Five More Marketing Myths and Service Slips
In "Marketing Myths and Service Slips" John Goodman provided some common misperceptions in the customer service industry. Here, in the second part of this article series, Goodman shares additional customer service myths. Do you recognize your company in any of these practices?
Myth: The best way to improve service is to get front-line employees to do what they are told and to have a better attitude.
Fact: A majority of customer dissatisfaction is caused by other factors that often prevent employees from providing effective service.
TARP has found that more than 90 percent of employees come to work wanting to do a good job, but are stymied by product-related unpleasant surprises, incorrect marketing expectations, broken processes and even confusing directions. These types of issues cause 40-60 percent of dissatisfaction. Also, customers cause 20 percent of their own dissatisfaction by failing to understand the product limitations, making errors or stupid actions (like attempting to whiten teeth with household bleach—true story!).
The solution is to identify customers’ key points of pain and, for the major points of pain, determine if the cause is employee error or attitude, a product with built-in problem, a broken process, a marketing over promise, or a customer error/expectation. Call monitoring is an excellent source of this diagnostic information.
Lesson: Execute a true root-cause analysis of dissatisfaction. In most cases, the process, product or customer is at fault and needs to be fixed.
Myth: Service is nice but price wins customers–look at Walmart!
Fact: Some customers will always prefer price, but most prefer great service and will pay for it.
A majority of customers will pay more for higher quality. In fact, TARP has found, in most markets, that sensitivity to price in retail banking, for example, is strongly correlated with problem encounters. Fewer problems result in lower sensitivity to price as shown with this survey of more than 3,000 retail banking customers.
Less sensitivity to price means that companies with better service can achieve higher margins. Customers may say, "You’re expensive but you’re worth it because I seldom have problems." This is what we call the "Neiman Marcus effect."
Lesson: Reduce problems to gain flexibility in pricing.
Myth: Once we’re at 90 percent satisfaction and loyalty, the law of diminishing returns kicks in and we should declare victory.
Fact: Easily fixed points of pain still exist and damage revenue even at top performance levels.
TARP has worked with financial, catalog and retail clients who have the very highest satisfaction and loyalty scores, but every company identified customer "points of pain" that were easily resolved, and, when fixed, resulted in even higher scores. For example, an East Coast power company asked customers "Who provides better service than we do?" and gave its customers choices like Amazon and FedEx. This company learned how they could borrow service strategies from different industries to improve service beyond what people expected for "just a power company."
Lesson: Don’t stop improving service when you rise to the top of your industry.
Myth: All we need to measure is the net promoter score (NPS) and we have all the data we need on customer satisfaction and loyalty.
Fact: NPS scores are a range that do not provide context.
There are two problems. First you don’t receive diagnostics from the NPS. Second, two very different situations can result in the same score. Your customers could all be in the middle with 30 percent advocates and 15 percent detractors (to get a 15) or you could have a very polarized market where 55 percent very happy and 40 percent are very unhappy. Both yield the same score!
Lesson: You need to understand the diagnostics behind the scores and estimate the revenue at risk for each month the status quo exists.
Myth: We have a 100 percent satisfaction guarantee, so we hear all the problems and all of our customers are satisfied.
Fact: A majority of customers do not contact you about satisfaction guarantees.
In most cases, even with very high visibility guarantee, only about 30 percent of customers will avail themselves of it because customers perceive that it will take too much effort to invoke the guarantee. Also, if the customer has encountered any limitations on the guarantee in the past, the rate drops to closer to 10 percent. In essence, a 100 percent guarantee does not guarantee that 100 percent of your customers will be satisfied.
Lesson: You must monitor the actual complaint rate by type of problem as well as the success of employees in satisfying customer when they do complain. Further you must understand that those who invoke the guarantee are only the tip of the iceberg compared to what is happening in the marketplace.