All Posts Tagged With: "customer loyalty"
Think Like Your Buyers
In the 1980s, four out of five American car buyers were loyal to the company that manufactured their brand. I remember growing up in a Chevy family and we had friends who were Ford people and we were as loyal to our car brand as we were to our religion.
In 2009, only one in five Americans was loyal to the same car brand.
In “The Manufacturer’s World Has Changed Forever” (IndustryWeek, July 14, 2010), Robert Bloom provides this contrast in customer loyalty to point out that the purchasing behavior of customers has changed, which is old news to any company that’s managed to keep its head above water the last two years, but his case study is interesting. Italy’s Fiat Auto reported a net loss of nearly two billion euros in 2002 and experts thought it would not survive. In 2008, it reported a trading profit of more than 1.1 billion euros—a three billion euro turnaround in six years.
How did Fiat Auto do it? Bloom lists several key actions:
- Terminated a failing venture with General Motors to gain full decision-making autonomy
- Eliminated an entire floor of executives to reduce costs and bureaucracy
- Cut Fiat’s product development time in half to get products to market quickly
- Reorganized and re-energized its dealer organization to assure sell-through
- Redesigned every Fiat product to create Customer Preference for the Fiat brand and products
According to Bloom, manufacturers can take several steps to compete in today’s global marketplace—and those…
14Jul2010 | Steve George | 0 comments | ContinuedFast Food Customer Focus
When Pal’s Sudden Service, a small fast-food chain in Tennessee, won the Baldrige Award in 2001, its president, Thom Crosby, suddenly realized that winning prohibited them from reapplying for five years. “I called up the head of the program and asked if we could decline the award and stay in the system. He didn’t want to hear that.”
Pal’s continues to conduct annual internal assessments because, as Crosby states, “I’m a real big believer.” Like other world-class companies, Pal’s benefits from asking and answering key questions that reveal how the organization works. The snapshot produced by this exercise becomes the engine for change, improvement, and success.
The questions explore all areas that are critical to an effective management system. Many of the questions have never been asked, which means many of the areas they address have never been evaluated. And therein lays their power.
A few years ago I asked these questions of senior leaders at an organization that dominated market share in its industry. One question in particular solicited a variety of responses. The question was: How do you determine key customer requirements and expectations?
Many of the leaders talked about how they interacted with their customers daily. Others mentioned customer surveys, complaints, and lost customer interviews, among other approaches. Nobody described a process. I asked how they used the information from these sources to determine customer requirements and they said they knew what their customers required because…
16Jun2010 | Steve George | 0 comments | ContinuedRecommendability Boosts Revenues
Net promoter score (NPS) is a measure of customer loyalty that many companies are using instead of customer satisfaction surveys. You determine your NPS by asking customers a single question: “How likely is it that you would recommend our company to a friend or colleague?” Customers use a 0 to 10 rating scale, and their responses are categorized as Promoters (9-10 rating), Passives (7-8 rating), and Detractors (0-6 rating).
You determine your NPS by subtracting the percent of Detractors from the percent of Promoters. Scores of 75% or higher are considered very good.
Church of the Customer Blog recently reported on the 2010 NPS Industry Benchmark reports released by Satmetrix. The NPS leaders by industry are:
- Airlines: Jet Blue (64%)
- Auto Insurance: USAA (78%)
- Banking: USAA (81%)
- Brokerage & Investments: Charles Schwab (46%)
- Cable & Satellite TV: DIRECTV (27%)
- Cellular Phone Service: Verizon (41%)
- Computer Hardware: Apple (78%)
- Consumer Software: Adobe Systems (37%)
- Credit Cards: American Express (27%)
- Department, Wholesale & Specialty Stores: Costco (66%)
- Grocery & Supermarkets: Trader Joe’s (69%)
- Health Insurance: BlueCross BlueShield of Illinois (5%)
- Homeowners Insurance: USAA (69%)
- Internet Service: Road Runner/Time Warner (21%)
- Life Insurance: State Farm (34%)
- Online Search & Information: Facebook (65%)
- Online Shopping: Amazon.com (71%)
A few things jump out of this list. First, health insurance companies stink. If 5% is the best NPS score, this is indeed a sorry bunch. Second, being the best in credit cards, internet service, life insurance, and consumer software is no great accomplishment. Third, USAA is really good.
Church of the Customer blog…
14Apr2010 | Steve George | 0 comments | ContinuedAn Online Gold Mine
I was halfway into “Lost” when an alarm blared in my hotel room. A recorded voice told me to exit the hotel using the stairs. I did what most people probably do, which was check the hallway and look out the window. I didn’t see or smell a fire. I started putting my shoes on when a different voice announced that we should stay where we were while they assessed the threat. I watched “Lost.” A few minutes later, the first voice once again demanded that we leave the building. I was on the 17th floor and was in no hurry to comply, but I finished getting my shoes on, grabbed my wallet, phone, and briefcase, and headed for the stairs. I never got there: The second voice explained that it was a false alarm and we could return to our rooms.
A month later I stayed in the same hotel. Same thing happened, although they were more efficient this time: They told us to ignore the alarm before I could get my shoes on.
The next morning, the hotel forgot my wake-up call.
When they sent an email asking me to take a short survey, I did, explaining why the false alarms and missed call accounted for the low scores and the likelihood that I wouldn’t stay there again.
A week later I received an email from one of the hotel’s managers apologizing for the alarms and missed call…
30Mar2010 | Steve George | 0 comments | ContinuedWalk in Your Customer’s Body Armor
USAA insures military members and their families. It does this really well: Its customer retention rate is 97.8%.
The company’s call centers are critical to serving customers located around the world. Its call center reps spend six months in training before answering customers’ calls. They eat MREs (meals ready to eat), find out what it feels like to wear Kevlar vests and flak helmets, and receive deployment letters to get them thinking about what such letters mean to the families they affect.
USAA understands its customers’ needs. It was founded by 25 Army officers in 1922; almost a quarter of its management and new hires have served in the military. It has ranked number 1 or 2 every year for the four years of the BusinessWeek and J.D. Powers Customer Service Champions list. No other company has come close to matching its performance. (“USAA’s Battle Plan,” Jena McGregor, BusinessWeek, February 18, 2010)
Mobile customers require mobile banking and insurance solutions. With USAA, a service member can use his iPhone to send a photo of his check to the USAA bank and it is deposited in his account. He can find out his balance with a text message. Later this year, he should be able to email or text-message money to family and friends for immediate deposit. He can use his phone to initiate a claim from the scene of an accident. If he’s looking at new cars, he can use his…
1Mar2010 | Steve George | 0 comments | ContinuedEngaging Customers in a Digital Age
In a recent survey of businesses in the UK, mainland Europe, and the U.S., 62% of respondents agreed that differentiating their value proposition by customer service rather than by product was essential or very important (click here for the article). In fact, as customers, 74% said they were likely or very likely to buy more from a company as a result of service excellence that goes beyond expectations.
The Baldrige Criteria ask how you engage customers to serve their needs and build relationships. Engaged customers are loyal, do more business with you, and recommend your products and services to others, which is why more and more companies are taking steps to develop “very satisfied”—as opposed to merely “satisfied”—customers.
One obstacle to engaging customers, according to Pegasystems, which commissioned the survey, is the constraints imposed by legacy Customer Relationship Management (CRM) platforms. Only 43% of respondents can provide a consistent customer experience across all delivery channels. Part of the problem can be traced to the digital divide: legacy CRM systems don’t have the flexibility to adapt to differing requirements and can’t deliver a high-quality customer response to all customers.
I’m reminded of a story Michael Dell tells in Behind the Cloud by Marc Benioff and Carlye Adler. Benioff had told Dell about an internal networking technology they were using at salesforce.com to create a feedback loop with their customers. Dell adapted the technology to create IdeaStorm, an online community forum that…
15Feb2010 | Steve George | 0 comments | ContinuedBottom-Line Value of Customer Engagement
“Organizations that engage their customers outperform those that do not.”
The statement comes from a Gallup report, Customer Engagement: What’s Your Engagement Ratio?, available on Gallup’s Web site. Gallup backs up the statement with results from extensive cross-industry research:
- In average organizations, the ratio of fully engaged customers to actively disengaged customers is 0.8:1. (Fully engaged customers are emotionally attached and rationally loyal; actively disengaged customers are emotionally detached and actively agnostic.)
- In world-class organizations at or above Gallup’s 90th percentile, the engagement ratio is 8:1 — 10 times larger than the average organization’s ratio.
- Fully engaged customers represent an average 23% premium in share of wallet, profitability, revenue, and relationship growth over the average customer.
- Actively disengaged customers represent a 13% discount in the same measures.
The report cites an example of a restaurant chain with an engagement ratio of 5.4:1 in 2006 that improved its ratio to 7.2:1 in 2008. Over the same time frame, its overall U.S. sales increased by 30% and per-unit sales grew 13%. A competing chain’s engagement ratio dropped from 0.63:1 to 0.46:1 over the same period and its overall sales dropped 2% in that period.
“Customer Engagement” is the first Item in the Customer Focus category of the Baldrige Criteria. Gallup’s report identifies five areas that world-class organizations focus on to fully engage their customers:
- Emotional Attachment. Your most profitable customers have strong emotional bonds with your organization that must be honored and strengthened.
- Moving Beyond Satisfaction. Simply…
