Reprinted from MarketingProfs, January 7, 2007
Squeeze the Lemons for Loyalty Growth
by Lynn Hunsaker
Lemonade is refreshing, particularly on a hot day. With a little sugar and a lot of squeezing, sour lemons are transformed into a nice, healthy source of sustenance. Similarly, profitable customer loyalty can be a healthy source of sustenance for brand equity and a powerhouse on hot days of competition. Numerous companies are nurturing customers with an arrany of sweet programs such as personalized marketing, advisory boards and references, customized offerings, privileges, and rewards. These are important contributions to your value proposition.
Squeezing the Lemons
But what about the rest of the customer experience? How about squeezing the lemons, or acting on the less-attractive feedback from customers, to transform ambivalent and at-risk customers into a reliable source of profit?
We're not talking here about alienated or costly customers, but rather the portion of
your customer base that are fence-sitters due to inconsistent business processes or lack of a compelling experience with your brand. After all, if a large group of ambivalent customers has "sour feedback," then your delighted customers may eventually confront situations that spoil their currently sweet experience.
The average American company loses half its customers within five years.1 How can your company achieve sustained growth with image-building alone? By addressing the group that provides "lemon feedback," your company can transform negative word of mouth trends to sustainable competitive advantages that benefit your entire customer base.
This is an internal branding effort that aligns what's going on inside the company with what's being promised to customers. It adds customer experience substance to your value proposition.
Truly Great Marketers
Ability to grow a business is what distinguishes a truly great marketer, as stated in a recent article by consulting firm Booz Allen Hamilton: "In an era of unlimited opportunities but constrained resources, the only marketing metric that matters is growth. Driving growth means stretching the traditional boundaries of the marketing function to encompass activities many companies don't even think of as marketing—yet."2
Growth goes beyond quarterly revenue targets. Growth is fueled not just by brands but also by customer equity, or customer lifetime value (CLV).3 Research shows that a 1% improvement in retention can increase customer equity 3-7%.4 The ultimate goal is to increase customer lifetime value.
Rewards programs, customer databases, and empowered customer call centers have their role in growth. Wisely, customer experience management (CEM) is also a growing practice among leading companies.
CEM is the "process used to comprehensively manage a customer's cross-channel exposure, interaction and transaction with a company, product, brand or service." An "outside-in" operational excellence focus is one of the key components of CEM, with a "comprehensive evaluation and improvement of people, process, policies, technology, and systems that facilitate, track, and measure customer interaction and transaction".5
Marketers have an important opportunity to assert their authority and value as a conduit for the customer's voice into all areas of the company. "Squeezing the lemons," or driving companywide action on the less-attractive feedback from customers, represents a chance to own CEM, improve CLV, and be acknowledged for playing an instrumental role in growing the business.
Value-Based Business Case
The first essential step in growing your business by acting on the voice of the customer (VOC) is to establish unwavering executive sponsorship. Let's face it: Long-term growth is a sizable stewardship that requires companywide enthusiasm for the means employed to achieve it. A well-respected executive champion accounts for a great deal of the difference between success and failure.
Calculate CLV by identifying your costs to acquire and service different customers. Also calculate the cost of your lost customers. According to the Pareto principle, 80% of your profits are typically generated by about 20% of your customers. Some of your customers are likely creating losses due to their inordinate service demands and/or insistence on deep discounts.
Once you assess customer profitability, you can develop appropriate strategies for aligning your company's efforts with the varying CLV levels across your customer base. This analysis also provides an opportunity to engage your CFO as an advocate for CLV and to minimize the likelihood of budget cuts that could cripple your growth efforts.
Assess your current methods of capturing VOC to determine whether these methods provide you with a 360-degree perspective of the customer experience. Customer advisory boards, user groups, blogs, surveys, complaints, call centers, transaction pulses, executive listening sessions, sales and service call reports, and many other techniques are VOC options. Consider firsthand VOC exposure for middle managers and executives for additional momentum. Make sure your VOC methodology provides you with a thorough understanding of customers' pain, wherever it may be. As Jim Morgan, chairman of Applied Materials, quips: "Good news is no news, no news is bad news, bad news is good news."
Acting on VOC
To overcome apathy, denial, or finger-pointing when sharing customer feedback within your company, slice the customer feedback by product line and by sales and service teams. When each group has its own set of data, you can drive VOC throughout the organization, establishing clear accountability for action as the data relates to each internal group.
Additionally, VOC feedback associated with support functions, such as safety and human resources, can be assigned to these organizations for action-plan development. Distribute templates that help each group prioritize the low-performing business processes with the highest correlation to customer loyalty. Each group can examine and summarize diagnostic comments from customers to help identify root causes of underperforming processes.
Action plans must be specific in naming deadlines and action item owners within the group, and must include metrics to track progress. Ask each group's executives to sign the action plans as a visible endorsement of their support.
Measure and reward the right things to motivate employees and to predict future customer perceptions. VOC data are symptoms of underlying business process health. They are lagging indicators, reflecting what customers have already experienced. Other lagging indicators include revenue, profit, and market share. While these symptomatic metrics are important to track, it is essential to identify, track, and provide visibility to metrics for the associated business processes. These are leading indicators because they represent future impact on the customer experience.
Effective incentives reward internal groups for improvements in both leading and lagging indicators, with a balanced formula that reflects the improvements' results from the perspectives of all affected stakeholders.
Reaching out to Customers
Be sure to "close the loop" with VOC participants as often as possible. Thank customers for their feedback and let them know you're working on solutions. Validate your thinking with them as you establish priority action areas. Share your action plan progress with them. By making your internal metrics visible to customers once you've achieved significant improvements, you're helping customers reset their perceptions for fresh experiences and fresh feedback in the near future.
Customer-focused service at all customer touch points is only as good as the weakest link in the entire value chain. Analyze handoffs throughout the company's business processes to identify streamlining opportunities and to track in-process warning signals. By monitoring internal customer satisfaction for each group's business processes, you can greatly reduce the "garbage-in, garbage-out" syndrome of business processes that plagues the reliability of the customer experience.
A wide variety of programs can be developed that engage and reward customers who are delighted with their customer experiences and to address those who are at risk of defecting. These include customer appreciation events, reference programs, gifts and rewards, privileges, and customized offerings among many other strategies.
The Key Is What You Do With VOC
Clearly, in the quest for sustainable growth, there is much essential work to be done to transform VOC into high ROI. In your recipe for healthy sustenance, don't forget to "squeeze the lemons in addition to adding sugar."
In the new book Chief Customer Officer: Getting Past Lip Service to Passionate Action, author Jeanne Bliss sums it up excellently:6 "As with any customer feedback system, it's what you do with the information that's key," explains Bliss.
"Companies have spent more time chasing the elusive 'score' than doing anything different for customers," she says. "In their quest to drive customer focus, corporations have attempted to improve customer experiences by attaching things people want to the attainment of a good score....
She enumerates:
- What will you do when a customer won't recommend you? Will you find out why not?
- Are you collecting all of that information from dissenters and identifying the big things that are broken in your business and fixing them?
- Are you identifying and holding those who have declared that they would recommend you close and building stronger relationships with them?
- Have you spent the time to find out what they really love about your business and then pinpointed which part of your operation those actions are coming from?
- Have you created systems and processes to reliably replicate those loved experiences across your enterprise?
Bliss concludes: "Becoming a hero to your customers is more about reliability than it is about heroics. If they could just count on you to always deliver, to always be there, to fix what ails them, to really care... well, things would be different. You'd have customers who desired the experience you deliver so much that they keep coming back again and again for more. And recommend you? No prodding necessary. They'd be singing your praises from the rooftops."6
Notes:
1 The Loyalty Effect, by Frederick F. Reichheld, 1996.
2 "Growth Champions" by Edward Landry, Andrew Tipping, and Jay Kumar, strategy+business, Booz Allen Hamilton, 6/20/06.
3 Driving Customer Equity, by Roland Rust, Valarie Zeithaml, and Katherine Lemon, 2002.
4 Return on Customer, by Don Peppers and Martha Rogers, 2005.
5 "Just What is CEM Anyway?" by Leigh Duncan, MarketingProfs.com, 1/10/06.
6 "Is Your Company a Customer Survey Score Whore?" by Jeanne Bliss, MarketingProfs.com, 7/25/06.
Lynn Hunsaker specializes in teaching corporations how to set up programs for acting on the voice of the customer for improved profits and sustainable growth. She is an AMA Professional Certified Marketer, ASQ Certified Quality Manager, and Qualified MBTI® Practitioner. Lynn also has taught courses at UC Berkeley Extension, SJSU and Mission College. Before founding her own firm, ClearAction and being appointed CEO of Marketing Operations Partners, she directed marketing and quality at Applied Materials, Business Insights, Tragon, and Sonoco.
To find out more about Marketing Operations Partners' Customer Profitability-focused services, please call 408-243-7881 or e-mail sales@mopartners.com.
