Customer satisfaction Archives

Customer Value vs. Valued

by Bob Walker | Sep 20, 2021 | Customer experience, Customer satisfaction, Marketing research, NPS, ROAS, ROI

Customer Valued?

In our age of automation and AI, marketers risk becoming detached from how their business practices, products, and services are perceived by their customers. Marketers have it all wrong by focusing solely on customer satisfaction or a willingness to recommend: these measures do not capture the customer’s relationship-based perspective. Customer satisfaction or willingness to recommend are thin, shallow, “last click” based, and largely transactionally-oriented.

The customer can be momentarily satisfied with their last transaction (product or service): it delivered a promised benefit. But that is, by definition a transactional experience, and often devoid of any emotional richness.

In working through these distinctions with our clients, the notion of customer value (or customer lifetime value, aka “CLV”) can be the polar opposite of whether the customer feels valued.

From a financial or marketing perspective, a company’s approach to customer value is formulaic: extract maximum value from the customer. The metrics take many forms: ROI, ROAS, narrowly targeting, and upselling to name a few. But this “share of requirements” approach (i.e., siphoning off more revenue from the same customer) is entirely transactionally driven. There is no “emotional stickiness” created with the customer from a single transaction, or even from multiple successful transactions.

From the customer’s perspective, feeling valued creates an emotional connection which is deeply internalized and an incredibly powerful sticky magnet for retention.

As a CMO, how would you answer this question from the customer: “Does this company appreciate my business?” If you don’t know, consider path-to-purchase or other in-depth insights work. Test new programs. Test reward structures. In what ways can your company demonstrate to the customer that their business matters – that they themselves are valued?

Even highly satisfied customers can be quickly dislodged by a competitor who can, for example:

Offer products at a lower price
Offer products with more features/benefits
Offer products that appeals to more users
Offer products that have more use cases
Deliver products in less time
Leverages variety-seeking behavior or changing tastes

In email automation and drip campaigns, we have learned that with more personalization comes better response – and a greater likelihood of consumers responding to offers. But everything now comes through as personalized (except for the occasional misfire, like “Dear {FirstName}”), which slowly erodes that competitive edge. But all of this plays in the transactional space, devoid of motivation or emotion.

In our client work on customer value, we have noticed that measures related to the customer’s perception of his/her worth to the company is a far better predictor of customer retention than “shallow” measures of satisfaction or willingness to recommend. One measure (NPS), in particular, is especially weak in this area. Correlations with purchasing are always the lowest. This really should come as no surprise, since it is a thin ‘report card’. Management teams gain some comfort by following the herd who also uses NPS, but it provides little actionable insight into the underlying value equation.

We urge CMO’s and marketing leaders to think about longer-term results and to focus on the customer’s perception of their relationship, rather than the transactional value extraction approach embraced by many marketing organizations today.

As Peter Drucker famously noted, the purpose of business is not to make a profit; it is to create a customer.

Why are Customer Satisfaction Research Experiences so bad?

by Bob Walker | Nov 13, 2020 | Business strategy, Customer satisfaction, Research design, Sales forecasting

Automated surveys are everywhere, triggered by retail and online purchases, a flight you took, or your dentist. If you are like me, you probably get wee bit cranky when you experience a badly conceptualized customer feedback interview. We seem to be swimming in an ocean of really, really bad feedback programs. Why is this happening, and why does it seem to be happening on such a massive scale?

The two primary causes of poor survey quality are CRM auto-generated surveys and poorly executed DIY. There isn’t much you can do about this. What you can do is make sure that your programs are world-class.

The most effective customer satisfaction programs embody thoughtfulness, intelligence, and even a little irreverence. Too often, programs miss the mark and companies can actually damage the relationships they are trying to nurture with poorly executed programs.

In my experience, customer satisfaction programs can implode for multiple reasons:

Questions assume that customers can accurately isolate all elements of their purchase experience. Marketing researchers and data scientists spend a great deal of time identifying all of the dimensions that need to be evaluated. But most customers are incapable of remembering more than a few things (even if they were experienced moments before). Expecting hyper-granular customer feedback is unrealistic.
The emotional state of the buyer at the time of purchase is ignored. If we know someone’s emotional state before or during a purchase experience, we can better understand how customers are interacting with us as marketers – and do something about it. If I have a surly register clerk, a rude gate agent, or am in a poor frame of mind, my ability to provide useful feedback is compromised. Conversely, if I am always greeted with a smile at Starbucks do I care if my latte doesn’t have enough whipped cream?
The longitudinal (holistic) relationship with your customer is overlooked. In addition to the current wave of feedback, have you bothered to look at the same customer over time? Have you acknowledged the customer relationship in your questions or survey flow? Are you nurturing or alienating? Questions that capture the longitudinal dimension can help business operations improve.
Questions are mistimed with product use (e.g., questions are asked before the product is used, or asked when not enough time has passed for the product to be appropriately assessed). If I am asked to complete a survey off of a cash register receipt, but the questions are about products I’ve yet to use, how am I expected to report on my level of satisfaction?
Framing questions around the product or buying occasion and not the customer. It’s not about the product, it’s about your customer. Did the customer feel valued? Were they treated with dignity and respect? Staples recently sent me a feedback request labeled my “paper towel experience”. This is awful.
Don’t assume that a purchase is in a category where repeat buying is routine. This includes recommendations for additional purchases that the retailer would like me to consider. My favorite solicitation was after I had purchased a car battery. Amazon proudly suggested other car batteries I might want to buy because well, you know, you can never have too many car batteries.
Don’t focus on a single score, or assume that buyers will, on an unsolicited basis, recommend products to others. I have written about this in previous posts. Consultants continue to push this “single score” narrative. It is plain wrong. Yet companies are willing to pay for this sage guidance.

Companies should not feel compelled to collect feedback after every purchase or experience. This is unnecessary and saturates the customer with far too many requests for feedback. This causes damage not only to the company, but the data of everyone else who need feedback. Companies are best served by collecting data on an Nth-name transaction basis and letting sampling theory do the rest.

The compulsion to collect feedback after each and every interaction harms data quality – and weakens the bonds of the buyer-seller relationship.

Customer satisfaction programs deliver important KPI’s to assess performance and, programs should be conducted because it makes a material difference.

But we must avoid the temptation to mindlessly automate customer satisfaction programs. The goal is to make the customer happy. The way things are going, it’s causing more harm than good.
If you’d like, let’s continue the discussion.

The ROI of Customer Satisfaction

by Bob Walker | Aug 25, 2020 | Business strategy, Customer satisfaction, Marketing research, ROI

I have seen many CSAT programs change a company’s culture by quantifying problems and isolating their causes, thus boosting retention and profitability, and moving from reactive to proactive.

Conversely, some companies don’t think that customer satisfaction (or “CSAT”) programs can add value because “we know our customers”. This comment conveys a misunderstanding of what a well-designed CSAT program is, and the value that it can bring to an organization.

In the short term, maintaining the “status quo” is a cheaper alternative, but it avoids the broader discussion about total (opportunity) costs. How much revenue are you leaving on the table by assuming that you know what the customer wants?

Here’s a basic example. Let’s say you run a $50MM company. What would you be willing to spend to prevent 10% of your customers from leaving?

At a 30% gross margin, you saved $1.5MM in profit. A CSAT program that costs $50K a year has an ROI of 30x! Now do you get it?

Even if we are conservative, a 5% reduction in defection produces $750K in savings, and an ROI of 15x – still impressive! By improved problem detection, by alerting key people about problems in real-time, thus cutting response time, we help mitigate customer defections and avoid a significant amount of lost business.

What are the fundamental problems with what I call a “status quo” approach? Here are a few:

Markets are changing. Your competitors are not standing still; they will continue to innovate, merge with others, or be acquired. Markets themselves morph from regional to national to global, and regulatory frameworks change.
Customers are changing. New customers replace old, and this year’s buyers are demographically, attitudinally, and behaviorally different from last year’s buyers, who will be different next year’s. How are you planning for that?
Expectations are changing. Customers are constantly evaluating their choice options within categories and making both rational and emotional buying decisions.

Maintaining the “status quo” is NOT a strategy: it is a reactive footing that forces you to play defense. In a status quo culture, you are not actively problem-solving on behalf of customers, nor are you focused on meeting their future needs!

Consider a couple of scenarios in which a CSAT program could add value:

If you run a smaller company, most of the company’s employees (including management) are interacting with customers every day. The company also gets feedback, albeit subjectively or anecdotally, every day. Corrections to sales or production processes can be done rapidly, and the customer is presumably happy. But even in smaller companies, there is limited institutional memory (i.e., a standard way to handle a problem or exception). One solution may reside with Fred in finance, another with Pat in production, or someone else entirely. There are no benchmarks to compare performance (other than sales). It is likely that the same problem will surface repeatedly because line staff or did not communicate with each other, or it might appear in another form in another department (i.e., a parts shortage caused by an inventory error). Unless management is alerted, larger “aha” discoveries are missed. This can cost hundreds of thousands of dollars in lost revenue.

If you run a large company or a major division, the gulf between customer feedback and management grows wider. News about problems may not reach management because they are viewed as unremarkable. And a company doesn’t have to be huge for these dynamics to occur. The evidence shows that by the time a company reaches just 100 employees, it behaves much like a multi-national enterprise. In a small company, it is everyone’s responsibility to fix a problem; in a large organization, it becomes someone else’s responsibility. The opportunity loss becomes even greater because there is no system in place to alert key staff or a specific department. As a result, millions of dollars in revenue can be lost.

A well-designed CSAT program that alerts the appropriate people or department can add significant value. At Surveys & Forecasts, LLC we offer basic CSAT programs (with key staff alerts, dashboards, and an annual review) for just $1,000 a month.

Get in touch to learn more! We’d love to work with you and help you improve satisfaction, retention, and save your organization some significant money.

Are You an SMB? Use the Three T’s!

by Bob Walker | Jul 8, 2020 | Customer satisfaction, Marketing and strategy, Medium-sized business, Small-sized business

If you work for a small-to-medium-sized company (SMB) and are in a marketing role, you are no doubt strapped for resources in the form of people, money, or time. This is especially true when it comes to research for understanding customers, prospects, and how to best message and market your product or service. The day-to-day challenges of managing your business can easily get in the way of thinking and planning about ways to grow or expand.

A “plan” does not scream out for immediate attention. Plans assume that conditions are stable and predictable — but in the new era of COVID-19, conditions are far from ordinary. As a colleague of mine recently said, “If you see lots of umbrellas, you can conclude that it’s raining, but it doesn’t tell you when it will rain next.” Or if there is a hurricane coming. The obvious challenge we are ALL facing now is how to meet future customer needs given the restrictions imposed by COVID-19, and a future that is far from certain.

What kind of planning can you do right now? Certainly, long-term planning will be challenging, but let’s start with some simple rules — what I call the “three T’s” of SMB marketing.

Targeting: involves identifying your target audience, the best way to reach your target, and the best way to communicate your story (messaging).

Work hard to make sure your user target is right. Begin to dimensionalize it by using readily available data sources. A great place to start is the US Census (business and county data patterns), and companies that sell secondary research (e.g., “pre-packaged” reports on various categories, from companies like Statista or Packaged Facts).

Ask yourself: what problem are you solving? How is your solution better than the competition? Use custom research to better define your target and refine your USP. Common descriptors are “market studies”, “positioning research”, and “market segmentation ” to understand and size your market. In some cases you can link survey data with shopper data (which can be appended to your surveys) to understand who you should target. Some of this can be done subjectively based on your own knowledge, but back up your opinions with some hard facts.

If you are in a fast moving consumer goods category (FMCG), or any category where customers have multiple buying opportunities during the year, consider targeting loyal customers or loyal competitors. They are unlikely to be consuming all of their category volume solely from either you or the other guy. This is sometimes called a “share of requirements” strategy — i.e., the share your brand has of total category consumption.

As another close-in strategy, find non-buyers who fit the profile (demographically, attitudinally) of loyal customers, as this is likely to reap rewards. Initially, maximize your reach (i.e., the total number of people exposed to your message), but do not over-emphasize it. If launching a product, it is initially a numbers game. Not every consumer or prospect is equally valuable/profitable, but you have to start somewhere.

If you are lucky enough to have a marketing or media budget, now is the time to re-examine all of the possible ways to target customers… via social media (e.g., Facebook, Instagram, Pinterest, LinkedIn), advanced and addressable TV (read more from media expert Bill Harvey here), and linear (live) and local TV. But more importantly, is your messaging on-strategy?

Testing: test different messages, selling points, products, or features in each channel you advertise, to educate and communicate. Test, test, test!

Testing is an iterative, tactical process that also feeds your business strategy. The more you learn, the more your strategy will adapt. You must continuously test to find that winning message, product, or formulation for your target (or targets). Give special consideration to testing among loyal customers (if you have them) or best case prospects. As noted, loyal customers are an ideal research audience, and can provide significant insight, as they are already pre-disposed to you behaviorally and attitudinally.

Pay special attention to testing your creative. Experts in media attribution assign about 80% to the impact of creative (i.e., the combined impact of the raw information about your brand’s story, combined with words, images and sound) on conversion. Put another way, if your message resonates, the teacher will give you an automatic ‘B’! The rest depends on the delivery mechanism and overall customer journey. With so much fertile ground in the creative itself, focus your initial efforts here.

Many platforms allow you to A/B test different offers in real time (i.e., pricing, flavors, colors, products), messaging (different creative executions), and delivery schedules (i.e., continuous advertising, vs. flights). Testing resources here include Central Control or independent platforms like One Count. Don’t get distracted with the more sophisticated attribution modeling companies (e.g., C3 Metrics, Sequent Partners) – as an SMB, you’re just not ready for them yet.

Occasionally, when I talk about doing survey research, SMB clients think I have three heads, but do not discount the power of survey research to provide insight into what consumers are looking for, or to help narrow down options for your retail store or e-commerce site. Get a free SurveyMonkey account, or use forms-based tools like Constant Contact, Google Forms, or Office 365 Forms to gather feedback. Some of these tools are basic, and you may need to graduate to a more sophisticated platform as your testing needs grow, but their basic feature set is excellent.

Here’s another idea: leave your office, go out into the world (mask on, of course), and visit some real stores! Woo-hoo! Yes, lots of commerce is done via the web, but the vast majority is still brick and mortar, and the retail environment is closest to the end customer. If you already have distribution, go visit stores where your product is on-shelf. Note what is working, and what is not. While you are there, check out your competitors, or hire a mystery shopping firm to see if there are problems in finding your product. Are competitors better or worse than you? In what ways? How can you improve?

Tracking: once you have identified your target, and you have tested and identified messages for your target, monitor how well you are doing.

If you can’t measure it, you can’t manage it. Develop forms of continuous reporting, i.e., sales x channel x region x segment; or customer reviews; or other forms of objective feedback. Build monitoring systems using dashboards and visualizations to know whether refinements or adjustments are needed. Consider an ongoing advisory panel comprised of customers or clients, or a heavy user panel, to give you regular feedback on your product or service. Gather ideas from distributors/resellers to learn about issues that you might be unaware of. Talk to competitors if you can. Smartly designed research can yield significant insights.

Most of all, just listen. Keep your ear close to the ground and gather feedback like a sponge. Review each customer rating through an objective lens and see how it can enhance or improve your business. Don’t have a thin skin when it comes to feedback of any kind. Customers can be especially sharp: the internet lets people hide and in turn ‘permission’ to be nasty. Take the high road.

Last, this doesn’t have to be expensive. Well-designed research and good judgment can go a long way to help your business thrive and grow. As your business becomes more successful and more sophisticated, the need for feedback on individual aspects of your business will increase (i.e., individual products, or new customer targets).

As your needs grow, consider working with an expert to help identify problem areas and to refine your overall marketing plan. After all, if your marketing problems were that easy to solve, you would’ve figured them out by now. It will be money well spent.

Five Simple Questions to Assess Customer Satisfaction

by Bob Walker | Apr 9, 2020 | Analytics, Customer satisfaction

Determining whether your customers are happy or not shouldn’t be a complicated, mind-numbing exercise. Too many companies believe that they cannot afford to conduct customer satisfaction programs because it will be either too complex, too expensive, or feel that they don’t possess the skills to analyze the data when it comes in. I’d like to put this misconception to rest.

In my many conversations with small- to medium-sized business owners this seems especially true. SMBs often have smaller marketing departments or lack a reasonably well-developed research and analytics function. It shouldn’t be that complicated, but the huge global management and research consultancies make it that way. They offer various customer satisfaction benchmarking or scoring systems that are complex or based on simulation and modeling. But customer satisfaction research should be a basic function.

I have conducted many customer satisfaction studies for some of the nation’s biggest companies. I’ve concluded that most companies (or, for that matter, business units or divisions) only need a core set of key measures to help them understand what customers think and feel about their business.

The nice thing about this “core set” is that each question is clear, obvious, and generally self-leveling. This means that you needn’t rely on external benchmarks, nor hire a marquee-name company to feel good about the data you are collecting. It’s unfortunate that many customer satisfaction consultancies try to make prospective clients feel that they have inside knowledge (i.e., without their brilliant insight, experience, or benchmarks, other customer satisfaction data is invalid). It’s just not true.

Below are five simple questions that will help you understand what your customers think and feel about your business. They provide solid diagnostics to help you focus in on areas that need improvement. Optionally, you can start with this core set and modify it to suit your particular business needs – but the incremental value is likely to be marginal. You might add ratings on brand features, or separate product performance from service and support, but with common sense and good judgment, these five questions will likely answer 90%+ of what you need to know about how your business is performing. These questions are:

How satisfied were you with the product or service we provided you today? Satisfaction has been proven to be the best overall measure to assess whether customers are pleased with your product or service. Keep in mind that satisfaction does not predict loyalty: it is a temporal assessment – i.e., a general barometer of product or service performance. Loyalty is best measured by purchase behavior. Alternatively, you can replace the word “satisfied” with “happy” and get the same result. Note that satisfaction is also an excellent dependent measure when correlating with other metrics used by your organization.
If we could change one thing about how we specifically did business with you today, what would it be? We have used this question in multiple studies and have found that it is especially effective at identifying pain points and in informing the customer journey (and informing the analysis of “moments of truth”). The benefit of this question is that it produces a hierarchy, similar to a ranking, by focusing the respondent on one thing. Note that this question is also focused on the most recent transaction. Answers about specific issues typically require a solution closer to the front line, such as a manager, director, business unit head, or head of operations.
If we could change one thing about how we generally do business with you, or our products or services, what would it be? In contrast to #2 above, this question focuses on broader business processes, service issues, and interactions. Use this question in contrast to what customers experience transactionally. General business issues that are out of alignment require senior management involvement.
What one positive thing stood out to you that that we should do more of, or tell other customers about? Once you have cleared out the constructive criticism (above), look for areas where your business is performing well. Use this feedback to improve overall product or service performance, and communicate it back up through the organization as motivational feedback. Leverage and communicate these strengths so that prospects are aware of what you offer and the great value you add.
Aside from the product or service we provided, what was the personal benefit to you? This an optional question that we often include, because it is helpful at identifying “end benefits” – i.e., the key human benefit derived from your product or service. Note that we are not seeking product or service features, but rather downstream benefits that the customer receives from you. For example, your product or service may let a mom regain control over her day, such as freeing up her morning or spending time with her spouse or kids. The answers to this question are especially helpful in messaging, communication, and brand tonality (i.e., the character or feeling of what your business or brand is all about).

Again, the five questions above form a “core set”: there is nothing preventing you from asking other questions, such as brand awareness, usage, behavior, or attribute ratings on the product or service you provide. But companies often fall into a trap of asking exhaustive questions that produce flat results with little variability over time. Our advice here is simple: less is more. If the questions that you want to add are not actionable, trust your instincts and exclude them.

Asking fewer, simpler questions engages the customer in a conversation with you, rather than subjecting them to a relentless barrage of questions.

This core set of questions is especially useful because it forces business owners and managers to review and listen to the comments that customers provide – and offers huge opportunities to gain real insight and make continuous mid-flight improvements. And there are many software platforms that can let you ask your questions for little, if any, cost.

The challenge for you is to read their responses: it is in the nuance of their answers that real improvements in customer satisfaction often hide.

Customer Satisfaction Won’t Inform Your Business Strategy

by Bob Walker | Aug 28, 2018 | Customer satisfaction, Marketing and strategy, Survey research

Many companies have established ongoing customer satisfaction programs: your department or company may be one of them. If not, you probably see many customer satisfaction survey examples once you finish a purchase transaction with a company. The airlines and lodging industries are particularly good at sending out requests for feedback shortly after every flight or stay. Yet a recent conversation with a client gave me pause: he rather confidently indicated that customer satisfaction research was the primary tool used for strategic insight into the performance of their business and the minds of consumers. Um, not.

Customer satisfaction research is not strategic research, and it never will be because it was never intended to be. Customer satisfaction research results cannot identify areas for new product development, a new advertising or communications strategy, or possible new market opportunities. Importantly, customer satisfaction research cannot tell anyone if the business is expanding or contracting, or effectively meeting customer needs, since it is restricted to recent customers.

At its best, customer satisfaction research is a process control and exception reporting tool. But even these goals are sometimes elusive, especially when the measures being used are general and nonspecific. Customer satisfaction can be very useful if trying to determine if specific performance criteria are within acceptable limits. However, the research ‘container’ (i.e., areas of investigation, questions, scales, and metrics used) is generally naïve in terms of whether the dimensions themselves are relevant or not.

One can hypothesize that, in a number of cases, some of the measures being asked probably have little to do with characteristics of the transaction that matter, or where the business is going – or where it is been. As an exception reporting tool, customer satisfaction is useful; as a business guidance and strategy development tool, it is of limited use.

But where does that leave us if most marketing managers and researchers don’t recognize the essential distinction between a process control tool and research designed to help grow the business?

The function of strategic research is to help an organization look out the window and navigate the uncertain and constantly changing road ahead. It is both quantitative and qualitative in nature. Strategic research helps the management team understand their customers’ attitudes and behaviors about the products they are using – and also those of their competitors. Additionally, strategic research helps identify the direction in which category users feel the market is going. It’s research that is dynamic, and always listening to customers general feelings and more detailed perceptions of your brand or service, rather than restricting their responses to the measures that are predetermined in a customer satisfaction study.

Don’t be lulled into complacency by positive customer satisfaction research results that indicate your business is doing well among your existing customers. You are only getting part of the story, and strategic research (which can take many forms, and should be conducted routinely) involves actively listening and responding to the ever-changing needs of today’s customers.