Stakeholder Magazine - 2009

Creating value for customers, employees and shareholders

LOYALTY Customer insight or sales promotion?

November 2009 £4.50

COMPANIES IN THIS ISSUE Tesco NCFE Johnsons Apparelmaster Coca-Cola Barclays Hilton T-Mobile

CONFERENCES TRAINING EXERCISE LATEST THINKING BOOK REVIEW

2009 Training Courses Customer satisfaction - £325 (ex VAT) Our customer surveys course is our starting point for all customer satisfaction research. It teaches the foundations of starting a survey from scratch, all the way to analysing the results.

3rd November - Central London 25th November - Manchester

Analysing & Reporting Customer Satisfaction Data - £325 (ex VAT) Analysing real customer satisfaction data you will take away all the formulae, macros, user-defined charts etc to use back at work.

4th November - Central London

Questionnaire Design - £325 (ex VAT) A complete guide from professional researchers about how to design questionnaires that work – covers all aspects including wording, graphics, response options and response rates.

5th November - Central London

Facilitating Focus Groups - £325 (ex VAT) Learn how to prepare for and moderate a successful focus group in this ‘hands on’ course.

12th November - Central London

Understanding Dissatisfied Customers (New Half Day Briefing) - £145 (ex VAT) A half-day for people who want to improve the way they measure and manage customer dissatisfaction and defection.

17th November - Central London

Complaints Management - £325 (ex VAT) Ideal if you are implementing a complaints management system or improving an existing one. This course explores best practice in managing the complaints system.

18th November - Central London

Stakeholder Showcase (Half Day Briefing) - £145 (ex VAT) Everyone is having to work harder than ever to keep customers coming back - this short dynamic briefing will give you lots of ideas and you'll take away proven ways of improving your customers' experience.

1st December - Central London

For more information about all our courses or to book a place, please visit our website: www.leadershipfactor.com

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Training courses and Conferences from around the country.

November 2009 23 Customer The national measure of customer satisfaction.

7 Customer Loyalty - Customer insight or sales promotion?

27 Research AITS - Accredited interviewer training scheme.

12 Latest thinking

29 Conference

Co-creation - the new customer experience.

European customer experience world.

16 Case Study NCFE - Customers don’t come first...employees come first.

In this issue...

VOLUME 6 ISSUE 3

33 Case Study Complaint handling.

38 Book Review Risk - The science and politics of fear by Dan Gardner.

20 Case Study Johnsons Apparelmaster - Our people make the difference. www.stakeholdermagazine.com

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Nigel Hill editor

Loyalty schemes and customer loyalty People have widely differing views about loyalty schemes. Some customers are avid points collectors but 15% of us resolutely refuse to join a single loyalty scheme. Some professionals argue that loyalty programmes are unnecessary because they’re just a way of spending money rewarding customers who would probably have been loyal anyway. More acceptable from a PR point of view, some companies say customers prefer ‘everyday low prices’ to loyalty schemes.

Other companies, however, have invested considerable budget in their loyalty schemes, both Tesco and Sainsbury’s having increased the value of their reward points in the last few weeks. So what’s the benefit? Actually there are two. If linked to EPOS sales data as well as customer geo-demographic and lifestyle information, the loyalty scheme can generate a vast amount of marketing insight. To take full advantage of this opportunity, suppliers must offer customers more than just a simplistic discount or rebate programme. If customers simply cash in points and take them for granted the scheme has achieved very little. To maximise their return on investment suppliers must make customers interested in the scheme or “club”, must enhance the perceived value of the rewards and must motivate customers to increase their loyalty behaviours in some way. Perhaps they will visit more often, buy a wider range of the company’s products or services or trade up to higher value items. And if they do that they must be rewarded.

Tesco encapsulates this in a simple phrase – “reward the behaviour you seek”. The article on page 7 compares many leading loyalty schemes so you can make up your own mind about whether they work or not.

There are also some great examples in this edition of Stakeholder Satisfaction of other companies that are working really hard to maximise customer satisfaction and loyalty. In a B2B environment, Paul Stoddart, Marketing Manager at Johnson’s Apparelmaster (page 20) explains how the company has used its quarterly customer satisfaction surveys to enhance staff training and develop a really effective direct marketing campaign. Hilary Whitaker, Service Excellence Manager at north-east awarding body NCFE, describes the strategic framework they’ve developed to make their service excellence model work (page 16). Like Johnsons, it starts with involving and motivating staff to deliver the behaviours that satisfy customers as well as developing the systems and processes that help them to do it. On page 29, Sarah Stainthorpe reports on the 2009 European Customer Experience World conference with great customer experience-enhancing ideas from Coca-Cola, Barclays and Hilton amongst others.

After broadcasting the contributors’ favourite wine in the last issue, not a single bottle was received by anyone, so we thought we might as well do favourite loyalty schemes this time!

Best wishes Nigel Hill

Stakeholder Satisfaction is the magazine for people who want their organisation to deliver results to employees, customers and any other stakeholders as part of a coherent strategy to create value for shareholders. We publish serious articles designed to inform, stimulate debate and sometimes to provoke. We aim to be thought leaders in the field of managing relationships with all stakeholder groups.

Our people and their favourite loyalty cards:

Editor:

Nigel Hill (M&S &More) Production Editor: Chris Newbold (Nectar) Rob Ward Designer: (Shell) Creative Director: Rob Egan (Liverpool FC Fan Card) Charlotte Ratcliffe Advertising: (Boots Advantage Card)

Printers of Stakeholder Satisfaction www.stakeholdermagazine.com info@stakeholdermagazine.com Stakeholder Satisfaction PO BOX 1426 Huddersfield HD1 9AW Tel: 0845 293 9480 NB: Stakeholder Satisfaction does not accept responsibility for omissions or errors. The points of view expressed in the articles by contributing writers and/or in advertisements included in this magazine do not necessarily represent those of the publisher.

Whilst every effort is made to ensure the accuracy of the information contained within this magazine, no legal responsibility will be accepted by the publishers for loss arising from use of information published. All rights reserved. No part of this publication may be reproduced or stored in a retrievable system or transmitted in any form or by any means without prior written consent of the publisher.

Copyright © STAKEHOLDER SATISFACTION 2009

ISSN 1749-088X www.stakeholdermagazine.com

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Diary Dates

Improving Customer Satisfaction

November 2009 The Wow! Awards 1st Gala Ceremony November 4th London The largest customer-nominated awards programme in the world. A day of celebration and learning. www.thewowawards.co.uk

19th November Manchester Full of practical ideas for making your customers more satisfied.

You’ll learn how to set realistic targets for what you want to improve, prioritise the improvements and make customers notice the improvements you are making. www.leadershipfactor.com

World Quality Day November 12th An opportunity for quality professionals and organisations across the globe to celebrate their achievements and prove how quality approaches can make a tangible impact on a business. www.thecqi.org/worldqualityday

Understanding Dissatisfied Customers – half day briefing November 17th London This briefing is for people who want to improve the way they measure and manage customer dissatisfaction and defection.

Come along to hear some latest thinking and share practical experiences with others.

December 2009 Stakeholder Showcase – half day briefing £145 December 1st London Everyone is having to work harder than ever to keep customers coming back - this short dynamic briefing will give you access to lots of ideas and latest thinking and you’ll take away proven ways of improving your customers’ experience www.leadershipfactor.com

March 2010

www.leadershipfactor.com

The ICS Annual Conference Customer Surveys – one day training course November 3rd London November 25th Manchester This course covers the whole process of designing, conducting and analysing a professional customer survey for monitoring and improving customers’ satisfaction.

March 23 & 24th London.

The ICS Annual Conference will feature 20+ speakers over two days with more than 300 delegates – the most authoritative customer service conference in the calendar. www.instituteofcustomerservice.com

www.leadershipfactor.com

May 2010 Complaints Management – one day training course November 18th London Aimed at those implementing a complaints management system or improving an existing one – this course explores best practice in managing the complaints system. Great if you want to you want to improve your processes in order to increase levels of customer satisfaction. www.leadershipfactor.com

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European Customer Experience World May 18th & 19th London Offers you and your organisation the opportunity to learn from major companies who are currently delivering exceptional customer experience. www.ecew.co.uk

Customer

In November 2004, Hurricane Frances was rushing towards the Florida coastline. Some residents were already in their cars heading inland. Much further inland in Bentonville, Arkansas, there was also much activity in the Wal-Mart office as CIO Linda Dillman encouraged staff to take advantage of the company’s ‘predictive technology’. With almost 4,000 stores in the US and around 100 million customers every week, Wal-Mart is continuously gathering, storing and processing billions of pieces of data about customers’ needs and spending habits by store, by region, at different times of year, in changing weather conditions and during major events. So what do they buy when a hurricane’s on its way? Not what you might expect. Torches, batteries and bottled gas isn’t too surprising, nor maybe that beer sales showed the biggest increase. But what about strawberry pop tarts? Sales increase seven-fold on average in areas with a hurricane alert!

Based on these consumer behaviour insights, Wal-Mart trucks were soon heading for Florida with emergency supplies of pop-tarts and six-packs. And they all sold

Wal-Mart rushes pop-tarts to hurricane-threatened Florida

well. So Wal-Mart uses its massive database and software expertise at macro level to minimise stock-outs and

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Customer

maximise sales. As well as hurricanes, it knows what sells when the Super Bowl final’s on TV, when there’s a heatwave or a flu epidemic. (Apparently, during a flu epidemic you get them in with a price promotion on Lem-Sips and make big profits on other products like fresh orange juice without any price cutting.) But WalMart doesn’t use its data at micro level. It doesn’t know what will make Mrs Smith buy more orange juice or what might incentivise Mr Jones to trade up to a higher margin beer. For that you need data from a loyalty scheme. And that adds far too much cost for a discounter like WalMart. In the last few weeks it’s added a lot more cost for Tesco.

Clubcard points doubled On August 17th, Tesco hit the headlines in the business pages when it doubled the points earned on Tesco Clubcard to 2 points for every £1 spent, equivalent to a 2% discount. This followed an earlier initiative in May allowing customers to double the value of their Clubcard vouchers by spending them on high margin products such as health, beauty and clothing. Marketing Director, Carolyn Bradley refused to reveal the cost of the new scheme but some analysts estimated it would reduce the company’s profits by £400 million per annum. Others thought it smacked of desperation following Tesco’s unaccustomed loss of market share during the recession. But the doubling of Clubcard points only equals the discount provided by Sainsbury’s Nectar card and still lags way behind the most generous scheme – the 4 points per £1 offered by Boots Advantage card.

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Others don’t offer any points or loyalty schemes. ASDA promotes ‘everyday low prices’ and works very hard to be at the top of Big Four price comparison tables.

Morrisons has also been dismissive of loyalty schemes, preferring in-store promotions such as ‘bogofs’ – buy one get one free. But is this rewarding loyalty or disloyalty? Many traditional sales promotions are an attempt to “buy” market share. Most supermarkets worldwide (Wal-Mart’s “everyday low prices” strategy is an exception) use the sales promotion budget to reward disloyal customers using a “hi-lo” principle. Deep discounts on some popular items attract customers to the store and sales increase, at least in the short term. But what kind of customers has it attracted? Almost certainly the switchers, continually looking for the best deals and happy to cherry pick from whichever company currently offers the lowest price. Tesco’s “core purpose,” printed on the back of the business cards of many of its executives, is “to earn the lifetime loyalty of our customers”, but is a loyalty card the way to achieve this? Has any loyalty scheme ever earned customers’ lifetime loyalty?

Successful loyalty schemes Some loyalty schemes have been very popular. Air Miles was created during the mid 1980s by Alan Deller, Commercial Director of British Caledonian Airways and

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the partners of advertising agency Mills, Smith & Partners. Together they formed the Air Miles Travel Promotions Company Limited in 1986 and sold 51% of the UK operation to British Airways soon after.

They attracted three million collectors in the first three months. Sainsbury’s was Air Miles first supermarket partner in the UK, but when it replaced its Reward Card with membership of the Nectar scheme, Sainsbury’s customers were no longer able to collect Air Miles. This was an unfortunate decision for both sides since almost 25% of the 1 billion air miles issued in 2001 had gone to Sainsbury’s shoppers, but it was an opportunity for Tesco.

When Tesco launched its new partnership with Air Miles in March 2002, searches online for the nearest Tesco store jumped 450% and Sainsbury’s lost an estimated 1% of its sales and 60,000 customers to Tesco. And they weren’t just any old customers. They tended to be affluent, mature, confident people who organised their own travel and were prepared to change supermarkets to earn their miles.

Perhaps Sainsbury’s should have anticipated this because Tesco was the big winner. Air Miles now has 8 million customers and 200 partners in the UK. Air Miles soon became a generic with most of the world’s airlines launching copycat schemes. But did it drive customer loyalty? Certainly Air Miles built a very loyal customer base with some people zealously, perhaps irrationally, going out of their way to chase miles wherever possible. Air Miles, and copycat schemes, also increased repeat purchase for airlines as customers put up with inconvenience, poor service and even higher prices (especially if the company was paying for business trips) in order to collect those last few miles for the family holiday. But they didn’t increase the loyalty of Sainsbury’s customers, nor did they increase most collectors’ loyalty to the airline as opposed to Air Miles. In fact, some airlines’ biggest detractors were committed members of their ‘loyalty’ schemes.

Customer

Air Canada’s Aeroplan frequent flyer programme was so successful that its parent spun the scheme off into a stand-alone loyalty business in 2005. The Aeroplan programme was initially valued at US$2 billion, significantly more than Air Canada!

Today, Aeroplan has a valuation of US$2.8 billion against Air Canada’s US$0.5 billion and Aeroplan’s loyalty business has expanded into a loyalty portal, offering a vast market of products members can ‘earn and burn’ points on or simply buy.

Loyal to the scheme not the company In Canada, extremely large percentages of consumers are members of loyalty programmes. Loyalty publisher Colloquy recently released the results of a survey of 2500 Canadian consumers, 87% of whom were active participants in at least one loyalty programme. (85% in the UK possess at least one loyalty card.) Nearly 50% of loyalty programme members said that special treatment is important to them, yet only 7% said that they get special treatment from their loyalty programmes. Research results such as these indicate that many consumers perceive value in loyalty programmes and use them often to earn rewards, but have less attachment to the company, Air Canada and Aeroplan being a good example. If so, loyalty schemes are driving short-term

behaviour, not loyalty. Most customers are in it for the points and the rewards that come with them, not because they hold the company in high regard. The special treatment that customers crave and that they don’t feel they get from most loyalty programmes has to come from a visible effort by the company to treat customers well, to demonstrate its interest in them – in fact to build its entire business model around meeting customers’ needs.

Earning the lifetime loyalty of our customers So, back to Tesco Clubcard. Is it the same as all the other loyalty schemes? Or is it building the lifetime loyalty of Tesco customers? Many people highlight Clubcard as the main driver behind Tesco’s huge increase in market share since its introduction in 1995. So lets have a brief look at its history.

What scares me about this, is that you know more about my customers in three months than I know in 30 years

Clubcard was introduced after a trial at three Tesco stores (Sidcup, Wisbech and the Dartford Tunnel) ended so successfully that boss, Lord MacLaurin, told the Clubcard team: “What scares me about this, is that you know more about my customers in three months than I know in 30 years”. He was right to give the go-ahead.

Just one year later Clubcard holders were spending 28% more at Tesco and 16% less at Sainsbury’s.

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Customer

From the outset, Tesco saw the card more as a thank you than a sales promotion tool and this genuine philosophy of rewarding customers’ loyalty has been the key to its success, allied to some other very clever decisions based on analysis of facts rather than gut feel: · Applications were maximised by making the process as quick and simple as possible and by really educating staff about Clubcard so that they sold it enthusiastically in store. · Clubcard was not advertised as a ‘loyalty’ card. The words ‘thank you’, ‘reward’, ‘every little helps’ etc were used but never the word loyalty. Being loyal to a supermarket is not a selling point for customers, being thanked and getting rewards are. · One of the best decisions, and one that still differentiates Clubcard from most other reward schemes, was the quarterly mailing. Instead of allowing customers to cash in their points at the checkout whenever they wanted, Tesco decided to incur the massive cost of sending a quarterly statement with cash vouchers for the value of points earned in the period. This has been very effective for three main reasons: · Customers place more value on the rewards because the physical vouchers are like being sent a gift of money. When customers habitually cash in points at the checkout to reduce their shopping bill they tend to take the reward for granted. · Behaviourally, spending vouchers is very different from using the card to reduce your shopping bill. The latter does not change behaviour. It just reduces the retailer’s profit. The evidence from Tesco’s trials was that if customers had cash vouchers, many would use them for special treats rather than reducing the cost of their existing shopping.

Moreover, Tesco can proactively encourage this behaviour by adding promotional coupons to the quarterly mailing for higher margin products that fit the customer’s basket history or lifestyle profile.

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· Clubcard holders have an incentive to inform Tesco of address changes.

If customers can cash in rewards on demand they often don’t bother, so the database decays.

Harvard Business School summarises customer loyalty in terms of the 3Rs: · Retention · Related sales · Referrals.

One of the main things that has distinguished Clubcard from other loyalty schemes is the depth of its data analysis.

This has enabled Tesco to do things like target lapsed shoppers, customers who ignore certain departments, customers who are clearly using competitors more than Tesco etc. It also shows that 88% of Tesco’s revenue comes from the most loyal 40% of customers. Using Clubcard data has enabled Tesco to concentrate promotions on those high value customers and the products they buy, attempting to deepen the most profitable relationships rather than indiscriminately recruiting new customers.

Tesco believes that marketing strategy should be simple. At its core, an equally simple idea that’s written into its marketing manuals – ‘reward the behaviour you seek’.

As Clubcard built Tesco’s understanding of where its profits were coming from, the company increasingly focused on long-term customer loyalty as its main objective, especially the most loyal 40%. Up to 2003, Tesco had spent over £200 million of its sales promotion budget on incentives for “opportunity” customers. By 2004, after using its loyalty card data to predict customer loyalty and sales growth long term, Tesco switched almost the entire budget to rewarding long-term loyal customers.

Are loyalty schemes worth it?

Given the very high cost of in-house loyalty schemes (in Tesco’s case vouchers worth around £400m each year, 11p on each physical card and 15 million letters to Clubcard members four times a year), are schemes like Clubcard and Advantage worth the investment? Many loyalty experts and business leaders say that loyalty schemes encourage repeat purchase, but that’s not the same as loyalty. It’s still just a transactional relationship not an emotional one, and true loyalty has to encompass the emotional dimension.

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Clearly there’s sometimes, but not always, an emotional element in recommendation, although customers do often rationally recommend a good deal as well as the more emotional memory of a great experience. The Leadership Factor has always maintained that satisfaction is an attitude but loyalty is a behaviour. Tesco, very sensibly, doesn’t get hung up on esoteric debates about whether loyalty is emotional or rational, it just focuses on why it wants its best customers to be loyal.

Because it wants them to spend more, especially on higher margin products (and services like Tesco Personal Finance).

How does that happen? By customers visiting Tesco more often, using competitors less often, buying a wider range of products in Tesco and, icing on the cake, becoming less price-sensitive and upgrading to higher quality, higher margin options. All behaviours. Tesco uses Clubcard to ‘reward the behaviours it seeks’. If customers feel satisfied with the value they’ve had from Tesco or, less likely, if they’ve had some great emotional experience from a really helpful member of staff, they may recommend the company to friends. But the lion’s share of what Tesco wants is in those behaviours. So who cares if it’s real loyalty or not? The end result is the same.

And there’s another massive and growing advantage of loyalty schemes, especially inhouse ones where the company owns all the data.

Analytics and computing power Some people now argue that the real value of a loyalty scheme is linked to our increasing ability to crunch vast volumes of demographic, situational and transactional data, which is leading to a new analyticallydriven era. A Boots Advantage card application form asks customers for their employment status, number of children, spectacles or contact lens usage and, if

Customer

they are pregnant, when their baby is due.

The Clubcard form does put its questions about dietary preferences and who you live with in an “optional” information box, but most people fill it in. This computing power allied with the vast amount of data collected over the years allows Tesco and Boots to make insightful, personalised recommendations to move very specific customer behaviours closer to their objectives. For example, Tesco found that bird feeders were bought by a high concentration of serious organic shoppers. “The sales data would make you believe there is only a tiny market [for bird seed and feeders], whereas Clubcard data implied that, actually, there was a big potential market,” says Crawford Davidson, now Marketing Director of Tesco Personal Finance but previously involved with Clubcard. “If we stocked them more and told customers about them, would they buy them? The answer is yes, and, in fact, you can sell more elaborate bird feeders and bigger bags of bird seed.”

In December 2006 Tesco offered 80,000 customers up to one-third off their Christmas shop, sending them a £5 gift card and a voucher offering them a further £18 off if they spent £70. Competitors described the offer as ‘madness’. But was

it? Tesco was using Clubcard data to target customers who, despite being regular Tesco shoppers, obviously did their main Christmas shop elsewhere. The offer illustrates Tesco’s increasingly sophisticated use of Clubcard data, enabling it to specifically target and incentivise people who are clearly using competitors more often or for specific purposes – something that’s impossible for rivals without a loyalty scheme to do. Tesco can analyse when individual customers shop, how they pay and even how many calories they consume.

If customers buy less than a week’s worth of calories they must also be shopping with a rival. If they shop at an out-of-town store late at night they almost certainly own a car.

The data can be used for tailored promotions and to sell relevant new products and financial services to specific customers.

Tesco’s list of company values starts with the goal to ‘understand customers better than anyone’. That might explain a lot about their success. S Nigel Hill Founder of The Leadership Factor and editor of Stakeholder Satisfaction.

Most admired loyalty scheme: Tesco Clubcard

STOP PRESS At the end of September, Sainsbury’s announced a multimillion pound investment over five years in a coupon-based loyalty scheme, giving customers money-off coupons at the till for hundreds of branded and ownlabel products in what will be its biggest investment in customer loyalty since it launched its Nectar card in 2002. Coupons will be generated on the spot through stand-alone printers installed in all of Sainsbury's 535 supermarkets. Over 60 leading brands including Unilever, Proctor & Gamble and Heinz have signed up to the scheme. Clearly a response to Tesco increasing the value of its Clubcard points over the summer, it seems to be another escalation in loyalty card wars – great for customers but maybe not so good for suppliers’ profits.

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Maximising customer loyalty So what lessons can we learn from this article about maximising customer loyalty? For me, the four most important are: 1. Any long term scheme or ad hoc actions to improve customer loyalty must be a genuine reward not a sales promotion. Our research shows that having their loyalty rewarded is very important to customers, but most think it doesn’t happen much. Tesco’s philosophy of Clubcard being primarily a thank you is spot on.

2. The more relevant and interesting the rewards are to customers the more they will value them, the more they will see the rewards as a genuine thank you from the supplier and the more it will motivate them to remain loyal.

3. The scheme must make an impact. One of Tesco’s best Clubcard decisions was to incur the very high cost of the quarterly mailings.

Cost yes. Cost-effective? Definitely. The ‘cash in your points whenever you feel like it’ approach of many competing loyalty schemes means that many customers take them for granted.

4. If you are going to invest in anything to improve customer loyalty, make sure it passes the Tesco test – ‘reward the behaviour you seek’.

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Latest thinking

Co-creation the new customer experience

Consumers today have more choices of products and services than ever before, but they often remain dissatisfied with their experiences with many organisations. Firms are constantly investing in greater product variety but find it increasingly difficult to differentiate themselves. It may be that this paradox can be explained by the fact that the meaning of value and the process of value creation are rapidly shifting from a product- and company-centric view to personalised customer experiences. Informed, networked, empowered, and active consumers are increasingly cocreating value with the organisations they most value. Consequently, the interaction between the organisation and the customer is becoming the essence of value creation and customer loyalty. As value shifts to experiences and opportunities for communication multiply, many markets are almost becoming breeding grounds for conversations and recommendations between friends, customers and consumer communities.

Involvement The key to making this work is involvement. Organisations need to make their customers feel involved. This doesn’t mean some kind of automated CRM system that spews out selling messages whose net effect is to irritate customers.

What it does mean is listening to customers, consulting customers, responding to customers’ problems and aspirations and making it obvious that you’re doing that. Some businesses do it in real time with the customer right there in front of them. The ultimate examples are tradition-

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al services businesses such as hair dressers where the ‘product’ is designed, produced, evaluated and paid for with the customer right there doing it with the supplier. The academics have christened this co-creation.

ices that produces these great customer experiences and very high levels of customer satisfaction, and how mass market organisations can take a leaf out of their book.

Characteristics of services Co-creation Many service businesses do it without thinking, and that shines though in the excellent customer satisfaction scores achieved by the Service and Tourism sectors in the UKCSI. In this article we’re going to investigate what it is about serv-

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For many years marketing science concentrated almost exclusively on products.

It wasn’t really until the 1980s that there was any significant academic interest in the marketing of services as a distinct type of business. Even then textbooks and university courses did little more than insert a

Latest thinking

single chapter or the odd lecture explaining what was different about service businesses. However, from this initial academic interest in services we can identify the main elements of pure services that result in the delivery of a superior customer experience. We’ll examine in turn the four distinctive characteristics of service businesses: 1. Intangibility 2. Perisishability 3. Heterogeneity 4. Inseparability.

2. Perishability You can’t find a product that’s much more perishable than a 7.30pm table reservation at a restaurant. If nobody buys it, it can’t be sold again. So what do service businesses often do? They charge different prices for same product. Sometimes services are expensive sometimes cheap - pensioners’ midweek lunches, earlybird evening meals with free wine, the massive range of prices for same route on Ryan Air or Easyjet. And customers love it. They understand that some ‘products’ are in greater demand than others. Some are happy to pay more for a Saturday evening table at 8pm whilst others really value the midweek earlybird bargain.

sional service Legal / profes u don’t know how Intangibility – yo ter e will be until af good the advic r it you’ve paid fo

1. Intangibility Services are intangible. You can’t touch, feel, see or smell them. So they’re really difficult to sell because customers are not sure what they’re going to get. Products are easy to sell. That’s why retailers focus nearly all their resources on products and merchandising. Service businesses have to work much harder to make sales not least because they’re also perishable.

Restaurant Perishability – the revenue from those empty tables is lost for ever

4. Inseparability For true services, such as hair dressing, production and consumption are inseparable. They happen at the same time.

Customer management professionals have started calling this co-creation.

The supplier and the customer create product together. When you think about it that’s pretty scary – anything goes wrong and the customer’s right there watching it happen. Not the case with the yogurt or the BM – they can get everything spot on long before the customer’s ever judging it. Even a lot of services don’t have to bear the full brunt of this. In financial services, for example, the vast majority of the work happens behind scenes. As it does in a restaurant – although customers really like the ones that are all open where you can see what’s going on in kitchen. If you put all these service characteristics together you can identify a key thread running through them……

Involvement

Dentist Heterogeneity – one check-up is never the same as the next 15 minute slot 3. Heterogeneity Services are heterogeneous. They’re all different. Most products are homogeneous. One Dairy Crest de-luxe yogurt is just as thick and creamy as the next one.

One BMW 530d looks exactly same and goes just as fast as another. But a dental check-up is never the same as the next 15 minute slot with same dentist. And that’s because of the fourth characteristic.

The customer is involved with service businesses. It means the supplier spends time with the customer. In person. This can be a double edged sword. Get things wrong and it’s a big problem. Get things right and it’s a great opportunity. You can build a relationship with the customer. A genuine one. These days, all companies want to build relationships with customers.

The trouble is they’re trying to do it artificially through CRM software. Real people do it by spending time together or at least through two-way communication if they’re not face-to-face.

Genuine service businesses also do it by spending time with customers, understanding their aspirations and concerns and consequently co-creating and delivering a product that’s just what customers want.

Hair dress

er

Co-creatio n – design ing the product w ith the cus tomer

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Latest thinking

Unlike most marketers, Ted Levitt was saying this 40 years ago:

Conclusions So what can we learn from all this:

1. Customer dissatisfaction

But most senior managers weren’t listening. Improving one-to-one service was expensive. They were more interested in cutting cost and the way to do that was standardisation, mass-production. In the early years of the 21st century, academics at the University of Michigan, basing their views on a huge amount of real ACSI data came to the conclusion that the main reason why US businesses were failing to improve customer satisfaction was that in an increasingly service-based economy, most organisations still haven’t got the message about why customers love genuine service businesses. Depressingly, it’s just the opposite with many organisations trying to grow profits by making their “service” business as much like a factory as possible. In the words of Claes Fornell:

In an increasingly servicebased economy companies are still behaving as though they’re manufacturers – growing profits through maximising investment in productivity-enhancing technology

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Service providers are there with their customers. A good waiter knows if a table’s unhappy with something even if they don’t complain. For any customerfocused member of staff it’s very, very important to them that customers don’t have problems for two reasons. First, if they’ve been recruited for attitude and trained for skills they’ll be instinctively empathetic and will want to make other people happy. And second, it’s because they’re right there, witnessing the dissatisfaction perhaps even the distress customers feel when things are not right. They’re responsible, so unless they’ve no intention of doing a good job they’ve got to do something about it. Even just from a selfish perspective, it’s much better to get it how the customer wants it. And that’s a big reason why customers love genuine service businesses more than most organisations. In most organisations, if a customer’s unhappy, perhaps really unhappy who’s bothered? How much real discomfort does it cause to how many staff? I’ll leave you to answer that question for your own organisation.

2. Recommendation As we’ve seen, services are intangible.

They don’t have a physical product.

The customer experience is their product. The downside of intangibility is that it makes services really hard to sell. Unlike when they’re buying a physical product, it’s really difficult for customers to form any clear view of what they’re going to get. Think about buying and insuring a car. If you buy a car you can touch, feel, drive it, listen to it. Unless you’re an existing customer of an insurer with experience of going through their claims process, you pay your money and hope for the best. You’ve no idea till you make a claim what they’re going to be like. So you’ve really got only two choices – buy on price or on recommendation from a trusted source who has actually experienced how well, or

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badly, the insurance company looks after you when it really matters. Which is better, buying on price or recommendation? For the customer?

For the supplier? So why has the insurance market ended up being one where so many insurance purchase decisions are based on price?

3. Keeping existing customers Because services are so hard to sell, it’s crucial that service businesses keep their existing customers. They have to be really good at Harvard’s 3Rs (retention, related sales and referrals) just to survive. It’s easier for product businesses. That’s why most organisations that aren’t manufacturers try to automate, productionise, their business as much as possible. It makes it easier and less costly for them. But it doesn’t make it better for the customer. It probably is better for short term profits but where’s it leading to?

4. Commodity or value-added?

Based on research conducted for PayPal, Experian are forecasting that UK online spend will increase by 137% from £9bn in 2008 to £21bn in 2011, pushing its market share up to 7.4% from 3.2%. As this trend continues (and at the moment the rate of increase is still accelerating not levelling off), where will that leave many traditional bricks and mortar businesses? For some products, like books or DVDs, if you want to compete on price, automation and being a low cost provider, you already have to be an internet business.

Others like electrical goods are rapidly following. If you want to or need to compete with internet businesses you’re going to have to recall the words of Ted Levitt, think about the views of Claes Fornell and listen to what customers are increasingly telling us.

You’re going to have to compete on price or added value customer experience, and if it’s the latter you’re going to have to try and become much more like a proper service business. S

Case Study

....employees come first�, at least according to Richard Branson.

NCFE, the North Eastbased awarding body, agree; and that goes to the heart of their strategy to improve the customer experience. We spoke to Hilary Whitaker, Service Excellence Manager, about NCFE’s approach to building customer satisfaction, starting with their internal culture and processes.

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Case Study

NCFE have seen tremendous gains in customer satisfaction in a very short time, leaping up The Leadership Factor’s Customer Satisfaction League Table. How have they achieved so much so quickly?

Hilary’s answer is “we take it seriously”.

Perhaps the biggest challenge for an organisation that wants to improve customer satisfaction is to ensure that all staff really want to improve. When people are happy with the status quo, it can be very difficult to motivate change. For NCFE, achieving cultural change was the first, and most important, step to meeting their targets for improvement.

A strategic framework There are many different models and frameworks which touch on the importance of having satisfied customers.

Though they sometimes differ in detail, the gist of these models is usually very similar.

NCFE have adopted the “service excellence model”, which follows much the same logic as the Value Profit Chain we have written about extensively in this magazine. It starts with the people, who are the ones who make the customers happy, and sees the relationships between the organisation and its customers as a virtuous circle.

others are profit making. Profit-making or not, income is still the ultimate test of success, but adopting this model shows an assumption that the best way to deliver increased income is to focus on satisfied employees and customers.

Targeting the organisation on both employee and customer satisfaction, as well as income, is crucial to a successful business in the long term. But which comes first? In principle it should be possible to start anywhere in a circular model.

NCFE think that it makes sense to concentrate on employees first—it might not be enough on its own, but it’s difficult to see how it would be possible to deliver great customer satisfaction without a base of satisfied and engaged employees.

· · · · ·

Bringing solutions One team Developing people Inspiring leadership Exceptional customer service

As well as driving the right behaviours with formal performance related reward, NCFE also appreciate the importance of celebration and informal rewards. When they achieved their customer satisfaction target, champagne and cheesecake was wheeled out to mark the occasion. Key milestones along the way to all their targets are celebrated in a similar way.

Moving from survey results to action

Customers don’t come first. Employees come first. If employees are treated right then service will follow.

Richard Branson

The service excellence model

NCFE is a non-profit organisation operating in a strange marketplace—some competitors are also non-profit, whilst

have been identified as crucial building blocks in the model.

A commitment to this model is reinforced by basing performance-related pay on values, reinforcing specific behaviours that

The Chief Executive makes sure that the whole management team is there for the presentation of the customer survey results. After the presentation, Hilary picks out the key themes, and then everyone contributes in creating the action plan.

Based on that, everyone in the organisation is told what’s planned over the next year and what changes are in the pipeline.

Importantly, these actions are now tied into the organisation’s general operational plan, rather than leaving the customer satisfaction action plan as a separate entity. This is a key part of embedding customer satisfaction at the centre of the business, and sends a message that supports cultural change. Making sure that the customer survey is tied into the business planning cycle, and the action plan is integrated with wider strategic planning, makes sure that things really happen.

Feeding back to staff Hilary does a shorter version of the presentation to groups of staff, as well as communicating the key headlines. She uses the verbatim comments from customers to help illustrate the headlines, and to put some flesh on the bones of the numbers from the survey.

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November 2009 Stakeholder

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Case Study

Comments really make it come alive, so I’ll put those in In principle, it’s the numbers that really matter, but in practice it is often more qualitative information such as comments, or video of real customers, that engages staff with the survey and makes them want to change. Comments are a useful reminder that at the other end of each customer questionnaire is a real person, and they help to bring about a customer-focused culture.

Feeding back to customers After that, NCFE go and tell customers what they’re doing about the survey. For the last few years they’ve put it in a regular newsletter (now an e-bulletin) and also on the website. Hilary says that their customers respond better to electronic communication than to snail mail.

Building the action plan A lot of the negative feedback from customers is not a surprise. Many of the things that the survey suggested should be in the customer action plan were areas that NCFE had already planned to work on, which makes it easier to get buy in and suggests that the organisation is already on the right track.

Alongside the customer research, NCFE are mapping out their customer experience in order to understand better the customer journey. Hilary explains that it’s all about putting yourself in the customer’s shoes, trying to map out different customer interactions and identify the potential problem areas. The verbatim comments explaining low scores in the customer survey are a key part of that process.

Improving customer satisfaction is a sim-

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ple job on paper–you just have to consistently to give customers what they say they want–but in practice doing that flawlessly every time is very difficult. Hilary comments wryly that “it sounds simple until you start doing it”. I suspect this is the first sign of an organisation that is actually doing something to improve. Changing satisfaction tends to be harder, and to take longer, than you expect.

It sounds simple, until you start doing it Breaking it down NCFE, like many organisations, has a complex and diverse customer base.

Each one of its “customers”, say a college of further education, might have 10 departments offering a host of different qualifications and programmes managed by different people. That adds up to a lot of people who are in contact with NCFE on a regular basis.

The customer survey has to involve interviews with exam officers, principals, delivery staff, curriculum leaders and so on. When it comes to looking at customer priorities and choosing priorities for improvement, all these differences add up to different potential actions. A key part of NCFE’s approach is to break down the results in order to understand “who is saying what”. The priorities for improvement are not, and cannot be, the same for all customers or for all staff.

Each priority for improvement was broken down into a set of specific actions. “Being kept informed”, for example, was tackled by a number of things that were designed to change crucial staff behaviours such as: · A top tips sheet of how to deliver excellent customer service on the phone

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· Pre-printed message pads, with all the things you should get from each customer (e.g. what’s the best time to call them back?) · A behavioural change always to check calendars before making a promise to a customer The idea is that these are tools which help staff to get it right—but importantly they’re all predicated on the idea that staff want to do a good job. In almost all cases this is a good assumption, but Hilary emphasises that there are two angles of attack when it comes to improvement. One is to make sure that all the processes and systems are in place. This is crucial, but it’s never enough on its own.

The other perspective has to be cultural – fundamentally you need good staff who are motivated and empowered to do their best for customers. The starting point is to make sure you have the right people.

Structuring the contact environment is a challenge that has as many attempted solutions as there are companies. NCFE’s approach is to have a first line of contact, the Centre Support Team, which should be able to deal with any query. On the rare occasions when they can’t, they know the right person to put the customer through to.

Each member of the Centre Support Team has their own individual allocation of customers, and they will do everything for that customer from centre approval through to certifications and support. This end-to-end approach is much more customer-focused than using specialists who are expert in each of the phases, passing the customer from one to the next, and it suggests a greater concern with customer satisfaction than with “bean-counting” internal efficiency. Customers are frequently crying out for a clear point of contact, and this is precisely what NCFE gives them—one place to go for all enquiries.

The obvious weakness with having a single point of contact is what do you do when that person is on holiday? NCFE operate a “buddy” system, which means that each member of staff has a buddy who is somewhat familiar with their contacts. This ought to bring them the best of both worlds.

Case Study

Since everything starts with the employees, it’s essential to know how satisfied they are. Staff who are dissatisfied can sometimes still be motivated to do a good job for customers, but usually not for long.

The staff survey, using a matching methodology to the customer survey, achieved a 100% response rate, and is seen as a vital part of improving the customer satisfaction score.

deliver for customers, and be excited about the changes on the horizon.

This is backed up by integrating the customer action plan with wider business planning and rewarding people for meeting satisfaction targets, both of which send staff an important message about what senior management see as important.

2.Focus on specific behaviours—getting Conclusion

the right people is important, but you also need to focus on specific actions that result in satisfied customers. This amounts to giving your people the tools to deliver for customers.

I think NCFE’s successes can be attributed to getting two basic things right.

Firstly they realised that change is all about the people within the organisation.

That, in turn, entails three points of attack:

3.Processes—staff also need to know

1.The culture—people must want to

that the processes they are working within do support and reinforce their

work for customers. Processes can’t satisfy customers, but they can certainly lead to dissatisfaction if they prevent your staff from delivering.

The other thing that NCFE got right was breaking down the results of the customer survey into specific action plans targeted at different types of customer, and owned by different members of staff. This goes hand in hand with integrating customer actions with other strategic planning, and is a sign of an organisation that is serious about change.

All in all, the NCFE story proves that rapid change in satisfaction is possible if you really put your mind to it. It’s not easy, and you really have to mean it, but it can be done. S

Hilary is Service Excellence Manager at NCFE. She’s responsible for driving employee and customer engagement projects throughout the organisation using satisfaction data to identify areas for improvement. Outside of work, Hilary enjoys a passion for food and spending time with friends and young family.

Loyalty scheme – at the moment it’s at my hairdressers – simply because they surprised me with a free haircut last week because I had enough points!

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Case Study

Paul Stoddart, Marketing Manager, Johnsons Apparelmaster Johnsons Apparelmaster is a leading UK provider of workwear services with nearly 40,000 customers ranging from SMEs with less than 10 employees to sites of large multi-national operations. The company clothes over 1 million people at work. Ensuring that the right garments are cleaned, maintained and delivered back to the customer in good condition is essential, so customer service is paramount.

The company began working with the Leadership Factor back in 2004 to measure customer satisfaction and identify areas to increase customer retention and service levels. As Paul Stoddart points out; “We had always prided ourselves on being the best in customer service but had never independently measured customer satisfaction until this time. The results from the first benchmark survey although good, showed that there was certainly room for improvement”.

Project Pride Like any customer service driven business Johnsons Apparelmaster realised that its people were key to delivering and enhancing customer satisfaction so using

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the survey results they embarked on a major company wide training programme as well as introducing new operational procedures and IT enhancements to support it.

The training project was named PRIDE as this encompassed the culture the business needed to generate amongst employees and focused initially on those in customer facing roles, as one of the major priorities for improvement or (PFIs) from the survey was ‘improving handling of problems & complaints’. Hence, the first stage of the PRIDE training programme was branded, Pride in our Customers.

Every service centre across the UK was included in the Project Pride training pro-

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gramme which lasted over 6 months with over 600 employees undergoing training out of a total workforce of nearly 2,000. In addition, Project Pride resulted in the implementation of 30 operational, IT system and procedural changes which were far more than first anticipated. The key objectives of the project pride training programme were identified as; · Changing culture & customer service by improving relationships with the customer through more open communication · Enhancements to IT systems to enable improved customer response times

Case Study

· Changes in quality procedures & processes to improve customer service

TM

Satisfaction Index League Table Business Services 50%

· Greater co-operation between departments reducing the barriers which delay the solution to the customer

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

New customers 2008:

89.8%

Top quartile

New customers 2005: 83.9%

· More accountability & regular data reports · Greater levels of decision making for service teams to speed up customer solutions.

The first stage of project pride was completed in Spring 2005 and by the end of the year the volume of annual customer losses was down to 8.4% from 10.25%, with turnover increasing by over 5%.

Johnsons 2004: 77.2%

Competitor B 2005: 74.6% Competitor A 2005: 73.5% Bottom quartile

However, the real measure of the effectiveness of PRIDE was the second customer satisfaction survey undertaken by the Leadership Factor at the end of 2005. This identified a clear improvement in customer satisfaction levels.

The graph top right illustrates Johnsons’ results against main competitors. This set the company on route to achieve its longer term target of an 80% plus satisfaction rating. Perhaps most significant was the score amongst new customers (less than 12 months service) where the improvement was far in excess of expectations, increasing from 72.4% in 2004 to 83.9% in 2005.

In 2008, this has now risen to 89.8% amongst new customers.

Pride in Our People While customer satisfaction levels had increased, the real success of Project PRIDE was the cultural change that it effected, as Paul Stoddart comments;

More tellingly, customer satisfaction had improved most in the areas which had been PFIs, the results of the second 2005 Leadership Factor survey clearly demonstrated to our people that they could make a difference.

While the success of the PRIDE training programme was reflected in a prestigious National Training Award for Johnsons Apparelmaster in 2006, the commitment to measure customer satisfaction and use the results to drive changes in working practices was now firmly established in the culture of the business.

Evolving Project Pride Since the first survey in 2004 Johnsons Apparelmaster has measured its customer satisfaction each year with the Leadership Factor and evolved its PRIDE training programme accordingly to embrace themes covering Pride in our Workplace, Pride in our People etc.

The chart below shows satisfaction scores for all the ‘people requirements’ that matter most to customers from the 2007 customer satisfaction survey. As

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November 2009 Stakeholder

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Case Study

approach sought to get across ‘the problem’ in a slightly humorous way but with a serious underlying message.

Johnsons Apparelmaster vs Competition ‘People Requirements’ Satisfaction Score out of 10

Admittedly, a slightly risky approach particularly if it only reminded the recipient of their feelings of frustration with their current workwear service. However, after only two postcard mailings over 1,000 new business appointments have already been generated this year and as one prospective customer put it after receiving his postcard “that’s exactly how I feel”.

Handling of Problems/Complaints Helpfulness of Staff Responsiveness of Staff Problem Solving Ability of Your Account Manager General Handling of Enquiries Decision Making Ability of Your Account Manager Ease of Contacting Your Account Manager

0

2

4

Company A

can be seen, Johnsons Apparelmaster out-performed its key competitors on each requirement.

6

8

10

Company B

just quoting topline numbers such as ‘90% overall satisfaction rating’ leaving the customer to contemplate “so what, how does that relate to my service?”.

It’s fair to say that the customer satisfaction surveys have helped drive fundamental change within Johnsons Apparelmaster embracing people, processes and marketing but far more significant is that these changes have led to increased customer satisfaction, retention and turnover. S

Indeed, the slogan

Our People Make the Difference became the theme of the company’s national sales and customer service conference in 2008 and the people requirements used in the survey form the basis of new KPI measures introduced for larger customers.

In 2009, Johnsons Apparelmaster launched a new direct marketing campaign, Pride in our Marketing, based on the results from the latest Leadership Factor survey where the whole campaign strategy was based on comparing the customer service experience between Johnsons Apparelmaster and its key competitors. In essence the campaign highlighted the problems that users of workwear services encountered most often and how Johnsons Apparelmaster could provide the solution.

Pride in Our Marketing Of course, using favourable results from customer surveys in marketing campaigns is nothing new but they can come across sometimes as a bit underwhelming when

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In order for Johnsons to use the customer survey results in their marketing they had to really make their marketing look different. A series of six ‘postcards’ were created in-house and the creative

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Paul Stoddart Marketing Manager Johnsons Apparelmaster Favourite loyalty scheme: any retailer who always replaces or refunds something you’re not happy with, no questions asked.

Customer

Wave 5 Results: July 2009

THE NATIONAL MEASURE OF CUSTOMER SATISFACTION Service continues to improve Based on a representative sample of 25,000 adults surveyed over the internet, by The Leadership Factor on behalf of the Institute of Customer Service, the UK Customer Satisfaction Index (UKCSI) has now established itself as the National Measure of Customer Satisfaction for UK organisations. (results available online at www.ukcsi.com) 50

55

60

65

70

75

80

Tourism

77

79

Retail (food)

77

79 76 78 77 78 77 77 75 76 75 75 74

76

Retail (non-food) Services

75

Finance (insurance)

75

Automotive

74

Finance (banks)

Satisfaction with the banking sector has continued to improve, showing that customers are still capable of scoring from their own experiences rather than basing their opinions purely on media coverage.

However, it is also noteworthy that The Royal Bank of Scotland, whose parent RBS Group arguably attracted the most adverse media comment, has maintained an above-average CSI of 75.9 but its position in the league table has dropped.

At the same time, another subsidiary of RBS Group, NatWest which went largely unscathed in the media, improved its position.

90

95

100

74 72

Customer satisfaction The UK Customer Satisfaction Index has continued its upward trend, increasing across most sectors and regions. In this tough economic climate, companies seem to be focusing on their customers as economic downturn and competitive pressures make customer retention even more important than usual.

85

72

Leisure

74

70

Public Services (local)

71

70

63

Transport Telecommunications Public Services (national)

71 70 70 67 70 70 66 64

67 64 63

Utilities

England

72

Northern Ireland

72

Wales

75 73 74 72 74 72 71 70

73

Scotland

70

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November 2009 Stakeholder

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Customer

Sector consistency

A “new entry� for the UKCSI, Co-op Bank has gone straight to the top of its league table, displacing First Direct for the first time. In order to be included in the UKCSI, organisations need to have enough responses for a reliable score.

Maximum: 87 Maximum: 84

A new sector at the top The Leisure and Tourism sector has now been split into two separate sectors and the Tourism sector has overtaken Services and Retail (non-food) to go to the top of the table.

The Tourism sector shows much more consistent performance than Retail, with the range from the lowest to highest scoring company of only 9 points, from 75 to 84 (Center Parcs). The Retail (food) sector has an 18 point spread, from 69 to 87 (Waitrose). Looking at individual company scores (shown as small horizontal ticks in the chart top right) reveals that Waitrose and Marks & Spencer, on the positive side, and a lone very poor performer are responsible for the wide spread. The two top performers in Retail (food) are more than 6 points clear of their nearest rival (ASDA).

Minimum: 75

Minimum: 69

Retail (food)

Yes

12%

No

88%

At a time when many consumers might feel the need to tighten belts and cut spending, we asked customers if they had changed supplier in the last year and, if they had, their main reasons for doing so.

Only 12% of customers stated that they had changed supplier. The sectors with the biggest proportion of customers changing supplier were Utilities at 22% and Finance (insurers) at 21%, although this comes as no surprise given suppliers’ extreme focus on price promotion and attracting switchers in these 2 sectors.

Reasons for switching Price

44%

Service

20%

Product

16%

Convenience

Unsurprisingly, price came out as the main reason why people would change supplier, with over 80% of Finance (insurers) and 70% of Utilities customers choosing this as their main reason for swapping. But if you watch the

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Tourism

How many switch?

Switching most common in commoditised markets

24

Average: 79.1

Average: 78.7

CSI

10%

Reputation 2% Other

7% 0

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5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Customer

plethora of TV ads, for insurance in particular, how many other reasons would you notice?

The best service in the world?

Rest of the world

28%

We asked customers which country they believe offers the best customer service.

These results show that the UK comes top. As a nation we seem to be proud of the customer service we can expect, shaking off the stereotype that American ‘service with a smile’ is best.

We also asked if customers would be spending more or less money overall on their holiday when compared to last year.

40% of people said they would be spending less money than last year and when we break this down by whether their holiday will be taken in the UK we can see that the majority of customers spending more time in the UK will also be spending less money.

Wales, again, showed the biggest effect, with a net movement of 49% towards spending less. England had the lowest effect with a net change of 21%.

Men showed themselves to be more profligate than women, with 20% planning to spend more on their holiday this year compared to 15% of women (we wonder whether they’re going on holiday together!).

Age proved to make more difference, with young people more likely to spend more and older people more likely to spend less (particularly the 45-54 age category).

About the same More time in time in the UK the UK

UK

46% 50% 35

%

USA

26%

While still thinking about different countries we wanted to know if customers planned to spend more or less time in the UK for this year’s holidays.

85% of customers stated they would take more or the same amount of time in the UK. Could this be to do with the recession? We subtracted the percentage of people intending to spend less time in the UK from the percentage planning to spend more to produce a net change figure. Overall the net movement towards the UK is 20%, but there is significant variation across countries, with Wales showing the greatest effect.

Holiday destination

Best customer service

Less time in the UK

15%

More holiday time in UK by region

35%

Wales

24%

Northern Ireland

20%

England

17%

Scotland 0%

5%

10%

15%

20%

25%

30%

35%

40%

Holiday spend More time in the UK

17.4% 63.9%

18.7%

Less time in the UK

20.0%

43.9%

36.1%

About the same time in the UK

67.2% 0%

22.5% 20%

40%

About the same amount of money

60%

10.2% 100%

80%

Less money than last year

More money than last year

Holiday spend by age group 26.7%

18-24

19.6%

25-34

65+

0%

44.0%

50.3%

14.6%

37.4%

16.7%

31.7%

10%

42.4%

41.1%

11.1%

55-64

34.4%

38.0%

14.9%

35-44

45-54

38.9%

20%

About the same amount

30%

38.6% 48.0% 51.6%

40%

50%

60%

70%

Less money than last year

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80%

90%

100%

More money than last year

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Customer

Satisfaction by theme Even if the increased propensity to holiday in the UK is driven primarily by a desire to save money, it is surely no co-incidence that the Tourism sector is at the top of the customer satisfaction league table. It makes the industry well placed to give customers a great experience, increase customer loyalty and build on its sales gain in the years ahead.

Professionalism

80 Tourism

75 68 Utilities

Quality & Efficiency

80 Retail-food

74 64 Utilities

Ease of doing business Problem solving Timeliness

78 Tourism

73

65 Utilities

80 Retail-food

75

67 Utilities

66 Utilities

50

60

70

80

The results for top performing companies in all sectors are freely available online at ukcsi.com. Of the 156 individual organisations measured for the UKCSI, the highest scoring named Top Ten were: John Lewis Waitrose Marks & Spencer (food) Mazda RAC Marks & Spencer P&O Ferries Center Parcs Hilton Boots

76.8

*Tourism Automotive Retail (non-food) *Leisure Finance (insurance) Services Retail (food) Transport Finance (banks) Utilities Public Services (local) Telecommunications Public Services (national)

75.6 73.3 70.9 70.9 70.5 70.3 65.1 64.1 63.3 62.6 62.3 62.2

0

20

40

60

July - 09 January - 09

80

100

Outcome of complaint versus handling 5.00

Overall

On average, companies are achieving higher scores than last time indicating customers are generally more satisfied.

Last time we wondered whether a company could achieve an index of over 90, in July 09 this has been achieved by John Lewis gaining a score of 91, 2% higher than the score in January 09.

The chart top right shows which sectors are at the top and bottom when the individual requirements are grouped into themes. We can see that the best scorers are the tourism and retail food sectors.

Improved complaint handling A complaints index is calculated for every sector based on how well these companies handle complaints and how many complaints are generated.

The overall complaints index is 67 (up from a score of 64) In general all sectors have seen an improvement with their complaint handling, the biggest increases being for public sector (local) and finance

Stakeholder November 2009

100

67.0

Overall

26

90

Complaints index

The top ten

· · · · · · · · · ·

Highest sector Average Lowest sector

78 Tourism

73

|

4.50

Tourism Automotive Retail (non-food) Leisure Services Retail (food) Finance - insurance Telecoms Finance (banks) Utilities Transport Public services (National) Public services (local)

4.01

4.79 4.14 4.65

4.02

4.56 4.41 4.48

Outcome Handling

4.01 4.32 4.10

0

2

(insurance). The new tourism sector scores a very respectable 77 for complaint handling, while at the bottom of the league public services (national) come out the worst.

The chart bottom right shows the breakdown of the two complaints questions asked within the survey. Here we can see the new tourism sector coming out on top for the outcome of the problem with a score of 6.2. S

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5.34 5.39 5.17 5.39 4.88 5.24 4.90 5.23 4.84 4.94

6.21 5.80 6.07 5.98 5.80

4

6

8

10

Stephen Hampshire Client Manager The Leadership Factor Stephen manages customer and employee surveys for Visa, Norwich & Peterborough Building Society and King’s Fund amongst others. He also presents training courses on employee surveys, customer surveys and data analysis.

Favourite loyalty scheme: Taste Fine Wines because they value my custom and round down the price.

stephenhampshire@leadershipfactor.com

Research

There are numerous quality marks circulating in different industries, but as a dedicated fieldwork agency Teamsearch knows how critical it is to provide its clients with the confidence that their data is being collected to the highest possible quality standards. For something as specialised as telephone interviewing, a specific quality standard, tailor-made for the job is needed. It was therefore the relevance of the training that motivated Teamsearch to put its staff through the paces of the Accredited Interviewer Training Scheme (AITS) rather than any other more general quality mark.

The scheme offered by the MRS (Market Research Society) provides a long-term basis for supervisors to train interviewers on the knowledge, skills and attitudes for effective interviewing. According to Rob Hogan, Teamsearch MD, “AITS was something that we found to be perfectly tailored to our core business, that we had dedicated years to specialising in.”

Rob continues: “It’s a given that we were already very confident that we train our interviewers to a high standard, but it is just as important to continue to learn and develop and what better way but to do that than with the research industry’s leading association that supports best practice; plus setting and enforcing industry standards through the MRS Code of Conduct.”

There are many factors that create a good interviewer. Adhering to good practice, such as the MRS Code of Conduct, and to regulations, like the Data Protection Act, provide the essential foundations of quality interviewing and AITS reinforces these areas through the code of practice, ensuring that interviewers have the relevant knowledge and uphold all industry standards and regulations.

Rob concludes: “We understand our clients may be using the data we collect to make extremely expensive decisions. They could be making strategic decisions that can affect thousands of employees, tens of thousands of customers or, in the case of some of our public sector research, millions of citizens. As such it’s only right that we make investments in our staff and procedures to ensure that our output is consistently of the highest quality.” S

It doesn’t end with the theory though. AITS covers everything from recruitment and assessment procedures through to ongoing training & monitoring processes. It gives further guidance on how to secure a call, how to build a rapport with respondents, how to get past gatekeepers and how to prevent respondent fatigue - all key ingredients to ensuring the data collected is accurate and timely.

All Teamsearch supervisors underwent a rigorous 12-month assessment by the MRS, producing portfolios of evidence and enduring stringent visits from assessors. All the hard work and training paid off when Teamsearch became one of only six research organisations in the UK to become fully accredited as MRS AITS Trainers with each member of staff, in addition, achieving the MRS Certificate in Interviewing Skills for Market & Social Research.

Rob Hogan Managing Director Teamsearch

Rob is Managing Director at Teamsearch Market Research and is very experienced in a wide variety of research including attitude and opinion surveys with a wide range of B2B stakeholders and consumers, product development research and testing, international research, brand surveys and much more. He can be contacted on 01422 360371 or bob@teamsearchmr.co.uk

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Call us on 01422 360371

Welcome to Teamsearch

Teamsearch has over 15 years of market research experience with large blue chip corporations, SMEs, and the public and not-for-profit sectors with a particular specialism in surveying hard-to-reach audiences. These could be senior managers in the private or public sectors, politicians, IT managers, doctors etc.

Teamsearch is one of only a handful of market research agencies that is accredited to the Market Research Society’s AITS – Accredited Interviewer Training Scheme. This ensures that all our interviewers are trained to the highest possible industry standards, ensuring a totally professional interview that creates a good impression with your customers or stakeholders.

With a team of 14 staff and a consistent pool of 70 interviewers we are able to produce up to 14,000 interviews a month. It’s our philosophy to meet the needs of our clients with a flexible and professional approach whilst maintaining that all-important personal touch.

For more details contact: Rob Hogan Managing Director

We promise clients: · Director involvement on every project

bob@teamsearchmr.co.uk

· Dedication to building long-term relationships

Tel: 01422 360371

· Rigorous standards to ensure total quality throughout

Conference

The European Customer Experience World conference was held at the Radisson, Heathrow Airport on the 20th and 21st May. The focus was ‘delivering a great customer experience while improving operational performance’. Here are just some of the case studies outlined at the conference… www.stakeholdermagazine.com

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Their strategy seems to have paid off, the results of their external and internal customer surveys have both seen Coca Cola rated as number one. prises; la Enter Coca Co irector; eD er Servic Custom

ends Andy M

Other tangible measures of Coca Cola’s success are staff turnover rates of less than 10% and staff engagement scores of just under their target of 65%. Mends asserted that most businesses that are performing well have staff that are engaged over 65%.

Mends focused on how having a clear vision leads to engaged staff and therefore a better experience for customers.

Brand (sell the promise)

Barclays Co mmercial B ank; Customer Service Dire ctor;

Rob Hawth orn

Hawthorn stressed the importance of having the right staff in your business to satisfy your customers’ needs and motivating people to perform. He also talked about the importance of listening to customers, especially in the current economic downturn.

How do Barclays Commercial find the right people?

Customer

People

(believe the promise)

(keep the promise)

Hawthorn also stressed the importance of communication in keeping staff engaged and motivated. They hold daily team communications with staff in the form of a dialogue, with latest news and discussion points. In these they also discuss any customer problems or complaints.

How have Barclays Commercial listened to customers?

Why is a clear vision important?

A company’s vision needs to recognise the link between the brand, the people and the customers. (below picture of vision triangle) People are key to delivering that brand proposition to customers, so they need to understand the company’s vision and their objectives need to be aligned to it. Articulating a clear vision will better engage them in delivering the required result.

holiday time amongst staff. Other facilities and services offered on work premises are health services such as massage through to car washing and the provision of organic food. All of these are paid for by staff, but Barclays have organised them.

Like some other companies, Barclays recruit for attitude, they want people who want to help customers, not just those who go through the motions. Anyone who applies for a job at Barclays Commercial gets a DVD of what it’s like to work there.

They ran focus groups where they asked customers what was important to them.

As well as some predictable answers, Hawthorn says they got some more surprising answers. Rather than the speed of getting through, resolving queries and empowerment of staff were found to be critical to customers.

What have they done with the feedback from customers?

Barclays shared the focus group findings with their staff, changed their operating model and rebuilt their complaints process, using the results. They have focussed staff on getting it right first time; which has resulted in a significant change in the inbound/outbound mix of calls.

Based on the customer feedback, Barclays see complaints management as fundamental to driving up customer satisfaction so they give any complaints customers the contact number of a senior person rather than delegating down.

How do Barclays Commercial keep staff?

Mends adds that a company’s vision should be part of everything people do and be relevant to everyone. The vision should also be tangible, practical and understandable, with the acid test being….does everyone know it?

What have been the benefits of engaging staff?

Coca Cola’s vision is to be the best for beverage sales and for customer service.

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Hawthorn told us of a range of benefits offered by Barclays Commercial. As well as flexible working, there are a range of more creative benefits that Hawthorn says are cost neutral to the business, but add value for staff. For example, they offer a holiday club for children at half term, which is funded partly by staff and partly by the local council. This has solved the problem of staff having to take holiday at half term so has evened out requested

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What have been Barclays Commercial’s successes?

Barclays have won awards such as European Call Centre of the year in 2005 and 2007. Hawthorn also quoted results such as sickness rates of less than 1% per day and a 3 % attrition rate, as well as improved customer satisfaction results, agent productivity rates and reduced service costs. They also haven’t missed any service levels in 2 years.

Conference

The challenge of engaging third parties in improving customer service delivery Leasepla n; Managin g Directo r;

David B rennan

Brennan shared how and why they have measured the customer experience at Leaseplan

Why is service important?

Brennan asserted that in the car leasing market you can’t differentiate on product and cost, so you need to differentiate on service. Customer experience is therefore at the forefront of their business success – they need to value add for customers to differentiate their service in these economic times. He says that it is critical to get insights in how to balance operational efficiency and deliver a better customer experience. Leaseplan are therefore interested in knowing what it is that they currently do that customers aren’t interested in/bothered about. Conversely, what they don’t do that customers would put a value on/pay for.

How have staff been engaged in customer service delivery and what have been the benefits of this?

All staff have targets and reward schemes linked to customer service delivery, including those at a senior level. Leaseplan have also worked at communicating to staff the impact of customer service and have created storyboards to illustrate the difference between good and great customer service scenarios. Fundamentally, Brennan says staff should be empowered to answer the question; ‘why should I choose your business?’. Every department also has to have a plan of how to get from good to great within three years.

Brennan told us that comparison of their four business areas reveals that the best businesses for staff engagement have also increased their market share the most.

Brennan spoke of the challenge of having so much of their business delivered by third parties. To ensure third parties are just as committed to customer service, they have quarterly accreditation reviews and annual meetings at a senior level to discuss service delivery. Third parties are also strictly vetted and have a performance-related pay scheme. In summary, even though suppliers are harder to control, Brennan maintains that engaging with suppliers at the right level and clarifying SLAs and objectives has worked.

more information about the hotel and the location, the telephone channel is more appropriate. More profitable customers are also encouraged to use the phone channel as this allows opportunities for Hilton to up-sell and cross-sell.

T-Mobil e; Head of Satisfac tion for Custom er Serv ice;

Lee Mo stari

Mostari demonstrated T-Mobile’s instant customer feedback tool and how this has benefited their organisation Hilton Group; Vice President of Global Performance Management;

Michele Rowan

Rowan spoke about how they have reviewed customer contact channels to improve both the customer experience and operational efficiency

How has segmenting customers and their needs underpinned Hilton’s strategy?

What are the benefits of instant customer feedback?

T-Mobile needed to overcome the cost challenge of getting customer feedback to the lowest level, as they have 4,000 customer service staff. These customer service agents have the most influence on improving the customer experience so it’s vital to get feedback to those staff. The decision was made to use a text survey to get feedback from all customers who made contact with T-Mobile, this seemed to ‘fit’ well with T-Mobile customers too.

Rather than simply trying to reduce costs by pushing more customers booking hotel rooms to the internet, Hilton have segmented customers according to their differing needs and also according to their profitability. Their strategy has been to drive each guest to the most profitable channel whilst offering a differentiated service through each. For example, they have tried to encourage appropriate customers to book via the internet including those with more experience of booking and those who are less profitable, such as travel agents and staff using their discount to book a room.

T Mobile feel that one of the benefits for customers of using text is that it is quick and easy for customers to give their feedback. Mostari also outlined other benefits; that they can contact customers quickly on the back of any problems raised and crucially, that it is part of agents’ bonus scheme is based on the feedback on their performance from customers. T Mobile are also able to compile league tables of results at all levels, site, team and agent, in order to encourage competition and share best practice.

However, for those customers who need

There has been a month on month

What have been the results?

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Conference

increase in customer satisfaction and an increase in first call resolution (one of TMobile’s KPIs). Mostari has also found that this type of feedback has increased agents’ understanding and clarity of their impact on the customer experience.

view is that the only way they can make money is by keeping their current clients, and they need customer insights to do this. The results of these insights have been improved client retention, advocacy and a positive impact on their bottom line.

Barclay s Stock brokers ; Head of Client C ontact; Alistair Thaw

One; Capital ager; ce Man en ri pe er Ex ps Custom ip r C e Mik

believe that they can positively influence the measure.

In line with this, Capital One based their new measure on three aspects of the call handling; first call resolution from an internal perspective (whether all the relevant things were actioned after the call), the end to end call from the customers’ perspective and an internal regulatory compliance check. If staff achieved an acceptable standard in all three on a call then they would ‘pass’, but if any of the 3 was not good enough then the call would be a ‘fail’.

This was because Capital One found that there are negative costs associated with the three measures not happening, such as losing the customer’s business.

What have been the results?

Thaw told us how Barclays have used client feedback to drive customer service and retention strategies

How have Barclays used client feedback to improve the business?

Like Leaseplan, Barclays Stockbrokers have found that strong competition in their sector has meant it is increasingly difficult to differentiate on product and price, leaving service as an opportunity to differentiate themselves. Barclays chose to match their customer feedback method to the predominant channel of business, the internet.

The advantage of this, Thaw says, was flexibility and real time feedback.

Barclays used this client feedback to turn measurement into action. They analysed the themes in the feedback, using these to identify root causes of advocacy/detraction and satisfaction/dissatisfaction. Like T-Mobile, they used the feedback to follow up on any issues or questions raised by clients, and even further than that, any opportunities highlighted to sell a product. Impressively, Barclays have calculated that they have retained £1.6 million worth of business by responding speedily to client dissatisfaction. They have also seen complaints and account closures reduce where they have fixed a process.

Thaw summarised by saying that Barclays

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Cripps shared Capital One’s approach to measuring and improving quality within their call centres, by working to eliminate ‘bad’ calls

How did Capital One create an effective measure of quality?

Cripps pointed out that call centres are still predominantly managed on productivity rather than customer experience, probably because the former is easier to report because they are absolute measures and system generated. However, Cripps argues that relying solely on external customer satisfaction data can also be counterproductive because staff may avoid telling the customer ‘bad news’ that they are obliged to do for regulatory reasons. Plus, customers can be unhappy with the outcome of the call, for example because the staff member was unable to up their credit limit, and score the staff member low for this even though it is the company’s decision.

To overcome these limitations, Capital One wanted one measure to be used operationally that was based on both internal and external feedback. Cripps believes that to be effective, an operational measure has to be derived from what staff are here to do, be timely and perhaps most importantly, staff need to

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Capital One’s system generates daily and weekly reports for each staff member including the details of any defects logged.

The monthly data is examined across all agents to identify patterns and themes.

Capital One also log why customers call in, as well as defect levels by call type. This information was used to feed into self-service design, so that customers are provided with the option to do certain functions online if they would prefer to.

Cripps summarised by reminding us that you get what you measure. The results of changing the operational measure have been an improvement in customer satisfaction, fewer repeat calls and a reduction in complaints that are due to agent error. S

Sarah Stainthorpe Research Manager: The Leadership Factor

Sarah specialises in using data mining to provide customer insight to Direct Line, Churchill and RBS amongst others.

Favourite loyalty scheme: Boots Advantage, but she’s lost her card at the moment so if anyone’s got it please give it back. email: sarahstainthorpe@leadershipfactor.com

Customer

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Why are complaints valuable?

It’s a cliché, for good reason, but complaints provide businesses with some real opportunities. For a start, a complaint gives you a chance to see your organisation through the eyes of a customer. By pointing out flaws and weaknesses you are being given a chance to make corrections and improve your performance. By improving performance customers will be more satisfied and, ultimately, you’ll spend less time correcting problems. Furthermore, if you treat an unhappy customer well you are likely to benefit from heightened satisfaction and loyalty and, in turn, increased revenue and profitability. Generally speaking, customers who complain want you to put things right and restore their faith. Most customers really cannot be bothered to change suppliers and it takes a lot to drive them away. On every level it makes sense to understand what makes customers unhappy and put it right. But there’s more to complaint handling than correcting the problem. Research shows that, at the end of the day, it is usually the complaint handling process that leads to customer dissatisfaction rather than the original problem itself.

When you review the way your business handles complaints, it’s worth asking yourself, or your customers, just a handful of questions. The answer to all these questions should be ‘yes’.

1) Do you encourage complaints from customers –and staff?

Encouraging customers to complain demonstrates to staff as well as customers, that you take complaints seriously and that you are not afraid of hearing bad news.

Because staff tend to try and sort out customer complaints, management doesn’t hear about a large percentage of problems and is therefore unable to take action to eradicate the cause. By encouraging staff to be open about the problems customers encounter, management is in a much better position to take corrective action. Staff can also be customers so it’s also important to create a forum where staff are encouraged to feed back their experiences as customers. Staff are often in a strong position to suggest solutions as they have inside

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knowledge. Businesses do sometimes shoot themselves in the foot on this one, however. If you have set targets based on reducing the number of complaints you receive you may need to rethink because if you successfully encourage customers to give feedback, complaints will increase.

The most sensible approach to targeting complaints is to focus on the number of resolved complaints and customer satisfaction with the way the problem is handled rather than the number of inbound complaints.

2) Do you make it easy for customers to complain?

An unhappy customer, finding it difficult to complain is going to either give up and probably defect without you ever understanding the reason, or struggle to complain, ending up furious and frustrated by the end of the process. Customers will also share the experience with their friends and they are hardly going to be complimentary. On the other hand, an unhappy customer who finds it easy to complain is not only going to feel somewhat relieved (remember, complaining in itself is stressful for customers) but is also going to provide you with valuable insight into what’s going wrong in your business.

Furthermore, they are also presenting you with an opportunity to recover the relationship. Customers need to be able to complain using the channel that is most appropriate for them (not you). Not all customers may be able to write a letter or use a computer. Others may not have access to a telephone. Open yourself to complaints by making sure you accept complaints through every available channel (telephone, email, website, in person, feedback boxes etc.) Don’t hide your contact details in a secret location.

Remind yourself how infuriating it is when you can’t find those contact details on stationery or you have tried every page on a website and still can’t find the telephone number you are looking for.

3) Do you provide customers with all the information they need about your products?

Sometimes even customers don’t know if

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they have a legitimate reason to complain.

It is useful for both staff and customers to understand when the grounds for a complaint are legitimate. If customers understand what is expected, or not expected, from your products or services they can make this decision more easily.

This actually leads to a less stressful experience for the customer. All literature, websites, labelling and instruction leaflets can be used to communicate this information as well as the product itself, for example, a problem helpline sticker on a laptop.

4) Can customers, and staff, easily access your complaints procedure?

If customers do not understand what is going to happen and when it is going to happen they may feel you are not dealing with their complaint. It may take two days, it may take two weeks but customers need to know when you are going to respond to their complaint. If you do not let customers know what to expect this may lead to an increasing number of incoming queries that take up a great deal of resource. Customers are usually reasonable as long as they are understnad where they stand. It is not knowing what’s happening that makes them unhappy. An absence of information may lead customers to believe your complaints process is rather arbitrary. This erodes faith in the process. Promote your complaints procedure widely using all the tools available to you. It is not a weakness to admit you have a complaints procedure. Make the procedure easily accessible and available on request.

5) If necessary, do you provide customers with support and advice?

Some customers may have contact with only one member of staff. In some cases, especially if the relationship is strong, a customer may feel unable to complain to this person. This situation may arise for a range of reasons – the complaint may be about their contact or may be closely linked to the service they provide. In this situation a customer will require support.

Alternatively, where a product/service involves technical know-how or specialist

Customer

knowledge it can be difficult for customers to explain their problem easily without assistance. In order to provide customers with the best possible support and advice, it is important to allow customers to complain to staff with whom they have no contact. In other situations it may be beneficial to allow someone else to complain on a customer’s behalf. Furthermore, it is important to cater for special needs by employing a range of support systems.

This support and assistance should also stretch to making sure your complaints procedure refers to outside bodies and organisations if relevant (e.g. ombudsman) – as in the Virginia Power example right.

6) Is your complaints procedure clear?

A procedure does not need to be long or complicated but it will ensure all staff and customers have access to a document which provides a formal framework. A clear procedure will ensure that all staff operate consistently and that all customers are treated in the same way. This will assist and empower staff, saving both time and money.

But what are the features of a first-class complaints procedure? A solid procedure will include the following information: · · · · ·

Full details of all channels of complaint Where complaints are handled/collated System for logging and analysing complaints Identification of the staff responsible Procedure for handling different levels of complaints · How customers should be kept informed · Structure of compensations · Follow-up action

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7) Do you log complaints?

The information gathered during the complaints procedure has two uses: it improves the complaint handling process itself and enables root cause analysis and eradication of the original sources of problems. In order to make the most of customer feedback you have to ensure you log the complaint, gathering the following information: · Useful information – name, address, contact number of customer, date, nature of complaint · Take note of the solution suggested to the customer – and how the customer responded · Time-frame to put the matter right

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Customer

· Person responsible for the action · Recommended corrective action to prevent recurrence

8) Do you acknowledge all complaints quickly?

Imagine you’re a customer and you’ve got to the stage where you feel strongly enough to make a complaint. You make the complaint – feeling somewhat relieved that you have done something and your problem is going to be resolved. Time passes by and nothing happens – you feel your blood pressure rising. It is vital to acknowledge customers’ complaints quickly. You may not be able to resolve the complaint straight away but by providing an acknowledgement the customer is at least aware you are in receipt of their complaint. Regardless of how the customer makes the complaint consider telephoning to acknowledge – it is often the quickest and most efficient way to make contact. Furthermore, in many cases speaking to the customer will give you a greater understanding of both the customer and the problem. It can also ‘buy’ you time as the customer is likely to be guided by your timescales.

9) Do you know much customer complaints cost your business?

Every complaining customer costs your business. If you lose a customer, as a result of handling a complaint poorly, you are also losing the customer’s entire lifetime value, including: their future purchases, the opportunities to up-sell and cross-sell, and the chance that a satisfied customer would recommend you.

You have also wasted the cost of acquiring the customer in the first place.

Furthermore, any investment you made in handling the complaint – staff costs, materials, compensation and sundries has also been lost. Once these ‘costs’ are added up the total is considerable.

10) Do you make sure you follow the ‘basics’ of complaint handling?

It’s very easy to forget the simple steps that form the basis of good complaint handling. These are:

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· Thank the complainer.

Complaining isn’t always easy and can sometimes involve the customer in a considerable amount of time and/or emotional energy. · Explain why you appreciate the complaint.

Customers will contact you because they want their problem sorting out but in many cases customers also let you know about more minor issues because they want to help you. Whatever the case, be sure to let customers know you appreciate the complaint because it’s going to help you improve your performance in future. · Apologise for the mistake.

In most cases it is just polite to apologise. If you really do feel you are putting your business in a vulnerable position by saying sorry you can at least apologise for the customer being put in the position of having to contact you. In many cases what makes customers most unhappy is that at no time does anyone say sorry to them. · Promise to do something immediately.

Customers are obviously more satisfied when they feel their complaint has been treated as a priority. You may not be able to rectify the problem straightaway but you can get the ball rolling.

Remember to let the customer know what is happening. · Ask for the necessary information.

Do make sure you gather all the information you need for a full and thorough investigation. If a customer does not supply all the information you need, go back to them and ask for it. There is nothing more embarrassing than going back to a customer weeks after they complained to ask for basic information you should have noticed was missing when they submitted their complaint. · Correct the mistake promptly.

There is always much to be gained from correcting any mistake you have made as quickly as possible. Customers do not always expect compensation (in many cases it’s the last thing they want) but they do want the mistake correcting. · Check customer satisfaction.

We know that handling complaints well can increase customer satisfaction and loyalty, but handling them badly can

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result in customer defection plus negative word-of-mouth. After customers have been through the complaint process it therefore pays to give them a call and understand how they feel, what went well and what didn’t go so well.

You should also do periodic surveys of a random sample of customers who have complained to monitor their satisfaction with your complaint handling process as well as the consequences for overall customer satisfaction and loyalty. (see below). · Prevent future mistakes.

There is little point in gathering information and understanding what makes customers unhappy if you do nothing with the information to prevent mistakes from recurring. Make good use of the information you have gathered to eradicate future mistakes.

Complaints surveys At least once a year you should conduct a survey of a random sample of customers who have been through the complaints process up to final resolution. The format should be similar to a conventional customer satisfaction survey – i.e. scoring for importance and satisfaction a list of factors that are important to customers when they are going through the complaints process. The list of customer requirements should be identified before the first complaints survey through focus groups or depth interviews with a small sample of customers who have made a complaint.

To satisfy customers who have complained, you simply have to ‘do best what matters most’ to them during that process. The actions for improving satisfaction with your complaint handling will therefore be pinpointed by the largest gaps between importance and satisfaction. In the Chart 1 below we can see that the biggest gaps are for providing a detailed response if the outcome is not as the customer expected, sending letters that are understandable and having a clear point of contact. These things are all very actionable and improving them would make the biggest difference to customer satisfaction with complaint handling. They should therefore be flagged as PFIs (priorities for improvement).

Customer

Chart 1: Doing best what matters most Ability to keep promises and commitments Understanding your complaint A detailed response if outcome is not as expected

PFI

Knowledge of the complaint handling staff Helpfulness of the complaint handling staff Staff take ownership/responsibility of the problem Issuing understandable letters

PFI

Consistency of the information provided Keeping you informed of progress Having a clear point of contact

PFI

Provision of initial contact information Clarity of complaints fact sheet Time taken to resolve your complaint 5

6

7

Importance

8

9

10

Satisfaction

Conclusions

complaints process, introducing it by saying something like “Now, thinking about the way your complaint was handled, how satisfied or dissatisfied were you with the complaints process?” Then you can score their satisfaction with the longer list of factors that are important to them during the complaint handling process. From this sequence of questions you will get answers that much more accurately reflect their views of the process, not clouded by the outcome.

It is also essential in complaints surveys to disentangle customers’ feelings about the outcome of their complaint from their satisfaction with the complaints process itself. The sequence of these questions is very important. When you ask people about a complaints experience, their thoughts usually go first to how satisfied they are with the outcome, and that tends to cloud their answers to any other questions. It’s therefore best to get that out of the way first, by asking a straight forward question such as “How satisfied or dissatisfied were you with the final outcome of your complaint?” Ask for comments to explain low scores on this question. Then ask about their overall satisfaction with the

loyalty. It would therefore be very useful if you could highlight the elements of the complaints experience that make the biggest impact on future customer loyalty.

To do this you need to ask a suitable loyalty question such as recommendation and compare the satisfaction scores of the most and least loyal respondents. In Chart 2 the requirements are sorted in order of the things that make the biggest difference to customer loyalty. We can see that as well as the PFIs identified in Chart 1, staff taking ownership of the problem makes a big difference to future customer loyalty so should also receive significant management focus.

Of course, your main objective in all this focus on good complaint handling is to stop your unhappy customers defecting and if possible even enhance their future

Chart 2: Impact of complaint handling on loyalty Staff take ownership/responsibility of the problem Having a clear point of contact

In our work with some of the UK’s leading organisations we have concluded that those handling complaints well tend to share some common characteristics such as: Strategy · Linking complaint handling to the company mission · Viewing complaints as an opportunity for improvement · Understanding the link between complaints resolution and loyalty · Encouraging complaints from customers and employees Processes · A clear complaint handling process in place · Sharing information about complaints across the business · Using complaints data to make changes · Having reward and recognition programmes in place for customer service staff

Issuing understandable letters A detailed response if outcome is not as expected

Measurement · Customer satisfaction with complaint handling is objectively measured · Complaint handling is linked to future customer loyalty · Reasons for complaints are measured and analysed · Cost of complaints is measured S

Consistency of the information provided Ability to keep promises and commitments Keeping you informed of progress Clarity of complaints fact sheet Understanding your complaint Helpfulness of the complaint handling staff Knowledge of the complaint handling staff Time taken to resolve your complaint Provision of initial contact information 5

6

7

More loyal (scored 9-10)

8

9

10

Less loyal (scored 1-5)

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Book Review

Risk The Science and politics of Fear Dan Gardner

It could be argued that we live in unprecedented times. Our life expectancy has doubled even looking back only 100 years. We’re mostly healthier, we have access to more technology and for most of us, despite the current economic climate, we’re better off than countless previous generations. However, we seem to be living in a constant climate of fear if you pay attention to the media, and we seem to be afraid of everything from global warming, to the Y2K bug, terrorism, and the latest global pandemic and all this seems to be a great paradox to how well off we are. There’s no suggestion that these fears aren’t genuine, but ‘The Politics of Fear’ suggests that our ability to judge how much threat they pose is irrational and illogical. It’s all down to how we are wired, and how our biases play a significant part in our inability to judge risk.

Part of this paradox is driven by media frenzy. The unusual grabs our attention.

Fear sells. Fear speaks to our ‘gut’ and our primitive wiring that developed on the plains over thousands of years, which admittedly did a great job in keeping us alive. But fear doesn’t speak to our ‘head’. Our intelligence should jump in and correct our rash instincts when our gut shouts ‘panic, run’. Gardener explains how such biases as the example rule and the rule of typical things significantly influence our ability to make intelligent decisions that weigh both the likelihood and impact of a risk and how this has wider ramifications for our day to day behaviour.

However just as it was all starting to make sense, adaptation jumps in and plays a contributing part in this equation of fear.

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Without the ability to adapt we wouldn’t be here now but it also fails to serve us.

We’re hard wired to be able to react to individual, perceived fast moving threats and we’re very good at it. We’ve had plenty of practice. Where we are not so good, is at perceiving slow moving and potentially larger threats, or business trends until it’s too late. This is one reason why organisational change and improving satisfaction is a challenge. It needs to be addressed, day in day out and most likely will never go away. If organisations achieve customer excellence, it won’t be a one-time event that will then disappear.

In order to keep themselves ‘excellent’, organisations will need to keep customer focus an elevated priority, almost as a daily fear to ensure focus and attention stays. The down side, again as part of our wiring is that once a perceived threat is over, it’s easy and most likely that organisations will revert back to their old habits and so the cycle begins again.

Interestingly there’s no suggestion that fear should be used to elevate an argument to motivate people to take action.

However in lots of instances every day it can be seen. Anyone reading this book will gain far greater insight into how we are motivated by fear and why. Perhaps there is a case for understanding what would really frighten us by not delivering great levels of customer satisfaction. Certainly, if we feared that our actions and behaviours towards customers today could result in our going out of business tomorrow, it could be argued that we would do something radically different today. Fortunately or otherwise, this isn’t the case, but the longer, slow moving threat is still there even if we can’t run away from it. S

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Richard Kimber Richard is Client Manager at The Leadership Factor, working with companies such as VW / Audi, Co-op Business Banking, Xerox, Hilti, Principality Building Society and Lombard Vehicle Management. Richard can be contacted on 01484 517575 or email: richardkimber@leadershipfactor.com Favourite loyalty scheme: Co-op, the old fashioned one for your local store with a pass book and a number

Customer Surveys One day training course £325

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