GetQuik Blog
Tuesday, March 11, 2008
The Art of Customer Retention
Many businesses carefully study the cost of customer acquisition. Budgets for advertising, marketing, promotions and sales are largely defined by their effectiveness in bringing in new customers. The better organizations realize that not all customers are created equal. Businesses can offer high service levels to high volume and profit generating customers. Businesses can also succeed by attracting a large number of lower volume, low maintenance customers.
Many businesses carefully study the cost of customer acquisition. Budgets for advertising, marketing, promotions and sales are largely defined by their effectiveness in bringing in new customers. The better organizations realize that not all customers are created equal. Businesses can offer high service levels to high volume and profit generating customers. Businesses can also succeed by attracting a large number of lower volume, low maintenance customers.Companies need to be careful if the techniques they use attract low volume, high maintenance customers. That is not to say these are "bad" customers (though some are). More often than not, the company does not have the proper infrastructure and support structure to effectively address these customers. An example is McDonald's. Very few restaurants can generate ANY profits featuring a $1 value menu offering. McDonald's has the size, equipment, training, brand, marketing, and system to generate billions of dollars of profits with this product offering. If a restaurant uses a go to market strategy which attracts customers seeking pricing, speed and quality to match McDonald's, there is a good chance they will fail. Even if the cost of customer acquisition is very low, the lifetime value of the customer may be less than zero. For those versed in mathematics, the flaw with this business model is obvious.
Landing high volume customers is often managed with expensive sales or marketing programs. A critical mistake that many companies make is to take these high volume customers for granted once they transfer from prospect to customer status. In any business relationship, there are going to be problems that occur in the course of the account maintenance. These mistakes can often be costly for the company to remedy and absorb. Rather than taking a big refund hit that will impact a bonus or commission, the company takes a hard line on the service issue. In turn, this highly prized customer may take their business to the competition. If they are really pissed off, they may influence other prospects or luke-warm customers to steer straight of the company. Sounds pretty bad, right? It is. Now let's be clear. I am not advocating that a company give away all their profits to ultra-demanding customers. Instead, I am suggesting that if a customers truely has a legitmate claim to refunds or credits due to a mistake made by a company, than the company needs to take ownership of the situation and satisfy these high-value customers. Offering customers satisfaction when every things are running smoothly is easy. The trick is to delivery when something blows up. The cost to remedy a customer service disaster can be expensive, so a company is highly motivated to reduce these problems. However, customer service disasters happen to even the best run organizations.
Funds need to be directed to both customer acquisition and customer retention costs. The benefit of spending on customer retention are many. Organizations with the happiest customers are able to win new customers with lower costs than competitors with low customer service ratings. In turn, sales, marketing and customer service talent are easier to recruit and retain. Due to a superior employee base, the top customer service organizations delivery superior results. This virtuous cycle is how some of the legendary customer service companies such as Nordstrom's, Southwest Airlines, and AMEX have outperformed their peers. Although it a simple concept, many organizations' focus on short terms profits conflict with this "do the right thing" approach.
Labels: customer acquisition, customer retention, customer service, lifetime cost of a customer, profitable customers
¶ 9:04 PM 1 Comments Links to this post
Wednesday, August 8, 2007
Listen Better to the Right Customers
Customers service has come a long way. Back in the 80's, the saying "The Customer is Always Right" was coined. Today we have customer service software which can measure which customers are better to let go. Sprint received a storm of criticism recently for firing a couple thousand "problem customers."
Customers service has come a long way. Back in the 80's, the saying "The Customer is Always Right" was coined. Today we have customer service software which can measure which customers are better to let go. Sprint received a storm of criticism recently for firing a couple thousand "problem customers."When classifying customers, the conventional wisdom would use the following rating system.
Good customers are:
- patient,
- willing to pay for quality,
- flexible, and
- loyal.
Bad customer are:
- fickle,
- unreasonably demanding, and
- expect free services.
When launching a new product or service, your most valuable customers possess qualities of both of these "good" and "bad" customers. You want to listen to the customers who are demanding, though reasonable; and loyal, but only to a point. These customers are willing to pay extra for superior service, but expects a significant value in return for the extra cost. These customers are a product manager's best friend. If you listen to your "good" customers, you make assumptions that you can charge a premium and offer a good but not great product and thrive. Once the product hits the market, the flaws in features, quality and pricing levels will quickly be exposed. On the flip side, if you try and please a "bad" customer, a product manager ends up delaying product releases while trying to incorporate an enormous set of product features, many which are only useful to this ultra-demanding customer. Even then, this customer will want everything free and will leave your product for a cheaper alternative without hesitation.
The fair but demanding customer is the ideal market research target. Especially if she is comfortable in being brutally honest. She will explain the must have features and service levels. Additionally, she will provide an excellent idea of which add-on features or services she is willing to pay for. If you are lucky, you can get a good sense of the $ amount she will be willing to spend for the product and the various add-ons and extra service levels. Many times this $ amount will be zero. It is the responsibility of the product manager to figure out which features and services to enhance, remove/eliminate, and add based on the market research collected from this valuable customer feedback. A common mistake that product managers make is to waste time and resources building "cool" features that are not considered valuable to the customer base. The other big mistake is to leave out must-have requirements due to a lack of market research. Listening to the wrong customers as explained above can also lead to a product that is too weak, or one that does not have broad appeal.
The fair but demanding customer is the ideal market research target. Especially if she is comfortable in being brutally honest. She will explain the must have features and service levels. Additionally, she will provide an excellent idea of which add-on features or services she is willing to pay for. If you are lucky, you can get a good sense of the $ amount she will be willing to spend for the product and the various add-ons and extra service levels. Many times this $ amount will be zero. It is the responsibility of the product manager to figure out which features and services to enhance, remove/eliminate, and add based on the market research collected from this valuable customer feedback. A common mistake that product managers make is to waste time and resources building "cool" features that are not considered valuable to the customer base. The other big mistake is to leave out must-have requirements due to a lack of market research. Listening to the wrong customers as explained above can also lead to a product that is too weak, or one that does not have broad appeal.
The Sony Playstation 3 is an example of a product that has disappointed due to a wide gap between what the customer cares about, and what Sony believed the consumer would require and be willing to pay a premium for. The $600 price tag was too high for the price of admission for these Blu-Ray Disc playing, graphics-mastering machines.
The jury is still out on the iPhone. Apple and Jobs have been on a hot streak in mastering the customer requirements and commanding premium pricing in turn. There may not be a better judge of the consumer value-proposition and feature sets than Steve Jobs. So unless you are Steve Jobs, make sure to seek out the honest, tough, but not impossible customer and listen, listen, listen and then create your specifications.
Labels: customer service, iPhone, playstation 3, product management
¶ 9:13 PM 0 Comments Links to this post
Thursday, June 7, 2007
Thank You for Complaining
"Your service doesn't work" read the Subject line. This is an email I received today from a GetQuik customer. With our new "no fee" policy implemented June 1, we sent our registered users an email notification of the changes. As well, we requested feedback on ways to further improve the GetQuik service. This customer explained his GetQuik mis-experience in gory detail. The problem began when our customer placed an order in the GetQuik system, and somewhere in the process, it did not post successfully in our system. This in turn created a situation where the customer showed up at the restaurant to pick up his order, and our restaurant partner was totally clueless about the order. You can imagine that this customer was not happy.
To make matters worse, this customer is not only the coveted "early-adopter", but also an "influencer". He was preparing to get all his colleagues to use the system, but obviously could not endorse the GetQuik system after his disasterous customer experience.
Now if we had the transaction record posted, and we knew about the problem at the time or order (approximately 2 months ago), we may have been able to work on a damage-control situation. We had a day or two of posting irregularities during the time of this order error. However, although our restaurant partner mentioned a ticked off customer, we were not clear on who it was... till we received this email.
One of the things that GetQuik should have implemented earlier is our "Customer Satisfaction" survey, which we are now using to get a regular pulse of our user community. We are using Survey Monkey. In fact many of the recent changes we have made are a direct result of our survey responses. We currently have a 75% positive response for our survey question: "Would you go out of your way to refer GetQuik to a friend?" We have not been running the survey that long, so we probably would have had a more critical response if we had begun our survey from day 1.
So why air our dirty laundry in a blog format? Because the more criticism we collect, the quicker we can address our shortcomings. It is not realistic to expect our customers to tell us every thing they dislike about our service, but the more we ask, the more we receive. For each unhappy customer that speaks out, there are many more that simply vote with their feet. Every company asks for feedback, suggestions and complaints, but the ones that I admire most are the ones that do more than give lip-service to their customer's feedback. If GetQuik can emulate the customer service experience of industry-leaders like Nordstroms, Whole Foods, Amazon, eBay; hopefully we can also produce their results. We still have our work cut out for us, but we are making strides in this area. Who wants to build a company that is despised or simply tolerated by their customers?
We are working to try and patch our customer relation with the customer who sent the email. We have provided him some store credit to give our service a second try. Hopefully, he will take us up on our offer.
If you have a suggestion or comment, we welcome your feedback.
"Your service doesn't work" read the Subject line. This is an email I received today from a GetQuik customer. With our new "no fee" policy implemented June 1, we sent our registered users an email notification of the changes. As well, we requested feedback on ways to further improve the GetQuik service. This customer explained his GetQuik mis-experience in gory detail. The problem began when our customer placed an order in the GetQuik system, and somewhere in the process, it did not post successfully in our system. This in turn created a situation where the customer showed up at the restaurant to pick up his order, and our restaurant partner was totally clueless about the order. You can imagine that this customer was not happy.
To make matters worse, this customer is not only the coveted "early-adopter", but also an "influencer". He was preparing to get all his colleagues to use the system, but obviously could not endorse the GetQuik system after his disasterous customer experience.
Now if we had the transaction record posted, and we knew about the problem at the time or order (approximately 2 months ago), we may have been able to work on a damage-control situation. We had a day or two of posting irregularities during the time of this order error. However, although our restaurant partner mentioned a ticked off customer, we were not clear on who it was... till we received this email.
One of the things that GetQuik should have implemented earlier is our "Customer Satisfaction" survey, which we are now using to get a regular pulse of our user community. We are using Survey Monkey. In fact many of the recent changes we have made are a direct result of our survey responses. We currently have a 75% positive response for our survey question: "Would you go out of your way to refer GetQuik to a friend?" We have not been running the survey that long, so we probably would have had a more critical response if we had begun our survey from day 1.
So why air our dirty laundry in a blog format? Because the more criticism we collect, the quicker we can address our shortcomings. It is not realistic to expect our customers to tell us every thing they dislike about our service, but the more we ask, the more we receive. For each unhappy customer that speaks out, there are many more that simply vote with their feet. Every company asks for feedback, suggestions and complaints, but the ones that I admire most are the ones that do more than give lip-service to their customer's feedback. If GetQuik can emulate the customer service experience of industry-leaders like Nordstroms, Whole Foods, Amazon, eBay; hopefully we can also produce their results. We still have our work cut out for us, but we are making strides in this area. Who wants to build a company that is despised or simply tolerated by their customers?
We are working to try and patch our customer relation with the customer who sent the email. We have provided him some store credit to give our service a second try. Hopefully, he will take us up on our offer.
If you have a suggestion or comment, we welcome your feedback.
Labels: customer service, GetQuik, survey monkey
¶ 9:22 PM 0 Comments Links to this post
Monday, April 16, 2007
Yelp! Friend or Foe?
While sitting in the headquarter offices of Chordiant Software (automation software for service-oriented businesses), I recall a statistic they posted in their lobby. If my memory serves me correctly, the stat mentioned that 98% of customers do not log a formal complaint to the business after a bad customer experience. So what happens to these upset customers? Well they probably tell 10 of their friends about their poor customer experience and spend their money elsewhere.
That was pre-Yelp. Now that same customer logs onto Yelp and tells the other million plus Yelpers in delightly colorful proses of their consumer mis-experience. I am sure that 98% will continue to drop as customers find how loudly they can speak with one sharply-written Yelp review. Yes, the proverbial "pen" is mightier than the sword.
Business owners can do two things: closer your eyes and hope that Yelp goes away (not bloody likely), or embrace the invaluable, direct feedback that Yelp provides. Marketing people spend googlezillions of dollars collecting customer feedback, market research and surveys.
Here is a free tool to improve your customer service and business operations! The Yelp reviews are extremely detailed, so you can see which of your baristas or servers you need to re-train or perhaps even part ways with.
So business owners, save your yellow page advertising funds and utilize those funds in solving your operational or service weak spots. You can win more business and better yet, repeat business by getting that extra star on your Yelp ratings. Now the question of how many user reviews do we really need for one falafel house? That is another discussion altogether.
That was pre-Yelp. Now that same customer logs onto Yelp and tells the other million plus Yelpers in delightly colorful proses of their consumer mis-experience. I am sure that 98% will continue to drop as customers find how loudly they can speak with one sharply-written Yelp review. Yes, the proverbial "pen" is mightier than the sword.
Business owners can do two things: closer your eyes and hope that Yelp goes away (not bloody likely), or embrace the invaluable, direct feedback that Yelp provides. Marketing people spend googlezillions of dollars collecting customer feedback, market research and surveys.
Here is a free tool to improve your customer service and business operations! The Yelp reviews are extremely detailed, so you can see which of your baristas or servers you need to re-train or perhaps even part ways with.
So business owners, save your yellow page advertising funds and utilize those funds in solving your operational or service weak spots. You can win more business and better yet, repeat business by getting that extra star on your Yelp ratings. Now the question of how many user reviews do we really need for one falafel house? That is another discussion altogether.
Labels: customer service, marketing analytics, user reviews, Yelp
¶ 10:35 PM 0 Comments Links to this post
