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Editor’s note: James T. Heisler is senior vice president of Harris Interactive Loyalty, Princeton, N.J.  Mark S. Perline is research manager with mail solutions provider Pitney Bowes, Stamford, Conn.

The business world has come to recognize that satisfying customers and winning their loyalty is critical to a company’s success within an increasingly competitive marketplace. Moreover, most companies know that that they need to listen to their customers’ concerns and requirements and then act on that information.

To this end, running periodic relational and transactional customer satisfaction and loyalty surveys has become de rigueur for many businesses. Ideally, the knowledge gained from such exercises is used to reinforce and/or change processes to improve the customer experience and foster their loyalty to the company.

Were the paradigm so simple - field a survey among your customers, ask them how you’re doing meeting their expectations, make a few changes and voila…you’ve maximized your customer loyalty! In reality, things are more complex. The issues run from knowing how to measure customer satisfaction and loyalty in valid ways that have explanatory and predictive power to knowing what research you should implement first. It is the latter to which this discussion now turns.

Every year companies spend millions of dollars asking customers, “How well did we do on your most recent transaction with us?” For some reason, few ever stop to first ask the more important question: “What is the experience you want from us?”

As a result, some companies expend considerable resources delivering experiences that are not what the customer wants and/or have little impact on loyalty, retention and incremental revenues and profits. Even worse, they may be under-delivering on experiences needed to maintain healthy customer relationships.

The practice of customer touchpoint management works hand in hand with customer loyalty measurement to determine the relative impact of various elements of the customer experience on loyalty (e.g., interactions with sales reps) and in turn to spell out specific actions that can be taken (e.g., make three to four sales calls per year, consult on best practices, return calls within two hours, etc.).

The overall aim is to obtain answers to the following business questions:

  • What is the relative impact of each service delivery touchpoint on customer loyalty?
  • What is the optimal experience with each service delivery touchpoint?

    - What is the acceptable medium (e.g., face-to-face, phone, online)?

    - What is the minimum acceptable performance standard?

    - What goes beyond the basics to provide loyalty dividends?

    - Would customers pay a premium for enhanced service levels?

    - Are there thresholds - points of diminishing return on certain client needs?
  • How do touchpoint requirements differ by customer segment? (A one-size-fits-all approach may not work for a diverse customer base.)
  • How can ROI on customer loyalty/satisfaction research be increased?

    - Is it by effectively allocating resources by prioritizing the relative value of various change initiatives?

    - Or by reducing service delivery costs by eliminating elements that do not add value to customers’ experiences?

Greatest impact

In 2004, Pitney Bowes had several customer experience change initiatives on the table for funding. Management needed to prioritize these in terms of which would have the greatest impact on customer loyalty. Accordingly, management turned to the company’s research staff and asked them to develop a comprehensive list of customer requirements across the numerous touchpoints Pitney Bowes has with its customers. They elected to partner with Harris Interactive Loyalty, a division of Harris Interactive, Rochester, N.Y., to conduct a customer touchpoint research study.

Asking customers what they want may seem simple enough, but it is a line of inquiry that has some serious potential pitfalls. For example, ask customers how many times a year they want to see their rep, or how long they’re willing to wait for technical service. When asked directly, customers will almost always tell you they want the highest level of service for the lowest cost. And, if the research is conducted piecemeal, there may be no way to prioritize change initiatives among functional groups (e.g., would there be a greater incremental gain by investing in sales rep training or by expanding technical helpline hours?).

Perhaps the most commonly used tool for identifying customer priorities is conjoint analysis, which attempts to simulate the real-word decision process in which customers must make trade-offs to operate within budget parameters. For example, if asked to choose between annual equipment tune-ups for $300 and ongoing training packages for $200, which would they select (if either)?

But can you do this for some of the intangibles that typically comprise the customer experience? Do customers understand the economic value they receive from things like more frequent contact, better information on new products and fewer “hand-offs” on the phone? Compounding this, there are some tangibles in the mix (e.g., eight-hour vs. four-hour response time), so customers would be trading off tangibles and intangibles. (Try asking yourself how you’d decide which is more valuable: two extra sales calls per year or $300 in free training.)

Pitney Bowes accepted the challenge of applying this established conjoint analysis methodology to touchpoint management. Using conjoint analysis as a core component of the research, plus considerable upfront internal and external qualitative research, the approach not only worked but generated actionable guidance for Pitney Bowes in its quest to effectively and efficiently meet and exceed customer expectations across the multiple touchpoints in which loyalty is shaped.

The development of the variables/levels used in the conjoint tasks was based on internal interviews among functional area managers, as well as on focus groups among various Pitney Bowes customer segments.

The trade-off task involved showing customers several “service package” scenarios (each representing a different combination of levels within the four variables) and asking them how each would affect their relationship with Pitney Bowes.

Conjoint analysis provided optimal levels of service to meet customer needs across many key touchpoints, and these were compared with perceived current levels of service in these areas. Table 1 shows a hypothetical example for two customer segments.

Implications for hypothetical segment 1:

  • require more rep contact; seek more of an ongoing relationship;
  • reducing service response time by two hours would enhance loyalty;
  • billing issues currently handled by phone center but rep should do;
  • reliability (less downtime) more a “hot button” than cost savings.

 

Implications for hypothetical segment 2:

  • rep visits not needed (or even welcome) more than twice a year;
  • next-day service response time saves cost and is just as acceptable;
  • less complex accounts can be “driven to the Web” for service;
  • help these customers save money on labor and postage.

 

Some additional areas were explored outside the conjoint exercise:

  • willingness to access Web for specific needs;
  • preference for single vs. multiple toll-free numbers;
  • who installs equipment and trains?
  • interest in electronic invoicing/payment;
  • when/how to notify about contract expiration?
  • interest in ongoing training packages;
  • desired frequency/mode of communications.

 

As mentioned, Pitney Bowes garnered a number of significant benefits from this research. For example:

  • Cost savings were realized - while increasing loyalty - through more effective channel selection (phone/field sales/Web etc.).
  • Contact plans were developed for customers based on the nature of the relationship they want with Pitney Bowes.
  • Pitney Bowes is more fully capitalizing on the relationship strengths/equities identified in the research.
  • Specialized teams of phone reps were created to better meet the specific needs of different customer groups.
  • New customer segments were identified based on the experience they want from Pitney Bowes.

Number of lessons

Finally, along the way Pitney Bowes and Harris Interactive learned a number of lessons on how to ensure that customer touchpoint management research achieves its objectives and provides actionable results. The lessons are outlined below in generic terms that apply to any organization looking to optimize its customer-facing resources and improve the customer experience.

1. Take steps to boost the comfort level with what you’re doing.

Any company making a comprehensive investigation of its contact strategy is going to uncover areas in which customer experience is not optimal. Some change initiatives will be supported by the research findings and others will not. Make sure to emphasize that results are going to be rolled out in a constructive manner that will help managers make better decisions.

2. Make stakeholders feel like you’re addressing their issues.

Take a lot of time up front to interview process owners on problems they face, decisions they have to make and information that could make them more effective. In addition to getting their buy-in, there will be a better chance that actions indicated by the research will be within the realm of feasibility.

3. Pre-test, pre-test, pre-test - before you program the survey.

If you do qualitative research up front to help structure the interview - and you should - don’t wait until the end to put together a questionnaire for pre-testing. Introduce questionnaire elements (flow, wording, choice sets) throughout to build up to a point where you are on the same page with customers on what the questions mean and what the choices represent.

4. Watch out for “deal breakers” in the choice sets.

In pre-testing this survey it was clear that including a highly undesirable alternative could kill the deal for every choice set in which it appears, reducing discrimination among the remaining variables. For example, giving respondents the option of saving money via self-installation may seem like a valid trade-off option, but it may make the whole package unacceptable.

5. Champion the possibilities for customers.

Put the customer first by offering them a full range of options in the choice sets. Don’t be limited by current paradigms or internal perceptions of what should be provided to customers. Management needs to know if customers require levels of service that may go beyond what the company has traditionally offered.

6. Try to tie the new segments back to your customer database.

Your customer contact plan may be based on various types of segmentation developed by your company. Segmentation based on customer touchpoint management research may yield a closer fit with the experience customers want.

Get it right

Three years later, Pitney Bowes continues to leverage what was learned in this research. Some companies get it right. They know when to ask the right questions of their customers - in the right order. By asking your customers what is important to them, determining how you can deliver what is important to them and measuring your performance at doing so, your company can earn loyalty and move toward maximizing the ROI on your sales and customer-care efforts.