at the individual level, or that their preconceived notions about an individual are not correct. Customer contacts who have been vocal critics in the past sometimes turned into our most powerful advocates, if we listened to them and acted. The problematic relationships are not the openly negative ones. At least they are communicating with you, and most want you to be successful. The problematic relationships are the ones where you have fallen into the deadly zone of mutual indifference.

Overcoming objections from sales teams

In a perfect world, you will already have other sales teams who have gone through the process and found it effective. You then use these first teams as references for the others. In the absence of such references, here are some suggestions, in priority order:

  1. Be clear, in writing, that the sales person will not be evaluated on the overall score that comes out of the survey or on its trend over time. This can be tricky to word correctly, as it is not impossible that you will find bad chemistry between the sales person and essential people at the customer end. This might lead to changing the sales person. (To minimize the exposure to ‘bad chemistry’ issues, your account managers should be interviewed by the customer before they are appointed.)
  2. Demonstrate to the sales person that you have the resources and sponsorship to drive the improvements suggested by the customer. This should be positioned as unburdening the sales team from the corresponding workload.
  3. If you are in the customer experience leadership position, negotiate with the sales leader so that the customer experience lead becomes a formal position in the account team, accepting guidance from the sales leader. The formal description of the work should concentrate on the improvement process, and not on the gathering of the feedback. As customer experience leader, you should also agree to function as part of the sales staff, and attend all their meetings, no matter where you report formally. These steps are designed to prevent perception of customer experience as a pure audit function.
  4. Concentrate your messages on the individual people in the customer’s organization chart when communicating feedback results. Your audience will find the individual stories highly interesting.
  5. Involve the key sales people assigned to the customer in the feedback and improvement process. It may be easiest to start this when conducting a win-loss analysis, as described in the next chapter.

If relationships are not quite that deep

If your customer coverage is not quite that dense or you simply don’t have the resource or travel budget needed to go and see them face-to-face, the second-best approach is to interview them by phone, or a video link such as Skype. Just remember that the main work is not the interviewing, but the improvements. In all cases, you must tell customers what you have learned quite soon after the interviews have been completed, then execute. Finally, if you only have the resources to do relationship surveys by email, I would suggest not doing them. I don’t believe you can have deep relationships by email. You should worry if your competitors are better resourced.

Conclusion

Thank you for reading these three articles. Your comments, objections and suggestions are always welcome. As usual, this article is an edited version of an extract from one of our books; in this case from Customer Experience – Design & Implementation.

angry colour 800

Customer relationship research / surveys for B2B – First of three articles

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In almost all B2B situations, you have a relatively small number of customers that provide the majority of your revenue. For many companies, it is not the old 80:20 rule, or even a 90:10 rule, but more of a 99:1 rule, or even 999:1. If you have a ‘strategic account’ team or something similar, you are likely to be in this situation. If you are not sure whether you have strategic accounts, a way of looking at it is to understand how many customers a face-to-face sales person has. If some of them are assigned one to three customers or partners, you have strategic accounts. You need to listen to them in a special way and work on improvements that are specific to them. Rather than going through a series of definitions, let me start with a personal story.

Shortly after HP and EDS announced their merger, I went to see Vodafone in Newbury, UK. They were a large customer for both HP and EDS. At the time, information from Vodafone showed that they really did not care very much for HP. My new EDS colleagues gave me their Voice of the Client (VOC) survey results for Vodafone, which were outstanding. I started the meeting by saying, “Look, I would like to cut this short. You hate us and you love EDS. I am going to learn what EDS is doing that HP is not, and copy it.” The main Vodafone person in the room was surprised. “EDS is even worse than you,” he said. “What makes you think they are any good?” I proudly produced the transcripts of the EDS interviews with senior Vodafone people. “But…” he said, “None of these people were actually involved in the EDS project.”

The point here is that not all relationships are equal. You need to be certain you are talking to people who matter.

B2B Relationship research

A good relationship feedback process could be described as a non-anonymous mono-vendor benchmark survey. You usually only get detailed information about your own company. If you just have a small number of customers, say less than a hundred, you should simply interview them all face-to-face. If you have a large number of customers, you should segment the customers in some way, using increasing depth for your most important customers. Deeper research does not mean asking more questions. The Net Promoter System format (for example) remains intact. When you interview your most important customers, you go into far greater depth on the ‘Why?’ and ‘What should we improve?’ questions. Clarifying the input right away will make it far easier to prepare a worthwhile improvement plan for the customer to approve.

It is certainly possible to add questions about competitors to your relationship survey, though it would dilute the focus on your own company’s improvement opportunities. In cases where your product and your competitor’s are mutually exclusive, meaning nobody would buy from both companies, adding questions about competition would give you an early indication about whether customers are thinking of changing. For example, “Why do you buy from us instead of [insert key competitor name]?”

Resellers and other partners

Companies that help you to sell or implement your products and services are a special case. Since their job is to recommend your products and services, asking them the recommendation question is not appropriate. I recommend asking “Please rate your overall satisfaction as an Acme partner,” followed by the usual “Why?” and “What should we improve?” Since your partners have the choice of working with other suppliers, they are a good source of competitive information. I therefore suggest adding the following questions, using a reseller example, and supposing that the main competitors are called Alpha and Beta:

  • Do you sell products from Alpha or Beta?
  • What can Acme do to make it easier for you to recommend us over Alpha and Beta?

Future-facing relationship segmentation

I believe it is more useful to segment your research and improvement process by your future revenue expectations for a customer, rather than by what you achieve now. This means that customers who spend a lot on your type of product or service deserve a lot of attention, no matter who they spend it with. I suggest a two-year time horizon. The segmentation is used to determine the type of feedback process you will use. The top tier should be interviewed face-to-face, the second tier by phone or Skype and the lowest tier by email / web. The depth of your loop-closing and improvement commitments will also vary by tier.

Relationships are relative

Some time ago, we hired a new account manager for an important Swedish / Swiss customer, ABB, based in Baden, near Zurich. OK, it was a long time ago, when Digital Equipment Corporation still existed. Being clever sorts of people, we at DEC decided to move a Swedish sales person down to Zurich. While ABB was based in Switzerland, the most important executives were mainly Swedish. We told him he could live wherever he wanted. He did his research to find out where the key ABB executives lived and found a house on a street near two of them.

He struck up social relationships, and was feeling pretty good about himself and his prospects after a few months. I thought he was fantastic, and that his thinking was perfect. One evening he met a sales person from Andersen Consulting, who was competing with him for an ABB project. They had a discussion over a drink. He asked whether the Anderson person knew Mr. X, mentioning that Mr. X lived just a few doors away from his own home residence. The Andersen Consulting guy replied, “Sure. I took his kids to school this morning.” Oops.

Relationships can be complex

If yours is a large company and the customer is one of your most important ones, the relationship is likely to be complex. Multiple projects may be on the go at the same time. Some may be going well and others less well. One department can be ecstatic about you, while another may want to drop you as a supplier. Each person that deals with the customer in your organization is likely to have a partial view, but believe they understand everything. Good sales people are likely to know everyone that matters for their next deal, and may be totally unaware of an escalation on a product or service the customer bought three years ago.

Similarly, the support team may not know anything about a new deal that is being negotiated. When I was due to give a Big Data presentation to Swiss TV encryption provider Kudelski, I was given an exhaustive and rather painful briefing about a technical escalation that was in process. I was assured that the leadership team would not want to know anything about Big Data until the issue had been resolved. Once on site, the CIO did indeed note that “Our technical teams are working on an issue, but that is not why we are here today.” None of the others present mentioned it, and we had a great session.

In the next episode…

The next blog post / article will be on deciding who to interview, interview formats, and how to track results.

As is usually the case, the content of this article has been assembled from our books. This particular article combines content from Customer Experience Strategy – Design & Implementation, with related content from Net Promoter – Implement the System. As always, your comments, suggestions and personal experience are all most welcome below.

Happy couple

Valentine’s Day blog – How to stay married – to your customers of course!

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It was Valentine’s Day, and I was puzzled by the results of some HP customer experience research a few years ago. The data source and volume were impeccable. However, the results seemed to prove something that differed from everything that I had learned about customer improvement work. Putting the data and the date together let me learn something unexpected about how to keep your customers. While relevant to both, it applies more to business-to-business than business-to-consumer.

We were trying to determine whether NPS worked for us

We were about a year into the implementation of the Net Promoter System under Meg Whitman’s leadership as CEO of HP. The time had come to work out the relationship between our Net Promoter Scores® relative to our competitors, and our revenue growth or decline. We had eight years of benchmark NPS® data and were able to match it against corresponding revenue data for most businesses. We found that NPS was a great leading indicator of revenue. One HP business decided to investigate it in more detail. That business mainly had multi-year service contracts with its customers. The question they wanted to answer was “Which customers actually leave us?” They used their own relationship survey to understand the different behaviors of the NPS Promoters, Passives, and Detractors. What they found surprised us. I believe the findings apply to all businesses that have ongoing contractual relationships with customers.

From surprise to human relationships

Remember Valentine’s Day had come around when I was dealing with the surprise. Here is how I rationalized it in terms of human relationships:

Happy couple

The happy-happy couples

We all know couples who seem to be made for each other. I call them the happy-happy ones. They agree on everything. They have been together for years. We admire and envy them. In Net Promoter System terms, they are the Promoters. They are like the customers for whom everything is going well. All major project milestones are being achieved early. The customers are getting more than the financial benefits they expected. They have been working with the same account team for years. Life is wonderful. The customers talk positively about us to people they know, and bring us new business.

Angry couple

The couples who seem to fight a lot

Most of us also know couples who bicker constantly, needle each other, and occasionally provoke major arguments. In many cases, we are surprised to note that they have been together for years and show no signs of separating. Why? Because they are communicating! They stay together because they have invested a lot in the relationship and changing seems too scary. In Net Promoter Score terms they are the Detractors. They escalate to the CEO. They get lots of attention. They get price rebates because they are angry. And, in the words of HP’s former head of Global Account sales (Jan Zadak) “I love escalations! The customers always wind up buying more stuff.”

When there are ongoing service relationships or investments in technology, the cost of change can be high. Imagine you have built all of your business processes around the way that SAP software works, but you now have a dispute with SAP. You will probably try to work it out. One of Meg Whitman’s catchphrases as CEO of HP has been “Run to the fire. Fix it in 24 hours or escalate it in 48.” I suppose it is also a guy thing that comes to the forefront in male-dominated industries. Men want to solve problems, and are willing to devote all their time to fixing a customer escalation, no matter what else is happening in the relationship.

Indifferent couple

The couples in the deadly zone of mutual indifference

Have you ever been in one of these relationships? I have, in the distant past. You get home. You think to yourself, “She is not saying anything… everything must be fine.” If you had that sort of relationship, how did it work out for you? Communication is the lifeblood of couples and of businesses with contractual relationships. Think of it this way at the very least; if you are not communicating, your competition may well be doing so. In the absence of communication, someone else smiles at your partner or customer and offers them flowers. They leave you, and you are surprised. Why did they not complain about something? What happened? In NPS terms, these are the Passives. Across most industries, they are 35 to 40 percent of all your customers.

What did the HP data show?

This particular multi-billion-dollar HP division had about a 15-point NPS decline over three years. Their revenue declined with the expected time lag. However the surprise was where it declined. Revenue with Promoters rose slightly. Revenue with Detractors stayed flat. Revenue with Passives declined close to 20%. Someone else was smiling at our Passives and sending them flowers. For the sake of completeness, I have to add that the particular business has since more than recovered the decline. I believe this data and these conclusions are representative of businesses that depend on renewable single-year or multi-year contracts. It is not helpful for pure product businesses.

The message

It is simple. Communication matters. Customers want to be remembered. If the only times your customers have contact with you are when you want to sell them something or when something is wrong, they will leave you. This could help your personal life too.

Your customer experience listening and improvement system is a crucial part of maintaining ongoing communication with the customers who are not escalating, and who are not active references for you. Just as you would never consider delegating communicating with your partner to someone else, you should manage your listening and improvement process on your own. Don’t delegate it to a third party. That would communicate something you don’t want: “I am too busy to listen to you. Talk to this person instead. That is a good use of your time, but not of mine.”

Win some, lose some

A symptom of the strength of your relationship is whether you win or lose new deals with existing customers. Understanding why you win and lose will be the subject of a future blog post.

In the meantime, please comment below and sign up for our newsletter  here to stay up to date. The artwork is by Peter FitzGerald, and you can reach me at mfg@customerstrategy.net.

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