Customer Value
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European World Class Support Showcase Oct 28th, 2004 Munich, Germany
Top Box Measurement - Creating Customer Loyalty John Hamilton President Service Strategies Corporation San Diego, CA
www.servicestrategies.com [email protected]
John Hamilton President & CEO Service Strategies Corporation John is the founder of Service Strategies Corporation. He has more than twenty five years of service industry and software engineering experience. He has significant international expertise from working the Americas, Asia-Pacific and European regions. In addition to his service management knowledge, John has a well-rounded background from managing engineering, quality control, and training organizations. About Service Strategies Corporation Founded in 1999 and headquartered in San Diego, CA, Services Strategies advances service excellence for quality-minded organizations through industry-standard certification and training programs that ensure delivery of consistent, high-quality customer service and support.
“Top Box Measurements - Creating Customer Loyalty” We’ve all heard about “top box” scoring. But what does it mean? What is its correlation to delivering worldclass service and reaching beyond customer satisfaction and creating customer loyalty? In this session, you’ll learn in detail about the various measurement methodologies and rating scales and how they can impact the economics behind providing exceptional service in the IT industry. We’ll discuss the fundamental differences between delivering good and exceptional service, how it affects your customer loyalty and customer retention efforts, and how top box measurement fits into the picture.
Agenda
IT Industry Loyalty Trends
Customer Satisfaction versus Loyalty
What is Top Box Measurement ?
Customer Loyalty Management
Customer Segmentation
Return on Investment
Best Practices to Drive Customer Loyalty
IT Industry Loyalty Trends In the days of a booming economy, IT companies based their success on continuous product innovation. During an economic slow down, customers need more than product Features to earn their loyalty.
IT Industry Loyalty Trends IT companies claim an 80% average rating from customer satisfaction surveys
What do customers really feel about loyalty?
IT Industry Loyalty Trends LESS THAN HALF OF IT CUSTOMERS ARE TRULY LOYAL Only 44% plan on doing business with current IT vendor 30% feel trapped and are unhappy 23% are high risk and unlikely to continue relationship 3% are vulnerable to competitive product Source: 2004 Walker Information Benchmark study for the IT Industry
Customer Satisfaction versus Loyalty Satisfaction = Meeting minimum expectation Loyalty = Exceeding customers expectation and securing future commitment Retention = Satisfaction + Loyalty
Loyalty Factors 1.
Product capability and quality
3.
Customer service experience
5.
Ease of doing business
7.
Price versus value
9.
Company reputation
Customer Satisfaction Measurement
Most Service Vendors have a survey process to measure customer satisfaction Periodic surveys Event/Transactional surveys
Establish required sample size, target response rates and confidence level
Quantitative results and verbatim feedback gathered
Results are analyzed and communicated
Customer Satisfaction Rating Scales
Customer survey rating scales have “Satisfaction” set at the mid-point or just above Example from seven point scale
Extremely Dissatisfie d
Very Dissatisfied
Satisfied
Very Satisfied
Extremely Satisfied
Top Box Measurement “TOP BOX” IS SIMPLY A TERM USED TO
DESCRIBE THE 80TH PERCENTILE OF THE SURVEY SCALE
Definition from the “Support Center Practices” Certification program
Highest rated measurement to better understand customer loyalty and retention Question:“Overall, how satisfied are you with the Question: support provided by your vendor ?”
10-Point Top Box Measurement Scales Rating Scale
80th Percentile
10 7-Point Rating Scale
9 8
6
7 6
5
5
4
4
4
3
3
3
2 1
2
2
1
1
7 4-Point Rating Scale
Extremel y Satisfied
Satisfactio n
Extremely
Dissatisfie
Customer Loyalty Management Companies need to hang on to every customer. Acquiring new business is difficult and costly. CLM is a method to predict future customer behavior • It is forward-thinking • Understand how customers feel about you • Its strategic and tactical
Customer Loyalty Management Strategic and Tactical Strategic
Tactical
Measure loyalty across the organization
Distribute information to owners of relationships
Segment by region, product, customer type etc.
Discover and act on customer problems
Engage in one-to-one loyalty management with each customer
Discover customer issues
Forecast churn rate
Four Categories of Customer loyalty
Benefits of Truly Loyal Customers
Immunity Inoculated against competitive threats
The big “R’s” Relationship and revenue Reference-ability Repeat business
Customer Segmentation
Segmentation of customers for loyalty analysis Top revenue accounts – 80/20 rule Geography Products and Services Markets
ROI for Loyalty There are no scientifically proven methods to accurately measure customer loyalty and associated ROI. HOWEVER, “Top Box” is a good starting point along with customer specific financial metrics.
ROI Loyalty Measurement Approach 1.
Segment customers - select top 20% of revenue producing clients
2.
Plot 12 months of “Top Box” loyalty results from satisfaction surveys
3.
Establish customer specific financial metric (revenue/customer, margin/customer etc.)
4.
Plot alongside the loyalty metric
5.
Observe linkage between the two metrics and determine the impact each has on the other
6.
Create a Customer Loyalty INDEX
Life Time Value Analysis
LTV is a method for determining the complete financial relationship with a customer
Analysis includes cost and revenues: Cost of acquiring customer Cost to sustain customer Revenues generated over lifetime of relationship
Typically, 60% of a company’s revenues come from existing customers
Reducing the support demand or cost to support a customer can increase LTV
Best Practices to Drive Customer Loyalty 1.
Account Management
2.
Compensation linked to satisfaction & loyalty
3.
Complaint process
4.
Service performance metrics
5.
Quality programs
6.
Lifecycle and Retention measurement
Account Management
Technical Account Management role Prime interface, dedicated to taking care of the customer Become an extension of the customer organization Manage service problem escalation and resolution Customer advocate
Compensation Linked to Customer Satisfaction & Loyalty
Management goals and incentives tied to loyalty
Service employees compensation also linked to customer satisfaction Customer - Employee Loyalty Link
Loyalty targets established and reviewed periodically
Complaint Process
Company wide process that will expedite the resolution of all customer complaints
Complaint ownership
Follow up on negative comments from surveys
Complaints are opportunities to increase loyalty
Service Performance Metrics & Monitoring
Performance metrics that have a direct impact on customer satisfaction Responsiveness Resolution Status and follow-up commitments Defect tracking and patches Product release commitments On-time delivery and order fulfillment
Quality Programs
Monitoring of service interactions
Supportability feedback included in product
Customer feedback included in product
Release standards Defect per KLOC MTBF rates Uptime guarantees
Lifecycle and Retention Measurement ONE SIZE DOESN’T FIT ALL CUSTOMERS
Service product need to evolve with customer needs
Understanding customer retention rates
Method for capturing WHY customers leave and how to prevent defections
Determine cost of a lost customer.
Ultimate Loyalty Indicator Renewal Scorecard – Reason for not renewing Won’t Renew
Pricing
Service & Support
Product
Corporate
Other
Possible Renewal
Definite Renewal
Characteristics of Companies with High Customer Loyalty
Customers define quality
Provided a variety of services
Services are customized to suit client
Convenience of services
Timeliness of services
Understand expectations and set customer service standards well above these expectations (to “delight” customers)
Scorecard
Employee Satisfaction
Customer Satisfaction & Loyalty
Accountability
Financial Results
Conclusion
Loyalty is the commitment you must EARN from your customers in order to maintain an ongoing profitable relationship
Top Box Measurement - Creating Customer Loyalty John Hamilton President Service Strategies Corporation San Diego, CA
www.servicestrategies.com [email protected]
John Hamilton President & CEO Service Strategies Corporation John is the founder of Service Strategies Corporation. He has more than twenty five years of service industry and software engineering experience. He has significant international expertise from working the Americas, Asia-Pacific and European regions. In addition to his service management knowledge, John has a well-rounded background from managing engineering, quality control, and training organizations. About Service Strategies Corporation Founded in 1999 and headquartered in San Diego, CA, Services Strategies advances service excellence for quality-minded organizations through industry-standard certification and training programs that ensure delivery of consistent, high-quality customer service and support.
“Top Box Measurements - Creating Customer Loyalty” We’ve all heard about “top box” scoring. But what does it mean? What is its correlation to delivering worldclass service and reaching beyond customer satisfaction and creating customer loyalty? In this session, you’ll learn in detail about the various measurement methodologies and rating scales and how they can impact the economics behind providing exceptional service in the IT industry. We’ll discuss the fundamental differences between delivering good and exceptional service, how it affects your customer loyalty and customer retention efforts, and how top box measurement fits into the picture.
Agenda
IT Industry Loyalty Trends
Customer Satisfaction versus Loyalty
What is Top Box Measurement ?
Customer Loyalty Management
Customer Segmentation
Return on Investment
Best Practices to Drive Customer Loyalty
IT Industry Loyalty Trends In the days of a booming economy, IT companies based their success on continuous product innovation. During an economic slow down, customers need more than product Features to earn their loyalty.
IT Industry Loyalty Trends IT companies claim an 80% average rating from customer satisfaction surveys
What do customers really feel about loyalty?
IT Industry Loyalty Trends LESS THAN HALF OF IT CUSTOMERS ARE TRULY LOYAL Only 44% plan on doing business with current IT vendor 30% feel trapped and are unhappy 23% are high risk and unlikely to continue relationship 3% are vulnerable to competitive product Source: 2004 Walker Information Benchmark study for the IT Industry
Customer Satisfaction versus Loyalty Satisfaction = Meeting minimum expectation Loyalty = Exceeding customers expectation and securing future commitment Retention = Satisfaction + Loyalty
Loyalty Factors 1.
Product capability and quality
3.
Customer service experience
5.
Ease of doing business
7.
Price versus value
9.
Company reputation
Customer Satisfaction Measurement
Most Service Vendors have a survey process to measure customer satisfaction Periodic surveys Event/Transactional surveys
Establish required sample size, target response rates and confidence level
Quantitative results and verbatim feedback gathered
Results are analyzed and communicated
Customer Satisfaction Rating Scales
Customer survey rating scales have “Satisfaction” set at the mid-point or just above Example from seven point scale
Extremely Dissatisfie d
Very Dissatisfied
Satisfied
Very Satisfied
Extremely Satisfied
Top Box Measurement “TOP BOX” IS SIMPLY A TERM USED TO
DESCRIBE THE 80TH PERCENTILE OF THE SURVEY SCALE
Definition from the “Support Center Practices” Certification program
Highest rated measurement to better understand customer loyalty and retention Question:“Overall, how satisfied are you with the Question: support provided by your vendor ?”
10-Point Top Box Measurement Scales Rating Scale
80th Percentile
10 7-Point Rating Scale
9 8
6
7 6
5
5
4
4
4
3
3
3
2 1
2
2
1
1
7 4-Point Rating Scale
Extremel y Satisfied
Satisfactio n
Extremely
Dissatisfie
Customer Loyalty Management Companies need to hang on to every customer. Acquiring new business is difficult and costly. CLM is a method to predict future customer behavior • It is forward-thinking • Understand how customers feel about you • Its strategic and tactical
Customer Loyalty Management Strategic and Tactical Strategic
Tactical
Measure loyalty across the organization
Distribute information to owners of relationships
Segment by region, product, customer type etc.
Discover and act on customer problems
Engage in one-to-one loyalty management with each customer
Discover customer issues
Forecast churn rate
Four Categories of Customer loyalty
Benefits of Truly Loyal Customers
Immunity Inoculated against competitive threats
The big “R’s” Relationship and revenue Reference-ability Repeat business
Customer Segmentation
Segmentation of customers for loyalty analysis Top revenue accounts – 80/20 rule Geography Products and Services Markets
ROI for Loyalty There are no scientifically proven methods to accurately measure customer loyalty and associated ROI. HOWEVER, “Top Box” is a good starting point along with customer specific financial metrics.
ROI Loyalty Measurement Approach 1.
Segment customers - select top 20% of revenue producing clients
2.
Plot 12 months of “Top Box” loyalty results from satisfaction surveys
3.
Establish customer specific financial metric (revenue/customer, margin/customer etc.)
4.
Plot alongside the loyalty metric
5.
Observe linkage between the two metrics and determine the impact each has on the other
6.
Create a Customer Loyalty INDEX
Life Time Value Analysis
LTV is a method for determining the complete financial relationship with a customer
Analysis includes cost and revenues: Cost of acquiring customer Cost to sustain customer Revenues generated over lifetime of relationship
Typically, 60% of a company’s revenues come from existing customers
Reducing the support demand or cost to support a customer can increase LTV
Best Practices to Drive Customer Loyalty 1.
Account Management
2.
Compensation linked to satisfaction & loyalty
3.
Complaint process
4.
Service performance metrics
5.
Quality programs
6.
Lifecycle and Retention measurement
Account Management
Technical Account Management role Prime interface, dedicated to taking care of the customer Become an extension of the customer organization Manage service problem escalation and resolution Customer advocate
Compensation Linked to Customer Satisfaction & Loyalty
Management goals and incentives tied to loyalty
Service employees compensation also linked to customer satisfaction Customer - Employee Loyalty Link
Loyalty targets established and reviewed periodically
Complaint Process
Company wide process that will expedite the resolution of all customer complaints
Complaint ownership
Follow up on negative comments from surveys
Complaints are opportunities to increase loyalty
Service Performance Metrics & Monitoring
Performance metrics that have a direct impact on customer satisfaction Responsiveness Resolution Status and follow-up commitments Defect tracking and patches Product release commitments On-time delivery and order fulfillment
Quality Programs
Monitoring of service interactions
Supportability feedback included in product
Customer feedback included in product
Release standards Defect per KLOC MTBF rates Uptime guarantees
Lifecycle and Retention Measurement ONE SIZE DOESN’T FIT ALL CUSTOMERS
Service product need to evolve with customer needs
Understanding customer retention rates
Method for capturing WHY customers leave and how to prevent defections
Determine cost of a lost customer.
Ultimate Loyalty Indicator Renewal Scorecard – Reason for not renewing Won’t Renew
Pricing
Service & Support
Product
Corporate
Other
Possible Renewal
Definite Renewal
Characteristics of Companies with High Customer Loyalty
Customers define quality
Provided a variety of services
Services are customized to suit client
Convenience of services
Timeliness of services
Understand expectations and set customer service standards well above these expectations (to “delight” customers)
Scorecard
Employee Satisfaction
Customer Satisfaction & Loyalty
Accountability
Financial Results
Conclusion
Loyalty is the commitment you must EARN from your customers in order to maintain an ongoing profitable relationship
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