Customer Satisfaction Measurement - The Leadership Factor

The Holy Grail

At our conference this year, I talked about the Holy Grail of customer attitude measurement—proving the benefit by showing the financial returns from high levels of satisfaction, loyalty, etc.

This is important because, if we want the customer experience to be taken seriously at board level, we need to join the grown-up conversation. We need to talk pound signs (or dollar signs, or Euros).

My main message was that it's dangerous to see this goal as a Holy Grail. Mythologising the quest for proven links to financial outcomes makes it seem impossible, attainable only by the chosen few—the Galahads of customer service and business intelligence.

My view is that Percival is a much better Grail knight for us to model our quest on. He only had to ask the right question when he had the chance.

So what is the right question? Ultimately what we want to know is “if I invest £x in improving satisfaction, what will the payoff be in improved profit?”. But couched in those terms, it's an impossible question for most businesses to answer. Does that mean we should give up? No.

I think we can make big strides towards answering the question simply by looking at the implicit causal links embedded within it, and breaking the question apart to make them explicit. Ulimately we are looking at a three step causal chain:

1. If I invest £X* , how does that change our performance?
2. How does our performance affect customer perceptions?
3. How do customer perceptions affect their behaviour (in ways that improve profit through increased sales or reduced cost)?

I'll go into more detail in a follow-up post, but in a nutshell I think we can answer those by:

1. A combination of guesswork, experience, and experiment.
2. Well targeted event-driven surveys linking satisfaction to specific, tangible, experiences and behaviours.
3. An aggregate based on all the bits and pieces of the jigsaw we can lay our hands on. (e.g. How much do complaints cost to handle x how many more complaints we get from dissatisfied customers, what does one inbound call cost x number of extra calls for dissatisfied customers, acquistion cost x difference in actual retention rate)

So I think that most organisations could get their hands on the Holy Grail, or at least a convincing estimate of it, if they approach the quest in the right way. But do we have any evidence that the journey is worth it?

Results from January's UKCSI, which we conduct on behalf of the Institute of Customer Service, show that there is such evidence. The full analysis is available on the ICS website (read the executive summary as a good starting point), but one of the key charts is this one. It shows the strong link between customer satisfaction in the Retail sector and sales growth. Amazon, John Lewis, and other retailers generating great customer experiences, are growing faster than their less successful competitors.

Perhaps it's time you started finding your own path to the Holy Grail?

 

*********

* Or make changes which don't require investment!

George Orwell on the "boulot"

Not long ago I read Down and Out in Paris and London, George Orwell's brilliant semi-autobiographical portrait of the grimy world behind the scenes of upmarket hotels and restaurants in Paris, and on the streets of London.

His experiences in London don't have much to teach us about service, but I think his observations about high-class restaurants and hotels still have a lot of relevance. He understood that so much of what people call service is just theatre that exists to conceal the grim reality. Staff focus on the "boulot", the job, rather than inherent quality. If customers were ever allowed to see behind the scenes they would be horrified.

“In a hotel a huge and complicated machine is kept running by an inadequate staff, because every man has a well-defined job and does it scrupulously. But there is a weak point, and it is this — that the job the staff are doing is not necessarily what the customer pays for. The customer pays, as he sees it, for good service; the employee is paid, as he sees it, for the boulot — meaning, as a rule, an imitation of good service.”

This captures perfectly the difference between organisations that get it, that are genuinely customer-focused, and those that try to get away with the minimum. Ultimately that comes down to culture, and therefore to the values instilled by the leadership.

What's more important to staff in your organisation—service or the "boulot"?

Crisis and Awakenings - Generations, Values and Motivations

“Men resemble their times more than they do their fathers”-Marc Bloch

We are formed by our experiences, particularly in childhood, and shared experiences are likely to mould us in similar directions. That, in a nutshell, is generational theory. I'm going to discuss the evidence, some from our own research, about the impact that generational differences have on the behaviour, values and motivations of your customers and staff. I'll end with some thoughts about what generational theory has to tell us about the future of management, customer service, and marketing. But first, I want to put Marc Bloch's idea to the test.

Do I resemble my father?

My dad is 80 this year. He was born, in April 1931, at number 26 Greenwich South Street, a Victorian terrace pretty much like this one. In some respects we're very similar, but there are times when I wonder if he was born on a different planet. Like the times when he eats out-of-date food, just so it doesn't go to waste. Or when he spends half an hour driving around in order to find somewhere to park without paying. Or the times he goes into the bank and queues for a teller to draw money out, rather than using the ATM.

In some ways he was born on a different planet. London was a very different place in 1931.The pub his grandmother used to own, the Blue Eyed Maid on Borough High Street, is still there...but it didn't serve curry out of the top floor in 1931!

The southeast wasn't affected by the Great Depression as much as the North, but the country as a whole was suffering. These were hard times, but also times when innovations in technology and manufacturing where changing the world rapidly (not always without mishap).

My dad was staying with his uncle on a farm in Suffolk when the war broke out, and his parents decided it would be safest if he stayed there. By 1940 Suffolk didn't seem so safe, and he was packed off to relatives in Wales during Dunkirk week (sharing a packed train with kitless soldiers fresh off the "little ships"). The rest of the war was pretty remote for a kid in Wales, but its effects were all-encompassing. Rationing was in force, men were off at war and women were increasingly called into work to replace them. Duty and self-sacrifice were everywhere.

So that's a potted biography of my dad's formative years, does it help us to understand him? I think so. It's not just my dad who will go to silly lengths to avoid waste - most people probably recognise that in parents or grandparents who went through the same things. We can trace the roots of it to a childhood spent during the Great Depression, rationing and war. Like most people of his generation, he worked for one company for most of his adult life. Those values of duty, loyalty, respect for authority are also pretty universal; and again we can trace their roots to shared experiences of war, national service and a nation pulling together. My dad's generation is known as the "silent generation" (a little bit unfairly). They're self-sacrificing, hard-working, conformist, law-abiding, patient, and above all they hate waste!

The silent generation:

• Dedication
• Self-sacrifice
• Conformity
• Patience
• “Waste not, want not”

Let the good times roll

But what came next? Well, if we look at population broken down by year of birth, we can see a spike after the war, and then a bulge in the 1960s (and the bulge comes sooner in the US).

  

Why? Because after a tough couple of decades, things were pretty good. Rationing was phased out, men were home from war, women were getting used to an unprecedented amount of freedom. The result was a baby boom, and the vast generation it spawned are still known as "baby boomers".

Boomers are the engines of most of the exciting companies in the world at the moment. Steve Jobs is almost the archetypal boomer. Too independent to be content working for other people, boomers start companies. Why are boomers so relentlessly driven, so entrepreneurial, so confident? They were moulded by good times.

Strauss and Howe, the historians most associated with Generational theory, believe that history can be described as a cycle of Crises (happening about every 80 years) and Awakenings. Where you were born in relation to these crises shapes your values, so generations too have a cycle of four archetypes.

The Silent Generation, born during the Crisis of war and depression, conform to the "Artist" archetype. But for the Boomers, war and depression were in the past. Science and medicine (driven partly by war) were delivering faster than at any other time in history. Teenage boomers were healthier, richer, happier and safer than anyone had ever been.

Baby boomers:

• Grew up in time of affluence
• “You never had it so good”
• Idealistic
• Sex, drugs, rock and roll
• Personal gratification

Unique? Not according to Strauss and Howe. The generation born after a crisis fits the "Prophet" archetype. Self-absorbed but idealistic, they change the way society thinks. Utopia was round the corner...or was it?

 
The lost generation?

The next stage in the cycle is a "Nomad" generaton-Generation X. In many ways each generation is the product of the flaws of the generation "in charge" during its youth. For Xers, that mainly means the Silent Generation. So not only do I not resemble my father, my values are exactly opposed to his in some respects. This accounts for a big part of the cyclical nature of generations.

So what are we Gen Xers like? Well, by and large we distrust authority, we don't expect careers to be spent with one company. We don't believe in paying our dues, we want rewards now (although we are prepared to work hard for them in the short term!). Our defining feature is our need for individuality, cutomisation and self-expression. Brands love Xers and Xers love brands.

Generation X:

• Children of busy (divorced?) parents
• Distrust leaders/authority
• Career insecurity
• AIDS instead of free love
• Individualistic

The new boom?

Now we turn to the final generation of people you could broadly descibe as "adults" today. Gen Y, or Millenials, grew up in a post Cold War world of increased optimism and global connectedness. Nurtured and protected in childhood, they can be confident to the point of arrogance. They demand a rationale for any request or instruction ("because I said so" is not going to cut it). Millenials are a "Hero" generation, and we can expect them to be dominant and vigorous like the Boomers (unlike the "Recessive" Gen X and Silent Generation).

Generation Y:

• Confident
• Prolonged youth
• Integrated with technology
• Networks
• “Because I said so” doesn’t work

So that brings us full circle, back to another Crisis and another "Artist" generation. It's worth thinking, as you watch the news and think about social trends, about the effect events may have on the Generation being moulded by them now. What are we doing to our children? Philip Larkin had something to say [NSFW] about that!

So what does it all mean?

Where does that leave us?The graphic below is a quick summary of the proportion of the adult population made up of each generation, which life stage they stand at right now, and how much disposable income they're likely to have.

The Silent Generation has mostly retired from the world of work, and perhaps we tend to forget about them as customers too? But they're very much still there, and they have siginificant spending power if you can find the formula that appeals to them. Boomers are still on top right now, but they're beginning to move into retirement (major implications for "silver" spend!) and Gen X is starting to take over the reigns. There may not be as many Gen Xers, but we love brands and gadgets and if you can help us to express ourselves you'll be onto a winner. Co-creation is a very Gen X-friendly concept. The key to appealing to Gen Y is to make things social - networks and friends are significant to them...and they love causes.

Generations and behaviour

Let's look at how generational values shape the way people respond to technology. Gen Y have grown up with computers...but being "digital natives" doesn't mean they're tech-savvy, far from it. They probably know less about how computers work than their parents. The difference is that technology is embedded in their lives. They don't "go on the internet" to "look something up" any more than a boomer "goes on" their watch to "look up" the time.

In terms of online behaviour, there's a clear split between Gen Y and Gen X on one hand, and Boomers and the Silent Generation on the other. 50% of Xs and Ys on our panel own a smartphone, only 23% of the Boomers do. Gen X use the internet, like everything else, to express their individuality. Gen Y use it socially, with 3/4 of them on our panel having updated their Facebook status in the last week.

I think the difference between the generations is captured well by some advice I've seen on designing a website. Gen Y want it to be fun, or they'll lose interest. Gen X want it to be customisable, so they can express their individuality. Boomers want it to be useful. The interesting thing is that, at the moment, most sites are designed by Gen X. I wonder if they're factoring in the needs of other Generations? How does this bias feature in product and service design more generally?

Generations in the workplace

What are the implications for the world of work? The first one is that the peak of Gen Y is beginning to make itself felt in organisations. Their filters are more efficient than other generations, and they've been trained to believe that they're special. They're not used to waiting, and they don't see why they should listen to you...unless you can convince them you're worth listening to. That's the trend that everyone's talking about, this alien race of Millenials. But I think the real question is how all generations deal with each other, particularly when it comes to motivations and the management styles that work. Yes it's important to understand that, for Gen Y, you might as well cut off their arm as cut off their Facebook access. But likewise, you need to know that Xers will want to put their own personal stamp on a project.

Generations as customers

What about customers? Well, there are obvious things like preferred channels and forms of address, but there are also more subtle considerations. Our panel research showed a shift in where people turn to for advice on buying products, with older generations more likely to use "authorities" such as Which? or professional reviews. Gen X&Y are more likely to turn to other customers in the case of X, or friends and networks in the case of Y.

Wrapping it all up - how do we use generational theory?

So, time for some final recommendations. In terms of marketing, and research, the most obvious start is to use generations in place of the classic demographic age bands (18-24,25-34 and so on). With that as a basis you can start to explore the impact that core generational values have on the way your customers and employees relate to the business (and each other) and what they want from you. Share this understanding with your staff; put it on the agenda; design products and services with different generations in mind (or be very clear who you're targeting).

Do you need a Gen Y voice on the board? Maybe, but I think it's more important that your whole board has the brains to see that everyone in the world is not just like them. It sounds obvious, but this takes conscious work. It's really difficult to believe that anyone could be so stupid as to see the world differently to us, particularly if we're surrounded by like-minded people. The problem is that the people running companies are mostly one generation, while the people doing the work (and meeting customers) are another. No wonder we all think our bosses/underlings don't get it.

“The philosophy of the school room in one generation will be the philosophy of government in the next”-Abraham Lincoln

Generational theory not only gives you a framework that helps you to understand your customers better, it may give us an insight into the future. Are we just coming into another crisis? Will the next generation be much like my Dad's generation: anti-waste and pro-saving before you spend? It looks like they might be. Generational Theory is powerful not when you use it to spin just-so stories about the past, but when you use it give you insight into what the future might look like.

Changing customers' minds

This is an (other) interesting blog post from Roger Dooley at Neuromarketing called Replies can change customer minds

It's an interesting post in itself and something we've also been articulating to organisations for a long time, but more interestingly it actualy happened to me recently and I did exactly what the research suggests others do. I'd stayed with a colleague at a hotel the night before working with a client. I'd never stayed there before and picked the hotel for it's convenient location, walking distance from where the meetings were to take place.

Anyway to cut a long story short it was ok but not a great experience and so when I got an email feedback survey I grasped my opportunity. As part of my feedback, I also said I was unlikely to either stay there or recommend the hotel. I was then surprised to get an email from the Hotel Manager himself the next day following up on my feedback which we discussed. The upshot was it actually reversed my opinion of the hotel and I definitely would give it another try.

So there you have it, it does work. Again another important point we also advocate with clients - follow up on feedback with customers, in a personal way and quickly. It's like the saying goes..."problems are like a taxi meter..." You get the rest I assume!

Culture, innovation, and designing for joy

Adam Greenfield wrote an interesting article (it's too long to be called a "post"!) with his thoughts about the difference between his new job and his experiences at Nokia.

In a nutshell, he points out that the things that make Nokia an efficient business also tend to make it poor at designing great customer experiences. We should point out that Nokia is not alone in this, it is a general truth that it is very hard to be both efficient and innovative. As I wrote in this Stakeholder article[PDF], the solution is to create slack for innovation, either by giving people time (like 3M or Google) or by creating a "skunk works".

The most interesting part of Greenfield's article, to me at least, is his story about a protoype NFC vending machine. This is new technology that, among other things, will let your phone act like a contactless credit card. His point is that the experience worked, from an engineering perspective, but was horrible from a user experience point of view:

"I experienced, in fact, neither a frisson of elegant futurism nor a blasé presentiment of everyday life at midcentury. I was given an NFC phone, and told to tap it against the item I wanted from the vending machine. This is what happened next: the vending machine teeped, and the phone teeped, and six or seven seconds later a notification popped up on its screen. It was an incoming text message, which had been sent by the vending machine at the moment I tapped my phone against it. I had to respond “Y” to this text to complete the transaction. The experience was clumsy and joyless and not in any conceivable way an improvement over pumping coins into the soda machine just the way I did quarters into Defender at the age of twelve." [Emphasis mine]

This, in a nutshell, is what Apple tends to get right and its competitors tend to get wrong. Creating great experiences for the customer takes skill and care, and they must be designed. A good thing to aim for is what Mark Boulton call "spikes of joy" throughout the experience. This is as important as getting the underlying technology working, or no one will want to use it!

Maslow, emotion and hierachy of service

An interesting and slightly longer post from September last year relating Maslow's hierarchy of needs to a hierarchy of service that companies should be mindful of, in my view. Maslow, emotion and hierarchy of service

This is contrary to the almost magpie like behaviour of the next new thing to sell to customers which some companies have. Understandably, delivering on the basics is boring which is the challenge, however as Tom Peters says "timeless execution of the basics are priorities 1, 2 and 3". Good article worth a read.

Truth is another story

This post in a nutshell: stories are powerful, but dangerous.

Powerful, because they are the best way to persuade people to do what we want them to do (journalists, lawyers and salespeople know this well). Dangerous, because we also use them to sell easy explanations to ourselves.

 

Fooled by ourselves

In The Black Swan, Nassim Nicholas Taleb talks about the "Narrative Fallacy"—our tendency to believe stories we've made up to explain facts. Pretty much every newspaper story about scientific research is guilty of this (see for example this post by Kaiser Fung).

The problem is that we tend to be happy with an explanation which is plausible, as long as it is consistent with the evidence (particularly if it fits with our preconceptions), whilst forgetting that there are lots of other potential explanations. By jumping to conclusions we automatically cut off any further investigation of the real explanation, so this process tends to be self-fulfilling.

A key part of the scientific method is designed to tackle exactly this. Proper testing is all about thinking up ways our story could be shown to be wrong, not piling up more evidence that it is right. Sadly the testing part of the process rarely transfers into business.

Science: Facts->Hypothesis->Testing

   vs.

Business strategy: Facts->Hypothesis....... 

So what happened to fact-based management? It has been a victim of three fatal weaknesses:
1) Proper scientific testing of causality is difficult, sometimes impossible.

2) Science is a bit nerdy, and the people who run businesses were more often the captain of the school rugby team than they were the chess club.

3) Business likes to perpetuate a myth of itself as slightly macho, seat of the pants, instinctive and passionate. This is all very well if you want an organisation staffed entirely with Apprentice contestants (shudder), but doesn't help if you want to make good decisions.

Proper science is the only way to find out what actually works. As I've said before on this blog, why not put some of your assumptions to the test?

 

The responsibilities of the story-teller

If we have a duty to ourselves, and to our businesses, not to be fooled by our own glib explanations and preconceptions, we should also do our best to make sure that we don't lead others down the garden path.

It may not always feel like it, but our stories can be just as compelling for other people as they are for us. We need to be very confident what we're saying is true. The cynic in me thinks that many people would be paralysed with terror if they thought there was the slightest chance that what they were saying might actually change the way anything was done...but shouldn't we at least act as if it might?

Stories are, without doubt, the best way to make people take notice of what you're saying. But before you rush off to create your next story, make sure it's grounded in evidence. You don't necessarily need to show your working, but you do need to have done it. Great writers spend most of their time researching and rewriting—shouldn't you do the same?

Please ask me first before you try and sell me something....

I'd never thought about it this way before and it was one of those light bulb moments. I'd heard about permission marketing from Seth Godin before but I suppose I'd not truly understood it. The 'light bulb' moment came to me whilst running a financial services focus group. The group was discussing the subject of when it would be ok for a financial services company to approach an existing customer with new products or services and whilst most of the group suggested they would prefer to contact the company first, one of the group members responded, "well never really. You don't get Next trying to ring me up and sell me their new range of clothing." And that was it - simple. Even with permission marketing, which is defined as 'marketing centered around obtaining customer consent to receive information from a company', that still doesn't mean companies have the right to call me up and waste my time. I'll choose how I waste my time thank you. Great example is my bank who keep trying to sell me an upgrade to my bank account and their 'USP' is free breakdown recovery. Two issues with this (and it isn't just my bank). Firstly just because you have my details (Mr Company) doesn't give you the right to actually call me even if I have or haven't opted in or out to receive sales call, and secondly the actual value and cost of what's being offered is probably less than half the cost of what I would pay them in additional account fees per year, in the example with my Bank. Interestingly, my Bank never calls just to see how I am. The result, is in part probably the opposite of what organisations are trying to achieve. Yes they want increased sales but they also want trust, recommendation and great customer experience. Take it from me. With this type of behavior, you won't get it. So why do companies do it?

Competing priorities

Bruce Temkin  posts some very good articles on customer experince and most recently this one caught my eye on the challenge within an organisation to focus on delivering and improving the customer experience amidst a sea of competing priorities. In my mind, questions spring forth...what are these 'priorites' that are perceived to be more important than improving the customer experience, and are they really and truly more important?? Admittedly, I see it in the work we do with clients and I still don't understand it. I would be keen to hear your views on this and your competing priorities....Reminds me of a Tom Peters quote, " Calendars never lie. They are 100% accurate and visible indicators of your priorities."

Making the data fit the model

Kaiser Fung, author of "Numbers rule your world" and the Junk Charts blog has an interesting post on the ethics of "correcting" data so that it provides a better fit for a theoretical model. His post refers to a deeper (and longer) post by Phil Price explaining why climate scientists corrrecting their data is not as fishy as it has been made to seem.

He outlines three circumstances in which we might alter data to improve its fit to a model, which I would paraphrase as:

1. "If it ain't broke..." We tend to look into data that don't fit the model, and investigate "corrections" that would bring them closer to the model, more deeply than data that does.
2. Cherry picking We tend to discard questionable data that doesn't fit the model, while using weaker standards for data that supports our theory.
3. The model is right If a model is very well established, and very good, then the chances are that data which don't fit are wrong.

It's an excellent article, and well worth reading. I think the take-home point is that analysts in general have a tendency to bias data to fit their theory, but that it CAN be right to tinker with data. That said, we have to be very careful about whether it's justified in each particular case.

In customer research there is often a pressure, when scores are reported for individual cases or customers (or even at specific times), to cherry pick. "Don't interview Bob, he always gives low scores."

Next time you feel like removing a low score you don't deserve, ask yourself if you would be willing to take out one of the scores that's higher than you deserve.