Customer Crossroads

Is loyalty a one way street?

We talk a lot about loyalty in marketing, and act like it means something to the organization. Like perhaps the organization should be loyal to customers, as well as customers being loyal to the organization. [Stop laughing, I'm being serious here!]

This seems often to be a missing ingredient to me.

Two recent cases in point illustrate, and they are related even.

The CIBC Aerogold credit card was long considered a leading credit card in Canada. For years, it was the card to beat. The insight that helped competitors turn the corner was this: people were frustrated with points programs where the points could not be used for much of anything.

So TD and RBC among others, launched credit cards that accumulated points that translated directly to dollars, and could be spent on pretty much any form of travel. Both now provide travel services as well, through partnerships with Expedia and Travelocity.

The latest development is that CIBC VISA has lost exclusivity with Aeroplan, and TD will now be offering this an Aeroplan card as well.

Here's where the loyalty issue gets interesting to me. They sold me.

The deal made provided for sale / transfer of a portion of the portfolio. My account was on the list. So how much loyalty does this show? I fully understand that this was legal, and always a possibility under the terms of the contract.

CIBC sent me a boilerplate letter that could have been written by a machine. TD has now sent me a welcome letter and a little treat -- a free lounge pass. The implicit assumption is that my loyalty for 10+ years was to the product and the points, not the organization or the brand.

That certainly got me thinking about whether or not this product will serve me well in the future.

It starts to get more interesting for me when I look at my current challenges in using the points. I'm heading to Budapest for the AQR-QRCA Worldwide Conference on Qualitative Research in the spring. And tacking on a little vacation in London on the way home.

With all these Aeroplan points I've been accumulating, I thought I might be able to do something on this trip. Airfare was a non-starter, I'd need a ton more points to make this work. But I thought perhaps a hotel.

843 hotels! Woo-hoo!

 The Air Canada site lists 843 hotels in London that I can choose from if I want to spend real dollars. Wow, that's a lot of choice! That's when I thought of using my Aeroplan points to reserve with one of these. On the Aeroplan redemption site, I discovered to my horror and amazement that there are exactly 5 hotels available in London on points. (There was one in Budapest. ONE!)

Now for years, Aeroplan has been pushing the notion that a mile, or a point, is just like cash. Except it isn't. And for your loyalty to this program, you are rewarded by restrictions of all sorts. If you are paying cash, Aeroplan knows their customers have many different needs and price points. But if you are on points, it's all ha-ha, you lose.

Really, shouldn't I just buy a new iPad and forget the whole travel thing?

Well, that's a murky area too. If you are buying miles to make up a shortfall, I think you will be paying $.03 (3 cents) a mile.(Surprisingly hard to find this information on their site.) You are paying retail.

But if you are selling miles in exchange for goods like an iPad 2, for instance, you will be selling them at less than a penny a mile. You are selling wholesale.

A lot of this whole house of cards relies on a lack of transparency. Something we know people are deeply resentful about. It just feels kind of unfair, doesn't it. But that's the loyalty business today, it's anything but loyal if you are on the customer side of the equation.

I do wonder how long this approach is sustainable. It's all powered by the desire to get stuff for free, and I guess we are all guilty of that.

What do you think? Is the points game a house of cards? Or does no-one do the math?

Related articles

What happened to the telephone? permission media redefined

Can you brainstorm over the phone? Yes!

CIBC to help TD, Aimia ease transition of Aerogold customers by mid-2014

TD, CIBC complete Aerogold deal

New newsletter, new chimp, a free t-shirt, and thoughts on loyalty

We've just moved our e-mail newsletter to Mail Chimp. Which is actually kind of a big job as we'd been with Constant Contact for a long time.

[If you didn't see the most recent newsletter, you can subscribe below, and you will have access to the archive. As a new subscriber, you will also get a free copy of our e-book, Painless Qualitative Planning, a very useful document in our humble opinion.]

But it seemed like there were upcharges for things we are getting free elsewhere (like image storage, archive hosting), the interface was complicated, the help files weren't helpful, and we had trouble making a decent PDF from the site. We wanted more than one autoresponder, and they just didn't have it.

From a loyalty perspective, my take is that none of us has time to waste, and when people are leaving, it is a good idea to figure out why they would put themselves through the time and headache to learn a new system.

When people leave, there's a reason. Because it's a lot easier to just keep doing what you are doing now than it is to figure out something new.

By the same token, you need to make learning any new system as simple as possible. Because even a simple system takes hours to learn to use.

The t-shirt that surprised and delighted

After sending my first campaign, I got a lovely note from the Chimps, offering me a free t-shirt. All I had to do was select my size.

Now this is not something that would work as an incentive -- "come work with us and we'll give you a free t-shirt." That would just be ridiculous on so many levels. (Do you agree?)

But arriving as a surprise in my in-box was a really pleasant surprise. It put a smile on my face. It made me feel connected to the Chimp, which I had thought was a pretty goofy name up till now.

What about you?

I have to admit, I'm not doing anything quite as wonderful, but perhaps I should be. When a new client initiates a project, perhaps I should be sending them something fun to celebrate the moment. [I do send something nice when you subscribe, by the way.]

What do you do for new clients? How do you reinforce the notion that using your service was a good idea?

Would love to hear your thoughts on this.

How to get all the good stuff we send out:

If you are not on our mailing list, you might want to subscribe, using the button on the right, or the form below.

Subscribe to our mailing list

* indicates required

Email Address *

First Name *

Last Name *

View previous campaigns.

Related articles

Think your e-mails are good? Check out Don Cooper's newsletter

The future of social media for customer loyalty

A really good question was posed on the Focus Network about where social media and customer loyalty is headed.

“What's the role of social marketing in customer loyalty today? What about a year from now?”

Here's what I think, and what I posted -- what do you think?

Permit me a short anecdote first:

This week I experienced problems with my e-mail and Blackberry synching. I use a hosted exchange service, and went to their web site to see if there was a notice about a system outage (there wasn't, or at least not where I was looking).
After wasting a lot of time trying to figure out what was going on, including being abandoned by their chat support, i finally searched the company on Twitter. There I saw any number of people grumbling about the server outages.
The company was not responding very rapidly to the Twitter talk, and chose not to engage with any of the individuals who posted about problems. They posted about once a day, saying they were working hard to fix the problem. I noticed that others who were irritated were posting links to review sites where they had newly created negative reviews about the company's service.

This kind of behavior is surprising in 2011, but it will be toxic in 2012.

Service problems are one of the opportunities that any organization has to demonstrate that they put some commitment behind their brand promise, whether that promise is appliances that work, friendly flight attendants, or excellent hosted server support.
Every business needs a strategy to respond to customer issues and problems expressed in social media as part of their loyalty strategy.

The larger the business, the more rapidly an issue can escalate -- remember the Domino's pizza YouTube debacle way back in 2009? Domino's had done nothing -- it was two employees -- but they nevertheless experienced damage to their brand and their business.

The communications environment is now a social environment. Thinking about social media as somehow "different" is no longer a productive point of view, because it is completely pervasive. Even your print campaign has a QR code in it, which is likely linked to a site offering social possibilities of some kind. Hotels have QR codes on their front doors with "Like" stickers. So the physical environment has become a virtual link as well, and we will see many more examples of this.

One critical first step for organizations: Ensure you can respond quickly and effectively to problems that arise where your customers are communicating about problems in social media channels (Twitter, Google+, wherever). Implicit in this is needing a real-time monitoring strategy which usually involves putting a listening platform in place (e.g. Conversition, Radian6, etc.)

In the future, social media efforts in larger organizations are going to become much more mainstream in terms of media planning and measurement. They won't be in a cubbyhole by themselves in the leading organizations, they will be part of integrated brand and customer communications.

Opting out isn't an option, because it will create negative impressions. When you see a business with no website today -- even a small business, like an upholstery shop, you form an immediate impression of them as somewhat backwards.
A major enterprise with a poor presence on major social media platforms will soon communicate that they are behind the times.

We are so used to communicating through multiple channels, that I do think customers will start to wonder why they can't communicate with their bank or telecomm carrier this way. So the call centre of the future is likely going to have to figure out strategies for other kinds of channels, not just telephone, e-mail and chat on the company's web site. It might be chat via Facebook, for example.

I don't see the complexity of the environment diminishing at all. There will be more options, as well as greater risks. But also, greater potential rewards for those that choose to invest in experimenting and learning. It's still the frontier, and the patterns of behavior are shifting rapidly.

If you want to follow the thread on Focus, click here.

Your service doesn't have to be perfect: but it can't be hideous. Bonus: hostage loyalty versus natural loyalty

We decided to cancel our HighBeam research account a while back, and just waited until the renewal date was upon us to do it. [Ed. note: where's the link? Me: I am not helping their SEO by linking to them. Forget it.]

Hostage loyalty versus natural loyalty

This organization is one of many these days that has a rather obnoxious approach to renewals: they automatically renew you unless you cancel. There is no notice, there is no reminder, there is no opt-out.

Naturally, this begs the question of why their natural loyalty is so poor that they can't count on renewals... When any organization uses a hostage approach to loyalty, this is not a good thing.

Our chief money guy thought he had issued cancellations on all of our accounts. Then a charge went through. A phone call to the company generated no happiness. Here's what they said, roughly:

• Each account has to be cancelled separately
• There's a no refund policy, didn't you read the contract
• The fact that the charge went through only yesterday is irrelevant -- our no refund, no pro-rating policy still applies
• The fact that you have an e-mail confirmation of cancellation is irrelevant
• We can, however, offer you a discount right now if you extend your subscription
• There is a supervisor, however we are not authorized to transfer any calls to this person

Okay, that pretty much defines hideous, doesn't it.

Not only is there no help to resolve the issue, but pretty much an attitude of 'we got your money, jerk, and we plan to keep it. You could cancel now, but you'd lose access to our database for a year that you just paid for.'

Money guy asks me: Did you renew? Did you get a notice? I say, no siree, I did not

Next step: contact VISA

Biggest point in their favor: trying to help. Explaining what is going on. Advising of options. Being calm and respectful.

Key learning from VISA person:

• If you sign an automatically renewing contract, your bank will put the transaction through even on an expired card [so your expired card on the account is no protection at all]
• If you change your card number with the same bank, your bank might put the transaction through, even though that is not the card you gave the automatically-renewing-jerks

But, and happily...

• if they sent you a cancellation confirmation e-mail, we just might be able to get your money back for you

You don't have to be perfect, just don't be awful

So VISA wasn't really promising a lot. But they did calm down the chief money guy. They offered helpful information. And they tried to find a way to help. They did not suggest by tone or word that any fool who ticks "yes" to such an agreement is beyond help.

You just have to be nice. You have to try. And if you do, you will look so much better than the other guys, that you don't really have to be perfect.

Are you counting on hostages?

I don't want to tell you that hostage marketing tactics will not work for a while. But they will not work in the long term. And they will hide the fact that people don't want to renew, they just got suckered. If you were valuable, they'd renew.

Clever or annoying?

I'm curious -- what's your thinking about these automatic renewal contracts? A convenience (ie. clever) or annoying (seriously annoying)?

Loyalty? Or Loyalty Program? There’s a difference

 

So much time is spent talking about loyalty and loyalty programs that you might be confused and think they're the same thing. They are not.

Actual loyalty is when your customers choose you because they really have a strong preference for your products or services. Loyalty points that they may earn as a result of that choice are just extra bonus.

Let me give you an example. There are two airlines that I am on most often -- Air Canada and WestJet. I love WestJet for their efficiency, their ability to move the line, their wonderful staff who are always friendly and cheerful, and their leather seats. Until fairly recently WestJet did not have a points program. In addition, you couldn't book seat assignments well in advance of a trip, a problem when flying on business IMHO. There never was any food on WestJet flights. [I guess they were a leader on this trend ...] These factors tended to make me choose Air Canada when I had the option, even though I loved the WestJet service and value.

Now that WestJet does have a loyalty program, I still don't fly them that often because I have so many more points invested in Air Canada. Air Canada may well think of me as a loyal customer. I don't generally think of myself as loyal to them.

On a recent flight I was thinking about this and surprised myself to realize there are some things I really do like about Air Canada.  There is definitely more legroom on their standard flight configuration, even in cattle-class. I love their seat-back entertainment system that lets me choose if, what and when I want to watch. And of course there are the points. [Although it's become quite difficult to get upgrades because every flight is now stuffed to bursting. And the points required to go anywhere seem to keep rising.] Still, the possibility exists of that free trip to Europe someday, so I carry on accumulating.

My take

If you need loyalty points to get repeat purchase you may have a great loyalty program, but you might not have much true loyalty. Loyalty programs work best when it's difficult to actually build and maintain a real competitive advantage. Or, when you can shift purchasing at the margin, the way a grocery store or drugstore might try to do with their loyalty program.

It's a mistake to confuse consumer commitment to your loyalty program with the true preference for your service offering. We just love the points. 

How to build an e-mail list in a nice way: or how good places are good at many things

I was skiing over the holidays at Lake Louise and at Sunshine Village. Both great places to ski, but the customer experience at Lake Louise is just superior in so many ways, from the quality and variety of the food to the fact that the chairs are real (not attached to the table like a high-school cafeteria).

They bring a lot of extra touches to their operation. Over the holidays, they were playing pleasant generic seasonal music over loudspeakers. They had Santa skiing around the place (here's my shot of some little girls following him down the hill).

Santa made an appearance in the main lodge, and was available for photos at no charge. They took one with my camera, but also took one with their own camera and sent it to my e-mail. That's the one below, right. Now isn't that a nice way to build an e-mail list?

Plus they were giving out candy-cames to everyone who got a picture.

One of the things I notice is that good experiences aren't just good because the BIG STUFF is good. The LITTLE STUFF is also good. If you want to improve customer experience, you don't have to wait for the giant, innovative comet to come hurtling at you out of the sky. Instead, you can steadily work to light up little stars all over the place. If you keep at that, all the customer focus this generates will make it much more likely that you'll see the big innovative opportunities.

Fear of flying or yield management in action

In Montreal for a brief trip, I thought I could make a 3 p.m. flight. Not a chance.
Called to rebook ... after listening to a bunch of marketing stuff, they told me it would cost $20 to speak to an operator instead of going online.

Ever conscious of  clients' perceptions of the expense tally, I searched out an internet connection.
No dice -- it was less than 45 minutes to my flight, so I had to call.  They would waive the $20 surcharge if I provided a special code that showed I'd tried to do this online. Okay, scrounge a Post-it note, and take down code. Start again with the phone.

$40 to change the flight an hour. No problem, I said.
But they couldn't book me a seat, I had to do that at the airport, because people had already started to check in for the later flight. I have to admit, that surprised me, but what could I do?

Upon arrival at the airport, I see that -- incredibly -- the original flight has not yet left. Here's where it gets good. For another $50, I can rebook. I tell them I already paid. They check the system. They want to know if I paid at the airport or over the phone?
Too bad for me, I paid over the phone.

"Phone is not the same." That is literally what they told me. Shaking of heads, looking at each other for confirmation, agreeing. "Phone is not the same."

When you have to administer policies that horrible, you do your best to close off any possibility of discussion as quickly as possible. And can you blame them? In this kind of environment, they'd be wasting their money on customer-service training or anything else like that.

Yield management is about squeezing as much as possible out of every seat on the plane. And of course, by extension, out of you and me. No wonder the tickets need three pages of conditions after the itinerary.

"The freedom to fly your own way"

Because I organized my day so badly, I had to sit in the middle of two big guys who were travelling together. I would probably have paid a fee to avoid that. Maybe not for a 75-minute flight. But definitely for a long flight. A fee to avoid the middle seat. Or a fee to ensure you sit only beside thin polite people who have showered today. See how insidious this kind of thing can be? 

Wish List, Continued: Fewer unpleasant surprises

Doing some research for a client a few weeks ago, one of the things people had to say about their service experience was approximately this: 'please make sure I know everything I need to know.'

Consumers often take responsibility for 'not knowing the right questions to ask' -- I've heard this sentiment many times in experience research. They blame themselves for not asking what they should have known to ask... crazy, isn't it? Because that's why you are talking to a representative of the company in the first place. Unless the reps are just order-takers.

It's the feeling that the company rep actually know the pitfalls, but they're not telling you unless you ask a direct question on that topic. It's like some weird game show.

I've had this experience in my business several times recently. There's a whole industry that supports qualitative marketing research, called "field." These are the people who own the facilities, make the phone calls to invite respondents, and manage all the details, like catering. No matter how carefully we try to manage the field costs, the final invoice always seems to have a little surprise. Sometimes several surprises. On a big project, by the end of the thing, it's enough to fund an upgrade in airfare, or a dirty weekend in a country inn.

And because I try not to surprise the clients with a bazillion little nickel and dime charges, these extras invariably come out of my pocket.

Even though I put up a few of the lyrics to one of the funniest songs you'll ever hear -- Master of the House -- I don't really think it's as bad as all that. But there is a reluctance to tell you everything you need to know. People want to win the bid with a low up-front cost. Then they add on everything else as you go along. 

But here's what you need to know: This kind of thing damages loyalty. Period. Full stop.

So tell your customers what they need to know. That's what the very best service operations do, when they provide advice. Full transparency. 

As for myself, one of these days I hope I'll know all the right questions to ask.

Resources:

Lyrics to "Master of the House" by Herbert Kretzmer , part of musical Les Miserables, found here.

Solving the Commoditization Problem

Marshall Sponder at WebMetricsGuru picked up the discussion on loyalty, and added some great examples of whole industries suffering the commoditization problem:

"If you look at the PC Industry - it hardly matters which brand you buy (most PCs and monitors come from the same factories in China - anyway (you did not know that?) .... only the designs are slightly different) - it's all about price and processor performance now.   

"So we might come to the concept that it's important NOT TO COMMODITIZE your service if you want it to survive - long term ...or at least - move the "goodies" up the value chain ...."

Sponder goes on to provide additional examples, such as architects who sell house plans online. They want him to raise their search engine rankings, apparently without really adding anything new or better for their customers. Customers look at the plans and see a lot of the same thing. i.e. an undifferentiated product and an undifferentiated experience.

The problem, as Sponder says, "is everywhere."  Very true.

We know the problem, what's the solution?

The solution is to segment the market based on customer attributes, desires and unmet needs, and start finding ways to serve the segments better. A commodity product or service treats everyone as if their needs were the same. How can this possibly be true for a house?

Let's look at flour, clearly a commodity. But...there is all-purpose flour, pastry flour, easy-blending flour. I pay a premium for a little can of flour that has a shaker top. It's great for making roux. Is the flour different? No idea. It's the package that is meeting my needs. And I appreciate the company more because they make that effort.

A house, for most people, is the largest purchase they will ever make. Surely there are opportunities, even for those buying their home plans on line, to add more value to your customers. [And we stand ready to do the research that would uncover these unmet needs, these opportunities to stand out from the pack, operators are standing by....]

Branding works because it meets our need to feel special and different than others. We have a self-identity, and we want to use brands that match it. Branded experiences combine the best that product and service innovation can create with the best that marketing can offer. It's real value, not fake value. And people pay for real value.

Customer Loyalty and Sacrifice: are your customers just settling for you?

The December issue of Banking Strategies (link below) has an interesting piece on customer loyalty, and introduces an interesting concept: customer sacrifice.

Commoditization dissolves loyalty

The backdrop to this story is that the whole retail banking industry is characterized by increasing commoditization. Product and price innovations are quickly matched. Reasonably fast, accurate and responsive service levels are thought to be table-stakes to compete at all.

It's tough to build loyalty in commoditized products and services. Mostly what you have is habit, not real loyalty. So customer experience is now on the radar as the way to differentiate and gather more loyal customers.

Loyalty pays - d'oh

And there is pretty significant proof that loyalty pays: this research showed that loyal custmers bring 24% more deposit business and 14% more consumer loan business to their primary bank, as well as being three times more likely to recommend their bank. These stats are not new, and many researchers have found similar data. [and dear reader, I'm sure you know this, even if you didn't know the stats!]

Defining sacrifice instead of satisfaction

The sacrifice concept is interesting. Sacrifice occurs when customers have a high desire to receive services, but do not feel that their bank [substitute your category here] is providing them. In the research discussed in the article, they identified eight experience attributes where customers are experiencing significant sacrifice, such as:

• branches open evenings and weekends
• being rewarded for the size and length of my business

"I'm getting rewards from many of the other companies I deal with, why not my bank?"

• staff at the branch have been there a long time

"It's too much trouble to get to know people at the branch. They are different every time I go in there."

• branch staff knowledgeable so don't have to refer me to specialists

"I waited in line to talk to someone and then I had to wait again to talk to the person I really needed to see."

The attributes where there is low sacrifice are areas that are either unimportant, or the level of delivery is acceptable, or both, such as:

• having a childrens' play area
• staff take time to chat with me
• offering product bundles addressing comprehensive needs, (such as home buying)

Sacrifice is measured differently from satisfaction, and this difference is important, because it potentially shows how to break through the wall of "satisfied" to "loyal."

Customer Satisfaction = what customer expects to get LESS what customer perceives they get

Customer Sacrifice = what customer wants exactly LESS what customer settles for

Are your customers settling?

An analogy is drawn to the airline industry, where the last few years of horrible service have lowered expectations. So satisfaction scores are not as low as one might expect. Sacrifice scores, on the other hand, show that few of us are getting what we'd like to get, and we're all settling. Settling equals no desire to build a loyal relationship.

Paul McAdam and B. Joseph Pine, who wrote the article, Customer Experiences Rule, say that you have to choose whether you are going to live at the commodity end of your market, or the experience end. If you choose commodity, then you need to focus on cost and prices. If you choose experience, then you will need to focus all your resources on putting the customer at the centre.

Abbott's corollary: if you aren't an 800 pound gorilla that can push unit costs waaaay down, you don't really have a choice, you need to focus on customer experience or get caught in the horrible middle, neither cheapest nor best.

References:
Customer Experiences Rule, by Paul McAdam and B. Joseph Pine II, Banking Strategies, Novenber-December 2006.

Pine was co-author, with James H. Gilmore of The Experience Economy: Work is Theatre and Every Business a Stage , 1999.   

Do Your Customers Trust You?

Public relations firm Edelman released their sixth annual global trust barometer study, available online (click the chart). 

Among the opinion leaders surveyed, "someone like yourself or your peer" is the most trusted source of information about a company, exceeding even doctors and academics in most of the countries they surveyed. And we have much greater access to the opinions of "people like me" through the internet.

If people lose trust in your company, they won't purchase your products or services (70-80%), they'll tell other people bad things about you (70-80%), they won't invest in your shares (65-75%), and they won't even work for you (40-50%).   

The communications channels that worked so well in the past-- controlled messaging to specific stakeholder groups like investors, analysts, employees and customers -- are being supplanted by horizontal peer-to-peer communications.  Articles in business magazines are still a trusted source of information about a company, right up there with family, friends, and peers.

Beyond this lack of confidence in traditional sources of information, they see a "yearning to move beyond the simple act of consumption of information to social networking." 

Remember that co-creation trend we talked about a few days ago?  Well here it is again.

Edelman's recommendation? "Smart companies must reinvent communications thinking, moving away from a reliance on top-down messages delivered through mass advertising."

Other ways to develop trust:

The most important drivers of trust are company of origin (not easy to change), industry (not easy to change) and company behaviors (this ball's in your court). 

Quality: the quality of your products and services is a key driver, but not sufficient (Sony piracy scandal). 

Accountability: companies that put their name on their products show that they are accountable.  Unilever realized a big lift in their trust ratings as a result of putting their corporate brand on their packaging: people know them now, not just their brands.

Attentiveness to customers: showing you understand and care about their needs, (P&G). 

Employees: Showing concern for employees is especially important in some labour markets.  But communicating with your employees is also critical:  "they want contextual information on the business, including the company's strategic direction, how decisions are made, and competitive issues."

Being socially responsible: participating in disaster relief efforts (Wal-Mart), being environmentally responsible (GE), and cleaning up your third-world-labour issues (Nike) are all good for increasing trust. The social responsibility program must be consistent with your core brand values to make an impact.

CEO: celebrity CEOs are no longer a trusted source of information.  In fact, CEOs and CFOs are now among the least trusted sources of information. 

Our take:

However distasteful it may be, you are going to need to become more transparent, more open, more consistent in all your activities if you are going to build and keep a strong brand.  To get the dialogue going, look at how Amazon has brought customers into the communication and co-creation of the product, and see what you can borrow or build on from them.

Technorati Tags: Co-Creation, Edelman, Building Trust, Branding

How Good is Your Support Site? Customer Problems and Service Recovery

I spent quite a bit of unproductive time on the weekend trying to resolve hot-synch problems on my Palm TX.  When I saw "do you have a minute to take a survey?" you can bet I clicked.  The last of about five questions was this: "would you recommend Palm Support?" 
You've got to be kidding, right?  Not "would you recommend Palm", but "would you recommend Palm Support". 

The "would you recommend" question is a classic loyalty question often used to determine an overall rating benchmark in satisfaction and loyalty research.  But putting it in this context seems like utter nonsense to me.

The only reason anyone would ever be on their support site is because they are HAVING problems. Even more important, the support site does not stand or fall alone -- it is part of the total brand experience.   

Here are some better questions that would make this short survey more relevant and useful:

1. Were you able to resolve your problem to your satisfaction?
2. How much time have you spent on this problem?
3. How easy or difficult was our support site to use in solving your problem?
4. Would you recommend a PALM PRODUCT to a friend or colleague?
5. Thank you for answering our questions.  Is there anything you would like to tell us?

Number 4 is the loyalty question that matters.  It's a short way of asking this:

Now that you have experienced some problems with our brand, how do you really feel?  Do you still like us?  Are you going to tell ten friends how irritated you are and advise them never to buy our product? 

Was your experience of our support site so great that you actually like us even more than before, and you'll be raving to five friends about how great we are? Are you left feeling that you were fairly and justly treated? Or did we act like no-one has ever had a "runtime-error-r6025-pure-virutal-function-call" problem before? 

When you have to replace this product, will you remember us as helpful and caring when the chips were down, or swear never to do business with us again?   

If you solve a customer problem well, your customers will like you more than they did before.  This is not just some squishy, feel-good marketing stuff, this phenomenon has been researched pretty thoroughly. 

But the reverse is also true.  You can make committed antagonists for your brand if you don't solve a problem effectively.

Yes, my Palm is now synching again.  But only because I removed some software. And I'm wondering if I should have listened to my tech guy who told me to buy the Dell.  If the TX can run flawlessly for about a year, I'll probably be loyal again.  I'll let you know.

Here's a Shocker: Few are Investing in Loyalty, Despite the Lip Service

You may be shocked to learn this (or not...), but according to CRM Guru guy Bob Thompson (registration required), business leaders are only paying lip service to loyalty, and not backing it up with budget or action:

Most business leaders say they are devoted to loyalty, but new CRMGuru.com research shows that management systems and budgets often don’t back it up.

As a customer, you know this is true.  You are on hold, listening to "your call is important to us".  You get caught in the "blabberynth" of  automated phone directory systems, or the new and even worse voice recognition systems that won't let you press zero.

And yet execs continue to believe they are doing everything necessary for loyalty. 

It's the "everything necessary" element that is the problem, of course, because it often gets translated into the minimum necessary. 

Bob's article references a number of leading authors and researchers, and reminds us that:

• More customers leave over service issues (70%) than price or other issues
• Loyalty leaders have faster revenue growth rates than companies with poor customer retention (twice as high, according to Frederick Reicheld)
• It costs much more to get a new customer than to keep an existing one
• Sales efforts targeted at existing customers are much more likely to be successful (60 - 70% probability) than sales efforts targeted at lost customers (20 - 40%) or prospects (5 - 20%)

Bob's prescription begins with understanding customers using data, not anecdote:

In customer loyalty, there's no substitute for good research and planning. No matter the size or type of your business, you must start by understanding why customers stay and why they leave. Taking this customer-centric view will enlighten your management on why customers behave the way they do so that you can create a profit-generating loyalty strategy

The full paper is worth the registration required to read it. 

What Bob does not say, and that needs saying, is that the chief issue is not tactics, it's motivation.  The first objective in moving the business forward on loyalty is to create an experience for the executives that is so compelling that the see the whole issue in a new way and can get mobilized.   Once that happens, the  tactics will be relatively easy.

Picture:  I found a bunch of wonderful images in a 1945 edition of Grimm's.  Companies aren't really evil witches luring innocents with promises of candy.  But sometimes it feels that way.  And of course, trapping your customers with high barriers to exit only works in the short term.   

Handling Complaints Effectively: Give People Justice, But Watch Out for the Rocky Shoals of Embarassment

A lot of research has been done on the topic of complaint handling.  Having an unhappy customer in the first place has a lot to do with what the customer was expecting. 

I got a necklace and earrings as a Christmas gift from my beloved, and the clasp on the necklace recently broke.  I know it was not an expensive item, as necklaces go, but I had only worn it three, perhaps four times.  So I thought perhaps the store would fix it, replace it, or something. 

A dissatisfied consumer will consider their options:

• Seek redress for the problem i.e. complain to the company
• Complain to others -- negative word of mouth
• Vote with their feet -- change suppliers

Individual factors have a lot to do with who complains and who doesn't, but most people don't complain, and only about 5% of complaints ever get beyond the front line.   If people think their complaint is likely to be successful, they are more likely to complain.

Expectations Rising
When I took the necklace in, the nice clerk raised my expectations considerably, and asked to keep the necklace so she could talk to the owner, and told me she was confident they would either replace the necklace or repair it for me.  She wasn't sure they could replace it with an identical necklace (no problem, I said).

She called back later and crashed me on to the shores of disappointment, by telling me approximately this:

• The necklace was several months old (but I only wore it a few times, I protested)
• The necklace is out of stock, so they could not replace it (but what about something similar -- that would be fine...)
  
• They are not jewellers, and do not repair jewellery, however they were confident the necklace could be repaired by a jeweller, so I should come by and pick it up
• She was personally sorry to have to tell me this

I was disappointed with this, and said I wished to talk to the owner myself.  Naturally, she could not give out the number, but promised to pass the message along.

Distributive Justice, Procedural Justice, Interactional Justice

People expect a fair outcome from a complaint (distributive justice).  They expect not to have to jump through a lot of procedural hoops to make the complaint (such as returning the item in the original packaging); that's procedural justice.  And they want to be treated fairly throughout the process by the people involved (interactional justice).

When I got a call the next day from a second store clerk, I started experiencing some injustice.  The second clerk basically implied that I had been wearing the necklace for months, that the store was a small business just trying to survive, and that they couldn't exchange things months after their purchase. 

As the conversation went on, I was lumped in with all sorts of people who try to exchange things months after they have been wearing them, because they want something different. 

She then suggested several times that she should take the necklace to her friend, the jeweller Zack, and he would fix it for me, she was sure it would not be too expensive.  (thanks, but no thanks).

When I reviewed all the details (yet again - only wore it a few times), I said I still wanted the opportunity to talk to the owner.  But the owner was now out of town, and did not have time to speak with me.  (Okay, I confess, this really ticked me off, and I suggested the owner just didn't want to talk to an unhappy customer)  On and on this horrid conversation went, to the point where I was actually starting to get upset and lose my cool. 

The second clerk told me that when the owner heard the full circumstances, that she now understood I wasn't trying to "scam" the store, she was also confident that the owner would do something to rectify things.  They would be in touch. 

Meanwhile, my small problem, and probably a $10 repair bill was starting to grow horns and expand into an ugly lump of discomfort.  And in making my point, I started feeling like I was abusing these young women working in the store.  Now we are all unhappy, and getting unhappier by the minute.

Service Recovery Effort

Later that same day, the owner left me a voice-message.  She said she could no longer return the necklace to the manufacturer, and their policy was two week replacement only (first I'd heard of that...perhaps a training issue with the clerks?), and closed off by saying she was hoping I would continue to be a customer.

Is it Cognitive Consistency, or Just The Embarassment Factor

I was glad to have had the call from the owner.  I think she should have thrown me a small treat of some sort, like a discount on next purchase.  But here's the big problem.  Now I'm embarassed at making a fuss out of something small, and getting upset, and I don't even want to go in to pick up the necklace. 

This is not at all unusual for people.  The biggest problem in retaining a customer after things get ugly is that there is no happy feeling anymore.  Let me give you another example, this time of a resort.

My friend and loyal reader, R.B., told me that he thought a resort we have both enjoyed --  a premium priced lodge in Northern Ontario, had gone downhill.  After his last stay, he sent a letter outlining his unhappiness to the resort.  They never replied.

Now, he says he feels he can't go back.  "I would have gone back if they'd only replied to my letter", he says.  There aren't that many nice lodges in the wilderness, so now he's got a problem.  I am in total sympathy with this. 

My law firm sends out a survey every time you conduct any real business with them.  But knowing how dependent we are on a lawyer when we really need them, who can respond honestly to such a thing unless it's anonymous?  And as I discovered recently, it's not anonymous.  (I gave them high ratings on everything, but indicated in my comments that they should not bill me six minutes for sending me a follow-up e-mail asking if they can invoice me, and then call it client correspondence.  How sorry I was that I said that, triggering a series of phone calls and hand-wringing. What on earth was I thinking?)

Doing it Right
Service recovery is really an art.  It needs to be fast, it needs to be fair (probably more than fair, actually), it needs to come with a smile, and it needs to leave the relationship intact or better. 

When service recovery is done well, people who experience it are more loyal than people who have never had a problem, never complained.  This has been well documented in reams of research, and is a secret weapon for the firms that do it well. 

Speaking personally, I have put in extra unbilled days on lots of client projects to ensure that the final outcome met or exceeded the client's expectations, even when this was well beyond our contractual commitment.  But I doubt I'll ever get the chance to respond to a complaint, because I suspect clients to vote with their feet as their opening response. (all input welcome on that subject, what's your experience?)

Wish Me Luck
Here's my plan.  I'm going to drop by the store later today and pick up the offending necklace, and take it to a jeweller down the street.  I'm hoping to hit the store when it's busy enough that I can avoid a reprise of the entire conversation wherein they try to convince of their point of view.   And I'm hoping the jeweller doesn't give me a lecture about how the thing is too cheap to be worth fixing.  If he does, I'm using the "senitmental value" gambit.  I might even wear the matching earrings (which I really love) into the shop in an expression of goodwill.   

Cross your fingers for me, okay?

Acknowledgements:
Thanks to Andy Hayward at stock.xchng for the great picture
Thanks to Tom at True Talk for the inspiration for this post
And to R.B. for sharing such interesting conversations with me
 

Privacy and Trust: Watchfire Survey says it's about Trust

Online risk management firm Watchfire has sponsored a survey of online banking customers that suggests TRUST is the thing to pay attention to.

There are a lot of tables and charts, and some reasonable commentary, but from my perspective, it's this trust and loyalty thing that is interesting and new.  Although the commentary suggests that trust creates loyalty, that seems too simple.  The picture looks like this:  people with more of their wallet at one institution tend to shop around less, and tend to have higher trust.  So maybe the real formula here is this:  if you are trustworthy, I may give you more of my business, and have greater confidence to conduct business online.

The study also suggests that breaches of trust will be dealt with harshly.  Well, we need to wait and see on that one, because consumer inertia in matters of financial services is legendary.  I suspect the issue is a lot less salient when someone else had the problem than when it happened to you or someone you know. 

We'll have lots of opportunities to test this idea, since major breaches of security are becoming alarmingly commonplace: ChoicePoint, and now MasterCard. 

ChoicePoint was a spin-off from credit bureau powerhouse Equifax, who compromised the privacy of many thousands of people by unintentionally selling private data to crooks, enabling them to perpetrate identity thefts on a large scale. You can read ChoicePoint's apology to people who were compromised here.

The real story here is about the impact these problems are going to ultimately have on data mining -- maybe we've already had the golden age?

Reading the Luggage Tag: Nuts and Bolts of Customer Experience

I had a pleasant conversation yesterday with a senior executive at Rogen, the people who train execs to communicate and give winning presentations.  This is someone who travels extensively, and has experienced the full spectrum of travel joys and sorrows -- a veteran road warrior.  He had recently stayed at the boutique hotel chain W,  in New York. 
Here's what he told me, in the tones we usually reserve for religious experiences:

Within less than a day of checking in, everyone I met there knew my name.  I finally asked the bellman how he did this?  He told me he had been trained to look for and covertly read names on luggage tags.

The story gained more ground for me when I learned that the Manager also learned names and spoke to guests on a frequent basis.  What a friendly thing, and would make you feel at home in a big city! 

Why is it that some companies are able to achieve these startling service results, while others struggle?   

Well first, they have established behavioral service standards.  These are things that say clearly, "use the customers' name at every opportunity".   This stuff has to be granular, and crystal clear.

Then you have to actually train people in how to achieve the standard.  Senior executives often underestimate the need for this type of training, assuming that having the standard is enough.  It isn't.  We all need tips and tricks and help.  And committing time and $$ for training reinforces that you think your standards are important.

You also need management practices and systems that reinforce the standards in every way.  It's no good saying "do what I say, not what I do".  Every level in the company needs to reinforce the importance of behavioral standards.

Treating your employees well is another pre-requisite to good service.  (Incredible that we need to see proof of this, isn't it?  "Is there really a linkage between employee engagement and customer loyalty?  i.e. Do we really have to be nice to people to make money in this business?")

The bottom line is -- if you don't think you need to be civilized to your staff, why should they treat customers any better?   The fact that many do, even in the middle of long-standing labour disputes, is a tribute to the employees, not the skills of management.

And yet we do ask the loyalty question.  My own view is that service quality represents the margin of preference when you have choices. 

By way of example, I spent about 50+ nights in one city over about a year, where there were four convenient hotels to choose from.  I tried them all.  The first one I weeded out  did not have enough dining variety close by.  One of the others had too small a lobby area, and there was no place to relax at night.  The difference between the last two was largely service.  A few staff members learned my name in one of the hotels, and I kept going back.  When you spend that much time away from home, it is nice when someone remembers you.  Here's the hotel.

Customer service is a nuts-and-bolts game.  It takes a clear definition of what the experience is supposed to look like, and reinforcement from every angle you can think of. 

And then you get the kind of experience that can impress a polished executive like my acquaintance from Rogen, and make him want to tell a dozen or so of his friends.  And you can't buy that kind of ad any other way.

Rewarding Customers to Create Raving Fans

Passionate Users is really a great blog.  The posts are a bit long-ish, but they have tremendous insight into the customer experience. 

Kathy Sierra, one of the site's authors, relates a story about having to choose between practical and fabulous eyeglasses at a store where she has shopped for years.  She went with the practical ones, and the optician ordered both for her, with the funky ones as a complimentary thank-you for all her past business.

"Oh, I talked to my wife last night about you, and you've been such a great customer that we decided you might want to have some fun... so we went ahead and made those purple ones for you as well. They're on us."

For the author, this was not just about the thank you, or the complimentary freebie, it was about the emotional high from the whole connection.  Worth a read, and will make you wonder how you can do more to acknowledge your own loyal customers.

The comments are also worth a look, as they get into the debate about whether such treatment needs to be consistently offered or not.

Loyalty Programs Turning Into Giant Cross-Category Alliances

Loyalty programs are moving from discount programs into more complex alliances, according to Rupert  Duchesne, President of Aeroplan Canada.   He had some interesting things to say over morning coffee last week at a seminar.   

1. More and more, typical loyalty programs will create less and less loyalty.  Notable exceptions are the programs offered by Sears and Zellers. 
2. Consumers want portability of their points under programs
3. As a result of points 1 and 2,  major programs are going to consolidate into competitive alliances which will look more and more like the battles of giants
4. Inclusive loyalty programs need to take these major spending categories into account:  GAS, PHARMA, BANKS, TRAVEL and GROCERIES   
5. Wal-Mart doesn't have a loyalty program -- they put this 3% cost into lower prices.  So loyalty programs that are really just discount programs may actually be doing damage to the companies that sponsor them, if they compete with Wal-Mart primarily on price
6. Starbucks has created unreasonable loyalty (speak for yourself, there Mr. Duchesne, I think it's quite rational, actually)
7. Only one in 6 of their 6 million members are regular flyers
8. Aeroplan aspires to make their miles as fungible as currency

After his talk, I had a chance to ask him if Air Canada was actually at risk due to their relationship with the now-independent Aeroplan.  Mr. Duchesne told me that this risk is actually the reason that they are in a 20 year agreement, and the non-renewal provisions are favorable to Air Canada for that very reason.  For example, Aeroplan would have to wait a full year to align with another carrier if they did not renew with Aeroplan.

If he's right, things could get interesting in Kansas, Dorothy.  Stay tuned, especially to see which grocer lines up with Aeroplan, and which with AirMiles.  And what does this mean for PC Financial?  (Maybe they start PC Travel???)

Can I help you find something?

All the focus on CRM might make you think that the behavior of sales staff doesn't matter much.  You couldn't be more mistaken.  Small things can make a big difference in the retail customer experience: like whether someone offers to help you, and how that offer is delivered.   

The rising threat of DVD-by-mail services such as this one has Blockbuster working hard on customer experience these days.  And they are doing more than changing their late fee policy. They are trying some things to improve the store-front experience as well.

Have I reached the party to whom I am speaking?

The telco world has two kinds of firms in it these days:  the ones that have been around for decades and have engineering in their DNA, and the ones that are newcomers and have marketing in their DNA.  Those with engineering DNA sometimes struggle to provide a n integrated customer experience, and Bell Canada is no exception.

If you have ever tried to figure out how to configure the nodes for your Business ISP service, understand your toll-free number billing, or questioned why a small business is getting FOUR statements every month, plus bonus statements quarterly, there is good news on the horizaon.  Smart marketers like Marianna Ciocio are thinking about SMEs, and this is real cause for hope.

Because she is thinking some very interesting and insightful thoughts.

Ms. Ciocio spoke to an event earlier this week on B2B research and marketing to SME customers.   This is someone who is observing carefully, and listening to customers.  Let me share a few of these observations with you.

SME customers struggle with the integration of telecom.  They don't have specialized technical staff to deal with it like those enterprise customers do: they're on their own.  They're not always sure how to put the pieces together.  And they find it frustrating to deal with multiple suppliers.  (You are your own systems integrator)  IT and telecomm are becoming almost indistinguishable, but the model to put them smoothly together is not yet clear.  Should telco's provide servers?  Should they lease you a PC? 

Funny isn't it -- when we were all talking about convergence, we didn't clearly see the strategy mish-mash that would be faced by enterprises attempting to develop a coherent market position. 

A long-term focus on customer acquisition has made retention and loyalty a poor cousin.  (I can certainly vouch for this, every time I call to find out why I can't get the discount being offered to acquire new high speed customers.) 

Market segmentation has tended to be based on internal spend -- how much is the customer spending with Bell every year.  (Doesn't this sound so much like financial services?)    There is a need to move towards more behavior based segments and targeting, looking at the whole value delivery system.   And not just at a point in time, but throughout the business life cycle.

Good questions are being asked.  Like, when in the life of a business does the need emerge for basic service?  Is it before you register the company name?  When you find an office?  Before or after the domain name?  And when does the need emerge for additional telcom and other services?  What are the life events in the business that trigger these needs? 

The history of the company as an engineering company is something of a burden for them culturally -- in the past, they generally had the product in mind -- or even built -- before they started the research.  Now they are trying to look out at the behaviors involved in running a business, interacting with suppliers, interacting with technology, and the problems people have.   

They are starting to look for areas of opportunity in the customers, not in the technology. 

The cultural history is not unique by any means -- there are many examples of relatively introverted companies, especially where there has been a strong regulatory framework in place.  The benefits in these industries have been incredible stability and reliability.  Let's face it, when you pick up a land line and there is no dial tone, you look out the window to see what disaster has befallen.  Because it sure isn't some sort of re-boot situation.   

Like other complex service businesses, this firm is also challenged by the need to work effectively across functional and business line silos, and the organization is not really designed to make that easy.  (Did I mention the similarities to financial services?) 

So don't expect change to happen overnight.  But there are some smart committed individuals over there that would like to make things better.  And here's to them.  Because we all need telecom.

Friendly Reminders from FTD

A few weeks before Chrismas, I received this friendly reminder in my e-mail:

Dear Susan Abbott,

  As requested, we're reminding you that December 17 is an important date
  to remember, and you registered it as **Client Name**.

  Make the day memorable with a gift from FTD.COM.
  Choose from festive flowers, blooming plants, gourmet gifts and more!

  Plus, the holidays are right around the corner! Send cheer to family and friends
  with a gift from our Christmas Collection.

  You can earn airline miles or hotel points with your purchase. Order now!

  Sincerely,
                 
  B. Barton
  Customer Service

  P.S. To add reminders for other special occasions, sign into your Personal Account.

Friendly and useful.  And not accompanied by monthly spam-of-the-month e-mail.   Nice job FTD.     (Now could you create more creative arrangements please?)