Stakeholder Magazine - Jul. 2006

S AT I S F A C T I O N Creating value for customers, employees and shareholders

Improving customer satisfaction at VISA UNDERSTANDING FINANCIAL IMPLICATIONS OF CUSTOMER SERVICE 10 CUSTOMER CENTRED LESSONS REWARDING CUSTOMER SATISFACTION SUBLIMINAL MESSAGES AND SUBTLE CUES

PLUS THE BALANCED SCORECARD BOOK REVIEW DIARY DATES

July 2006 VOLUME 3 ISSUE 2 £4.50

Customer Satisfaction Measurement

Customer Satisfaction Measurement

Level 1

Level 2

A practical one day course that will take you step-by-step through the process of accurately measuring your customers’ satisfaction.

This course examines the more advanced research techniques relevant to customer satisfaction measurement and is suitable for people wanting to develop or critically assess their existing process.

The day covers

The day covers

Questionnaire design Sampling Methodology Analysing & reporting How to calculate a Satisfaction Index Pitfalls to avoid Dates 3rd October 17th October 26th October 1st November 2nd November 6th November 21st November

London Manchester Leeds Bristol Birmingham Manchester London

A robust measurement for tracking Measuring importance Sample reliability Measuring the customer experience How different measures can affect results Understanding what’s important to customers Timing and frequency Dates 18th October 22nd November

Manchester London

Cost: £325 excl VAT

Cost: £295 excl VAT

Over 5000 delegates have attended worldwide Presenters are authors of leading books in the area of customer satisfaction & loyalty

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For more information and a detailed agenda: CALL RUTH COLLETON on

01484 467000 Book online at

www.leadershipfactor.com

The

F A C T O R L E A D E R S I N S AT I S F AC T I O N M E A S U R E M E N T

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Diary Dates

Training courses and Conferences from around the country

July 2006 25 Employee Rewarding customer satisfaction

7 News Virgin to make improvements in service at NTL

8 The Balanced Scorecard Article 4: Balanced Scorecard and Corporate Strategy 10 Case Study

30 Latest Thinking

Visa “What we call results are beginnings”

Subliminal messages and subtle cues

33 Loyalty Maximising loyalty the publishers’ way

37 Fast Guide Fast guide to setting targets for satisfaction

16 Customer

In this issue...

VOLUME 3 ISSUE 2

38 Book Review

Understanding financial implications of customer service. By Don Hales

20 Customer 10 Key lessons from the European Conference on Customer Management

Stakeholder July2006

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design

To get eye catching design and high quality print you need to pay high prices right?

- Wrong!

Call us on 01484 467016 for top quality design and print at shoestring prices

Charlotte Ratcliffe editor

This issue of Stakeholder Satisfaction is so packed with useful articles that it really would be unfair to single out any, but I’ll have so start somewhere.

So………

If you want to know how a 15% improvement in customer satisfaction led to a 38% increase in revenue, as well as other interesting thoughts on quantifying the financial benefits of customer service, turn to Don Hales’ article on page 16.

If you’re intrigued about how being 2 – 4% better makes all the difference, check out Phil Dourado’s key lessons from this year’s European Conference on Customer Management. page 20 If you find it challenging to improve customer satisfaction, and everyone does, turn to page 10 for a fascinating interview with Head of Customer Implementation Services, Graham Parker-Gore, full of detailed insights into how Visa have made huge strides in managing and improving customer satisfaction.

If you’re really committed to customer satisfaction, and it’s not just lip service, you’ll want to motivate your people to deliver great service, and of course they won’t be motivated for long unless they’re recognised and rewarded for achieving it. Turn to page 25 for a practical analysis from reward expert Ray Robertson on how to make customer satisfaction-related pay work, and page 37 for a related Fast Guide on setting targets.

If, like most companies, customer satisfaction is just the way to achieve your bigger goal of customer loyalty, turn to page 33, where Rachel Allen will help you to think out of the box by explaining how publishers tackle the customer loyalty challenge in an incredibly competitive market.

And if you like intrigue, you’ll enjoy Stephen Hampshire’s Latest Thinking article on page 30, as well as in intriguing book review on page 38.

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.

Editor: Assistant Editor: Contributors

Charlotte Ratcliffe Lucy Rogers Nigel Hill Stephen Hampshire Ray Robertson Rachel Allen Don Hales Phil Dourado Graham Parker-Gore Rob Ward Designer: Creative Director: Rob Egan Louise Martin Advertising: Editorial Director: Janet Hill

Printers of Stakeholder Satisfaction info@stakeholdermagazine.com Stakeholder Satisfaction PO BOX 1426 Huddersfield HD1 9AW Tel: 0870 240 7885 NB: Stakeholder Satisfaction does not accept responsibility for omissions or errors. The points of view expressed in the articles by attributing 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 2004

ISSN 1749-088X Stakeholder July2006

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Diary Dates

Diary dates AUGUST

Annual Coaching at Work Conference

Improving Employee Satisfaction

ICS Customer Service Forum

12-13th September - London www.cipd.co.uk

30th October - Manchester www.leadershipfactor.com

23rd August 2006 Allianz - Dublin www.instituteofcustomerservice.com The forum will be hosted by Allianz and it will be an opportunity for all Council, Corporate, Associate, Business and Regional members of the ICS to explore, learn and share best practice ideas.

This conference is aimed at those responsible for developing an organisation’s training and development strategy, It provides practical guidance and the latest thinking by industry experts. The CIPD's annual conference will enable you to apply and carry out coaching to improve business performance.

SEPTEMBER B2B Conference and Exhibition 19-20th September - Harrogate www.B2Byorkshire.co.uk This is one in a series of seven pioneering business events and is a 'must-attend' conference and exhibition for owners of small and medium-sized businesses in Yorkshire. This event is free and has over 50 seminars and workshops and over 100 top exhibitors.

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OCTOBER Improving Customer Satisfaction 4th October - London 31st October - Manchester www.leadershipfactor.com

01484 467000

Customer Experience Assurance Event 26th September - London Stock Exchange www.beyondphilosophy.com

ICS Annual Conference 2006

At this event learn more about how to maintain great customer experiences and make them a reality within all areas of your business through continuous improvement. Share best practice ideas with other delegates and glean ideas from experts.

Stakeholder July2006

If you buy into the idea of satisfying employees, having a robust employee survey is essential. This course is a practical step-by-step guide to creating an employee survey that links to your customer measures, and ultimately to business success.

Facilitating Focus Groups

This one day course examines the strategies that you can adopt once you receive the results of your customer satisfaction survey. This will allow you to action your results and keep the spotlight on customer satisfaction.

0207 917 1717

01484 467000

10 - 11th October Radisson Edwardian Hotel, Heathrow www.Instituteofcustomerservice.com

01392 434031 This is an event that you really should not miss. It is the most authoritative conference on customer service. This year it is focusing on Strategy & Culture, People and Processes and speakers include former European Business speaker of the year Larry Hochman and Nigel Risner, human development specialist and peak performance coach.

16th October - Manchester 24th October - London www.leadershipfactor.com

01484 467000 When preparing a focus group there are many pitfalls to avoid, this one day course will take delegates through preparing and moderating a successful focus group.

Customer Satisfaction Measurement Level 1 3rd October - London 17th October - Manchester 26th October - Leeds www.leadershipfactor.com

01484 467000 This one day training course takes delegates step-by-step through the process of using customer surveys to accurately measure customer satisfaction. It includes instruction on relevant research techniques, group exercises and opportunities to ask questions relating to your organisation's customer satisfaction practices.

News

news

UK insurance body launches new scheme to improve customer service

for passengers. Initiatives like this will help raise the quality of rail journeys and ensure passengers' expectations are met."

Virgin to make improvements in service at NTL

ABI

stress as 5 or higher on a scale of one to ten and a quarter have taken time off due to anxiety, according to a survey by online learning provider SkillSoft.

An initiative that puts customer needs at the heart of the industry has been unveiled by the Association of British Insurers, which covers over 80% of the industry.

Over 26 members of the ABI have signed up to the scheme, which includes a set of commitments that must be delivered to customers. Examples of these are good practice guides for companies to improve their performance and an annual survey of customers' views and experiences across the industry. Speaking at its launch Keith Satchel, chairman of the ABI, said: "All customers will benefit from this renewed priority given to meeting their needs."

Train operator 'one' opens new customer service academy Transport Minister Derek Twigg MP officially opened the new 'one' Customer Service Academy, on the 27th April.

The new ÂŁ2m Academy, based in East London fulfils one of the company's key franchise commitments to invest in a Training Centre of Customer Service Excellence, supporting their 3,100 employees through a modern, fully equipped training environment.

Derek Twigg MP said "This is good news

Much of the talk surrounding NTL's merger with Virgin Mobile has been about rebranding. Staff at Virgin are to spruce up NTL's customer service levels.

It was revealed that there would be "significant participation from the Virgin Group and Management to secure Virgin culture and ideas throughout the organisation", which would lead to "significant operational improvements with increase in broadband sales and improvements in customer care."

Sir Richard Branson is so passionate about his brand that he told Bloomberg that the renaming of NTL would only go ahead once customer service issues had been resolved.

95% of all Public Sector staff suffer with anxiety in the workplace.

New research claims that nearly 95% of public sector staff rated their levels of

Stress is now the biggest cause of working days lost. Kay Baldwin-Evans, vice president of research at SkillSoft said "The TUC estimates that work-related stress costs the economy up to ÂŁ7 billion per annum." She urges employers to face this issue and learn more about how to manage the problem.

John Lewis has increased employee and customer satisfaction through encouraging a culture of empowerment.

A coaching programme has cut staff turnover, improved customer satisfaction levels and shifted employee attitudes from a command to a 'can do' culture.

Coaching has allowed the company to return to the levels of success that are normal for a company of its size, in a very competitive marketplace.

Steve Millbank, personnel manager, learning and development, said that achieving top management buy-in was essential to the coaching's success.

Encouraging senior managers to be role models encouraged most staff to embrace it making it the success that is has been.

Stakeholder July2006

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The Balanced Scorecard

Article 4: Balanced Scorecard and Corporate Strategy In the last issue of Stakeholder Satisfaction, we explained how balanced scorecard incorporates customer measures and links them with other aspects of organisational performance. Devised by Kaplan and Norton, and developed in two Harvard Business Review articles1,2 and a full length book3, Balanced Scorecard was promoted by its authors as “the instrumentation that managers need to navigate to success”. The scorecard brings together financial, customer, internal process and people into one performance monitoring system. It assists an organisation to translate its strategy into a comprehensive set of measures, through which its performance can be managed. It enables managers to understand the linkages between the four areas and helps them focus their efforts. This article examines how balanced scorecard is increasingly used to drive corporate strategy.

Implementation is difficult Many organisations find it extremely difficult to implement strategy. According to Fortune Magazine, only 10% of strategies are effectively implemented.

Kaplan and Norton found that without balanced scorecard 85% of executive teams spend less than 1 hour per month discussing strategy4. Even when companies do invest a lot of time in refining their values, mission statements, and strategic initiatives, the average employee often doesn’t have a clear understanding how their actions influence the success of the organisation. Balanced scorecard is a proven way to align an organisation with strategy, to harness employees’ efforts to strategic ends, and ultimately to deliver improved financial returns.

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Strategy Maps Since strategies, and the actions required to successfully implement them, often contain an overwhelming amount of information, Kaplan and Norton have developed a tool, known as a strategy map5,6, to help communicate these large, complex quantities of information in simple, easily understood ways.

Strategy maps make visually explicit a company’s strategy together with its associated objectives and measures, and the causal linkages between them.

Organising objectives in each of the four quadrants of the balanced scorecard, and mapping the strategic relationships among them, serves as a way to evaluate objectives to make sure they are consistent and useful in delivering the strategy.

The strategy map is also an excellent way to communicate to different parts of the organisation how they fit into the overall strategy. It helps to cascade the balanced scorecard throughout the company because it can be created at different levels of an organisation, and each level’s map can be viewed for alignment with the overall strategy map.

The example strategy map shown on the next page is available on the Balanced Scorecard Collaborative website7, along with a wealth of additional information about balanced scorecard and strategy mapping.

The strategy-focused organisation Experience over the last decade or more has shown that successful organisations use the balanced scorecard to create a

The Balanced Scorecard

culture of continual focus on strategy formulation, measurement, and revision.

They create what Kaplan and Norton call a strategy focused organisation. The key elements in creating a strategy focused organisation are as follows:

1. Mobilise change Building a strategy focused organisation usually involves significant culture change.

Consistent leadership and support are critical to maintaining momentum through the challenges that organisations inevitably encounter. The executive team must be in agreement on strategies and must drive the scorecard process for it to be successful.

2. Make strategy a continual process.

A strategic focus is not maintained if strategy formulation becomes a one-off activity that happens during an annual business planning cycle. Feedback loops are needed to constantly focus attention on and continually re-evaluate the strategy and the measures. Since the budget process is linked to strategy, the balanced scorecard should replace traditional budget formulation as a way to allocate funds.

3. Make strategy everyone’s job.

This is done through strategic education and awareness and by cascading the scorecard down through the organisation, so that business units, departments—or even individuals—create their own scorecards. The linkages to strategy are explicitly defined at all levels. This helps departments and individuals understand and find new ways to support the strategy. It also helps ensure that employees at all levels are being measured and rewarded in ways that support the strategy.

4. Align the organisation to the strategy.

This involves evaluating current organisational structures, lines of reporting, policies and procedures to ensure that they are consistent with the strategy. It can include re-alignment of business units or re-defining the roles of different support units to make sure that each part of the organisation is lined up to best support the strategy.

5. Translate the strategy into operational terms.

Tools like the strategy map, the strategy matrix and scorecards cascaded through all levels of the organisation, must be used

to integrate strategy with the operational tasks that employees perform daily.

In the next issue of Stakeholder Satisfaction we will look at an organisation that has succeeded in implementing balanced scorecard successfully, winning a coveted Malcolm Baldrige award in the process.

References 1. Kaplan and Norton: “The Balanced Scorecard: Measures that Drive Performance”, Harvard Business Review Jan-Feb 1992.

2. Kaplan and Norton: “Putting the Balanced Scorecard to Work”, Harvard Business Review Sept-Oct 1993.

3. Kaplan and Norton: “The Balanced Scorecard”, Harvard Business School Press, 1996.

4. Kaplan and Norton: “The Strategy Focused Organization”, Harvard Business School Press, 2001.

5. Kaplan and Norton: “Having Trouble With Your Strategy? Then Map It” Harvard Business Review, SeptemberOctober 2000.

6. Kaplan and Norton: “Strategy Maps”, Harvard Business School Press, 2003.

7. www.bscol.com S

Customer Financial

Community Banking Group Strategy Map “Our success comes from...

F2 - Maximize traditioal revenue sources

F3 - Grow nontraditional revenue sources

F4 - Manage financial resources for maximum risk-adjusted return

F1 - Achieve sustainable double-digit net income growth

...delivering great financial services,...

C1 - “Understand me and give me the right information and advice.”

C2 - “Give me convenient access to the right products.”

C4 - “Be involved in my communities.”

C3 - “Appreciate me, and get things done easily, quickly, and right.”

...which is all about developing and managing enduring relationships...

Grow High-Potential and Retain High-Value Relationships

I4 - Sell the right products at the right time I3 - Communicate the Allfirst brand and value proposition

I1 - Segment markets and target prospects for new opportunity

Learning and Growth

Internal Process

Acquire New Relationships

I7 - Provide premium service to delight and retain valuable customers

Increase Quality and Productivity I11 - Consistently deliver the Allfirst value proposition - at the right cost

I10 - Maximize efficiency and quality of business processes

I6 - Demonstrate the Allfirst value proposition I2 - Effectively develop products and access

I5 - Identify and recognize high potential relationships

I8 - Focus on the “critical fewer”

I9 - Enhance critical internal and external partnerships

...and being a great place to work!”

L1 - “We develop recognize, retain, and hire great people.”

L2 - “I’m developing the skills I need to succeed.”

L3 - “We understand the strategy and know what we need to do.”

L4 - “We have the information and tools we need to do our jobs.”

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Case Study

“What we call results “

are beginnings

Visa Europe has a commitment to providing excellent customer support for its bank members. This was put to the test in 2004 when they commissioned The Leadership Factor to carry out an ongoing customer satisfaction measurement study on their behalf. The crunch came last summer when a large-scale update survey revealed the extent to which Visa had been able to improve in key areas. The good news was a significant improvement customers had noticed that service levels were even better than before. This achievement prompted Stakeholder to speak to Graham Parker-Gore, Head of Customer Implementation Services, about the change process that his team went through in order to deliver those improvements.

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Stakeholder July2006

Case Study

Graham Parker-Gore Head of Customer Implementation Services at VISA Europe

Background: the cardholder is king Visa is unquestionably one of the world's leading brands, but not simply in terms of recognition. As Graham is keen to point out it is probably the brand that people most commonly carry with them. He is proud of the fact that this means that Visa has a big impact on people's lives and their ability to do what they want to do.

Graham sees Visa's job, and ultimately his own, as being about making life easier for cardholders as well as the customers with whom he deals directly - the banks who own the company. Visa's ultimate aim is to create a partnership with the banks that is geared around serving the cardholder.

We are a business to business organisation. Our first relationship on a day to day basis is with the banks, but I think it’s fundamentally important not to forget at any stage that the most important customer is the cardholder.

If people are not out there using that card, then the rest of it doesn’t matter.

The cardholder is absolutely at the forefront of our thinking.

Graham's role in all of this is to head up a team within Visa Europe that has the aim of "supporting the A-Z of Visa". They are responsible for fielding enquiries from members (the banks who are their customers) and supporting them in any way they need. The aim here is to offer members a single point of contact that will take ownership of any enquiry or problem and deal with it on their behalf.

Information gathering: customer satisfaction measurement Visa survey their members on an ongoing basis to assess how they're performing, with monthly reporting for the latest tracking information. Annually there is a larger scale survey and reporting process that aims to set Priorities for Improvement (PFIs) and provide the baseline for the coming year. This distinction between the purposes of tracking and full surveys is a crucial one. Tracking surveys are tremendously useful in terms of picking up very quickly on changes in customer perceptions: "‌we started to see things really improve.

It was just that tangible - as we started to do things the tracking surveys started to show progress."

Clearly this is a very encouraging morale boost, but it is vital to realise, as Visa did, that tracking surveys are prone to the variability that is endemic in survey research. A continuing trend is much

more reassuring than a one-off: "When we first saw them [the improvements] we wondered if it was a blip, but month on month it kept improving."

This is how tracking surveys should be used: as a tool to monitor if changes are being noticed by customers, to provide up to date information and to serve as a useful encouragement to staff that improvements are taking hold and being noticed.

Just having a survey once a year I would miss out on so much information that helps me to manage the business.

Organisations using tracking surveys often fall victim to a fire-fighting approach to customer satisfaction - picking new PFIs every month. The net result is, despite furious activity, a lack of consistency leading to little tangible progress. I put this to Graham - is it a danger?

"Not if you're true to your PFIs, not if you

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Case Study

focus on The Leadership Factor's methodology which is 'these are your PFIs, focus on these'. That was where the entire emphasis was. The tracking surveys picked up on whether we were achieving."

As well as satisfaction scores overall and for a range of key requirements, The Leadership Factor provides detailed verbatim comments supporting any low scores that are given, allowing a qualitative insight into the reasons that a customer is less than satisfied. This helps to point the way towards what changes will lead to higher customer satisfaction.

Graham is keen to point out the importance of these in deciding what to do to improve: "The satisfaction score, in some ways, I would even say can be a distraction. For instance we've had a really good year, we've got a really good satisfaction score, our progress from one year to the next has been very significant. There's a danger that too much emphasis is placed on that, rather than continuing to look at all those comments which tell us how we can improve."

particular country was performing much worse than the others, something which a targeted strategy has now helped to address and turn around.

Action: from survey to service The implementation process Visa's baseline customer satisfaction survey revealed an overall satisfaction index placing them just below half way up The Leadership Factor's league table of companies. More importantly it provided them with three Priorities for Improvement (PFIs) recommended as the areas where improvements would lead to most

Survey results from Jan 2005

December

January

February

March

April

The satisfaction improvement timeline

ine Basel y surve January 2005

July 2004

First Feed b Repo a ck/ monthly rtin king g trac survey February May 2005

s A ction to Tracking g surveys startin e showed tak t progress effe c The other immediate benefit of undertaking a formal customer satisfaction survey was detailed information about the performance of Visa in certain markets. For example, the baseline survey showed that one

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August 2004

June/July 2005

Updated main survey

September 2004

P Bra FI Te ins am to s/ rm in g

June 2004

August 2005

Update Feedba ck/ Reportin g

benefit in terms of overall satisfaction.

Crucially it also had the verbatim comments to back these choices up and give a starting point, in customers' words, as to what might need to be done to improve.

In order to move forward, Graham divided his team into three groups - one focused on each of the PFIs. "I wanted the department to break not along traditional line-management structural lines, I wanted it to be groups of people picked from wherever they sat, working with colleagues from different teams."

He decided to make sure that these groups were not dominated and led by managers, but rather that the staff who to June 2005 would actually have to implement the changes were involved.

"I wanted it to be seen as an opportunity for individuals within the teams to seize the moment and actually try to take some ownership for May June something outside their usual day to day function, or see an opportunity to get a bit more profile within the business."

Of course some of these groups were more effective than others, and within all of them there tended to be a nucleus of a few people that were responsible for most of the forward movement and decision making. Graham sees this as a natural part of the dynamics of groups, and not something to worry about too much.

Likewise he sees no point in worrying about the people who don't participate at this stage - if for no other reason because there's not enough time if any action is going to be taken. Hopefully those who involved themselves less than others will have another chance next time.

First of all the groups brainstormed in order to combine feedback from customers on the PFIs (the verbatim comments again) with their own ideas about how improvements could be made.

Next those ideas were filtered down to

Case Study

three things that they could tangibly do.

The rest of the time was spent communicating what the changes were to be (their impact and how they would work) and making them happen. Changes varied from technological innovations to behavioural issues that could be built into training programmes. Graham is clear that it is very important to make things happen quickly: "I think pace is really important. We're a very successful business, so sometimes you have to create a burning platform to get people to really run with something.

Having a very tight window is essential to keep that momentum going."

It is not always clear what the role of a consultant like The Leadership Factor is at this stage of a client's work - perhaps their job finishes at the final presentation of results?

Graham asked his Client Manager, Greg Roche, to stay involved by making a nuisance of himself. His job was to be demanding, to ask difficult questions: What are you going to do? What are you doing? Why are the PFIs not moving? Graham also asked his 3 PFI teams to present to Greg, which he sees as a very valuable part of the process, helping to crystallise the importance of improvement and also to narrow their focus down to two or three simple changes that could be implemented relatively quickly.

"We were great at brainstorming and coming up with a list of 20 or 25 different items, but we couldn't do them all, obviously. What we needed to do was just focus on one or two, and do them well."

A common question is how long it takes to make changes, and for customers to notice them. Graham mentions that the 910 months between survey feedback and the next annual baseline measure is not a long time, but is it enough?

"Yes. Your big customers, the people that use you most, only need to feel that difference for a month or two and see

some consistency before they start to think that things are improving. And part of the process is also to tell them that you are improving."

This is not to say that Visa are resting on their laurels - he is quick to point out that what he means here is not that the PFIs have been completely "nailed" and are now 100% problem-free, but that significant progress has been made and noticed by customers.

Another crucial insight is that the regular tracking data that Visa gather on customer perceptions has a very valuable role to play in providing ongoing information. A couple of months of positive feedback is very important in boosting morale and enthusing staff about the improvements they're making, engaging them in the process.

Graham recounts an occasion when two of his staff noticed Graham meeting The Leadership Factor, and immediately started to badger him for the scores. Sadly it was a meeting on a different subject, but the point for Graham was that he didn't need to worry about engaging his staff in the process - they were already there.

Getting buy-in I asked Graham how he went about getting people to buy in to the survey process, and really get them engaged in making a difference. He had no hesitation here: "You have to be passionate yourself, you have to be prepared to stand up and articulate how important this is to you and express your own values. You need to get your management team on board in the same way - they need to be prepared to stand up and be counted and become champions in the process."

If there's one thing you can't doubt after spending any time talking to Graham it's that he is passionate about this subject.

But what about the others? The important thing, according to Graham, is to get the right people on board in the first place.

'Recruit for attitude' is clearly the motto here, and it's a powerful starting point to get the right kind of managers involved.

Engaging the rest of the team is partly about leadership (the passion) but also about basic management practices like objective-setting. For instance, last year 60% of the weighting for staff objectives was based on customer satisfaction in one way or another. Another important thing was using the three PFI groups, which helped to involve staff in the process of deciding what to do to improve.

One of the things I wanted to do was to say to these guys ‘there’s no point in me coming up with the ideas; you know what you need to do, here’s the feedback that customers are giving us, so over to you - you come up with the answers’. That contributed to getting buy-in because it was their ideas.

They were coming up with things then that they could tangibly do; they weren’t having ideas foisted on them by some manager somewhere.”

This all sounds a bit too rosy doesn't it?

Of course there were some cynics, people who were more difficult to get engaged in the process. Graham points out, first of all, that most people are not cynical because they think customer satisfaction isn't important, but because they don't necessarily agree with the approach. The first step to dealing with them is therefore to engage them in a debate, giving them

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Case Study

an opportunity to argue their case. Better for them to challenge the process out loud than sit brooding in silence. If that works, then converted cynics are often the most ardent advocates of the programme. If not, then Graham remains philosophical: "You can't worry about that, you have to go forward. The ultimate answer is, providing they're delivering and hitting their objectives, then OK - I'll accept there's some cynics out there, but they're still delivering."

So the cynics, those that couldn't be brought on board, are not a real difficulty.

Surely something must have gone less than perfectly?

Lessons for the future The most surprising difficulty that Visa came across was persuading staff of the value of training. The problem is that many people can't see beyond the day to day pile of work sitting on their desk. Long term thinking is necessary in order to appreciate that the world won't end if they're away from their desk for two days.

Training is something that is taken very seriously in Graham's team. Eighteen months ago the department got a training manager of its own, who implemented a new strategy and a very structured induction process. There's also lots of refresher training and additional work on behavioural areas such as connecting with customers, problem-solving skills and so on. Graham sees training as vital in order to give people the tools to respond to the challenges they are faced with.

The other issue that Graham will readily admit to is that they were a little slow to get off the ground, falling into the trap of too much discussion and not enough action: "We fell for a couple of months into that rut of brainstorming to death. Really you just wanted to scream 'do one thing, I don't care what it is'."

This year it'll be very different, with a limit of one meeting to brainstorm, after which

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Stakeholder July2006

everything has to be action focused. It's also important to ensure that the ideas that the PFI groups come up with actually get into the day to day action of people's lives. That's why Graham sees it as important to set objectives and very actively communicate all planned changes internally.

Ok, so those were the problems. Was anything easier than anticipated? Graham is clearly very proud of his team and the way they reacted to the challenge he set them: "One of the things that I love is the people that surprise you - the people in your team who suddenly shine and come forward and start taking such an active interest in what you're trying to do. That makes the job easier to do, and it makes your life really rewarding"

guide is the survey, but not only the score again verbatim comments are crucial.

Strategic focus Customer satisfaction has now come to be a key part of Visa's bidding process, a reason to work with Visa rather than their competitors. Recently Visa presented the Satisfaction Index league table during a bidding meeting, and although they acknowledge they've still got things to do to improve, the response was "at least you know where you are, and at least you're trying to improve". Some companies don't even know how satisfied their customers are.

Satisfaction Index League Table TM

"I'm most proud of the team. There are some people who absolutely worked wonders, who delivered more than could have been asked of them. Frankly, to go from the point we were at to the satisfaction rating we now have in the top quartile was more than I expected, and I'm really proud of the way they delivered that."

Communication Of course there's no sense making changes unless customers notice them, and a key part of this is letting customers know that you are doing things. As well as general communication through newsletters and meetings, Visa place great emphasis on specific feedback to key customers.

Like many businesses they often focus within countries - for instance targeting the market which received the worst feedback with a specially tailored strategy, which has paid off with immediate benefit in customer perceptions.

And how do you know if they have noticed? One source is anecdotal evidence and occasional pieces of feedback, for instance in one case the customer support team was cited by a customer as a reason to work with Visa during business development negotiations.

In the end, though, the only really reliable

This strength means that customer service can become a really important part of the organisation, if it is one of the obvious differentiators that leads customers to do business with a company. Seeing customer service as an "aggressive" acquisition tactic as well as about "defensive" retention is unusual and insightful. If customer service is a differentiator, as we all say it is, why aren't more organisations using it in this way? I put this to Graham and he agrees, but is very quick to make sure that I have my priorities right:

Case Study

Hanging onto the business you've got has got to be the most important part of your strategy. Our fundamental role in the customer service world is protecting the business we have, and making sure the customers we already have working with us see that value.

It is obvious that Graham is sold on customer satisfaction, and sees it as the single most important driver of the success of any business.

"I think it's really important to try to get customer satisfaction as almost your only measure of success. We talk about 60% of your objectives, but if I had my own way it would probably be 100%, because you can make everything fit under that umbrella. What we're trying to do is get it to a point where customer satisfaction, the customers' measure of our business, becomes everything that we trust and believe in. If we trust what customers are saying to us then that will build the levels of loyalty that we're seeking to have as businesses, and that drives the shareholder value that is what the chief execs and the MDs want."

This contrasts strongly with the focus on cost-cutting and short-term, acquisitionfocused, marketing initiatives which characterise many organisations. As longtime readers will know, Stakeholder sees the Value Profit Chain as the best strategic management framework for a modern business, and fundamentally this is based on the same insight. Customer satisfaction is the only route to the longterm success of a business, and in the end a focus on customer (and employee) satisfaction will pay off more richly than a short-term obsessive focus on this quarter's profit margin above all else.

Conclusions

tangibly be changed.

Graham is perfectly prepared to admit that the approach he and his team took was at times challenging, and that they have learnt from it and will do some things differently this year. Nonetheless they managed to move the Satisfaction Index by a tremendous amount (an improvement of 8.2) giving them a solid top quartile score. There is no way they could have achieved this kind of movement in the space of year unless they got a lot of things right, so what were their successes?

Engagement in the process is crucial if all these ideas are actually going to filter through to what staff do day to day. This clearly has both top-down and bottom-up dimensions: passionate leadership and the right kind of management is one ingredient, but the other is involving staff in the process of coming up with ideas.

The three PFI teams served several important purposes: to engage staff, to get lots of practical ideas for improvement, and to focus narrowly on improving one thing through a small number of changes.

I believe focus is one of the key themes to emerge from the interview. Starting with a focus on customer satisfaction as a crucial measure of business performance, with a focused strategy for improvement based on a small number of PFIs, and a small number of tangible changes on each. This ability to narrow down what's going to happen is crucial if any improvements are to be made in the small amount of time available.

The second key point, linked to that, is the need for speed. Graham felt that Visa should have done better in this regard, but actually they were pretty good. Many organisations don't even get as far as brainstorming ideas for several months, let alone seeing three months of brainstorming as being in a "rut". Taking action early meant that there was time for the tracking surveys to show progress and encourage staff that changes were having the desired impact. "Do something now" still seems to be the key to improving customer satisfaction.

The net result is to cement customer service as a key part of Visa's strategy, something that is seen by customers as one of the main reasons to do business with the company. If they can maintain that focus in the long term then the rewards of customer loyalty are bound to follow. S Graham Parker-Gore was interviewed by

Stephen Hampshire Development Manager The Leadership Factor

If you have any thoughts about this article you can contact Stephen at: stephenhampshire@leadershipfactor.com

Nonetheless it's important to have a longterm view of what the priorities for improvement are - tracking surveys should be used to monitor performance but never to set priorities, or fire-fighting is inevitable.

In terms of coming up with effective ideas for improvement, the Visa experience highlights two crucial sources of inspiration - the comments customers make about why they're not satisfied with particular areas and the knowledge that front line staff have about the processes they go through and how these could

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Customer

1. How important is customer service to

My greatest claim to fame in the world of customer service is that seven years ago, assisted by my colleagues at Quest Media, I launched the National Customer Service Awards and I remain the chairman of judges for the programme to this day.

about the excellent service that they deliver.

your organisation?

The trouble with listening to all those great

2. How good would you rate customer service in the UK, across the board, today?

presentations however is that it distorts your perception levels. I can easily lull myself into thinking how great customer service is in the UK but reality quickly hits me as I return to the real world of being a customer and away from the "judging arena"I find myself dealing

Nowadays I combine that activity with speaking, writing and consulting on customer service and my specialist subject is helping people understand the financial case for great customer service Since launching the Awards programme over seven years ago, I have listened to over 1,000 great presentations by outstanding individuals and teams talking

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Stakeholder July2006

with insurance companies, retail outlets, local authorities, utility companies, telecoms providers and so on.

About a year ago, I asked the 2,300 customer service professionals who read my Newsletter three questions which I asked them to score on a scale of 1-10:

3. When an organisation finds the need to cut costs, for whatever reason, how vulnerable is customer service to be cut back as part of the cost saving?

I do not suppose that the answers will surprise anyone but for the record the thousand plus customer service professionals who responded to my questions said that: 1. Customer service is vitally important to an organisation, scoring it 9.2 out of 10 2. Generally customer service standards in the UK are low, scoring just 4.9 out of 10

Customer

3. Despite its importance, customer service is vulnerable to cutbacks with a score of 8.1 out of 10.

So where is the logic here? We do not seem to know if we are coming or going. On the one hand the feeling is that customer service is vitally important to the well being of an organisation, but overall, we are not getting it right yet, despite its importance and modest delivery we are ever ready to cut costs, and by implication, delivery - almost at a whim.

Before explaining why I think this is, I want to relate a couple of bad news customer service stories, which appeared in the national press at the beginning of this year.

the guard found that they had the wrong tickets - not that they did not have tickets but that they were technically incorrect.

This was sufficient reason for the guard to abandon them on a cold station in the very middle of a bleak winter day without any means of getting home.

What had happened was that they had been to stay with school friends in London. They had travelled up a few days earlier accompanied by their father, who had then returned to the family home in Devon by return. The boys stayed several days with their chums and were then put on a train in London by the friends' parents and were to be met at the other end by their own father.

Even here the guard had been given two opportunities to avoid the drastic action that he took. Firstly a lady passenger, seeing the boys' plight offered to pay their fare but the guard refused. Secondly one of the boys contacted his father on his mobile and the father offered to pay by credit card but again the guard refused on the grounds that he had no evidence that the voice on the phone was the father!

Naturally after the boys were abandoned on the first station at which the train stopped the father rang the railway company who agreed that such action was entirely inappropriate and after profuse apologies the boys were put on the next available train. But trains from that station to Devon are not every five minutes or so and the boys eventually arrived home many hours later than planned, cold, tired and very miserable.

The first concerns a railway company.

Two young boys (10 & 14) were ejected from a train taking them from London to Devon just after the start of their journey because

The problem was that they had all travelled under a family saver ticket and, of course, for the return journey an adult did not accompany them.

The second case involves a membership motoring organisation Unfortunately one of their members suffered

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17

Customer

a heart attack whilst out driving. He was taken to hospital by ambulance but was pronounced dead on arrival at the hospital.

all the necessary statistics to back up their arguments for greater financial support - both when the business is up and when it is down.

Obviously this was a big shock to his family and a few days later, as they began to pick up the pieces, they went to recover the car from the place where it had been abandoned by the emergency services. Predictably it would not start - the battery was flat. No problem his membership card was in the glove compartment.

For sure the customer service management teams keep reams of measurements, mostly successfully proving that KPIs are being met e.g.

They phoned the organisation to ask for roadside assistance to which he was entitled.

However the contact centre agent was quick to point out that the membership died with the member and that one of the relatives would have to join - there and then - if roadside assistance was to be provided.

Again the organisation has subsequently apologised and agreed that the behaviour of their agent was inappropriate and the correct action should have been to provide the assistance and subsequently invite membership for future use.

In both cases the Guard and the Contact Centre Agent were, no doubt, technically correct in their interpretation of the company's terms and conditions but completely out-oftouch with their company's philosophy to customer care and they clearly had no idea of the VALUE of a customer.

So going back to the original question why does this happen?

Why, if customer service is so important - do we get it wrong so often - especially when we can get staff to understand the rules and intricacies of our offerings so easily? And why do we find that customer service is vulnerable to cuts, when it is so important?

Well, I believe that it is OUR fault - yes us the CUSTOMER SERVICE PROFESSIONALS. I think we are so passionate about delivering great customer experiences that we do not take sufficient time and trouble to place a value on our services. This contrasts particularly with the Sales and Marketing departments who make sure that they have

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Number of queries Resolutions - first time and otherwise Complaints handling Call waiting time Call time Assessment scores Customer Satisfaction scores Etc., etc.

Frequently we even measure the wrong things or at least things which are not really relevant to the company, and certainly not to the customer.

At this stage it is important to remember why the majority of commercial organisations exist?

It is NOT to please customers but to make PROFITS. Basically the name of the game is to increase income - by selling more or raising prices whilst keeping control of expenses.

Unfortunately, in many such organisations the customer service function is seen as an expense that can potentially be cut rather than an income generator.

bookselling organisation that has seen dramatic growth in the last few years. About three years ago they were receiving thousands of contacts and had a staff of 500 agents dealing with the queries. The customer satisfaction surveys found that customers were very satisfied with the standard of service - all was well and in the old adage "If it ain't broke - don't fix it" - they could have left things as they were. But they did "fix it" - they researched in great detail why customers contacted them. As a result they were able to change some of their information material and their procedures and they reduced contacts by a massive 77%.

Business has continued to grow at the company but today they still have 500 agents looking after the queries. If they had been content with the customer satisfaction results, today they would need not 500.... but 2000 agents. What is that worth to the company?

If we assume 1,500 staff at say ÂŁ18,000 (with National Insurance and so on) we get ÂŁ2.7m and that is before you add rent and rates, telephony and I.T. As a conservative estimate, I would guess the value to the company of that piece of customer research has been worth between ÂŁ4-5m a year. But not only that by removing the reasons for calling they have:

Before those of you working for not-for-profit organisations think you can switch off because this stuff does not apply to you - the situation is not very different. For these organisations whether they exist to empty bins, collect taxes, raise money for charity etc., they are invariably charged with doing as much as possible for the most efficient costs.

Again customer service is frequently seen as a cost not a service enabler and cost reducer.

= Removed much customer frustration = Allowed more resource to be available to

Let us now look at some examples of organisations that have managed to provide outstanding customer service by quantifying costs and resulting benefits. These are just glimpses of some examples and serve to illustrate the work that can be done to improve service and, at the same time, being able to place a value on the activity that led to the service improvement, such that the benefit is unlikely to be reversed in some indiscriminate cost cutting exercise.

It involves a theatre group and I picked up the story whilst attending their customer service conference at which I was speaking. (It's funny but it is the companies that are already doing it right that invite one to speak).

The first example features an on-line

deal with the remaining contacts

= Set a pattern that can be developed to introduce more cost reductions whilst improving service quality

Let's have a look at another, perhaps smaller scale example of the cost benefits of great customer service

They are a chain of theatres, some in London's West End and many in provincial towns throughout the UK. Until a few years ago, they thought that the success of the operation largely depended upon the quality and reputation of the show -

Customer

it might be a blockbuster like Phantom of the Opera and on occasions perhaps a less wellknown and less popular show.

Attendance per show up 11% Spend per theatregoer (ex ticket) up 12% Total Revenue (inc tickets) up 38%

They thought that their main function was negotiating with the production companies to get the best shows into the theatre on the most favourable terms and beyond that, all they had to do was manage the box office, show people to their seats and maintain the fabric of the building.

So here we have clear and calculable evidence of great customer service making a positive contribution to the bottom line. In summary a 15% increase in customer satisfaction has led to a 38% rise in revenue and, whilst I do not have access to the profitability figures, we can safely assume that much of the extra revenue will go straight to the bottom line as very little extra expenditure has been incurred.

Then a couple of years or so ago, they decided to see what difference they could make by overlaying superb customer service on top of the show. Now obviously in this kind of business results will take a long-time to come through. But they reasoned that if they gave great customer service to ensure a fantastic night out, customers might come back to the theatre and recommend friends even when the following show was not such a popular attraction and maybe, if you make everything welcoming and easy for them they just might spend more when they are at the theatre.

They looked at every facet of customer service from making it easier to obtain interval drinks, organising taxis at the end of the show and ensuring that staff became part of the night's entertainment - even dressing in context with the show itself.

They did this at every one of their sites and two years later all were able to report increased attendances and uplifts in spend per customer on the night. Of course, over two whole years there would be a host of other factors that could affect results - including the economy, the weather and the perceived quality of the shows - but the fact that every theatre in the group showed substantial improvements against a background of flat attendances in the theatre world generally, indicates the level of impact that the customer service initiative had on this group.

The figures below, showing the improved results over a two-year period, relate to just one of the theatres - a small provincial site with committed and enthusiastic management.

Customer Satisfaction index up 15% Theatregoers up 37% Performances up 25%

Other benefits resulting from this initiative? = Production companies are happy and = =

more likely to offer their productions to the venue Staff more involved Theatre group’s reputation is growing

Just as we can put value on great customer service so we can place a value on poor service. Remember those statistics about how much it costs to gain a new customer compared with retaining an existing one - is it five, six or eight times - it depends on your business - why not debit that amount against every customer lost and credit everyone retained and set it against a budget?

be lost as a result of each complaint. In this case I would conservatively estimate the lost revenue could be £500 a year for say eight years - that's £4,000 - multiply that by the number of serious complaints and the size of the problem and the value of preventing such occurrence becomes clearer.

And what about the motoring organisation?

How much to handle the complaint and the PR and how many people will be deterred as a result of the family telling their story (and tell they certainly will)? How much business has been lost - maybe £400 a year for three years or so. S My work toady is largely focused on placing value on great and not so great customer service. I am gathering evidence and conducting research to enable companies to identify cost benefits or penalties arising from their service delivery. If you would like to add to my volume of evidence and stories or require more details of my work, please contact me on:

Don.hales@questmedia.com

07850 874120

Let's look at those examples we quoted at the beginning.

How much did the guard cost his company when he turfed those boys off the train?

Apart from the cost of dealing with the complaint. Do you think that the family will spend £150 on tickets when they visit these friends again or how about when the friends make a return visit to Devon?

What about the father -a successful businessman - is he more or less inclined to use the train rather than his car next time he needs to go on a long journey?

Don Hales is Deputy Managing Director of Quest Media (publishers of Customer Management magazine) and Founder & Chairman of Judges of the National Customer Service Awards. He is also a consultant, author and presenter on customer service and management issues.

And how about the boys? In a few years time they will be driving. Are they likely to be drawn to the trains as opposed to using their own set of wheels?

It should be possible to develop some ballpark figures as to how much business will

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19

Customer

1 CENTRED CHANGE FAILS

THE NO. 1 REASON CUSTOMER-

Harvard Professor John Kotter, with the help of some old video clips of Jack Welch and other leaders addressing his Harvard students twenty years or so ago, asked us why some companies had become customer-centred over the past 25 years, but many had not.

"Tom Peters (with Bob Waterman) was the first to say 'Customer, Customer, Customer,' in answer to the question 'What makes a company great over time?', when he wrote In Search of Excellence. Most industries have made progress, but many haven't. Just the other day a CEO said to me that their challenge was to focus externally. So why, after 26 years, is failure to focus on the customer still an issue?"

Outside-in is the new perspective JÒ ac k Welch of GE showed how to do it,” said Kotter, “by getting people to look at the company outside-in - taking a customer's eye view.” In medical systems, he opened up the business by saying “What does the patient need?” In aerospace engines, he opened up the business by asking “What does the world need?' 'Quieter airplanes'."

Conference chairman Chris Daffy summed up Prof. Kotter's message this way: "Almost all of the successful, big and sustained corporate change programmes had improving things for customers as their core driver". And conversely "Almost all of the unsuccessful, big and short lived ones had improving things for investors as a core driver".

In 1981 GE's market value was $13.1 billion.

In 2000 it had grown under Welch to $507 billion.

How? There's an eight-step pattern to large scale successful change, said Professor Kotter::

2. Build a guiding team 3. Get the vision right. It always has to be customer-centred.

4. Communicate for buy-in. Prof. Kotter showed us a clip of Jack Welch, talking to Harvard students in Boston 25 years ago.

He had stepped down from the lectern and was standing right down in front of the front row. He was out there where his customers were. "Did you notice that he stutters? Who cares! He was direct, honest and simple. People love it and get it."

5. Empower action 6. Use short-term wins as evidence of progress 7. Don't let up 8. Make it stick - The power of tradition is huge. You will slide back unless you grind the change into the culture.

Which of these steps is the most difficult?

Most companies fail at Step 1. They don't set up enough urgency, said Kotter.

2 (IDEAS PER HOUR) CULTURE KARAN BILIMORIA'S "IPH"

Karan Bilimoria, founder of Cobra Beer, featured in a recent edition of Stakeholder.

He told us to be restless.

"Everything we do has to be different and better. We have a group called the Hoffman Group, named after the first architect to build a bridge across the Grand Canyon when everyone said it was impossible. It meets every two months to generate ideas. The group measures its output in IPH - Ideas Per Hour. Its record is 72 IPH. "Be restless. We changed our bottle design even though the original was absolutely fine. The new version has the story of the brand written in images into the glass. We've developed Venom-free Cobra (non-alcoholic), a low cal beer targeted at women, since research shows that's why women don't drink beer, and King Cobra, the first double fermented premium lager ever. Why hasn't it been done before? It just hasn't!"

Kotter's 8-Step Change Formula 1. Increase urgency

So, what, in your market, hasn't been done before for customers? And what are

you doing to harness your frontline people's ideas to make things better for customers?

3 TO ASK CUSTOMERS

FIRST DIRECT'S ONE QUESTION

The magic number has changed, said Chris Pilling, First Direct's fresh new CEO, ten days into the job, poached from ASDA where he was Marketing and Customer Services Director.

The magic number used to be very, or extremely satisfied customers - we all know that this number is far more important than just 'satisfied' customers in determining if customers will stay. At First Direct, very, or extremely satisfied customers runs at 91% average.

But, the new magic number is about action not feelings. You need to change your magic number to include advocacy.

Fred Reichheld has been leading the charge here with his "Would you recommend us to a friend?" - The one question the godfather of loyalty says we need to ask customers.

Chris and First Direct have gone further than that, measuring action rather than intent. "HAVE you recommended us to a friend?" is the real question to ask, he says. At First Direct, an astonishing 96% of customers say 'yes' to that question, 86% saying they have recommended the bank in the previous year.

4

MARCUS BUCKINGHAM ON WHAT MAKES YOU GREAT

The best-selling co-author of First, Break All The Rules, and Now Discover Your Strengths, has been promoting his 'Strengths Revolution' for six years now, that the way to achieve performance improvements is to let people play to their strengths rather than dwell on improving their weaknesses. He presented his latest findings to us.

Most managers focus too much on developing areas where people are weak, is Marcus's main argument, building on the work of his Gallup colleague Donald

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Customer

Clifton's 'Strengthsfinder' system. Most performance appraisals spend two minutes on what you do well and twenty eight minutes on 'areas of opportunity' your weaknesses!

So, most conversations between managers and their people are around flaws and how to fix them. "We live in a remedial world fascinated by weaknesses," said Marcus.

5 AND YOU'LL MISS IT

MALCOLM GLADWELL: BLINK

Drawing on research for his most recent book Blink, the fascinating author of The Tipping Point told us that more customer information is NOT what you need - A timely observation after years of customer data gathering through CRM systems has failed to dramatically improve the customer experience (largely because it has been used for the wrong reasons - to up-sell and cross-sell).

Customer research makes more mistakes than any other discipline because it assumes that the rational decisionmaking rules prevalent in business apply to how customers make decisions.

Asking customers why they feel the way they do about a new customer proposition is pointless - They will give you an answer, but it will be made up. Not because they are lying, but because they don't know why.

Cognitive psychologists reckon that 7590% of our decisions are snap ones made using sub-conscious rapid pattern recognition. All the customer data you gather doesn't give you any insight into that - It gives you knowledge but no understanding.

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Similarly, most organisations' decisionmaking is not well-suited to fast-moving markets, said Gladwell.

Most organisations gather all the available evidence and proceed to a conclusion.

The more information you have, the better the decision will be, is the assumption.

In fact, just as too much choice confuses customers and stops them from buying (Gladwell's example was the number of jams on a supermarket shelf - too many and the amount bought actually plunges), similarly too much information can confuse your instinct's ability to see the wood from the trees.

6 BACK TO THE FLOOR

JACQUELINE GOLD ON GOING

The CEO of Ann Summers and Knickerbox urged us to be naïve rather than to draw too much on experience of how our industries do things.

"I started in 1981 with no knowledge of retail," she said. "What I thought was my greatest weakness was a strength, because I was forced to listen to the employees and customers. Turnover since then has gone from £81,000 to £145 million."

A key lesson from Jacqueline's presentation was the need for top managers to stay close to the front line, as that is where the real customer knowledge is. This insight came, she said, from appearing in the BBC-TV programme 'Back To The Floor'. "For the programme, I spent time working in our bra manufacturing company in Portsmouth. It was so useful that we introduced the principle of bosses

working on the shop floor as part of our culture. On Valentine's Day, for example, every one of our directors works in a store."

We've been promoting this idea at ecsw.com for years now - get your top people closer to customers by sending them back to the shop floor with a formal initiative that builds the principle into how the business is run. It's why Tesco's CEO Terry Leahy still spends time stacking shelves.

7 HOW TO RECRUIT RAN FIENNES ON

Sir Ranulph Fiennes, the intrepid explorer, entertained us with his extraordinary adventures, including robbing banks (an SAS initiative test, he assured us, but the police didn't know that), blowing up dams, crossing the Antarctic and Arctic Poles and fighting Communist insurgents for the Sultan of Oman.

Echoing Marcus Buckingham and Chris Pilling of First Direct, (see page 21) and the current wisdom in customer-facing jobs of "recruit for attitude, train for skill", Fiennes said: "Whenever feasible, pick your team on character, not skill. You can teach skill. You can't alter character".

8 THOSE HATS RIGHT

EDWARD DE BONO: GET

Dr. De Bono talked us through some of his techniques for diverting the brain into a more creative way of working - breaking our thoughts out of the channels of habit that they want to run in. These techniques include challenge, provocation and using random words - chance - to break

Customer

patterns of thinking and gouge out new channels.

Like Malcolm Gladwell, Dr. De Bono urged us to move away from rational, often adversarial styles of reaching decisions at work and to move to exploration instead.

"Reaching a decision by argument means you start with the conclusion, then argue for it and one of them wins. You make better decisions if you explore solutions then reach a conclusion," he said.

Hence his famous Six Hats method to help groups of people reach decisions by exploring from different perspectives instead of arguing from your own point of view. The biggest mistake people use with the Hats method, he warned, is that they sit around the table and each adopts a different perspective (each hat represents different approaches - feeling, caution, creativity etc.).

That's wrong - you need to all wear the same colour hat at the same time - all approach from the same perspective, then move onto the next perspective together. It's called 'parallel thinking' apparently, and avoids errors of perception - people seeing the same problem from different angles and arguing from their own viewpoint that the others must be wrong. Dr. De Bono cited David Perkins of Harvard's findings that "90% of errors of thinking are errors of perception."

9 BEST PRACTICE DOES WORK Jack Welch, legendary CEO at General Electric, used his interview with conference chairman Chris Daffy to argue that Best Practice, much-derided by academics as chasing last year's

methods, does in fact work. Welch said that many academics have got it wrong when they claim that benchmarking against best practice will always leave you running behind, and that leapfrogging through innovation is the route to competitive advantage.

Welch seemed to be saying that these were false opposites and that part of GE's recipe for success is its people's readiness to go out looking for good new ideas that can be adapted to GE.

heart of business where you work, don't despair - one or two percent difference is all you need. As Malcolm Gladwell told us in the Tipping Point, if most of what companies do looks the same to customers, then small changes can make a big difference, can make you stand out from the competition in your customers’ eyes. S

FINALLY...CUSTOMERS 10 AND, IN YOUR DNA Last word to conference chairman Chris Daffy, who spotted this gem in Alan Lias's presentation to the one-day Loyalty Summit that preceded the two-day conference: "Alan Lias, who is head of Loyalty for Virgin Atlantic, told us about the ways Virgin constantly strive to keep developing their product to keep it fresh, innovative and ahead of the competition.

About the author Phil Dourado is ecsw.com's content editor and author of the book Seven Secrets of Inspired Leaders. He has developed a fast intranet-based leadership development system called The 60 Second Leader, which is featured on his website www.PhilDourado.com

"An interesting point he made is that if you look at the DNA of monkeys and man there is only about 2% to 4% that's different; but what a difference that 2% to 4% makes! He believes it's the same with many businesses competing in the same markets for the same customers. There may not be much that's different between them but even if it's just 4%, if it's the right 4% it can make a massive difference to customers."

So, in case you feel it's a daunting task and you can only make a limited difference to putting the customer at the

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By Ray Robertson

Employee

How do you feel after you've stayed at a hotel where you were treated like a VIP? Great, relaxed and happy! You book a return visit and you tell your friends about it. How do you feel after visiting a retail store where the sales representatives treated you as an "inconvenience" they had to deal with? Annoyed, dissatisfied and negative! You tell your friends and they tell other people too. Next time, you and they, shop elsewhere!

Employees who deliver great customer satisfaction should be rewarded for it; and those who don't, shouldn't be. In this article Ray Robertson sets out a four step process to rewarding customer satisfaction and some examples of how it can work in different organisational circumstances.

Step 1: Focus on what matters most to customers If you want to understand how customers feel about your organisation you have to use the same criteria that they use to make that judgement. Take a train company, for example. You can ask lots of questions about cleanliness, the range of sandwiches, the colour scheme in the coaches and the frequency of services, and get good scores. But, if punctuality and the cost of fares matter a lot to customers and you don't include them in your questionnaire, you won't get a measure of how satisfied or dissatisfied they feel. Understanding what customers want and value is crucial for securing the satisfaction and loyalty that leads to long term growth and business success.

These are the factors that should be the focus of reward.

Step 2: Reward the people who deliver customer satisfaction Who should you reward? The answer is the employees who actually deliver, directly or indirectly, the desired outcomes. Front-line customer facing employees who have a direct impact on customer relationships will be at or near the top of list, with their team leaders and managers close behind.

But what about all those other employees who are involved in designing, developing,

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marketing and manufacturing products, or meeting and greeting visitors or telephone callers, or preparing reports for clients. Don't they affect customer satisfaction too? Of course they do! Their input is there, but it's not always visible to the customer and that's the crux of it.

Their input can be difficult to measure, but, and it's a huge but, many organisations expect these employees to deliver excellence in everything they do, although they don't reward them for it financially or non-financially. This hardly makes employees feel valued and that doesn't make commercial sense!

Step 3: Gain employees’ commitment from the start Employees may have heard on the grapevine that you're thinking about linking reward and customer satisfaction.

How will they react? "Is this instead of the annual pay rise?" they may ask. "What happens if we don't meet the target - will my salary be reduced?"

Employees must believe there's something in it for them and that it's not a management ploy to reduce salary costs, for example. So, it's critically important to be up-front with employees who will be affected. Prepare some examples of how a possible scheme could work and some questions and answers around the following aspects: The reasons you want to link reward and customer satisfaction Possible targets and how they will be established and agreed How performance against targets will be measured Potential payments employees could receive.

One of the best ways to gain employees’ confidence in what you want to achieve is to involve them in the design process.

Employee focus groups, face-to-face meetings, a project team or a "pulse survey" are great opportunities to tap into employees' knowledge, ideas and concerns, and design the type of scheme that will work best in your organisation.

Step 4: Ensure you manage targets robustly and fairly There are five things you have to get right.

If you don't, employees simply won't believe customer satisfaction related rewards are fair. And that's bad for your business.

Develop the right targets These should come directly from the things that matter most to your customers. So, if your organisation wants to improve customer loyalty, for example, it needs to find out which factors affect customer loyalty. These might be quality of service delivered at the time of sale, post sales support, speed of complaint resolution, technical support, and customer involvement in new product design. These factors alone should determine your targets.

Cascade targets to the right level Targets must always relate to aspects that employees can control or influence. That may sound obvious, but I come across many instances where employees just don't feel they can affect the outcome.

Targets need to be cascaded to the right organisational level, such as business unit, department, branch or team. That means actual performance in relation to those targets must be measurable at

Employee

those organisational levels too. This is especially important for schemes that combine targets which apply to specific parts of the organisation and other targets which are common to all parts of the organisation.

Targets should be SMART- specific, measurable, agreed, realistic and timed. A simply stated target, for example, "increase customer satisfaction in our 5 most profitable customers from 75% to 80%, over the next 12 months", is far better than a woolly statement of intent.

The timescale must be realistic too: if it's too short, employees may feel they've been "set up to fail"; if it's too long, keeping them motivated may be difficult.

Measure how targets are achieved This is about how employees achieve their SMART targets - their behaviour and competence in doing their job. Aspects that are important to customers might include professionalism, responsiveness, helpfulness and attentiveness. There are many ways these aspects can be measured, such as asking customers to fill in a simple questionnaire, using mystery shoppers, getting input from team colleagues and, of course, team leaders and managers observing behaviours.

Doing this at the appropriate organisational level is essential.

Give feedback and coaching Employees want to know how well they are doing, especially when part of their pay may be at risk, so managers must demonstrate they are totally committed to improving customer satisfaction by giving specific, relevant and constructive feedback about progress towards targets.

This should include private and public recognition of excellent customer service because it's a good motivator and encourages people to be as good as they can be. Highlighting low performance by giving only negative feedback - and in my experience that still happens far too often - is counter-productive. Disparity between what the organisation says and what it

Satisfaction Index Factor scores (attributes of employees) (un-weighted average) Expertise Professionalism Responsiveness Friendliness Helpfulness

Department

Have SMART targets

FIGURE 1 Measuring customer satisfaction by department

A

9.4

7.9

9.1

8.5

7.5

85

B

8.1

8.3

8.2

8.5

7.7

82

C

7.4

7.4

7.1

6.7

6.8

71

D

8.2

7.2

8.6

8.6

6.9

79

does is all too apparent to employees.

How rewarding customer satisfaction might work for you What sort of scheme might suit your organisation? This will depend on several factors: its size, structure, systems for measuring customer satisfaction and employees’ attitudes. Examples of the choices in three types of organisation are given below.

Small but growing organisation Your organisation needs everybody to pay attention to detail in every aspect of customer relationships and because it's a small organisation, departments must work together closely to get things done successfully, so everybody has responsibility for creating a quality "customer experience". You could consider a scheme along the following lines: Single measure of customer satisfaction for which you set a minimum target, and assess annually how easy or difficult it was to achieve.

Same payout for all employees, so for example, everybody gets 2% of base salary or £500 for an increase in customer satisfaction from say 82% to 84%. If the target is exceeded, you could make an additional discretionary payment of up to £250.

However, the scheme wouldn't reflect the

relative contributions of departments, teams or individuals, so some people may feel their efforts aren't rewarded sufficiently.

Fairly large organisation Your organisation has lots of work-based teams that interact with customers. Your customer relationship management and HR systems are reasonably sophisticated for example, a customer satisfaction index has been developed for some business units and employee performance review is well established and respected. However, the impact on customer satisfaction varies by department so, ideally, any link to reward should take this into account. You could develop a scheme along the following lines: Rather than having one measure of customer satisfaction at business unit level, you could break this down into the factors that drive satisfaction, such as the expertise, professionalism and helpfulness of employees.

You calculate a customer satisfaction index for each department by averaging the scores for all factors (Figure 1). If you know the importance customers attach to each factor, you could calculate a weighted index, probably quarterly. You would need to survey a minimum of 100 customers and aim to increase this to 200 to improve the "statistical validity" of the results.

You differentiate reward by department, using a simple scale (Figure 2). Let's

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Employee

organisation.

FIGURE 2 Differentiating rewards by department Satisfaction Index

Key points

A

85 84 83 82

B

81 80

A bonus of 0.5% of base salary for every 1% point increase in the Satisfaction Index

79

D

78 77 76

Minimum

75

2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 Payment - % of base salary

assume the minimum target customer satisfaction index by department is 75.

That means employees in department C, with an index of 71, don't receive any payment. You need to tell them why and agree priorities for improving their performance. Employees in the other three departments receive a bonus of 0.5% of base salary for every 1% above the target Satisfaction Index of 75. This means that employees in department D receive a 3.5% bonus, in department B, a 5.3% bonus and in department A, a 7% bonus.

The scheme gives higher rewards for higher performance and conveys the message "Continuous improvement counts". However, division between departments that need to work together could arise. If cooperation is important, rewards should be based on a combination of company and department results.

Project team-based organisation Your organisation is largely project-based and while each project is self-contained all projects contribute to the organisation's overall business results. Performance measures, which include customer satisfaction, are established at the outset of each project and actual performance is assessed at the end, using input from customers. However, you know that

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customer satisfaction (and ultimately customer loyalty) in relation to projects is based more on the experience of the relationship between the team and the customer, than on the quality of "the product / service" or work undertaken by the team. Customer feedback tells you this is where project teams need to improve.

You might want approaches:

to

consider

two

Reward the things that your customers tell you matter most to them - not what you "think" matters.

Focus on the people who can actually deliver the desired outcomes. That might be everybody; it might be a few.

Build grass-roots employee support for rewarding customer satisfaction, by involving them in the design process.

This is a major factor in successful implementation.

Ensure the process for gathering customer feedback is robust and fair.

Employees must be able to trust it otherwise you'll quickly alienate them.

Ensure you can establish and measure targets at the appropriate organisational level, such as business unit, department, branch or team. That way you connect employees’ day-today work and customer needs.

Don't forget non-financial rewards.

Give employees the opportunity to meet important customers in an informal setting and involve those customers in recognising employees for outstanding service. S

A bonus linked to customer ratings of satisfaction measured against criteria that matter most to customers, such as professionalism, problem resolution, relationship building and responsiveness. The bonus might be part of a plan which includes other performance criteria, such as cost and on-time delivery.

All teams could compete for "Project Team of the Year" an award based on overall contribution to the entire organisation. The fact that different projects may have different degrees of difficulty would need to be taken into account. Difficulty might be assessed in terms of factors such as technical challenge, resources available and balancing the needs of different groups of people involved. The "prize" could be presented jointly by a key customer and the Managing Director of your

Raymond Robertson Director Strategic Reward Ray can be contacted at team@strategicreward.com

Peak Performance Training Peak Performance Training was founded in 1995 by Rachel Davies and specialises in management training, particularly in the areas of customer service, team building and motivation.

Rachel, a former contestant on the Krypton Factor, selected as one of 36 televised contestants from over 10,000 applicants, and a former member of the British Ladies White Water Slalom Canoeing Squad, is always keen to achieve excellence in her profession. She has worked successfully with some well known companies including Caterpillar BCPD and Caterpillar Logistics, Dunlop Aviation, Triton PLC, Wincanton Logistics and Home Housing Association and lectures at North Warwickshire and Hinckley College in the area of Management Training.

For more information contact Rachel Davies at:

01455 213683 Mobile: 07720 789089 Telephone:

rachel.peakperformance@tinyonline.co.uk

Stakeholder July2006

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Latest Thinking

Subliminal advertising, have I lost the plot? Surely the one thing everyone knows about subliminal advertising is that it doesn’t work - it was just a 1950s scare story1. When a market researcher claimed that he could get cinema audiences to “drink Coca-Cola” or “eat popcorn” with subliminal messages there was a public outcry and rushed legislation to make sub-second advertising illegal.

But it soon emerged that his findings were, to put it bluntly, made up. Later studies, not surprisingly, failed to replicate his fictional results and we came to see the whole affair as an amusing footnote from a more innocent age.

Priming and brand preference

90 80 70 60 50 40 30 20 10 0 Control those in the control group.

The problem is that it does work, sort of.

A new study by Dutch psychologists2 suggests that subliminally processed messages can have an impact on brand preference. Simple messages can make thirsty people favour a particular brand of drink (somewhat surreally the brand tested was Lipton Ice). The thirstier subjects are, the more powerful the effect is. In other words a subliminal ad can’t make you buy a drink if you’re not thirsty, but if you are it can persuade you to opt for Coke instead of Pepsi, or in the words of the lead researcher: “Priming only works when the prime is goal-relevant”.

The results are powerful - in the thirsty group over 80% of those primed with the words “Lipton Ice” said they would have chosen Lipton Ice, against only 20% of

All this is very interesting, as well as slightly frightening, and it’s not just cinemas where it could work. The authors mention the possibility of subliminal adverts for Apple in computer stores, and in principle a retail environment should be perfect. But hold off on developing your own subliminal campaigns for the time being. Though the effect was quite strong, these findings are based on two laboratory studies, and psychology experiments are notoriously bad at surviving the transition from the lab to the real world.

The authors freely admit to limitations in their study: no actual choice was made (i.e. there were no tangible drinks for the

Priming Priming is a reasonably well-understood process. Put briefly it means that a stimulus which activates parts of your brain triggers off activation in related parts of your brain. An easy example is this - read through the first column of words and then complete the unfinished word, then do the same with the second column.

Red Blue Orange Yellow Gr___

Plum Nectarine Pear Apple Gr___

My bet is you opted for “green” first time round and then “grape”. No I’m not Derren Brown (although many of his tricks do make use of priming!). I just got you thinking along the right lines, activating associations in your brain that would make it more likely that you’d finish gr___ in a particular way.

Lipton Ice prime participants to select) and it is not clear how long the effect would last. Moreover the subliminal message must be very, very simple - no more than a brand name or an image. Even “eat popcorn” is probably too complex to work. Finally the prime pushing us one way or another can only sway choice, not convince us to buy something in the first place.

In reality it is unlikely that these intriguing findings will ever make their way out of the lab. As psychologist Matt Webb puts it:

TO BE HONEST, SUBLIMINAL ADVERTISING DOESN’T SEEM WORTH THE EFFORT FOR SUCH A SMALL EFFECT. GIVEN THAT PRETTY, BARELY CLOTHED PEOPLE DOING SUGGESTIVE THINGS ON TV SELL PRODUCTS SO WELL, I DON’T SEE A SHIFT TO SUB-SECOND COMMERCIAL BREAKS ANY TIME SOON3.

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Latest Thinking

The customer experience More important than specific messages is the idea that tiny details (or cues) in the environment can have a significant unconscious effect on customers. The Total Customer Experience embraces this notion that customers pick up on all sorts of clues when they form their impressions of a supplier. The most important of these will be captured by conventional satisfaction and brand measurement techniques, but some are very subtle and somewhat surprising. Brand Sense4 revealed that overlooked details such as the fragrance of a new car can have a powerful impact on customer perceptions. Managing these minute cues will increasingly be part and parcel of dealing with customers, and a valuable source of differentiation.

In How Customers Think5 Gerald Zaltman elaborates on this point with some strikingly familiar turns of phrase.

Discussing the role of environmental cues in triggering associations he notes: “…consumers’ goals or purposes … influence which cues people notice, and therefore which engrams become activated in their minds” - again cues must be goal-relevant to be effective. This is a reminder that, whenever you’re dealing with people, you never have total control over a situation. Customers bring their own agenda with them. We have to look at all aspects of the relationship from the customer’s perspective, considering what they want from each interaction. We need to design experiences so that they reflect those needs whether tangible or intangible, functional or symbolic. All environmental cues should reinforce our commitment to meeting those needs.

Zaltman gives an example of this kind of “experience engineering” at the Emergency Services Department of University Hospital in Georgia. The hospital redesigned its environment focusing on “…connecting patients and their families with the hospital in a more reassuring and empathetic way”.

Among the (over 100) cues used were: Rearranging the furniture into small circles around tables rather than rows (rows were seen as a negative cue associated with “waiting”) Transforming the stern security guard behind a desk into a roving “greeter” helping patients through the registration process User-friendly language was used (e.g.

“Triage station” becomes “Care Point 1 - Reception”) These and other changes, eliminating negative cues and introducing positive ones, led within a month to a one third decline in complaints and a 13% increase in “quality of care” rating.

Final thought - don’t try to run before you can walk You may have noticed that Barclays is currently trying something along these lines to make banking seem friendlier and less authoritarian - ATMs have become “holes in the wall”, pens have been liberated from their chains and cheerfully invite you to pocket them. Perhaps we are seeing the birth of experience-engineered banking? Or perhaps it’s just windowdressing - all the chain-free pens in the world won’t help if your local branch has run out of paying-in envelopes, as mine did the other week.

Micro-managing the unconscious cues in the customer experience is all very well, but when businesses are still failing to get the basics right on a regular basis there’s a very real danger that you’re simply rearranging deckchairs on the Titanic. S 1 The full story is well outlined at: http://www.snopes.com/business/hidde n/popcorn.asp 2 Karremans, J.C., Stroebe, W. & Claus, J. (2006) Beyond Vicary’s fantasies: The impact of subliminal priming and brand choice, Journal of Experimental Social Psychology 2006 3 Stafford, T. & Webb, M. (2005) Mind Hacks, O’Reilly, Sebastopol CA 4 Martin Lindstrom, (February 2005).

Brand Sense. Kogan Page 5 Zaltman, G. (2003) How Customers Think, HBS Press, Boston

Stephen Hampshire Development Manager The Leadership Factor

If you have any thoughts about this article you can contact Stephen at: stephenhampshire@leadershipfactor.com

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Loyalty

Maximising loyalty the publishers’ way Readers of Stakeholder know the benefits of keeping customers highly satisfied.

Whatever your favoured acronym or model, the message is the same - highly satisfied customers behave in a way that will benefit your business both in the short-term and long-term. As long you are able to keep them highly satisfied, that is.

They will buy more, pay more, stay longer, recommend more and cost less to service. As a result they are more profitable, and this profitability increases the longer you keep them. As most businesses are aware, this means that it makes logical sense to retain customers as long as possible and to put at least as much, preferably more, effort into retaining them as finding new ones.

However, not all market -places operate in the same way, and for some businesses, such as clubs, societies, magazine publishers or insurers, retaining customers (or getting customers to ‘renew’ their contract), has the added pressure of being defined by an annual cycle that typically relies on a once a year contact - more often than not in the form of a letter or ‘invitation to renew’. In most of these cases, customers are presented with a choice that has no subtlety. Stay or go!

This could be viewed as a dangerous ultimatum.

However, it could also be seen as a great opportunity to strengthen an existing relationship. After all, once a customer has ‘signed up’ they are captive, ready and waiting to be impressed. More than likely, they are also giving you at least a year to do this. And the chances are, they already like you.

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Loyalty

Creating highly satisfied customers is paramount - they are more likely to renew.

However, assuming you are on the way to doing this, there is another ‘tool in the box’ that can significantly improve renewal rates - the ‘renewal campaign’ itself.

This article looks specifically at the methods employed by publishers to encourage readers of consumer magazines to renew their subscriptions.

Let’s first look at a few facts and figures to understand exactly why subscription renewals are so important: Magazine subscription renewals are likely to be between 30 and 100 times more profitable than new subscriptions, which, in turn, are more profitable than shop sales.

Consumer magazines tend to have a low cover price and small margins. Effective cross-selling, up selling, upgrading and extending can double or treble the revenue from each subscriber during their ‘lifetime’, and each new purchase brings longer commitment.

The number of independent magazine retailers is diminishing and supermarkets, stocking only a limited range of highturnover magazines, are increasingly dominating the retail sales market.

Smaller publishers and lower circulation titles are finding it hard to maintain a presence in the high street, and subsequently hard to survive. There are more than 3,000 magazine titles in publication. The average independent newsagent handles 285 titles.

The advent of desktop publishing means that it is relatively straightforward to create a new magazine. Competition for readers is greater than ever with 350 new titles launched every year.

All in all, subscriptions are the lifeblood of the magazine publisher - providing not only guaranteed sales for the future and vital income, but reducing the reliance

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on newsstand sales, alleviating seasonal fluctuations and providing publishers with a profile of their readers.

The publishing sector would agree that when it comes to recognising and addressing the importance of subscriptions and renewals, the US is far ahead of the UK. In the UK, subscriptions account for around 10% of magazines sales. In the US this figure stands at over 80%. The US is a ‘bill-me later’ (soft payment) market whereas UK customers tend to pay upfront, although the UK market is slowly changing.

What makes a renewal campaign successful?

Any successful renewal ‘campaign’ starts on the day that the new subscription is acquired. It is not how long an order takes to process that is paramount but more the time taken to make the first ‘delivery’. The quicker the subscriber receives the first issue of the magazine, the happier they are likely to be. Living up to customers’ expectations at this stage is vital. When renewal time comes - those who got less than expected will be the first to go.

Immediately post-purchase when customers are feeling good - they have no reason not to have high hopes of their new ‘relationship’. This is when new subscribers are most receptive to selling propositions and therefore, this is also the time when subscribers are most likely to be tempted into expanding their product holding. A welcome ‘pack’ (which may just take the form of a letter) provides the ideal opportunity for the publisher to promote new products and invite the

subscriber to ‘Introduce a friend’. This may be seen as cost prohibitive but when balanced against the lifetime value of a subscriber, it could be budget well spent.

The more products subscribers buy, the stronger the relationship.

It is not unusual for publishers to offer ‘renewals at birth’ and throughout the year - not just as the subscription period comes to an end.

(A renewal at birth is when a new credit subscriber receives an invoice containing a second offer to subscribe for two or three years and pay for a longer subscription than they had originally accepted.)

Typically, but not always, the renewal campaign, for a monthly publication, will consist of a five letter series:

Stage 1 1st Renewal notice three months before last issue Stage 2 2nd Renewal notice two months before last issue Stage 3 Reminder one month before last issue Stage 4 On expiry at time of last issue Stage 5 Lapsed One month after lapsed It is generally thought that three months prior to expiry is actually quite late to start a renewal series. If any letters are added to the series it is always preferable to include letters earlier in the series rather than later. Some publishers do send advance renewals letters at nine months prior to expiry, and early renewals letters at six months prior to expiry.

The optimum timing between letters is generally accepted to be one month allowing time for subscribers to respond.

Ensuring databases are updated so that subscribers do not continue to receive inappropriate letters once they have responded, is key... these are the sorts of simple mistakes that can upset customers. When it comes to training, staff need to be aware of the timing of renewal letters so in the event of being faced with agitated customers they can

Loyalty

explain any cross over in the post.

Some publishers will send a ‘grace’ (free of charge) issue of the magazine after the subscription has expired. The purpose is to prevent the subscriber from breaking the buying habit. It gives them a last opportunity to see what they will miss if they allow the subscription to expire - and hopefully encourages them to re-instate.

A first time renewal letter will offer the subscriber the opportunity to extend the length of the subscription, introduce two and three year subscriptions and, where relevant, the opportunity to convert to direct debit payment. Paying by direct debit significantly increases renewal rates.

Focus on benefits When it comes to the renewal efforts, it is important that the content of the letter, at every stage, is benefit led, and specific to both the product and the customer.

There are different classes of benefits and they should all be covered:

1) Subscription benefits Save money, free delivery

2) Product benefits Learn the secrets of origami

3) Deep-seated benefits that play on longings and fears Ensure you are creating the best origami there is The most successful publishers ensure renewal letters are updated every month to reflect the magazine contents. Early renewal efforts will promote the specific contents of forthcoming magazines as ‘must-read’ articles and emphasise that renewal is necessary for the subscriber to continue to enjoy the publication.

Testimonials are also powerful.

Later efforts will focus on just what the subscriber will be missing if they allow their subscription to lapse.

The letter received by lapsed subscribers will remind them what they have missed but advise them that they can still receive a copy of the magazine... and it is not too late to renew their subscription - if they respond straightaway. A further follow-up might state ‘We are sorry to lose you as a subscriber. We would very much appreciate any feedback...’

Again, as touched on earlier, research shows that response is greater if at each stage, letters differ in theme, size, design, content, paper colour or ink colour. The outer envelope should also differ for each effort.

Making letters personal, with the use of ‘you’, ‘I’ and ‘we’ also has a positive effect on response. Research shows longer letters can encourage a greater uptake than shorter letters by up to 50%.

In addition, response rates improve if there is no expiry date on the renewal notice.

A phrase such as ‘three magazines to go’ incorporates a smaller number and therefore, psychologically, seems closer to expiry. This encourages the subscriber to respond more rapidly. It is also preferable not to use the word ‘renewal’ in early efforts - use ‘upgrade’ or ‘extend’. Almost without exception, first time renewal rates are significantly lower than for second and subsequent renewals. A first year renewal rate is likely to be around 30% lower than subsequent years. Typically, third year renewals will be higher than first and second years. In general, renewal rates will increase the longer the subscription is held. Publishers will therefore segment first year and subsequent renewals, treating each year differently. Furthermore, customers will be segmented by source.

From this information, it will be possible isolate the most likely defectors.

By Rachel Allen Rachel joined The Leadership Factor in 2005 after twelve years in publishing. In various account management roles she worked with a diverse range of large organisations including WH Smith, ASDA, Tesco, Sainsbury’s, Telegraph Group Newspapers, Waterstones, Borders and many others. At The Leadership Factor, she is currently working with clients such as Direct Line, Sainsbury’s Convenience, Royal Bank of Scotland, Shop Direct, seals and sealant manufacturer James Walker, publisher William Reed and domain name company Nominet.

www.leadershipfactor.com email:rachelallen@leadershipfactor.com

useless providing no information on the state of a publication or the loyalty of its customers. It is important to segment customers and know how various segments are behaving.

This segmentation will highlight opportunities for tailoring the sales message and offerings to customer groups, for example treating new and existing customers differently. To a degree, the principles for increasing renewals are the same as for generating new subscriptions - never stop ‘selling’.

Segmentation is key An overall renewal rate is borderline

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Loyalty

As the market changes publishers are continually looking at including new, possibly more convenient, methods of payment into the schedule. For instance, online renewal.

The majority of subscribers will renew automatically - five years ago this would have been by phone. The easier it is for subscribers to renew the more likely they are to renew. Renewal should be encouraged throughout the period of the contract and not just at the end.

Subscribers should be able to renew at any time during their subscription. ‘Early bird’ renewals should be encouraged.

This is a technique that can help smooth seasonal surges.

When promoting advance renewals sell the savings and ease of response, sell the longterm benefits and don’t mention the expiry date. Include an offer and a closing date.

Build a relationship Customer service is of paramount importance. Readers who use customer service are more likely to buy other products and increase the length of their subscription. Even automatic renewal customers should be encouraged to telephone. This will provide the customer service staff with the opportunity to crosssell (products) and up-sell (increase the length of the subscription). If they do not call they should receive a courtesy call.

Increasingly, telemarketing is being used to increase renewal rates. This method is used earlier rather than later in the renewal campaign - not after the subscriber has already received a barrage of renewal letters. The advantage of this method is that it is cost effective, instant and involves the customer on a personal level.

And, if the customer already feels valued then it is more likely that they will listen to the telesales caller. One note of caution here is that it is not advisable to use the customer service team for tele-selling.

What makes a good customer service operator is not what makes a good telesales operator.

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Customer lifetime value It is important to use lifetime value techniques when assessing the impact of the renewal schedule. Lifetime value techniques will provide such information as: forecast volumes in first and subsequent years, forecast revenues, forecast profit contribution and provide information on campaign performance (such as cost per order, return on investment, £ returned per £ spent, and forecast lifetime value).

Lifetime Value measurements are most effective when combined with other methods such as ROI. In addition, it is crucial to have accurate, up to date, information available. This is important when evaluating the effectiveness of the renewal schedule.

For instance, by tracking promotions and renewal orders by effort it can be seen how cost effective they are and subsequently how much it is worth spending to acquire new customers by type. Accurate source analysis is absolutely vital. For this information to be of maximum benefit, especially tracking information, time is of the essence.

So, what can be learnt from the way publishers approach renewal?

1. Segment renewals information i.e. identify first year renewals. (Review segmentation based on customer lifetime value). Integrate segment/ source analysis into customer satisfaction measurement.

2. Sell multi-year renewals and direct debit options in early efforts 3. Use an advance renewal effort.

Offer incentives 4. Make sure customer receives notice to renew in good time.

5. Include multi-channel response methods. Sell customer service as a benefit.

6. Promote renewals throughout the year.

7. Write specific copy for the audience 8. Use source of first order to segment customers and tailor communications.

9. Do not put expiry date on early efforts 10.Make sure accurate and timely response information is available for evaluation and planning purposes.

And if this doesn’t convince you that there is more to renewal that just sending a plain letter, here is some additional food for thought...

If your customers are so important why do you only contact them once a year?

If you are confident you have the right product for your customers, why are you frightened to ask them to renew early? (You are missing the opportunity to develop the relationship and cross-sell by avoiding them).

Why, if your customers are so important to you, don’t you give them plenty of opportunity to stay?

Ask yourself...

1 What are your renewal rates for first year and subsequent renewers etc?

2 What are your renewal rates for each source - where do the customers, most likely to renew, come from?

3 What are your renewal rates for each letter in your series?

(Indeed, do you have a ‘series’ or do you simply extend one invitation for renewal?)

4 What are the characteristics of your most profitable customers?

5 Who is most likely to defect?

What are they dissatisfied with?

6 Do you know how many products each of your customers hold... and in what order they were purchased?

All in all, are you making the most of your captive audience? S

Book Review

Fast guide to setting targets for satisfaction

The first thing most organisations could tell you about customer satisfaction is that they’d like theirs to be higher. But how much? Aiming to improve too much too quickly can demoralise staff when customer attitudes don’t change as fast (or as much) as expected. Other organisations may feel that their satisfaction levels are “good enough” (good enough for what?). We’ll run through 5 key points about targets for satisfaction.

1 Setting realistic targets Progress is rarely linear - it gets harder and harder to improve as you get better.

In other words a company starting with a low satisfaction score could expect to improve more in a year than one with a very high starting point.

A useful method for establishing what is realistic is to break the overall score down and investigate the views of different groups of customers.

Internal benchmarking, where possible, can give you a good idea of the levels of satisfaction that are possible with current resources. This approach is very effective for businesses with many outlets or branches.

2 Is there an optimum level of satisfaction?

If it gets harder (and more expensive) to improve satisfaction, the obvious question is whether there is a point at which it is no longer worth the extra investment to achieve marginal improvements. Reasoning by analogy to direct mail campaigns we might expect the answer to be yes, albeit with the caveat that a business would have to improve just to maintain its current level of satisfaction. Calculating where this point

is, for any individual business, would be far more tricky.

3 Beyond the number But is direct mail an appropriate analogy?

Occasionally it is, but for many businesses it is dangerously misleading. Direct mail, despite the best efforts of marketers, is a broad brush form of communication.

Customer relationships should be much more personal and individual. Improving customer satisfaction, especially when performance is already good, is more about eliminating lapses rather than across the board incremental change.

consistent long term strategy. Priorities for improvement must be adopted and addressed over the long haul, not changed every 3 months. Recognising that improving attitudes takes time will offset the demoralisation that can afflict employees when customers don’t seem to be noticing their efforts.

A long term loyalty strategy also emphasises the lifetime value of customers, justifying a surprisingly large investment in building customer satisfaction and loyalty. The cut off point, if there is one, may be much higher than you first supposed. S

It is very difficult to move a high satisfaction score even higher, so focus on those customers (or branches/groups of customers) where performance is not so good. Enterprise Rent-a-Car, for example, achieved great improvements by putting pressure on those outlets that fell short of the national average, cementing a much more consistent (as well as higher) level of performance.

4 Action plans first, targets second Overall improvement targets only make sense, and should only be set, in the context of individual priorities for improvement. If an organisation has lots of “low hanging fruit” then it will be relatively easy to improve. Rather than focusing on where you’d like the overall score to be it’s more effective to think about how much change it would be realistic to expect on the priorities.

Worked through this will give you a good idea of what’s achievable overall.

5 Thinking long term Target setting should be embedded in a

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Book Review

BO

OK

Michael Johnson, Problem Solved

Phaidon seem to have cornered the market in good value, offbeat, books about graphic design. Classics like The Art of Looking Sideways and A Smile In The Mind have found their way onto most designers' shelves, as well as a good few coffee tables. Problem Solved is unlikely to gain the living room popularity of its siblings, but it should catch the attention of professionals.

The book's conceit is that problem solving is a central part of being creative, but few books address the process.

Problem Solved is divided up into 18 common problems faced by companies trying to communicate with customers, each with a catchy name such as 'The Cargo Pants in Middle Age Problem'.

Each problem is discussed in detail along with a selection of different approaches and the usual inspirational examples (read "ideas to steal").

V E

Ultimately the Problem/Solution approach is nothing but a gimmick, albeit quite an effective one. The value of this book comes from its truly excellent text (which may sound obvious, but really isn't when it comes to design books) and the author's intriguing and personal selection of examples. Some of the most inspiring examples are small, but important, details in everyday communication rather than multimillion pound rebrands or advertising campaigns. My favourites are from the chapter on information rejection.

Johnson showcases the 1998 redesign of the Yellow Pages font, which allowed more information to be crammed into a smaller space whilst improving legibility, and also mentions the nearly invisible work of road sign designers:

...BRITISH DESIGNERS JOCK KINNEIR AND MARGARET CALVERT...NOT ONLY PROVIDED A ROLE MODEL TO THE WORLD OF HOW TO EXPLAIN CRUCIAL INFORMATION IN THE MOST DEMANDING OF CIRCUMSTANCES, THEY UNWITTINGLY BRANDED A NATION AT THE SAME TIME. IT’S ONLY WHEN TRYING TO NAVIGATE ANOTHER COUNTRY’S SYSTEM THAT A DRIVER REALISES HOW INGRAINED THEIR OWN SYSTEM HAS BECOME...

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Stakeholder July2006

W IE Phaidon

He drives his point home by laying out a UK sign in US style and vice versa. This level of design may win few awards, but its very invisibility is a testament to its success - the message is everything.

All in all Problem Solved is a more thoughtful book than its Problem/Solution gimmick might lead you to believe.

Unusually for Phaidon it is also a book that rewards reading rather than browsing, it should find a home with anyone who takes business communication seriously. S

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One Day

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