Do you have a customer service department?
The American Customer Service Index (ACSI) uses a national score to reflect an aggregate of customer satisfaction with companies that comprise a large cross-section of the economy. Since the baseline was measured in Q3 of 1994 with a value of 74.8 there was a steady decline to the historical low point of 70.7 reached in Q1, 1997. Fortunately, there was a fairly consistent trend of improvement in the index for over 15 years reaching a value of 76.8 during the fourth quarter of 2013. Since this highpoint, however, customer perception of quality, value, and resulting loyalty has fallen precipitously quarter-over-quarter to a value that is 1% below the 1994 benchmark. That’s right, we’ve made no progress in customer satisfaction over the past two decades. In fact we’ve taken a step back with no end in sight to the erosion of satisfaction. So, what does this mean to your business?
The ACSI serves as a macroeconomic indicator of the health of the U.S. economy. Does your company have a similar thermometer to measure the health of customer satisfaction? The index can be used to reflect economic utility and consumer demand. Is consumer demand in your company going up or is it chained to the ACSI index in a downward spiral? Very common responses to these questions represent customer service fallacies. These misunderstandings will be discussed in detail along with a different perspective on satisfaction metrics.
1. “Yes, we track customer satisfaction. The customer service department has all that data…I think.”
2. “We are doing great: Our backlog is strong! Customers must love us or they wouldn’t be ordering, right?”
3. “Relationships with customers are strong right now, complaints have dropped dramatically!”
The customer service department…
A dedicated customer service department is common in business today. Titles and reporting structures vary, but the role typically has responsibility to work with customers directly to assist with questions and concerns associated with a product or service. This happens via email, social media, live chat sessions, video conference calls, telephone, or in-person. The global economy has made customer interaction a 24/7 proposition.
It has become an endless task of responding, answering, clarifying, informing, correcting, updating, listening, supporting and going the proverbial ‘extra mile’. Sounds like a challenging department! I’ve heard people say, “You can only do customer service for 10 years before you get burned out”. Indeed, it can be hard to deliver bad news, deal with irate customers and resolve unreasonable requests. It takes a special personality to perform this job at all, let alone be good at it. Is that why is it so difficult for the US to get a “B” (80 or above) on the ACSI? A good friend of mine in the UK provided an insightful response.
He grew a business from nothing to tens of millions of British Pounds in just over 10 years. It was a competitive high technology market with global suppliers all staking claim to segments and customers. In wanting to understand his secret for growth in spite of intense rivalries, I asked him how he did it. His response is relevant: “It was always about the customer. I only hired people that aligned with my approach to customer service. If customer service wasn’t really who they were in practice, it became quickly apparent and we made a change. Over time, we created a customer service company.”
Wait a minute! I thought customer service was a department? Yes, customer service can be a department. It can also be a competitive advantage when the entire company embodies a customer priority with everything they do. But not everyone in the organization interfaces directly with customers, so how can the whole company be ‘customer service’? This is the fallacy: Everyone has customers that depend on deliverables, information, assistance and an ‘extra-mile’ effort. Customers can be co-workers, another department, hiring managers, or the next person on the assembly line. Like a symphony, a company is a system of interdependent, dynamically moving parts. If the paying customer is the conductor and everyone plays their assigned part, we enjoy inspirational music. No individual department can satisfy external customers without the needs of all internal customers being met in the process.
Warning! Internal processes must be designed and tailored to satisfy external paying customer needs. If processes are used as an excuse for not being responsive to customers, customer service is relegated to a department. To be graphic, this handcuffs the organization to a concrete block thrown from the pier into the bay.
Unfortunately, customer service isn’t a speaking engagement for the president. It really doesn’t matter what is said at the all-employee meeting or when making a promotional video. Customer service is something that happens when both you and the customer are having a bad day. It is visible when the customer (internal or external) makes a mistake and inconveniently needs you to fix it. It happens after 24 hours of travel when jet lag weighs heavy and a customer needs time-sensitive information. It is demonstrated when internal processes are proactively modified to better address market trends. Yes, customer satisfaction is determined by how you respond when there is a problem. Customer service requires complete honesty and brutal introspection. Rationalizing, justifying or dismissing feedback from customers denies the company of critical opportunities for improvement and customer loyalty.
Because customer service is not a department, the approach to doing business comes from the top. Customer service cannot be successfully delegated to a specific person to report on, improve, or manage unless it is driven from the senior leader first and consistently. The culture, personality and pace of an organization is set by the leader who should be greatly influenced by the cadence and needs of the market. If the leader can’t keep up with the market or doesn’t embody this passion for customer service in practice, the business will never be a customer service company.
Backlog looks great…
There are a number of metrics used to quantify customer satisfaction and loyalty. Order activity for some businesses do reflect near-real-time customer engagement. The E-Commerce sector, for example, earned the highest ACSI score for Q3, 2015 of 79.5. In this industry, competition is high with few barriers to entry resulting in low switching costs: Customers can often buy the same product elsewhere at the click of a mouse. Customer satisfaction is publicly displayed with a 1-5 rating score given to numerous aspects of the buying experience. For these businesses, customer satisfaction is often visibly tied to order patterns and associated trends. Probably not too difficult to understand why customer satisfaction is a priority for this sector: without it, well…let’s see how long you can hold your breath.
Many other businesses do not have this almost immediate connection between customer orders and customer satisfaction. In the aerospace market, FAA compliance is a significant obstacle for customers to change suppliers. The same could be said for medical device or pharmaceutical where FDA certification is both expensive and time consuming. In these markets, and other capital intensive industrial segments, backlog does not correlate to satisfaction. Depending on long-term contracts and product lifecycle, customers may be compelled to stay with the supplier for 2 to 10 years, sometimes longer for maintenance, repair and overhaul support. In businesses like this, using book-to-bill ratios or backlog to assess customer satisfaction can be entirely misleading because they reflect success from 5, 10 or even 20 years ago. For too many businesses, metrics that are out of phase with current customer perception can provide a false sense of security.
So if the barriers to entry are so high for some industries, why do you care about customer service? Because development cycles within the customer’s organization are not the same as product lifecycles. In the case of medical devices, companies are launching a new or refreshed product every year 3-5 years (development cycle). Each product is expected to be in production for up to 10 years with 7-10 years of service thereafter (product cycle). Although a supplier may be enjoying the annuity of the product lifecycle now, poor customer service will eliminate the supplier from the next development cycle. By the time the current product cycle finishes, the supplier is one or two development cycles behind with years before the next opportunity. Current financial data is rarely an accurate indicator of customer satisfaction.
Customer Complaints dropped…
The last myth to discuss is that customer complaints is inversely proportional to satisfaction. For any customer service-minded leader, silence is not good. When monitoring the health of a customer relationship, it is important to know if they are febrile or are experiencing early stages of hypothermia. Complaints of poor health come directly from the customer. Likewise, even the most demanding customers will experience an uncontrollable smile when they receive stellar service. From personal experience these battle-hardened clients are the most vocal in praise and generous in communication when expectations are exceeded. In the real-time world of e-commerce, customer reviews provide almost instantaneous feedback. For business-to-business transactions, if the customer has stopped talking altogether, it can be a disturbing sign they are talking to the competition.
Many businesses have multiple levels of distribution, value added resellers, independent representatives and retail outlets that make direct customer feedback more difficult. For customer service-centric companies, processes are prioritized to address this. There isn’t a business, market, sector or industry where “no news, is good news”. Where there is a will, there is a way to evaluate customer satisfaction, especially in this age of information. Methods and tools exist if customer satisfaction is the core of a business.
A different perspective…
So, if there is no such thing as a customer service department, where does a new employee or corporate officer get customer satisfaction data? Companies that live customer service connect the internal and external customer to every employee. This is driven by the senior leader, CEO or managing director, and is communicated frequently and transparently. If you asked human resources how customers are feeling today, they should be able to respond readily with an accurate assessment of the internal customers in detail and external customers in general. The same question should have similar responses from an equipment operator or the president. Go ahead, ask! Report back and share your experience.
If financial metrics don’t always reflect consumer’s current opinion of service, what barometer do companies use? Sources of customer satisfaction data vary by market and business model. For an E-commerce business the customer service barometer will necessarily be different than a business-to-government relationship. The best source for external customer data comes from those on the front lines with paying consumers. Independent of the business, get as close to decision makers as possible. For complex selling environments, this extends to the team that decision makers depend on to recommend suppliers for the next development. Second-hand information and current financial data are misleading at best.
When no news from the customer is actually horrible news, how do you measure customer loyalty? Customer loyalty is easiest to determine by listening to both positive and negative input. If there is no communication, proactively seek feedback. No news is a foreshadowing of no customers.
Andy Finch is President of RMI, a professional services company helping customers to overcome gaps in growth through market research, strategic planning, product development and due diligence.