Archive for the ‘Customer Satisfaction – Loyalty’ Category

How do big companies compete with quick, small competitors?

February 4, 2015

They focus on customer value.

McKinsey says that leading companies combine insights about customers, competitors, and costs to develop more innovative and cost-effective products.

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Excerpted from McKinsey Quarterly’s, “Designing products for value”

A rising tide of prosperity in developing economies is reshaping the nature of competition. Recognizing the challenges of the new environment, a few product makers … are taking a different approach.

Here are some examples:

(more…)

Nums: Gov’t Motors slips in consumer satisfaction …

September 3, 2013

Yesterday, we posted some recent ASCI Customer Satisfaction survey results.

Headline was that overall customer satisfaction numbers have been steadily increasing.

Minor surprise was that autos sorted relatively high on the list.

 

image
Source

But, there’s more to the story.

(more…)

Nums: Customers are feeling more satisfied …

August 29, 2013

It has been a couple of years since I glanced at ASCI Customer Satisfaction numbers.

And, I was a bit surprised by the numbers …

During the 1990s, there was a pronounced drop in customer satisfaction … aggregated across all categories of products.

But since 1997, there has been a steady improvement … reaching new historic highs.

 

image
Source

 

Here are the details by product category …

(more…)

How do big companies compete with quick, small competitors?

December 3, 2012

They focus on customer value.

McKinsey says that leading companies combine insights about customers, competitors, and costs to develop more innovative and cost-effective products.

* * * * *
Excerpted from McKinsey Quarterly’s, “Designing products for value”

A rising tide of prosperity in developing economies is reshaping the nature of competition. Recognizing the challenges of the new environment, a few product makers … are taking a different approach.

Here are some examples:

(more…)

Want to build loyalty? Think economics not just emotions.

November 13, 2012

Punch line: Marketers have long attempted to build relationships by engendering emotional loyalty. However, true loyalty requires better understandings of economics and behaviors.

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Excerpted from Fast Company’s, “What Marketers Are Getting Wrong About Loyalty”

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The biggest mistake brands make with loyalty programs is to model them on human loyalty.

It’s time not to make loyalty more “human,” in the traditional way, but to treat it as a question of economics and behavior.

This requires models that take into account:

  • DECISION-MAKING: One thing to know about human decision-making is that we want to be happy. And we prefer many small repeated gains over anything else. Knowing what mental accounts its customers are using and how they manage them helps a company maximize the impact of its offers.
  • BUSINESS DESIGN: The first thing to know is how a loyalty program will make money. Loyalty programs succeed when they simultaneously contribute to the bottom line and have a high negative churn rate.
  • EXPERIENCE DESIGN: At its simplest, experience design is about the quality of users’ experience with a product or service: ease of use, beauty, convenience, utility, simplicity. Improvements can revolve around adding a “software layer” over a company’s core business (as Target does), combining digital and analog offerings (Tesco Price Check) … or coming up with complimentary offerings (Amex Open Forum).

Instead of one-size-fits all, these new models are designed for diversity and customization … and they turn the entire company experience into customer benefit.

Edit by JDC

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Thanks for the good customer service … and, oh yeah, good-bye.

February 15, 2012

Ken’s Take: There’s a marketing classic titled “Why Satisfied Customers Defect”.  The authors say it’s because of something called the “top box effect”.  Keeping a customer merely “satisfied” isn’t enough.  To secure their loyalty, companies have to make them “completely satisfied” — which is often the top possible choice on a market survey.

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Excerpt from AdAge:
“Why Brand Love, Satisfaction Aren’t Keeping Shoppers Faithful”

Accenture found that even though consumers are more satisfied with customer service than ever before, they are switching brands at a high rate.

Consumer satisfaction had increases ranging from 5% to 7% in one year, depending on the category.

Consumers are happier, for instance, with shorter wait times; the ability to solve issues without having to speak to someone; and the ability to resolve an issue by speaking to just one person.

About 44% of consumers said they expect more, or much more, than they did last year from the brands with which they do business.

Today’s savvy digital customers expect polite and knowledgeable employees or convenient customer-service hours.

And while they appreciate and are satisfied with those things, it’s not going to stop them from taking their business elsewhere.

Edited by ARK

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Best brands: It’s how you treat (not tweet) your customers …

January 30, 2011

TakeAway: Social media has increased the speed at which customers hear from their friends about good and bad experiences with companies.  In times of recession, low prices AND good customer experience are what’s needed to succeed.  People-centric industries, like retail and hotel, where there is more competition tend to spend more to create a good customer experience and find success in doing so.

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Excerpted from AdAge, “The Marketing Value of Customer Experience,” by Josh Bernoff, January 12, 2011

Customer experience is marketing. That is, in a world drenched in social word-of-mouth, the way you treat your customers — and the way they perceive you — makes all the difference in what they say to their friends.

…results from Customer Experience Index survey.

  • Only six percent of the brands were ranked as excellent… two-thirds were rated “okay” to “poor.” Eighteen percent were ranked as poor. …
  • Retail and hotel companies did the best; health insurance and TV service providers ranked worst. … The cost of great experience in the retail and hotel business is very high, they are people intensive businesses where it’s easy to fail. And yet the companies that succeed here succeed in part based on great service — because they compete. In health insurance and TV service, there is far less competition. 

The best performers overall were Borders, Barnes & Noble, Kohl’s, Costco, Amazon, JCPenney, Walgreens, Target, BJ’s Wholesale Club, and USAA (credit cards). …a great experience by itself doesn’t make up for an industry facing digital disruption. It’s also fascinating how many low-price providers are in the top ten,… . In a recession, providing low prices and an experience that’s better than people expect is a prescription for success.

… advertising is a lot cheaper and easier than changing… to focus on customer experience. … sure, you can keep hammering the message of how great you are, even if your customers think differently. … But in the end, people will find out the truth — and with social technology, that happens more easily every day.

Or, you could put your money and effort into improving the experience. That’s an effort that will take a couple of years, but with buyers coming back and seeking value as the recession lifts, you’ll attract the leaders. They’ll talk. You could end up like Zappos, where the customer word-of-mouth is most of the marketing. Or, you could just develop a customer experience that resonates with consumers, which is a whole lot easier to advertise.

Edit by HH

 

 

 

Productive whining: how to resolve your consumer disputes

July 1, 2010

When Outback cut the size of their salads, I expressed my disappointment via OB’s online customer feedback site.  Result: free din-din next time in.

That may have been my only complaint win … ever.

Below are some more powerful techniques for whiners. 

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Excerpted from NY Times: A Guide to Complaints That Get Results , May 21, 2010

Here are some favorite techniques and stratagems for prevailing in consumer disputes …

USE YOUR CAMERA:  always photograph any unpleasant surprises in hotel rooms – like dingy towels, broken shelves and a view that was less than promised and paid for. A picture is worth a thosand words.

REQUEST A PRIVATE CHAT: Another hotel technique:  ask the manager to step out from behind the counter. “This sets a tone of importance and mystery.”

BE PASSIVE AGGRESSIVE, PART 1: Some have succeeded in a number of on-the-spot negotiations in hotels and restaurants by simply recounting the flaws in the experience and their unhappy effect on them and their family. Never lie or exaggerate. Just state the facts, calmly. When the manager inevitably asks, “Well, what can we do to make this right?” be ready with a reasonable request.

TRY TO REVERSE THE CHARGE: You can skip direct negotiations entirely and call your credit or charge card company. If you can provide compelling evidence that you’ve been snookered, the maker of your plastic will first suspend the charge while it looks into the matter, and then reverse it if your version of events wins the day. American Express gets especially high marks in this department.

BE PASSIVE AGGRESSIVE, PART 2: When you’re talking to a phone rep, time is on your side for two reasons. The first is that phone reps are often timed and expected to churn through a certain number of calls per hour. The second is that nearly all call reps are prohibited from hanging up on you. So the longer you’re willing to stay on the phone and repeat that you are not satisfied, and do not want to end the call, the better your chances of getting what you want.

ASK THIS SIMPLE QUESTION:  When stymied by phone reps, simply ask, “What would you do if you were in my situation?” They’ll often pass along an effective tip about how to get the desired result” 

WRITE THE CEO: Lots of complainers have success sending letters to the C.E.O., or chief auditor, or any combination of higher-ups — the more the merrier, it seems.  Send it registered mail for added gravity and while you’re at it, note that you’ve sent a copy of the letter to a government agency, like the Federal Trade Commission.

Worst case, suing in small claims court, turns out to be a pretty effective way to get the attention of just about any corporation. Reportedly, some companies surrender once the case is filed, or skip the court date.

Full article:
http://www.nytimes.com/2010/05/23/your-money/23haggler.html?ref=business

Press zero if to want to talk to a customer service rep … yeah, right.

January 8, 2010

Excerpted from: WHAT AMERICANS REALLY WANT by Dr. Frank I. Luntz

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According to Dr. Luntz’s surveys, 1/3 of Americans say that customer service is worse at major companies than it was five years ago … and people prefer taking out the trash to phoning a customer service call center.

There are two aspects of service that drive consumers crazy:

  • First, getting a live voice on the phone.
  • Second, actually getting help from that person

Telephone automated answering systems were created to organize and streamline consumer interactions, as well as to replace expensive personnel with cheap software and technology. But the cost in consumer irritation is often more than the savings.

It’s no wonder that road rage has given way to phone rage as the number one time-consuming annoyance.

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Companies that insist on automated phone systems to answer customer questions and complaints need to follow three procedures if they want to maintain customer credibility.

1. Three rings, max.

People expect the phone to be picked up just after the third ring. That’s the standard set by home answering machines and cell phone voice mail, so people are conditioned to it. Anything longer triggers an immediate negative emotional response and is almost guaranteed to make the call more unpleasant than it otherwise would have been.

2. Two people, max.

Even more irritating than waiting for the initial telephone pickup is being passed from one representative to another.

A company is allowed one transfer. If a generalist transfers you to a specialist, you’ll accept that to get the expert advice implied by the word “specialist.”  But if you’re transferred more than once, people lose confidence in the company and its ability to figure out what’s wrong and fix it.

3. Americans, please.

People are immediately suspicious when they hear a foreign accent. To them, it’s a sign that the help desk has been outsourced, and it immediately destroys customers’ confidence that the problem will be addressed and resolved.

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From: WHAT AMERICANS REALLY WANT. . . REALLY – The Truth About Our Hopes, Dreams, and Fears
by Dr. Frank I. Luntz

You said you were satisfied … so why did you leave me ?

December 17, 2009

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.

Edit by BHC

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Full Article
http://hbr.harvardbusiness.org/2009/12/closing-the-customer-feedback-loop/ar/1

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When you let folks down, spit out the words: "I’m sorry"

November 10, 2009

Ken’s Take: Here are two very different stories re: how companies respond when they let customers down.. AT&T tries to slick over the problem.  Cox Cable steps up, takes responsibility, and offer a couple of freebies to ease the pain.

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AT&T 

“AT&T customers have been complaining for months about dropped calls, spotty service, delayed text and voice messages and slow download speeds for the iPhone”.

In response, AT&T produced a three-minute YouTube video in which it appears that a spokesperson called “Seth the Blogger Guy” will address concerns from a large number of unhappy customers.

“Look, we see the discussions on the Web,” he says, “on blogs, on Twitter, on Facebook. So we thought it would be a good idea to take what’s being said head-on.”

So far, so good, but Seth quickly loses his focus by:

  • Describing the huge demands placed on networks by smartphone usage
  • Congratulating AT&T for its role in expanding the smartphone market
  • Detailing the extraordinary efforts to facilitate a smooth rollout for the iPhone’s MMS feature (which had yet to be released when the video was made, and about which no customers had complained.)

Nearly two minutes into the presentation, Seth finally gets to the point.

“So what are we doing about it?” he says. “Well, put simply, we’re working around the clock to enhance and expand out network to meet these challenges.”

He concludes by telling viewers what AT&T plans to do and how much it plans to spend, but fails to offer concrete timelines, or much else that would matter to a customer frustrated by terrible service.

More important to consider is what Seth left out: He never says what customers really want to hear … sorry.'”

Source Marketing Profs: Sorry Seems to Be the Hardest Word, Nov. 5,2009
http://www.marketingprofs.com/short-articles/1412/sorry-seems-to-be-the-hardest-word/?adref=NmiF1B9

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Cox Cable

Background: On Wed, Nov. 4 Cox had a massive system outage in Northern Virginia that lasted most of the nite.  As luck would have it, that turned out to be the nite that the Yankees beat the Phillies to win the World Series.  Lots of disappointed sportsfans.

Here’s how Cox responded.  I think they did a pretty good job …. considering.

An email from Cox NOVA’s General Manager:

We let you down. You expected to turn on your television and sit down to watch the game or your favorite Wednesday night show. That probably didn’t happen and I apologize for that.

Some of our most vital equipment took a significant power hit, and when rebooted, much like a home computer, it did not come back on line properly.

In spite of tremendous effort on the part of our best people, that reboot process took several hours and frankly, probably ruined your night. As your neighbor, I experienced the same in my home.

We are committed to you, our valued customer, and nothing is more important than rebuilding your trust in us by taking action to make things right.

First, we’re going to credit your residential account with a free month of digital gateway service.  The credit will be automatically applied to your account, no need for you to do anything. We also hope you will take advantage of a free video On DEMAND movie .

While such an outage has not occurred in the history of Cox NOVA, we take this very seriously and are already working to ensure higher reliability of our video network as we completely review processes and emergency procedures so that you can enjoy your your TV service uninterrupted.

We appreciate having you as a customer. It’s important to us. My thanks for allowing us to serve you,

Janet Barnard
SVP and General Manager
Cox Communications

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The intensity factor …

November 3, 2009

Ken’s Take: Marketers talk about the “top box” effect when evaluating customer loyalty. A repeated finding: only customers who are “very satisfied” are likely to stay loyal — not those who are simply “satisfied”.  In all customer surveys (and political polls) keep your eye on the folks who are “very” …

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Excerpted from WSJ: In Vote, Watch the Intensity Factor, Nov. 3, 2009

Polls can measure many things, but one thing they have a hard time getting at is intensity: Yes, people will tell a pollster whom they prefer in a campaign, but do they feel so strongly about their choice that they’ll actually go out to vote?

Only elections can answer the intensity question.

Last year, Barack Obama and his Democrats owned the intensity factor. Lately it has seemed to lie with the Republicans.

Anger is a great motivator, and there’s plenty of anger on the GOP side over Democratic plans for health care and government spending.

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Heading into Tuesday, the intensity factor takes on a quite different form in each of the big races:

New Jersey: A Quinnipiac University poll released Monday shows Mr. Christie ahead of Gov. Corzine, 42% to 40%, with 12% for Mr. Daggett. Perhaps more important, it shows the extent of the two major candidates’ unpopularity. Some 40% of those surveyed said they had an unfavorable view of Mr. Christie, and a whopping 53% had an unfavorable view of Gov. Corzine.

Virginia: The polls suggest a dispirited Democratic base and a fired-up Republican one. A poll shows 94% of Republicans planning to vote for their candidate, compared with 85% of Democrats planning to vote for their’s.

http://online.wsj.com/article/SB125718836927523405.html?mod=WSJ_hps_MIDDLEFifthNews

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Another Example: Healthcare Reform

Discord is all but certain if ObamaCare in anything like its present form is enacted.

A majority, or at least a large plurality, of Americans oppose it.

Their opposition is raw and intense, as we’ve learned from the spate of contentious town-hall meetings held by Democratic members of Congress last summer.

A Washington Post/ABC News poll of Oct. 19 confirmed the obvious: Far more Americans “strongly” oppose ObamaCare (36%) than “strongly” support it (26%).

Excerpted from WSJ :Major Congressional Reforms Demand Bipartisan Support, Nov. 2, 2009
http://online.wsj.com/article/SB10001424052748703932904574511263515975366.html

Why It Pays to Apologize …

October 26, 2009

Ken’s Take: In personal life, apologies can clear the conscience and “clear the air”.

In business, apologies make for good customer relations …

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Excerpted from Business Week, Why It Pays to Apologize, Oct. 12, 2009

What’s the best way for a company to disarm a disgruntled customer? A simple apology beats a cash rebate, according to a new study.

Researchers at Britain’s Nottingham School of Economics worked with a large German wholesaler that sells goods on eBay, tracking the lukewarm or negative comments posted on the site by the company’s customers over six months.

They then responded to the 632 complaints—about defective salt shakers, say, or the late delivery of a leather belt.

Half of the e-mailed responses offered a brief apology. Half offered instead a “goodwill gesture” of a small cash rebate (from $3 to $8). All the e-mails asked the customers to remove the comments they had posted online. For those offered the rebate, it was a condition of receiving the cash.

The result?

About 45% of customers who received an apology withdrew their so-so or negative ratings, compared with 21% of those offered money to do so.

It’s worth noting that the e-mailed apologies were effective even though they were brief and impersonal — and asked for something in return.

Why?

Despite the suspicions people might harbor, “apologies trigger a biological instinct to forgive that is hard to overcome.”

http://www.businessweek.com/magazine/content/09_41/c4150btw802994.htm

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Tomorrow: Getting personal – 8 principles for making your apologies count …

What Brand Would Your Recommend? Apple Tops the List (well, almost)

April 13, 2009

Excerpted from Brandweek, “Apple Has Highest Net Promoter Score” By Todd Wasserman, March 30, 2009

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Apple is not only the brand that marketers love the best, but it’s the one that consumers recommend the most, according to new research from Satmetrix, originator of the Net Promoter score.

Apple posted a NetPromoter score of 77%, which means that 83% of respondents would recommend the brand to a friend versus 6% who would not. (The score is calculated by subtracting the latter from the former and is based on a scale of one to 10.) The only “brand” to beat Apple was the USAA, a financial services firm for members of the military.

Satmetrix’s report … narrowed its focus on a few categories, including telecom, financial services and online. Categories like consumer packaged goods were not tested, though … company is considering looking at other such segments in the future.

The overall winners:

1. USAA
2. Apple
3. Amazon.com
4. Costco.com
5. Google
6. Facebook
7. Wikipedia
8. eBay
9.  Craigslist
10. Barnes & Noble (bn.com)

Satmetrix stressed that Costco and Barnes & Noble’s sites were judged separately from their retail operations …

Satmetrix introduced Net Promoter in 2006 after Bain fellow Fred Reichheld developed the metric with the company.  The company and Reichheld believe the score has the highest correlation to buying behavior.

Edit by SAC

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Full Article:
http://www.brandweek.com/bw/content_display/news-and-features/direct/e3i1a3d96e3863d2d6cdff085d95d2c1c61?imw=Y

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Satisfied customers reduce stock price risk … here’s proof

March 17, 2009

Excerpted from Knowledge @ Emory, “Positive Feedback: Why Customer Satisfaction Means More than Just Happy Customers,” February 12, 2009

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Businesses are wielding a new weapon these days in the battle to survive economic uncertainty: the chopping block. No longer just a kitchen accessory, the chopping block has become a fixture in divisions and boardrooms across the country, claiming budgets, superfluous expenses and, yes, jobs.

Managers may want to hold off, however, on hauling that block into the marketing department. Market research firm Gartner recently reported that companies eager to cut their marketing budgets in a weakened economy risk damaging their ability to hold and add customers when conditions improve. Marketing, while possibly appearing to be the low-hanging fruit, is not necessarily ripe for chopping.

Sundar Bharadwaj … would welcome Gartner’s support of marketing budgets … “When most organizations are under spending pressure or they have to cut costs, marketing is one of the first things to go … If you can’t demonstrate its value to the bottom line or to metrics that matter to senior managers, then it becomes difficult to justify the existence of such spending. So, there’s a growing area of research in marketing that looks at marketing’s impact on the financial performance of a firm.”

Bharadwaj and colleague, Kapil R. Tuli, are the latest marketing mavens to contribute to this body of research. In their paper, “Customer Satisfaction and Stock Returns Risk,” they study the impact of customer satisfaction on stock returns risk—both systematic risk or beta … as well as idiosyncratic risk … The authors set out to develop, test, and find empirical support for the hypothesis that positive changes in customer satisfaction result in negative changes in overall and downside systematic and idiosyncratic risk. In doing so, they test the effect of changes in customer satisfaction on changes in risk …

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The results of the analysis … indicate that customer satisfaction does indeed lower a firm’s overall and downside systematic and idiosyncratic risk. Ultimately, customer satisfaction has a vigorous impact on stock returns risk 

“The argument of the paper is that if I’m satisfied with the firm as a customer, I tend to be loyal and I tend to buy more from the firm. The firm has a richer understanding of my needs so they can more efficiently sell to me, which lowers their costs … They can plan their internal operations given that they understand me very well. That could lower their costs. I’m less prone to switch to other companies even if other companies come up with better offers. So, I stay with this firm and work with them. The firm’s cash flow therefore is not volatile. This is important because the financial market stock price is actually the present value of future cash flows. That’s why you would expect that firms with greater satisfaction would have much lower idiosyncratic and systematic risk” …

The study also proves that customer satisfaction is a metric that offers valuable information to financial market … “Customer satisfaction is critical,” stresses Bharadwaj … The results also underscore the holistic value of overall marketing efforts on a firm’s strength.

This is not only important for company managers, but the investment community and regulators, as well … customer satisfaction is a vital component of a firm’s performance and possibly worthy of more widespread public distribution. “Companies need to start thinking about reporting customer satisfaction numbers,” in annual reports and other investor relations material, suggests Bharadwaj. “Given their implications for risk, it will help investors to be more informed about how the company is doing in the marketplace” … 

Edit by SAC

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Full Article:
http://knowledge.emory.edu/article.cfm?articleid=1216

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Loyalty programs lose their umph … at least for airlines

January 28, 2009

Excerpted from WSJ, “Plunging Value of Fliers’ Miles Saps Loyalty” By Scott McCartney, Dec 9, 2008

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The plunge isn’t as severe as your 401(k) or home appraisal, but the value of frequent-flier miles has dropped so far that airline programs no longer drive customer loyalty as strongly as they used to … But now, a handful of airlines … are launching tweaked programs they hope will rebuild ties with fliers.

The percentage of online buyers who say they are loyal to particular travel companies fell to 25% this year from 31% in 2006 … Customer loyalty for airlines … are worse than for hotels and cruise lines. And travelers buy tickets based on price and schedule more than ever instead of choosing to fly a particular airline.

“Airlines are shooting themselves in the foot…Their loyalty programs are just not worth what they once were to consumers.”

The biggest force driving the erosion of loyalty is the loss in value of frequent-flier miles … Airlines have raised the price of awards and tightened availability of the cheapest award levels, forcing travelers to jump to more-expensive mileage levels to claim seats…

To be sure, frequent-flier programs still drive loyalty for some road warriors… And they still make lots of money for airlines … The programs have grown more profitable as airlines have made it more difficult to cash in miles and added fees and surcharges to awards…

Not surprisingly, research …s hows growing dissatisfaction with mileage programs…Some airlines are addressing these flier gripes and revamping their programs …

Industry watchers say it may be risky to continue to degrade frequent-flier programs … airlines need to re-examine if they have squeezed frequent-flier programs too tightly. He says airlines have ignored trends in other industries where loyalty programs are stronger, and made their rewards more expensive and more difficult to redeem than other loyalty programs.

“Airline passengers get whacked by a lot of sticks, but there are not a lot of carrots out there for them” … airlines need to reinvigorate their customer-service efforts across the board, improving service at the airport and on board aircraft … frequent-flier programs could be more valuable to airlines as stronger drivers of loyalty if carriers revamped their confusing and frustrating redemption schedules, and gave consumers better benefits for purchasing loyalty.

“The idea of trying to reward people for loyalty is good … but it has become too complex and frustrating in the airline industry.”

Edit by SAC

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Declining customer loyalty adds pressure to the airlines already heavy financial woes.  Passengers no longer see the value in the customer loyalty programs that were originally created to increase customer loyalty.  As such, frequent-flyer programs may be profitable for the airlines in the short-term, but in the long-term customer lifetime value is likely to decline having a great impact on the airlines’ bottom line.

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Full Article:
http://online.wsj.com/article/SB122877921525689525.html

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Managing the customer experience … from "delight" to "good enough"

January 26, 2009

Excerpted from the McKinsey Quarterly, “Maintaining the Customer Experience”, by Adam Braff and John C. DeVine, December 2008

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Stinting on customer service is a common and sometimes costly response to tough economic times. By managing the customer experience more rigorously, companies can maintain quality while still saving money.

How can consumer businesses make necessary investments in service while facing the pressure on revenues and costs? One key is to minimize wasteful spending while learning to invest in the drivers of satisfaction. Specifically, companies should challenge their beliefs about service and test those beliefs analytically. Many will discover that long-held but seldom-reviewed assertions about what customers really want are wrong.

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Consider service levels, specifically average time-to-answer, which is one of the most common metrics used in call centers. Companies that closely manage the customer experience have taken a rigorous approach to resetting service levels and, in some cases, are saving money without degrading them or customer satisfaction. In short, these companies have carefully measured the “breakpoints” to find their customers’ true sensitivity to service level changes.

One company, a wireless telecommunications services provider, found that its customers had two breakpoints at X and Y seconds on a call; answering the phone immediately (less than X seconds) produced delight, while leaving customers on hold for longer (more than Y seconds) produced strong dissatisfaction (exhibit). Although customers were fairly indifferent to service levels between X and Y, the company’s average time to answer was only loosely managed between these two points.

 

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The company considered raising service levels to the “delight breakpoint” or reducing them to just above the “patience threshold.” Customer-lifetime-value economics pointed to the second option: relaxing service levels but guarding against crossing the patience threshold. The drop in customer satisfaction was negligible, but the savings in staffing were significant, and the company ended up saving more than $7 million annually.

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Other good places to look for potential overinvestment include marketing campaigns (for example, offering to move a customer to a cheaper rate plan regardless of whether the customer says cost is a problem) and excessive use of bill credits and adjustments. The business case for these “customer delight treatments” can include unrealistic assumptions about how they will increase customer referrals and retention. And often, there is no business case.

Finding these savings requires rigor in customer experience analytics: the collection of customer-level data, matching survey responses to actual behavior, and statistical analysis that differentiates to the extent possible between correlation and causation. It also requires a willingness to question long-held internal beliefs reinforced through repetition by upper management.

Edit by DAF

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Full article:
http://www.mckinseyquarterly.com/article_print.aspx?L2=16&L3=14&ar=2259

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Getting Cozy With Customers …

November 21, 2008

Excerpted from HBS Discussion Leaders “How CEO’s Should Work with Customers” by John Quelch, September 22, 2008

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Customers are the source of all cash flow. Organic growth depends on developing relationships with new and existing customers. And future growth prospects are baked into stock market valuations of companies.

An increasingly high percentage of Fortune 500 CEOs have not come up the ranks through marketing or sales…actual customer expertise is typically a mile wide and an inch deep.

Marketing expertise depends on customer insights…To be customer-oriented, executives must get out and meet customers on their home turf – in their homes, on job sites, in their offices. in stores.   ..

Over time, the need for customer insights should mean a higher percentage of general managers coming up through the marketing ranks..

Edit by SAC

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Full article:
http://discussionleader.hbsp.com/quelch/2008/09/how_ceos_should_work_with_cust.html

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Building Better Customer Loyalty

October 2, 2008

Excerpted from Wall Street Journal “Rewards that Reward” by Jean Halliday September 17, 2008

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Used by businesses for more than 25 years, loyalty programs aim to entice consumers to make repeat purchases by offering them rewards — things like discounts on future purchases or points toward free airline tickets.

Since companies continue to expand them, one would think loyalty programs are powerful tools for boosting market share. Our research indicates many aren’t, at least not as designed.

The biggest problem with loyalty programs, we would argue, is that most retailers adopt a one-size-fits-all approach: They use monetary rewards to encourage repeat purchases. But product discounts won’t change buying behavior in the long run in shoppers who value things like personalized service, convenience or shopping pleasure more. These types of consumers may change their behavior to access the price promotion, but they likely will revert back to their regular brands or buying habits shortly thereafter, resulting in, at best, a temporary change in sales and market share.

Loyalty programs also seem to be mainly of interest to existing customers — the heavier, more frequent, more loyal buyers of the store, who tend to live closer to it…

A more effective way to woo customers and maintain their patronage is to offer them individualized rewards, based on what they value. By offering different types of rewards to different groups of shoppers, companies set themselves apart and give people a reason to keep coming back…

Here is how to build a loyalty program with the best chance of paying off:

Group customers according to purchase motivations…

Increase intrinsic rewards; decrease extrinsic ones…

Determine if customers perceive a loyalty program’s rewards to be valuable…

Weigh other factors that may influence the effectiveness of reward types…

Edit by SAC

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Full article:
http://online.wsj.com/article/SB122160028857244783.html

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