Customer Service

  • April 20, 2011
  • Marketing has become the new hot spot in CRM.  During the recession and even before, there was a great flurry of interest in customer service and related things.  Consequently, we have seen a lot of attention being paid to customer experience and much of the social media oriented growth in that period was centered on the existing customer.

    As the economy has begun to improve the orientation has been more toward sales but with a decided twist.  By their actions, vendors have made it clear that they understand that the rule of the day is cross selling and up selling the customer base.  That’s a big difference from rushing out to sell net new brands, products and categories.  With that shift it becomes more important than ever to market well and at a macro level that spells the rising importance of marketing automation.  This might seem redundant but it is not.

    When we sell net new categories marketing is rather bare bones.  Uber-marketer Thor Johnson describes marketing in explosive new markets as PR and brochure marketing and he has a point.  When the world is a green field you need little more than a list of names to cold call.  But the tenor of these times requires more incisive understanding of customer motivations and needs, hence the emphasis on data gathering through social and other channels, analytics and even revenue performance management.

    I have written about all of these ideas before but the difference between then and now is that I was early then and today the change is upon us.  You don’t need to look far for proof.  The Salesforce-Radian6 nuptials are proof enough but if that was the only proof point you could be skeptical.  However, numerous indicators suggest that this is real.  Revenue performance management (RPM) with its emphasis on embedding analytics into sales and marketing business processes is a case in point.

    RPM is all about building greater certainty into the sales process and if you dig a little it makes perfect sense.  When selling into an established customer base the demand is relatively lower than it is when selling into a new market but the costs don’t change much.  Consequently, a smart vendor will not simply chase every suspect but gather evidence of need, demand and ability to pay before committing expensive sales resources.  Depending on the market, the vendor might forget all about direct sales and opt for channel representation or retail selling, each of which off-loads significant expense.

    The reasons are manifold.  Margins are smaller the second or third time around and subsequent products have to pack more value.  Look at your latest wireless phone, how does it compare in features and functions with the device you had at the beginning of the century?  Now, how does your monthly wireless bill compare with the bill you paid ten or more years ago?  I rest my case.

    All of that speaks to an era when marketing is ascendant.  The last time something like this happened, in the US at least, manufacturing was king and we were able to stamp out any number of products for pennies.  To keep the engine of commerce running we marketed the heck out of products and ushered in the golden age of advertising abetted by the rise of new technologies ideally suited to mass marketing — broadcast medial.

    The situation is not identical today.  Manufacturing went to ultra low wage countries and we became an economy dominated by the service industry.  Smart vendors have tried to raise the idea of service to an art form calling it an experience and, of course, the experience starts with marketing, and our own new messaging technology, social media.

    This entire preamble has a CRM point.  If you look at the major CRM suites marketing is, in many cases, under-represented.  It is a sub-division of accounting in many places and that might be a good thing.  Before marketers could take an equal place in a company’s revenue discussion, they had to learn to talk the corporate talk.  In addition to the usual lingo of clicks, responses, placements and square footage, marketing has had to learn the language of ROI and it has done that or at least the process is underway.

    Today, in addition to the understanding of the art of marketing, advanced marketers are speaking the language of cost per lead, campaign ROI and revenue.  This change comes along at precisely the right time as vendors in both B2B and B2C worlds grapple with a dynamic marketplace where success requires more than brute strength cold calling or uninspired retailing.

    In this environment I expect to see more of the established CRM companies taking a second or third look at marketing and to strengthen their offerings beyond the basics.  This makes for an interesting time if you happen to be an independent software company specializing in marketing, social media marketing or analytics.  The IPO market is beginning to build but as the Salesforce-Radian6 deal shows, a good company doesn’t necessarily need to IPO in order to have a big payday.

    Published: 13 years ago

    There’s good news for any manager who has grown exasperated with trying to delight customers through “over the top” service.  You may be working too hard and the benefits are not forthcoming.  We’ll do anything to keep customers because they tend to buy more from us and the cost of replacing them if they leave is so high.  But according to a study published in Harvard Business Review, “Stop Trying to Delight Your Customers” by Matthew Dixon, Karen Freeman, and Nicholas Toman, vendors would be better off sticking to their service knitting instead of looking for ways to “delight” them.  This is not to say that the customer experience is unimportant, just the opposite.  The question is what constitutes the customer experience from the customer’s perspective.

    “Stop Trying to Delight Your Customers” is important because it is so thorough.  According to the article, which first appeared in HBR in July 2010, “the Customer Contact Council, a division of the Corporate Executive Board, conducted a study of more than 75,000 people who had interacted over the phone with contact-center representatives or through self-service channels such as the web, voice prompts, chat, and e-mail.”  The researchers also held hundreds of structured interviews with customer service leaders.

    Their conclusions mirror what some people in CRM have been saying for a long time.  Customers’ opinions of service quality, and their experiences, are determined by how well the vendor attends to the matter at hand — meeting the customers’ needs.  According to the study, refunds, freebies and the like are only marginally effective at making customers loyal.  What works exceedingly well on the other hand is attention to the basics.  From the report, top loyalty eroding problems include:

    • 56% report having to re-explain an issue
    • 57% report having to switch from the web to the phone
    • 59% report expending moderate-to-high effort to resolve an issue
    • 59% report being transferred
    • 62% report having to repeatedly contact the company to resolve an issue

    Most interestingly the report points to a new metric that has greater predictive value for customer loyalty than customer satisfaction or even the Net Promoter Score (NPS) — the Customer Effort Score or CES.  The CES measures customer effort as ranked by the customer, on a scale of 1 to 5 with 5 being very high effort.  Think of it like the friction in a customer service encounter, the lower the friction, the lower the customer’s effort and the happier and more loyal the customer.

    The article’s findings and recommendations paint a picture of how any company — without massive investment in the latest fad technology can make itself easier to do business with.  Often removing service friction is as simple as removing old policies and procedures that no longer apply, making websites easier to navigate and anticipating the customer’s next need based on the case information.  For instance, the authors cite a situation with Bell Canada in which a high percentage of “customers who ordered a particular feature called back for instructions on using it.”  By anticipating the next call and routinely providing instructions, Bell Canada “reduced its ‘calls per event’ by 16% and its customer churn by 6%.”

    Is it really that simple?  Apparently.

    This is all very interesting to me because for a couple of years I’ve been trying to raise the issue that no matter what else we do in the customer service interaction, we need to ensure that we solve the customer’s problem.  While it seems rudimentary, I feel we’ve lost sight of the idea amid the need to reduce call time, deflect issues to other channels and cross sell or up sell.  I have gotten to the point that I am recommending to clients that they adopt policies that equate customer resolution with a duty to the customer spelled out in black and white.

    The idea of duty might seem odd to some but the idea isn’t new and I have written about it before.  You can trace it back through American and English Common Law to the Magna Carta.  It may seem unusual but the idea of a vendor’s duty to a customer was codified into law in the great charter — the first example of a constitution-like document in Western Civilization.

    Among the duties in question is the reception an innkeeper owes to a customer and it is still in force today.  If you’ve ever arrived at a hotel with a reservation and for one reason or another there were no rooms available you might have been surprised at the level of service the hotelier provided to find you a room at a competitor’s place.  But they weren’t just being nice, the hotel has a legal “duty to receive” and that goes all the way back to June 15, 1215 at Runnymede.

    Taking a duty-based approach won’t solve every problem associated with providing customer service.  But the CES metric and the stories quoted in the HBR article make it clear that customer service is where a company “re-sells” itself to a customer, regardless of whether or not the customer takes a cross sell recommendation.

    So there’s something to be learned from the HBR study as well as from the hospitality industry.  We couldn’t find better sources or better examples of how all businesses ought to provide customer service.


    Published: 13 years ago