Innovation

The 7 new truths about your customers

Written by Kara Aaserud

Finally. The customer really is king. Several economic and technological forces are  propelling a revolution in buyers’ expectations and empowering them to find better service, price and selection with little or no effort. To continue to prosper in today’s marketplace, you need to understand how this revolution has created the seven new truths about your customers—and how you can employ just a few simple tactics to satisfy their fast-rising demands.

1: Customers won’t give you a second chance

Once upon a time, you could walk into your corner grocery store and the clerk, who knew you by name, would smile and ask you how your day was. At the checkout, she’d count back your change and place it neatly in your hand. And when you were leaving the store, she’d never fail to thank you for your business and ask you to return—which, of course, you would, regularly.

In stark contrast, shopping today is often fraught with clerks who avoid eye contact or pick up speed when you approach them, are indifferent to your complaints and shove your change in your hands while already pushing the next customer’s purchases through. If a simple trip to the grocery store leaves you feeling frustrated, join the crowd: a 2007 Customer Experience Impact Report by Harris Interactive Inc., a Rochester, N.Y.-based global market-research company, reported that after a negative experience with a business or organization, 47% of consumers swore and/or shouted and 29% had a headache, felt their chest tighten or cried.

But consumers are doing more than getting upset. In fast-rising numbers, they’re taking their business elsewhere. And the proportion who are doing so after just a single bad experience is soaring. According to the 2008 Customer Satisfaction Survey by global consultancy Accenture, a New York-based global management firm, 23% of Canadian consumers said they would quit doing business with a company immediately after a bad experience, twice the level (11%) in 2007. In the same period, those who said they would speak to a supervisor before taking their business elsewhere tumbled from 49% to 36%.

“We’re seeing a one-two punch here,” says Robert Wollan, Minneapolis-based managing director of Accenture’s CRM service transformation practice. “There’s a greater number of people who are saying their first response is simply to stop doing business with that company, and a smaller number who are willing to raise their hands and say, €˜I’m dissatisfied.'” That’s bad news for businesses that have relied on client complaints as their last resort to resolve problems and maintain customer loyalty. In a world of consumer empowerment, you have to get it right from the beginning.

Accenture’s survey shows how fast expectations are rising. Almost one-third (31%) of consumers described their service expectations as higher than in 2007, and a majority (52%) said they were higher than in 2003. And respondents were ready to switch providers if these expectations weren’t met: 67% had moved business to another company due to poor service, up sharply from 52% in 2006.

“Consumers are deserting companies in record numbers when they encounter experiences that don’t meet their expectations,” says Wollan. That’s partly due to a dichotomy in the marketplace. Although some companies are getting customer service horribly wrong, more and more are starting to get it right. And each time consumers get a taste of great service, they no longer wish to settle for the subpar variety offered elsewhere.

Accenture suggests three keys to respond to this: know your customers, by conducting customer-segmentation analysis to reveal their preferences and predict their behaviour; reach your customers, by interacting with them through channels such as blogs, social media and company discussion boards; and tailor your service to deliver a compelling customer experience based on what you’ve learned by knowing and reaching your customers.

“There’s a great risk that companies will lose customers in this new environment of higher switching, higher expectations and greater degrees of dissatisfaction,” says Wollan. “But there’s also a great opportunity. Those that stand out, in terms of developing the best consumer experience and in terms of their execution, stand to gain the most.”

2: Customers control the conversation

In 2005, New York-based journalist Jeff Jarvis, dissatisfied with Dell customer support’s attempts to resolve several problems with his new Dell laptop, started ranting about it on his now- famous blog BuzzMachine.com. Before long, other slighted Dell customers were flocking to read his “Dell Hell” account, share their own horror stories and swarm Dell’s own discussion board with complaints. Within weeks, BuzzMachine.com was the top Google search result for “Dell.” Yet the Round Rock, Tex.-based company took more than a month to respond to the online storm. By the time Dell announced it would start monitoring and responding to comments made on blogs and other social-media outlets, its reputation had taken a big hit. A firm that prided itself on its commitment to individuals and customization had become widely associated with faulty products and lousy customer service.

Unhappy consumers used to have few means to tarnish a company’s name: word of mouth and their inner circle of family, friends and colleagues. All that has changed with the sensational rise of social-media channels such as Facebook, MySpace and Twitter, and of Web-enabled mobile devices that make it easy to complain in real time about a lousy customer experience. And the Internet’s archival nature means a bad review lingers in cyberspace. Even a fairly moderate complaint about a faulty software program or the time it took to be seated at a restaurant can leave a digital trail for other Web users to discover for months or years to come.

Mark Healy, a partner at Toronto-based Torque Customer Strategy, a consultancy specializing in customer service, says it’s easy to become so caught up in factors that drive profitability directly, such as performance metrics and efficiency standards, that you lose focus on customer satisfaction. But as the consumer revolt widens, organizations are waking up to the fact that monitoring and responding to customers through blogs and other social media “is the next place where they can actually win,” he says.

In Satisfied Customers Tell Three Friends, Angry Customers Tell 3,000, author Pete Blackshaw argues that once CEOs accept that they no longer hold absolute sway over the decisions and behaviour of consumers, they can open themselves to new ways to gain insights into what their clients are thinking. “The Web not only provides consumers with a platform for expressing their preferences, grievances and experiences, but it also provides companies with a means of listening to them,” writes the executive vice-president of New York-based Nielsen Online Strategic Services and founder of PlanetFeedback.com, a site on which consumers post complaints, compliments and ratings of various firms. “It gives you and your competitors the invaluable opportunity to tune in to the issues and buzz surrounding your company or product.”

Monitoring and responding to consumer-generated media is an area in which smaller, more nimble companies can gain an edge, says Blackshaw. But you’ll need to pick and choose. After all, who has the time to participate in every message board and social-media website out there?

Blackshaw recommends that you routinely Google your firm’s name and key products and services to see where they show up in news stories, on Technorati (for blog postings), YouTube (for video postings) and Flickr (for postings of pictures of, say, your faulty products). You should be quickest to respond to those matches in which you see a lot of comments about your firm, ones appearing on several sites, comments expressing strong emotions about your company and ones about issues vital to its reputation. And when you come across negative feedback—which you will—respond with sincerity and transparency.

3: Customers expect to be heard

Gone are the days when you could bury your feedback form somewhere on your “Contact Us” page—or, God forbid, have no feedback form at all. Never before has feedback, and the ways in which you collect it, mattered more to your customers and, therefore, to your reputation. Web-savvy consumers, especially those who grew up with the Net, are used to providing feedback constantly. If you don’t offer them a range of channels through which they can share their frustrations and concerns (or compliments), they’ll soon find their own, often more destructive, outlets. (See Truth No. 2.)

“Virtually everyone has an emotional desire to be heard,” says Blackshaw. “A company that fulfils that need will have a huge leg up over competitors who ignore it.”

So, how do you let your customers know that you genuinely want to listen to them? Minh Ngo, CEO of Memory Express Computer Products Inc., a Calgary-based computer and electronics retailer, collects feedback from his customers in the same way that book e-tailer Amazon does. He encourages customers to post comments about his products directly on his website for everyone to see, as long as they don’t use vulgar language. “Allowing customers to post comments is a risk,” he says. “But in order for us to improve, we have to get customer feedback.”

Other ways to encourage feedback include inviting it on your home page and/or running the URL for your feedback page on your packaging, in your advertising and at the point of purchase. You can also create an e-mail address exclusively for customer feedback. Home Depot did so in 2007, when it set up a dedicated team to reply to every message sent to wearelistening@homedepot.com.

Another technique is to create a blog specifically about customer service. Aside from using it to gather and respond to client complaints, it can serve as a virtual focus group to help you make decisions about the direction of your business. Blackshaw points out that it can make your job of responding to consumers’ questions and concerns easier: “Often, you’ve got consumers helping other consumers resolve their issues.”

Just remember, he says, that consumers want a variety of ways to post feedback, not just text. If your site accommodates photos and videos, customers are more likely to speak to you on your forum rather than, say, on Consumerist.com, a site made just for the rants of the unhappy consumer.

4: Customers will bail if you keep them waiting

Back when your firm was in its startup phase, you probably took pride in your ability to respond to each customer enquiry as soon as it came in. Indeed, your livelihood might have depended on a fast response. But it’s time to rethink your strategy if, despite major growth in your business, you’re still personally responding to those pings on your BlackBerry at 1 a.m. (Yes, you know who you are.)

Swift response time has always mattered. But in our wired, 24/7 and globalized economy, speed is king. If you can’t get back to customers quickly enough—whether by phone, blog, e-mail or face to face—someone else will.

“Ten years ago, you could take three or four days to solve a problem,” says Alice Reimer, president of Evoco Inc., a Calgary-based developer of software for managing construction projects. “Today, it’s instant coffee. Our clients [want] an instantaneous response.”

Yet, most customers say they’re not getting that. Accenture’s survey shows the size of the gap between what clients expect and what companies typically deliver. On a scale of one to five, with five being “extremely important,” consumers rated the length of time waiting to be served at a hefty 4.5, but they gave providers an average performance score of an unimpressive 2.7.

Any firm that meets its clients’ need for speed will have an edge, especially given customers’ increasing propensity to jump ship if they don’t get what they’re expecting the first time out. If you want to be that business, you’ll need to set specific response times for customer e-mails, phone calls and postings on social-media sites, then design systems to deliver on those times.

Reimer says her company’s system for responding quickly to customers has been a key to the growth at Evoco, whose revenue reached $4.6 million in fiscal 2008—up by 574% from five years prior. “Because we are a €˜software as a service’ company and don’t have recurring revenue, we have to earn our clients’ business every single day,” says Reimer. “We do that by giving them exceptional service.”

Evoco offers its customers several ways to get a problem resolved. For instance, when they call for support, they can speak to a live representative any day of the week from 7 a.m. to 6 p.m.—or, if they prefer, use live interactive text chat. As well, Reimer employs an after-hours service in which a member from her client-service team is on call on a rotating basis to return customer-service calls within 30 minutes. “That’s even at 2 in the morning,” she says. Any calls this team member misses are escalated up through Evoco’s management team—if necessary, right to the vice-president of research and development or the chief technology officer.

“But calls don’t very often get to that level,” says Reimer. “We take client service really seriously, because it’s such an underlying tenet to our business. One hundred percent of our revenue is attributable to the service we have.”

5: Customers know more than you do

It seems odd to think that your customers would be better informed about your product or service than your own company is. Yet, according to a 2007 study by New York-based market research firm Yankelovich Inc., 31% of U.S. consumers surveyed agreed that “I often know more about the products and services being sold than the people who are selling me those products and services.” That was up from 27% in 2006.

Thanks (again) to the Web, it has become far easier for consumers to do their own research and shop around before even entering a bricks-and-mortar store. Just look at the auto industry. A survey by Westlake Village, Calif.-based J.D. Power and Associates, the gold standard for consumer ratings in the sector, shows that fully 75% (up from 70% in 2007) of new-vehicle buyers do online research before setting foot on a car lot, typically visiting several automaker and consumer-ratings sites.

“I feel bad for the car salesman, because the customer has already been to all the comparison websites that the car companies don’t want you to go to,” says Healy. Front-line people in a growing number of other sectors face the same challenge: what value do you bring to the transaction if the customer is better informed than you are?

In some industries, it’s still possible to ensure that your client-facing staff know more than your customers do. For example, Vancouver-based Lululemon Athletica, which makes and retails yoga wear, carefully screens potential hires to identify those who are passionate about yoga. This means the firm can, without enormous training costs, ensure that its staff match or beat its customers’ knowledge level.

But most firms operate in sectors that lack a pool of hard-core devotees to their product or service. Healy therefore advises switching your focus. “It’s highly unlikely you’ll win the information war,” he says. “You should try to win the relationship and service war instead.”

A car salesperson, for instance, could shift from primarily providing information to helping to take the fear and complexity out of the buying process. Auto dealers recruiting salespeople would then look for people who have the emotional empathy to hold customers’ hands through the sale, and the communications skills to explain clearly the complicated steps needed to complete a deal.

Skilful recruiting tactics are only the start if you wish to deliver customer service focused on building strong relationships with well-informed customers. You also need the right organizational structure in place, including training and incentives. Windley Ely Inc., a London, Ont.-based provider of workers’ compensation management services, has built solid customer relationships in part by forming employee teams that are each devoted to a specific client. CEO Sam Ely says this gives these teams an intimate understanding of the needs of such Windley Ely clients as Loblaws, Canadian Tire and Tim Hortons. “As you grow, you [the CEO] can’t maintain daily contact with all of your customers, so you need to do that through your employees,” he says. “To be able to do that, you really have to get your employees to believe the message you give them.”

Because Windley Ely can’t match the pay rates of its biggest competitor, the government, the firm must recruit more affordable entry-level employees. But it markets itself as a more human environment and one in which its young hires will have a chance to grow, thanks to top-notch training with a core focus on customer service. “People want to work for a company that has good values, and they’ll go the extra mile if they feel you appreciate it,” says Ely. It’s an extra mile that has paid off: since opening its doors in 1997, Windley Ely has lost just one client.

Reimer also focuses intensely on building a culture of good customer service. In fact, she has every new hire, from business analyst to intern developer, do a stint in Evoco’s client-service department. “This is the best way for our employees to be steeped in knowledge about our clients, by picking up the phone and talking to our users,” says Reimer. Evoco also motivates its team through its Superstars program, whereby employees can earn points toward prizes such as game consoles and TV sets. “It’s so important that when they go above and beyond the call of duty, particularly when it’s client-related, that we recognize that,” she says.

6: Customers see transparency as the key to credibility

The bleak economy likely has you feeling even more inclined than usual to keep your cards close to your chest. Yet it’s tough to keep bad news secret in an ultra-wired world, and if it leaks out online, the damage to your firm’s reputation can spread far and fast. On the flip side, consumers—especially younger ones glad to share on Facebook things most people used to keep private—are willing to cut you some slack if you’re forthright about your internal goings-on, including your mistakes. Being open will build the kind of “Web cred” that makes customers interested in helping you out by offering ideas and critiques.

Dell showed how powerful transparency can be when it staged a comeback from the “Dell Hell” fiasco (see Truth No. 2) by launching Direct2Dell.com, a blog aimed at giving the firm a credible—and human—voice. Dell has used this blog to discuss problems it is having with products, including posting recall lists. The strategy quickly paid off. Just a year after the blog’s launch, Dell’s internal tracking of customer satisfaction with its brand, which had dropped to a record low of 58%, rebounded to 74%.

Jason Shron, CEO of Rapido Trains Inc., a Concord, Ont.-based model-train maker, is a big believer in the power of business transparency. He shares everything with his customers—from the status of orders to manufacturing errors—via his website, discussion boards, model-train hobby blogs, an e-newsletter with 4,000 subscribers and even YouTube videos. “It’s okay to make mistakes that affect your customers,” says Shron. “When you make mistakes, though, you’ve got to own up to them. And it’s much better if you own up to them before somebody else decides to own up for you.”

If that seems like a lot of work for an uncertain ROI, Shron isn’t worried. He says he gets a lot of calls and e-mails from new customers who appreciate how candid Rapido is. And, he says, this openness is one of the biggest business drivers for his firm, whose revenue grew by 2,396% in the two years ended in October 2007, to $1.2 million. “People find it refreshing. They realize that I’m a model railroader like they are, that I’m a human being. And that has allowed me to move ahead of the competition.”

For Windley Ely, transparency comes in the form of its own Web-based software, which allows clients to see the progress of their files in real time. Says Ely: “They can go in at a moment’s notice and take a look at what we’re doing on any of their cases.” That’s something, he says, that keeps his firm credible and, more important, gives it an edge over its rivals.

7: Customers insist on individual treatment

Companies have relied on Demographics 101 to distinguish among target markets since there were markets to distinguish among. But a cookie-cutter approach that analyzes consumers based on broad measures such as age, sex and income doesn’t cut it anymore. As customers become increasingly diverse, the gap between what they want—more personalized, customized service—and what companies are delivering is widening. The Accenture survey measured this gap. Customers rated “having customer-service people who know me and my history based on information I have previously provided” very highly, at 4.3 on a five-point scale. But they rated the average provider’s performance in this area a mediocre 2.9.

“With a €˜one size fits all’ approach, which is the standard model, all you can really do is throw more money and people at it, and constantly strive to address the mass,” says Guy Taylor, Accenture’s Toronto-based managing director for CRM in Canada. That doesn’t make much sense when true competitive advantage comes from being able to tailor your products or services to the individuals you serve, he adds.

For Tali Nizic, CEO of Toronto-based staffing agency Controllers on Call Inc., tailoring her service has been key to gaining an edge on her giant rivals. Nizic, whose firm’s revenue grew by 260% in the five years ended in May 2007, to $1.3 million—surveys her clients and job candidates to discover what their frustrations are with other staffing agencies, then uses the answers to customize her service offerings. As well, one of her consultants meets with each of the firm’s clients face to face in their own offices. By observing and interviewing clients, Controllers on Call learns enough about them to narrow the candidate selection to three resumés, max.

“In our industry, this type of service is an exception,” says Nizic. “But we have always prided ourselves on not being a vending machine for resumés. We take our time to find out exactly what it is our clients are looking for in a person rather than a position, so we can present them with a solid profile of a potential candidate—not just a piece of paper.”

In your line of business, it might be impractical to meet with each customer in his own environment. But there are other ways to gain the insights you’ll need to customize your products or services to the right segments. Wollan says that you probably already have a lot of the information you’ll need inside your walls. “A retailer might have a lot of data around what someone purchases, but little data about what they return. What was returned? Was it an indication of an expectation mismatch?” he says. “When you really start to look for behaviours and patterns, the clues are generally scattered around [in] an organization.”

If you have a lot of customers, you can choose from among a plethora of CRM and analytics software that measures client behaviour. For instance, you can crunch data on the periods when your customers spend the most with you to help you better tailor your services. And your front-line staff can use this software to call up a customer’s profile, including information on her past purchases from you, to direct her call or e-mail to the employee who can give her the specific help she needs.

Still, Blackshaw warns against overreliance on this type of software. “A lot of ROI models around customer service are hopelessly outdated,” he says. “They’re typically based on frameworks of the customer’s lifetime value, which are good but not sufficient for this new world of virality and word of mouth.” Instead, you need to figure out, he says, “What is the viral potential? Does this person have a large online network? Satisfying the consumer is not enough. You need to nurture advocacy.”

The key to doing so, says Blackshaw, is to engage directly in conversation with your customers. Asking them in your feedback form which forms of social media they use can help you identify highly connected people who have a disproportionate influence on others. Blackshaw also says that to ensure you have the conversations with clients that you need, you must offer them many ways to interact with you, such as a blog, discussion board or video postings on your website. However you connect with today’s customers, the key to understanding them is to listen to what they have to say and respond.

The specific methods you’ll use will no doubt be more sophisticated than those practised by that humble corner grocery store. But the objective is the same simple one: to truly get to know your customers, so you can serve them in a way that meets their individual needs.

 

 

 

 

Originally appeared on PROFITguide.com