Customer Service Reader

What is strategy?

Excerpts from What is Strategy?
Michael E Porter in Harvard Business Review

A company can outperform rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at a lower cost, or do both. The arithmetic of superior profitability then follows: delivering greater value allows a company to charge higher average unit prices; greater efficiency results in lower average unit costs.

• Ultimately, all differences between companies in cost or price derive from the hundreds of activities required to create, produce, sell, and deliver their products or services, such as calling on customers, assembling final products, and training employees.
• Cost is generated by performing activities, and cost advantage arises from performing particular activities more efficiently than competitors.
• Similarly, differentiation arises from both the choice of activities and how they are performed. Activities, then, are the basic units of competitive advantage. Overall advantage or disadvantage results from all a company's activities, not only a few.
• Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.
• Strategy is making trade-offs in competing. The essence of strategy is choosing what not to do. Without trade-offs, there would be no need for choice and thus no need for strategy.
• Strategy is creating fit among a company's activities. The success of a strategy depends on doing many things well - not just a few - and integrating among them. If there is no fit among activities, there is no distinctive strategy and little sustainability. Management reverts to the simpler task of overseeing independent functions, and operational effectiveness determines an organization's relative performance.

Fit and Sustainability

Competitive advantage grows out of the entire system of activities. The fit among activities substantially reduces cost or increases differentiation. Thus in competitive companies it can be misleading to explain success by specifying individual strengths, core competencies, or critical resources. It is more useful to think in terms of themes that pervade many activities, such as low cost, a particular notion of customer service, or a particular conception of the value delivered. These themes are embodied in nests of tightly linked activities.

• Strategic fit among many activities is fundamental not only to competitive advantage but also to the sustainability of that advantage. It is harder for a rival to match an array of interlocked activities than it is merely to imitate a particular sales-force approach, match a process technology, or replicate a set of product features. Positions built on systems of activities are far more sustainable than those built on individual activities.
• Consider this simple exercise. The probability that competitors can match any activity is often less than one. The probabilities then quickly compound to make matching the entire system highly unlikely (.9x.9= .81; .9x.9x.9x.9= .66, and so on).

The Role of Leadership

• The challenge of developing or reestablishing a clear strategy is often primarily an organizational one and depends on leadership. With so many forces at work against making choices and tradeoffs in organizations, a clear intellectual framework to guide strategy is a necessary counterweight.
• In many companies, leadership has degenerated into orchestrating operational improvements and making deals. But the leader's role is broader and far more important: General management is more than the stewardship of individual functions. Its core is strategy: defining and communicating the company's unique position, making trade-offs, and forging fit among activities. The leader must provide the discipline to decide which industry changes and customer needs the company will respond to, while avoiding organizational distractions and maintaining the company's distinctiveness.

Remembering World-Class Courtesy

In February 1998, the National Partnership for Reinventing Government released its report on Best Practices in "World-class courtesy". Long since consigned to the dustbins of bureaucracy, the report (prepared with the cooperation of USAA, Nordstrom, and Ritz-Carlton, among others) deserves to be exhumed. We paid for it, we may as well use it.

Some key findings:

Each of the organizations studied exhibited these characteristics

• The organization's cultural climate reflects a commitment to meeting and exceeding customer expectations.
• Senior leaders demonstrate by example the organization's commitment to exceptional courtesy.
• Employees are empowered to fully meet the needs of their customers.
• Courtesy is practiced by everyone throughout the entire organization.
• Specific and ongoing training in courtesy is provided.
• Formal and informal screening techniques are used to hire employees with exceptional skills in courtesy.
• The organization establishes systems to measure the value of its services to customers.
• Services are provided seamlessly from the customer's perspective.
• There is zero tolerance for discourteous service.
• All the organizations found that courtesy improves customer loyalty.

Courtesy & Behavior

Courtesy is expressed as a wide range of respectful behaviors and positive attitudes. Personal characteristics and behaviors that were repeatedly expressed by our partners as essential elements of courteous behavior are:

• a willingness to discover opportunities to exceed the customer's expectations,
• sincerity,
• a friendly smile (even over the phone),
• using the person's last name (unless the customer indicates otherwise),
• a neat appearance,
• proper use of the language,
• exceptional listening skills (attentiveness),
• a relaxed and natural tone of voice,
• appropriate eye contact,
• clear communication at the customer's comprehension level, and
• knowledge about the product or service.

Quick tips for improving courtesy

• Be flexible. People's expectations regarding courtesy vary. Learn to take your lead from your customer. Quiet, reserved people tend to appreciate a more reserved and dignified sort of service. Loud, spirited people often like to know that the person they are talking to is "getting it." Use good judgment always, but be ready to stretch a little to make your style better match your customer's expectations.
• Take some risks to delight and surprise the customer. Consider the chef who, upon realizing he sent a dinner to a table with the meat slightly overcooked, immediately went out to the table, sat down, took a bite from the overcooked meat and said, as the surprised couple looked on, "Hmm...I thought so, a bit overcooked. Please forgive me. The next one will be perfect and on me!"
• Practice servant-leadership. Develop a passion for service and then put that passion to work in whatever position you now hold. If you are already a recognized leader in your organization, then serve as a mentor for others who wish to become servant-leaders.
• Smile your best smile. Customers appreciate a pleasant atmosphere. A smile always helps. Use your smile frequently when dealing with the public. You will come to enjoy the many benefits it will bring you and your customers.
• Listen as if you mean it. The greatest compliment to another person is listening to them. Really listening. You have to listen as if you mean it. Sit up, take a few notes, ask clarifying questions, show some reaction to what is being said.
• Call people back. If you must use voice mail, update your message daily, check it at least twice a day, and get back to people within one day at the latest. Returning calls has a direct relationship to dependability and dependability is the cornerstone of good customer service.
• Demonstrate phone courtesy. The tone and pitch of your voice can assure the caller that you are sincere, friendly­and that you are listening. Create a vision for your caller that you are responsible and dedicated to resolving his or her issue.
• Develop a team focus. Team work is definitely needed when it comes to improving courtesy. Demonstrate your team commitment on a daily basis.

Developing Strategies For Implementing World-Class Courtesy

The following strategies are a composite of the ideas worked out by the team members for implementing world-class courtesy in their own agencies. Depending on your individual circumstances, these suggestions will hopefully serve to stimulate interesting and practical ideas.

Remember: Your journey toward world-class courtesy begins from where you are, not from where you wish you were. The important thing is to get started.

1. Establish credibility. Unless you are the CEO in your organization, you may want to first establish some credibility on this topic. Develop a good knowledge base of what world-class courtesy is, or could be, in your organization. You can start by reading this study thoroughly, marking those sections that look interesting , and taking some notes as you go along. You may also want to read several of the articles listed in the selected bibliography.
2. Determine your organization's attitude toward courtesy. Determine what your organization's current mission, vision, strategic plan, or value statements say about courtesy. With the issuance of the President's Executive Order 12862 on setting customer service standards, the enactment of the Government Performance Results Act of the 1995, and the National Performance Review's publication of customer service standards, you probably have a good basis for assessing your organization's current level of and attitudes toward customer service.
3. Take a "snapshot". Determine where in your organization might be the best place to take a "snapshot" of how courtesy is currently being practiced. Choose an office or section that already has an interest in knowing more about its customer service capabilities. If its not obvious at first where to start, arrange a meeting with an appropriate official or committee to which you can provide a short briefing on the benefits of looking at organizational behaviors leading to world-class courtesy.
4. Publicize, promote, and popularize. Through information, actions, and tools, help your organization journey toward world-class courtesy.

The report also includes an extensive bibliography.

The revolution begins with you

When I started this blog, one of my concerns was that the customer service literature mainly tends to treat those of us who actually provide the service as objects to be manipulated (see "That's a good doggie"). I argue that for any customer service program to succeed, providers must turn that bias on its head. We must exercise leadership, and take personal responsibility for our success. While trying to develop that theme, I recalled this article by Peter Drucker, who died in November 2005, after having devoted 70 of his 95 years to the hope that he could make us better people, as well as better managers.

Excerpts from Managing Oneself
Peter Drucker, in Harvard Business Review

We live in an age of unprecedented opportunity: If you've got ambition and smarts, you can rise to the top of your chosen  profession, regardless of where you started out. But with opportunity comes responsibility. It's up to you to carve out your place, to know when to change course, and to keep yourself engaged and productive.

To do those things well, you'll need to cultivate a deep understanding of yourself -- not only what your strengths and weaknesses are but also how you learn, how you work with others, what your values are, and where you can make the greatest contribution. Because only when you operate from strengths can you achieve true excellence.

What Are My Strengths?

• A person can perform only from strength.
• We need to know our strengths in order to know where we belong.
• Most people think they know what they are good at. They are usually wrong.
• The only way to discover your strengths is through feedback analysis. Whenever you make a key decision or take a key action, write down what you expect will happen. Nine or 12 months later, compare the actual results with your expectations.
• Several implications for action follow from feedback analysis.
• First and foremost, concentrate on your strengths. Put yourself where your strengths can produce results.
• Second, work on improving your strengths.
• Third, discover where your intellectual arrogance is causing disabling ignorance and overcome it. Far too many people -- especially people with great expertise in one area -- are contemptuous of knowledge in other areas or believe that being bright is a substitute for knowledge.
• It is equally essential to remedy your bad habits -- the things you do or fail to do that inhibit your effectiveness and performance.
• One should waste as little effort as possible on improving areas of low competence. It takes far more energy and work to improve from incompetence to mediocrity than it takes to improve from first-rate performance to excellence.

How Do I Perform?

• Amazingly few people know how they get things done. Indeed, most of us do not even know that different people work and perform differently. Too many people work in ways that are not their ways, and that almost guarantees nonperformance.
• Like one's strengths, how one performs is unique. It is a matter of personality.
• Just as people achieve results by doing what they are good at, they also achieve results by working in ways that they best perform. A few common personality traits usually determine how a person performs.
• Am I a reader or a listener? What’s the best way for you to get information? The first thing to know is whether you are a reader or a listener. Far too few people even know that there are readers and listeners and that people are rarely both. Even fewer know which of the two they themselves are.
• How do I learn? There are people who learn by writing. Some people learn by taking copious notes. Some people learn by doing. Others learn by hearing themselves talk.
• Do I work well with people, or am I a loner? And if you do work well with people, you then must ask, In what relationship? Some people work best as subordinates. Some people work best as team members. Others work best alone.
• Do I produce results as a decision maker or as an adviser? A great many people perform best as advisers but cannot take the burden and pressure of making the decision. A good many other people, by contrast, need an adviser to force themselves to think; then they can make decisions and act on them with speed, self-confidence, and courage.
• Do I perform well under stress, or do I need a highly structured and predictable environment?
• Do I work best in a big organization or a small one?.
• Do not try to change yourself -- you are unlikely to succeed. But work hard to improve the way you perform. And try not to take on work you cannot perform or will only perform poorly.

What Are My Values?

• To be able to manage yourself, you finally have to ask, What are my values?
• Organizations, like people, have values. To be effective in an organization, a person's values must be compatible with the organization's values. They do not need to be the same, but they must be close enough to coexist. Otherwise, the person will not only be frustrated but also will not produce results.
• A person's strengths and the way that person performs rarely conflict; the two are complementary. But there is sometimes a conflict between a person's values and his or her strengths. What one does well--even very well and successfully -- may not fit with one's value system. In that case, the work may not appear to be worth devoting one's life to.
• Values are and should be the ultimate test.

Where Do I Belong?

• Most people, especially highly gifted people, do not really know where they belong until they are well past their mid-twenties. By that time, however, they should know the answers to the three questions: What are my strengths? How do I perform? and, What are my values? And then they can and should decide where they belong.
• Or rather, they should be able to decide where they do not belong. The person who has learned that he or she does not perform well in a big organization should have learned to say no to a position in one. The person who has learned that he or she is not a decision maker should have learned to say no to a decision-making assignment.
• Equally important, knowing the answer to these questions enables a person to say to an opportunity, an offer, or an assignment, "Yes, I will do that. But this is the way I should be doing it. This is the way it should be structured. This is the way the relationships should be. These are the kind of results you should expect from me, and in this time frame, because this is who I am.”
• Successful careers are not planned. They develop when people are prepared for opportunities because they know their strengths, their method of work, and their values. Knowing where one belongs can transform an ordinary person -- hardworking and competent but otherwise mediocre -- into an outstanding performer.

What Should I Contribute?

• Knowledge workers have to learn to ask a question that has not been asked before: What should my contribution be? To answer it, they must address three distinct elements: What does the situation require? Given my strengths, my way of performing, and my values, how can I make the greatest contribution to what needs to be done? And finally, What results have to be achieved to make a difference?
• It is rarely possible -- or even particularly fruitful -- to look too far ahead. A plan can usually cover no more than 18 months and still be reasonably clear and specific. So the question in most cases should be, Where and how can I achieve results that will make a difference within the next year and a half? The answer must balance several things.
• First, the results should be hard to achieve -- they should require "stretching," to use the current buzzword. But also, they should be within reach. To aim at results that cannot be achieved -- or that can be only under the most unlikely circumstances -- is not being ambitious; it is being foolish.
• Second, the results should be meaningful. They should make a difference.
• Finally, results should be visible and, if at all possible, measurable.
• From this will come a course of action: what to do, where and how to start, and what goals and deadlines to set.

Responsibility for Relationships

• Very few people work by themselves and achieve results by themselves. Most people work with others and are effective with other people. Managing yourself requires taking responsibility for relationships. This has two parts.
• The first is to accept the fact that other people are as much individuals as you yourself are. This means that they too have their strengths; they too have their ways of getting things done; they too have their values. To be effective, therefore, you have to know the strengths, the performance modes, and the values of your coworkers.
• Bosses are individuals and are entitled to do their work in the way they do it best. It is incumbent on the people who work with them to observe them, to find out how they work, and to adapt themselves to what makes their bosses most effective. This, in fact, is the secret of "managing" the boss.
• The same holds true for all your coworkers. Each works his or her way, not your way. And each is entitled to work in his or her way. What matters is whether they perform and what their values are. As for how they perform -- each is likely to do it differently. The first secret of effectiveness is to understand the people you work with and depend on so that you can make use of their strengths, their ways of working, and their values.
• The second part of relationship responsibility is taking responsibility for communication. Most conflicts arise from the fact that people do not know what other people are doing and how they do their work, or what contribution the other people are concentrating on and what results they expect. And the reason they do not know is that they have not asked and therefore have not been told.
• Organizations are no longer built on force but on trust. The existence of trust between people does not necessarily mean that they like one another. It means that they understand one another. Taking responsibility for relationships is therefore an absolute necessity. It is a duty.

Conclusion

The challenges of managing oneself may seem obvious, if not elementary. And the answers may seem self-evident to the point of appearing naïve. But managing oneself requires new and unprecedented things from the individual, and especially from the knowledge worker. In effect, managing oneself demands that each knowledge worker think and behave like a chief executive officer. Further, the shift from manual workers who do as they are told to knowledge workers who have to manage themselves, profoundly challenges social structure. Every existing society, even the most individualistic one, takes two things for granted, if only subconsciously: that organizations outlive workers, and that most people stay put.

But today the opposite is true. Knowledge workers outlive organizations, and they are mobile. The need to manage oneself is therefore creating a revolution in human affairs.

CS in Wikipedia

I've been asked to improve the Wikipedia entry on Customer Service. So I don't make a mess of the encyclopedia, I'm developing the draft in this blog, will post it there when I'm done.

Notes are in the article's discussion page: (1) Proposed outline, (2) References.

Proposed Outline

• Introduction
  • Definition
  • History
  • Impact of customer service
    • On organizations
    • On providers
    • On society
• Focus on the Customer
  • What customers want
  • Service maps, value chains, moments of truth
  • Complaints & recovery
  • Dysfunctional customers
  • Customer surveys
• Standards & competencies
  • Standards of customer service
  • Customer service competencies
• Policies, Systems, Processes, and Structures
  • Hiring
  • Training
  • Recognition
  • Leadership
  • Processes that affect customer service
• References (Books and Papers)
• External links (non-commercial only), description

This turned out not to be such a bright idea. I'm organizing the material in my Squidoo lens instead.

Dysfunctional customers

Customer service initiatives should be grounded in integrity and reality. One aspect of that reality is that in fact customers are not always right. It undermines one’s credibility to contend that they are. This paper is an important contribution to the understanding that there are dysfunctional customers, and that their behaviors have serious consequences.

While I agree with most of the propositions in this paper, I have one fundamental disagreement. In my long experience at the front lines of customer service, I have found that dysfunctional customers are rare. More often than not, disruptive behaviors can be avoided by (1) providing good customer service in the first place, and (2) managing situations before they get out of hand.

I should probably note that the most egregious manifestations of dysfunctional behavior cited in this study occurred in bars.

Excerpts from The consequences of dysfunctional customer behavior
Lloyd C Harris & Kate L Reynolds in Journal of Service Research

This article addresses dysfunctional customer behavior, which refers to actions by customers who intentionally or unintentionally, overtly or covertly, act in a manner that, in some way, disrupts otherwise functional service encounters.

Classifications of dysfunctional customers

Zemke and Anderson, typology of five "customers from hell":

• abusive egocentrics
• insulting whiners
• hysterical shouters
• dictators
• freeloaders

With the objective of gaining faster, superior, or even free service, such customers use service encounters in a dysfunctional manner (at least from the perspective of service providers and other customers).

Lovelock's "jaycustomers":

• thieves
• rule breakers
• the belligerent
• vandals
• family feuders
• deadbeats

Drivers and forms of dysfunctional customer behavior

• psychological characteristics - personality traits, attitudes, the extent of moral development, aspiration fulfillment, the desire for thrill seeking, and aberrant psychological dispositions
• demographic characteristics - age, sex, education, and economic status
• social influences - socialization, norm formation, and peer pressure
• contextual factors - physical environment, types of products/services offered, level of deterrence, public image of the firm
• perceptions of a store's relative power
• customer dissatisfaction - consumer retaliation due to customer perceptions of inequalities and the need to restore equity
• combination of the interaction characteristics

Key findings of this study

• All of the customer-contact employees interviewed reported that they witnessed, or were involved in, some form of dysfunctional customer behavior on a daily basis
• 82% of customer-contact staff had either witnessed or been subjected to violent or aggressive behavior within the last calendar year
• 54% believe that their working lives were "significantly affected" by unrelenting dysfunctional customer behavior

Figure 1 is a framework of the consequences of dysfunctional customer behavior. Briefly, the framework presents three main consequences of dysfunctional customer behavior, namely, effects on (1) employees, (2) customers, and (3) the organization.

Effects on employees

Long-Term Psychological Consequences

• sustained feelings of degradation, humiliation, or subjugation - feelings of worthlessness and humiliation long after specific events
• stress disorders - caused by extreme dysfunctional customer behavior that years later continued to result in memory flashbacks, anxiety, and sleeplessness

Short-Term Emotional Effects

93% of employees interviewed indicated that dysfunctional customer behavior negatively affected their emotional state.

• short-term emotional distress, such as fear, stress, frustration, anger, hatred, and irritation
• feigned emotional display - what has become known as emotional labor

Behavioral Consequences

• low levels of motivation and morale among customer-contact employees.
• high levels of esprit de corps and effective customer-contact employee teamwork
• increased desire of customer-contact employees to retaliate, to take revenge, or to sabotage the efforts of dysfunctional customers

Physical Consequences

• violence toward an employee
• damage of employees' personal property

78% of informants reported that they had witnessed or encountered more "restrained" forms of physical violence by customers.

Consequences for customers

Domino effect

• collective expression of sympathy toward the frontline employee who has been a victim of "unreasonable" customer behavior or, less frequently
• the contagion of dysfunctional customer behavior by witnesses of the customers' behavior, particularly vociferous or illegitimate complaining

Spoilt Consumption Effects

Exposure to acute or sustained dysfunctional customer behavior increases the likelihood that the consumption experience of proximate customers will be negatively affected.

Organizational consequences

Indirect Financial Costs

• increased workloads for members of staff who are required to deal with dysfunctional customer behavior, thus reducing employee time to serve functional customers effectively
• negative financial implications for personnel in terms of staff retention, recruitment, induction, and training

46% of informants claim that they had no long-term career plans in their employing organization or even the broader hospitality industry due to frequent exposure to such behavior.

Direct Financial Costs

Acute or sustained dysfunctional customer behavior increases the likelihood of direct financial costs, in terms of expenses incurred in restoring damaged property, additional legal costs, increased insurance premiums, property loss, costs incurred in recompensing customers, and the costs accrued through "illegitimate" claims by dysfunctional customers.

Discussions and Implications

• The current study illustrates the pervasiveness of dysfunctional customer behavior and, in this regard, undermines the veracity of the notion of consumer sovereignty in that dysfunctional customer behavior is consistently found.
• Not only are customers "not always right," in fact, they can frequently lie, cheat, act abusively, and even physically or psychologically harm customer-contact employees.
• The mantra "customer perception is reality" is too frequently mentioned to the detriment of the accuracy, legitimacy, validity, and communality of such a reality. From the perspective of customer-contact employees, many customers' views of reality are not simply incorrect but, all too frequently, personally damaging and in some cases intentionally biased.
• In many organizations, there appears to be dichotomous realities for those serving and in daily contact with customers and those who generate and enforce customer-related policies. Thus, the espoused cultural beliefs and prescribed procedures enforced centrally appear somewhat divorced from the perceived reality of the customer interface.
• This study also provides another illustration of the need of customer service encounters to be, in the broader sense of the term, "managed." That is, these results confirm and further emphasize the need for service organizations to ensure that every aspect and moment of service encounters is considered, organized, carefully staged, controlled, and supervised by the firm.  The contribution of the current study is to highlight the need for the differentiated management of functional and dysfunctional customers.
• The emphasis placed on improving service standards in the 1990s and the earlier stress on customer focus in the 1980s have overemphasized the view of customer sovereignty and underplayed the dysfunctional, the deviant, and the dark side of service.

Party pooper

If you'd ever had to fall in line at the DMV, you may have thought "even Costco has shorter lines than this", and entertained dreams of privatization.

Harvard University's Jane Fountain may wake you up. In Paradoxes of Public Sector Customer Service, she concludes that increasing customer service in government may actually lead to poorer government service.

• The use of market-based perspectives may be dangerous when these substantially recast the role of the state and the relationship between the state and its citizens.
• Service models may produce improvements, but they obscure political outcomes that render some customers much less powerful than others.
• Without political change, these "market segments"--the poor and the politically weak--will continue to be poorly served.
• The growing incursion of market metaphors into political life may further the already disturbing erosion of civic responsibility and civic engagement.

Well thanks a lot, Jolly Jane.

Keep the survey simple

Excerpts from The One Number You Need to Grow
Frederick F Reichheld in Harvard Business Review

• One of the main takeaways from our research is that companies can keep customer surveys simple. The most basic surveys - employing the right questions - can allow companies to report timely data that are easy to act on. Too many of today's satisfaction survey processes yield complex information that's months out of date by the time it reaches frontline managers. Good luck to the branch manager who tries to help an employee interpret a score resulting from a complex weighting algorithm based on feedback from anonymous customers, many of whom were surveyed before the employee had his current job.
• Contrast that scenario with one in which a manager presents employees with numbers from the previous week (or day) showing the percentages (and names) of a branch office's customers who are promoters, passively satisfied, and detractors - and then issues the managerial charge, "We need more promoters and fewer detractors in order to grow" The goal is clear-cut, actionable, and motivating.
• In short, a customer feedback program should be viewed not as "market research" but as an operating management tool. Consider Enterprise Rent-A-Car. The first step in the development of Enterprise's current system was to devise a way to track loyalty by measuring service quality from the customer's perspective. The initial effort yielded a long, unwieldy research questionnaire, one that included the pet questions of everyone involved in drafting the survey. It only captured average service quality on a regional basis - interesting, but useless, since managers needed to see scores for each individual branch to establish clear accountability. Over time, the sample was expanded to provide this information. And the number of questions on the survey was sharply reduced; this simplified the collating of answers and allowed the company to post monthly branch-level results almost as soon as they were collected.
• The company then began examining the relationships between customer responses and actual purchases and referrals. This is when Enterprise learned the value of enthusiasts. Customers who gave the highest rating to their rental experience were three times more likely to rent again than those who gave Enterprise the second-highest grade. When a customer reported a neutral or negative experience, marking him a potential detractor, the interviewer requested permission to immediately forward this information to the branch manager, who was trained how to apologize, identify the root cause of the problem, and resolve it.
• Despite the system's success, CEO Andy Taylor felt something was missing. Branch scores were not improving quickly enough, and a big gap continued to separate the worst-and best-performing regions. Taylor's assessment: "We needed a greater a sense of urgency." So the management team decided that field managers would not be eligible for promotion unless their branch or group of branches matched or exceeded the company's average scores. That's a pretty radical idea when you think about it: giving customers, in effect, veto power over managerial pay raises and promotions.
• The rigorous implementation of this simple customer feedback system had a clear impact on business. As the survey scores rose, so did Enterprise's growth relative to its competition. Taylor cites the linking of customer feedback to employee rewards as one of the most important reasons that Enterprise has continued to grow, even as the business became bigger and, arguably, more mature. (For more on Enterprise's customer survey program, see "Driving Customer Satisfaction" HBR July 2002.)

Who benefits from complexity?

• If collecting and applying customer feedback is this simple, why don't companies already do it this way? I don't want to be too cynical, but perhaps the research firms that administer current customer surveys know there is very little profit margin for them in something as bare-bones as this. Complex loyalty indexes, based on a dozen or more proprietary questions and weighted with a black-box scaling function, simply generate more business for survey firms.
• The market research firms have an even deeper fear. With the advent of e-mail and analytical software, leading-edge companies can now bypass the research firms entirely, cutting costs and improving the quality and timeliness of feedback. These new tools enable companies to gather customer feedback and report results in real time, funneling it directly to frontline employees and managers. This can also threaten in-house market research departments, which typically have built their power base through controlling and interpreting customer survey data. Marketing departments understandably focus surveys on the areas they can control, such as brand image, pricing, and product features. But a customer's willingness to recommend to a friend results from how well the customer is treated by frontline employees, which in turn is determined by all the functional areas that contribute to a customer's experience.
• The path to sustainable, profitable growth begins with creating more promoters and fewer detractors and making your net-promoter number transparent throughout your organization. This number is the one number you need to grow. It's that simple and that profound.

See also:
A Survey of Surveys
Ultimate notes
Reichheld on the war on customers, on Loyalty, and on "The Ultimate Question"
Fred Reichheld's net promoter slide show. A 3-minute presentation.

Wrong yardsticks

Excerpts from The One Number You Need to Grow
Frederick F Reichheld in Harvard Business Review

• Because loyalty is so important to profitable growth, measuring and managing it make good sense. Unfortunately, existing approaches haven't proved very effective. Not only does their complexity make them practically useless to line managers, but they also often yield flawed results.
• The best companies have tended to focus on customer retention rates, but that measurement is merely the best of a mediocre lot. Retention rates provide, in many industries, a valuable link to profitability, but their relationship to growth is tenuous. Furthermore, retention rates are a poor indication of customer loyalty in situations where customers are held hostage by high switching costs or other barriers, or where customers naturally outgrow a product because of their aging, increased income, or other factors.
• An even less reliable means of gauging loyalty is through conventional customer-satisfaction measures. Our research indicates that satisfaction lacks a consistently demonstrable connection to actual customer behavior and growth. This finding is borne out by the short shift that investors give to such reports as the American Consumer Satisfaction Index. The ACSI, published quarterly in the Wall Street Journal, reflects the customer satisfaction ratings of some 200 U.S. companies. In general, it is difficult to discern a strong correlation between high customer satisfaction scores and outstanding sales growth. Indeed, in some cases, there is an inverse relationship; at Kmart, for example, a significant increase in the company's ACSI rating was accompanied by a sharp decrease in sales as it slid into bankruptcy.
• Even the most sophisticated satisfaction measurement systems have serious flaws. I saw this first-hand at one of the Big Three car manufacturers. The marketing executive at the company wanted to understand why, after the firm had spent millions of dollars on customer satisfaction surveys, satisfaction ratings for individual dealers did not relate very closely to dealer profits or growth. When I interviewed dealers, they agreed that customer satisfaction seemed like a reasonable goal. But they also pointed out that other factors were far more important to their profits and growth, such as keeping pressure on salespeople to close a high percentage of leads, filling showrooms with prospects through aggressive advertising, and charging customers the highest possible price for a car.
• In most cases, dealers told me, the satisfaction survey is a charade that they play along with to remain in the good graces of the manufacturer and to ensure generous allocations of the hottest-selling models. The pressure they put on salespeople to boost scores often results in postsale pleading with customers to provide top ratings --even if they must offer something like free floor mats or oil changes in return. Dealers are usually complicit with salespeople in this process, a circumstance that further degrades the integrity or these scores. Indeed, some savvy customers negotiate a low price--and then offer to sell the dealer a set of top satisfaction survey ratings for another $500 off the price.

See also:
A Survey of Surveys
Ultimate notes
Reichheld on the war on customers, on Loyalty, and on "The Ultimate Question"
Fred Reichheld's net promoter slide show. A 3-minute presentation.

Customer service can kill you

Excerpts from
Emotion Regulation in the Workplace: A New Way to Conceptualize Emotional Labor
Alicia A Grandey, Department of Psychology, Pennsylvania State University
in Journal of Occupational Health Psychology

Customer Service Performance

• In the service industry, managing emotions (showing happiness and empathy, not fear or anger) is an important facet of maintaining loyal customers and repeat business.
• As a means of presenting a positive image of the organization and inducing the appropriate feelings in customers, managing emotions may result in good customer service performance.
• However, the personal effort of emotion regulation may impair cognitive performance.
• Burnout is a stress outcome typically found in employees in the helping industries.
• Several authors have mentioned the importance of emotional displays being seen as “genuine” in service settings.
• Emotional expressions that are perceived as insincere may negatively impact customer service. Emotion research has found that when people “fake” emotions, there seems to be “leakage” so that observers can detect the deception. Surface acting is negatively related to service performance.
• If employees are not showing genuine expressions, emotional labor may be dysfunctional to employees by creating a need to dissociate from self.
• Individuals generally do not like to feel "fake", because suppressing true emotions and expressing false emotions requires effort that results in stress outcomes.
• Research has linked the inhibition of emotions to a variety of physical illness, including higher blood pressure and cancer. Inability to express negative emotion is one of the strongest predictors of cancer.
• When employees really feel the way they act, it is perceived as genuine, and is positively related to customer service.
• Servers who don't feel "false," have more job satisfaction than those who fake emotions.

Autonomy

• Feeling a lack of control over events has been identified as a source of life stress, as well as job stress.
• Those who have high autonomy have lower emotional exhaustion in both high and low emotional labor-typed jobs. Job autonomy is negatively related to emotional dissonance and emotional exhaustion, and positively related to job satisfaction.

Supervisor and coworker support

• Support from coworkers and supervisors creates a positive working environment. An employee's perception that she works in a supportive climate has been found to relate to job satisfaction, lowered stress, and turnover intentions, and higher team performance.
• Those who perceive high levels of supervisor support may report high levels of emotional labor but not burnout because support acts as a buffer against the stressors.
• Support may help employees cope with the stress of service jobs. Talking to other people is a method of coping with difficult customers. Disclosure of emotional events helps individuals cope with stress and buffer against health risks. Social support in service settings helps protect individuals from stress, and is a buffer against job dissatisfaction.
• In customer service settings, where positive expressions are expected, feeling positive about the social environment may mean that less emotional labor is necessary. One may genuinely feel the emotions that are expected in a service environment if the interpersonal relationships are positive and supportive.

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Moral of the story:

For the Manager: Forcing people to serve customers is counter-productive. Instead, you should hire the right people, serve them as you would have them serve the customer, and give them the power to serve.

For the Provider: We all have to pretend some of the time. But if you have to fake it most of the time, customer service may kill you. You should probably get a less stressful job.

Satisfaction vs Delight

Excerpts from Reassessing the Foundations of Customer Delight
Adam Finn, University of Alberta in Journal of Service Research

• There is strong evidence of positive effects of customer satisfaction on repeat purchase, retention, loyalty, and profitability.
• However, the 1990s saw some questioning of the value of treating satisfying customers as a business objective. One explanation is that the rating scales that researchers commonly use to measure satisfaction do not translate linearly into desired managerial outcomes, such as repurchase and loyalty.
• Only when satisfaction scores exceed the upper threshold of a customer’s zone of tolerance does a service experience have a lasting impact by creating customer delight.
• What is really important to intentions and future behavior is not satisfaction itself but the emotional response to the experience.
• Although meeting expectations can satisfy, it is the emotional response to a surprise—whether delight or outrage—that has a real impact on customer loyalty.
• Cross-sectional consumer behavior research found that the cluster of consumers reporting the highest levels of surprise and joy were more satisfied than others.
• Customer delight is conceptualized as an emotional response, which results from surprising and positive levels of performance. As such, it could provide an explanation for the observed variation in the intentions and subsequent loyalty of customers reporting the same level of satisfaction.