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October 14, 2014

Customer Retention Is Also about Keeping Your Promises

If you’re reading this, you likely already know your brand is your promise to your customers. But there is an important extension to this: keeping customers means keeping your promises.

Let me tell you the story of what just happened to me (I admit this is a bit of a rant, but if you’ve been following my customer retention stories, you know how I love to pick on the companies with the worst customer service—they are fantastic examples of what not to do).

This story is about my mobile phone upgrade. You’re probably not surprised to learn I have not been thrilled with my mobile phone carrier. When my contract was up and the new devices became available, it was time to upgrade. I did my homework, calling and asking lots of detailed questions about devices and plans. I got great answers from very helpful people.

In other words, they made me a promise. They made promises about the features and plans, and more importantly, they made promises (implicitly) about the kind of service I would receive (friendly and helpful, making the upgrade process easy and smooth).

When it came time to place the order, things started to go wrong, and small issues turned into big issues, leaving me wanting to switch to another carrier. First, when I called to place the order, I was told I could only do that online. Just a small inconvenience, so I tried online. Even though I was out of contract, they wanted to charge me a fee for upgrading (this is a common, if customer hostile, practice). I called to complain and was put on hold, then transferred to three (!) different departments. Then I was told this fee was required, and that I could not upgrade my phone without it. And no, not even if I paid full price for an unlocked phone could I avoid this fee.

More than an hour later (trying my patience), I hung up and called another carrier. They agreed to sell me new phones (the same model) with a similar plan without any fees to get started. The only reason I did not sign up right there and then was a small technical feature I need—which they do not have.

So I called back my old carrier and told them I would leave if they didn’t waive the fees and process my order without further hassles. I was transferred to the “customer retention department.”

As you probably know, these are the people whose job it is to handle the angriest customers and the worst customer service mistakes the company has made to improve customer retention. The mere fact a customer retention department exists means customer service is failing (If you have such a customer retention department in your company, I advise you to do a better job of customer service). They succeeded (they were nice, apologetic and made the process easy for me), and I renewed and upgraded.

But they’d made me a promise: an easy process with no hassles. They broke their promise and failed in every possible way to deliver. Then they were forced to spend time, effort, and money to “retain” me.

If you’ve dealt with customer service or even customer retention departments, you probably have at least a few stories that sound just like this or maybe worse. But this, as I noted above, is the bad example.

What you can do to avoid having a customer retention department and doing this to your customers is simple: keep your promises.

When a customer comes to make a purchase—any kind of purchase —make them a promise. Your promise is not just that the product or service you sell will perform an expected task, but it is a promise about the kind of service you will offer, what the buying experience will be like (now and every time they come back), what their experience will be using the product, how they will feel about your product, and how your product will affect their reputation.

The single biggest mistake companies make when they are seeking repeat or return business is breaking promises.

As a consumer, you know what it feels like to have a company break a promise. You are left with a sour taste and a desire to seek out competitors. Sometimes you switch, but even if you stay put, you are not a happy customer.

In your business, you are probably breaking promises to your customers far more often than you think (and certainly far more often than they are telling you). Without your customers’ willingness to tell you every single time you break a promise, how do you know?

Here are two questions you must ask for effective customer retention:

What promises are you making to your customers? Make sure you know every single promise your customers think you are making and not just the ones you want to make.
Which promises do your customers value? Companies break promises all the time, but most of the promises broken are unimportant to their customers. Find out what’s important to your customers.

Once you know the answer with a great deal of certainty, you are left with the very hard customer retention work (don’t underestimate this) of finding out how you are breaking those important promises. It might be in very small ways (oops, we forgot to tell you we charge $40 to upgrade your phone. Didn’t you read the small print? And if your agent starts quoting small print or company “policy” to your customer, you have blown it). You will have to look hard.

You’ll probably have to do the hardest thing of all: get outside your view as a representative of your company and step into the view of your customer. Live the experience your customer has with you as if you are your customer. You might be surprised at what you find.

In my experience working with companies whose business depends on having customers come back again and again, the work of fixing the issues you find is the easiest part. Often there are some simple tweaks to your processes that will help. Almost always, giving your employees on the front lines the authority to solve customers’ problems will solve most of your customer retention problems.

No matter what kind of business you are in, you depend on customers coming back. Breaking your promises in important ways (even if the importance is small) can ensure they never do come back. If you are in a recurring revenue and custom retention business, broken promises will certainly spell the end of your company.

Please share how you found out about your own broken promises and how you fixed them in the comments.

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Contributed by MENG Member Jeff Weinberger, CEO & Founder at DS3 Consulting.
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August 21, 2014

Four Steps to Fixing Your Biggest Customer Service Mistake

There’s one big mistake you can make in your customer service, and, if you’ve read my earlier posts, you know this is a pet peeve of mine: Letting your process and policies govern how you deal with people.

This often happens even in the best customer service organizations. In fact, this one mistake can sour great service more often in companies already known for great customer service than in ones where there is little or no customer service in the first place (though sometimes this is true because there is no service to sour in the latter set of companies!).

My Customer Service Experience

Here’s what one recent experience I had looked like:

My computer (partially) died. It could do a few simple things, but it was useless for anything significant and pretty much stopped all my work and productivity. My computer is from a company known for great customer service. So I called.

They sent a technician to my office the next business day with a replacement part. He opened up the computer, did his work, and left in less than an hour. I was thrilled.

The people were helpful and friendly, the service was quick and personalized, and what could have been a lengthy loss of time and work for me turned into a quick repair without my ever leaving the office

Then things went sour. It turns out there were two parts that needed to be replaced, and the technician didn’t know this. But the company acted quickly, and the next day he was back replacing the second part, avoiding a potentially poor customer service outcome.

But while the technician was working on the second part, he broke an even more critical part. He then spent two more hours in my office trying desperately—and unsuccessfully—to fix it.

So, again, I called. The customer service department wanted to send him out a third time with a replacement for the broken part. This was just a bit too intrusive for me. The next best offer from customer service was for me to ship my entire computer to them—and be without it for 10 days.

Yes, there’s a lot of drama behind this story. But the point is that it started out as a fantastic experience based on a set of customer service policy rules that allows the company to provide me with great initial service. Then it turns quickly sour because the same set of policy rules which are intended to make the service great end up creating more pain for the customer.

And yes, you’ve done this to your customers. I don’t know if you do it all the time, but I’m sure it’s happened. And I’m sure you looked at how it happened and decided that the policies in place were really best overall and that the particular case was unusual. But we’re all the unusual case.

How do you redesign your customer service policies to delight your customers─and keep delighting them even if things go wrong?

Develop People Centered Customer Service

Most customer service processes are designed to keep interactions short, solve problems quickly, and get cases closed as fast as possible.

People centered customer service does not lengthen the process. Rather, it changes the policies and procedures so they work around how your customer works and what is happening to them.

Sometimes changing this focus is easy. Car dealership service departments have been notoriously customer hostile, and they take your car (usually your primary mode of transportation) away for some inconveniently long period of time. The key issue is that the car owner’s life revolves around his or her car, and loss of the car is a pretty big deal.

The solution to that, at least for some dealerships, was to set aside a fleet of loaner cars. Now, for some cars, when you take your car in for service, you drive away in a loaner car (if yours is like mine, a newer and nicer car than yours!) which you use until your car is fixed. Transportation problem and intrusiveness problems solved.

In my computer situation, the company was so focused on getting quick, personal (on-site) repairs scheduled, that they lost site of why it is an issue for me. They forgot that my primary means of working is my computer. They forgot that sending someone to my office to fix it is intrusive. They forgot that every time they do a repair, I then have no computer for ten to twelve hours while my backup restores.

There was no process in place to allow the company to ask whether one more day, one more on-site visit, or one more restore would be just too much for me (The end of the story and the right answer is that they are sending a new computer but only after way too many hours on the phone arguing).

How do you implement people centered customer service in your organization? Here are four steps:

1.) Develop a model that helps you understand your customer’s life surrounding your products.

You might already do this to some extent for your marketing efforts. And if you have lots of different kinds of customers who use your products in different ways, you will have to develop something such as marketing personas for describing the various situations.

Your model needs to ask questions such as: How does this customer use the product? How critical is the product to their work or life? What will happen in the customer’s life if he or she is without the product for a period of time?

2.) Develop your service, support, and repair procedures to fit the scenario this customer faces.

Ask questions such as: How much are you requiring the customer to do on their own? Can they do it, and do they have the skills? Is it best for them to do it themselves? How much can you do for them without intruding on their routine? How can you choose routes to the solution that fix the problem effectively but minimize how much it affects the customer?

3.) Ask.

Before you insist that there is a defined next step in solving the problem, ask the customer if that next step is reasonable. Taking the same step three or four times may seem right to you, but it might not work for your customer.

4.) Consider the context and what came before.

When you offer a next step in a solution, look at what came before. Have you put the customer through significant burdens in the previous steps? Are you asking them to accept the same burden one more time? Your process and policies need to consider that when the problem is not solved on the first try, the tolerance of the customer is often challenged in subsequent attempts.

Don’t forget that this applies not only to previous attempts to solve the issue at hand but also to how you handled issues in the past. If you need to ask the customer to do some work to resolve the issue, you need to know if this is the fifth time in six months you are asking.

Make sure your process allows for escalation and severity increases that go along with failures to fix the issue.

If you can design those four steps into your customer policies and processes, you will go a long way to making your customers happy—and keeping them happy.

And we know that a recurring or repeat customer is the most profitable of all.

Let us know how you are making your customer service people centric.

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This MENG Blog post was contributed by MENG member Jeff Weinberger, Founder of DS3 Consulting.
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June 17, 2014

How Do You Define Customer Success?

Customer success is a very hot topic (rightfully so). With the rise of the subscription economy, companies are more obligated than ever to make sure their customers are happy with their products and services. Companies from salesforce.com to Dollar Shave Club are adding “customer success’ departments (or the like), appointing chief customer officers and finally paying attention to what happens after the initial sale.

But what constitutes “customer success?” Regardless of your business, it’s a hard question to answer. For a company such as salesforce.com, one customer might be successful if they use the software to track and report on sales reps, but another might be successful if they can establish and enforce a sales process. For a company such as Dollar Shave Club, a customer might be successful if they get a close shave from the razor blades, while a different customer might be very happy as long as the blades are delivered on time.

Not My Definition of Customer Success

Here’s a personal story of how a large subscription economy company failed to understand customer success:

A few weeks ago, I was watching television one evening. The picture became pixilated and then disappeared, leaving me staring at a blank screen (Have you guessed that I’m going to pick on my favorite target: my cable television provider?). After ruling out all the other equipment in my home, I determined the CableCARD device that my cable company provides was malfunctioning (A CableCARD allows a third-party device to decode the encrypted signal sent by the cable company, meaning you don’t need extra boxes in your house…sometimes.).

When I called the cable company’s “customer success” line, they walked through it with me again and agreed with my conclusion: the problem was with the CableCARD. They said they would send a technician to install a new one in three days.

Three days (!) seemed a long time to wait just to be able to watch television again. When I challenged this, I was told:

“This is not a priority issue. We are successfully delivering a signal to your home, and a malfunctioning CableCARD is not important enough for us to send someone tonight or tomorrow.”

I reiterated that I felt they were leaving me without their service for three days, and that this is a failure to deliver the service promised. They reiterated:

“We are successfully delivering signal to your home, so we are successfully providing service.”

Our definitions of “success” did not match. Theirs was “signal on the cable wire,” while mine was “seeing a picture on my television” (I’ll spare you the rest of the argument; it didn’t go well from my perspective.). Maybe there are other customers who use their signal differently and who consider “signal on the wire” to be success, regardless of whether their TV is watchable. Not I.

As I reflected on this discussion, I thought about all the other companies that fail to make sure I am using their service successfully, and only focus on the limited set of issues they choose to define as success.

A recent study showed that 53% of Americans would choose to switch cable providers if they had the choice (cable television service is a monopoly in many parts of the country). If the monopoly is broken, it does not bode well for these providers. Not only does it mean customers will be looking to leave and take their recurring revenue elsewhere, but it opens the market for disruptive competitors who may be more than happy to meet the needs that the current providers are not meeting.

The important question for your business is this:

Do you know how your customers define “success”?

If you don’t know that, you can’t help your customers be successful. And their definition is the only one that matters (cable companies, be damned).

An Approach to Customer Success

One company that is making a good effort at answering this question is Contactually (a social CRM product I use in my own work). Susan Watkins, their newly appointed head of customer success, tells me that when a customer shows up, Contactually contacts the customer and offers to help them get started, including personal tutorials on how to do the things the customer hopes to do with the product.

In that process, they discover how the customer intends to use Contactually—and how the customer defines success. When renewal time comes, they can then contact the customer and, instead of just asking for a renewal, ask how they are doing against that definition of success and how Contactually can help them be more successful.

Their data is not in yet, but I’ve seen this approach reduce churn by 5% to 10% in other companies.

In the subscription economy, if you don’t help make your customers successful—by their definition—you won’t be in business for long.

Post a comment and tell us how you figure out how your customers define success.

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April 17, 2014

Escape Social Media FOMO : Ask the One Right Question

If your company or brand is trying to have a presence in every social media outlet possible, you might have social media FOMO (fear of missing out). But fear not, there is a cure, and unlike consumer FOMO, you don’t need to stop marketing completely.

“Don’t I have to be on every social media outlet? How will I find my prospects and customers?”

If you’re asking this question, you probably already have FOMO. You can escape FOMO with one simple question:

“Is this the media in which my prospects prefer to establish relationships?”

EAT24, in what is now a well-publicized move (much to their benefit), recently broke up with Facebook. If you haven’t done so already, you should read their tongue-in-cheek-but-entirely-serious rationale as well as Facebook’s response.

What they really are saying is they don’t believe social media (specifically Facebook, but this applies to any social media) is about blasting out ads to their fan base. Rather, it is about establishing relationships and raving fans. They conclude, given that Facebook allows them very limited organic reach, that they cannot succeed in engaging their fans and building relationships (even those based on sushi porn) in this particular media.

Will this cost them exposure? Yes. And while I have no inside knowledge of their media strategy, it’s easy to conclude there are other media which are more effective for their prospects.

They could buy more exposure on Facebook, but it’s also obvious that the amount and depth of engagement is simply not worth it—there are better places to spend that marketing budget.

Applying the test above, it becomes clear their customers and prospects don’t really prefer to build relationships on Facebook, so it’s not worth spending the time and money.

In another recent high-profile move, OKCupid strongly urged its customers not to use the Firefox web browser on their site due to the homophobia of Brendan Eich, the now former head of Mozilla, the organization that publishes Firefox. Given Firefox’s 10.5% market share (source: netmarketshare.com April 2, 2014), this could be a risky move.

Firefox isn’t a social medium, but it is an important means of accessing OKCupid’s services (and every other service online). OKCupid is making two statements with this action:

their customers and prospects care about equality and will act on that belief, and
it’s easy to engage with them using another browser (Chrome, Safari, etc.).

OKCupid clearly believes that once the information about Eich’s homophobia is known, Firefox is not where its prospect and customers will prefer to engage so it does not feel the need to be easily available in every browser.

Back to your brand: How much time and effort are you investing in making sure you are available everywhere—on every browser, every social media outlet, and everywhere else? Are these time and budget investments well spent? Do they have the expected or needed ROI?

You know who your customers are. You know which prospects you are trying to target. Make sure you’re spending your time and money doing what they need you to do to build those relationships.

So before making an investment in a new media outlet, ask yourself: Is this the medium in which my prospects prefer to establish relationships?

It’s a surefire cure for your FOMO.

February 12, 2014

Choosing the Right Way To Create Transparency

We hear about transparency every day. We are told that, in a world where everything is exposed in media (mostly social media), it’s far better to be transparent than to try to hide blemishes, problems, and defects in the hope that they’ll go away or, at least, not be discovered until we fix them. Marketing blogs and publications are filled with disaster stories about companies that have chosen not to be transparent and success stories of companies that have chosen transparency.

But just like our personal lives, we have to choose the right level of transparency, and we have to choose the topics on which we will be transparent.

The following is a great example.

In November, I wrote about Buffer, a tech start-up that put transparency on top of their values list. Not only do they talk about nearly everything internally (including personal goals, such as education and weight-loss), but they publish many of their results externally, such as their customer success metrics, for the world to see.

Since then, they have become even more transparent, releasing more and more information publicly. Two of the ways they have done this have produced very different outcomes. Let’s take a closer look.

A Transparency Tempest in a Teapot

In December, Buffer decided to make public all the salaries of all their employees, including the formulas they use to determine these salaries.

This produced a small tempest in social media: some praised their transparency, and others chided them for releasing personal information about their employees or for creating potential envy and dissatisfaction in their ranks.

The question I asked was this: how does this disclosure benefit the customer (or any other constituent)? The answer is simple: it doesn’t. Granted, it does no harm, but it adds no benefit either.

This is a case of transparency for transparency’s sake. Some have made the argument that disclosing this information is consistent with Buffer’s culture, so it enhances their reputation and brand. I disagree. Disclosure is a choice, and we can always find something they are not telling us (they can’t possibly think of everything!), and this choice does not add value to the most important audience of all: their customers.

The Slippery Slope of Transparency

Buffer’s chief happiness officer, Carolyn Kopprasch, also publishes a monthly report on their customer success efforts. One element of this report shows how quickly Buffer responds to customer inquiries, tech-support requests, and the like (they state 85% of requests are answered in less than six hours though they’re not quite there yet).

This does add some value to their customers (including me) in that it shows what I can expect in terms of response to my requests as well as how well they are doing with all the issues brought to them.

To be clear, I think this disclosure is useful and valuable. But it also creates a potentially slippery slope.

Not long ago, I sent in a tech-support request and waited four days for a response. This is not typical of Buffer support or of my experience. It left me asking about the distribution of response times. Specifically, Buffer publishes the percentage of responses in one and six hours, but how often does it take a day? Two days? Four days? Was my response in the bottom 10%? 1%? 0.001%?

Which then led to the logical next question: since we know not all requests are of equal importance or urgency, and Buffer’s resources are limited, how do they make the triage decisions as to which requests get one hour response times and which get four day response times?

You can keep going, asking more and more logical questions until their entire operational plan is public.

Let’s say that Buffer chose to disclose the entire response time distribution and the triage criteria. Where would that lead?

In our interview, Carolyn noted that most customer service and support organizations train customers to get angry. Customers learn that getting angry leads either to faster resolution or to a supervisor who has the power to resolve an issue. This is a version of gaming the system.

Buffer’s disclosure of the triage criteria most likely would cause its customers to game the system. If I knew the criteria, I would certainly try to adjust my request to get a higher position in the queue and get a faster response.

Clearly this doesn’t help Buffer or its customers; it only adds to animosity and frustration.

Let’s say they only disclosed the distribution of response times. That would create frustration on the part of customers who were in the bottom 10%, or worse, the bottom 1%. My assuming my request fell at the bottom is not nearly as bad for my relationship with Buffer as having them tell me exactly how unimportant they deemed me. We are all better off if I don’t know.

This is, then, a choice Buffer has made about how much information to disclose and where to stop disclosure. I think they have made a good choice in that what they disclose helps customers understand their efforts better without taking away from the relationship and adding to frustration.

Is this two-faced? Yes. But not in a detrimental way.

Buffer values transparency on one hand and says it will keep increasing transparency. But it also makes choices about just how much disclosure meets their transparency value. Being transparent is an aspiration. We have yet to find out how far Buffer will go.

We expect transparency from companies. But we also expect there are boundaries, just like there are in our personal lives.

How Do You Decide?

You make decisions every day on what to disclose to whom. Do we tell our customers this fact? Do we tell the world that policy?

How should you decide?

I propose there is one simple standard embodied in these two questions: Does the disclosure add value? And if so, to whom? If it adds value for your customer, disclose.

Tell us how you’ve made your difficult disclosure decisions in the comments.
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December 12, 2013

Four Ways for Your Customer Service Team to Make Your Customers Less Angry

When your customers contact your customer service team, are they already angry?

An Increasingly Angry Customer Culture

Last month, I interviewed Carolyn Kopprasch, chief happiness officer at Buffer. She said:

“We live in a culture that has trained customers to start on the offensive just to get good service…Often, you don’t get to talk to a manager or someone with authority to solve your problem unless you say a curse word.”

This is, sadly, the case for many organizations. Consider companies with which you do business in your personal or business life. If something goes wrong and you need help, what happens? How do you find that help? And how do you feel by the time you call or send them an email? I’m going to venture a guess that by the time you make that contact, you’ve tried a number of things—to no avail—and are pretty angry.

In fact, a recent report (“Duck and Cover: More Customers Are Experiencing Rage”) on customer rage shows “customer satisfaction over a company’s ability to solve a complaint is no higher today than it was in the 1970s” and “customer dissatisfaction over complaint resolution has increased eight points in the past two years.”

This culture of anger is the result of a widely practiced approach to helping customers that is designed to lower costs for the company. This approach is also thought to improve the speed of resolution, but it often just creates bad experiences.

The practice is one of self-help or community driven help (the latter being very common in the technology business). Companies will try to figure out what most customers need help with and then post those issues on their websites in some form of FAQ. The assumption is that most people will go there, find the answer, and solve their problem. The advantage for the company is there is zero marginal cost to help each customer.

The second step of this practice is a community driven approach. The company will form some sort of online forum and allow customers to post questions and answer each other’s questions. The underlying assumption is that someone else has had the problem before and can help solve it.

This is not a zero cost approach, as many companies also have customer service team members watching the forums, adding comments and solutions and, sometimes, looking for common problems or requests that can point to product improvements. But it is a very low-cost approach to helping customers. And it puts a big onus on customers to seek and provide their own support.

The next step is to contact someone at the company on a customer service team. While a few companies don’t provide any direct contact capability, most do, either by telephone or email.

But by the time the customer reaches that point, they have probably tried to solve it through the other two methods, maybe had some unpleasant exchanges with forum members or employees, and have probably been forced to search the FAQs repeatedly to try to solve the problem on their own.

In other words, they’re angry.

Guiding Your Customer Service Team

Four things you can do to avoid this:

1. Stop making it us vs. them.

When your customer contacts you and is frustrated, angry or worse, it’s your customer service team’s job to take the company’s side. However, your rep should take away the need to take sides at all. The conversation should never be about what the customer wants vs. what the company will do.

The only conversation your customer service team should have with your customer is about the result they need to achieve and how they can help the customer get there. If every interaction is not designed around that idea, your customers will see your customer service team and your company as “against” them, and they will get even angrier.

2. Know why your customers are getting angry.

Don’t just ask. Measure. Don’t be biased by the loudest and angriest customers (perpetuating your contribution to the anger culture), but look at all your customer interactions and know why escalations happen.

Once you identify points of frustration, you can act to intervene. Depending on the issue, you can post simple solutions on your help pages or accelerate personal contact when a particular issue is raised. The better you get at directing more of your customers to their desired outcome, the happier your customers will be.

3. Learn your customers’ interaction preferences.

Some of us like to talk through our issues with someone. Others like to do research and solve it themselves.

Do you know what your customers prefer? Are you providing it? Or are you making assumptions that result in more escalations than needed?

Talk to your colleagues in marketing, and steal one idea. Ask who is good at developing what marketing people call “personas,” and create the ones you need. Figure out how to identify what type of problem solver each customer is and what you need to deliver to have them walk away happy.

4. Be honest.

If your customer has a problem, you have a problem. It doesn’t matter if it might be their fault. If you don’t eliminate your rep’s need to take sides and help your customer get the outcome they need, it’s going to be your problem, one way or another.

When you have a problem, admit it (“yes, I can see how the instructions are not that clear about that”). Show understanding. If it’s not your fault, help your customer get past it. If it is, be direct and just fix it.

When your customer service reps get to the point of quoting warranty limits, user agreements and company policy, you have lost — not just the conversation, but the customer — and you can kiss repeat business goodbye.

Are you already doing some of these? Are they working? Tell us what you think!

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October 16, 2013

Customer Service Culture Keeps Customers Coming Back

Below are examples of two very different customer service cultures. Which would you prefer? Let’s say you have to bring your car in for repair. The mechanic diagnoses the problem. Would you choose:

A) The shop where the mechanic tells you: “This is a simple issue. We fix these all the time. It’s not going to be any problem at all. Your car will be good as new in a few hours. Just go about your business, and I’ll call you when it’s ready.” or

B) The shop where the mechanic tells you, “Your car’s coolant system has three leaks in different hoses. The hoses are easy to access, and I have replacements in stock. It will take me two or three hours to replace the hoses and test them to be sure they are working. I’ll call you as soon as I’m done.”

If you’re like me, not only do you prefer option (B), but if you run into the mechanic in option (A), you’re likely not to come back (and maybe not even leave your car in the first place).

The reason is we don’t like to be dismissed, and we don’t like condescension. The mechanic in option (A) was condescending and a bit insulting. She assumed we not only have no idea how our car works but that we don’t care to know and will trust her implicitly. The mechanic in option (B) showed respect for our knowledge, ownership of the car, and likely, our time.

Is your company’s customer service insulting your customers without even knowing it?

I’ll give you another example of good and bad customer service. Recently, I contacted technical support for two different software products. Both are websites that run SaaS products. Both issues were simple ones that required little explanation and should have been easy to identify as issues (I can’t say how hard they would be to fix).

Company 1 responded like this:

We really appreciate you bringing us this kind of issue affecting our software’s performance. Rest assured our developers are fully aware of the changes and the glitches that occurred after the software update. They have made these adjustments their top priority to ensure our software is as stable as possible.

Thank you for your patience and understanding during this time.

Company 2 responded like this:

Thanks so much for writing in! This is a great question, not too odd at all! 🙂 I’m afraid there isn’t a great solution for this at the moment. Sorry about that. 🙁 We haven’t figured out a great way for it to know to re-look for the image and description if nothing shows up at first. Great idea though, and we definitely see the value of it.

Sorry I don’t have a better answer for you on that one. Is there anything else I can do to help or any questions I can answer?

I’m guessing you know which one I thought was well-done and which I thought was disingenuous

Company 1’s response is more troubling than just a dismissive response. It points to a customer service culture that assumes customers want reassurance and kind words above all else. It suggests that the company’s customer service protocol has guidelines or even templates that advance the idea that customers are to be dealt with and dismissed as quickly as possible.

This was reinforced after my follow-up question asking if they knew about the specific issue and might be working on it. I was told there are many issues on which the developers are working and that I could be certain they would be informed of this one. Further reinforcing the dismissive approach, five days later the company announced an update that resolved the specific issue. I have to assume someone there knew that this update was coming yet failed to communicate that to me.

Company 2’s response points to a customer service culture of openness and honesty. Telling me that there is “no great solution” admits the software has shortcomings and just can’t do everything all the time. This is true of all products of all kinds. Being direct about the limitations and aspirations of your product shows both honesty and confidence in your ability to deliver value to your customer.

My cultural assumptions were reinforced on follow-up exchanges, where I offered an idea for a solution, and an interesting discussion on how to best get the specific value I needed from the product ensued.

Evaluating customer service

Far too many companies evaluate the performance of technical support or customer service success on how quickly issues can be resolved and how friendly the language of the company’s representative is. Both of these measures lead the customer service teams to shorten their responses, use more reassuring and friendly (not honest and direct) language, and to be dismissive of customer issues in the hope they will accept answers such as those above from Company 1 and go away.

But customers are evolving the other way. Customers demand more details and honestly from companies, as well as more and more transparency.

In order to meet the needs of this evolving customer, companies must also change their customer service culture and the metrics that support it. For example, rather than measuring duration of interactions, you might measure how many interactions it takes for the customer to consider the issue resolved. You might also want to measure how much progress each interaction made toward resolving the issue (if it makes no progress, you are wasting time and angering your customer). Your metrics should always focus on what the customer perceives as progress and what your customer perceives as a resolution.

Is your company’s customer service culture dismissing and alienating your customers?

Try acting like a customer with a problem for a day, and go find out. Then tell us your story in the comments.
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August 28, 2013

Investing in Your Customer (to Avoid Customer Churn)

I had lunch with a friend recently who ran customer success for a SaaS company. Customer success in the SaaS business is typically responsible for handling customer support and service to build renewals when they come due while avoiding customer churn (customers who do not renew).

As we discussed the issues surrounding delivering a great customer experience and handling renewal sales, he commented that his biggest surprise was how much customer churn hurt his business. He noted that every percentage point increase in churn had a multiplier effect on the top line for the business.

I’d be repeating myself if I included a rant on how keeping customers coming back is the only way to realize the return you expect on your investment in customer acquisition. So instead, let’s talk about investing and how you can apply some very simple investment concepts to your marketing ROI.

Let’s talk bonds to demonstrate customer churn.

I know: bonds are much less exciting than stocks when it comes to investing, but if you’ve listened to any of the decent advice out there, you probably have a reasonable percentage of your portfolio invested in bonds.

Here’s the thing about bonds: they provide you with an income stream. You expect the issuer to pay the coupon on the bond (the debt payment) at the scheduled interval. The market places a value on the bond that is largely based on the dollar amount of those coupon payments, the time over which they will be paid, and the current market interest rates. If all goes well, you invest a lump sum and get paid back with interest over time.

Sometimes, all does not go well. I hope it’s rare for your portfolio, but defaults happen. Companies (sometimes even governments) fail to make the coupon payments. When this happens, you lose your money. Yes, it’s part of the risk of investing, but it also means your money is gone. Not exactly the outcome you wanted.

Connecting bonds, marketing, and churn.

Marketers have been talking about a concept called “customer lifetime value” for the past few years. Whether you are in a business that depends on subscribers or repeat customers, you can look at your customer the same way you look at a bond: you pay some amount up front (your acquisition cost), and you get a revenue stream that comes in at predictable intervals over time. As with the coupon payments on a bond, you can use the risk of the market and net present value formulas to determine the value of a customer’s revenue.

But sometimes customers don’t come back or don’t renew. The difference is that this happens at a much higher rate than bond defaults. For some SaaS software companies, customer churn (the rate of non-renewals) can be as high as 30% annually.

Let me show you what this does to your portfolio or your top line in marketing terms.

For the sake of simplicity and illustration, let’s assume you have 1,000 customers today, and those customers are paying you $100 per month for your service. Let’s also say you are a fast growing company, hitting growth rates of 50% annually. Here’s what churn (or customers not coming back) does to your business over three years.

MRR - Churn Rates — Click on chart to enlarge.

On the chart above, the green line shows monthly recurring revenue (MRR) growth over three years, assuming there is no churn. The yellow line shows the same growth rate, but assumes 10% churn. The red line shows the same growth rate, but assumes 30% churn.

If you lose 30% of your customers every year for three years, your revenue is lowered by 56%.

If your portfolio underperformed by 56%, I’m guessing you’d be looking for a new investment adviser. Likewise, if your revenue is 56% below where it should be, I’m wondering if your CFO isn’t thinking about a new CMO.

I’ve been fortunate to work with many companies who understand the financial leverage keeping customers holds for your company. And I’ve helped a few gain insight into this leverage.

Which leads me to ask:

– Are you investing appropriately in keeping those customers?
– Does your company know how many customers it’s losing?

Tell us how you’re getting it right (or wish you were) in the comments.

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July 3, 2013

Getting It Just Right: Measuring Customer Success

In an earlier post, I discussed how to get measuring customer success right. It sparked quite a few questions about how to choose the measurement and how to ensure it causes you to be aligned with your customer’s business success. Here are some thoughts about how to get it just right.

The Goldilocks Customer Success Metric

In my earlier post, I compared two public safety companies that had very different measurements of how their customers became successful because of their products.

One was RedFlex, whose most often cited metric was the number of red light tickets issued because of their cameras (though, I don’t think they want to be measured this way). This metric misses the mark, because it does not measure an outcome that is of value to the people who have to make a decision on the purchase of the camera system. The goal is public safety, not more tickets.

In contrast, ShotSpotter (SST) measured a variety of outcomes, including number of arrests resulting from gunshots detected and number of convictions made easier because of their data. The goal—public safety—is the same, but the metrics are directly relevant to the outcome.

Let’s analyze these:

Neither company chose what I’ll call the “papa bear” metric, which is something such as increased public safety. This metric is far too broad, far too hard to measure, and while both companies do something that affects public safety, neither can claim to have increased it directly.

The number of tickets metric, which I’ll call the “mama bear” metric, is too narrow. It measures the direct result of the system, but it does not take into account any of the results the activity produces.

The number of arrests metric is the Goldilocks metric (or one of them). It’s not the direct result of the system (you could measure number of gunshots identified), and it does not claim to be a panacea for all police issues. It does measure an outcome most of us can link directly to which is increased public safety (criminals get arrested), and one the immediate buyer (police department) and the ultimate buyer (political leadership) can relate to and definitely care about.

One alternative to the number of tickets metric might be to look at the total number of accidents at intersections with red light cameras. For most of us, fewer accidents mean safer streets.

**So How Do You Choose Your Customer Success Metric?**

Let’s assume for the moment you are selling to a business.

Papa Bear

Increase revenue or reduce costs. I hope whatever it is you are selling to the business does one or both of these, or I suspect your prospective customer will never buy. That said, with very few exceptions, your product or service probably does not directly do either one, and the outcomes of your product are not “more revenue.” They should do things that lead to one of these two.

These are the wrong metrics.

Mama Bear

More twitter followers (sorry, social media folks, this isn’t a business outcome). This is certainly a metric, but for most businesses, it doesn’t produce something effective, nor does it (in any meaningful way) affect costs or revenue. It’s too narrow, and too immediate. Other examples are things such as, “keeps all your customer activity in one place” or “ensures everyone knows the correct procedures.”

Those might be things your product does, but they are not why your customer buys.

The Goldilocks Metric (encore)

If you were selling a product to a marketing department, the outcome might be “produces more leads in the pipeline” or “shortens the time to conversion to a sale.” Both of those are things your product might do where you can measure the effect your product has on either number of leads or time to conversion, and the metric has a credible effect on the business (in these examples, more revenue).

In another recent post, I discussed Christensen’s idea of “hiring” a product to “do a job.” Your customer has a job they need done (e.g., they need more leads). That’s something they hire a product to do. And it’s something you can measure before and after they buy your product, so you and they can tell how effective your product is for them.

Another way to consider this is that every team, every group, and every department in a company has business objectives they can measure. Your product needs to help their measurement of at least one of those business objectives moving in the right direction.

The Goldilocks metric has to be specific and countable. ShotSpotter counts the number of prosecutions and convictions that use their data. You can count number of leads, length of sales cycle, reduction in overhead, etc.

So finding the right metric is really simple: It is a business objective, and it is countable.

Get that right, and you’ll have no trouble getting your customers to show you just how successful you are for them. Which is just right.

Tell us how you are measuring your customers’ success in the comments.

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May 9, 2013

Has Marketing Failed Sales?

A few weeks ago, at the Sales 2.0 conference, I noticed a trend: salespeople are generating their own leads. In fact, I heard pundit after pundit offer justifications for salespeople to be more proactive and take lead generation into their own hands, including statistics showing that as few as 30% of the leads sent to sales by marketing are worthy of pursuit.

Isn’t it marketing’s job to deliver qualified (or at least pursuit worthy) leads to sales? So has marketing failed?

Well, no, not exactly. There are two significant (you might call them disruptive) trends happening at the same time in lead generation: the individualization of technology and social selling.

Marketing is less well equipped than sales to take advantage of these. Sales, especially the individual salesperson, is far better equipped to experiment with new methods, processes, and technologies than any marketing department can be, if only because of the scale. And marketing has significant responsibilities beyond lead generation, including leading and developing the company’s relationship with prospects, customers, and all other stakeholders and stewarding the company’s brand.

But in order to be successful, marketing will have to watch these trends- and how salespeople take advantage of them- and figure out how to make them part of everyday marketing in order to stay relevant.

Trend One: The Individualization of Technology

Technology has migrated from huge systems only practical for large institutions to apps any individual can use anywhere, anytime. In the same way, systems which large corporations use to manage their resources are now available for individuals, including cloud based (SaaS) services such as CRM and marketing automation.

Companies such as Nimble and Contractually provide cloud based services that are designed for (and priced for) individual salespeople to do the essential parts of what a more cumbersome CRM system once did. They manage everything from contacts to social relationships to follow-ups to engagement opportunities.

What is important about this is these services can be used by an individual salesperson to find opportunities and generate leads entirely on his or her own, even while working within a larger corporate CRM system.

In fact, my friend Matt Heinz offered a wealth of tips and tricks (he calls them ”sales hacks”) for individual salespeople to use as a range of tools to create a robust lead flow- all independent of any marketing department (yes, this works very well for sole proprietors, too!).

Trend Two: Social Selling

Social selling means salespeople can use their social networks and the activity they generate to find prospects and identify buying signals. For example, if I were selling marketing automation software, and a 2^nd degree LinkedIn connection just took a new job as CMO (a possible buying signal) for a company in my market, I would want to contact that person. I might find that out through the activity generated in my own social network and then find out more about that person through their own social and other activity. I would then have a connection that can introduce me and would also know how to approach my newly discovered prospect.

Notice I am not looking in my CRM system for a lead that has not been touched in a while nor am I looking for an introduction from my management. Salespeople (presumably) have their own networks they can use to find the connections they want and need.

Services such as TwitHawk and Newsle offer this kind of social signal search service, and Nimble and Contactually integrate it into the activity stream.

When you put all this together, you have a powerful new source of very well-qualified leads for the salesperson to pursue.

So Where Is Marketing?

Marketing departments have done a very good job of adapting to the world of on-line and social media, and they have found ways to successfully get the word out. Marketing departments have also become very good at doing this on a large scale, just as they became very good at large scale communication in traditional media.

But even the most targeted integrated email and social media campaigns reach thousands- sometimes tens or hundreds of thousands- of people in the hope that a small percentage will be sufficiently interested to become leads and prospects.

Salespeople are looking at this from the other direction. They are ignoring the scale of reaching mass markets and large target audiences, and instead, using the power of atomized technology and social media combined to find the proverbial needle-in-the-haystack- who they are pretty sure is an interested prospect.

Can Marketing Adapt?

Should marketing change its approach and focus on finding individuals? No. Well, maybe.

Marketing must look after its whole scope of responsibilities and ensure there are strong relationships with customers, prospects, and other stakeholders. Marketing must also continue to use its ability to scale communications to ensure large audiences are reached.

In fact, without doing this first, the salesperson may never have the chance to find that one interested prospect.

But marketers must also become proficient in a world that has become individualized. This individualization has happened not only in how sales leads are found but also in how relationships and brand preferences are developed. Marketers must be able to take all the activities where they focus on the mass market and find ways to translate or evolve them into individual relationships.

It’s easy for individual salespeople to experiment with new methods and technologies, and they are finding some of them very useful. Marketers must find ways to experiment with new methods, processes, and technologies to find the ones that work in this changing world.

The challenge marketers face is learning how to scale this individualization to reach the mass audience so the company can scale its individual relationships.

And marketing can deliver more relevant leads.

Join the conversation: post a comment telling us how you are addressing this issue.

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Jeff Weinberger

DS3 founder Jeff Weinberger found his passion in helping organizations identify and develop critical, yet often overlooked, strategic opportunities. With a reputation for being innovative and, well, disruptive, he helps organizations maximize the value of their key relationships to create, adapt to and capitalize on disruption in their markets. A recognized thought-leader, speaker, writer and blogger on sustainability, disruptive marketing and Web 2.0/Enterprise 2.0 technology issues, Jeff’s writings can be found at http://www.dsthree.com/blah-blah-blog/ and at @jweinberger.