Study Shows Customer Experience is Path to Profit

ST. PAUL, Minn., Jul 14, 2008 (BUSINESS WIRE)

Companies that have a definition for customer experience and use this definition in everyday decision-making are more likely to exceed profit and revenue goals than those that don't, according to a new study.

"Finding the Performance Payoff in Customer Experience" surveyed 644 business leaders at all levels of leadership, organizational areas and across industries, from health care to manufacturing. The research was designed and conducted by Aveus, a St. Paul-based global strategy and operational change consultancy.

Definitions of customer experience vary widely. The study breaks new ground by surveying business leaders about how their organizations define customer experience and which definitions yield the biggest performance payoff.

"Perception still hasn't caught up to reality," says Linda Ireland, Aveus partner. "When asked if their focus on customer experience is costing the company money, many business leaders still say 'yes.' But our findings show a clear difference between those who have an organization-wide definition of it and those who haven't. Customer experience is a path to improved profitability, not a trade off from it."

The survey showed that 26 percent of companies with a definition of customer experience report exceeding profit targets, while only 14 percent of those without definitions can report the same.

Furthermore, the survey showed that organizations with the strongest use of customer experience in daily decision-making report the strongest operating results. "Of these elite organizations, 67 percent report meeting or exceeding revenue targets; 65 percent meet or exceed profit targets," says Ireland. "Simply put, these organizations use customer experience as a strategy for achieving performance. And it's working."

Aveus released a first round of customer experience research in 2006. Both rounds consisted of online surveys for leaders at management level and above. Functional quotas were set so the sample was not over-represented by sales and marketing professionals. With more than 1,000 respondents combined, these two unique studies establish a baseline for the payoff from customer experience use in the United States.

"We believe that by examining the use of customer experience and its link to financial and customer performance, business leaders will be able to make the operating decisions that hold the strongest potential for performance payoff in their organization," Ireland says.

Managers essential to excellent customer service and experience management

Reference is often made to the People – Service – Profit chain, to point out that success in achieving excellence in customer service and customer experience management begins and ends with People management.

Middle managers are an essential organization ingredient to make this happen. Yet, so many companies, especially the (often technology based) fast growing ones frequently promote relatively young people based on technical competence. The balance between the competence to "managing things" and "lead people" is often uneven.

Leadership expert Jim Clemmer in a recent Leadership Letter (worth subscribing to) points out these key challenges facing newly appointed managers:

Knowing Thyself - It's natural for new managers' egos to become a bit inflated. After all, it's a big deal to get promoted. But it's important after coming down from that "high" to ask yourself "is this what I really want and does it fit my strengths and passions?" Too many managers accept a promotion because there may be more money, or they covet more power. Taking a hard look in the managerial mirror would result in many more happy offices.

Servant Leadership - Highly effective managers serve and support the people on their team. Too many new managers see their role as command and control.

Navigating Change - It's easy to be pulled "below the line" and feel victimized by major changes in an organization. Strong leaders make people hopeful. They help their teams navigate through tough times. It is the leader's mood that most impacts the team.

Coaching and Developing - I agree with Peter Drucker; the central role of a manager is developing people. This is where a new manager may have a real challenge because his or her natural strengths may be to do work and handle problems. Making the transition from solving problems to making sure people have the skills to solve problems is a big change.

Tame the E-mail Beast - Technical tools are great for informing, staying in touch, and operational management. But we don't lead through e-mail. Most people are overwhelmed with data, analysis, and the sheer volume of daily e-mails. New managers must counterbalance IT tools with verbal communications.

Deal with the Moose-on-the-Table - It's often easier to avoid tough conversations or touchy topics. That's like ignoring a moose standing in the middle of the meeting room table. Everyone knows it's there and is annoyed by it. It takes courageous leadership to initiate those difficult conversations or to hear the team point out that leadership behaviors are doing more harm than good.

Upward Leadership - Many new managers think their main role is leading people on their team and perhaps influencing peers. But strong managers also work hard to lead their own boss or influence the bigger organization. They refuse to be victims of weak direction from above.

More complaints leads to better customer service

Yes, it’s true and it’s quite possibly one of the best kept secrets of those companies with superior profits and good reputations. In fact, what may surprise you is that those companies with consistently high levels of customer complaints also have even higher levels of customer loyalty.

More Complaints = Better Business

How does that work? These companies actively pursue customer feedback and see each complaint as a gift rather than a nuisance. They make it easy for customers to let them know what they think and what they experience with their products or services. Only 14% of customers leave for product reasons, 68% leave because of poor treatment when complaining or asking questions. These companies recognize that trust and listening are the foundations for customer interactions. Also, better interactions translate into happier customers and more business.

In my more than two decades of working with companies looking to improve their relationships with customers, I’ve discovered that your most unhappy customers are your greatest source of learning and if you make it easy for them to complain, they offer themselves for free! The customer that does not complain and does not come back is the one that hurts your business most of all! Ninety percent of them won’t come back to you.

Not surprisingly, I found resonance in a recent article in the newsletter of the Toronto Chapter of ICSA (Int. Customer Service Association) by Gail Levitt who provided these critical steps and checkpoints for developing an effective complaint management system:

1. Create and Implement a Complaint Management System Policy Statement

• Communicate standards for conduct, policies, procedures, and resolution in writing so it is clear to all customers and staff;
• Ensure that the policy statement reflects the needs of customers based on value and legality;
• Make it accessible to customers and staff through a variety of media.
  

2. Publicize a Location for Receiving Complaints

• Make it visible and accessible to customers;
• Encourage customers to voice their dissatisfaction;
• Communicate the positive intentions of the company.
  

3. Develop an Efficient System for Record-Keeping

• Design a flexible and efficient system with quick identification of and responses to complaints;
• Enable staff to respond immediately to complaints that must be reported to other departments or distribution networks or legal enforcement or regulatory agencies;
• Monitor the efficiency and effectiveness of the system and make improvements with minimal bureaucracy.

4. Process and Record Complaints Consistently

• Log in the complaint and any relevant data;
• Categorize the complaint for the appropriate resolution and record-keeping;
• Assign the complaint to one person for handling;
• Forward the complaint to additional levels of authority, as appropriate.
  

5. Acknowledge Customer Complaints Promptly

• Establish and enforce response times;
• Personalize the message;
• Talk to the customer if possible by phone or in person;
• Avoid using impersonal form letters or emails;
• Ensure customers with special needs are handled appropriately.

I would like to share with readers that I offer an innovative and very systematic complaint handling diagnostic service. Interested?