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Targeting Your Service Recovery to Avoid the “Hail Mary”

Last week I visited a company in St. Louis who put me up in a Hampton Inn. Hampton Inn isn’t at the top of my hotel list, but it isn’t on the bottom, either. It’s a fine hotel, with a hot tub mercifully free of screaming kids. But as I was getting ready for the day I found my hot water disappearing, and had to shave without any hot water at all.

I was mildly annoyed, but that was all. As I stopped by the front desk for another purpose, I waited (and waited!) for the manager who was on the phone. Finally, I gave up and sought out another staff member, asked my question, and casually asked whether they knew they were out of hot water. In my mind, the conversation was over. No big deal.

I was running late, so sat down for a quick breakfast. The manager then sought me out, apologized for being on the phone, then quickly mentioned they were comping my room, saying “We want you to come back here.”

Great service recovery, you might think. But was it?

Service Recovery is Crucial

Few activities impact a hotel (or indeed, any service company) more than service recovery. Beldona’s and Prasad’s study of hotels in Orlando found that poor service recovery was actually more damaging than having no service recovery at all.

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Three Customer Experience Surveying Principles

The Heart of the Matter

We need to create a standard for customer satisfaction surveys. In this post, I propose the following Customer Experience Surveying Principles:

      1. Make it short;

      2. If you ask it, use it;

      3. Never ask a question when a query will do.

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A few weeks ago I met with another consultant offering customer satisfaction surveys, although as only a small part of his business. The conversation turned to methodology when he said “I just like to put together a few questions, and get something out there quickly.”

When I showed shock at his cavalier approach, he argued, “What you have to realize is that these companies are not in the business of doing customer satisfaction surveys. They just don’t want to spend much time thinking about it.”

I was offended at the remark, but held my tongue. What I wanted to say was “They’re not in the business of doing accounting, either. Do you suggest they do a similar half-a** job of that, too?” I simply could not believe he argued for such a deliberately casual and careless approach towards a customer-facing effort.

Unfortunately, he is not alone in this disregard towards interrupting customers. Why else do we find so many terrible surveys? He is casually regarding two pillars that I hold dear: My customers and my brand. How you treat the first directly impacts how they see the second. But apparently this viewpoint is unique.

How else do you explain JC Penney’s satisfaction survey question: “Please select the number 2 for this question.” I get it – they want to validate the scientific accuracy of the response. But what does this say about their opinion of their customers? “We don’t think you’re paying attention, so we’re going to ask a question that shows our low opinion of you.”

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Drivers: the Secrets to Creating a Great Customer Experience

The Heart of the Matter

Typical Customer Experience Measurement Programs treat all customers as one homogenous group, rather than as unique segments. These programs need to analyze customers based on their value to the organization and analyze what drives the behavior of each segment. This white paper lays out a process for developing and analyzing these Customer Experience Drivers.

Introduction

Do you understand what motivates your best customers and sets them apart from the rest? For example, why do some customers:

  • Come to your restaurant every week, whereas others only when they have a coupon?
  • Call you first for consulting help, while others make you bid for the lowest price?
  • Require constant hand-holding, compared to others who are very inexpensive to maintain?

And how do you find more customers like the first group?

Simply said, some customers are engaged with your company, love your products and services, and trust you. These customers tend to be your most loyal and profitable. Others buy from you because you are convenient or have a good price. These are often expensive to serve and contribute less to your business’ bottom line. You need to learn what drives the former, to find more like them.

This is true for both B2B and B2C companies. In fact, because the order sizes are typically much larger, this is even more critical for B2B companies.

Without this understanding, product development and marketing become a best-guess effort. Driver Analysis is the process used to determine what motivates your best customers.  It extends your current NPS, Satisfaction, or Engagement studies to discover and measure these underlying motivations.

Driver Analysis is the practice of including motivations in your Customer Experience Measurement Program, then correlating these motivations with your customers’ Lifetime Value. This process separates those who purchase based on convenience or price from those truly profitable customers who view you differently, and then shows the motivations of each group.

For example, quick service restaurant customers selected the chain they visited the most. Within a restaurant’s most-frequent visitors, those who were “engaged” spent $8 a month more here than the average. What drove this engagement was not “the Quality of Food,” or “Speed of Service.” Instead, it was “the Warmth of the Greeting.” Similarly, Gallup found that B2B customers who rated their partners high on “Impacts my business” are stickier – they remain customers longer, and are more profitable. The specific drivers vary by company – even within an industry – but are critical to understand how to motivate customers to spend more with you.

Another reason to use drivers is to target efforts in your different delivery segments. Using the restaurant example above, imagine the situation where a general manager is told her store NPS or satisfaction score is low. While this is important to know, it does not tell her how to improve these scores. Drivers provide insight on where action is needed.

Similarly, drivers help B2B account teams know where to focus. Satisfaction or NPS helps evaluate the state of the relationship – drivers identify how to improve it.

So, how do you discover these drivers? See Figure 1 for an overview. The process starts with your staff, and then expands to your customers.

White Paper

This post continues in: Drivers – the Secret to a Great Customer Experience White Paper. Please download it to learn the entire end-to-end process!

Shopper Education: The Hidden Casualty of Price Wars

Introduction

How do shoppers learn what they need to know about new products? Traditionally, the retail associate provided this product wisdom, but slashes to labor budgets have left shoppers on their own, accelerating their move to online competitors.

The Harvard Business Review’s The Future of Shopping by Bain consultant Darrell Rigby is an outstanding article on the future of retail. Rigby shows the risk to brick and mortar retailers if they do not react to the growth of online shopping. He proposes a vision for omnichannel retailing – combining the impact of a physical store with the opportunities of online and mobile shopping. It is a terrific call to action, filled with great thinking. The original link requires a registration to HBR, but you can also access it here.

This article led me to consider one aspect only briefly referenced: the role of product and category information in the shopping experience, and how changes in retailing have removed the traditional source of information from the shopping experience.

Consider the evolution of brick-and-mortar retail as it experienced the growth of its online cousin. As Rigby recalls, in the early days of online shopping retailers built separate Internet organizations, dreaming of spinning them off for Internet riches. This separate reporting structure led to disconnects between the online and in-store experiences. With the crash of the DotCom bubble, companies eventually integrated the Internet with their brick and mortar stores.

Or did they?

Certainly, integration is better today than in the past. Shoppers can research whether a book is available at their local Barnes and Noble. They can order a product at Best Buy and pick it up 30 minutes later (Penney’s, on the other hand, has had issues). The Brick and Mortar experience has merged into the DotCom. But physical stores have not returned the favor.

To understand why this is important, we need to review the Price War between traditional retailers and Wal-Mart and online competitors, and how this war impacts the store experience.

The Price War

Much of retail lives in conflict with Wal-Mart and its Every Day Low Pricing. Costco and low-cost pure-play Internet competitors such as Amazon.com have only increased these pricing concerns. These are not trivial fears, as these competitors’ continued growth shows the impact of Every Day Low Pricing. But selling against low price is nothing new. Retailers can still win, even with this price disadvantage.

But retailers cannot match Wal-Mart on price without a complete revamp of their business model. The fastest way to Chapter 11 is to attempt to pair a high-service experience with the lowest price. The economics simply do not work. Unfortunately, many retailers are landing in this No Man’s Land, with Best Buy as Exhibit A.

Last February Best Buy floated moving to Every Day Low Pricing. At the same time, they made no effort to discontinue their sales-focused labor strategy (as opposed to the cheaper “Where is this product” labor approach at Wal-Mart and Costco, or no labor at Amazon). Neither did they end their use of promotions to drive sales. This disconnect creates higher labor costs than competitors like Wal-Mart, who already enjoy the advantage of traffic drivers such as groceries. It is a no-win game, and Best Buy’s recent results show what happens when you try to play in this No Man’s Land. Neither they nor their customers are winning.

The alternative is to embrace the shopper, equipping her with the information she needs to make a purchase, rather than leaving it up to her to do the research.

Consumer Education: The Loser in the Price War

Consider how high-consideration products were purchased before the Price Wars or the rise of the Internet. TV created awareness, leading consumers to talk it over with a few friends before going to the store. Shoppers reviewed the product packaging (P&G’s “First Moment of Truth”), then found a sales associate to learn more about the product and its alternatives. They either purchased it, went home to read Consumer Reports, or visited a competitor to talk with their sales associate for a second opinion. Overall, a fairly linear experience, and one on which the store associate had a huge impact on a shopper’s (and retailer’s) success.

That world no longer exists. As Google argues in Zero Moment of Truth, consumers are now much more likely to search for information or ratings before making a purchase. This is partly because the growth of the Internet and product rating sites makes it easier. But a contributing factor is that retailers forced consumers into this model.

The Price War caused retailers hoping to keep track with low-cost competitors to cut any cost possible. Labor was their biggest expense – so it was reduced substantially, with disastrous impact to the customer experience. While this Wall Street Journal article focuses on the checkout line, shoppers see the same results in the aisles: Retailers have cut labor for short-term gains, but with long-term consequences to the customer experience.

Remember Circuit City? They were once the consumer electronics leader, even being featured in the seminal Good to Great. They were a model company. Until they weren’t. What big decision accelerated their demise? They fired “3,400 of arguably the most successful sales people in the company” in a move to save costs. But this type of move was not unique to Circuit City – retail labor was seeing regular cuts across the board.

Unfortunately, now that this labor has been slashed, shoppers are expecting more education than ever before. They want to compare products and learn what others think. They once went to stores specifically to ask associates for this type of information. With no one to ask, consumers are finding it the only way possible – by turning to alternate methods, particularly the Smart Phone.

Imagine this scenario: Your shopper is at your store when she remembers she needs a new coffee maker. She looks for a sales associate to help narrow down your ten models, but you do not staff this aisle. She reads the packaging, but does not find enough comparable information to make an informed choice. She reviews the shelf tags, but its four bullet points only repeat what is on the packaging.

You have now left her with three choices:

  1. Make her best guess (if she’s wrong, expect a return – which is bad for both you and her);
  2. Go home, do some research, and buy one from you (or your competitor) next week;
  3. Use her Smart Phone to educate herself on the product and check out reviews.

What do we expect? Of course she uses her Smart Phone. And once she pulls it out, you have lost. Because why wouldn’t she pull up a competitor’s site while she’s at it? And if their pricing is better, she will order it from them – especially if she can pick it up on her way home.

The irony is, you as the retailer have all the information she needs to buy today. You have the ability to accelerate her purchase, sending her home with the perfect coffee maker today. For example, Target’s website offers 15 separate product details: product height, width, and even the surface treatment (matte!). It is easy to compare between models, and she can also read reviews (43 for the Mr. Coffee 12-Cup Programmable Coffeemaker – Black). But none of this is in your physical store – at least not conveniently. There may be a kiosk five aisles over – but she is not going to go look for it.

A 2011 study at an international retail chain found that “Insufficient Product Information” was a top driver of customer disengagement, resulting in significantly lower spend for consumers reporting this problem. Today’s shoppers expect more information – not only in consumer electronics, but also in:

  • Groceries (Is it healthy? Organic? Low fat?)
  • Appliances (Is it green? How much energy will I need to run it?)
  • Pet food (According to Google, 1/3 of pet food consumers search for information on these products)

In Zero Moment of Truth, Google reports that the average customer uses 10.7 sources of information before buying. How many of these are yours?

How has it come to this?

How is the store, where we traditionally learned about our product choices, now the place with the least information? It is almost as if we designed the experience to accelerate shoppers’ transition to online shopping.

Product Education is a missing sales driver

It is time for a customer experience do-over. How do you provide the information necessary to accelerate consumer purchases so shoppers buy from your store today, instead of your competitor’s website tomorrow? A quick review of some options:

Increasing labor is clearly one alternative. Retail associates can not only educate shoppers, but also close the sale and add in complimentary products. Best Buy found that for every 10th of a point it boosted employee engagement, its stores saw a $100,000 increase in operating income. While this is distinct from adding labor, it does show that effective associates improve financial results.

Apple is another example. Apple elected an anti-Wal-Mart retail model, refusing to compromise on staff talent or shopper information, and has been rewarded with sales-per-square-foot of $5,626 – easily the highest of any national retailer. I was at a competitor when Apple started their huge retail growth, and we studied them to improve how we educate shoppers. Unfortunately, we could not replicate their model: We had signs, they had people. And people always win.

Labor is the most expensive option, but it is also the most powerful. A 2009 study shows that 10% of all retail revenue was spent on employee wages. However, it also found that increases in labor at the chain they studied were correlated with increases in store profitability. Effective labor works.

But not any labor will do. Apple invests significant time and money into their training, teaching its sales associates a different sales philosophy: not to sell, but rather to help customers solve problems. The quality of your associate talent and management is what makes the difference.

You can also learn from Apple’s merchandising, particularly as it applies to shopper education. Apple supplements their labor with an innovative use of the iPad as a product information source. Each item at the Apple Store has an iPad placed right next to it with links to product information.

Or consider the digital price tag. Today’s paper tag is outdated – information is limited and static. Digital price tags offer the ability to provide updated and detailed product information, supplementing the traditional role of the associate.

The goal of this post is not to put out the all-inclusive guide on how to merchandise effectively, but instead to show how the Price War has impacted the customer experience, particularly regarding how customers research products and categories. Shoppers are leaving bricks-and-mortar retail now – and we are pushing them away. It is time to help them buy from us.

There is still time to react. You can fight the Internet at its own game, by bringing your online information to the shoppers in your stores. Better yet, unleash your killer app – your associates – in the battle. Fighting the Price War while simultaneously trying to engage customers is a losing battle. Select a path today, then invest whole-heartedly. Your customers will thank you.