Takeaway: Many companies dedicate thoughtful efforts to understanding the voice of their customer, but few successfully convert these insights into actions.
In a back-to-basics move, some companies like Charles Schwab have abandoned their elaborate surveys and complicated research models to place the feedback responsibility on an obvious source – their front line employees.
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Excerpt from Harvard Business Review, “Closing the Customer Feedback Loop,” by Rob Markey, Fred Reichheld, Andreas Dullweber, December 1, 2009.
When Charles Schwab came out of retirement to retake the helm of his firm in 2004, the business was struggling. “We had lost our connection with our clients, and that had to change,” he confessed to shareholders in the annual report. Schwab responded by implementing a new customer feedback system to reestablish the connection with his customers. In 2008, the firm saw its revenues increase by 11% and the scores that customers gave the company jump by 25%. During a time when the financial services industry was being rocked by turbulence, Schwab clients entrusted $113 billion in net new assets to the firm, and the number of new brokerage accounts increased by 10%.
Every day, managers at each of Schwab’s 306 branch offices and five call centers call customers who gave their site a low service rating. Schwab credits this outreach program as an integral part of the company’s new focus on direct customer feedback that was responsible for turning around the company.
Most companies devote a lot of energy to listening to the voice of the customer, but few of them are very happy with the outcome of the effort. Elaborate satisfaction surveys that involve proprietary research models can be expensive to conduct and slow to yield findings. Once delivered, their findings can be difficult to convert into practical actions. Additionally, most customers who end up defecting to another business have declared themselves “satisfied” or “very satisfied” in such surveys not long before jumping ship.
Instead of building elaborate, centralized customer research mechanisms, some firms begin their feedback loop at the front line. Employees working there receive evaluations of their performance from the people best able to render an appraisal—the customers they just served. The employees then follow up with willing customers through one-on-one conversations. The objective is to understand in detail what the customers value and what the front line can do to deliver it better. Over time, companies compile the data into a baseline of the customer experience, which they draw upon to make process and policy refinements.
The strongest feedback loops do more than just connect customers, the front line, and a few decision makers in management. They keep the customer front and center across the entire organization. One approach that works well across a range of industries is the Net Promoter Score (NPS), which immediately categorizes all customers into one of three groups—promoters, passives, and detractors. This allows employees throughout a company to see right away whether a customer experience was a success or a failure, and why.
NPS is generated by asking customers a single question, “How likely would you be to recommend this company or product to a friend or a colleague?” Respondents giving marks of 9 or 10 are promoters, the company’s most devoted customers. Those scoring their experience 7 or 8 are passives, and those scoring it from 0 to 6 are detractors. NPS is the percentage of promoters minus the percentage of detractors. Customers are then asked to describe why they would be likely or unlikely to recommend the company. The insights gathered from their answers enable employees to quickly identify issues that create detractors, and the actions required to address them.
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Full Article
http://hbr.harvardbusiness.org/2009/12/closing-the-customer-feedback-loop/ar/1
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