35 CUSTOMERS.pdf

7/29/2019 35 CUSTOMERS.pdf

http://slidepdf.com/reader/full/35-customerspdf 1/5

BY ROB MARKEY, FRED REICHHELD,

AND ANDREAS DULLWEBER

Closing theCustomerFeedback

LoopII'

I If

In a resource-challenged economy,

empower your frontline employees

to respond fast.



a transaction to his account - grabs her

attention. The client has indicated that

he'swilling to discussthe issue in a follow-

up call, so Pasquale makes a note to try

to reach him that day. Surprising as it

may seem, she usually looks forward to

such calls.They giveher a chance to findout what's on customers' minds and solve

their problems - and potentially turncritics into fans.

Every day, managers at each ofSchwab's 306 branch offices and fivecall centers conduct a similar drill. It's

an integral part of a new focus on di-rect customer feedback that the firm's

founder, Charles Schwab, credits with

turning around the company. When hecame out of retirement to take its helm

in 2004, the business was struggling."We had lost our connection with our cli-

ents - and that had to change;' Schwabconfessed to shareholders in the annual

report. The new customer feedback sys-

tem has helped reestablish that connec-

tion. In 2008, the firm saw its revenues

increase by 11%and the scores that cus-

IDEAIN BRIEF

.It's never been more impor-tant to keep the customers

you already have - it's much

cheaper than acquiring newones. But elaborate customer

research may be beyond this

year's budget.

. Many companies have suc-

ceeded at retaining customers

by asking them for simple

feedback - and then empower-

ing frontline employees to act

swiftly on that feedback.

. European manufacturer

Grohe, for example, turnedaround a decline in market

share and used its sales force

more effectively after imple-

menting a simple feedback

loop from the distributors whosold the company's products.

out to spend time in the field can gener-

ate fresh insights, but few managementteams sustain such efforts - and even if

they do, they often struggle to convert

of the customer experience, which they

draw upon to make process and policy

refinements.

The strongest feedback loops domore

than just connect customers, the front

line, and a few decision makers in man-

agement, however; they keep the cus-tomer front and center across the entire

organization. A number of tactics, such

as hiring "mystery shoppers" to test cus-

tomer service or arranging periodic fo-rums between employees and customers,

help strengthen this organization-wide

focus. One approach that we believe

works well across a range of industries

is the Net Promoter Score (NPS), which

one of the authors of this article, Fred

Reichheld, created seven years ago.

NPS immediately categorizes all cus-tomers into one of three groups - pro-

moters, passives, and detractors - allow-

ing employees throughout a company to

see right away whether a customer ex-

perience was a successor a failure - and

why.NPS isgenerated by asking custom-

ers a single question, "How likely would



ing it from 0 to 6 are detractors. NPS is

the percentage of promoters minus the

percentage of detractors. Customers arethen asked to describe why they would

be likely or unlikely to recommend the

company. The insights gathered from

their answers enable employees to

quickly identify issues that create de-

tractors - and the actions required to ad-

dress them. (For more on NPS, see"The

One Number You Need to Grow;' HBR

December 2003.)

Gathering Feedbackon the Front Line

Saythat thousands oftransactions occur

daily between customers and frontline

employees at your company. Each is an

opportunity to create a new promoter.

But which customer experiences matter

the most? Wehave learned that the most

important interactions are "moments of

truth;' those relatively few points of con-

tact that hold the greatest potential to

delight - or alienate - an organization's

customers. As they mine the steady

flow of customer feedback, companies

Eachtransaction is an opportunityto

create a new promoter.Butwhich



CustomersClosing the Customer Feedhack Loop

claims facility, and call center maintain

a "compliment database;' where theyregister feedback that praises frontline

employees by name. Individual employ-

ees' successes are celebrated at regular

office "town hall" meetings hosted by

a senior Allianz executive.

Managing Change Through

Customer Feedback

For many companies, the route to the

end customer is circuitous. They sell

their products to distributors, retail-

ers, and other intermediaries. Frontline

sales reps typically have little incentive

or ability to reach beyond their imme-

diate customer and connect with the

people who end up choosing or using

the products.

That was the situation that Grohe, a

European manufacturer of premium

kitchen and bathroom fixtures, found

itself in. Grohe sells its products in 130

countries through more than 20 divisions,

to customers like home-improvement

chains, hardware stores, and building

GiveCustomersaVoice

inRunningYourBusiness

Many companies have discov-

ered that closed-loop customer

feedback systems can energize their

frontline workers. To inspire customer-

centered learning throughout an orga-

nization, however, you also need feed-

back loops in the executive suite and

the middle ranks. There, customer input

can influence decisions on everything

from where the company will compete

to product development, pricing, poli-

cies, and processes.

The top-level strategy loop.

Direct input from customers can help

make strategies coherent. Allianz, a

Munich-based financial services firm,

uses Net Promoter Scores to bench-

mark the strengths and weaknesses

of its major business units around the

world. Annual NPS surveys measure

how each operating enterprise (OE)

Integration into the learning loop

with customers can help functional

managers avoid the wrong trade-offs.

For instance, instead of trying to hit Six

Sigma quality levels at every touch-

point - which can be prohibitively ex-

pensive - companies can learn to focus

on the few that really build or destroy

loyalty.

For American Express, one of those

touch points was the replacement of lost

or stolen charge cards. While combing

through Net Promoter Scores and cus-

tomer transactions, company analysts

saw that initial requests for card replace-

ments went unresolved at about twice

the rate of other call center requests.

Even more alarming, the analysts

discovered that the customers request-

ing replacements were some of the

company's biggest spenders. Follow-up



easeof installation, dependability - that

were Grohe's competitive advantages.Grohe quickly launched programs

to address these shortcomings. Sales

reps began sponsoring workshops in

distributors' showrooms to teach con-

tractors how easy the products were to

install. They provided new floor and win-

dow displays to showcase the products'

decorative appeal. And they recruited

a select group of high-volume distribu-

tors into an elite "Grohe Club," offering

incentives and extra sales support. To

close the feedback loop and determine

whether the techniques were boosting

customer loyalty and sales, Grohe con-

ducted regular NPS surveys with the dis-

tributors. In the year after it launched

the new program, Grohe saw its NPS

climb more than 20 percentage points.

The company also uses NPS in con-

trolled experiments to field-test ideas

before rolling them out systemwide. For

example, in one of its markets, the com-

pany began tracking how often sales

reps visited their customers and what

effect the number of visits had on NPS.

It found that scores spiked at three visits

and began to fall off with more frequent

contact. By cutting back on the unpro-ductive extra calls in most of its sales

territories, Grohe freed up an estimated

25%of its selling capacity.

At companies where strong customer

feedback systems take hold, business-

unit leaders and frontline employees

start to own customer loyalty the same

way they own their targets for revenue,

profits, and market share. Indeed, in-

creasing positive customer feedback

and meeting conventional financial ob-

jectives are becoming one and the same

goal. Analysts at Grohe, for instance,

have calculated that a 10%improvementin NPS correlates with a six- to seven-

percentage point increase in revenue

growth.

As employees at Grohe, Schwab, Alli-

anz, and other companies we've worked

with have seen, you can't fix problems

you don't know you have. And unlessyou keep the customers you already have

coming back for more and recommend-

ing your company to their friends and

colleagues, it's hard to grow a business. \J

RobMarkey ([email protected])

is apartner in the New Yorkoffice of

Bain & Company and leader of thefirm's

global Customer Strategy and Marketing

Practice. FredReichheld (fred.reichheld

@bain.com) is a Bain Fellow and a lead-

ing authority on customer loyalty. He is

the author of The Ultimate Question:

Driving Good Profits and True Growth

(Harvard Business Press, 2006). Andreas

Dullweber (andreas.dullweber@bain.

com) is a Bain & Company partner

based in Munich, where he leads the

firm's European Customer Strategy and

Marketing Practice.

~

Reprint R0912C

Toorder, see page 131.

Documents

35 CUSTOMERS.pdf