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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

Six Megatrends of Retailing

Survive and Prosper the Consumer Megatrends

The New Shopping-as-life Model Has a Broad Competitive Perspective

As we enter the 21st century, the nature of shopping and the role it plays in life has changed dramatically. Shopping is about much more than feeding and clothing the family, it is about who we are, how we live, and how we spend our time. It is no longer about shopping versus life. It is about shopping as life. In fact, shopping has become so integrated into everyday life that consumers do it almost without thinking as they juggle family, work, and social activity.

How then do we manage this shopping life? We do it by being more efficient, smarter about our choices, and by blending shopping seamlessly into our lives, sometimes as a practical function and sometimes as entertainment, adventure, and emotional reward. We are shopping more at the outlets of choice and for more product categories.

Heighten the Emotional Quotient in Retail Branding

In the last four years, consumers have doubled the number of outlets they shop during their weekly shopping trips. However, they are not making more shopping trips, they are shopping more stores on each trip. The increase in outlets and categories shopped is partly due to the range of new, convenient, and affordable shopping options.

However, this increase in shopping is also driven by the level of shopping confidence and experience exhibited by female shoppers who willingly and eagerly shop everywhere.

Consumers have changed their weekly shopping matrix, overlaying the traditional supermarket with the increasingly accessible, discount-oriented mass merchandiser and the local convenience store. While three out of four American women still shop the local supermarket weekly, one-out-of two now shops a mass merchandiser once a week and one-in-five shops a drug store weekly. We now see the interrelationship between convenience and price. Retailers can no longer trade one for the other. Consumers demand both. If it is not conveniently located, reliable, and easy to shop, if the prices are not right, consumers will not integrate the outlet into their weekly shopping matrix.

One-in-two consumers of all ages shop at a mass merchandiser weekly (more than double five years ago). Mass merchandisers have affected supermarkets and caused declines in all outlets that compete with them.

Six Megatrends of Retailing

Six Consumer and Retail Mega-Trends

  • The Walmart-ing of America. This trend is not about mass merchandisers as a whole, it is about Walmart. Walmart has redefined the American consumers’ shopping experience and expectations. Stunningly, four-out-of-10 American female consumers now shop Walmart weekly. Walmart has become the benchmark against which American consumers evaluate not just the functional aspects of shopping (price, convenience, selection, service) but also the emotional experience of shopping. Not only is it the outlet consumers rate as the best place to get the lowest prices but also the place they look for what’s new.
  • The new value equation. Consumers now demand the functional aspects of convenience, price, selection and service as basic requirements of any and all retail outlets-be they discount-oriented national chains, catalogues, department stores or e-commerce sites. No longer can an outlet define itself by a singular functional dimension, such as low price, convenience or service. Today, all consumers demand convenience, good prices, selection (always in stock) as basic minimums wherever they shop. Now consumers view shopping as part necessity and part adventure, part pragmatism and part emotion. A retailer can no longer survive unless it satisfies consumers on both functional and emotional issues.
  • Retailers on the rise. Mass merchandisers are clearly leading the way as the outlet of choice. Not only do nine-out-of-10 primary shoppers of all ages and income levels shop a mass merchandiser quarterly but also one-out-of two shop there weekly! Mass merchandisers reflected the largest increases in consumers shopping for all the core categories they carry, with the exception of clothing. Mass merchandisers are now the primary outlet for all major beauty care categories, skin care, hair care, and cosmetics, overtaking department stores and drug stores, and second only to department stores in fragrance. As the big get bigger, the opportunity for the more concise, more personal, more specialized retailer grows. More consumers are shopping specialty stores in areas that did not even exist 10 years ago—in beauty care, hair care, skin care, fragrance, and cosmetics.
  • Retailers at risk. Retailers that fail to offer more than price or convenience or service are struggling to survive. Drug stores have become convenience store—places where Americans fill their prescriptions and pick up a container of milk. Seven of every ten consumers still fill their prescriptions at the drug store; however, the margins on the prescriptions have declined significantly in this era of managed care. Since 1996, the percentage of consumers shopping department stores has declined in all core categories with the exception of clothing. Most department stores focus on attracting younger consumers. However, they are not doing it as effectively as the specialty stores. The result? Older consumers with more disposable income are disenfranchised, and younger consumers are not compelled to make the department store their primary fashion outlet. The warehouse club is no longer the adventurous shopping outing. Other retailers have learned how to compete on selection and price. The result: the percentage of consumers who shop a warehouse club declined significantly. Supermarkets beware. Mass merchandisers have moved ahead of supermarkets as the outlet more consumers use.

The Demographic Divide Trends in Retailing

  • The demographic divide. While everyone is shopping more, younger consumers, 18 to 34 years of age, are driving the increases. Consumers 55 to 70 are shopping more selectively. This creates a demographic divide in retailing that has major implications, especially since consumers over 50 now represent 38 percent of the U.S. adult population and have 55 percent of the disposable income. When retailers and manufacturers concentrate on youth to the exclusion of older shoppers, older consumers stop shopping. They only replenish their basics. They spend their discretionary funds on investments, travel, computers, and their gardens, eating out—not on clothes, accessories, beauty products, home decorating products, or entertainment.
  • The truth about E-commerce. The outlook is clear: e-commerce will play an important role in retailing. However, today’s reality is that only 10 percent of primary female shoppers use the Internet as regular shopping alternative. E-tailing will have an impact on where consumers shop. The growth over the last two years has been dramatic. In 2000, 10 percent of respondents said they had shopped on-line in the last three months, up from five. The fact that one-in-four upper income women have embraced this new shopping outlet is an indicator of its potential.

How to Survive and Prosper the Consumer Megatrends

How can a company profitably capture the consumers’ attention and hold it when at every moment, on every corner, at every event there is an enticement to shop and spend. It is not just about opening more stores. It is not only about adding entertainment. It is not solely about offering e-commerce. What it is about is integrating a brand into the consumers’ life and embracing their lifestyle so that the outlet or product is indelibly inscribed in the consumers’ shopping life. Here are six keys for success:

  • Expand the landscape. It is no longer enough to present a singular concept in a singular landscape and assume it will satisfy your target customers and maintain their loyalty. Ensure that the real estate or the assumption that your target customer will shop there regardless because what you offer is so compelling does not limit the concept.
  • Increase share of consumer’s mind and life. Create multiple reasons for consumers to think of you for more. Once the consumer “buys” into the initial concept, they are encouraged to embrace you as part of their life and community—and thus buy more. By creating multiple layers of value, it is harder for a competing outlet to entice customers away.
  • Any way the customer wants it. Enable consumers to shop when, where and how they want since consumers can readily find somewhere else to shop. For consumers to keep coming back they need more than random access; they need to be assured they can count on you whenever they need you.

The Truth About E-commerce

  • Retail branding. Loyalty is built when consumers see and believe that the company reflects and satisfies both the practical and emotional tenor of their life, that it mirrors their attitudes and their sense of community, that it clearly resonates, “this outlet is like me and for me.” By creating a format—be it web site or store—with such affinity to a consumer’s life, it ensures that the consumer will stay true and loyal in spite of the shopping alternatives.
  • Heighten the emotional quotient. Pragmatism and functionality are merely the foundations of customer loyalty. Every company must provide convenient, easy-to-shop outlets, with a mix of merchandise always in stock at fair prices. What keeps customers coming back is the emotional bond they form with the outlet or brand. This is not solely about entertainment or novelty. It is about the trust and affinity customers feel a company offers them.
  • Recognize its global. The model against which you must evaluate your opportunities is global.

To build loyalty you need to establish a clear functional and emotionally satisfying matrix Study the trends and apply the six keys.

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Posted in Global Business

Customer Feedback Systems to Go Beyond Customer Expectations

Customer Feedback Systems to Go Beyond Customer Expectations

There used to be a sofa in Microsoft’s telephone customer support center called “the Mail Merge couch”—named for a feature in Microsoft’s word-processing program that lets users customize form letters. The early version of Mail Merge was so complicated that whenever a customer called for help, Microsoft’s representative would lie down on the couch, knowing the conversation was likely to take a long time.

Clearly, something was wrong with that feature. Microsoft fixed the problem in the next generation of Word (and eliminated the need for the couch), but the story illustrates just how important customer feedback can be.

Most business managers understand that using customer feedback to guide the development and improvement of products and services is critical to success. However, some companies and individual managers are better than others are at collecting feedback and using it to make strategy decisions.

Nine Customer Feedback Rules for Managers

Managers who want to help their companies be customer-driven might observe the following nine rules.

  1. Create a system for effectively soliciting customer feedback, and then put that system to work. Boeing uses extensive customer involvement when developing new jetliner models. United Airlines influenced the design of both the 767 and the 777, and British Airways and Eastern Airlines participated in developing of the 757. As a result, the airlines were able to tailor the planes to their specific needs and preferences.
  2. Make sure your feedback system provides reliable information from a cross-section of customers. When a company has thousands or millions of customers, it can’t involve many of them in the product design, but it can involve a representative sample of customers.
  3. Make it easy for customers to provide feedback. Some companies offer a customer-feedback phone number. Surveys are another system for gathering feedback, but many people, including me, are not willing to spend much time answering them. Observing customers while they are using existing products and services is habitually the only way to identify hidden frustrations that they may not even be deliberately conscious of.
  4. Microsoft's Nine Customer Feedback Rules for Managers Send e-mail surveys to customers and offer incentives to fill them out and return them. The incentive may be a little digital money or coupons to buy products at a discount. The electronic survey will be immensely efficient for the company, because the survey results will be in electronic form, making results easier to compile and analyze. Some companies already use the Internet in this way. Encyclopedia Britannica recently e-mailed people who had accepted a free seven-day trial of the company’s online reference, offering another free week to those willing to fill out an online survey about their reactions to the product and its price.
  5. Use focus group and customer councils. Getting a few customers together to discuss their reactions to current and new products or services is another good way to collect customer feedback, although these groups and councils, too, have their limitations.
  6. Go beyond what market research tells you. The transition to graphical computing is an example of an instance where Microsoft needed to go beyond what Microsoft’s market research was telling us. Most software customers who were surveyed did not know they would prefer graphical computing because they had not tried it. Microsoft believed that customers would prefer the new way of interacting with their computers, even though Microsoft’s market research was not very positive. Microsoft’s gamble proved right.
  7. Log and evaluate all service requests, customer suggestions, and product complaints. Microsoft logs and evaluates hundreds of thousands of calls made to Microsoft’s support technicians every year. Put yourself in your customers’ shoes. Observe them using products and watch for frustrations they may not even notice.
  8. Require that the software engineers who develop products spend some time listening to calls from customers. These engineers need to get firsthand feedback. To get the attention of Microsoft’s group managers, Microsoft charges their departments for the cost of providing technical support to customers who use their products.
  9. Request, receive, and act on input from your salespeople. Microsoft seeks and use input for the people who are out in the field with customers. In this industry, customers are eager to share their ideas, frustrations, and enthusiasm. Microsoft is also lucky to be in an industry where products are so adaptable. Whereas it might take an automobile company five years to retool a car model to adapt to customer preferences, software companies can—and do—update their products constantly in response to customer input.

Beyond Customer Feedback

Customer feedback is critical to success of a business No system of market research is foolproof, of course. Even companies that do a good job of listening to customers can make mistakes. Business partners are relying on questionable information to make customer-related decisions. Our new understanding of customer-related decision making should be the starting point for a research approach that has impact on a greater proportion of high-value customer-related decisions.

I am a strong believer that heeding customer feedback is critical to success in any business, especially a dynamic, fast-moving industry such as ours. Despite Microsoft’s willingness to look beyond customer input, 80 percent of the improvements in products like Windows result from customer feedback. Experience has taught us that it is also important to trust your instincts, to take risks, and to provide leadership, even when the customer is not demanding that you do so.

Apply these rules to your business and use the feedback to make improvements. Companies often make the blunder of organizing customer feedback systems around one structure—say lines of business or channel—and employee feedback systems around another—say geography or function. In the end, well-designed feedback loops facilitate employees to be more empowered and companies to be more approachable, creating the competitive edge companies need to adapt and thrive.

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Posted in Business and Strategy Management and Leadership