Measuring Customer Performance – The Value Co-Creation Way

[tweetmeme source=’MarkTamis’ service=’bit.ly’]

I found a new Dutch initiative to measure a Company’s Customer Performance: The Dutch Customer Performance Index (DCPI) (Dutch only) – a new objective and validated index for measurement of Customer performance – . I thought it worthwhile sharing with you.

The Dutch Customer Performance Index is an initiative of the Customer Insights Center of the University of Groningen (Dutch only), intelligence bureau MIcompany and market researcher MetrixLab. The University of Groningen is responsible for the scientific bases of the research. MIcompany determines wich value companies create for themselves from their Customers and MetricLab is repsonsible for data collection and building the benchmark database.

The DCPI conducts their research on a regular basis for 80 of the largest service providers in The Netherlands, which is based on a research base of 4.000 Dutch consumers.

The DCPI measures and compares these 80 companies based on two perspectives of a company’s Customer performance:

  • The value a company creates FOR their Customers: Value to the Customer (V2C)
  • The value a company creates for themeselves WITH their Customers: Value to the Firm (V2F)

The Value to Customer Dimension

The V2C dimension is based on articles by Rust, Lemon and Zeithaml and Verhoef, Langerak and Donkers and is based on four components, all equal in weight to the total score:

  1. Relationship Equity: Valuation by Customers of the relationship with the company.
  2. Value Equity: Valuation by Customers of the price-to-value relationship.
  3. Brand Equity: Valuation by Customers of the brand
  4. Emotions: Valuation by Customers of both positive and negative emotions that can be associated with a company

The Value to Firm Dimension

The V2F dimension is based on articles by Gupta and Zeithaml, Reichheld and Gupta, Lehmann and Stuart and also has 4, equally weighted components:

  1. Revenue: Customer spend on a company’s service(s)
  2. NPS: Net Promotor Score
  3. Retention: The likelihood of Customer retention
  4. Risk: The risk of future revenue. This one is based on the variation between the three previous components. In short: the higher the variation between the three individual scores, the higher the risk.

My take on this

I like this research for a few reasons:

  • It’s Dutch.. but that doesn’t mean anything to most of you probably ;-)
  • It has a scientific/academic foundation and the research is conducted under the responsibility of a respected Dutch University.
  • The two dimensions fit into my “value co-creation” thinking.
  • The fact that the Value to Firm dimension does not talk only of financial value and it’s not based on one number.
  • I particularly like the way the research approaches the Risk of future earnings by bringing it into the equation for starters, but mainly by it being a component based on the variation between the three other components. This makes a whole lot of sense to me.

Additionally I would like to add that I’m not a fan of NPS as an indicator. Most certainly not when it’s presented as a “silver bullit”. I would choose to add at least one more question to the NPS question:
– Did you recommend company x/y/z over the past three months.

Unfortunately I do not have insight in the questionnaire itself. Hopefully I will obtain this. If I do, and get permission, I will put it up here too.

Curious as to what you all think. Is there something similar to this somewhere else in the world? If so, how’s that working? Is this the closest we get to measurement of value co-creation on a company to company comparable level? If not, what are your suggestions for improvement? [tweetmeme source=’MarkTamis’ service=’bit.ly’]

Metrics – to fool or be fooled – that’s the question!

KPI’s should be about understanding what you need to improve to be better at meeting your Customer’s needs and desires. Designing a measurement framework, the metrics that go with that, and the cross-functional dashboards to ensure cross-silo understanding how improvement in one area effects another, should not be regarded lightly. At the same time putting together a Customer Experience Feedback Analytics team to keep tracking metrics, searching for new correlations and continuously increasing your understanding of what truly matters to Customers, as well as what you need to do about just that, I consider a must for every company.

Unfortunately, in the perception of many, KPI’s seem to exist only to please “the boss” or to show “the boss” how well one is doing. KPI’s or metrics are often not well designed, and are sometimes extremely well designed: Extremely well to suit an important purpose: Fool your Boss (e.g. for a bonus, for getting the money to launch that project you really want to do, or just to be able to not have to do anything).

Here are two examples of metrics that fit into that last category:

Pursuing your own desires, not your Customer’s:

A company understands that their customers desire a speedy turn-around time with regard to account-change-requests. They have asked their clients what they would consider a speedy turn-around time. On average the Customer has provided feedback that 10 business days would be fine. The manager therefore has put in place a metric: average turn-around time of account-change-requests. After a big ICT project (which they always wanted to do but did not have a sound business case for) they succeeded in getting it about right. Unfortunately Customer Satisfaction did not increase and the (complaint) volume in their Contact Center did not decrease either, it increased!

What happened: after analyzing the data on turn-around times it was discovered that the company has been successful in decreasing the turn-around time of requests, that were already being dealt with within 10 days before. They improved turning them around in 3 days. Great achievement, but clearly not in line with the desired outcome of their Customers. Worse even, the turn-around time of requests that were handled outside the 10 day limit, increased from 15 days to 18 days. A lot of money had been spend on reducing the average turn-around time (by system automation), only to find out it did not have any of the desired outcomes for the company. The manager is happy though, with a state of the art system and a good bonus for meeting the KPI-goals.

Little effort, maximum results

A company has analyzed that their Call Center First Contact Resolution-rate was too low, causing high levels of dissatisfaction among their Customers who contacted the Contact Center. They also analyzed that most of the repeat traffic occurred within 2 weeks after the first call. Hence the responsible contact center manager put in place a KPI to track and reduce the repeat volume that occurred within 2 weeks. After as little as one month they saw an increase in the new First Contact Resolution KPI and after 3 months they hit their target (95 % FCR). Unfortunately, and you feel it coming, dissatisfaction levels did not decrease, nor did call volume.

What happened: contact center management proved to be very effective. They implemented the new KPI all the way through to the level of Customer Services Representatives. They of course know exactly how to influence this, without structural improvements needed. The CSR’s made a great effort in managing expectations of the calling Customers: it will take at least 2 weeks before your requests will be dealt with. No improvements were made on the actual turn-around time of the Customer requests, hence all Customers kept calling back after the two weeks had passed. A good example of: little effort maximum result!

What kind of (bad) examples do you have to share? Or: how did changing the way you measured really improve understanding, what mattered for your Customers, for you? Please share your stories here.

Reblog this post [with Zemanta]

Don’t take your Customer’s word for it!

This week I had a conversation in which a friend said: “Bad results begin with bad assumptions”. We scrabbled around with the theme and got from “Assumptive Bias” to  “BIASsumptions” (which is not an actual word unfortunately). A fun to have conversation, but I believe underlying is a serious matter that brought me to write this post.

Let me start by saying that some form of guessing or interpreting facts is inevitable when you are embarking upon new roads, trying out stuff, experimenting or analyzing e.g. process failures and their consequences. ” Assumptions” are not the problem. It is how we treat assumptions and what we believe are good assumptions that worries me. My 3 main worries about assumptions are:

  1. Assumptions are often built upon “common knowledge or understanding” that are presented as facts
  2. When used for building business cases assumptions are hardly ever checked in hindsight
  3. Attempts to validate assumptions lead to “biased”  research aimed only to prove one’s assumption is correct

Assumptions based on Common Knowledge or Understanding, not supported by facts

I wrote about one of the most sticky assumptions, which is regarded knowledge in the Customer Services arena, before: Why keep chasing the wrong Goose? The assumption I’m talking about: One should pick-up the phone within (on average) 20 to 30 seconds to keep customers satisfied. As this might be true for a specific company, it is most likely not to be true for all companies. It actually doesn’t matter if it is true or not in general. What does matter is if it is true for you, or better, if you can change it to: what is customer waiting time tolerance for your company? For a good example on how one could prove what’s true for your company, take a look at this post by McKinsey. Research based on the facts & data of your company is the best you can get. You have it, why don’t you use it? As the example shows: a lot of waste can be prevented.

Assumptions are hardly ever checked in hindsight

Much attention gets paid to the assumptions in preparing a business case. It therefor has always surprised me how little time is taken to review afterwards, whether the business case came through or not. In both cases this is missed opportunity. First of all you can learn from the validation of your assumptions. It might be your assumption came through, but the result of your business case didn’t, or the other way around. There is always a great learning potential by checking in hindsight. Best case: you have proved your assumption for this business case. Now you know it is a better assumption for your next business case. But never forget: even if it came through 2 times or more, you need to check every time. Don’t miss-out on the opportunity to learn.

Biased research

The first two are about failing to check, my last one is about poor validation. The issue here is that most people tend to look only for the positive proof of the assumptions they made. We often disregard completely the proof against the assumptions. It is not only scientifically better to make a real effort to not prove your assumptions, it also makes your assumption (much) less of an assumption if it comes out as true (or highly correlated at best actually). True validation is about checking both sides of the coin.  It will provide you with great (personal) satisfaction if you do, even if your assumption proved false. At the same time you might have saved your company from adding more waste to the bottom line.

Bad results begin with hypotheses poorly validated

The best way to take the turn away from Assumptions in your business cases, plans or analysis, is to change from Assumptions to Hypotheses. As discussed above, assumptions are regarded truths without the facts supporting it, are poorly checked and often a result of bias. Hypotheses are not about that. Hypotheses are screaming to be challenged. Change your assumptions to hypotheses the next time you need one and dig in the facts.

And, if you get any of those facts from Customer Surveys, don’t take your Customer’s word for it: you have another Hypothesis in your hand..

What do you say?: will you start working with hypotheses and walk away from assumptions?

To be a Value (Call) Center is not your choice…

Over the past years most companies have recognized the contact center or customer services center as an important touch-point between the company and its Customers. This insight has been mostly driven by the recognition or discovery of Customer Experience Management. I very much welcome the interest of Marketing (and Sales) for the call center environment as much as I do the attention for improvement of the Customer Experience.

The main strategy of call centers has been to develop itself from a cost to a value center. From a terminology perspective this works for me, but the practice, in my opinion, is mostly focused on single value creation or value extraction. Let me explain my thoughts:

The main elements of the cost to value-center strategy have been focusing around generating additional sales, through up- and/or cross-selling. Also customer retention calls (inbound or outbound) are a good example of the value that companies are trying to achieve through the Customer services touch-point. Some pro-active companies are aiming to improve the customer experience with things like welcome calls or any other form of courtesy calls (generating another sales-opportunity).

I’m a firm believer in the great opportunities for value creation there are on the customer services touch-point. I also see that, in lots of cases, after a promising first starting year, companies forget that value-creation is not only about extracting as much value possible out of the Customer into the company. Hence companies start increasing the sales-targets and more importantly, they start increasing the “sales-per-hour” target, which is just another productivity metric not aimed at customer value creation. Which leads me to the following statement:

Deployment of a Value Center strategy will only have a chance to meet the desired result if one can leave behind Cost Center methodologies and metrics.

Becoming a Value Center is not about choosing to upsell or cross-sell when you want it. Becoming a Value Center is also not something one can decide to be by itself. Let the Customer be the judge of how much value is created through the Customer Services Experience, let the customer decide if your Call Center is a Value Center.

Call Centers are an important touch-point in the Customer Experience. It is also not the only point a Customer will touch in its lifetime. The design , delivery and decision making aspects within the Call Center change if a company thinks and manages the contacts as part of a lifetime of Customer interactions. If one factors a longer term of interactions, then there is an emphasis on consistency and sustainability of the experience, not single contact value distraction.

Thus, to conclude, I believe the best way to go is not with a cost-centered, not with a profit-centered and not with a flawed value-centered approach. The best approach to Customer Services Call Centers is the Customer-centered approach.

Any thoughts? Please share them in the comments.

Reblog this post [with Zemanta]

Reconnect the Customer and the Employee with the company

– This article was first published at www.CustomerManagementIQ.com. You can find the article there, here

Call centers have been named the drains of the organization. Unfortunately this is a true statement. Anything that goes wrong, within an organization’s attempt to sell and deliver products and services, will return in Customer Services. Also the people working in Call Centers are viewed and treated as Production Capacity, not as one of the most important assets of the company.

Reducing the P-side of the equation

The starting point for Customer Services Call Centers, as we know them today, has been the desire to concentrate the work (handling customer calls) which was viewed “disruptive” of the higher valued (administrative) work. The clear signs are still there today: Administrative work usually gets higher pay and working conditions in “the back office” are significantly better.

Over the past decade or two call centers have been managed on the P side of the equation: P (price per contact) x Q (volume of contacts).  Almost all innovations in call center or customer service management have been aimed at reducing the human factor in the equation, because that’s where the costs were considered to be highest. Even Quality and Knowledge Management systems could only be implemented after proving ROI through reduction of employee costs (e.g. of monitoring & coaching).

Sadly, for a long time, The only “quality” parameter in play has been Average Speed of Answer or Call SLA and until recently one was considered a specialist in call centers if one understood how to increase accessibility whilst increasing productivity.

We need to change the course of evolution..

I believe that all of the above has resulted in the following “shocking” fact:

The probability that a service interaction will drive disloyalty is approximately four times greater than the chance it will create any positive loyalty impression

I see this statement as “our” main challenge for the upcoming decade. It proves that we are not doing a great job. We have disconnected the customer from the company, by disconnecting the Customer services call center employees from the company first. The above examples prove to me that it is part of our genetic structure. This is not an easy fix. We are in need of genetic manipulation, we need to change the course of evolution: We need a new course, a new map, and a new compass to support that.

What should call centers of tomorrow chase? – How do we reconnect the customer?

Actually I exaggerated a bit above. The course of evolution is being changed. We already see smart companies like Amazon and Zappo’s following the new course. It is likely that more have followed. We just do not hear as much of them as we do from the companies that have a bad service reputation. And frankly I do not encounter a lot myself in my daily work as consultant. Smart companies follow a course that is build upon a few simple building blocks and which is resulting in Loyal Customers: Customers that buy again, buy more and are spreading positive word of mouth.

When we choose the course of Loyalty there is a clear map to follow. Several researches show that there is a high correlation with loyalty through the Customer experience (ease of use, usefulness, delight) as well as Customer engagement and last, but not least: Through employee engagement. It’s these three roads, “we” should follow to get to goal.

What does this mean for call center KPI’s

When targeting Loyalty, call centers should adapt their compass, their KPI’s, metrics or balanced score-cards, in accordance with this goal. So what does this mean:

How successful your Customer’s Experience is, will not be driven by continuously reducing the human factor in the interaction with Customers. It will only do so if the alternative makes the customer service experience easier and more useful for Customers. E.g.: How easy it is for the Customer to find the solution to his problem, how easy it was to find the correct phone number and how easy it was for Customer Service to solve the problem. And also: how empowered is the Customer Service Rep to solve even difficult cases. Those are factors that will increase the likelihood of the Service Experience being a contributor to the full Customer Experience and Customer Loyalty in the end. Those are the factors that need to play a key-role in your Customer Services Call Center score-card.

Employee loyalty will increase not by focusing on AHT, but if you empower employees with knowledge, skills and tools to have better conversations, it will. Employee loyalty does not increase by business rules or scripts that limit employees to deal with Customer problems themselves. Employee engagement does not increase by focusing on 10 critical errors out of 20 potential errors when you do (distant) call monitoring. Engaged employees are less ill, have higher productivity and are more likely positively contributing to the Customer Experience. Engaged employees are also your most loyal Customers. Measurement (and improvement) of Employee engagement should be a key-indicator for your scorecard.

Does the above mean that you can throw out all your old KPI’s? Do Call SLA and AHT no longer matter? From my perspective it does not. It does imply that it is significantly more important to focus your efforts and investments in areas where it does truly matter to increase customer loyalty.

By improving on the above I bet that your “old” KPI’s will improve too. Most of all your company’s profits will grow through increased sales, reduced customer churn and growth of the customer base. How’s that for an ROI? The question that remains: does this suffice for “genetic manipulation”?

Reblog this post [with Zemanta]