Using the Voice of the Multiple Customers to Drive the Quality of The Customer Experience

John Goodman, Vice Chairman, TARPASQ 0511 August, 2012Quest Diagnostics

*AgendaCustomer Experience is THE key initiative of the decadeTop priority for 86% of execs (Forrester)Service is only sustainable differentiatorCE if best guided by an effective Voice of the CustomerCE is in Qualitys sweet spotCreate an alliance use QAs analytical expertise coupled with Service dataJointly test solutions and implementationUnderstand context of Service, VOC and Quality within CEEstimating the economic impact of improvementIntegrated approach for enhancing the CE by gathering, analyzing and reporting feedback from multiple customersGrade your approach to managing the customer experience

*About TARPFounded in 197141 years of customer experience leadershipWhite House Complaint Studies 1970s-80s (instigated 800#s and GE Answer Center)Assisted 6 Baldrige Winners and 43 Fortune 100 CompaniesInitiated concept of word of mouth (TARP/Coca-Cola 1978 Study) and word of mouse (eCare and Click & Mortar studies 1999)Offices in Wash., D.C. and London Credited with developing the approach for quantifying the impact of quality on revenue, cost & WOM for companies like Neiman Marcus, Toyota/Lexus, USAA, Cisco Systems, Xerox, 3M, Moen, Mayo Health System, U Penn Hospital, Apple, Neustar, Kraft, AAA, Allstate, Hyundai, Marriott, AARP and Chick-Fil-A.

*Customers, will:Use againUse or donate moreTell others to useTry your other products & services

+=DOING THE RIGHT JOB RIGHT THE FIRST TIMEMAXIMUM CUSTOMER SATISFACTION, LOYALTY & WOMEFFECTIVECUSTOMERCONTACTMANAGEMENTFormula For Maximizing Customer Experience

*Firefighting Mode

Driving the Customer Experience Management: Six Big Ideas From Strategic Customer ServiceStaff doesnt cause most customer dissatisfaction sales, products, processes and customers doIt is cheaper to give great service than just good service, the revenue payoff is 10-20X the cost People are still paramount make the front line successful with flexibility and clear explanationsDeliver technology that customers will enjoy delivering psychic pizza via any channelSensibly create remarkable delightAn effective Voice of the Customer managed by a Chief Customer Officer has many kinds of data

*Recent Survey of CE & Service Strategy ExecutivesOveruse of rearview mirror:Most companies primarily use traditional survey & complaint data

Underutilization of early warning devices:Only 25% use operational data Chicago bankOnly 30% currently monitoring Social Media for VOCOnly 13% are using Speech AnalyticsProprietary 2012 TARP WorldwideSurvey Results: Data Collected by VOC (Study Method- N=160, Nov 2011)Proprietary 2012 TARP Worldwide

*Recent Survey of CE & Service Strategy ExecutivesAbout 33% produce an end-to-end view of the Customer Experience using data that is integrated into a single pictureThese 33% of companies were more than twice as likely to have significant improvements in customer satisfaction than those who didnt integrate multiple types of data Over 50%: 3 or more FTE Customer Experience AnalystsHowever, the size of the analytical staff had no correlation with the impact of the VOC!Proprietary 2012 TARP WorldwideSurvey Results: Analysis & ReportingProprietary 2012 TARP Worldwide

*Recent Survey of CE & Service Strategy ExecutivesCFO buy in to business case is criticalWhere buy-in existed, 40% of VOC processes were very effective in getting things fixed and 55% had significant increases in customer satisfactionWhere buy-in did not exist, only 8% of companies were very effective and only 23% had significant increases.Business cases can include four dimensions:LoyaltyMargin great experience and innovationWord of mouthRisk reduction (Liability, warranty, regulatory and PR)25% of companies now have Chief Customer OfficerProprietary 2012 TARP WorldwideSurvey Results: Business Case Proprietary 2012 TARP Worldwide

Cost of Poor Procurement Service?Cost of poor service includes:Increased cost within purchasing fire drills, reworkIncreased cost for internal customers of purchasingIncreased dissatisfaction of external customers causing additional internal service costHigher prices to your organization

Customer Behavior

*Employees Do Not Cause Most Customer Dissatisfaction- Fails to follow policyThe majority of customer dissatisfaction is NOT caused by employee error or attitude but by products that cause disappointment and broken processes*Poorly designed products,Processes, and marketingcreate most unmet expectations. Customer expectationsmust be set to avoid problems and surprises. *Finding based upon TARP analysis problem cause data in over 200 consumer and B2B environments.At least 30% of contacts are preventable

1%-5% Complain tomanagement or HQMost that complain (5-25%) go to front line person

75%-95% Encounter a problem but dont complain

The Tip of the Iceberg Phenomenon Proprietary 2012 TARP Worldwide

Customer Expectation: Key Factors Driving SatisfactionNo Unpleasant SurprisesIf Trouble EncounteredAccessibility not speed of answer, when customer is using product, preferred channel including social mediaTaking ownership, apology, believe customer is honestFlexibilityClear, believable explanation leaving treated fairlyReduce uncertaintyCreating an emotional connection rather than courtesyMoney is often not the best solutionTimeliness and Keeping promises are table stakes

*Problems Raise Sensitivity to Price, Hindering High Margins% Dissatisfied with price or feesPercent of customers dissatisfied with fees rises with number of problems.

Using the VOC to Drive the Quality of the Customer ExperienceProduce a unified picture of qualityQuantify the implications to create economic imperativeSuggest innovative solutions

* 1. Creating a Unified Picture of Customer ExperienceCustomer surveysCustomer contact data root cause of contactInternal operations process, quality dataEmployee and channel input second root cause Together, these elements are used to quantify the cost of inaction on customer experience issuesTake The Role Of Chief Customer Officer

Estimating Number of Customers and Market Impact From Contacts to Different Touch Points** For these channels, the consumer may have first complained elsewhere and then escalated their complaint to this channel.90% Dont Complain100 Airline customers encountering delayed baggage 3% to baggage agent0.8% to consumer affairs/ customers relations** 2% to supervisor on site** 2% to social media**0.2% to executive by e-mail** 1% to frequent flyer 800#** 4% to reservations 800# 1% airline web site1.5% Other

10% Complain

Integrating Touch Point Data (Airline Example)

Source

Problem Reports

Multiplier

Total Estimated Instances

Best Estimate # Instances

Web Site

6

100

600

Baggage Exception Data

1%

200

Reservations

14

25

350

555

Executive E-mail

2

500

1,000

Social Media

10

50

500

Survey

2.5%

500

# Customersin Month

Damage to Loyalty

Value of Customer

Monthly Revenue Impact

555

x

.25

x

$2,000

=

$277,500

* Journey, not an event Began as Quality Improvement Group Dashboards, Scorecards Reactive Process Multiple reports required prior to action Transformed into Customer Experience Quality Group One complaint can result in action Proactive ProcessFirst step was to centralize information flow

ABCs Voice of the Customer Process

Prior StateVoice 1Department1Current StateVoice 1Voice 2Voice 3Function for ResolutionCustomer QualityFunction for ResolutionClear ownershipClear CommunicationBetter Scope of issue

Strategic Warranty ManagementResearch Issue [knowledge base]CommonCustomer Experience QualityCQI Issue GenerationForm, Fit Function InvestigationsContainment/ReworkWrong/Missing PartsDocumentation Issue(MF37, Instruction Sheets)Service KitAvailabilityMarketing(Product Specifications)DESIGNSUPPLIERMANUFACTURINGASSEMBLYMARKETINGRBUWBUCommercialCSISanfordPine GroveNew BernMGFCRBUWBUCommercialCSIHome OwnerPlumberVIP PlumberBuilderWarranty grpSpecifierInstallerArchitectCSCC-CoreRBU SalesRetailrWholesalrWholesale SalesRepsField Service SalesCSCC-ProIntlCentersModularPlatformCommercialCSIInvestigationWarranty $Defective $Claims ManagtVOC IMPROVEMENTCONTACT MANAGEMENTSWMEnd UsersCustomersInside SalesCanadaChinaIndiaRoot Cause AnalysisMexicoWarrant StatementsWarrant PolicyWarrant EntitlementService Kit Mgt

*2. Get CFO Support by Quantifying Problem Impact IQuestion/problemexperienceII ContactbehaviorIIIContact handlingCustomersNo Question/problemexperience70% Question/problemexperience*30%IVMarketimpactNon-contactors75%Satisfied150%Mollified230%% Definitely Will Recommend69%39%74%42%32%Dissatisfied320%Word ofMouth**---2.91.74.45.5% Definitely Will Keep Purchasing82%42%86%42%22%% Very Satisfied with ABC81%40%82%52%35%Contactors25%* In the past 6 months** Average number of friends/colleagues told about the experience with ABC

*=====Estimate Customers and Revenue At RiskDemonstrating financial impact with the CFO, CMO and the General CounselThree strategies: Prevention, Solicitation of Complaints and Improved ResponseAt $1000 one year value per customer, $54.500,000 at risk

Quantify The Consumer Experience: Health Care

Mollified2 30%IQuestion/ ProblemExperienceII ContactBehaviorIIIContact HandlingPatientsComplainers5-30%No problemexperience60%Problemexperience 40%

Experience suggests three strategies:Prevention, Solicitation of Complaints, and ResponseIVMarketImpact% Definitely/ProbablyRecommend/repurchasefrom same organizationDissatisfied320%Satisfied1 50%90%93%30%60%50%Non-Complainers95-70%*Proprietary 2012 TARP Worldwide

Lost Doctors01 out of 40 doctors complained to start referring to competitorM% Complains to PhysicianQQ% Complain to Physician

ZZ% Switch30%MollifiedX% Complain to Physician

YY% Switch70% Do NotComplain 16,80030%Complain 7,20020% DissatisfiedImpact of Problems on Referring Physicians120,000Patientswith 20%ProblemsZZ% Switch24,000 Patients with Problems50% Satisfied No One Complains or SwitchLost Patients1684145764320$45.6M1147,7286,720$19.3MTotal of $65 Million at Risk

**1 Based on multiple problem selection2 Based on will not repurchase only

Set Priorities Based on Revenue Damage & Customers at RiskProprietary and Confidential TARP Worldwide

Overallproblem experience

Problem freq

% Wont recommend

% Customers potentially lost

(45%)

(%)1

Will not2

Meeting promised delivery dates

27

10.5

1.3

Product availability within desired time frame

23

0.0

0.0

Meeting commitments/follow through

21

30.0

2.8

Equipment/system fixed rightfirst time

20

22.2

2.0

Adequate post-sale communications

19

10.0

0.9

Returning calls

16

33.3

2.4

Minimum customers at risk

9.4%

$ 33,000$ 72,000$ 80,000$250,000====$453,000=Total Cost of Unnecessary ServiceQuantify the Cost of Poor Internal ServiceHelp Desk Environment

*Show The CMO That Negative Word Of Mouth Can Trump Marketing10%delighted70%satisfiedTelltwoTell one==2,0007,000-3,00010,000customersExample calculation of potential impact20%dissatisfiedTell six=-12,00020% dissatisfaction can counter 80% satisfaction

*Great Service Is A Word of Mouth Management Mechanism10%delighted80%satisfiedTelltwoTell one==2,0008,0004,00010,000customersExample calculation of potential impact10%dissatisfiedTell six=-6,00010% decrease in dissatisfaction results in net positive WOM

3. Suggest Innovative SolutionsWelcome packagesBest defense is a good offenceis this your first time with this product? new user portalEducation to prevent next call - GuardianNote standard mistakes on forms Enhanced home page (living list of questions) and web site map (Index to products and issues)Encourage calls before getting into troubleAggressively solicit complaintsLead horse to self service water - give first sip - HPPsychic Pizza - Confirm both before and after actionNJ NGDominos

Proactive Education

3. Suggest Innovative SolutionsWelcome packagesBest defense is a good offenceis this your first time with this product? new user portalEducation to prevent next call - GuardianNote standard mistakes on forms Enhanced home page (living list of questions) and web site map (Index to products and issues)Encourage calls before getting into troubleAggressively solicit complaintsLead horse to self service water - give first sip - HPPsychic Pizza - Confirm both before and after actionNJ NGDominos

*Real Psychic Pizza

Departments with Interest in a Great CEMarketing retention, word of mouth and word of mouseFinance margin and cost reductionBrand brand-aligned service storiesQuality reduced customer error and innovative fixesChannel partner management less channel hasslesRisk, Warranty and Insurance reduced claims and lawsuitsLegal and Regulatory better service reduces visibilityHR less problems leads to happier front line and lower turnoverProduct development/market research ideas and panels

*Ten Myths About Service 1. Always exceed customer expectations2. Answering the phone really fast is the key to success3. People always prefer talking to people4. The customer is always right5. Complaints are down, things are getting better6. Employees are the cause of most dissatisfaction7. Price and cost cutting is the key to success8. Were better than the average in our industry thats great!9. Were at 90% satisfaction lets declare victory!10. We measure Net Promoter so were done!

*Grade 1-10, if less than 75, you are wasting 15%+ of your service budgetPractical Exercise: Evaluate Your Experience System

Grade

Proactively educate to prevent problems

Track problem and non-complaint rates

Make the front line successful

Aggressively solicit complaints

Quantify problem impact on revenue and WOM

Set quality priorities based on revenue not cost

Develop a unified VOC describing experience

Use technology to deliver psychic pizza

Implement cheap delighters

Continuously update and communicate

Total _________

SummaryCE is a huge opportunity for QualityCreate a unified VOC to identify the full range of opportunities with payoff and sell to other departmentsUnderstand the full range of root causes and prevent unpleasant surprisesQuantify the revenue and word of mouth impact overall and by granular issue to create the economic imperativePrevent workload by proactively educating, connect, explain and deliver psychic pizza Take control of the VOC and then become the Chief Customer OfficerOutlined in detail in Strategic Customer Service published by AMACOMFor care package of articles: jgoodman@tarp.com or 703-284-9253

***7*50This graphic portrays the overall client experience. Read the chart from the left, walking the audience first through problem experience, then complaining rate then outcome of complaining. Define the three outcomes, satisfied, mollified, and dissatisfied. For this chart, satisfied is completely satisfied with the action taken to resolve a problem.

Mollified is not completely satisfied but the response is acceptable or not completely satisfied but some action was taken. This is a so-so reply.The bottom category is dissatisfied and dissatisfied, no action taken on the complaint.Point out the resulting loyalties on the right hand side. No problem is the highest at 90%.Satisfied complainants are also 90% loyal. In some environments, their loyalty is actually higher than those with no problem but research in this industry does not show that possibly because clients have to be persistent to get things fixed rather than one call and resolution is accomplished. Also point out that mollified patients have 30% lower loyalty than satisfied complainants, meaning that for every three clients who are mollified, one who will likely not buy again.Also point out that non-complainants are actually more loyal than mollified complainants. Therefore, if they complain you must satisfy them if you are to get a return on your complaint handling investment. The good news is that it is not that hard to satisfy the client.*50*32*50*

Ask the group which is the weakest functions.

Stress that ServiceMaster can help in those areas and that one or two customers will pay for the whole program.