Category Archives: CRM

CRM strategy and execution.

Volkswagen Lets Down Customers

vwVolkswagen reportedly manipulated emissions tests, an unethical action that is going to cost the company $7.3 billion to cover the cost of recalling 11 million vehicles worldwide.  In addition, the stock price went on  downward spiral, losing 23% of its value.  This may not be the end of bad news for Volkswagen.

The deliberate attempt to mislead officials and consumers is shocking.  We haven’t seen dishonesty of this scale from a major global brand in recent years. From Yahoo News:

The company told U.S. regulators that it intentionally installed software programmed to switch engines to a cleaner mode during official emissions testing. The software then switches off again, enabling cars to drive more powerfully on the road while emitting as much as 40 times the legal pollution limit.

Interbrand, which ranks world’s top 100 brands by brand value each year, had Volkwagen at #31, with a brand value of over $13,716 million.  The brand saw a 23% jump in value from 2013 to 2014.  Volkswagen has a great portfolio of brands including Audi, Porsche and Bentley.  It’s global ranking and brand value are sure to decline as a result of this scandal.

Toyota lost a lot of brand value when they recalled over 5 million vehicles due to the “unintended acceleration” problem.  In that case, an extensive investigation revealed that there was no “electronic defect in Toyota vehicles”.  There was no accusation that Toyota deliberately did something wrong.

In Volkswagen case, any savings from the fudged emissions tests would have been insignificant compared to the penalty, damage to brand equity and future effort needed to win back customer trust.  Doing it right the first time would have been far less expensive.

It will be interesting to watch if and how they win back consumer trust.

A Few More Thoughts on Social Couponing

I was recently interviewed by News 97.5FM on this topic.  Most of what I said was reiteration of the earlier blog entry on social couponing.  The interesting part is when small business owners called in to express their views.  The few that called didn’t have a positive experience with social couponing.

You can listen to the interview here:

Social Couponing Interview – Part 1 and Social Couponing Interview – Part 2

It is increasingly evident that small firms that use this technique for customer acquisition will be disappointed if they don’t have a strategy for converting the coupon consumers into full paying, regular consumers.  From the consumer side, as consumers get used to great deals, will they ever want to go back to paying a full price?  There are more close to a 100 coupon sites now.  A great deal, it seems, is just a mouse click or two away.

One of the callers during the radio show said, (paraphrasing) “coupon people are coupon people.” That could be true.

Story of a Lost Customer – Lessons for Brand Engagement

Last year I switched to a new land-line telephone service provider.  For years I was overpaying with my previous telco.  Over an 18 year period, I reckon I’ve spent at least $36,000 with this company.   Finally, one day I called customer service and asked them why they were overcharging me when lower rates are available.  The terse response was that the rates are publicly posted and that it was the customer’s responsibility to switch plans if the one they had did not serve them well.  To adjust injury to insult, the tone of the call center agent was plain rude.

There is no doubt consumers have to be vigilant and ensure that their interest is protected at all times.  In this case the business did not do anything illegal.  But they sure didn’t look out for the customer’s best interest either.  Isn’t there a moral responsibility? What if companies operated with a different mindset?  What if they also looked out for the customers’ best interest, at least once in a while?

The company could have handled such a profitable customer in a couple of different ways.  They could have automatically switched me to lower rate and then informed me that this is their way of appreciating my business relationship with them.  Alternatively, they could have called me or written to me and proposed that I switch to a lower rate to save money.  I would have been delighted at such a call/letter.  Such communication would have presented them a great opportunity to sell me another service.  Delighted by their service, I probably would have fallen for their sales pitch.  Instead, they chose to do nothing.

If they had taken the aforementioned steps, they may have lost a little bit on my monthly bill, but I sure would have stayed with them.  Their proactive approach to saving me money, would have been worthy of blog posts and tweets.  I would have spoken about it to not only friends and family, but to my students and business associates.  I might have considered using this as a positive example in my professional writing and speeches.  Such endorsement and word-of-mouth has real value.

First they lost residential account.  They lost the opportunity to sell me a bundle of other telecommunication and entertainment services.  Then, when I needed a business line, I chose a competitor.  I should have been a brand ambassador.  Instead, I am a brand detractor.  I felt that I was taken advantage of.  Their single focus was on the high margins I afforded them.  My long-term value (from my own spending with them and the value of WoM I can provide them) was unimportant to them.

A couple of weeks after I left them, I received a standard card from the company, signed by a VP, expressing regret that I had left them and wanting my business back.  It sounded very insincere.

What is my advise to companies, based on my personal story?

  1. Treat customers fairly.  That’s the sure way to build brand reputation.
  2. Ensure every employee is trained to treat customers with respect and courtesy.  Every touchpoint and interaction with the company should create a positive impression, even if the customer’s demands are not always met.
  3. Don’t focus just on short-term profits always.  Consider the long-term value (direct and indirect) of retaining happy customers.  In an earlier post titled Select, Not Fire Customers, I talked about Sprint firing some of its “unprofitable” customers.  But too often, it is profitable customers who leave because they don’t like the way they are treated.
  4. Proactively manage customers, especially the profitable ones.  Some degree of churn is inevitable.  But there is little to be gained by losing profitable customer due to neglect.
  5. Don’t use brand engagement and customer experience as buzzwords.  If you really want to create strong brand engagement focus on delivering superior customer experience.  Often, a fundamental shift in management’s attitude is needed.  In many cases, changes to compensation plans are needed to ensure customer satisfaction and experience get the requisite attention.
  6. Last, but not least, look at the damage caused when you ignore the above five recommendations.  The negative sentiment that is expressed by unhappy/former customers can’t really help the brand.  Positive sentiment in today’s social media world cannot be manufactured.  Positive sentiment occurs when companies show customers that they really care.

Faulty Feedback Forms

Recently I conducted a training seminar for managers from several organizations on “Managing Customer Satisfaction and Loyalty.” The participants came from SMEs, large businesses and the non-profit sector. I asked the 30 participants if their organization measured customer satisfaction on a regular basis – two-thirds did not! How does one run a successful company without knowing if we are indeed delivering value to our customers? Most of those who did not measure CS were SMEs, which was not surprising.

After the session was over, I started thinking about how well companies measure customer satisfaction. It is one thing to say we do it, and yet another to actually do it. I collected several customer satisfaction/feedback forms. My unscientific sample included: Subway (fast food/quick service), Pizza Delight and Boston Pizza (restaurant), Delta Hotels (hospitality), Dell Canada (computers & technology), Sears Canada, Leon’s and Kent (Retail). For Delta and Dell, I got their online feedback forms.

My analysis led me to conclude that most forms are poorly designed. They either do not ask the right questions or do not measure using the right scales, which would diminish the quality of data obtained. Let me elaborate on this conclusion. Specific problems I identified included the following.

  1. Response Scaling or Categories. Leon’s uses a YES/NO (dichotomous) scale. Often response to questions like “where you satisfied with the service at the front desk” is not black or white. It is useful to know the degree to which customers like or dislike a particular aspect of the service. Subway uses a 3-point scale (excellent, satisfactory and unsatisfactory) and Boston Pizza uses a 4-point scale (excellent, good, fair, needs improvement), which is interesting because I would think that any response that is less than “excellent” is in need of improvement. The response scales convey the impression that for Boston Pizza “fair” is good enough. Kent, a home improvement chain which competes with Home Depot, has 10-point scales, which in my view is better than all of the previous examples. A scale with more response categories provides more variance, and will help in identifying consumers who have varying levels of satisfaction. I consider 2, 3 and 4 point scales to be clearly inadequate.
  2. Scale versus Item. Customer satisfaction is a construct that needs multiple measures. Anyone trained well enough in survey research will tell you that using multiple items leads to more reliable measurement.
  3. Measures. There is a great deal of variance in the actual measures found in these surveys. Some like Dell Canada, Kent and Sears (in the latest version I saw) don’t have an overall satisfaction question or an intent to revisit question. Dell Canada, instead, chooses to focus on four specific aspects of online user experience (interesting Dell.com asks only the “overall satisfaction” question and does not probe on individual drivers of satisfaction). Some firms like Leon’s include loyalty measures and others like Boston Pizza have a “willingness to recommend” question. It just appears that not a lot of thought has gone into the creation of these comment cards. Most of the feedback surveys or cards focus on ratings of individual performance attributes (like knowledge of staff, friendliness of staff, appearance of the place etc.) and don’t have measures which can be used to a create satisfaction/loyalty index. The scales are also not suitable for predictive modeling. I would like to see surveys, even short feedback cards, measure attribute-level satisfaction as well as overall satisfaction and loyalty.
  4. Wording. Some of the customer feedback cards are poorly worded. There are two types of errors:
    • Two-in-one Questions. Delta’s questionnaire consists of several two-in-one questions like “comfort and layout.” Comfort of a room may be determined by several factors with layout being one of them. Even if layout was perfect, overall comfort could have been low due to several other factors.
    • Use of Jargons. Dell uses the term “usability” in their Canadian site. According to Wikipedia:
  5. Usability is a term used to denote the ease with which people can employ a particular tool or other human-made object in order to achieve a particular goal. Usability can also refer to the methods of measuring usability and the study of the principles behind an object’s perceived efficiency or elegance.

    Wouldn’t the term “user-friendliness of the site” be easier for the average consumer to understand than the term “usability”? Opt for language that is easy to understand.

  6. Data Collection. The vast majority of these are self-reporting type of instruments. Leon’s has a shorter version of their form that is implemented via phone (using IVR or interactive voice response survey). Delta Hotels offers both a paper form and an online form. Little thought is given to increasing the response rates for these surveys, which is typically very low. Leon’s again does a nice job offering a chance to win a $50 gift certificate and Kent has a similar offer. In other places, the comment cards are tucked away near the counter or some place and the onus is on the customer to request them. Among the firms with multiple locations, some like Boston Pizza don’t ask for the location of the restaurant. It would be a good idea to ask this question so that different locations can be compared on customer satisfaction. In my recent experience, Leon’s was the only place where I didn’t have to ask for it. They included it with my purchase receipt. Consumers are bombarded with surveys these days. Make it easy for customers to complete the survey and provide an incentive to respond. Without a good response rate month after month, it would not be possible to track key metrics.
  7. The Objective. These comment cards and surveys seem to measure different things. It is unclear how much thought has gone into what these surveys are supposed to accomplish. What analysis will be done with the data? What managerial insights will be generated by such analysis? Thinking about what analysis will be done and what managerial questions will be answered and what gaps will be identified makes it easier to identify the right questions and ask them using appropriate scales. If some really useful insights have to emerge from this exercise, then more thought has to go into the design and implementation of these feedback cards and systems.

In addition to methodology issues, it should be borne in mind that asking the customer for feedback provides the firm two great opportunities:

  • Make Customer Feel Important. By asking for opinion, you are letting your customers know that you care about them. If you can also show how you have used customer feedback in the past to improve your service, it adds to your credibility.
  • Reinforce Brand Identity and Brand Experience. The survey process should be treated as another critical touch point, where the customer comes in contact with the brand. I was surprised to see the varying quality of the comment cards. Sears was the worst. Sears used to have a fairly decent card with English on one side and French on the other side (in Canada), with the Sears logo at the bottom. A couple of weeks ago, I went to Sears and asked for the feedback form. After searching several messy drawers behind the counter, the clerk in the children’s clothing section gave me poorly photocopied form which did not even have the company name or logo! In terms of presentation, Pizza Delight and Kent were very good. Pizza Delight has a neatly folded 2″x4″ card which showed the logo and graphics in colour and they also attached a little ball-point pen to the comment card… a nice touch. Kent has a professional looking card with pre-paid mail and even a signed letter from the general manager, which suggests they take customer feedback seriously. Dell Canada’s online comment card did not have its logo (they may fix this soon), while its US counterpart did. When customers are asked for feedback, that’s a great opportunity to reinforce the brand identity. Clearly, some companies, even big ones, are not capitalizing on this opportunity.

The problem is everyone thinks they can design a survey. After all, what’s so difficult about asking a few questions? As evident from my limited sample, a lot of things can go wrong if the expertise, attention and resources required to do it well are not allocated. The worst thing is that a poorly presented survey or feedback card can present the brand in bad light.

In closing, while I don’t excuse SMEs that do not ask their customers for feedback, it is not surprising that many SMEs are not measuring customer satisfaction. But among the firms that do measure, even many larger firms are executing it poorly both from a methodological and branding standpoint. That’s a shame.

As always, I welcome your comments and feedback.

(This post originally appeared on November 5, 2007)

Select, Not Fire Customers

Sprint made news lwhen it sent “you are fired” letters to about 1000 customers who, the company claimed, made excessive amount of calls to customer service. Apparently, these 1000 customers combined made more than 40,000 calls a month in total! See a termination letter sent to a customer. Notice Sprint’s attempt to make it “easy” for customers to end the relationship.

Sprint, not surprisingly, received a lot of flak for this move. Most of the blogs I’ve seen have been highly critical of Sprint’s actions. The 1000 problem customers represent a miniscule percent of Sprint’s 53 million customer base. When you have that many customers, there will be some that are not profitable. Was the negative publicity created by the termination of a small number of high maintenance customers worth it? It appears that some of Sprint’s competitors may benefit from the fallout. Did Sprint make a mistake?

Before I answer it, I’d like propose a three-step approach which can help avoid such problems.

  1. Customer Selection. Very few companies seem to pay careful attention to who they choose to serve. Businesses can and need to select their customers carefully. Segment your market and choose the segments you wish to target. This will ensure a better fit between the company’s offerings and the customers’ needs. In a category like wireless/mobile, usage patterns and needs are not homogeneous across customers. It is important to understand these segments and create offerings that are meaningful and offer value. By choosing not to serve certain segments or types of customers, a lot of subsequent pain can be avoided.
  2. Creating Expectations. Even if you target the “right” customers, it is still important to create the right expectations in terms of service features and service standards. Most of the time, in my experience, customer experience is rated poorly because the firm did not do a good job of setting appropriate and realistic expectations. Sprint said in the letter sent to the 1000 customers, “The number of inquiries you have made to us during this time has led us determine that we are unable to meet your current wireless.” When these customers were sold the Sprint service, was a proper assessment of their needs made? Or did the customer needs change over time? Where the customers over-promised?
  3. Delivering on Expectations. As I’ve said in other posts on this blog, delivery is critical to customer expectations. If a brand does not fulfill its promise, it loses its credibility. In this case, Sprint does not seem to be doing a good job here too. According to a Zogby poll commissioned by MSN, Sprint ranked at the top of the list on the Customer Service Hall of Shame. It is possible, that the 1000 customers who were terminated were the most vocal among a large number of dissatisfied customers. The Zogby poll was based on a national sample of over 5000 customers. So, there is mounting evidence against Sprint. I’d rather promise a little less and deliver more.

This is not rocket science. It is surprising to see so many companies not getting the basics right.

Was Sprint’s action prompted by bottom line concerns? According to an article in the Contact Center World the average cost per call to a contact center varies from $3.50 and $32.74. If assume $5 per call in Sprint’s case, 40,000 calls per month to serve 1000 customers translates to $200,000 cost or $200 per customer. The cost could have been higher. Clearly Sprint was losing money on these folks. Some CRM and customer profitability and customer lifetime value (CLV) proponents would argue that dropping these customers is the right thing to do.

Incidentally, I had the same discussion with a group of executives last week at a seminar I gave on Customer Experience and Loyalty Management. Most of them were uncomfortable with the idea of saying “you’re fired” to a customer and some even suggested that certain companies have a larger societal obligation that goes beyond generating profit from each customer. Their arguments were compelling.

Saving about $200-500K by getting rid of these customers will not make a big impact on the bottom line. Clearly these consumers were using an extraordinary amount of resources. In my view, the situation has been mishandled badly. The negative publicity could end up costing more.

There is a deeper malaise within Sprint, given the very low service rating in the Zogby poll. They have to address this service delivery issue first At the same time, set the customer expectations appropriately to match the service standards.

Under the right conditions, it may be appropriate for a business to choose not to continue the relationship with certain customers. There are cases where ethical and societal considerations would suggest otherwise. Most businesses would rather swallow the losses and carry a certain percentage of unprofitable customers. Sprint’s decision was bold. But if they had a great reputation for service excellence and customer satisfaction, they would’ve been on firmer ground.

I’ve noticed that this topic gets most people riled. Look forward to your comments.

(This post originally apppeared on July 15, 2007)