Successfully measuring customer satisfaction can improve the customer-distributor relationship. This article examines some of the most popular metrics and discusses how to develop a strong customer feedback program that can help improve the customer relationship.
In today’s competitive marketplace, where the battle over wallet share is more competitive than ever, feedback from customers can strengthen distributors’ relationships and drive value. When it comes to collecting this feedback, there are three common metrics that companies are tracking: advocacy, effort and satisfaction.
Advocacy is often measured by the Net Promoter Score, which revolves around one simple question: “How likely is it that you would recommend this company to a friend or colleague?”
This approach is based around the idea of “delighting” customers and winning their loyalty by providing exceptional customer experiences, with the expectation that delighted customers will then be “promoters” of the company.
Berlin Packaging, Chicago, IL, a supplier of packaging products and services, began using the NPS system in 2010. “We actually look to this mindset around customer experience, therefore Net Promoter, and all the executional elements around that, as one of the key explainers of share gain that we’ve been having in the packaging industry,” says Jeremy Lagomarsino, vice president of business development and strategy for Berlin.
Customer effort is often measured by the Customer Effort Score. Customers rank, on a scale of one to seven, how much they agree with the statement: “The company made it easy for me to handle my issue.” As the name suggests, the CES measures the amount of effort a customer had to put forth in a given situation, with the goal of increasing ease, as opposed to delight, for the customer.
“We did research of B2B and B2C customers globally, and we found that customers told us that… customer delight actually didn’t impact future loyalty behaviors at all,” says Lara Ponomareff, practice manager for business advisory company CEB. “The thing that impacts future loyalty behaviors the most is, in fact, whether or not that customer had a low-effort or high-effort experience.”
The final metric, customer satisfaction, is considered the weakest of the three, as it’s prone to the most subjective answers and doesn’t provide actionable steps from the collected feedback.
“At the end of the day, the customer satisfaction score is very little more than a measure of your competence – your perceived competence – in the mind of customer,” says Joseph Michelli, chief experience officer at The Michelli Experience, a consulting firm focused on customer experience. “It does very little to assess the strength of the connection. If you can’t satisfy 90 percent of your customers 90 percent of the time, you should be in another career field.”
There’s a low correlation between customer satisfaction and loyalty, Ponomareff says. A customer who is satisfied with a company, for instance, may still leave if a competitor comes along and offers a better price.
Benefits of the Systems
The NPS system is based on the idea of converting customers into promoters. By doing so, not only will that customer’s loyalty be strengthened, but they will be actively spreading goodwill about the company and increasing business.
“The investment is trying to deliver an experience to customers that is so compelling that they stay and they talk to others, and in so doing you don’t have to go out and pay the high acquisition costs and soaring marketing money,” Michelli says.
The key is to focus on the right end goals.
For Berlin, the end goal is helping customers grow their businesses. “What I think the customers are saying when they give Berlin – or another company – a high score is that it’s helping that customer achieve better results. Ultimately, our mission is to improve the bottom line of our customers,” Berlin’s Lagomarsino says.
The big benefit of the CES is its practical nature, CEB’s Ponomareff says. It can provide a good starting point for distributors to make tangible change to their customer service programs, while also being something that can be segmented like NPS.
Another benefit to CES is the fact that effort is a subjective term, a perception that can be swayed with the right adjustments to the problem, Ponomareff says. “We found that effort is actually two-thirds of what we call ‘feel,’ or how I felt about the interaction as a customer, and only one-third is what we call ‘do,’ or the actions and steps I actually had to take.” This allows front-line representatives to track what “feels” like high-effort and make adjustments to help change the customer’s perception.
Overall, reducing effort in an organization can help decrease costs, Ponomareff says. “A lot of times, things that reduce effort reduce operating costs as well, because they reduce callbacks, escalation – all of these things are hugely expensive to organizations,” she says.
Challenges to Implementation
Implementing a customer feedback system can cause fear in an organization that the system is creating a “witch hunt,” or looking for people to blame for customer disputes, Michelli says. But if a company institutes the system from a top-down perspective and focuses on enabling employees to resolve customer disputes, it can create a culture of accountability and empowerment within the company.
“No longer am I in the business of getting product from point A to point B,” Michelli says. “I’m in the business of building loyal customers.”
Along with internal concerns, distributors should be careful about inundating customers with constant survey questions, he says. It’s all about striking the right balance. “How can you ask the customer with enough frequency to be able to operationally adjust your business, but without too much frequency that it’s going to annoy them?” he says.
It’s also important to have a clear goal in mind with any system. “The biggest problem is thinking that by surveying your customers, you will get better scores over time,” Lagomarsino says. “The survey has nothing to do with it. It’s what goal do you have?”
In order to get the most from these systems, distributors need to develop actionable steps they can take to act on the feedback they’ve received.
“I think from an organizational perspective, you have to break through the notion that ‘We’ve always done it this way, and we can only make iterative changes,’” Michelli says. “This is the time to say, ‘Look, let’s blow up this process if we have to. What is the optimal process we would put in place if we really did care to solve this problem for the customer?’”
Another way to get the most from the system is to follow up with the customers who provided feedback. “Often times, reaching out has the dual effect of gathering data as well as retaining that customer,” Ponomareff says.
For example, Berlin Packaging provides customers with Starbucks gift cards when they complete a credit application. “We’re trying to make every touch point surprising and delighting, no matter how mundane you may think that touch point is,” Lagomarsino says. “Getting a little thank you from someone that you were never expecting shows what’s to come.”
Berlin also seeks to “close the loop” within 24 hours with customers who have self-identified and given them feedback, providing follow-up calls and discussions to better understand why they provided the feedback they did.
It’s also important to look at the feedback within the context of how it was given. “Don’t look at the data point in isolation, because that customer did not just see that thing in isolation,” Ponomareff says. “Look at it in terms of the larger customer journey they’re going through. Where did they start and where did they finish, and where does this fit into their larger relationship with us, whether about this one particular issue or question they had with us, or the broader relationship in general.”
Tying it All Together
NPS is good at evaluating the overall customer relationship, but it doesn’t tell distributors how or what they can do to increase their scores, says Ponomareff. This is where the CES can come in. “We see that effort is more actionable,” she says. “I know what I can do to make that a lower-effort experience for you.”
Ponomareff sees these two metrics as being very complimentary, with lowering effort being a key component to increasing a company’s NPS.
“We find that lower effort experiences are highly correlated with [higher] NPS,” she says. “If we reduce customer effort within the customer service function of a distributor, then we would actually see a positive impact in NPS.”
For example, a CEB survey revealed respondents whose effort scores for a company ranked in the bottom quartiles (i.e., exerted higher effort) reflected an average -11 percent NPS score for that company. Customers whose effort scores ranked in the top quartiles for a company (i.e., exerted low effort) had an average 54 percent NPS score for the company.
Both metrics also allow you to dig into specific areas within the company, gaining better insights into specific opportunity areas.
“We like the ability to drill down into the data,” Lagomarsino says about the NPS system. “It’s not a high level score; we will slice-and-dice our information by sales office, by location, we’ll even cut it by sales rep or customer service representative. We can truly drill down to where the pockets of absolute thrill are, and where there are opportunities for improvement.”
According to Michelli, however, the order in which these metrics are prioritized is important. Remove pain points (extra effort) first, and then focus on delight, he says.
“What you’re really trying to get at is, this provider, this vendor, is so integral to my success, that I can’t imagine a world without them and they are perfect for me trying to be successful in this business,” Michelli says. “Once you get into that emotional space in the life of your customer, it’s really hard for them to go elsewhere, because they don’t want to take risks over some pennies on the margin.”
While the metrics are useful snapshots of how well a company is achieving its end goals, they are still only as useful as the people analyzing them, Lagomarsino says. “The metric is just something that validates what we’re doing, it helps us to course-correct and allows us to drill down into things and points a spotlight on things that may need more attention, but it’s the people that are the ultimate spirit behind the thrill culture, and I think that needs to be true no matter what company you’re at.”