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Customer Loyalty as a Key Support Strategy
John Hamilton
President
Service Strategies Corporation
. . . evolving customers from highly
satisfied to intensely loyal.
Customer Loyalty as a Key Support Strategy
What makes customers really happy?
1. Customer service experience
2. Ease of doing business
3. Price versus value
4. Company reputation
Customer Loyalty as a Key Support Strategy
Customer Survey Process
Whether surveying for
Customer Satisfaction,
Loyalty or both . . .
Customer Loyalty as a Key Support Strategy
Beginning with a solid foundation
• Whenever we survey a segment of
our customer population about
satisfaction or loyalty we are using
statistics, or more specifically,
Inferential Statistics.
• That is, we are inferring something
about the entire population by
looking at a sample of that
population.
Customer Loyalty as a Key Support Strategy
But first . . . Some key Inferential Statistics terms
• Population (Universe)
– All Items of Interest
• Parameter
– Summary Measure about Population
• Sample
– Portion of Population
• Statistic
– Summary Measure about Sample
P in Population
& Parameter
S in Sample
& Statistic
Customer Loyalty as a Key Support Strategy
• Most Service Vendors have a survey
process to measure customer satisfaction
– Periodic surveys - Perceptions
– Event/Transactional surveys –
Actual experience
• Establish required sample size, target
response rates and confidence level
• Quantitative results and verbatim
feedback gathered
• Results are analyzed and communicated
Customer Loyalty as a Key Support Strategy
Common Errors in Customer Surveys
Since the usability of any customer survey
depends upon the accuracy of the results,
error control plays a critical role in the
research process.
•Sampling Errors
The inaccuracy of the results of a survey when
a non-random sample of a population is used
to infer the satisfaction of the total population.
–Only Closes cases
–Exclusion period
Customer Loyalty as a Key Support Strategy
Respondent Influencing Errors –
•Leading the respondent
• Leading question by telephone survey
interviewer.
• Survey wording bias.
“We value our highly satisfied customers etc..
• Support representative pleading…
“My job depends on your rating”
Customer Loyalty as a Key Support Strategy
Questionnaire Structure Errors –
•Question Ordering bias .
–Overall question
•Questionnaire Language error
–Ambiguous - Are you satisfied or very satisfied with the
support you received?
Respondent Error
•When respondents purposefully or mistakenly give
incorrect answers to survey questions
Customer Loyalty as a Key Support Strategy
• Customer survey rating scales have
“Satisfaction” set at the mid-point
or just above
Example from seven point scale
Extremely
Dissatisfied
Very
Dissatisfied
Satisfied
Very
Satisfied
Extremely
Satisfied
Customer Loyalty as a Key Support Strategy
“TOP BOX” IS SIMPLY A TERM USED TO
DESCRIBE THE HIGHEST RATING ON A
CUSTOMER SURVEY SCALE
• Definition from the “Support Center
Practices” Certification program
• Highest rated measurement to better
understand customer loyalty and
retention
– Question:“Overall, how satisfied are you
with the support provided by your vendor ?”
Customer Loyalty as a Key Support Strategy
10-Point
Rating Scale
9
Top Box
7-Point
Rating Scale
4-Point
Rating Scale
10
Extremely
Satisfied
8
7
7
6
6
5
5
4
4
4
3
3
3
2
2
2
1
1
1
Satisfaction
Extremely
Dissatisfied
Customer Loyalty as a Key Support Strategy
Now let’s look at the evolution
from highly satisfied customers to
intensely loyal customers. But,
first we must consider . . .?
Customer Loyalty as a Key Support Strategy
Satisfaction = Meeting minimum
expectation (32% chances of losing customer)
Loyalty = Exceeding customers
expectation and securing future
commitment (0 to 3% chance of losing
customers)
Customer Loyalty as a Key Support Strategy
It costs five to ten times more money to get
a new customer than it does to keep the
customers you already have
John Tschohl, founder and president, Service Quality
Institute.
5% increase in customer loyalty can
increase profits by 25 to 85%
Harvard Business Review
Customer Loyalty as a Key Support Strategy
• Satisfaction scores for the automotive industry have
ballooned up to 90%, while repurchase rates have
remained mired below 50% .
• Bain & Company’s research has shown that in business
after business, 60% to 80% of customers who defect to
a competitor said they were satisfied on the survey just
prior to their defection.
Customer
Satisfaction
Repurchase
Rates
Customer Loyalty as a Key Support Strategy
. . . and how about employee and investor loyalty?
Employee turnover rates of
15-25% are common.
Cost of losing a service employee
can be as high as $250K
Average investor churn now
exceeds 50% per year.
Customer Loyalty as a Key Support Strategy
Customer Loyalty as a Key Support Strategy
Employee Sources of Job-Related Meaning
Related to Management’s Options to Influence That Source
Sources of Meaning
What Management Can Do to Increase
Meaning, Thereby Increasing Inner Fulfillment
Stock options.
Make the stock grow and split. (Very difficult.)
Career growth and
promotion.
Provide for the company’s continued growth so that
there are many slots to which one can be promoted.
(Very difficult.)
The daily satisfaction of
providing a valued
service to customers.
Give employees all of the necessary tools and authority
to provide a valued service to their customers.
The daily satisfaction of
being a valued member
of their organization.
Help employees align their daily actions to provide value
to the organization and recognize them for doing so.
The daily satisfaction of
fulfilling their own
personal work-related
needs.
Help employees see how daily satisfaction of
organizational and customer needs is satisfying their
own needs as well.
This concept was supplied by John Wright of Computer Associates.
Customer Loyalty as a Key Support Strategy
Customer Loyalty as a Key Support Strategy
In 2005, Walker Information
conducted a U.S. and European study
on customer loyalty in the software
and hardware industry.
Customer Loyalty as a Key Support Strategy
The 12 Loyalty Leaders are:
Of all the major software and
hardware companies evaluated
as part of this Walker Loyalty
Report, just 12 were
designated as Loyalty
Leaders. Earning high
percentages of truly loyal
customers, these companies
also have relatively low
percentages of customers in
the high-risk category.
•
Adobe
•
Apple
•
Cisco Systems
•
Dell
•
EMC²
•
Hewlett-Packard
•
IBM
•
Microsoft
•
Oracle
•
SAP
•
Sun Microsystems
•
Symantec
Customer Loyalty as a Key Support Strategy
Walker Loyalty
Reports
categorize
Loyalty in four
quadrants
* Walker Information @ www.walkerinfo.com
Customer Loyalty as a Key Support Strategy
Walker Loyalty
Reports
categorize
Loyalty in four
quadrants
Truly Loyal
Accessible
. . . customers like
your company and
choose to associate
themselves with it.
. . . customers are
willing to give you
opportunities to earn
their loyalty.
Trapped
High Risk
. . . customers feel
forced to do business
with you now but will
leave if they can.
. . . customers are
dissatisfied and are
actively looking for
alternatives.
* Walker Information @ www.walkerinfo.com
Customer Loyalty as a Key Support Strategy
The U.S. Hardware industry
generates less customer
loyalty than the Software
industry, despite Hardware's
higher scores in customer
experience areas. This
suggests Hardware
companies have fewer
barriers to switching, more
competition, and/or less
differentiation.
Hardware products are
more commodity-like than
Software, which is why
vendors seek to wrap the
products into more
consultative solutions for
customers.
Hardware Customers / U.S.
Truly Loyal
Accessible
Servers/Workstations
55%
Servers/Workstations
4%
Network Storage
55%
Network Storage
3%
Net Equipment
48%
Net Equipment
4%
Mass Storage
40%
Mass Storage
2%
Trapped
Network Storage
Servers/Workstations
Net Equipment
Mass Storage
High Risk
24%
25%
27%
33%
Servers/Workstations
16%
Network Storage
18%
Net Equipment
21%
Mass Storage
25%
Customer Loyalty as a Key Support Strategy
Software Customers / U.S.
Software as a total sector in the U.S. maintains
more truly loyal customers than does the U.S.
Hardware industry.
Europe's Software customers are less truly
loyal than the U.S. customers and score
similarly to Hardware in Europe.
Despite having more loyal customers, Software
scores fall slightly below Hardware on
company images, and even lower on customer
experiences.
Within Software, CRM loyalty is slightly below
the norm in the U.S., driven by concerns with
total cost of ownership and product quality.
Truly Loyal
Accessible
Enterprise
59% CRM
5%
Desktop
57%
Enterprise
5%
Infrastructure
55%
Desktop
3%
CRM
52% Infrastructure
3%
Trapped
High Risk
CRM
21% Enterprise
15%
Enterprise
21%
Desktop
16%
Desktop
24%
Infrastructure
18%
Infrastructure
24%
CRM
22%
Customer Loyalty as a Key Support Strategy
How focusing on Customer Loyalty improved results at
Cisco Systems* over the past few years.
Truly Loyal
Accessible
2003 – 58%
2003 – 10%
2004 – 67%
2004 – 12%
2005 – 70%
2005 – 10%
Trapped
High Risk
2003 – 15%
2003 – 17%
2004 – 7%
2004 – 14%
2005 – 7%
2005 – 13%
* Wim Elfrink, Senior Vice President of Customer Advocacy, Cisco Systems
Keynote Speaker at AFSMI Conference – October 2005
Customer Loyalty as a Key Support Strategy
Measuring Customer Loyalty
Very
Dissatisfied
Dissatisfied
Neither
Satisfied or
Dissatisfied
Satisfied
1
2
3
4
Likelihood of
Recommending
How likely are you to
recommend QuickSoft to a
friend?
Very
Unlikely
Unlikely
Neither
Likely or
Unlikely
Likely
1
2
3
4
Likelihood of additional
purchases
How likely are to buy
software products from
QuickSoft in the future?
Very
Unlikely
Unlikely
Neither
Likely or
Unlikely
Likely
1
2
3
4
Overall Satisfaction
Please rate your overall
satisfaction with the support
center response to your recent
support request.
Reference
Workbook
Page 5-68
Very
satisfied
5
Very
Likely
5
Very
Likely
A useful
Customer
Loyalty Index is
the percent of
surveys with top
box selected on
all three of these
questions.
5
SCP Support Manager Certification course
Customer Loyalty as a Key Support Strategy
The road to Customer Loyalty at Hewlett-Packard.
First time fix rate
Hold time
Time to resolution
Highly Satisfied
Each of these case
attributes were
found to be highly
correlated with
high levels of
customer
satisfaction.
Quality (monitoring)
* ML Krakauer, Vice President & General Manager, Technology Services, Hewlett-Packard
Keynote Speaker at AFSMI Conference – October 2005
Customer Loyalty as a Key Support Strategy
The road to Customer Loyalty at Hewlett-Packard.
Loyalty Index
Highly Satisfied
Highly Likely to Recommend
Highly Likely to Repurchase
The percent of
customers that
scored a five on all
three of these
survey questions
make up the HP
loyalty index.
* ML Krakauer, Vice President & General Manager, Technology Services, Hewlett-Packard
Keynote Speaker at AFSMI Conference – October 2005
Customer Loyalty as a Key Support Strategy
•
McKesson is a client of SatMetrix and uses a variation of the
SatMetrix Customer Loyalty Index analysis. The CLI is
based typically based on the answers to four questions:
1. How satisfied are you with this provider’s overall
performance?
2. How likely is it that you would recommend this provider to a
friend or colleague?
3. How likely is it that you will continue to purchase
products/services from this provider?
4. If you were selecting a similar provider for the first time,
how likely is it that you would use them?
• McKesson only uses the first three questions which are
the same as the three questions used at Hewlett Packard
and recommended in the SSC Certified Support Managers
course.
Customer Loyalty as a Key Support Strategy
The SatMetrix CLI analysis separates customers into four
categories.
•
•
•
•
Promoter
– High scores on each of the loyalty questions. They are
committed customers and are very likely to provide
recommendations
Content
– Medium to high scores on each of the loyalty questions.
Although they are likely to remain loyal, your company
should develop action plans so that “Content” customers
become “Promoters.”
Disappointed
– Average scores on each of the loyalty questions. They are
dissatisfied with one component of loyalty, and could be
easily lost to competitors if your company does not
address their needs.
Lost
– Low scores on each of the loyalty questions. They exhibit
a high level of dissatisfaction on the loyalty questions. At
this point, it is better to concentrate your efforts on
customers in the Disappointed or Content categories.
Customer Loyalty as a Key Support Strategy
• Customer driven, recognizing that our
customers determine the definition of value
Relentless pursuit of excellence, setting
aggressive goals and measuring against
progress
Innovation, open-minded, willing to embrace
new ideas and challenge our current way of
doing business
Speed, acting with a sense of urgency, a bias
for action and a passion to win
People, sharing respect for one another and a
common sense of integrity in our work
Customer Loyalty as a Key Support Strategy
Customer Loyalty as a Key Support Strategy
The Idea in Brief
You only have to ask your customers one question: "How
likely is it that you would recommend our company to a
friend or colleague?" The more "promoters" your company
has, the bigger its growth.
Customer Loyalty as a Key Support Strategy
Calculating your Net Promoter Score
Group your customers into "promoters" (extremely likely to
recommend), "passively satisfied", and "detractors"
(extremely unlikely to recommend). Then subtract the
percent-age of detractors from the percentage of promoters.
Extremely
likely
10
Extremely
unlikely
Neutral
9
8
Promoter
7
6
5
Passive
4
3
2
1
Detractor
0
Customer Loyalty as a Key Support Strategy
Comparing Net Promoter Scores and Financial Results
A more sophisticated approach is to use profitability-based segmentation to
align customer experience with corporate goals and objectives.
3 year revenue growth
Wintel PC’s US only
20%
5-year revenue growth
Rental Cars
20%
10
15
Dell
Enterprise
Budget
0
10
HP
Dollar/Thrifty
-10 Compaq
-20
5
0
Avis
Gateway
IBM
20
40
60%
Alamo/
National
0
10
Hertz
20
Net Promoters
30
40%
Net Promoters
5 year revenue growth
Airlines US only
15%
5-year revenue growth
Package Delivery
10%
Southwest
Continental Alaska
5
0
-5
-20
UPS
8
10
America West
Delta
Northwest
US United
Air
TWA
0
20
FedEx
6
4
USPS
2
Airborne Express
American
40
Net Promoters
60
80%
0
40
50
60
Net Promoters
70%
Customer Loyalty as a Key Support Strategy
Why businesses loose customers!
Other
Needs Change
4%
5%
Market research on lost customers by major
companies shows that 14% leave for better
product, 9% for cheaper product, 68% because of
poor service and/or service provider’s attitude,
which can be easily avoided by designing,
measuring and monitoring effective customer
service process.
Price
9%
Product Quality
14%
Poor Service /
Attitude
68%
New slide
Customer Loyalty as a Key Support Strategy
Loyalty and the Purchase Cycle
Decision
to repurchase
Post
purchase
evaluation
Re-purchase
Loop
Repurchase
Each time a customer buys, he or she
progresses through the buying cycle.
The first-time buyer goes through five
steps. The sequence of purchase,
post purchase evaluation, and
decision to re-purchase then form a
re-purchase loop that is repeated
multiple times, during a customer’s
relationship with a company and its
products and services.
Initial
Purchase
Awareness
Customer Loyalty as a Key Support Strategy
• Immunity
– Inoculated against competitive threats
• The big “R’s”
– Relationship and revenue
– Reference-ability
– Repeat business
Customer Loyalty as a Key Support Strategy
Loyalty is the commitment you
must EARN from your customers
in order to maintain an ongoing
profitable relationship