What is Loyalty? And is it Dead?

Let me start by answering the second part of the question: loyalty is not dead. But the assumption that any company can earn the unwavering commitment of their customers is simply naive.

If you think that loyalty is the blind devotion of customers to purchase your goods and services, then it’s not only dead, it’s crazy. Many marriage vows include the phrase “until death does us part,” but there are still a lot of divorces. If people can’t stay loyal to their spouses for life, why would we think that they can remain loyal to a company?

So what is loyalty? That’s the key question. I’d like to throw out this simple definition:

The willingness to consider, trust, and forgive

A loyal customer is willing to consider new products and services you have to offer. A loyal customer is willing to consider you in their short list of suppliers for new purchases. A loyal customer is willing to trust your descriptions of new products. A loyal customer is willing to forgive you if you make a mistake (as long as it’s not repeated or egregious).

What more can you really ask for?!?

And if you need more convincing about the existence of loyalty, take a look at the range of loyalty levels for companies across multiple industries (data from 2012 Temkin Loyalty Ratings, 2012 Temkin Trust Ratings and 2012 Temkin Forgiveness Ratings).. There are some significant differences between loyalty leaders and laggards.

A loyal customer, however, can not be expected to purchase a product that is overly expensive, or select a service that is substandard, or put up with a consistent set of mistakes.

USAA tops the 2012 Temkin Loyalty Ratings for banking, insurance, and credit cards. Do you think it would be in that position in 2014 if the company doubled its fees and rates, cut way back on its call center training, made it difficult to file a claim, and stopped investing in mobile, which is becoming its members’ most-used channel? I don’t think so.

Loyalty is not dead, but it’s also not permanent. Companies need to constantly focus on how to keep customers loyal and not fall into the trap of relying on that loyalty.

Loyal customers are willing to consider, trust and forgive you….for now. Nothing more, nothing less. Embrace it.

The bottom line: If you want a customer’s loyalty, then you need to keep earning it

Companies Don’t Earn The Loyalty Their CX Deserves

Our report The ROI of Customer Experience shows that customer experience is highly correlated to loyalty. The research analyzed the relationship between Temkin Loyalty Ratings and Temkin Experience Ratings (TER) for 206 U.S. companies.

After analyzing the connection between these ratings, we found that some companies seem to have higher loyalty levels than they seem to deserve based on their customer experience while others have lower loyalty levels.

Using that dataset, I compared actual loyalty levels with projected loyalty levels. How? By plugging each company’s experience rating into our regression model to identify what their loyalty rating should be (normalized to their industry average) based on its TER and compared that projected rating with its actual loyalty rating. In the chart below you can see the companies with the largest positive and negative variances from the model’s projections.

The companies with loyalty levels the most above the projections are USAA, Highmark, Medicaid, credit unions, and TriCare. The companies that fall the most below the projections are T-Mobile, BMW, Bosch, AT&T, and Alamo.

Let’s examine USAA as an example. Since it has very high experience ratings compared with its industry peers, our model projects that its loyalty ratings should be at the high end of banks, credit card issuers, and insurance carriers. This analysis shows that USAA’s actual loyalty levels are higher than expected, even after factoring in its wonderful customer experience.

So what?!? There’s nothing inherently good or bad with being above or below the projected loyalty level. There’s no reason to expect companies to fall directly on their projected loyalty levels.

What’s interesting about this analysis is not what’s good or bad, but WHY are some companies so far away from the projected levels. This is where I’ll leave the data behind and offer my interpretation about WHY some companies have higher than projected loyalty while others have lower than projected loyalty:

• Product fit. CX is not the only component of customer value. Companies that have tailored their products and services to better meet customers’needs (like USAA and TriCare) have an even better loyalty level than their CX would suggest. If companies have a poor product offering, then their loyalty may be lower than projected (this may explain Sears and DHL).
• Product quality. If companies have quality problems with their offerings, then they would have lower loyalty levels than their CX deserve (this may explain AT&T, T-Mobile, and Alamo).
• Service expectations. Companies that have premium status (BMW cars and Bosch appliances) often elicit higher expectations from customers, so they don’t earn the loyalty that their CX would suggest and have to work harder.
• Trapped customers. In industries where customers have a hard time switching, a bad experience may not lead to the loyalty decline anticipated by the model; the same type of situation would occur if a company is harder to move away from than it’s competitors (this may explain Medicaid, Medicare, MSN, and EarthLink).
• Commoditization. In industries that have a lot of pricing comparisons, customers may overly focus on price and not award good customer experience with the level of loyalty that the model projects (this may explain Alamo). It can also push consumers that have poor experience to more quickly leave a company for its competitor (this may explain DHL).
• Substitutions. In sitations where customers don’t have a lot of clear alternatives, they will be more loyal to a company than the model suggests (this may explain eBay). A company that relies on self-service may be seen as easier to move from than a company that forms more personal connections with customers (this may explain E*TRADE).
• Emotionality. Sometimes customers develop a strong affinity for a brand that increases loyalty and dampens the negative effect of any poor experiences (this may explain Southwest Airlines and Apple).

These items cover three broad topics: offerings, competitive environment and customer expectations. What do you think causes companies to earn more or less loyalty than their customer experience seems to deserve?

The bottom line: CX is correlated to loyalty, but other things matter as well

2012 Temkin Forgiveness Ratings

Temkin Group has just released the 2012
Every company makes mistakes now and then, but how willing are customers to forgive the company when it happens? Forgiveness is a valuable asset that companies earn by consistently meeting customers’ needs.

We introduced the Temkin Forgiveness Ratings last year to gauge which companies are earning this important element of loyalty. The 2012 Temkin Forgiveness Ratings include 206 companies from 18 industries and is based on a survey of 10,000 U.S. consumers.

Congratulations to the top firms in this year’s ratings: USAA, Hyatt, credit unions, H.E.B., Hy-Vee, Dollar Rent A Car, Chick-fil-A, Publix, Costco, and Amazon.com. Of course, not every company enjoys such a high degree of forgiveness from their customers, especially the companies at the bottom of the 2012 ratings: Citigroup, Charter Communications, HSBC, Chrysler dealers, EarthLink, Bank of America, Comcast, Quest, and US Airways.

We also examined industry averages and found that grocery chains have earned the most forgiveness from consumers followed by retailers, appliance makers, and parcel delivery services. But consumers are not very likely to forgive mistakes by credit card issuers, Internet service providers, and TV service providers.

We examined how individual companies are rated relative to their industry peers. USAA holds the top two spots, outpacing its credit card and banking peers by more than 30 percentage points. USAA also outpaces the insurance industry by more than 20 percentage points. Credit unions, Hyatt, US Cellular, Dollar Rent A Car, Chick-fil-A, and Bright House Networks are also more than 15 percentage points above their industry averages. Five companies fall 15 or more percentage points below their industry’s average Temkin Forgiveness Ratings: Chrysler dealers, Citigroup, Travelers, Charter Communications, and RadioShack.

We also analyzed changes from the 2011 Temkin Forgiveness Ratings. The research shows that consumers are more forgiving this year than they were last year. Led by banks and insurance carriers, all 12 industries that were in both the 2011 and 2012 Temkin Forgiveness Ratings showed improvement.
Sixty-eight of the 139 companies that were in the 2011 and 2012 Temkin Forgiveness Ratings earned double-digit improvements and four companies improved by more than 25 percentage points: TD Ameritrade, Lenovo, USAA, and credit unions. Ten companies lost ground over the last year with the biggest drops coming for Citigroup, Continental Airlines, Travelers, Sears, Holiday Inn Express, and The Hartford.

Do you want to see the data? Go to the Temkin Ratings website where you can sort through all of the results for free. You can even purchase the underlying data if you want to get more access.

The bottom line: To err is possible, to earn forgiveness is divine

Report: The ROI of Customer Experience

We just published a new Temkin Group report, The ROI of Customer Experience. The report provides groundbreaking analysis of 10,000 US consumers and 3,000 UK consumers, identifying the financial benefit of improving customer experience. Here is the executive summary:

An analysis of US and UK consumers shows that customer experience is highly correlated to loyalty. Customer experience leaders have more than a 16 percentage point advantage over customer experience laggards in consumers’ willingness to buy more, their reluctance to switch business away, and their likelihood to recommend. A modest increase in customer experience can result in a gain over three years of up to $382 million for US companies and up to £263 million for UK firms, depending on the industry. While the case for loyalty is compelling, companies should determine the business impact that customer experience has on their specific business by following our five step process. To achieve these results, however, companies must create customer experience metrics programs that embed these measurments into how they run their business.

Download report for $195

I put together this infographic which captures some of the high-level findings from the report:

Download report for $195

The bottom line: Customer experience correlates to loyalty.

Credit Cards Need Trust For Recommendations

I’ve started to analyze our 2011 Temkin Trust Ratings and decided to look at how trust and loyalty are connected. I started by looking at the connection between the level of trust that a consumer has in a credit card provider and the likelihood of that consumer to recommend the company.

Here’s a chart with the data; I think it speaks for itself…

The bottom line: Credit card companies need to design for trust

CX Mistake #7: Obsessing About Detractors

In this series of posts, we examine some of the top mistakes companies make in their customer experience management efforts. This post examines mistake #7: Obsessing about detractors. Customer experience programs often spend most of their time fixing problems so customers don’t dislike them, but they don’t spend enough time figuring out how to make customers love them.

It’s always important to create operating processes that deliver consistently good experiences. But consistency is a minimum requirement for strong brands. To make a deep connection with customers, experiences need to reinforce other key attributes of a brand. In a recent Temkin Group study, we found that only 14% of companies target campaigns at their brand promoters. Customer experience efforts aren’t purposely ignoring advocates, but the environment in which they operate pushes them in that direction. Here are some of the contributing factors:

• Customer feedback overemphasizes problems. Customers are most articulate about their dislikes. In recent Temkin Group research, we found that 34% of US consumers give feedback to a company after a very bad experience, but only 21% did the same after a very good experience. So normal customer listening mechanisms push companies to focus on problems.
• Understanding dissatisfaction does not help you understand loyalty. It might seem reasonable that focusing on dissatisfaction would help you learn about loyalty. But it turns out that the attributes that makes people unhappy are often not the same things that make them very happy. If the brakes in my car don’t work, then I’m very unhappy with the car. If my brakes work, then I don’t think about it. So companies often lack insight into what causes customers to become advocates.
• Executives overreact to problems. When executives hear about a single customer issue, they often push hard on the organization to fix the problem. When they get feedback from a happy customer, they just say “great job” but don’t push their organization to make any changes. Over time, this creates a lot more energy towards fixing problems than towards creating customer advocates.
• …and they don’t like talking about emotions. Customer experience is a combination of what consumers do, think, and feel. But executives are often more comfortable focusing on the most tangible items, what customers do and think. Given this bias, corporate plans inadvertently focus on creating satisfied customers, not engaged brand advocates.

Here are some tips for avoiding this mistake:

• Create a stream of activity around advocacy building. You shouldn’t stop finding and fixing problems, but you need to make sure that you are also identifying and implementing things that create brand advocates. So establish a separate track of activity around “raving fans” so that it gets unique attention. 
  
• Translate the brand into desired attitudes. Customer experience management efforts should create customer attitudes and behaviors that support business objectives. So make sure you explicitly describe the desired attitudes of customers that will reinforce your brand and use that information when you design and examine experiences.
• Map your customer’s journey. One of the most effective tools for understanding how customers feel about your company is a customer journey map. If you don’t understand how customers view their interactions with you, then you won’t be able to turn them into advocates.
• Use alternative research. Traditional market research approaches of surveys and focus groups can uncover what people like and dislike, but they may not uncover what people really desire. Why? Because customers can’t often articulate what they really desire. That’s why you should incorporate qualitative research techniques like contextual inquiry, shadowing, and journaling.
• Infuse emotion in the design. Since experiences are made up of functional, accessible, and emotional attributes, it’s critical that customer experience designs incorporate all three attributes. Make sure you put desired feelings into the design requirements.
• Don’t track average or net scores. While coming up with a single metric may be interesting, it blurs the distinction between really happy and really unhappy customers. Make sure you have a measurement and goal around really happy customers. If you’re using Net Promoter Score, for instance, start tracking promoters and detractors separately.

The bottom line: Design for love, not just for eliminating hate

Stop Listening To Customers… Sometimes

In a recent post, I listed valuable quotes from Steve Jobs. Here’s one of them:

You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new.

Jobs seems to be saying that you shouldn’t bother listening to customers. Is that what companies should do?

My take: No. Companies should not stop listening to customers. But they do need to understand what they’re listening for and recognize the limitation to some listening systems.

To start the discussion, here’s a basic loyalty model that I like to use. It’s based on defining a simple hierarchy of customer needs:

• Expectations: What customers think they’ll get from a company, which is heavily based on their perception of the company.
• Core needs: What customers want from a company, which is heavily influenced by their perception of what is normal and mainstream in an industry.
• Desires: What customers really want, which is not based on any company or industry activity and is often difficult for them to articulate.

As companies meet these needs, they build stronger emotional connections with customers. At the highest level, when they meet customers’ desires, companies end up with engaged customers — the raving fans that will promote and defend the brand.

Going back to Jobs’ comment, I agree that you can’t rely on simple customer feedback to identify their desires. Consumers weren’t telling Apple that they wanted a new MP3 player, iTunes, an Apple phone, or even Apple retail stores. Those “breakthrough” experiences came from understanding what customers really desire. In technology, desires can be even more difficult to articulate because people can’t even imagine the possibility of future capabilities.

Most customer listening efforts, which are often part of voice of the customer programs, can uncover expectations and many of customers’ core needs. But they are weak at uncovering desires. To grow the number of engaged customers, companies need to think of less traditional ways of getting customer feedback to uncover desires, like ethnography. It also helps to have a visionary like Steve Jobs who can envision the potential of technology and the evolution of consumer desires.

Unfortunately, most companies don’t have someone like Steve Jobs to rely on.

The bottom line: if you listen to customers, you might not hear their desires

Words Of Wisdom On The 4th Of July

For those of you who celebrate it… Happy 4th of July!

Given the holiday in the US, I’m turning to insight from one of our founding fathers, Benjamin Franklin, who said

“All human situations have their inconveniences. We feel those of the present but neither see nor feel those of the future; and hence we often make troublesome changes without amendment, and frequently for the worse.”

These words should provide a wake-up call to executives that underestimate the value  of customer loyalty. Firms that consistently deliver better customer experiences end up with more loyal customers. But in a recent Temkin Group study, we found that only 17% of respondents believe that their executives regularly support decisions to trade off short-term financial results for longer-term customer loyalty.

The bottom line: Treat customer loyalty as a critical business metric

8 Customer Experience Trends For 2011

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It’s the time of year when prognosticators drag out their crystal balls and divine about next year. Well, I’m not too different. But instead of a crystal ball, I’ll tap into the 8 customer experience megatrends that I outlined earlier this year. They remain the key trends that I think we’ll see in 2011.

Here are the 8 megatrends along with my thoughts about how they’ll play out in 2011:

1. Customer Insight Propagation. Most decisions in companies are made without any real customer insight. Companies will increasingly recognize that they need to integrate a deeper understanding of their customers throughout their company. That’s why Voice of the Customer (VoC) programs represent one of the most popular customer experience efforts. A new cadre of vendors are making it easier to collect, analyze, and share customer information broadly across just about any organization.

2011: I’ve written a lot about VoC programs this year. Companies are beginning to figure out how to better use the insights and an emerging set of vendors have deployed customer insight and action (CIA) Platforms that can help considerably. But there’s still a long way to go. In the research report The State Of Voice Of The Customer Programs, we found that only 1% of large companies are “Transformers,” which is the highest level of maturity. In 2011,  I expect to see many companies move up on the VoC maturity scale as this continues to be an increasing area of focus next year. Don’t be surprised to see CRM players like Oracle and SAP acquire some of the CIA vendors.

2. Unstructured Data Appreciation. Deep feelings that customers have about a company often get truncated into a 5-point, 7-point, or even 11-point multiple choice scales; making it difficult to understand “why” things are happening. New text analytics applications can quickly process thousands of pieces of unstructured data and discern what’s making customers happy or what’s making them upset; pushing a dramatic rise in companies analyzing rich unstructured data like comments on surveys, call center verbatims, or social media discussions.

2011: As I said in a blog post earlier this year, it’s time for text analytics. I’m working with many companies on strategies for getting deeper customer insights and just about all of them involve a component of text analytics. In 2011, I expect there to be twice as many text analytics pilots as in 2010 and a lot of companies touting success stories at conferences. I expect IBM to make a big push in this area next year with SPSS and I would not be surprised to see Big Blue acquire either Clarabridge or Attensity.

3. Customer Service Rejuvenation As companies do touchpoint analyses and customer journey maps, they often find that customer service is a key “moment of truth” for customers. Unfortunately, the cost-cutting in this area over the last several years has created many poor experiences. Companies are recognizing that poor customer service is creating a very negative perception of their brand and will increasingly make investments to improve these experiences.

2011: During customer service week in October, I discussed how companies sometimes seem to care more about saving $1.50 in transaction costs than they care about $60 worth of business. But, I am seeing some changes. I’ve actually been working with a number of contact centers that are transforming the service they deliver. In 2011, I expect to see more contact centers drop average handle time (AHT) as a core metric and revamp quality measures based on customer feedback.

4. Loyalty Intensification. Over the last several years, many executives have realized that shareholder value is not an objective; it’s actually the outcome of building stronger customer loyalty. As companies starts using measures like Net Promoter Scores (NPS) to track loyalty, more firms will elevate these metrics to their executive dashboard; pushing companies to think and act more strategically about loyalty.

2011: Many companies are developing loyalty metrics and infusing them into their management dashboards. We found that 45% of companies tie compensation to some customer feedback metrics, but don’t push too hard, too early with compensation.  We also found that only 25% of respondents think their senior executives are willing to trade-off short-term financial results for longer-term loyalty. In 2011, it will become much more common for companies to balance loyalty metrics with financial ones. And many companies will evolve beyond fixing problems that cause dissatisfaction and start designing experiences that inspire advocates.

5. Interaction iPod-ization. QWERTY keyboards help make PCs so universal. But a keyboard-based QWERTY device is not the ideal interface for the next generation of digital devices. Fortunately, Apple’s iPod (and iPhones, iPads) are doing the same thing that QWERTY did over 100 years ago, teaching myriads of people how to interact with a touch-screen. As a result, a new wave of touch-pad based applications will emerge.

2011: Add Nooks, Android, and Windows Phone to the list of devices that will be teaching people how to touch, drag, shake, pinch, and tap to get what they need. In 2011, Mainstream PCs with a keyboard and mouse will seem even more like relics’ as people increasingly transition to iPad (and iPad-like) devices.  I also expect to see more voice interfaces emerge.

6. Social Media Assimilation. Social media is a hot topic. But Social Media is not really a new thing for companies; it represents just another interaction channel with customers. Companies will increasingly fold Social Media activities into the core activities of the company; especially within customer service.

2011: I created a term called “Social Schizophrenia” which describes companies that provide levels of service in social media that differ significantly from service levels in other channels. That still describes a lot of companies. In 2011, focus on social media will continue to grow but I expect much more mature approaches as the tools and processes are evolving.

7. Digital/Physical Integration. Consumers increasingly go online with their cell phones while they are doing activities like walking through a mall or eating at a restaurant. At the same time, iPhones have introduced consumers to the notion of task-specific application downloads. In this environment, companies can no longer think about online as a separate and distinct channel. They will start designing more experiences that blend together online and offline interactions.

2011: Mobile applications will increasingly take advantage of location-awareness to provide services and capabilities that are specific to the store, restaurant, hotel, ball park, intersection, or wherever you are. In 2011, we’ll also see more adoption of recognition-based services like Shop Savvy that can scan barcodes and Google Goggles that recognizes landmarks, text — pretty much anything you can take a picture of with your phone. Given the capabilities, I think we’ll see a bunch of integrated digital/physical offerings in the second half of the year.

8. Cultural Renovation. Companies are increasingly recognizing that “unengaged employees can’t create engaged customers” which is one of my “6 Laws Of Customer Experience.” That’s why many firms are starting to focus on the culture of their firms; trying to align employees with the vision, mission, and brand of the company. Cultural change takes several years to take hold; so significant changes won’t show up in companies immediately. But when change happens, it will very difficult for competitors to replicate.

2011: It’s great to see many executives ask for help building a customer-centric culture. I often compare customer experience to quality, which is captured in my manifesto: Great Customer Experience Is Free. I also like usurping this quote from the quality movement: “Great customer experience is the result of a carefully constructed cultural environment. It has to be the fabric of the organization, not part of the fabric.” We gauge customer-centric culture with Temkin Group’s Four Customer Experience Core Competencies. Our assessment of 144 large firms showed that only 3% are customer-centric. In 2011, I expect many companies to put in place the foundations for improving their customer-centricity while a few will revert back to their old ways; this stuff is not easy.

The bottom line: Hopefully you’re ready for 2011!

Customer Service Attracts Loyal Customers

In a new research report called Service Seekers Are More Loyal Than Price Seekers (based on a survey of about 4,600 US consumers), we analyze the loyalty of four consumer segments that I’ve previously discussed in this blog:

Source: Forrester Research

The report examines the loyalty of these segments across 12 industries: airlines, banks, wireless providers, credit card providers, hotels, insurance firms, Internet service providers, investment firms, health plans, PC manufacturers, retailers, and TV service providers. Across all industries and consumer segments, I analyzed three areas of loyalty: willingness to buy more products, reluctance to switch from current providers, and likelihood to recommend providers to friends and colleagues.

Here are some of the interesting findings from the analysis:

• Across all 12 industries and all 3 measures of loyalty, Service Seekers are more loyal than Price Seekers
• In all 12 industries, the most loyal segment is either Service Seekers or Price & Service Seekers.
• In 10 of the 12 industries, Service Seekers are the most reluctant to switch away from their current provider.
• The gap between loyal Service Seekers and loyal Price Seekers is at least 20% in the following areas:
  • Willingness to buy: Credit card providers, TV service providers, Internet service providers, airlines, and insurance providers
  • Reluctance to switch: Airlines, TV service providers, insurance providers, and hotels. 
  • Likelihood to recommend: TV service providers, credit card providers, medical insurers, Internet service providers, and insurance providers.
• The gap between loyal Service Seekers and loyal Price Seekers is lower than 10% in only the following areas:
  • Willingness to buy: Banks, investment firms, and retailers.
  • Likelihood to recommend: Retailers, banks, and PC manufacturers.

The bottom line: Good customer service attracts more loyal customers.

Take 5 Minutes To Build Customer Loyalty

I recently blogged about Hyatt’s plan to offer some customers “random acts of generosity.” I’ve received a number of comments about how this program seems  “forced” and may actually backfire if customers start expecting acts of generosity. But the research in that post also showed that unexpected value can cause gratitude which creates a potentially strong foundation for loyalty.

So what should companies do? Take Five!

Disney trains its staff on a program called Take Five. Cast members (employees) are expected to take five minutes from their normal daily duties to do something special for their guests; they call it being aggressively friendly.

These aren’t meant to be random acts like paying for somebody’s drinks, but little things that are contextually relevant to the guest. For example, when one cast member heard that a guest wasn’t feeling well, she went on her own to get some chicken soup and bring it to the guest in her room.

How can companies make this type of program work:

• Encourage it. Companies need to teach employees to look for and act on relevant opportunities for helping customers. Using language like “Take Five” for the program will help embed it in the culture. As with any of these programs, employees should understand “why” this is happening and also be given clear parameters.
• Talk about it. As I mentioned in a recent post, storytelling is a powerful tool for shaping culture. Workgroups should share these experiences in normal team meetings (to motivate and to learn) and execs should share these stories at company wide venues to demonstrate their commitment and to motivate employees. 
• Reward it. One of my 6 laws of customer experience is that employees do what is measured, incented, and celebrated. So companies should think about creating awards to honor employees for going above and beyond their duties to help customers — in five minute segments.

The bottom line: It’s worth five minutes per day to wow your customers.

Customer Experience Boosts Revenue

Earlier this week I published a research report called Customer Experience Boosts Revenue. In the report, I analyzed consumer data to figure out how a change in customer experience affects loyalty and how that can affect revenues. It built off of my earlier analysis about how customer experience correlates to loyalty.  Here are a couple of slides that I used to introduce the research at Forrester’s Customer Experience Forum:

Here are some of the key findings:

• The difference in loyalty between companies in the top quartile of customer experience (when measured against industry averages) and the companies in the lowest quartile:
  • 14.4% more customers willing to buy another product
  • 15.8% more customers reluctant to switch
  • 16.6% more customers likely to recommend
• I also examined the revenue change from a 10 point increase in a firm’s Customer Experience Index. It results in a $284 million change for every $10 billion in revenue (average across 12 industries):
  • Additional purchases: $65 million
  • Reduction in churn: $116 million
  • Word fo mouth: $103 million 
• Here’s some of the industry-specific data:
  • Five largest revenue changes: Hotels ($311 million), credit card providers ($308 million), banks ($305 million), wireless carriers ($305 million), and TV service providers ($302 million)
  • Most change in additional purchases and reduction in churn: Hotels and banks.
  • Most increase from word of mouth: Airlines and wireless carriers

The bottom line: Customer experience is a great investment.

Retailers Lead, TV Service Providers Lag In Loyalty

I just published research called How Loyal Are Consumers? Not Very that examines the loyalty that consumers have with 113 large firms across 12 industries: airlines, banks, cell phone service providers, credit card providers, hotels, insurance firms, Internet service providers, investment firms, medical insurance companies, PC manufacturers, retailers, and TV service providers.

We asked 4,500+ US consumers about three areas of loyalty:

1. Willingness to consider the provider for another purchase
2. Reluctance to switch business away from the provider
3. Likelihood to recommend the provider to a friend or colleague

Here are some of the industry-level findings (in terms of the percentage of loyal customers):

• Willingness-to-repurchase
  • Leaders: Retailers (89%) and Insurers (82%)
  • Laggards: TV Service Providers (69%) and ISPs (73%)
• Reluctance-to-switch 
  • Leaders: Retailers (80%) and Investment Firms (73%)
  • Laggards: Airlines (62%) and TV Service Providers (63%) 
• Likelihood-to-recommend 
  • Leaders: Retailers (81%) and Insurers (75%)
  • Laggards: TV Service Providers (59%) and Health Plans (60%)

Here are some of the company findings (ranked relative to their industry averages): 

• Willingness-to-repurchase
  • Leaders: USAA credit cards (+24%), Southwest Airlines (+13%), and credit unions banking (+13%) 
  • Laggards: US Airways (-18%), Sprint (-16%), and RadioShack (-13%)
• Reluctance-to-switch 
  • Leaders: USAA credit cards (+20%), Apple (+19%), and Hampton Inn (+18%)
  • Laggards: US Airways (-18%), Sprint (-16%), RadioShack (-15%), and Washington Mutual banking (-15%)
• Likelihood-to-recommend 
  • Leaders: USAA credit cards (+26%), Kaiser (+17%), and Southwest Airlines (+17%)
  • Laggards: US Airways (-18%), Compaq (-17%), and RadioShack (-16%)

The bottom line: What are you doing to make your customers more loyal?

Lessons Learned From My Jimmy Fund Walk

Yesterday I walked with my family in the Boston Marathon Jimmy Fund Walk which covered the route of the Boston Marathon to raise money for the Dana-Farber Cancer Institute. I described this walk in a previous post called “Something More Important Than Customer Experience.” Although our feet are a bit sore, we really enjoyed the day. The weather was perfect — it was sunny and in the low 60’s. And all along the way, people were psyched to be there — from the nearly 8,000 walkers to the countless volunteers that worked at stations all along the route.

If you want to get a feel for the day, here’s a 2 minute video on YouTube…

While I was walking, I couldn’t help but notice a number of things that other organizations (both non-profits and for-profits) could learn. Here they are:

• People like feeling connected. All along the route, everyone that we ran into was talking to each other. I probably had at least a small conversation with fifty people that I didn’t know. Why was there so much conversation? Because we all felt good to be connected to a common (and great) cause. It was great to share that feeling with thousands of other people.
• Empower your teams. There were almost 600 different teams walking yesterday; each one focused on there own special effort (typically in honor of or in memory of someone they cared about). All of the teams had their own things going on like custom T-Shirts, special rest stops, and reinforcing message boards along the walk. The Jimmy Fund recognizes the power of these teams — and actively supports them with everything from highlighting the teams at the start/finish to making the Website easy for a team to be setup and managed. 
• Leadership matters. Behind every successful venture you’re likely to find an outstanding leader. This event is no exception. I was lucky to be part of a great team, called Amy’s Admirers, that raised the second highest amount last year (and we hope to be at that level again this year). Our team’s success was based on the tireless efforts of our leader, Peggy Grodd. She demonstrated some key attributes of leadership: 1) Clear and consistent communications; 2) passion for the objective; and 3) caring for the well-being of each person on the team. Thank you Peggy!
• Keep reinforcing the core message. It was a beautiful day and we were walking along the Boston Marathon route — an easy enviornment for distraction. But the Jimmy Fund made sure that we remained focused on why we were all there — to save kids from cancer. Every mile or so, there was a picture of a different child who was fighting (or had been fighting) a battle with cancer. The pictures also provided some small details about the children — enough to remind us all about what was truly important. 
• Make constituents feel good. While we were all there to raise money for the Jimmy Fund, the walkers felt more like heros than fundraisers. At every juncture, the walk was setup to make us feel good. At the starting line, there was a band making things seem very festive and announcing each group as they started the walk. Along the way, there were a ton of signs with reinforcing messages — thanking us for our efforts. At every rest stop, volunteers cheered us on and put stickers on our number badges to acknowledge the success of making it to that point. When we crossed the finish line, we were greeted by rousing cheers and a medal. And then there was a big party on the other side of the finish line.
• Purpose is more compelling than profits. As I discussed in a previous post called “Don’t Let Profits Replace Purpose,” many companies lose site of their constituents and, instead, focus too directly on profitmaking. Firms need to think of profits as a reward for serving key constituents. So organizations needs to focus on how they serve key constituents — and not on making money. The Jimmy Fund Walk showcased the power of this concept. While we were there to raise money (for companies, that’s the equivalent of making profits), the entire day was setup to make us feel good about a more important effort — our collective fight against cancer. And, I’ll bet that most of the walkers are already looking forward to participating again next year (for companies, that’s the equivalent of loyalty).

The bottom line:  Let’s keep up the fight against cancer!

Lesson From The Streets Of New York: Keep It Real

My family was recently in New York. We had a great time — except for the Yankees sweeping the Red Sox. And if you’re interested, at the bottom of the post I’ve listed a few of the restaurants that we enjoyed during our visit.

While we were walking around the city, we ran into a number of people asking for money on the streets. One guy was selling candy on the subway. Here was his shpeel:

I’m here to sell candy. The money is not going to charity or any organization. I will use the money to buy more candy to make more money. And I will spend the money wisely.

Another guy on a street near Yankee Stadium was holding out a cup and had a sign that said: 

I’m not going to lie. I really need a beer. Keep it real.

Both of those interactions made us laugh. But then I thought: “why is the truth so funny?”

My take: It’s unfortunate, but we’ve all become used to having things “marketed” to us in a less than honest fashion. Consumers end up developing filters for either ignoring or just not believing any advertisements. So when something shows up as being truly honest, it stands out.

Our research shows that many types of firms (especially banks, insurers, credit card firms, investment firms, and health insurers) get more loyal customers when they are seen as a “Customer Advocate” (take a look at an earlier post called Banks Prepare For Customer Experience Wars). And, what better way is there to show advocacy than by being honest?

So here’s a new strategy for firms to consider: brutal honesty.

The bottom line: Honesty may be more than just novel, it may also be profitable.

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Some restaurant recommendations in New York:

• La Bonne Soupe (48 West 55th Street, between 5th and 6th Aves). Great spot for lunch. As the name suggests, great soups. But also excellent fondue, chopped steak, and other french bistro options. My kids tried Escargots de Bourgogne for the first time and loved it!
• Rosa Mexicano (61 Columbus Avenue at 62nd Street). We really enjoyed dinner here. Make sure to get the guacamole appetizer that they make at your table. We enjoyed both the chicken the goat tacos (which are prepared more like fajitas — you assemble them yourself). The short ribs were also outstanding. When you’re done, order the guacamole ice cream if they have it. The mix a bunch of things with ice cream at your table — just like they make the guacamole. But don’t worry, there’s no avodaco in the dessert.
• Balthazar (80 Spring Street). This was another French bistro lunch spot that we really liked. Everything was good — from the french onion soup to the french ham and gruyere sandwich. But you must try the roast pork chop. Much pricier than La Bonne Soup.  
• Rice To Riches (37 Spring Street). If you like rice pudding (and who doesn’t), then you need to drop in here. You will be treated with a wide range of flavors and a really funky environment. Great place for dessert or just an afternoon snack.
• Norma’s (in the Le Parker Meridien, 119 W 56th Street). An unbelievable breakfast spot — a truly unique menu. We loved everything: flat-as-a-pancake crab cakes, very-berry brioche French toast, nutella fruit-filled crepes, and risotto oatmeal. But plan on spending top dollar for this breakfast experience: $25 or more per person.