Monthly Archives: July 2016

Service Excellence: Creating Customer Experiences that Build Relationships. Interview with Dr. Ruth Bolton

Podcast Transcript

This podcast is brought to you by the Center for Services Leadership, a groundbreaking 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: Welcome to the CSL podcast, I’m Darima Fotheringham. Today I’m talking to Dr. Ruth Bolton, Professor of Marketing at the W. P. Carey School of Business at Arizona State University. She is the author of the new book “Service Excellence. Creating Customer Experiences that Build Relationships.” Ruth, thank you so much for joining me today, and congratulations on the new book!

Dr. Ruth Bolton: Thank you. It’s my first book, so I’m very excited.

Darima Fotheringham: It is very exciting! And I really enjoyed reading your book. It covers a lot of ground but it’s not a textbook. It is a very engaging and informative read that you can finish quickly. And it is the type of book that you want to hold on to so that you can go back to it again and again. Can you tell our listeners about what led you to write this book?

Dr. Ruth Bolton: Markets have been changing very rapidly, and I hear from the managers that there are many new opportunities and challenges. However, amidst all this change, managers kept emphasizing the importance of the customer experience. And I was intrigued that this term came from business not from academics. So what was it that managers were seeing that was so important? After thinking about it for some time, I realized that service researchers have a really important perspective to offer on the customer experience. So I decided to write a book about it!

Darima Fotheringham: Great! And it’s very timely. So as you said, customer experience is a really hot topic these days, and in your book, you emphasize a service-centered view of the customer experience. Can you talk about that? Why is this distinction important?

Dr. Ruth Bolton: Well, managers and academics who have been studying services really have a head start and understanding the customer experience. The reason is that, for many years, services research started from the premise that customer experiences are co-created by participants in a network. The participants, of course, are the company, its customers and other partners, such as suppliers. The key idea is that from a co-creation perspective, the goal of each participant is to use the resources and capabilities to support other actors in achieving their goals. So that’s how companies create value for customers.

In a service-centered view, co-creating customer experiences builds profitable relationships. But the emphasis is on innovating, designing and producing experiences that create value for both. So customer participation and engagement become key. Now if you stop and think about it, it explains the emergence of some of the innovative new business models in many industries such as the entertainment industry which is going through tremendous disruption.

Darima Fotheringham: Most companies are fairly up to speed on topics of customer satisfaction, value, loyalty, word-of-mouth, and so forth. I can imagine these are still very important when we talk about the customer experience, but what’s new today?

Dr. Ruth Bolton: Many people are fascinated by the new collaborative services such as Airbnb and Uber. These companies are co-creating with their suppliers, the people who rent out their homes or cars, and with customers, the people who travel. I think that many of us start by thinking that the technology platform, which enables the service, is important. However, the real challenge is how these three partners share information, develop group norms, and work together to achieve their goals. Uber recently recognized the Drivers Association in New York City to facilitate discussions on workplace issues. And if you stop and think about this from a service center perspective, it makes really good business sense.

Darima Fotheringham: Speaking of technology, as you note in your book, technology and new media enable customers and companies to engage in these new ways. Other than Uber, what other interesting and innovative examples can you share about how companies have been able to enhance customer experience using technology?

Dr. Ruth Bolton: I’m especially interested in how B2B companies have leveraged data driven insights to innovate and create value with customers. DuPont Pioneer was able to leverage its expertise in biotech to identify new services that help farmers map and plan how best to replace nitrogen in their fields. It lead to a new service channel and a new market that provides insights and solutions for land management. And the latest I read in the news is that folks are using drones to look at very large properties.

In China, Alibaba Group has built rural service centers in hundreds of Chinese villages so that people can search for products online and place orders as well as sell products through its online marketplaces. With an economic slowdown in China in 2015, the rural service centers are an important opportunity for new growth. So I really find the data driven insights fascinating. And an interesting feature about both these examples is that they improve societal wellbeing as well as creating benefits for customers and profits for firms.

Darima Fotheringham: Which is really great! In the chapter “the Building Blocks of the Customer Experience”, you discuss practical and emotional motives of the customers as they engage and develop relationships with companies. I think companies are usually well aware of the practical motives of their customers, but emotional motives are often much harder to identify. Why is it important that service experience is designed around both practical and emotional motives? And does this mostly apply to B2C companies or does it also matter in the B2B world?

Dr. Ruth Bolton: Oh, emotions matter for business customers too.  Businesses are composed of human beings, and human beings experience a variety of emotions such as fun, excitement, boredom, and frustration when they interact with companies. The starting point is that the business customer and its supplier are each pursuing their own goals, which may or may not be aligned. And within the business-customers organization, employees have specific roles and identities and they have their own goals.

There’s some really solid research showing that people interact with the company to achieve their goals, and when they do achieve them, they’re happy and feel in control. When they can’t make progress towards achieving their goals, look out for annoyance or even customer rage. Take a simple example, imagine a courier service is late in delivering an important package. The employee receiving the package can’t carry out his responsibilities and then there are ripple effects throughout the organization. Will we see customer rage? Quite possibly!

The effects of emotions can magnify aspects of the customer experience that might otherwise seem like small details. For example, I’ve been participating in research for the global retailer that’s been studying shopper satisfaction with the customer experience. We’ve discovered that people’s feeling of fun and frustration play a big role, no matter whether they are shopping in the store, online, or using a catalog. It’s crucially important to meet shoppers’ goals, say whether they’re browsing, searching, or buying, so that you can satisfy them. Interestingly, despite the fact that there are so many technology-enabled services, people still feel emotions in computer mediated environments.

Darima Fotheringham: I personally found the chapter “Managing Customer Relationships to Achieve Growth and Profitability” packed with great and useful insights. In that chapter, you give an example of IBM, how it successfully used the portfolio approach to managing their customers. Can you talk about that and share what we can learn from this example and this kind of approach?

Dr. Ruth Bolton: Yes, IBM successfully navigated the dot-com crash through better management of its customer portfolio, whereas Sun Microsystems did not. I’m really proud of our work looking at customer portfolios. This was a joint effort with Crina Tarasi and other colleagues at ASU, and it’s won some important awards.

You may have heard people talk about the customer asset and how customers produce cash flow streams over time. However, our research team identified an important issue that’s often overlooked, namely that customers’ cash flows are variable over time and that exposes the company to risk. Just like a stock portfolio, a customer portfolio should be diversified to minimize risk for a desired rate of return, and we were able to identify a number of strategies to reduce risk while maintaining profits.

One way is to manage the mix of customers, which is what IBM did. The general approach is to balance the market segments that your company serves so that its decreases in cash flows over time from one market segment are offset by increases in cash flows from another market segment, so that the average cash flow of the organization remains stable. This insight gives an entirely new perspective on market segmentation strategies. It’s particularly helpful for B2B companies because often they segment their markets by small, medium and large customers who have very different cash flow patterns.

Another approach is to work to increase customer satisfaction with their experiences. It turns out that satisfaction has a double whammy effect, lower cash flow variability and higher cash flow levels. I know it sounds too good to be true, but it’s backed up by solid research by many academics. And surprisingly loyalty programs may not always be the answer. Some loyalty programs lead to more variable cash flows, but not higher average cash flows. So companies need to think about designing loyalty programs to improve the experience or the intangible benefits, for example, membership recognition for consumers rather than offering economic incentives.

Darima Fotheringham: Very interesting! In conclusion, what one advice can you give companies that strive to achieve service excellence?

Dr. Ruth Bolton: I think you’re right that most companies know all about service quality, customer satisfaction, loyalty, and so forth. So my advice is: look forwards not backwards. What does the customer want for the future? Customers have goals they’re trying to accomplish by partnering with you so it’s crucial that companies understand what customers want next. In other words:

  • Understand and align with customers goals.
  • Generate trust that you can deliver experiences that satisfy these goals.
  • Offer products that are relevant to customers’ future needs not what they wanted yesterday.
  • And match the customer’s future circumstances.

Darima Fotheringham: Very helpful! Thank you so much. We were talking to Dr. Ruth Bolton, the author of “Service Excellence. Creating Customer Experiences that Build Your Relationships.” Ruth, thank you so much for your time!

Dr. Ruth Bolton: You’re welcome.

For more information on the science of service visit the Center for Services Leadership on the web at wpcarey.asu.edu/csl

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Ruth_BoltonRuth N. Bolton is Professor of Marketing at the W.P. Carey School of Business, Arizona State University. She previously served as 2009-11 Executive Director of the Marketing Science Institute. She studies how organizations can improve business performance over time by creating, maintaining and enhancing relationships with customers. Her recent research has focused on high technology, interactive services sold in global business-to-business markets. She has extensive experience with survey research design, as well as the econometric analysis of large-scale, integrative data bases. Her research is typically conducted in partnership with businesses, such as the Marriott Corporation, Hewlett-Packard and Schneider National Inc.

Customer Rage Study: Interview With Scott Broetzmann and Mary Murcott

 

Podcast Transcript

This podcast is brought to you by the Center for Services Leadership, a groundbreaking 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: Welcome to the CSL Podcast. I am Darima Fotheringham. Today I’m talking to Scott Broetzmann and Mary Murcott. Scott Broetzmann is the Co-Founder, President and CEO of Customer Care Management & Consulting (CCMC) and Mary Murcott is the President of the Customer Experience Institute for Dialog Direct. They will share insights from the latest Customer Rage study that CCMC and Dialog Direct conducted and partnership with W.P Carey Center for Service Leadership. Scott, Mary, thank you both for being here today!

Scott Broetzmann: Thank you.

Mary Murcott: Thanks for having us.

Darima Fotheringham: This is the 7th wave of National Customer Rage study. When and how the Customer Rage study begin?

Scott Broetzmann: The concept of the National Customer Rage study goes all the way back to 2002, but it really wasn’t about customer rage at the time. It was much more narrowly conceived as a replication of a very famous study, a notable White House study from the mid-70s that my colleagues, John Goodman and Mark Grainer, did for the White House. It was that seminal piece of work that connected the words “quality” and “profit”. And the study had not been updated in close to 30 years. When we founded CCMC, one of the things we wanted to do was to provide really good actionable information in the marketplace about the customer experience. So we said, why don’t we redo the “White House study”?

Along the way, when we were first conceiving the study, we thought that we ought to put in some new things as well. One of the things that I read in The Washington Post was an interesting article about how local retailers here in the Washington D.C. area were having trouble holding on to their retail staff because customers were so angry and awful to them, and the pay was so low. It struck a chord with me. I did a literature search, looked around and there were all kinds of anonyms or acronyms for rage that were out there. There was software syndrome rage, road rage, and restaurant rage but there wasn’t really any empirical research, anything meaningful that was even quasi scientific with the exception of one study that, I think, was at the University of Buffalo that talked about angry customers.

It left me feeling that people were saying angry customers and customer rage was really the stuff of lunacy. It was a hyperbole, it was an exception. It was just crazy people that painted the car yellow and stood outside the auto companies, lemon laws, that sort of thing. And that didn’t seem right to me. I knew personally, I’ve gone through my own fits of rage from time to time with products or services. Long story short, we added a question or two on rage. The rest as they say is history because the first Rage Study that came out was published in The Wall Street Journal. It continues to enjoy coverage in the popular press and in a lot of other places.

I would also make these other two side notes. First, I think part of the reason that so many are attracted to the Rage Study, outside of some of our friends in the corporate world that manage customer care, is that everybody has their own personal story of rage. A lot of the times, when we present the Rage Study, everybody comes with their own passionate stories about their worst product and service experiences. Everybody gets really jazzed up before we even start talking about data. A part of the reason why the Rage Study is connected is tied to that.

And I would say as well, it’s the only longitudinal study that offers credible trustworthy data about complaining experience. There’s lots of other studies out there, like American Customer Satisfaction Index, J.D. Power, etc. But this is the only study that, over the course of now in effect of a decade, provides a credible view of what it’s like to deal with a company when you have a problem. That’s really an important part of the Rage Study story.

Darima Fotheringham: Right. And looking at the data collected over the years, what can you say about the most common triggers of customer rage, let’s say ten-fifteen years ago and now? Have they changed?

Mary Murcott: Good question. About 10 or 15 years ago we led simpler lives. The cable companies were not in telephone service, were not in security, were not in wireless service. As we start bundling services in the banks and in telecommunications, we’ve seen the complexities rise. Not only has the complexity risen because we have bundled services, but companies that have actually listened to the customers, added a lot of features and a lot of channels in which they can communicate. That’s causing a lot of customer bouncing from one representative to another representative. So I think the common trigger is complexity.

The features have gotten complicated, so customers have more reasons to call because it’s not intuitive how to use a product or service. Secondly, they don’t know who to call within the company and, lastly, the company isn’t really sure if the representatives have been clearly trained or they lack a common database about customers, a common database about knowledge. That’s become a real problem. So, I think, it’s complexity that is driving the rage at this point.

Darima Fotheringham: Going into the latest customer rage study, did you have any predictions about what you’d find? Were the predictions confirmed? Were there any surprises?

Scott Broetzmann: So what’s interesting of sort, turning a lemon into lemonade, is that the rage data, over the course of these seven times we’ve done it, hasn’t really moved very much. Sometimes, the key indicators are sort of static or now we’re starting to see, now that we have a longer term view – that’s why the longitudinal view is so important – things can move just a little bit, but over the course of seven times over 13 years or so, every little bit adds up to a lot. So there’s a slower decline, maybe, but things are in decline for some of these really important measures. Continue reading