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The Gift of Customer Loyalty Begins with Employee Loyalty

Customer Loyalty Flourishes

Employee and customer loyalty are one in the same. The gift of customer loyalty begins with employee loyalty. Nurtured and directed employee loyalty will create worlds of energy, inoculating against the apathy and distrust endemic in many organizations. It can also result in synergy, the energy-laden connection that emerges in a group channeling momentum toward the common good. Trust, added to the mix, instills confidence, which helps employee loyalty grow, and customer loyalty flourish.

Employee & Customer Loyalty Case Study: Sam Walton and Wal-Mart

At the time of Sam Walton’s death in 1992, Wal-Mart had annual sales of $44 billion. One out of every five retail items purchased in America came from a Wal-Mart store. His personal fortune exceeded $23 billion. Sam once said: “There is only one boss: the customer. And he can fire everybody, from the chairman on down, simply by spending his money somewhere else.” When asked how Wal-Mart was able to grow so fast, Sam replied, “The answer is always the same-people. Not only the right kind, but interested, dedicated, enthusiastic, and loyal people. That makes our company exceptional.”

Southwest Airlines Customer Service

Employee & Customer Loyalty Case Study: Herb Kelleher and Southwest Airlines

Southwest Airlines devotes a considerable budget to celebrating its employees with parties, banquets, gifts, birthday cards and outings. Accountants have told Herb Kelleher how much money he could save if he didn’t budget for these activities. His reply: “Southwest Airlines has the fewest customer complaints in the industry. How much is that worth?”

Kelleher believes that the front office is there to support the employees. He said: “Southwest has its customers, the passengers; and I have my customers, the airline’s employees. If the passengers aren’t satisfied, they won’t fly with us. If the employees aren’t satisfied, they won’t provide the product we need.” Southwest employees make flying a fun experience. They try to surprise and delight the customers.

Employee & Customer Loyalty Case Study: Nordstrom Rules

Nordstrom leaders also inspire employees with actions and directions that are surprising. For example, the Nordstrom Handbook says: “Our number one goal is to provide outstanding customer service. Set both your personal and professional goals high. We have great confidence in your ability to achieve them.” And Rule 1 simply reads: “Use your good judgment in all situations. There will be no additional rules. Please feel free to ask your department manager, store manager, or division manager any question at any time.”

The founders of Nordstrom maintain what they call a “worshipful relationship” with the customer, resulting in delighted customers, enthusiastic salespeople, and high profits. They actively practice “doing virtually anything possible to please the customer.” The founders also do virtually anything possible to please their employees.

The Gift of Customer Loyalty Begins with Employee Loyalty

Employee & Customer Loyalty Case Study: Ritz Carlton: Discovering what customers savor

A few months ago, I was involved in a seminar in Pasadena at the Ritz-Carlton Hotel. During lunch I asked my waiter for a burger and a chocolate shake. When he let me know that they didn’t offer milkshakes, I setfled for a glass of water. I was surprised when a chocolate shake arrived with my hamburger. Manuel Avila, my waiter, on his own initiative, found chocolate ice cream and cold milk in the kitchen and created a shake. Manuel felt free to exercise initiative on my behalf because of the positive creative examples set by his leaders.

When Employees are Cared for, They Care for Customers

The way employees treat customers reflects directly on the way they are personally treated. Many employees are truly loyal. The question is; how do we retain and increase our loyal employees, thereby increasing our customer loyalty base?

The way employees treat customers reflects directly on the way they are personally treated. How can you emulate these four cases to improve loyalty in your organization?

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Posted in Business and Strategy Uncategorized

The Magic of Customer Enchantment

Reality Check on Customer Enchantment

The Magic of Customer Enchantment We love hearing those service champion stories—always laced with awe-inspiring heroics and “happy ever after” endings. These way-beyond-the-call-of-duty stories are generally exotic, extravagant, and frequently involve helicopters, champagne, and penthouse suites. Then, we go back to work, thinking “My boss would kill me if I did something like that.” As the cold reality of work quickly freezes out the story’s warmth, it gets dropped in our brain’s “fairy tale” file.

But, is there another side to these enchanting stories? Could extravagant service have a return on investment of sufficient size to warrant repetition? Should managers challenge their employees to “bring me more lavish bills for unplanned, unbudgeted red carpet treatment for customers!” In this era of tight margins, ferocious waste reduction, and microscopic expense control, how do you cost justify an encounter which is by nature extravagant?

Service extravagance does have an important role in any service quality effort. Power, however, lies first in its uniqueness. A steady diet of extravagance and you not only abuse the bottom line, you turn unique into usual—and the magic disappears. However, what mileage can be gained by going the extra 10 miles? Assuming unique is kept unique, there are advantages to encouraging an occasional service extravaganza.

Experiment with service extravagance and customer enchantment

Three Big Benefits of Customer Enchantment

While the CFO might have to take a leap of faith, there are great payoffs of service heroics. Service indulgence fosters customer love and other benefits.

  1. Service Extravagance Releases Employee Power. When the subject of empowerment is discussed with leaders, they all bewail that employees have far more power and authority than they typically use. And, it is generally true. Get a group of employees together and they will quickly gripe about their lack of authority. Empowerment (or lack of it) is often code for fear of failure. Celebrating service heroics can encourage employees to “take it to the limit” and “push the edge of the envelope.” When their confidence is matched by affirmation, they learn to take risks. The goal is to encourage employees to experience the limits and, if they go too far, learn that the leader response will be support and coaching rather than punishment and rebuke. Empowerment begins with error; error begins with risks. Employees risk when they believe failure will spark growth, not censure.
  2. Service Extravagance Keeps Service Quality Top of Mind. The challenge in creating a service culture is how to keep the “shine from wearing off.” The early elation of the “The year of the customer” kickoff quickly turns to exertion when incensed customers make unreasonable demands on an already fatigued front line. How do you insure excitement wins over despair? Part of the answer is celebrated heroics. Effective service celebrations begin with “see.” The telling of heroic service stories provides a graphic pictures of what great service looks like. Too often those witnessing a celebration learn who but not why. They depart with little to emulate. So, tell the story in detail, along with the philosophy or attitude.
  3. Service Extravagance Builds Teamwork at Its Best. Service extraordinaire events, when instigated and implemented as a team, can raise morale and reinforce important lessons in interdependence. The adage that “nothing pulls a team together more than a crisis” can be expanded to a “celebration” as well. And, since teamwork is a decisive commodity in today’s service, the winners in the eyes of the customers are less likely to be the single acts of excellence, and more apt to be the collaborative efforts of colleagues who craft an experience which customers retell over and over. Simply the act alone can fuel teamwork.

'Delight Your Customers' by Steve Surtin (ISBN 0814432808) Remember: Celebrate customer extravagance as extra-ordinary. And, teach employees the principle behind the peculiar. Give leeway for the exceptional, and your employees will have exciting standards for excellence that can energize them to produce service performances customers will remember as special.

Experiment with service extravagance and customer enchantment.

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Posted in Management and Leadership

Customers Expect Rewards in Exchange for Their Loyalty

'Customer Loyalty: How to Earn It, How to Keep It' by Jill Griffin (ISBN 0787963887) If you are over sixty, you may remember the thrill of filling S&H Greenstamps books and taking them to the redemption center.

That is how loyalty programs suck us in: we buy the things we always buy, but we get something extra. The more we buy, the bigger the reward. Today we expect loyalty programs to be part of our purchases, hence the popularity of frequent-flyer miles, supermarket discounts, merchandise rewards for credit card spending, and lower fees for maintaining higher bank balances.

But Loyalty Programs are Not Enough

You must offer a compelling value proposition and ensure that the customer’s experience is positive.

The financial value of a loyal customer is well documented. It costs a company to acquire (buy) customers with advertising, loss-leader items, and other incentives for initial purchases. If customers buy again, the company makes back its money. If they keep buying, more money is made. It becomes cheaper for the company to satisfy customers because repeat customers do not need as much support and understand the value of the brand. They even send new business. Therefore, companies need enticing ways of keeping customers.

You now have many options for incenting loyalty. You can offer discounts, provide points redeemable for free stuff, offer improved service (such as free shipping or fast turnaround), or priority treatment. As you look at your loyalty programs, determine which rewards appeal most to your customers—and then match the rewards to their desires.

Three Motivators for Loyalty

Three Motivators for Customer Loyalty Programs I see three reward programs, each supporting a different motivation for loyalty. Each motivation can be expressed positively or negatively:

  1. Reward/Greed. This is the “I get something for nothing” motivator. Flyer miles, and membership points are examples that appeal to people on a personal level. S&H Greenstamps recently reinvented itself as S&H Greenpoints (www.greenpoints.com). Their motto is “Earn them on the things you buy. Spend them on the things that make you happy.” You now register as a Green–points user and collect electronic points for shopping at affiliated stores or Web sites. You redeem your points from an online catalog of products.
  2. Philanthropy/Guilt. Some customers react more on a community level. These customers respond most positively to loyalty rewards such as donations to charity. A good example is the affinity credit card. I have accepted credit card offers from banks because a small donation in my name will be made to my alma mater. You can get affinity cards for your favorite charity. It is a painless method of philanthropy because you do not take anything out of your wallet; the vendors with whom you do business give the money.
  3. Love/Obligation (or Fear). This loyalty program is targeted at customers who want rewards to serve them as a family rather than an individual. These customers also want relief from the financial burdens of family obligations. A new company that has endorsed this motivation for loyalty is UPromise. Its loyalty program makes donations in their children’s names to tax-deferred college funds when purchases are made from participating companies.

Most companies have a mix of customers with different hot buttons. You can offer different types of reward programs to appeal to each type of customer.

Dangers of Outside Loyalty Programs

Customers Expect Rewards in Exchange for Their Loyalty Loyalty programs provide rewards separate from the brand of the company sponsoring the rewards. In addition, there are dangers inherent in promoting outside brands as a bonus.

  1. More expensive to fulfill. When you offer a product from a different company, you may pay less than its list price, but the cost is still tangible, and you do not control it.
  2. Loyalty to the reward, not the brand. The biggest danger of offering rewards that are not part of your brand is that customers become more loyal to the reward system than to you.
  3. Held hostage to your loyalty program. As a company offering rewards you are, in some way, being held prisoner by your rewards provider.

As appealing as loyalty programs may be, they are not enough to keep customers coming back. Unless the customer finds value in your products and finds it easy and pleasant to do business with you, no loyalty program will work. You must have a compelling value proposition independent of any reward system. Your customers must value you! The loyalty reward is just a bonus.

Identify the motivators and incentives that appeal most to your target audience and customers.

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Posted in Business and Strategy Management and Leadership

Companies Must Think Ahead: What Was Hip Then is Not What Customers Want Today

Companies Must Think Ahead: What Was Hip Then is Not What Customers Want Today

As we look back at the last two decades of e-commerce, we have seen major shifts in the way companies are doing business online. Companies that succeed are constantly reshaping and re-evaluating their e-business plans. Companies such as Dell, E-Bay, and Amazon.com, among many others, stay ahead of the curve in e-commerce by being committed to never-ending improvement.

Companies that become leaders in e-commerce offer better services, redefine their position in the marketplace, research customer buying trends, partner with companies, and take advantage of technological changes.

  • 'Playing to Win' by A.G. Lafley and Roger Martin (ISBN 142218739X) Dell was one of the first companies to reap the benefits of e-commerce. Dell continually improves their Web site to include more personalization and one-to-one relationships with customers. They increase online customer service and expand their business to provide benefit services. More than 40 percent of the company’s revenue comes from online sales. Last year they generated $15 million per day of revenue online; this year they expect to generate half their revenue online. Dell attributes their success to customer service and providing a personalized experience for their shoppers. This year they invested $26 million into Site-Smith, a fast-growing application service provider. Dell entered into the ASP market as part of its efforts to expand into new markets and increase revenue stream beyond selling computers online. Their goal is to increase infrastructure services using the ASP business model. Another initiative, Dell Ventures, will focus on making strategic investments in early-stage private companies. Dell is also offering clients value-added services such as Web design and e-commerce storefronts.
  • EBay, with a simple concept (web-based auctions) and a market capitalization of $16 billion, has harnessed the resources of the Internet to capture over two million registered users—and have never stopped looking ahead. EBay is constantly looking for ways to increase their markets by providing international sites and moving into new markets. This year, eBay collaborated with zipReality.com to provide a new category of products and services called eBay Real Estate. Although eBay is a brand name for auctioning online, they keep moving forward and thinking of next steps to stay ahead of the market.
  • Amazon.com is another online company that is constantly improving their business practices and strategies. Branded on the Internet as a major bookseller, Amazon.com is selling other products such as lawn, patio, and kitchen products. One of their key innovations is the 1-Click ordering. Once customers have registered or made a purchase online, they can select the 1-Click ordering. This will automatically select all of the previously entered billing and shipping information. Amazon.com realized that their market was based on convenience and impulse buying. So, they used technology to allow their customers to bypass all of the billing and shipping forms and focus more on the 1-Click feature.
  • 'Strategy That Works' by Paul Leinwand and Cesare Mainardi (ISBN 162527520X) JCPenney.com has generated over $100 million in sales online. In just the last three years, JCPenney has transformed from including only a few catalogue items online to becoming one of the most visited sites on the Internet. To move ahead, they formed a separate subsidiary called JCP Internet Commerce Solutions, which focuses on their e-commerce presence and catalog. The key to their success was thinking how they could provide the best customer service, fulfillment, and personalization online.
  • Bid.com created an auction-based site focused on business-to-consumer auctions. They wanted to provide a site similar to eBay. The results: they lost substantially. To counter their poor performance, Bid.com revamped their business model toward the business-to-business market. Knowing they had a great auction technology, the company moved to selling its online auction technology and services to other businesses. The business revenue model is now based on implementation fees, monthly hosting fees, and transaction fees from the businesses. Bid.com is now seeing some successes with this new model.

'Your Strategy Needs a Strategy' by Martin Reeves (ISBN 1625275862) We see that “brick and mortar” companies often create a new department or company purely related to e-commerce because customer service, personalization, sales, marketing, and other areas need to be addressed differently. By creating a new division or spin-off company, the right resources and experience can be brought into the company. It is possible to re-train internal people, however, it takes time to shift a large company to think in e-commerce terms.

Since the e-commerce market is still fairly new, companies will need to test what works. You may work for a company that sells ABC products; however, over time you see that the company’s strengths lie in distribution and customer service instead of product sales. So, capitalize on your strengths by providing distribution and customer service for other e-companies.

With the e-commerce field changing, re-evaluate your strategy. Plan your e-commerce strategy.

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Posted in Management and Leadership

Engage in a Constructive Leadership Dialogue

Conduct Soul-searching Interviews with Outsiders

Engage in a Constructive Leadership Dialogue If you are a leader, what is your most important job? As stated by John Kotter, leaders groom organizations for transformation and help them manage as they struggle through it. That is their foremost job. However, how do they go about doing it? Jack Welch, former CEO of General Electric, once said: “My main job was developing talent. I was a gardener providing water and other nourishment to our top 750 people. Of course, I had to pull out some weeds, too.”

Evidently, setting a direction for the future is an important aspect of leadership. Telling what the organization should become in the long term and how it should get there becomes the foremost duty. Soon after taking the helm of IBM, Lou Gerstner announced, “The last thing IBM needs right now is a vision.” Some people nailed his hide to the wall for that statement. He explains that reporters dropped the words “right now” from his statement. Gerstner felt that IBM was long on vision statements, but short on getting the job done. Fixing the company was all about execution.

Creating a Culture of Leadership

Execution is nothing but aligning people, motivating them, and creating a culture of leadership. Kotter contrasts execution with equally important but managerial duties such as planning, budgeting, organizing, staffing, controlling, and problem solving. The value of a wonderful strategy is only achieved when it is carried out. And it is the people who make the grand vision a reality. That’s why, as Jack Welch points out, leaders need to make it a priority to plant and nourish talented people at every level.

If you lead a big organization like General Electric, you might have assets at your disposal like the GE John F. Welch Leadership Center at Crotonville, the world’s first major corporate business school. Here everyone from important customers and partners to present and future GE leaders come together to identify opportunities and debate issues. But few organizations have the resources to invest like GE. They can’t operate a dedicated leadership center.

Creating a Culture of Leadership The constraint of a smaller budget is hardly an excuse to not operate key levers that drive superior performance in people. Going back to Welch’s garden analogy, some aspects of cultivation are free, such as sunshine. But how you choose to orient your garden in relationship to the sun makes all the difference. If you place your garden under a large shade tree, you cut it off from necessary nourishment.

While a leader needs to have a strong sense of the direction, cultivating new culture by changing people’s frame of mind and behaviors is the hardest part. In doing so, they can follow the profit-at-any-price model by relying on fear, pressure, and greed, or they can follow a more sensible leadership model based on inspiration, motivation, and enthusiasm.

Four Bad Leadership Models

Even leaders who articulate a convincing vision, inspire followers, and display passion and courage to take on challenges can have wasteful traits that limit them. These tend to manifest themselves in four ways:

  • Know-it-alls: They start believing that they know and do this better than anybody, and believe that they don’t need others as much as others need them. So they tend to treat others as dispensable and tune them out.
  • Micromanagers: They get mired in minutiae and sometimes miss the forest for the trees. By measuring too much, they measure nothing.
  • Perfectionists: They spend too much time doing things right rather than doing the right things, thereby losing focus. They take any constructive feedback as a direct hit and return what they see as not-so-friendly fire.
  • Detached: They become emotionally distant and lose the intimacy and connection to other people. To any push-back, they respond: “Tough! If I can do it, so can you.”

When these behaviors occur, the results follow quickly: Any constructive confrontation within the executive team ends almost immediately. Honest exchange of ideas on options and their pros and cons ceases. What is happening on the ground to the foot soldiers becomes irrelevant. The pressure people feel becomes unbearable. The “guilt trip” that nobody else is pulling their weight becomes harder to take. Any semblance of work-life balance is lost. Conversations become one-way streets, and people feel like glorified order-takers. It seems like they have ceded all authority to the boss.

The leader is quickly surrounded by loyal sycophants in the inner circle who simply want to ride the coattails. Everyone else is in the outer circle-albeit with more self-esteem, yet fearful to say that the emperor has no clothes. Soon people start telling the leader what the leader wants to hear, lest their heads are chopped off. Collaboration comes to a grinding halt, and providing lip service becomes the politically correct thing to do. Everyone looks out for themselves, and any mutually shared goals, if they exist, take a back seat. Any sense of intimacy, camaraderie, and belonging on the team becomes non-existent.

Any concept of a team breaks down. Any sense of empowerment evaporates. The vision of the leader becomes a pipe dream. The strategic plan to get there suddenly has strong disbelievers. The short-term results, obtained through draconian measures, become harder to sustain. As Michael Maccoby notes: “Narcissistic leaders can self-destruct and lead their people astray.” So, there is plenty of leadership, but little followership.

Foster Competencies to Compete in the Future

Foster Competencies to Compete in the Future A key challenge for leaders competing for the future is to foster competencies that provide access to tomorrow’s opportunities. Further, as discussed by Gary Hamel and C. K. Prahalad in Competing for the Future, leaders need to find innovative applications of the current competencies. Leaders must objectively assess and proactively improve the caliber of the executive team and the organization as a whole.

However, before a leader can assess the caliber of the executive team, he must take stock of his own. Surveys—whether leadership or 360 degree—are popular and necessary, but rarely tell the leader the whole story. Objective, confidential, and focused interviews by an outsider with each individual on the executive team can deliver unvarnished truth-rich information about what’s really happening behind closed doors. Is there a true strategic alignment? How is the leadership style perceived? How much constructive confrontation occurs? Do people collaborate or simply provide lip service? Is everyone pulling in the same direction?

There are five prerequisites to getting the most from these interviews:

  1. Right reason. First, conduct the interviews for the right reason: improving leadership by eliminating unproductive behaviors. If the hidden agenda is to vilify non-performers or to find scapegoats, the approach backfires.
  2. Objectivity. You need an objective outsider to hold the mirror. This person must not be afraid to find out the truth and tell it like it is.
  3. Confidentiality. The interviews have to be treated as confidential, and the interviewer can’t make any direct attribution to a specific individual. Despite all the talk about openness, blackballing is still a common practice.
  4. Specificity. While recognizing that everyone’s reality is different, the interviews have to focus on direct observations, experiences, and involvement rather than hearsay.
  5. Commitment. There must be a commitment to develop an action plan at the individual and team level.

If these criteria are met, the insights gained from interviews can help create a high-performance culture. The honest feedback and recommendations can raise the candor and constructive dialogue.

Baseball manager Tommy Lasorda said leading people is like holding a dove in your hand. “If you hold it too tightly, you kill it; but if you hold it too loosely, you lose it.” Finding that delicate balance between providing nourishment and pulling weeds is the key to effective leadership. But it begins with looking in the mirror.

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Posted in Leaders and Innovators

Tap the Power of Your Viral Customers

Viral Customers are Your Brand Ambassadors

Viral Customers are Your Brand Ambassadors Whether you are aware of it or not, customers are talking about you this very minute. They are offering opinions, trading experiences, and influencing other customers about you—your company, products, services, and reputation.

Welcome to the world of the “viral customer,” the turbocharged version of the word-of-mouth customer. If you’re not aware of your company’s viral customers, you need to be. If you haven’t geared your company to their growing influence, you had better start now. These talkative, influential customers will play a critical role in the future of your marketing schemes, loyalty programs, customer service efforts, public relations outreach, brand management, privacy policies, and bottom line.

The Internet has created a generation of so-called “viral customers.” Viral customers can be champions or destroyers. They can talk trash about you or trumpet your worth. Which route they take depends on you.

  • If customers are happy with their encounters with you, they are likely to tell lots of their friends. In essence, they become viral ambassadors who will rave about your company to others to create a gush of goodwill. These ambassadors can be valuable, low-cost avenues for building existing relationships, recruiting new customers and keeping old customers happy for life.
  • But if customers are not satisfied, watch out. So-called “viral rebels” can destroy your products, brands, and reputation as they share negative experiences. Moreover, at the moment of negative feedback, they’re likely to be in a “switch mode,” ready to find someone else to satisfy them in ways that your company hasn’t or won’t.

Are you paying attention to what your own viral customers are saying and doing? We’ve found that some companies and industries are more “viral” than others. Customers are much more likely to pass along opinions to others about insurance firms, health maintenance companies, utilities, banks, long-distance and wireless telephone companies, mail delivery services, Internet service providers and auto manufacturers.

What’s at stake is more than the lifetime value of a single customer. Everyone in the viral rebel’s sphere of influence is also at stake, because even though the original customer may walk away from you, he or she is not necessarily finished. The bad-mouthing continues. Suddenly, one person’s negative encounter becomes everyone’s shared experience, and you’re left to pick up the pieces, re-establish ties, win confidence, and regain long-term loyalty.

Some Brands and Issues are More Viral Than Others

Some Brands and Issues are More Viral Than Others Certain brands elicit highly viral customer buzz. Billing issues typically fly off the virility chart. Other hot-button issues involve safety among automakers, baggage claim among airlines, customer service at e-commerce sites, hygiene at restaurants, and staff attitude at retail stores.

If you listen to your viral customers, you will know whether your marketing budget is based on the correct assumptions. You’ll be able to apply one-to-one marketing principles to customer feedback, making your customer insight even richer and more robust. You will know which brands are working. You’ll know your company customer service record, because you will have real-time feedback from the customers. You will identify trouble spots or opportunities well in advance, enabling you to take advantage of positive feedback or stop negative feedback before it explodes.

As you analyze the customer insight you receive, you become wiser and more adaptable, smarter and better able to react, respond, and retool. You start giving customers what they want—easy and convenient communication. They want to be heard. They want to help others, and they want a forum that fits their propensity to rant or rave.

In a world governed by customer insight, all feedback is gold and every complaint is a gift. Raw data guides us, but insight that has quality and meaning enlightens us. Anticipation beats perspiration, and the only way to know what is around the next bend is to pay attention to the curve as it develops.

Here’s five things you can do to tap the power of viral customers:

  • Identify them. Viral customers communicate with you frequently by e-mail, letter or phone. They send copies to others, are passionate or emotional about their experiences and are among the first to try new products or services.
  • Make communication easy. Offer as many ways as possible for customers to get in touch with you-a toll-free phone number, Web-site e-mail address, third-party feedback service, street address or special mailing address.
  • Respond quickly. Respond quickly and in the same fashion. Be empathetic.
  • Mine the negative comments. Respond decisively so that the customer decides to remain in your camp. Don’t give a reason to bolt to the competition.
  • Build the relationship. Add communicative customers to a preferred-customer list. Extend special offers, ask their input on new products and services, and ask how you can improve the relationship. The more you integrate the relationship, the stronger it will be.
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Posted in Business and Strategy Management and Leadership

How American Express Realizes the Enormous Opportunity of eService

The internet represents an enormous opportunity to transform and improve old businesses and engage in new ones.

American Express is constantly transforming its business, eventually putting American Express’s old products out of business with new product innovations. All of its Internet initiatives are designed to accelerate its business transformation by capitalizing on interactive capabilities.

The assets that have made American Express one of the leading global financial services companies are highly relevant on the Internet.

American Express eStrategy #1: Become or Remain a Leader in Online Payments American Express has one of the most recognized and respected brands in the world, representing security, integrity and trust. American Express has a large card member base with 50 million cards in force worldwide. It owns or manages nearly $300 billion of assets for its 2.3 million financial services customers. In addition, it transacts with millions of merchants in over 200 countries and territories. It has a broad and diverse product set catering to the financial and travel-related needs of its consumer, small business, and corporate customers.

American Express provides superior value and service to its customers, and runs first-class operations that are nimble enough to conceive and launch major products in Internet time. The Internet is an extension of its business, and American Express believes the “bricks and clicks” strategy will ultimately prevail. In fact, an increasing number of online-only players have recently announced the desire to acquire physical assets as their virtual business models have run their course.

American Express’s eStrategy consists of four parts.

American Express eStrategy #1: Become or Remain a Leader in Online Payments

Currently, of the $5 trillion in consumer payments in the U.S., only about 30 percent occurs on card-related payment products. In addition, of this $5 trillion, less than 1 percent is transacted online. However, as a greater share of spending moves online, most spending will occur on plastic or its electronic cousins as consumers and merchants look for standard ways to transact in a secure fashion. The three key drivers of success as an online payments provider will be merchant acceptance, authentication, and security.

  • On merchant acceptance, American Express has 97 percent coverage of the 100 top e-commerce sites, which accounts for approximately 70 percent of all online spending. In addition, of the top 500 sites, American Express has 95 percent coverage.
  • On authentication and security, American Express’s Online Fraud Protection Guarantee, Private Payment, and Online Wallet allow customers to shop in a secure fashion. Private Payments provides customers with choice and protection when shopping online. Online Wallet offers one-click order fulfillment and form-fill capability that allows users to automatically and securely checkout virtually anywhere on the Internet. The Blue smart chip offers an extra layer of authentication and protection.

As corporations move their purchasing to dynamic online exchanges, they have a need for payment, financing, trust facilitation, and risk management products to support these transactions. American Express is positioning itself to support these types of transactions.

American Express eStrategy #2: Become a Preferred Ecommerce Destination

American Express eStrategy #2: Become a Preferred Ecommerce Destination Becoming a preferred destination for American Express’s current and potential customers who are looking for content, products, and services across financial services, lifestyle, and travel. AmericanExpress.com is the nexus for all of its product and service offerings. This website receives over two million visitors a month.

Many of the products it is developing—such as Membership B@nking and its Online Brokerage—require new skills and capabilities. To succeed, American Express has focused on simple product functionality with differentiating value propositions, all introduced in Internet time. American Express’s Membership B@nking offering includes no-fee interest checking and account access through the American Express ATM network, the second largest in the U.S. And American Express Brokerage offers free online trading for accounts over $100,000.

Despite American Express’s relatively light marketing efforts, response to these offerings has been extremely positive. This popularity attests to the power that an established physical world company can wield by extending the strength of its brand onto the Internet in a way that offers its customers something of value.

American Express has a comprehensive web offering. To simplify the interaction for customers, American Express gives them the flexibility to customize their on-line dealings with American Express through “My American Express.” It has also added Online Extras to The Offer Zone where customers can access savings with local restaurants, merchants, and online retailers.

Another feature is American Express Online Services, the common entry point to all of American Express’s card products and services. Upon authentication, Online Services allows customers to access their American Express accounts as well as special or new offers. Based on a customer’s preference, it can communicate offers, services, and information directly to the customer’s e-mail address.

Through the combination of American Express’s physical assets and web site, it can serve customers when, where and how they want. American Express is increasing share of wallet with customers and providing them with greater levels of service by broadening American Express’s relationships across multiple channels.

American Express eStrategy #3: Provide Online Service that American Express’s Customers Value

American Express eStrategy #4: Improve American Express's Operating Structures Provide online service that American Express’s customers value across all of its entire businesses and products. Online Services already has several servicing options including Bill presentment and bill payment, Membership Rewards account management and online redemptions, and online card applications. American Express also is continuing to develop its online services for merchant, small business, and corporate customers.

If a customer encounters a problem adding an additional card to their Online Services account, a pop-up button will appear that they can click on to reach a customer service representative in real-time to resolve the issue.

Another application, American Express @ Work, moves customer-servicing capabilities online. American Express’s goal is to make the interactive channel one of the preferred methods of servicing.

American Express eStrategy #4: Improve American Express’s Operating Structures

American Express eStrategy #3: Provide Online Service that American Express's Customers Value Use interactive capabilities to dramatically improve American Express’s operating structures through reengineering on the cost and revenue sides. American Express constantly reengineers its business activities to increase its value to American Express’s customers, employees, and shareholders and to develop new capabilities and products. Most of its online reengineering initiatives focus on using the Internet as an additional channel to conduct functions such as online account acquisition, program enrollments, order fulfillment, and targeted, customized marketing campaigns.

American Express’s eStrategy Integrates the Internet with Core Banking Operations

Going forward, American Express plans to use the Internet to change the way it interact with customers, which can have a substantial impact on its cost structure and business processes. American Express is moving to integrate the Internet more closely into its operations and redesign its processes to allow it to be more nimble and proactive in meeting the needs of its customers. Consumers today expect to pay less online for the same products and services they once received through physical channels. Reengineering enables American Express to adjust its cost structure to meet customers’ needs and ensure that they receive superior value.

Create and implement a plan to improve your eService. You might seek ways to use the internet to change how you interact with customers

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Five Criteria by Which Customers Judge Service Quality

Five Criteria by Which Customers Judge Service Quality

  1. Reliability: Consistency in performance dependability. Examples: accuracy in billing, keeping records correctly, performing the service at the designated time.
  2. Tangibles: Physical evidence of the service. Examples: physical features, appearance of personnel, tools used to provide the service.
  3. Responsiveness: employees’willingness or readiness to provide service. Examples: mailing the transaction slip immediately, calling back the customer quickly, giving prompt service.
  4. 'Raving Fans' by Ken Blanchard (ISBN 0688123163) Assurance: employees’ knowledge and ability to convey trust and confidence. Examples: Knowledge and skill of contact personnel, company name or reputation, personal trait or contact personnel
  5. Empathy: caring and individualized attention to customers. Examples: learning customers’ specific requirements, consideration for the customers.

Read this popular book: Raving Fans: A Revolutionary Approach to Customer Service by Ken Blanchard and Sheldon Bowles.

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How to Enfranchise Customers in the E-commerce Era

Putting customers back in the equation

How to Enfranchise Customers in the E-commerce Era The internet has dramatically advanced the ways business can deliver products and services, and meet customer needs. However, while e-business has succeeded at leveraging technology to enhance business productivity, it has done little to enfranchise customers. Countless web sites that aim to provide a seamless shopping experience simply are not designed for the needs of the user. Customers needing support often have to abandon their shopping carts to get their questions answered. Many end up turning to the phone to get the information they need, or they just give up. Most e-businesses lack the human touch.

Customer needs will continue to change as technology plays a greater role in our lives. To be successful in the future, businesses will have to add the customer viewpoint into the equation, and seek to satisfy unmet customer needs. Rather than concentrating on e-business, companies will need to reorganize as c-businesses, orienting their operations around customer need sets across all channels and touch points, from the perspective of all products and services, and for each customer group, whether on the consumer level, small businesses, or large enterprises.

Six Drivers of Change in eCommerce

Let’s examine these emerging customer need sets, the drivers of change, and how certain businesses are prospering in the new c-business age.

  1. Information overload. The Web has unleashed a plethora of information. The result of this easy access to information is that people are seeking knowledge in context. Presenting data in the context of the customer’s needs transforms it and makes it far more valuable. The financial services company USAA doesn’t inundate its clients with sales pitches and junk mail. It takes a highly targeted marketing approach based on major events in them customers’ lives. When you’re about to buy a house, have a baby, or send a child off to college, USAA will contact you with information about products and services tailored for these needs.
  2. Six Drivers of Change in eCommerce More choices. Today, there is a wider variety of goods and services than ever before. This surfeit of choices is leading people to demand more personalized service and customized goods. Look at cars. Henry Ford told his customers they could get a Model T “in any color you want, as long as it’s black.” The computer industry long took the same approach-only this time with beige. Apple changed the landscape with its iMac, providing consumers with true choice. But Mac enthusiasts still have a hard time getting options they want built right into their systems. Dell, on the other hand, customizes virtually every PC it sells to its customers’ specifications. As advances in technology and manufacturing make it easier for firms to tailor their offerings, customers will increasingly expect personalized service.
  3. Automation. It has become possible for businesses to automate nearly every aspect of the customer interaction. This increase in automation leaves most of us with a yen for the human touch. But for corporations to deliver quality, human scale service, customers will need to make concessions in terms of privacy. Smart e-businesses will prove to their customers that these sacrifices will be worth it. Already, enterprises with good “corporate memory” are succeeding. Consider FedEx, which provides a reassuring presence by putting kiosks in the offices of their best customers. FedEx also provides real value through its Web site by letting customers track deliveries.
  4. 'Ecommerce Evolved' by Tanner Larsson (ISBN 1534619348) Pervasiveness. The pervasiveness of information and services is another driver of change. Having the capability to get whatever you want, whenever you want it is driving a need for control and integration. For example, we can get email on wireless handhelds, and order groceries online. However, is anybody helping people remember what’s supposed to be on their grocery shopping list? Webvan has made inroads in this area, but they still must overcome entrenched shopping habits. As these platforms develop, they provide resources essential for national growth and reduce the market inefficiencies that slow the pace of development.
  5. New pricing models. A heightened awareness of value is the direct result of new pricing models and pressures. Customers don’t necessarily look for the best prices, but they do look for value. In the airline industry declines in service and fluid pricing models have made it difficult for people to determine what is and what isn’t a good deal. Companies that can clearly define their value proposition are having more success in meeting customer expectations and needs.
  6. New entrants in the marketplace. New entrants can now establish themselves in the marketplace with relative ease. Barriers to entry are so much lower now that business can expand into new sectors virtually overnight. For customers, this leads to increased choices, but it also raises questions of trust. Customers look for clues that they can rely on their provider, which is why companies need to build trust through their online and offline presences.

Determine How You Can Deliver Better Attention, Choice, and Value in E-commerce

E-business may have radically changed the ways companies and people buy goods and services, but the essential elements of the buyer/seller equation are timeless. Customers want personal attention, they want choice, and they want good value. Solving the marketer’s dilemma will not be easy.

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Employees Must Have a Vested Interest in the Success of the Business

Robert Frost once said, “Isn’t it a shame that when we get up in the morning our minds work furiously—until we come to work.”

In the new economy, we need to equip people to think and act like owners. Everyone must come to work fully engaged and ready to make difference. A global revolution is under way, and it calls for gutsy leaders—people who can inspire knowledge workers idea merchants, and business innovator to exercise their own brand of leadership. The future belongs to those who use the power of culture to feed the entrepreneurial spirit.

Here are eight ways you can create a culture where people have a stake in the success of your business.

  • Employees Must Have a Vested Interest in the Success of the Business Recognize that ownership is more than a stock certificate. Ownership is a state of mind, a way of looking at the world and approaching work. Owners are people who step out from behind titles and job descriptions to act on behalf of the customer and the company. Non-owners hide behind position descriptions (“It’s not my job.”) and throw problems over functional walls (“Let me transfer you to…”) as an excuse for inaction. Owners cater to the purpose of the organization—its mission, vision, values, and strategy. Non-owners cater to the boss. Owners focus on the business results of their actions regardless of who is watching. Non-owners focus on the chain of command Owners ask the tough question: “How can we make it better?” Preoccupied with safety, non-owners gravitate toward the comfort of the status quo where things are more predictable and less disruptive.
  • Develop leaders who know how to liberate talent. Ownership is about giving people the freedom to act and removing the fears that cause lack of initiative. Unforgiving, zero-defect cultures foster cautious inactivity that kills the ownership mentality. People who don’t feel safe live under an umbrella of fear that makes them reluctant to make decisions, own problems, admit mistakes, take on projects, and act in ways that grow the business. When people cling to safety, they have no commitment to ownership; accountability vanishes, and self-preservation arises. Ownership is trusting that employees will operate with the company’s best interests in mind. Putting our trust in these people tells them that we think they are trustworthy. It suggests that we have faith in their character and competence. It boosts their self-confidence. Strengthen a person’s self-confidence and you strengthen his or her ability to think and act like an owner of the business. Herb Kelleher, Southwest’s chairman, says, “You build self-confidence when you give people the room to take risks and fail. You don’t condemn them when they fail. You just say, “We’ve just spent a good bit on your education; we hope to see you apply it in the future.”
  • Build a corporate culture of employee ownership Lay out the guiding principles. As a leader, you have to be confident that when the decisive moment comes, those who have assumed ownership will exercise common sense and good judgment. As the one assuming ownership, you have to be confident that what you are doing is the right thing because, after all, with ownership comes responsibility and accountability. Exercising good judgment and doing the right thing result from a clear understanding of the company’s guiding principles. Your firm’s business purpose and strategies, its mission, vision, values, and philosophy all define those principles. In essence, they create a set of helpful boundaries. When the boundaries are clear, employees have more freedom to step up, take action, and assume ownership for getting things done. When the boundaries are fuzzy, people get nervous and cautious. The result is a culture characterized by compliance instead of commitment.
  • Help people become business literate. When people understand how revenues and costs translate into profits, they become business literate. How many people on the front lines of your organization understand how the company makes money? How many of them are capable of reading a financial statement? If you asked them how much it costs to run their part of the business, could they tell you? How can we expect them to cut costs if they don’t know what those costs are to begin with? When people start asking cost questions, they are starting to think and act like owners of the business. The true experts are people at the point of action. Smart leaders open the books and equip these people with the financial information they need. When employees become business literate, they look for ways to drive costs down.
  • Make information relevant, fun, and interesting. The key to creating business literacy is getting people to internalize the information. If busy people do not see the information you put out as relevant, fun, and interesting, they are less likely to use it or be impacted by it. Information is relevant only when it is useful. If the salespeople at Sears knew that only three cents out of every dollar shows up as profit at the end of the day, they might be more passionate about watching costs and serving customers. Southwest Airlines’ annual profit-and-loss statement is written simply and illustrated with icons and cartoons, making it compelling to read and easy to understand.
  • 'The Truth About Employee Engagement' by Patrick Lencioni (ISBN 111923798X) Eliminate the “class” mentality. Leaders who are serious about leveraging the knowledge of every person must also eliminate the “class” mentality-socially prescribed or stereotypic boxes. This mentality undermines work in three ways. First, it strips the individual worker of his or her dignity and lowers morale. It essentially says, “We don’t believe in you enough to trust you with this information. It ensures that power resides at the top and widens the gap of inequality. Second, it doesn’t capitalize on people’s knowledge. The company pays for insight it never receives. Third, it crushes the entrepreneurial spirit. People stop caring, learning, and growing. When a financial statement is written so that only a CFO can understand it, forget about getting the frontline involved in a dialogue about cost containment. You breed compliance versus commitment. If your frontline people aren’t interested in reading a profit-and-loss statement, assess whether your information is too complicated or too mundane to capture their interest.
  • Show people how the business affects them personally. Most of the 18-year-old ramp agents at Southwest are business literate. They know that when they push a plane just 30 seconds late, that delay could translate into one hour and 45 minutes at the end of 11 flights in a day. Southwest would have to add 35 more planes at $30 million each to maintain its schedule. That could mean wage concessions, profit sharing, and lowered job security. They know how their job performance creates results, and how those results affect their lives. Southwest has made information relevant and interesting to its employees.
  • Give people a stake. Stock options and profit sharing can be powerful incentives to think and act like owners. However, just because people have stock options, they won’t necessarily think and act like owners. When you offer stock options and profit sharing without the culture to support these motivational tools it’s like putting new tires on a car that needs an alignment. When you add stock options and profit sharing to the rest of this list, you reward and reinforce people for behaving in ways that are consistent with an established culture. In doing so, you leverage the power of the incentive!

Build a corporate culture of employee ownership.

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