Delivering Irresistible Value to Your Customers

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Once you’ve sharpened employees’ focus on target customers and gotten to know your customers through gathering feedback from them and observing them, you can use the information to deliver irresistible value to customers. There are four keys for doing this: understanding the customer value equation, developing satisfaction goals for profitable customers, establishing customer-friendly processes, and designing customer listening posts. In the pages that follow, we look at each of these in turn.

Understanding the customer value equation

What is value? Think about your own experience as a customer. How do you determine what’s most important to you? Did you get the results you expected when you purchased and used a product or service? Were the results delivered the way you wanted them? Did the supplier make it convenient for you to acquire the product or service you wanted? Was the price what you were hoping for?

A calculation known as the customer value equation factors in all these considerations to arrive at the measure of value that the customer perceives. But before we look at the calculation itself, let’s examine in greater detail each factor that goes into it.

• Results. Customers buy results they value. They don’t buy products and services. A customer buys a prescription to deal with an ailment. The result is a cure. A customer fills the car with gas. The result is transportation. A customer buys a dinner at a fancy restaurant. The result is a pleasant evening of fine dining and entertainment.

• Process quality. This is the way the product or service is delivered. Process quality is a combination of such factors as dependability, timeliness, and a professional attitude on the part of company representatives.

• Price and access costs. Price is only one factor in the ultimate cost of the product or service to the customer. When customers consider price, they also add in the access costs. A cheaper product that requires that the customer drive sixty miles to obtain it may not be worth the price. On the other hand, the added cost of overnight delivery may be well worth it to a customer who wants convenience.

The customer value equation can be expressed as follows:

 

Results + process quality/price + customer access costs

Developing satisfaction goals for profitable customers

You’ve listened to the customer. You understand what the customer wants and expects. You know what the customer values. Now you have enough information to develop satisfaction goals for your profitable customers. In addition to sources you have already developed, consider using:

• Service criteria

• Informal polls of employees who deal with customers

What Would YOU Do?

Things Aren’t So Easy at Easy Order, Inc.

Easy order, inc., a mail-order company, has seen its revenues settle into a holding pattern. Market research shows that Easy Order isn’t gaining or losing customers, and the existing customers are purchasing products at a steady level.

Arnold manages Easy Order’s marketing group. To stimulate revenues, Easy Order has approved a small increase in the marketing budget—just enough for one marketing campaign. Arnold and his group decide to use the increase to target established, loyal customers. Their marketing initiative—dubbed “Lift Loyalty”—is companywide. The goal is to increase customer loyalty and encourage loyal customers to buy more products. Employees on the front line are encouraged to look for ways to increase loyalty and sales.

Arnold has lunch with a colleague, Brenda, who manages customer orders. Her group takes orders over the phone and through the company’s Web site. Brenda tells Arnold that she’s worried: her front-line employees are growing frustrated and disgruntled. In fact, she recently lost two employees. One complained she “couldn’t do a good job.” The other said, “It’s not enough just to tell us to look for ways to increase customer loyalty.” To support the marketing initiative, Brenda knows she needs to turn things around—quickly.

But how? Should she ask Arnold to reduce the pressure on her people from the new campaign? What about giving her people more responsibility and autonomy to help customers? Should she bring in new people with the specific skills needed to carry out the campaign? It all seems so complicated . . .

What would YOU do? The mentor will suggest a solution in What You COULD Do.

• Informal polls of customers

• Informal polls of supervisors

• Experience and judgment

• Common sense (often overlooked)

The table, “Developing satisfaction goals—examples,” sheds additional light on this subject.

Goals should consist of factors that influence the satisfaction of your profitable customers. Remember, some people will only be satisfied with a product or service that costs them less than what it costs you to produce. Obviously, pleasing those customers will not be profitable for your company.

Establishing customer-friendly processes

Many problems that arise in serving customers stem from clumsy processes. For example, hidden costs or deadlines hinder delivery of a service. Customers wait too long on the phone for help. A billing process is complicated and confusing.

TABLE 2
Developing satisfaction goals—examples
Target area Sample goal
Style of interaction We will treat every customer with respect.
Timing We will respond to every customer within five minutes.
Attitude We will explain our product features and functions in the language of the customer, not in the language of our organization.
Communication We will end every interaction with a customer by asking if there is anything else we can do.
Policies and procedures We will increase the amount of petty cash available. Internal customers will no longer have to pay for their own expenses and then be reimbursed.
Employee latitude Following company guidelines, employees will be able to authorize checks without the approval of a manager.
Customer retention Over the next year, we will increase retention of profitable customers from our current rate of 50% to 65%.

Research has shown that there are five generic influences of service process quality that can negatively affect customers:

• Dependability. Did the service provider do what he said he would do?

• Responsiveness. Was the service provided in a timely manner?

• Authority. Did the service provider help the customer feel confident about the service-delivery process?

• Empathy. Did the service provider demonstrate the ability to see things from the customer’s perspective?

• Tangible evidence. Is it irrefutably clear that a service has been provided?

Keep these influences in mind when problems arise. Chances are, the problems will be linked to one or more of the generic influences. To identify process problems, begin by mapping out every step of the service process. Examine each step by asking what the purpose of the step is and how it adds value to the service or product. Explore the source of each problem step. “Steps for mapping a service process” provides additional guidance on how to do this.

Steps for mapping a service process

1. Choose a service process that many employees perform—one that has a strong impact on customer satisfaction and is prone to problems.

2. List the activities involved in the process. Use a separate note, index card, or sheet of paper for each activity.

3. Arrange the activities in the sequence in which they occur. Indicate how long it takes to complete each step.

4. Transfer this information to a work process map. Add or subtract levels as appropriate.

– List people involved down the left (vertical) side of the map.

– Divide the horizontal axis of the map into appropriate segments of time, such as hours or days.

– Arrange the work activities in sequence from left to right across the map with arrows to indicate the flow. You may find it helpful to represent each activity with a numbered box and include a legend below to name and describe them.

5. Brainstorm with the group to determine fail points. Fail points are:

– Inefficiencies

– Unnecessary steps

– Lost time

– Any factor that inhibits timely, high-quality products or services

You’ll see that the two dimensions of the map (vertical and horizontal) provide new insights regarding cost and customer satisfaction.

6. Study the map from different perspectives. Put yourself in your customers’ shoes. Then ask again how you can change the work process to eliminate fail points and to deliver better service.

Designing effective customer listening posts

Companies can design the questions asked at listening posts to find out whether the products and services satisfied customers buy are continuing to meet their needs. Responses to these questions can shed light on whether you should adapt existing products to respond to new needs or add new services to respond to consumers’ changing lifestyles.

For example, when a leading provider of baked goods saw sales begin to level off, managers decided to find out why. By asking questions, they learned that most loyal customers were growing older and becoming more concerned about fat and cholesterol in their diets. These customers were no longer satisfied with the company’s products or delivery. They stopped buying the company’s baked goods because the product line no longer met their needs. Managers discovered that if the firm were to offer low-fat products, the loyal customers would be happy to buy them. By listening to their most devoted customers, the company determined that it should offer new products, which have since become very successful.

Companies must design and use listening posts to measure customers’ satisfaction, of course. But they can also use them to measure factors that will gauge the possible defection of satisfied customers. See “Steps for developing listening posts” and “Steps for improving listening posts” for more information on this.

Customer satisfaction is not a surrogate for customer retention. While it may seem intuitive that increasing customer satisfaction will increase retention and therefore profits, the facts are contrary. Between 65 percent and 85 percent of customers who defect say they were satisfied or very satisfied with their former supplier.

—Frederick Reichheld

Steps for developing listening posts

1. Determine your listening posts. List points at which your organization receives customer feedback—for example, sales representatives, marketing research results, telephone representatives, customer service representatives, or servers.

2. Interview employees to find out what feedback they are receiving.

3. Organize the feedback. Categorize the significant types of feedback from each listening post. Feedback can include such things as suggestions for new product features, confusion about service terms, or annoyance about waiting for product delivery.

4. Determine the current use of the feedback. Find out how employees are using feedback. Are they using it to make product improvements or to create better service agreement instructions? Do they talk about the feedback and then ignore it?

5. Decide how you should use feedback. Take action to use valuable feedback. Involve your employees in coming up with ways to make feedback more useful by converting it into data they can use in their jobs.

Steps for improving listening posts

1. Review the feedback you are receiving.

2. Look at the timing of information you get. Is the information coming in at the right time? Can you get the feedback earlier? You can use many listening posts more proactively to prevent problems before they occur.

3. Decide what you want to know about customer behavior. There are information gaps about customers in every organization. Why are customers loyal? Why do satisfied customers defect? Why do new customers come here? Brainstorm the big-picture information the organization needs about retention, defection, and overall satisfaction and ways of getting it.

4. Design ways to use listening posts to find out what you want to know. Develop questions to uncover patterns in customer behavior. For example, when an order is taken, representatives in many organizations ask new customers, “How did you hear about us?” When properly recorded and tracked, the answer to this simple question is invaluable. It helps assess advertising and marketing efforts, as well as the rate of referrals.

5. Establish a process to build in new questions at key listening posts. People asking questions must understand why they are asking the questions, and they must have an easy-to-follow process to gather the information. Simple forms, brief weekly meetings, and informal chats are all ways to be sure that people are asking good questions at the right time.

6. Assess the need for new listening posts. Many organizations are adding a follow-up satisfaction call to the listening posts they already have. Once you have redesigned your current listening posts, ask yourself if you need to add other types.

What You COULD Do.

Remember Brenda’s question about how to address her employees’ frustrations?

Here’s what the mentor suggests:

If you recall, one of Brenda’s employees said she “couldn’t do a good job.” This suggests that Brenda’s team members likely need more latitude to make on-the-spot decisions and take immediate action to support the marketing initiative. Brenda’s direct reports are in the best position to have a positive impact on customer loyalty. Also, employees who can “make a difference” tend to enjoy their work more, stay longer, and become even more productive. Research shows that employees place a high value on latitude—the freedom to make decisions and the ability to deliver results to customers.

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