The impact of customer service on loyalty – Part I

SURPRISE, SURPRISE your customer is a human being. 

At nexxworks we talk a lot about customer centricity in our keynotes and about the sheer necessity of putting the customer first. People often come up to me afterwards, basically with one of three reactions: 1. They have problems creating a ‘business case’ for putting the customer in the center of their organization, 2. They already are a customer-centric company because they measure NPS (Net Promoter Score), however it does not seem to improve customer loyalty, and 3. If you make your customer ‘king’, you will soon go out of business.

Let me go more deeply into this first one. Companies that think they need to come up with a business case calculating ROI for putting the customer first, will most likely be amongst the first ones to disappear. Your customer IS the heart of your organization, you don’t have the choice but to give him that spot, otherwise you will become obsolete. My business partner Peter Hinssen often talks about “the end of linear thinking” in his keynotes; we can no longer keep extrapolating and refining current business models and expect them to stay relevant for more than a few years (or even a year for that matter). We simply have to rethink our business model, starting (REALLY starting) from the customer’s perspective.

Secondly, stating that your organization is customer-centric simply because you measure NPS is, of course, total nonsense. Don’t get me wrong, I’m not saying measuring NPS is useless, but this fact alone just doesn’t make you a customer-centric company. Besides, NPS is not the best predictor of customer loyalty, but I will return to that later. By the way, Customer Satisfaction Score (CSAT) is an equally bad predictor of loyalty. In fact, research has shown that, in some cases, more than 20% of customers who said they were satisfied also admitted that they were disloyal.

As to the last reaction, we never claim that a company has to make the customer ‘king’. Sometimes customers can be unreasonable, irritating or just plain wrong. Empowering employees to do whatever it takes to exceed the customer’s expectations or simply to satisfy him, will be a tall order while keeping results in mind and your bottom line. But there are ways of dealing with this, especially from an emotional perspective.

Let me now focus on Customer Service and how this influences your relationship with the customer. Although many companies have their primary focus on selling products and services, it is no secret that the service provided largely determines the loyalty of customers. That’s a tough thing to handle for Customer Service departments, because service calls are typically not the type of interaction to make a customer extremely happy. In fact, service interactions are much more likely to drive disloyalty than loyalty. The negative impact can be up to 4 times higher.

So what can companies do from a service perspective to satisfy their customers? Simple. Just solve their problem! My other nexxworks business partner Rik Vera wrote how “Time is the new currency” in one of his latest blogs, well that is exactly where the focus should lie. Make sure that you make it AS EASY as possible for your customer to get an answer to his problem. That doesn’t mean you have to do this solely through phone interactions. On the contrary, customers actually love it when they can self-serve, even for more complex issues. Now this all sounds quite straightforward, but when we look at organizations and the ways in which they provide self-service, we still see much room for improvement. Firstly, they make it very hard for customers to even find the information. Secondly, although it is common knowledge that we live in a mobile world, a lot of the mobile sites are still merely a bad version of the internet site, are not easy to navigate around or don’t provide easy-to-use search features. And thirdly, the language used in standard answers to problems is often way too complex for users to understand (when texts are in English, applying the Gunning fog index[1] might be a good idea). This readability test estimates the years of formal education anyone needs to understand the text on the first reading. You would be amazed how intricately some pieces of text are formulated on service sites!).

Now what if a customer DOES prefer a telephone interaction? Although it is almost too obvious to mention, make sure your service phone number can easily be found. Doing tests on mobile sites justifies my including this statement. And then, when customers do use the phone channel, make sure you keep customer effort in mind at all times. Traditional measurements such as Average Handling Time (AHT) or First Call Resolution (FCR) may be easy from a performance management perspective, but are usually not very customer-centric. AHT often leads to ‘unnatural’ and sometimes even impolite conversations, whereas FCR is too short-term focused. The latter gauges whether the current issue has been solved by asking the question at the end of the conversation with the customer, but never takes into account that customers often call back later with a related issue or because they hadn’t understood the solution completely or were simply cut off. In his book ‘The Effortless Experience’, Matt Dixon strongly advocates ‘Next Issue Avoidance’, where service reps walk the extra mile so that customers don’t have to call back. Next issue avoidance can, of course, be reached during the call, but it may also be accomplished by emailing additional (personalized!) information afterwards, e.g. extra instructions on how to install products or ways to prevent them from malfunctioning. So, basically, instead of measuring handling time or first call resolution, it may be a very wise move to measure callbacks.

At the beginning of this article, I mentioned both ‘Net Promoter Score’ and ‘Customer Satisfaction Score’. These metrics are OK to measure the high-level customer experience. But from a service perspective, measuring Customer Effort is far better to predict loyalty. The reason I am not a super fan of just using NPS is because it measures the likelihood of customers recommending you, and not if they actually do recommend you. Furthermore, all the ‘detractors’ (scores 0 to 6) are viewed as one group, whereas a more fine-grained segmentation might provide deeper insights for a company. And, finally, a negative NPS score does not tell you all that much if you don’t ASK the customer for the reason behind it.

‘Customer Effort Score’ is much more suitable for measuring service interactions. The question asked is much more down-to-earth: “Do you agree/disagree with the statement that ‘The company made it easy for me to handle my issue’, on a scale of 1 to 7”. There is no doubt that this score is not a merely objective one from the customer’s point of view. In fact, it is largely determined by the way the customer FEELS about the service interaction and not merely by the ease or the amount of time it has taken. But if the customer FEELS like you have helped him in a timeframe that he thinks is reasonable, you’re all good! Because, after all, time is the new currency.

[1] You might try this yourself here.