Category Archives: Customer Value

Why some companies succeed without focusing on customers

Ben Wignall, when owner of the Tasmanian firm, Blue Banner Pickles, used to get a lot customer complaints. Each time Ben’s response would be the same – he put his prices up.

The complaints were from supermarkets that were not able to get enough stock of the famous (in Tasmania only) pickled onion brand. Ben figured that if he put up the price it would dampen down demand and the complaints would disappear. He was right – and very profitable. Blue Banner had 90% of the Tasmanian market for pickled onions – a virtual monopoly – and, like other monopolies, it could dictate the terms and not be too concerned about focusing on customers.

Ben was in for a shock when he expanded into other geographic markets in Australia where there was strong competition and his Tasmanian strategy would not work. He hadn’t realized that the remote island state of Tasmania acted as a market fortress where he could act as a monopolist – but not elsewhere. If you have a monopoly you can probably succeed without focusing on customers….

In fact where everyone in an industry provides a poor customer experience it is still possible to be profitable. Forrester’s Customer Experience Index shows this to be the case in the wireless services industry in which all competitors show similarly low scores. Customer experience is not a differentiator and other factors like market footprint and price dictate results in this growth industry. As my college marketing professor used to tell me:

“Even Donald Duck could run a company profitably in a rapid growth market!”

Dominant market leaders can survive offering poor customer experience for a time due to better distribution or a broad product range. Inertia carries these companies through. But a time comes when these factors are not enough to retain leadership. We have seen this with the successful emergence of online (only) banks and online retailers that have decimated competitors in those industries that could not provide a consistent high-level customer experience.

These are some of the reasons why companies can be successful while offering poor customer experience.

“Make sure you know why you are winning.”

If it is not based on good customer experience, it is likely you are on living on borrowed time.

How long can you continue ignoring your customer’s experience?

Are you paying attention to your customers? A lesson from Wholefoods

wholefoods bike stand

Companies highly focused on customers are always paying attention to what is going on in their lives.

Here is a great simple example from Wholefoods. After seeing an increasing number of shoppers coming to the store on bikes the local store manager decided to install a bike fix it stand. The stand provides a range of tools and amenities that cyclists can use to tune up or service their bikes while visiting the store.

From a business point of view, Wholefoods are adding value to their cycling shoppers experience. Will this positively influence these customers to choose whole foods over other supermarket options? Time will tell.

The message this action sends however is very powerful, it demonstrates Wholefoods is committed to its customers. It is willing to invest in helping make customer’s lives easier without an obvious return.

How do you show you are paying attention to your customers?

Do your customers inspire you? How Virgin Rail was saved by its customers

inspired by customers

Sometimes our customers inspire us to great heights. 

Recently Richard Branson’s Virgin Trains created a major bureaucratic turnaround by sheer force of will and the inspiration of their customers.

On September 10th 2012, Richard Branson and his CEO of Virgin Rail, Tony Collins, were answering questions at a Parliamentary Enquiry in London initiated by Branson. This was about the awarding of the West Coast train franchise (London to Glasgow) to a competitor, FirstGroup – a franchise that had been held by Virgin Trains for the previous fifteen years.

Branson said: “We submitted a strong and deliverable bid based on improving the customers’ experience through increased investment and innovation.”

He added: “Our team has transformed the West Coast line over the last 15 years from a heavily loss-making operation to one that will return the taxpayer billions in years to come.”

Branson, who had considered abandoning the rail industry in Britain after this 4th unsuccessful bid (second each time), decided to put up a fight this time. It was not because of the money – he has plenty of that – it was because of the customers and the staff of Virgin Rail.

Buoyed by 170,000 passenger signatories to an e-petition supporting the company, rallying support from unions and staff, he decided to press the government for an investigation into the transport franchise tendering process and how decisions were made.

When asked on 10th September by a member of the Parliamentary Inquiry why he was objecting, he said: “The customer is the heart of our business”. He went on to say that customers and staff had given overwhelming support to him and the CEO, Tony Collins, and he did not want to let them down. The growth of over 10% per annum in passenger numbers over the previous 10 years was testimony to the customer appeal and quality of the service provided.

The parliamentary Enquiry overturned the decision to award the franchise to the competitor, citing irregularities and lack of transparency in the bid decision.

Here is a man who believes that the most important thing in business is to have satisfied customers and fully engaged, happy staff around a customer culture that delivers increasing value to all stakeholders – and he has proved it in Virgin Rail and other Virgin businesses.

This only happens when your customer culture is so strong that your customers not only like your products and services, but they love you and your organization. When the going gets tough, your customers will “go in to bat for you”.

Would your customers help save your business?

How to be insanely service centric – Lessons from Zappos

Customer Culture Car from Zappos

Zappos is renowned globally as a legend in customer service, partially for the e-retailer’s unique approach to customer interaction management. Zappos invests in the call center not as a cost, but as a marketing opportunity

Recently, Software Advice  Analyst Ashley Furness sat down with the company’s Customer Loyalty Operations Manager Derek Carder. He said the company’s whole strategy is to create loyalty through incentivizing ‘wow’ moments and emotional connections. Here are the four KPIs they use to monitor, track and improve performance:

  • Measure Total Call Time, Not Time Per Call

Instead of valuing quick time to resolution or processing high call volumes, Zappos looks at the percentage of a time an agent spends on the phone. Agents are expected to spend at least 80% of their time in customer-facing communications. This measure – called personal service level – is a way to empower the team to utilize their time how they see best promotes customer loyalty.

Reps who achieve this target get receive rewards, while those who fall below the 80 percent line are coached.

  • Quantify and Reward Wow Moments

Zappos measures calls against a 100-point scale called the “Happiness Experience Form.” This is based on answers to the following questions:

  1. Did the agent try twice to make a personal emotional connection (PEC)?
  2. Did they keep the rapport going after the customer responded to their attempt?
  3. Did they address unstated needs?
  4. Did they provide a “wow experience?”

Agents are expected to achieve a 50-point average or higher. Again, agents earn incentives for meeting their goals, while under performers are required to take extra training.

  • Mine for Idle Chats

Zappos monitors “abandonment time,” or periods when an agent has a session open even though the customer already disconnected from the chat.  Carder said sometimes agents do this purposely to avoid responding.

This strategy of looking for idle chats zeroes in on the cause of unproductivity. When agents aren’t productive, customers wait longer. And the longer they wait, the more apt they are to abandon the session.

  • Reward Perfect Attendance and Punctuality

Zappos uses a program called Panda to combat absenteeism. Employees receive a point for every day they miss work or come in late. Staff with zero points in a given period receive a varying number of paid hours off. These hours can be accrued and stacked for an entire paid day off, Carder explains.

The primary take away is that Zappos created metrics that emphasize creating a relationship with the customer rather than rushing them through the call. At the same time, these KPIs still successfully improve performance and make employees feel appreciated and rewarded.

This is what call center metrics look like when they are designed to maximize value for customers, rather than minimize costs for the company…..

Thanks to Ashley Furness for providing great inputs for the content of this post, for more on this story visit her here

How you can create killer customer insights

Customer Insights

Customer insight comes from a deep understanding of customers’ needs and drivers of customer behavior at a level well beyond what customers themselves can explain. These needs are understood from what customers tell us, but more deeply from what we observe customers doing and the frustrations they have in using particular products, services and companies.

Richard Branson, when trying to identify industries to enter a new Virgin service, asks the brainstorming question – “What are 10 things that nobody would say about this industry?” He and his team then prioritize those ideas that would create value for customers and profits for virgin. The next step is decide if a Virgin service can be designed to deliver some of these unspoken values in that industry. It is a great example of outside in thinking, starting with the customer’s pain points or needs and working backwards.

At Mercedes-Benz, rather than asking customers “What do you think of Mercedes-Benz?” a standard question that gets the standard answers about high quality, luxury and so on, they reverse the question –

“What do you think Mercedes-Benz thinks of you?”

This unique twist on a common question results in much deeper insights. Many customers responded initially by saying thing like “ you think we are made of money … that we have all the time in the world”. These responses  led the company to find ways of making its car servicing much more convenient for customers and to build in servicing costs to the initial purchase or lease arrangement.

In both cases these are questions designed to get customer insight that goes beyond what customers will normally tell us.

Are you asking the right questions?

12 Lessons from a CFO that created a Customer Culture in the finance function

Culture Transformation

In my last blog post I described the customer transformation experience of the Finance & Administration support function in Telstra, a $25 billion Australian telecommunications company. Their CFO developed and implemented a vision of a “value service culture” (known as VSC) in which leaders and individuals viewed their stakeholders as customers and found ways of increasing the value (actual and perceived) they delivered to them. This transformation created a $15 million bottom line impact

In this post I summarize their 12 key learnings from this transformation.

  1. The senior leaders’ passion, ‘walking the talk’, ongoing monitoring and follow-through is critical to success
  2. Initially there is need for a Customer Engagement Council that guides the culture change. It works best if it is relatively small (5-8 members), has a mix of senior leaders and opinion leaders and focuses on overall planning and key initiatives. As embedding of new behaviors occur and support systems are implemented there is less need for such a group as responsibility is spread throughout the organization.
  3. Linking a culture change to a long term corporate or business strategy creates relevance and reduces perception that it is a fad.
  4. A set of guiding principles that reflect an emphasis on corporate values such as empathy and transparency is important in changing mindsets to embrace customer needs. It is necessary to continually emphasize these principles with practical examples to create the new cultural norms.
  5. Creating an emotional connection to the culture change and acceptance of a logical reason for urgency to change takes time in a large group. Creating a sense of fun, competition and reporting of “wins” in the short term can accelerate the diffusion.
  6. For Corporate Support groups that have limited experience in thinking about what they deliver from the customer’s perspective and lack a mindset related to delivering perceived value, the launch phase should provide concrete guidelines at the outset. A comprehensive communication strategy that continually provides examples of the new desired activities usually needs dedicated resources and focus to provide clarity.leading_culture_transformation
  7. Collaborating across lines of business can speed the desired cultural change across an organization. In disparate functions it takes time to find common ground for sharing. An initiative like VSC creates the common ground. Cross-fertilization of best practices makes the cultural change more exciting and effective and demonstrates to new staff the relevance and scope of the customer responsive culture. It also promotes collaboration and innovation.
  8. A clear framework and measurement toolsare vital to guide improvements and reinforce desired behaviors. These include:
    1. Customer culture measurement as a starting benchmark, then for tracking culture improvements
    2. Customer satisfaction metrics that point to areas that need improvement
    3. Customer focus behavior norms incorporated in manager and staff reviews and their key performance indicators.
  9. Technical people who have little experience in treating colleagues as customers will require a set of new tangible skills as well as an emotional connection that sees personal value in doing things differently. The emotional connection is essential for people to take “ownership” of the customer’s problem and follow through with a solution.
  10. Well structured workshops are valuable to alter mindsets and provide skills. These should be implemented as early as possible to provide immediate ‘how to’ concreteness to the desired change in behavior. Workshop attendees who represented all lines of business and all levels were generally inspired by the VSC initiative. Train-the-trainer follow-on enabled them to reinforce their skills, train others and leverage the benefits for the wider group. Also, management workshops to evaluate their own VSC behaviors as role models were useful in presenting a common picture of VSC across the entire group.
  11. People at all levels need to understand that behavior change is difficult. It takes more time than expected to embed new behaviors in an organization, particularly those that require new skills as well as a new mindset. A strong ‘command and control’ hierarchy is present in many corporate support functions because of compliance requirements. It takes substantial and continued effort to break the “police” mindset to enable people to take customer initiatives freely and without fear. Initiatives emanatingfrom the lower levels in the organization need to be encouraged, nurtured and reported.
  12. Culture change can be effected more rapidly in smaller groups, particularly roles that are consultative and rely less on systems that may be unaligned to customer needs. This means that in large groups, the new culture mindset, skills and processes must be effectively taken into all of the small sub-groups as quickly as possible to have the greatest chance of making them stick.

A culture change that produces a customer responsive organization makes culture one of the most valuable assets of a business. It is a organizational capability that can and should be measured and the profit impacts assessed. The end result of this VSC transformation was annualized savings and benefits of $15 million after an 18-month period. These benefits increased as the customer culture became more embedded.

Interested to find out more about how to measure and manage a customer culture? Visit our resources page here.

How CFOs can use a customer culture to deliver $15m to the bottom line!

Internal Customer Culture

A lot of the discussion about building a more customer focused organization centers on the customer facing parts of a business. While there is no doubt major improvements can be driven by sales, marketing and customer service, the real turbo boost to organizational performance comes from support functions that creates a culture around their internal customers.

“If your not serving customers make sure you are serving someone that does”

 Corporate Support functions like Finance, IT and Operations have the potential for releasing huge gains to the business in terms of cost savings and profit improvement. How? By developing a culture where they see their internal stakeholders – that is those to whom they provide their services – as customers.

When they develop a “customer” mindset they think about the value (or lack of) they are providing. They stop delivering reports or services that have no value to their customers and focus on things that will increase value.

John Stanhope, CFO of Telstra, a $25 billion Australian telecommunications business set out to transform his Finance & Administration Group of 2500 people into a support group that would create new value, provide top service and be seen to be valuable by its customers. He painted a vision of what he called a “Value Service Culture” (known as VSC) in which he wanted all his staff to identify their internal (to Telstra) customers and deliver services of value to them. This journey from 2008 to 2012 was an outstanding success.

“We have delivered $15 million per annum in recurring gains from stopping non-value services and activities while creating more value in those services that were needed by our customers. This translates to an additional $55 million added to the value of our business.” – John Stanhope, CFO, Telstra Corporation, 2012.

An investigation by Telstra’s Finance & Administration group of estimated gains and savings conducted in 2010 showed annualized gains and cost savings of $15 million for 2009 representing added value to the business of $55 million.

These gains were derived from analysis of specific initiatives by:

a)    Credit Management acting to collaborate with Telstra customers to reduce bad debts, cost savings from less follow-up calls and longer customer retention periods.

b)   Risk Management & Assurance collaborating with internal customers through an education initiative clarifying compliance requirements and streamlined processes for reducing work for both parties. Cost savings from labor savings.

c)    Corporate Security and Investigations working with Telstra retail shops to provide better processes, follow-up and liaison with those shops most targeted by consumer fraud. Reduction of fraud yielded large cost savings.

d)   All finance and administration groups engaged in activities to reduce duplication and eliminate non value-add activities and reports resulting in measurable savings.

Care was taken to attribute only those gains and savings that could be aligned with VSC initiatives to do with understanding customer needs, providing greater value for customers, monitoring customer feedback and collaborating with customers to deliver the Group’s fiduciary responsibilities more efficiently. Later analysis showed these gains were continued over 2010 to 2012.

Stay tuned for my next blog post in which I will summarize the actions vital to Telstra’s VSC success and the lessons learned from this transformation experience.