Monthly Archives: June 2016

How Can Product-based Companies Enhance B2B Services Success?

In this post, we feature Forming Successful Business-to-Business Services in Goods-Dominant Firms” published in the Journal of Service Research. This highly cited research papers by Wayne Neu, from the Metropolitan State College of Denver, and Stephen Brown, from Arizona State University discusses multi-firm case studies of four Fortune 500 firms, focusing on what factors goods-dominant firms should consider when developing services, and how to enhance the success of their service offerings. Based on the experience of employees at these four firms, the authors distill which factors contribute to successful service development. Below we highlight those factors along with some key questions managers should ask themselves as they expand their product-based offerings into services and solutions in B2B business.

If the shoe fits: the importance of strategic alignment

Neu and Brown’s research found that successful B2B service development in product-dominant firms requires alignment across three sets of variables—market, strategy, and factors of organization. Successful managers formed their B2B services strategy to fit the demands of a highly complex market and molded organizational factors to support the newly formed strategy.

How complex is your market for B2B services? How easy will it be to form a strategy and adapt several factors of organization to meet the demands of a complex market?

Object of affection: a market and customer-centered focus

Successful companies adopted both market and customer-centered orientations as they developed their B2B services. Market orientation meant managers understood the complex needs of the market and directed their organization’s activities toward satisfying those needs. Adopting a customer-centered orientation meant managers collaborated closely with individual customers to understand each one’s needs and tailored a service program to satisfy those needs.

Does your company have what it takes to be both market and customer focused at the same time?

From black & white to color: defining the new value proposition

Shifting from a goods provider to a goods and services provider requires a new value proposition to customers. Managers in this study touted their firm’s ability to create customer value by effectively 1) assuming responsibility for the whole challenging task of developing, supporting, or managing a complex business system, 2) tailoring the service offering to meet each customer’s unique needs, and 3) enabling customers to concentrate on developing the competencies needed to successfully compete in their own line of business.

Can your company delivery on all three components of this value proposition?

Our people, our livelihood: the human resource advantage

Successful companies emphasized the critical role of frontline workers in serving the needs of a highly complex market. As a result, they worked hard to ensure frontline roles were designed to respond to the challenge of the market in the following ways:

  • Serve as a trusted advisor: partner with the customer to formulate and implement unbiased recommendations.
  • Develop a learning relationship with individual customers: learn about customers’ complex business needs and develop an intimate understanding of their business as they, in turn, get to know your business and capabilities.
  • Lead a collaborative support performance: with the service delivery often occurring in a team-based setting, the importance of working well together and networking with peers to resolve problems cannot be overlooked.
  • Deliver a complex service: frontline employees must be able to assume the responsibility of dealing with complex issues that arise during service delivery.
  • Hire for behaviors, expertise, and attitude: successful firms hired for behavioral competencies, technical expertise and customer-focused attitude. Some key things to look for when hiring include selecting for high collaboration, refined listening and communication skills, learning agility, and a strong base of technical expertise.

Pursuing services requires human resources to manage all of these issues—does your organization have what it takes to accumulate and retain employees who can carry out these roles?

Good bone structure: reorganizing to reflect strategy

During their study, Neu and Brown found that the successful firms integrated the responsibilities of multiple value chain activities across multiple business units. In that way, the complex service becomes a single market offer, although it requires integrated effort across the firm to deliver. That means working together laterally across the firm, but also outside the firm by linking with customers in collaboration to develop and implement new services. It also means decentralizing authority to be closer to the customer and retaining flexibility when it comes to frequently changing factors.

How well suited is your company’s culture and structure for these kind of fundamental structural changes?

You get what you pay for: measurement and rewards

Because of the high degree of intra-firm collaboration required to pull-off successful B2B services, companies that did it well made sure their incentives encouraged this kind of working together. Those who didn’t succeed were incented in ways which encouraged intra-firm competition, which is destructive to service creation.

Does your incentive system support the integration of responsibilities and intra-firm collaboration?

The sound of music: sweet improvisation

Much like improvisational jazz musicians, successful managers were able to adapt and change with respect to unanticipated events and conditions during the performance. While implementing strategies for B2B services, successful managers learned about customer needs and changed the service program in real time without skipping a beat.

Do you have the information-sharing capabilities and company culture that allow for real time reactions and adaptations?

Customer Rage: The Bottoming Out Of Complainant Satisfaction & The Unintended Consequences Of Corporate Customer Experience Vices

By Scott Broetzmann

Customer Rage – Many companies don’t really understand it and are impotent to manage it because they are infatuated with insincere customer experience metrics and narrowly focused on optimizing a transaction.

Consider these disquieting facts from the 2015 National Customer Rage survey:

  • Customers are experiencing an ever-increasing level of problems with products and services; 54% of households reported a problem in 2015 – up from 32% in 1976.
  • Two-thirds (66%) of customers reported experiencing customer rage (being extremely or very upset) in association with their most serious problem. On the whole (putting aside a handful of companies that are spectacular and another bushel basket that are just OK), corporate responsiveness to customer complaints is horrid.
    • Nearly one-half (49%) of customers report that the time spent complaining to a company (about their most serious problem) was not worthwhile.
    • About two-thirds of complainants report that they got “nothing” when they complained to a company (about their most serious problem).
    • Only 17% of complainants indicate that they were satisfied with the action taken by a company that they complained to (about their most serious problem). In1976, 23% of complainants were fully satisfied!

What gives? Companies have put an overwhelming emphasis and invested meaningful resources in the customer experience. Yet, today’s customers are experiencing more problems than ever before are less satisfied with corporate responsiveness than ever before. In fact, the results of our study show that the vast majority of complaint handling experiences are extraordinarily bad for an overwhelming majority of customers. You have to ask: ‘Why are so many companies so incompetent at resolving customer problems?’ Our research and experience working with various companies, suggests that this low-level of complainant satisfaction is an unintended consequence of two corporate customer experience vices.

First, and foremost, too many companies are infatuated with insincere customer experience metrics. Second, all too many companies build their customer care foundation on executing their transaction rather than on diagnosing and responding to what customers want.

Infatuation With Insincere Customer Experience Metrics

When we launched the National Customer Rage survey 13 years ago, I think the only people who truly appreciated the freshness of the perspective and the implications of “customer rage” were the business press corps and John Q. Public.

My encounters with many a corporate audience were remarkably different. Some leaders (responsible for contact centers, company-wide customer experience strategies or corporate customer satisfaction programs) would shake their heads in mild disbelief. Others would speculate about the relevance of these data about a few “wacky,” “unreasonable” and complaining customers. It often seemed that companies didn’t “get it” or were somewhat smug about the imperative of customer problem handling.

Why might customers and businesses be so polarized in their views regarding the relevance and complaint handling satisfaction? My own view is that most companies are not knowingly providing mediocre service. Virtually no company would be willing to accept the levels of non-performance that have been uncovered in the National Customer Rage survey. Rather, too many companies today don’t truly know how unexceptional their service is. They are all too often lulled into a sense of self-satisfaction by their use of tepid, ineffectual metrics. As a result, companies are awash in data, but achieve a lower ROI for the significant time and money that they spend collecting data. Why? Because those data do not offer valuable insights needed to operationalize meaningful and customer-driven change in the way that the company does business.

Take, for example, your typical contact center (nearly three-quarters of customers identify the telephone as their primary channel for solving their most serious problems). In most companies, contact centers may possess the richest source of customer data. Yet I would argue that many contact centers lack a reliable, unvarnished point of view about the customer experiences that they are creating.

Instead of measuring customer’s ROI for the contact experience, far too many contact centers are reliant on weak, statistically unreliable and non-actionable voice of the customer (VOC) surrogates, such as:

  • IVR surveys with 3 to 5 questions that only address the representative’s demeanor and yield low response rates,
  • text analytics tools that are useful for data mining purposes but offer no more than anecdotal data about the actual outcomes,
  • call quality monitoring scores that are more telling about compliance with silly standards – think “said customer’s name twice”

What are some alternative metrics that matter when it comes to complainant satisfaction (or any customer contact for that matter)? Here are three metrics with teeth from the National Customer Rage survey:

  • What percentage of the customers contacting your customer care center would rate their experience of seeking help as “worthwhile?”
  • What are the specific types of remedies or outcomes that your customers seek most, when reaching out to your company with a problem? Which of these remedies do they get/not get?
  • What percentage of customers with a problem would say that they got “nothing” in return for getting in touch with your corporate contact center?

In more than one-quarter century of consulting with companies worldwide, I’ve yet to see these sorts of data appear with regularity on a corporate dashboard of contact center performance. Yet, data from these telling questions – focused on the customer’s return on investment (ROI) – are essential to understanding a true level of contact center performance and are indispensable when it comes to achieving a better contact center ROI.

Instead, there’s plenty of call volume, occupancy rate, ASA, mystery shopper, IVR survey, call quality monitoring and assorted myopic, internal and boring data. But tough-love, customer-point-of-view data is a rarity. Moreover, it’s not uncommon for insincere customer experience metrics in contact centers to portray the customer experience as genuinely OK (how typical is it for IVR-type surveys or call quality monitoring results to exhibit scores in the high 90’s?).

In my opinion, establishing and leveraging a more thoughtful and authentic set of customer experience metrics is a lynchpin to improved insights and performance when it comes to customer problem handling specifically, as well as to the customer experience overall.

The Optimized Transaction As A Paper Tiger

A second reason for the levels of complainant satisfaction uncovered in the National Customer Rage Survey is the focus that companies place on the “transaction”. It is frequently done to the exclusion of what customers really want when they reach out for help with a question or problem.

So often, when calling a company for help with a problem, the call can be pure drudgery as one is dragged through a sequence of company-centric transactional requirements, including:

  • The automated telephone sub-transaction complete with a series of disclaimers, warnings and other compliance-related messages
  • The gatekeeper sub-transaction featuring an initial “hello” from a live agent (maybe) followed by a host of more “qualification” and “security” questions (often some of the same ones you endured on the automated telephone path)
  • The “I’ve met all the criteria in my quality monitoring requirements” sub-transaction featuring selected phrases such as “I can help you with that” or “Have I met all of your needs today?” or making sure that your name is uttered a minimum of two or three times during the call.

You get the idea. This transactional-minded focus, coupled with the real pressure for agents to hit a magic talk time target, yields what might be called the optimized transaction strategy. In this model of service, the aim is to complete the transaction in the amount of time permitted; there isn’t time for a more genuine conversation, discovery of what the customer wants and consideration of how to deliver to expectations. And while such a strategy can and often does result in satisfying the company’s budget targets, it can also be at odds with fulfilling customer needs.

What is it that customers really want when they contact a company for help with a problem?

The National Customer Rage Survey results, coupled with our proprietary research with hundreds of companies over the past four decades, has convincingly shown that the number one key driver of contactor satisfaction (i.e., among customers contacting a company with a question or problem) is “getting what you  wanted.” Not surprisingly, most companies don’t measure this attribute and many are dismissive of it because they  assume that they will get low scores (i.e., “we can’t give customers what they want because they’re unreasonable and all they want is free product and money.”). Yet most customers – facing a serious product or service problem – are quite reasonable, motivated to be civil and want to get through the call as quickly as possible. As suggested by the National Customer Rage Survey, most customers desire simple, non-monetary remedies. They want to be treated with dignity, get a thank you for their business, an explanation, reassurance and the like.

Satisfaction with “getting what you wanted” typically accounts for 40% to 50% (or more) of the overall satisfaction with the contact center interaction. Not measuring it is reckless. Data from these telling questions – focused on the customer’s return on investment (ROI) – are essential to understanding a true level of contact center performance and are indispensable when it comes to achieving a better contact center ROI.

Where To From Here?

I keep seeing and hearing advertising campaigns that suggest I should be a happier customer. I should be ecstatic because companies are professing a dedication to customer delight. I should be experiencing only the best service because every company seems to be #1 in some sub-segment of a segment of a sector in the JD Power ratings. I should be feeling extra-special and empowered because so many companies are inviting me to share the bliss by giving them a “10” on a follow-up survey or writing a Yelp review for them to sing their praises.

By all indications, I should be much happier than my grandparents were when contacting a company for help with a problem. Companies have spent billions, value service as a competitive advantage and have so many more customer response tools available to them today than they did a generation ago.

So why so often is it that I dread the experience of asking companies for help with a problem? Maybe the National Customer Rage Survey can serve as a starting point for an enlightened dialogue about overcoming a transactional approach to complaint handling and the use of a more sincere set of metrics. Such metrics can help companies discern what customers really want and focus the company’s efforts to meet those needs.

___________

Scott Broetzmann is co-founder, President & CEO of Customer Care Measurement & Consulting (CCMC). CCMC helps Fortune 500 companies from every sector achieve a better ROI for improving the customer experience. His creed for creating an extraordinary customer experience is simple: invest in those actions that lie at the intersection of increased customer loyalty and a favorable return on investment. Over the past 30 years, Scott has been empowering marketplace leaders from all industries to deliver a more profitable customer experience. Having collaborated with more than 400 companies, worldwide, in nearly every sector, Scott has a well-rounded, results-focused, and practical perspective on how to make the leap from measuring to managing the customer experience. A pragmatic business analyst, he believes that the secret sauce for realizing customer experience profitability is motivating managers to translate the voice of the customer into a business case. Scott’s work and perspectives are routinely featured in the national and international conversation about the customer experience. You might read about his views in The Wall Street Journal, The New York Times, The Washington Post, USA Today, Business Week, Forbes, or Money. Or perhaps you might see his work referenced on CNN, MSNBC, or CBS News.

Leveraging Big Data Analytics to Create Value

Interview with Professor Peter C. Verhoef, a co-author of the new book Creating Value with Big Data Analytics: Making Smart Marketing Decisions.

Podcast Transcript

This podcast was brought to you by the Center for Services Leadership, a ground-breaking research center in the W. P. Carey School of Business at Arizona State University. The Center for Services Leadership provides leading edge research and education in the science of service.

Darima Fotheringham: Today we are talking with Professor Peter C. Verhoef from University of Groningen, The Netherlands. He is a co-author of a new book Creating Value with Big Data Analytics: Making Smart Marketing Decisions. Hello Peter!

Professor Peter C. Verhoef: Hello!

Darima Fotheringham: First of all, congratulations on your new book Creating Value with Big Data Analytics: Making Smart Marketing Decisions. Can you tell the listeners about you and your co-authors and how the idea of the book came around?

Professor Verhoef: I’m a professor of Marketing at the University of Groningen and I have been an expert in, specifically, customer relationship management and customer analytics. My co-authors have been working in practice and are now the founders of MetrixLab Big Data Analytics. They have extensive experience in customer analytics and marketing intelligence. We wrote this book because, first of all, the three of us wanted to share what we learned over the last two decades of our careers. Secondly, we saw that many firms are nowadays struggling with big data, specifically big data analytics and how to create value from these analytics. So we wanted to offer firms, service professionals and students, for instance MBA students, a book about big data and specifically big data analytics.

Darima Fotheringham: Great. Everyone would agree that value creation is the ultimate goal of big data strategy. At the same time, as you pointed out in the book, value has multiple dimensions. There is value to the firm, and value to the customer, also value to the society as a whole. Can you talk about these different perspectives on value? And what is the optimal way to balance these perspectives when developing your big data strategy and should that be your goal?

Professor Verhoef: Indeed, we make a distinction between these concepts. Specifically, value creation to the customer means that you provide customers with, for instance, brand new products, good customer service that creates good experience. You want to make your customers happy. Second, value creation to the firm means that, as a firm, you also aim to benefit from the things you do for your customers. You want to extract value from your customers. For instance, you want your customers to be more loyal or you want them to buy more products or maybe advertise for you and, in that way, bring in new customers. The last concept we talk about is the value to society. What that means is that you are not only focusing on delivering value to customers but also to the grand society. Consider, for instance, the concept of corporate social responsibility and, beyond that, more sustainable value for the long run, a more sustainable development of your firm in the society in the long run.

How do you balance these perspectives in creating your big data strategy? What you’d like to consider actually is, how your marketing actions or your service improvements can benefit your customer while, maybe not in the short run but maybe in the long run, your company can also benefit from that. So we observe, for instance, many firms in the online industry may have very satisfied customers but find it pretty difficult to earn money from these customers. That might work in that industry for some time but in the long run that might not be a sustainable way of doing business. In the end, what you want is to create value for your customers in such a way that you can also benefit from it as a firm by extracting value.

Darima Fotheringham: As you point out in the new book , data analytics have been around for many years, but the recent growth of big data has taken analytics to the next level. Can you talk about a few most important and maybe unexpected changes that took place and give some examples?

Professor Verhoef: Yes. A major change has been that we see the volume of data growing. While in the past we analyzed, for instance, four hundred customers, maybe a thousand customers, we are now analyzing data of one hundred thousand or even one million customers. That has an important implication. For instance, in terms of analyzing data, many things become significant. That means, actually, we are no longer interested in significance. We should move from significance of our results to focusing on the substantive differences. When we analyze a very large database, a small change of, let’s say, 0.001 % can already be significant but, at the same time, the substantive effect can actually very limited. That’s one major change.

Second change is that we are moving from structured data to unstructured data. We still have structured data, but we have more and more unstructured data, especially online. That means that firms have to learn how to analyze and how to interpret these data and learn new techniques. That means, for instance, that companies are using more text mining techniques. It also results in new metrics, digital sentiment indices, for instance, which can tell you more about how customers feel about your brand, about your service.

And the third point that we see changing, in terms of analytics is that are we moving from traditional methods more to computer science methods. You should think about, for instance, neural networks, Bayesian model averaging techniques. That’s a new area which marketers and traditional market analytics people are not as familiar with. So we also see new people, for instance, from computer science coming into our field.

Darima Fotheringham: Very interesting. When we are talking about this volume of data that companies have access to now, we know that questions of data privacy and security have been in limelight lately. You mentioned the case of Edward Snowden in the book and there was an Apple-FBI encryption dispute going on, which is widely discussed by experts but public reaction seems somewhat indifferent or at least so far. In the chapter discussing customer privacy and data security, you mentioned privacy paradox, which I thought was very interesting. Can you explain what that is and talk a little bit about that?

Professor Verhoef: Sure. Well, the privacy paradox suggests that consumers are worried about their privacy, they think it’s important, they think that firms should take care of it, etc. But when you look at their behavior, consumers frequently don’t behave consistently with their beliefs. So there is a strong discrepancy between how they, for instance, deal with their data, what they post on social media, and what they say about privacy. That’s kind of a strange paradox. So briefly, consumers do not behave as they say or they would like to behave when they talk about privacy. That’s an interesting phenomenon. Still, I think privacy is getting more important, as mentioned in the examples. Also, from a legal perspective or a government perspective, specifically in European Union, you see that firms are restricted in how they can use that data. For instance, we observed that some companies are throwing away data, especially nowadays they keep only one year of data in their database. They don’t want to keep the history of customers for long. One of the rationales behind that is the fear of all kinds of privacy regulations.

Darima Fotheringham: When customer data is the life line of the business, digital trust also becomes very important. Based on research in this area, what policies related to data privacy and security issues companies should consider adopting?

Professor Verhoef: Well, there are multiple recommendations I could give. One of the most important things is that you should give control to the consumers or at least they should perceive that they have control. They have to be able to see or be able to control, to some extent, how the firm uses their data. There is an interesting study by Catherine Tucker from MIT. It actually shows that after Facebook implemented such a strategy, the response rates to their commercial activities or some of their commercial approaches to consumers increased. It’s a very interesting phenomenon that when you give consumers more control, they are more likely to respond to your commercial efforts.

Darima Fotheringham: That’s a very interesting effect. In the chapter ‘Building Successful Big Data Capabilities’ you discuss four main building blocks of analytical competence: processes, people, systems and organization. Can you talk about the competences that are most critical yet most challenging for the companies?

Prof Verhoef: In terms of systems, you see that firms now can choose from a wide variety of systems, where in the past you had only a few suppliers. Now you see many suppliers of all kind of databases, cloud solutions, analytical solutions, dashboards, etc. In one way or the other, you should try to build a comprehensive big data ecosystem. The organization aspect looks at how you organize your big data analytics within the firm. Is it for instance, a very centralized staff department? Or are big data analytic teams available in several business lines, several business units? And how do you incorporate their analytics in your decision making? What for instance we see nowadays is that many companies are adopting a multi-disciplinary approach where the big data analytics play a major role.

The people aspect is very important, that’s also where firms face the most challenges. There are some studies, for instance by McKinsey, which actually show that it’s very difficult to find good data scientists. There is a shortage of data scientists on the market. And firms find it very difficult to find these people. In terms of capabilities, they need to have IT capabilities, they need to have data capabilities, know how to deal with different data sources, how to integrate them. They need to have analytical capabilities to be able to do sophisticated analytics, and finally they also need to have some business sense. An important question is, of course: Are the people that have all these capabilities available? Or should you work in big data teams where each of the team members brings some of these capabilities; and, together, they form a very powerful big data analytics group.

Darima Fotheringham: In your book, you actually have an example of a company that created this special program internally to close that capability gap. Can you share that example with us?

Professor Verhoef: Yes. That was a Dutch Telecom company. At the time they had a problem of not having sufficient number of highly trained analytics people. They set up a program called the Marketing Intelligence (MI) Academy together with a consulting agency to train new people. It was an in-house training program, where a part of the time participants were doing coursework, part of the time they were also working within the company. Most of the people who entered that program just came out of a University. They were trained in doing analytics but another important aspect was that these people also applied these new skills to have an impact within the organization. So it was not only about doing analytics but also, for instance, about things like: how do you visualize what you found? or how do you communicate? how do you tell your story to the management? That was an important aspect of the program. In doing so, this company was, at that point, able to build a successful analytics team.

However, many of these companies face problems about how to retain these employees. So building up a successful analytical capability is one thing, the next step is to figure out how you retain your people and how you keep these people happy and satisfied and ensure that they still find challenges in what they do. Especially, given that the people you trained are very, very attractive for other companies as well.

Darima Fotheringham: And in conclusion, what advice would you give to organizations’ leaders as they are navigating the complexities of big data?

Professor Verhoef: I think maybe the most important advice is that you should not consider big data as some kind of revolution, as “the big new thing”. We actually think it’s more of an evolution and, by acknowledging that, it’s very important that you start with small projects which can immediately create value for your firm. For example, we have an example in our book, where we describe a case of an online retailer that wanted to improve their recommendations systems. They started very small and that proved to be successful. Then, they invested strongly in building up these recommendations systems to a much higher level. So start small, and then scale up.

Darima Fotheringham: Thank you again for your interview today. We talked to Professor Peter C. Verhoef, one of the authors of the book Creating Value with Big Data Analytics: Making Smarter Marketing Decisions. Peter, thank you for talking to us.

Professor Verhoef: Thank you.

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