Customer power

In today’s volatile financial services market, keeping your existing customers happy whilst growing your customer base is absolutely vital. How do you define a ‘good’ customer experience? How do you measure it? To find out, Adam Burns put a flower in his hair and took off for San Francisco...

“We had great leadership that stood by the initial conviction and belief in customer centricity, and we were right”
-Laura DeSoto, SVP for Strategic Initiatives, Experian

Provide a poor customer experience and you run the risk of creating legions of detractors, customers who will complain loudly about your company and switch their loyalty to your competitors at the earliest opportunity: but providing a good customer experience is notoriously tricky. 

How do you change your customers from brand detractors to brand promoters, the sort of people who generate healthy profits and sustainable growth, and how likely are your customers to recommend the goods and service from your company? Knowing how to effect and measure the answer to these questions is key to retaining the best customers and finding new ones, even in a down economy. 

To get to the heart of the matter, I travelled to San Francisco, home of the Net Promoter Conference, to talk with Fred Reichheld, author of The Ultimate Question and partner at Bain and Company.

Fred originated the Net Promoter system of customer experience metrics, now a widely-used system across a variety of industries, including financial services.

I also spoke with two executives from the sharp end of customer loyalty – Brad Smith, president and CEO at Intuit, named America’s most admired software company, and Laura DeSoto, senior vice president for Strategic Initiatives at Experian, a global leader in consumer and business information services – about how, by putting customer experience to the fore, they have managed to outperform their competitors. 

The ultimate question
Measuring customer experience is a thorny issue, one that companies and individuals have been wrestling with – to varying degrees of success – since the dawn of commerce. Fred’s approach has garnered plenty of interest because, on the surface, it seems simple. And it starts with a simple question: have I treated you in a way that is worthy of your loyalty?

“How do you get at that? We’ve found that there’s one question in most businesses that is a good shorthand tactic,” says Fred. “It’s ‘how likely is it you’d recommend us to a friend or colleague?’ 

“People don’t recommend you enthusiastically to a friend unless you’ve really done something special. You’ve treated them in a way that’s worthy of their loyalty.”

Changing executive minds
Most executives, of course, believe that their company does provide a good customer experience. I asked Fred if he found that view changes when his metrics are put in place and ‘proper’ customer feedback is established.

“I find that executives are startled. They are dismayed when they actually measure this process of ‘am I doing a good job building loyal relationships?’ We find at Bain and Company that about 80 to 90 percent of companies or executives believe that they deliver an outstanding customer experience. Then when you ask the customers of those same companies, about eight percent actually believe that company is offering an excellent customer experience. The gap between perception and reality is astonishing.” 

What, then, are the fundamentals for good customer experience metrics? Fred: “true success is behaviors, and the behaviors that indicate loyalty are customers repeating, coming back, buying more things from you, adding product lines, generating referrals to their friends and family or colleagues.

“The last one is a little more subtle but equally important, and that’s an investment. They invest their time, their most precious asset, for free to give you feedback or to plan jointly with you.”

Fred maintains that those four behaviors drive profitable organic growth. But what of those startled executives? A metric will give you a score, but what should they do with it – and how do they secure buy-in to what may seem a nebulous process?

“It is not about the score,” states Fred. “It’s about using the score effectively to take action and to turn more of your customers into promoters.

“The only way you can grow profitably is to make sure your front line is treating customers in a way that makes those customers want to come back for more and bring their friends.  That’s a simple idea. The other thing is your reputation is everything. 

“Your legacy really is a function of every time your brand or your company touches a customer, did they come away feeling that they were treated correctly? It’s understanding how do I take what I have today, which is a mishmash of different satisfaction systems and market research, and how do I get that into a serious operational process that makes sense not just to our front line but to our board of directors.”

Sustainable growth
Fred started to analyse customer experience for Bain and Company when he realised that many companies were optimising profitability in the short term. He wanted to find a way to try and get them to focus on building the right kinds of relationships and creating sustainable growth, and focused initially on retention rates and loyalty. 

He made, he says, “some nice progress”, but was still left searching for a practical, timely way that leaders could measure development, hold people accountable, and to see where they are succeeding and, as importantly, where they are failing. Did he ever consider the other side of the argument? That loyalty is often the surest way to get the worst pricing, service and treatment? 

“The squeaky wheel is the one that gets the oil?” He laughs. “In today’s world, I’m finding that companies who are serious about living up to golden rule principles are also growing profitably. Their people are recognizing ‘no, it’s not the golden rule versus profits’. Frankly, the only way to have sustainable profits and beat the competition is to be better and more consistent at living up to the golden rule and earning loyal relationships.”

If the squeaky wheel argument is no longer true, what about the oft repeated statement that a happy customer tells one or two people; an unhappy customer tells nine or ten. Is customer experience fighting against a rising tide? 

“No. I find that if you delight a customer and just shock and amaze them with your thoughtfulness, the value that you deliver, how you treat them, you can get hundreds or thousands of comments out of that, and the same thing happens if I shock and amaze you on the downside and do something evil.” 

So how do you differentiate between customer retention and customer loyalty?  Someone may be on a long-term contract but spend every day bemoaning the state of that contract... 

Fred: “We initially looked at these behaviors. At Bain, we have an accounting and finance mentality, and retention rates seemed like such a great way to turn loyalty from a soft, fuzzy idea into real practical, measurable results. So we developed this science from retention. The problem was in some cases you’re keeping a customer for the wrong reasons. Sometimes they’re locked in a long-term contract. More often, they might not even be aware of the superior alternative or it’s just laziness, so that really wasn’t the ideal metric. That made us move to ‘would you recommend it to a friend’. 

“It’s not something you would do lightly. You’re putting your own reputation on the line when you recommend to a friend, and when you do it enthusiastically you know something very special took place.”

It sounds good, but this conversation is taking place against the backdrop of a serious economic downturn. When people are unhappier, your overall score will drop and that must have a demotivating effect. Can customer experience metrics turn against the company? Fred re-iterates that the absolute level of score is not where the focus should lie – it’s what you’re doing versus the competition. “Even if your score is going down,” says Fred. “As long as it’s going down slower than the competitor’s, that’s the goal.” 

Putting theory into practice
To find out how customer experience metrics work in the world of business, I asked Brad Smith, president and chief executive officer of Intuit, about the ‘real’ benefits of a good customer experience program, starting with employee engagement.

“One of the questions I hear most often is, ‘how do you get your employees to care?’,” says Brad. “And the simple answer we’ve discovered is they already do. Employees join a company because they want to be a part of something great. We’ve gone so far as looking at our employee satisfaction scores and we’ve discovered the No. 1 driver is our commitment to making our customers’ lives better. When we’ve made deviations from that, we’ve had big policies and procedures get in our employee’s way, employee satisfaction goes down. 

“When we empower the employees to do great things for customers, our employee satisfaction and our customer satisfaction goes up... They already care. As leaders, we have to find a way to empower them to do great things and get out of their way.”

Brad further explained that a good customer service program can get customers themselves involved, pointing out that an average of two blogs are being posted every second and over 200 million online searches are being conducted every day. “Word of mouth,” he says, “has never been more magnified than it is right now.”

What of the technology behind that customer experience? He says he’s happy with the way it provides end-to-end feedback and the way it has involved, with user contribution systems, to the stage where customers can actually be a part of the development process.

Brad: “In fact, in our case in TurboTax (Intuit’s tax software package), we had 40 percent of customers’ questions last year answered by another customer, with an accuracy rate higher than anything we’ve ever delivered in 24 years.”

So there you have it. Treated well, customers can become a very real part of your value proposition.

Goal setting and managing change
Experian is another company that has made the customer experience transformation. I asked its senior vice president for Strategic Initiatives, Laura DeSoto, about the leadership and management challenges behind implementation. How important are formal goal-setting performance and recognition programs versus day-to-day direction? 

“This is a great question for us,” laughs Laura, “because we had great leadership, certainly from the senior level and a lot of engagement with our line managers [but] we probably swung the pendulum too far to the goal setting.” 

In its exuberance in delivering this experience, Experian cascaded its scorecards, its goal-setting exercises, all the way through the organization, from the CEO to the frontline employee. “So we ended up with literally thousands of these client Experian scorecards in the organization where people were trying to measure against certain performance,” explains Laura. “This became unwieldy for us and after the first year we abandoned it at that level. 

“We certainly do goal setting today, but it is much more focused. We’ve balanced out between the leadership and the culture aspect and setting performance goals.”

Laura also warns not to expect an instant solution. “It took about 18 months before we saw any impact in the scores and/or some of the key levers that we were looking for. We’re in a business-to-business environment and many of our relationships are long-term, and so we really had to prove ourselves. [We] put some changes in place and then over time our customers began to reward us by telling us, ‘you’re on the right track. We see the difference you’re making’. And then we started to see our scores really escalate.”

Experian began their process by investing a great deal of time and effort upfront, interviewing customers to look at what they expected from a provider of information services, what kind of experience was being delivered, and where there were gaps.

The company used this exhaustive research and statistical methodologies to hone in on the key ‘loyalty drivers’ for its customers. Did it get them all right? “There was a lot of questioning in the organization early on,” says Laura. “How come we’ve put some of these changes in and we’re not seeing necessarily all the behaviors that we want? We fortunately had great leadership that stood by the initial conviction and belief in customer centricity, and I think we were right. It just took a period of time for our customers to really see the difference.

“We are constantly having to question: ‘are these still the right aspects we should be focused on?’ And so we’re very, very intent on listening to customers, making adjustments as we get new data in the door, and aligning the organisation around that.”

Ensuring a good customer experience may be a process that never ends, but for all of these companies – and many more – it pays well in the meantime.

Watch the full interviews with Fred Reichheld, Brad Smith and Laura DeSoto in ‘Customer Experience: The Ultimate Question’ on www.meettheboss.tv.

The solution provider
CA is a $4.3 billion software company, based in Islandia, New York, that help technologists enable the best customer experience. Mark Bubar, CA’s vice president of sales for Global Financial Services, explains...

Financial institutions in all sectors (insurance, banking, and brokerage, institutional and retail) have shifted their focus from “defensive” risk management, compliance and security to making money through improved customer retention, cross-selling and customer acquisition.

As financial institutions seek to boost revenues, however, industry consolidation and competition from Web 2.0 companies offering financial services have left them to face the challenge of commoditized service offerings as well as decreasing transaction fees and profit margins.

To differentiate their offerings, firms are focusing on improving customer experience. Indeed, a Forrester survey of 190 North American banking executives about their customer experience efforts found that 76 percent of respondents said that customer experience will play a critical role in their company’s competitiveness.

The eight dimensions of the customer experience
In the past, customer experience was the purview of customer service representatives in the field. Today, many factors affect customers’ satisfaction and willingness to recommend a financial institution. Multiple channels, including online, branch, telephone/call centers and ATMs, together with a rapidly growing number of products and services, represent customer touch points that contribute to the customer experience. Because technology underlies them all, IT has become essential to delivering on the customer experience.

If your firm is embarking on the journey of improving customer experience, you will need to begin with an understanding of the ways in which technology impacts that experience. In working with 50 of the top 50 financial institutions worldwide, CA has developed a methodology for relating business strategies to IT imperatives based around eight dimensions of customer experience and the related technologies.

These components include:
1. Customer-centric architecture
2. Extended Enterprise security
3. Transaction efficiency
4. Transaction performance
5. Value for cost
6. Anytime, anyplace service
7. An ethical and compliant partner
8. A constant stream of new solutions

To find out more, visit www.ca.com.