Customer Loyalty as a Key Support Strategy John Hamilton President Service Strategies Corporation... evolving customers from highly satisfied to intensely loyal.

Customer Loyalty as a Key Support Strategy What makes customers really happy? 1.Customer service experience 2.Ease of doing business 3.Price versus value 4.Company reputation

Customer Loyalty as a Key Support Strategy Whether surveying for Customer Satisfaction, Loyalty or both... Customer Survey Process

Customer Loyalty as a Key Support Strategy Whenever we survey a segment of our customer population about satisfaction or loyalty we are using statistics, or more specifically, Inferential Statistics. That is, we are inferring something about the entire population by looking at a sample of that population. Beginning with a solid foundation

Customer Loyalty as a Key Support Strategy Population (Universe) –All Items of Interest Parameter –Summary Measure about Population Sample –Portion of Population Statistic –Summary Measure about Sample PP P P in Population & Parameter SS S S in Sample & Statistic But first... Some key Inferential Statistics terms

Customer Loyalty as a Key Support Strategy Most Service Vendors have a survey process to measure customer satisfaction –Periodic surveys - Perceptions –Event/Transactional surveys – Actual experience Establish required sample size, target response rates and confidence level Quantitative results and verbatim feedback gathered Results are analyzed and communicated

Customer Loyalty as a Key Support Strategy Common Errors in Customer Surveys Since the usability of any customer survey depends upon the accuracy of the results, error control plays a critical role in the research process. Sampling ErrorsSampling Errors The inaccuracy of the results of a survey when a non-random sample of a population is used to infer the satisfaction of the total population. –Only Closes cases –Exclusion period

Customer Loyalty as a Key Support Strategy Respondent Influencing Errors – Leading the respondent Leading question by telephone survey interviewer. Survey wording bias. “We value our highly satisfied customers etc.. Support representative pleading… “My job depends on your rating”

Customer Loyalty as a Key Support Strategy Questionnaire Structure Errors – Question Ordering bias. –Overall question Questionnaire Language error –Ambiguous - Are you satisfied or very satisfied with the support you received? When respondents purposefully or mistakenly give incorrect answers to survey questions Respondent Error

Customer Loyalty as a Key Support Strategy Customer survey rating scales have “Satisfaction” set at the mid-point or just above Example from seven point scale Extremely Dissatisfied Very Dissatisfied Very Satisfied Extremely Satisfied

Customer Loyalty as a Key Support Strategy “ TOP BOX” IS SIMPLY A TERM USED TO DESCRIBE THE HIGHEST RATING ON A CUSTOMER SURVEY SCALE Definition from the “Support Center Practices” Certification program Highest rated measurement to better understand customer loyalty and retention –Question: –Question:“Overall, how satisfied are you with the support provided by your vendor ?”

Customer Loyalty as a Key Support Strategy Point Rating Scale 7-Point 10-Point  Satisfaction Top Box  Extremely Satisfied  Extremely Dissatisfied

Customer Loyalty as a Key Support Strategy Now let’s look at the evolution from highly satisfied customers to intensely loyal customers. But, first we must consider...?

Customer Loyalty as a Key Support Strategy Satisfaction Satisfaction = Meeting minimum expectation (32% chances of losing customer) Loyalty Loyalty = Exceeding customers expectation and securing future commitment (0 to 3% chance of losing customers)

Customer Loyalty as a Key Support Strategy It costs five to ten times more money to get a new customer than it does to keep the customers you already have John Tschohl, founder and president, Service Quality Institute. 5% increase in customer loyalty can increase profits by 25 to 85% Harvard Business Review Loyalty

Customer Loyalty as a Key Support Strategy Satisfaction scores for the automotive industry have ballooned up to 90%, while repurchase rates have remained mired below 50%. Bain & Company’s research has shown that in business after business, 60% to 80% of customers who defect to a competitor said they were satisfied on the survey just prior to their defection. Loyalty Customer Satisfaction Repurchase Rates

Customer Loyalty as a Key Support Strategy Loyalty Average investor churn now exceeds 50% per year.... and how about employee and investor loyalty? Employee turnover rates of 15-25% are common. Cost of losing a service employee can be as high as $250K

Customer Loyalty as a Key Support Strategy

Employee Sources of Job-Related Meaning Related to Management’s Options to Influence That Source Sources of Meaning What Management Can Do to Increase Meaning, Thereby Increasing Inner Fulfillment Stock options.Make the stock grow and split. (Very difficult.) Career growth and promotion. Provide for the company’s continued growth so that there are many slots to which one can be promoted. (Very difficult.) The daily satisfaction of providing a valued service to customers. Give employees all of the necessary tools and authority to provide a valued service to their customers. The daily satisfaction of being a valued member of their organization. Help employees align their daily actions to provide value to the organization and recognize them for doing so. The daily satisfaction of fulfilling their own personal work-related needs. Help employees see how daily satisfaction of organizational and customer needs is satisfying their own needs as well. This concept was supplied by John Wright of Computer Associates.

Customer Loyalty as a Key Support Strategy

In 2005, Walker Information conducted a U.S. and European study on customer loyalty in the software and hardware industry.

Customer Loyalty as a Key Support Strategy Of all the major software and hardware companies evaluated as part of this Walker Loyalty Report, just 12 were designated as Loyalty Leaders. Earning high percentages of truly loyal customers, these companies also have relatively low percentages of customers in the high-risk category. The 12 Loyalty Leaders are: Adobe Apple Cisco Systems Dell EMC² Hewlett-Packard IBM Microsoft Oracle SAP Sun Microsystems Symantec

Customer Loyalty as a Key Support Strategy Walker Loyalty Reports categorize Loyalty in four quadrants * Walker

Customer Loyalty as a Key Support Strategy Walker Loyalty Reports categorize Loyalty in four quadrants * Walker

Customer Loyalty as a Key Support Strategy Hardware Customers / U.S. The U.S. Hardware industry generates less customer loyalty than the Software industry, despite Hardware's higher scores in customer experience areas. This suggests Hardware companies have fewer barriers to switching, more competition, and/or less differentiation. Hardware products are more commodity-like than Software, which is why vendors seek to wrap the products into more consultative solutions for customers.

Customer Loyalty as a Key Support Strategy Software Customers / U.S. Software as a total sector in the U.S. maintains more truly loyal customers than does the U.S. Hardware industry. Europe's Software customers are less truly loyal than the U.S. customers and score similarly to Hardware in Europe. Despite having more loyal customers, Software scores fall slightly below Hardware on company images, and even lower on customer experiences. Within Software, CRM loyalty is slightly below the norm in the U.S., driven by concerns with total cost of ownership and product quality.

Customer Loyalty as a Key Support Strategy How focusing on Customer Loyalty improved results at Cisco Systems* over the past few years. * Wim Elfrink, Senior Vice President of Customer Advocacy, Cisco Systems Keynote Speaker at AFSMI Conference – October 2005 Truly Loyal 2003 – 58% 2004 – 67% 2005 – 70% Accessible 2003 – 10% 2004 – 12% 2005 – 10% Trapped 2003 – 15% 2004 – 7% 2005 – 7% High Risk 2003 – 17% 2004 – 14% 2005 – 13%

Customer Loyalty as a Key Support Strategy A useful Customer Loyalty Index is the percent of surveys with top box selected on all three of these questions. ReferenceWorkbook Page 5-68 Measuring Customer Loyalty SCP Support Manager Certification course

Customer Loyalty as a Key Support Strategy The road to Customer Loyalty at Hewlett-Packard. * ML Krakauer, Vice President & General Manager, Technology Services, Hewlett-Packard Keynote Speaker at AFSMI Conference – October 2005 First time fix rate Hold time Quality (monitoring) Time to resolution Highly Satisfied Each of these case attributes were found to be highly correlated with high levels of customer satisfaction.

Customer Loyalty as a Key Support Strategy The road to Customer Loyalty at Hewlett-Packard. * ML Krakauer, Vice President & General Manager, Technology Services, Hewlett-Packard Keynote Speaker at AFSMI Conference – October 2005 Highly Satisfied Highly Likely to Recommend Highly Likely to Repurchase Loyalty Index The percent of customers that scored a five on all three of these survey questions make up the HP loyalty index.

Customer Loyalty as a Key Support Strategy McKesson is a client of SatMetrix and uses a variation of the SatMetrix Customer Loyalty Index analysis. The CLI is based typically based on the answers to four questions: 1.How satisfied are you with this provider’s overall performance? 2.How likely is it that you would recommend this provider to a friend or colleague? 3.How likely is it that you will continue to purchase products/services from this provider? 4.If you were selecting a similar provider for the first time, how likely is it that you would use them? McKesson only uses the first three questions which are the same as the three questions used at Hewlett Packard and recommended in the SSC Certified Support Managers course.

Customer Loyalty as a Key Support Strategy The SatMetrix CLI analysis separates customers into four categories. Promoter –High scores on each of the loyalty questions. They are committed customers and are very likely to provide recommendations Content –Medium to high scores on each of the loyalty questions. Although they are likely to remain loyal, your company should develop action plans so that “Content” customers become “Promoters.” Disappointed –Average scores on each of the loyalty questions. They are dissatisfied with one component of loyalty, and could be easily lost to competitors if your company does not address their needs. Lost –Low scores on each of the loyalty questions. They exhibit a high level of dissatisfaction on the loyalty questions. At this point, it is better to concentrate your efforts on customers in the Disappointed or Content categories.

Customer Loyalty as a Key Support Strategy Customer driven, recognizing that our customers determine the definition of value Relentless pursuit of excellence, setting aggressive goals and measuring against progress Innovation, open-minded, willing to embrace new ideas and challenge our current way of doing business Speed, acting with a sense of urgency, a bias for action and a passion to win People, sharing respect for one another and a common sense of integrity in our work

Customer Loyalty as a Key Support Strategy

The Idea in Brief You only have to ask your customers one question: "How likely is it that you would recommend our company to a friend or colleague?" The more "promoters" your company has, the bigger its growth.

Customer Loyalty as a Key Support Strategy Calculating your Net Promoter Score Group your customers into "promoters" (extremely likely to recommend), "passively satisfied", and "detractors" (extremely unlikely to recommend). Then subtract the percent-age of detractors from the percentage of promoters. PromoterPassiveDetractor Extremely likely Extremely unlikely Neutral

Customer Loyalty as a Key Support Strategy Comparing Net Promoter Scores and Financial Results A more sophisticated approach is to use profitability-based segmentation to align customer experience with corporate goals and objectives. Wintel PC’s US onlyRental Cars Airlines US onlyPackage Delivery

Customer Loyalty as a Key Support Strategy Market research on lost customers by major companies shows that 14% leave for better product, 9% for cheaper product, 68% because of poor service and/or service provider’s attitude, which can be easily avoided by designing, measuring and monitoring effective customer service process. Why businesses loose customers! New slide

Customer Loyalty as a Key Support Strategy Decision to re- purchase Re- purchase Post purchase evaluation Awareness Initial Purchase Re-purchase Loop Each time a customer buys, he or she progresses through the buying cycle. The first-time buyer goes through five steps. The sequence of purchase, post purchase evaluation, and decision to re-purchase then form a re-purchase loop that is repeated multiple times, during a customer’s relationship with a company and its products and services. Loyalty and the Purchase Cycle

Customer Loyalty as a Key Support Strategy Immunity –Inoculated against competitive threats The big “R’s” –Relationship and revenue –Reference-ability –Repeat business

Customer Loyalty as a Key Support Strategy Loyalty is the commitment you must EARN from your customers in order to maintain an ongoing profitable relationship