Category Archives: Service Experience and Co-creation

The Moment of Truth: A Co-creation Perspective

The term “moment of truth” (MOT) is not new to me and I was happy to learn it was an integral part of the customer-experience community vocabulary.  As I have visited with many in the community, I’ve discovered there are various definitions for MOTs in relation to the customer journey. It is generally agreed that customer interactions are called “touchpoints,” and MOTs are the more significant touchpoints. However, the criteria for what’s “significant” depends on who you talk to. Some say the MOT is at the beginning when the customer decides to accept (or reject) the firm’s offer, while others point to the end of the transaction when they determine whether the whole experience was good or bad. Some identify various touchpoints where significant value is or is not realized. Yet another criteria is a touchpoint that shows the greatest likelihood the customer will “fall off”, or is most likely to end the business relationship. I contend there is too much ambiguity for the term to be useful in the context of a professional discussion.  At a minimum, the customer-experience community needs to agree on a more unified definition. I would go as far as to suggest a slightly different definition – one I think was intended by the first person to use the idiom in these contexts.

Richard Normann (1943-2003) is credited with the first use of the idiom “moment of truth” in a business context. Using the MOT concept, Normann was highly instrumental in the turnaround of Scandinavian Airlines (SAS) in the early 1980s. Jan Carlzon, SAS’s CEO during that time, recounts the turnaround in his book titled Moments of Truth (1987), attesting to the powerful perspective the MOT provides and Normann’s more significant contribution to the effort. By removing MOTs which provided little or no value to their customers, and enabling employees to deliver the best experience possible in those that remained, SAS became profitable again by more than three times the first year target.  They also earned the rank of “top Airline” the same year, and held that distinction for many years.

Normann’s book Service Management: Strategy and Leadership in Service Business, Third edition (2002) gives us the greatest insight to his thought process regarding MOTs. I find it fascinating and affirming that his first reference to MOTs is directly preceded by a discussion about co-creation. Normann says:

“…the customer is often more than just a customer – he is also a participant in the production of the service. A haircut, the cashing of a cheque, education – none of these can conceivably be produced without the participation of the consumer. Thus the service company not only has to get in contact with the consumers and to interact with them socially; it is also necessary to ‘manage’ them as part of the production force.”

Normann is clearly stating that a customer is integral to the value creation process. This is co-creation – the customer and the organization working together to create desired value.  If the customer is not involved, no value is ever created.  No customer, no value.

With this backdrop, Normann introduces the concept of MOTs. He states:

“Most services are the result of social acts which take place in direct contact between the customer and representatives of the service company. To take a metaphor from bullfighting, we could say that the perceived quality is realized at the moment of truth, when the service provider and the service customer confront one another in the arena. At that moment they are very much their own. What happens then can no longer be directly influenced by the company. It is the skill, the motivation and the tools employed by the firm’s representative and the expectations and behavior of the client which together will create the service delivery process. A large service company may well experience tens of thousands of ‘moments of truth’ every day.”

From the very first mention, Normann is clear that when a customer comes into contact with the organization, it is a MOT. The two have come together to accomplish something in relation to creating the value the customer seeks – their job-to-be-done. We know from experience there are often many interactions per customer journey depending on the size of the job-to-be-done.

We also know customers judge the experience of each and every interaction as to perceived quality in relation to its part of accomplishing “the service delivery process”.  Customers have some idea of how much time and effort they should be expending. They have some expectation of how they should feel at a particular point in the process, and they judge the interaction based on whether their expectations were met. The quality of each and every interaction is determined and (either consciously or subconsciously) scored in the mind of the customer. Think of this as a “running score.”

When Normann first introduced the MOT concept, most interactions were face-to-face; but don’t take this too literally.  As technology emerged and matured, Normann realized the potential for applying technology to MOTs.  He says, “…new communication and information technology clearly increase the possibilities to ‘store services’, and to make person-to-person interaction in their provision unnecessary.” Customers understand that automation is still designed and implemented by “faces” in the organization.

Normann also talked about the cumulative and/or knock-on effects of MOTs:

“There is a well-known dynamic in interpersonal interactions whereby positive action creates positive reactions, which in turn leads to mutually positive feelings which in turn leads to mutually positive interaction. Or the reverse can apply. A positive attitude and efficient action on the part of the service supplier will encourage the client to participate more, and more effectively, which in turn encourages the service supplier, and so on. A ‘virtuous circle’ has started.”

Normann continues at length to point out when the interactions are positive and customers feel the experience is valuable, a “virtuous circle” ensues.  Furthermore, the outcome of each interaction or MOT sets up the likelihood of a similar outcome at the next interaction. Good interactions tend to foster more good interactions, while poor interactions tend to lead to yet poorer interactions.

Perhaps Normann is the clearest in defining the MOT when he said:

“The quality experienced by the customer is created at the moment of truth, when the service provider and the client meet in a face-to-face interaction. The most perfectly designed and engineered service delivery system will fail until things work out then. Thus, any enquiry into quality must start from the microsituation of client interaction, the moment of truth (emphasis mine). The important question is: what mechanisms lead to and reinforce the client’s experience of quality and good value in that microsituation?”

In defining what Normann meant by the ‘moment of truth’, focus on the most consistent and defining vocabulary he used throughout: the words “interaction” (used consistently) and “microsituation” (used specifically), and more importantly, the juxtaposition of the two – “microsituation of client interaction.” From my reading of Normann, MOTs are each individual interaction with the customer – not high-value interactions, not high-risk interactions, not just the buy/no-buy interaction, and not the last interaction, which are all macrosituations.

The organization typically dictates the customer’s journey, and therefore, determines the time and effort required from customers. Unfortunately many organizations tend to think of some interactions as trivial and inconsequential. All too often, what the organization considers innocuous, the customer perceives as a waste of time and resources. Furthermore, the cumulative or knock-on effects of multiple or poorly executed interactions could culminate at a relatively innocuous one – the proverbial straw that broke the camel’s back.

From a co-creation perspective, each interaction either increases or reduces value to the customer. In other words, that running score really matters. Is every interaction equal to another? Absolutely not, but they are all weighty! We need to consider each and every interaction and what it contributes to customer value in relation to all other interactions.

Therefore, a co-creation perspective takes into account the value exchange of each and every interaction with a customer.  As the customers navigate their journey, moment by moment they are sizing up how they feel about the potential of achieving overall success, and with a few exceptions, they can drop out at any interaction in the journey. Though the organization may identify a particular interaction in which customers typically drop out of the journey, this doesn’t necessarily indicate that interaction is the culprit. The root problem is just as likely to be poor execution of one or more upstream interactions. The customer journey is part of the co-creation ecosystem and systems thinking needs to be applied.

Please keep in mind my purpose is first: to create a better and more common understanding in our terminology, and second: help us leverage the brilliance of Normann’s work. I’m not necessarily suggesting the customer-experience community change its vocabulary. However, I do recommend we at least apply Normann’s research and concepts to whatever the corresponding vocabulary is. Every organization’s success depends on creating Normann’s “virtuous circles”, yet these are only possible when we acknowledge the full significance of what he called the MOT with their cumulative, knock-on effect in the co-creation ecosystem. Call them what you will, interactions, touchpoints or MOTs, but for the good of the customer give every single one their due consideration.

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

_________________________________________

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.

Complain Like a Pro: 5 Tips for Effective Communication With Customer Service

By Mary Murcott

The results of 2015 Customer Rage Study show that consumers are increasingly dissatisfied with customer service in spite of the investments companies are making to improve customer satisfaction. Over 60% of the consumers interviewed for the study felt that they got “nothing” in response to their complaints about a problem with a product or service. Over 65% of customers experienced rage when interacting with customer service. In my previous post I talked about practices that companies can incorporate into their customer care to prevent and diffuse customer rage. Today I’d like to shift the focus to the customers and what they can do to reduce frustration and rage when dealing with bad customer service. These five communication tips will help you save time and will significantly improve your chances for a favorable customer service resolution.

  1. Ask for the representative’s name – make sure that you do it nicely, so the company representative doesn’t think you are out to get them. A way to do this is to say: After briefly (in one short sentence) describing the issue (eg, a billing problem, technical issue, etc), ask: “Are you the right person to help me with this issue?” No use going into detail if they are not, and then getting frustrated when they transfer you to another department, and you have to start all over again. Next, and then, and only then, ask for their name. Use their name through out your conversation – you want them on your side – and pay them compliments on how clearly they are explaining the process, etc., and thank them along the way for helping you. Often these employees are paid relatively little for taking a lot of customer frustration and abuse.
  2. Keep calm – the representative can make it easy or hard for you. Loud voices and abuse simply do not work……it is interesting how a call can accidentally get disconnected under these situations.
  3. Help them help you – Before you pick up the phone, write out a brief outline for the conversation. Stay away from the minute detailed story line. The clearer, shorter, more pertinent and more accurate you can make the scenario, the easier it will be for the representative to diagnose the problem and offer a solution. Often older customers will go into excruciating detail, which often is not related to the problem at hand. This is because they are speaking extemporaneously, and have not thought through their communication or practiced in their head how they are going to approach the company’s front line employee. I often have my 80 year-old mother, write out an outline of her conversation before she calls with question or complaint, and the conversation usually has a much better result.
  4. Be clear about what you want to happen – Conversations go much better if you are clear in your own mind as to what would make you happy and what you want as a result of your complaint. Sometimes you just want the company to know they have an issue and want a commitment that senior management will be made aware of the problem; other times, in addition to wanting something resolved, you might want monetary compensation or something else. Ask for what you want – you may get it or something that might help ameliorate the feelings you have for the company. Know that while you might want an hourly rate monetary compensation for the time you spent resolving the issue; that rarely happens. Attorneys have been known to say they bill out at $500/hour and want 3 hours of their time back. You may want to let the company know how many days or hours it took to resolve, and ask what can they do to compensate you for your time? You may get something, although not your hourly rate, if you have been courteous throughout the process.
  5. Ask what else you should know – Often there are downstream issues that could be avoided if you only were told about them. So ask. Ask what other problems might I know about that are downstream from this one? What else can you tell me that might avoid this problem in the future? A recent personal medical example comes to mind. I went to the doctor who recommended a test with another doctor involving an outpatient procedure. The office administrator advised me to watch how the doctor involved in the outpatient procedure coded the results. She said if he put down a certain code I paid $100, but if he put a similar but different code, my out of pocket fee might be closer to $1000. She was right. I was able to get the doctor to change the final code (it meant virtually the same thing), and avoided fighting a $900 fee difference. Luckily, the administrator was proactive. But it taught me to ask, as a customer, about avoiding any downstream surprises when I worked through future administrative issues. I learned how to be a more effective consumer of healthcare services!

Communication. It is important. It is how things get done – and yet it is not a mandatory, or often not even an elective course in high school or college. Both companies and customers need to do a better job in communicating in order to avoid rage. Some people have mastered the art of communication, and are more at peace with resolving issues. We all have the choice to be one of them.

Co-creating the Arab Spring

skalen_webOn December 17, 2010, Mohamed Bouazizi, a Tunisian street vendor, set himself on fire as a protest against the autocratic regimes in his Arab country. Bouazizi’s act was captured on film and quickly spread throughout the world. The images and film clips of Bouazizi triggered protests and demonstrations against regimes in other Arab countries. Bouazizi set in motion an uprising against Arab regimes that is known as the Arab Spring.

In a study of the Arab Spring, our team spotlights how activists transformed service systems to protest against the autocratic regimes. In many Arab countries press was censored. Through the use of social media platforms, such as Facebook, activists were able to freely share information with each other and with the public. The international media used this information to report on the uprisings that were taking place in the Arab countries. By transforming the media service system, the activists were able to bypass the censorship and report in real time about the acts of oppression by the autocratic regimes and injustice experienced by the greater Arab population.

In addition to the reform of the media service system, the activists also created a service system for the social movement. They used this system to coordinate and organize demonstrations and other protests against the autocratic regimes. When the protests escalated to armed conflict, the activists used the social media channels to arrange access to healthcare therefore transforming the health care service system. The activists transformed these three service systems by co-creating value in advancing democratic ambitions. This was in sharp contrast to the service systems established by incumbents in support of the oppressive regimes.

Value co-creation has become a key focus for service research in the last decade. Previous service research primarily focused on economic value co-creation (i.e., firm profit), but service research can also examine social and cultural value co-creation (i.e., connecting people and educating people about democracy). Our team’s project illustrates how these three types of value co-creation are not only interconnected but also enhance one another. For example, during the Arab Spring the activists informed each other by sharing information about protests and demonstrations via social media. Their main intention was to increase participation and the impact of the protests (social value co-creation). At the same time, the international media was able to use this information as a part of their operations (economic value co-creation) to report about the uprisings in Arab countries capturing the historic event, informing public (cultural value co-creation) and generating social support for the activists.

Value co-creation takes place in service systems constructed by different types of actors and resources. In the Arab Spring case, the actors of service systems are activists, journalists, doctors, etc. The resources they use are smart-phones, social media platforms and knowledge about technology. But it was the conflict between the activists and the regime that triggered the transformation of the service systems. Conflict and contention have not been in the center of either business research or service research, which adopts a more harmonious view of the world. We use social movement theory to argue that the transformation of service systems is always driven by a latent or overt conflict between incumbents who want to preserve status quo and challengers who want change.

The Arab Spring teaches us how service systems, including business systems, transform and work. Although conflicts appear to be negative, the Arab Spring proves that conflict may spark positive transformation. For instance, Tunisia has embarked on a democratic path since the Arab Spring of 2011. The actors behind this positive development, the so-called National Dialogue Quartet, received the Nobel Peace Prize in 2015. However, it also needs to be acknowledged that conflicts may have severe negative effects, best exemplified by the current situation in Syria.

The transformation of the music industry and service systems for distributing music is an example of how conflicts between incumbents and challengers can play out in the business world. The conflict between record companies that wanted to keep distributing music in traditional ways and so-called web-pirates that distributed music for free, but illegally, through the Internet lead to the creation of legal music streaming service firms such as Spotify. By studying what appears as negative events we can learn more about the positive transformation these negative events can lead to.

The research paper “Cocreating the Arab Spring Understanding Transformation of Service Systems in Contention” discussed in the post was published in Journal of Service Research August issue of 2015,   vol. 18 no. 3 250-264. It was the winner of the Best Paper Award for the Special Issue on Transformative Service Research.

SERVICE EXPEDITION: Exploring Services from the Customer’s Point of View

JOIN US ON A SERVICE EXPEDITION: Exploring Services from the Customer’s Point of View on January 15th, 2016!

We invite you to experience a set of integrated service design frameworks that, when used together, are a powerful tool for creating and sustaining customer experience that is aligned with your organization’s brand and customer experience strategy

1. Service Blueprinting

Your day begins with step-by-step instructions on how to create service blueprints. You will learn the blueprinting approach and process – five components that, when drawn up together, can help you make your customer-company relationship and the customer experience crystal-clear.

2. Customer Journey Mapping

Next we go deeper into your customers’ service experience by creating a customer journey map. The customer journey map is a visual representation of the different touchpoints that characterize their interactions with the service. We will work step-by-step as when service blueprinting, except now we also consider critical intangible elements such as affinity, pride, and satisfaction.

3. Customer Brand Encounters

Here we introduce a process designed to guide you in determining how closely aligned your customers’ actual experiences and perceptions are to what they expect from your brand. We will demonstrate how to pull insights from your service blueprint and your customer journey map to uncover new ways to strengthen brand preference and loyalty.

4. Making it Real

Now it is your turn! We will work with you as you complete a service
expedition for your company. This is your opportunity to design
your services according to your customers’ needs and eliminate
potential failure points in your delivery efforts. You will finish the
day with outlining an action plan to take back to your organization.

What You Need to Know about the Impact of Service Crises

Service crises and their impact on companies

Extreme and massive service failures. They are probably the worst nightmare for any service provider. Such crises have a profound impact on customers as the service they seek becomes simply unavailable. The scope of the problems – thousands, to even hundreds of thousands, of customers being hit at the same time – assures wide-scale media attention, damaging the reputation of the company even more. Vivid examples of such failures include JetBlue’s Valentine’s Day crisis in 2007, when over 130,000 customers got stranded; or the BlackBerry service failures in 2011 and 2012, when Blackberry owners around the globe could not access the Internet or their emails for several days in a row.

Whereas a traditional product-harm crisis still offers the possibility to trace the batches of defective goods and engage in recall actions, a mass service crisis does not have this option. All users are experiencing service failure at the same time. This drop in objective service performance (OSP) has an immediate and strong negative impact on the perceived service quality (PSQ). However, it may take much more time for companies to restore their customers’ satisfaction.

Picture7

Losses loom larger and last longer than gains

We studied the impact of mass service crises on the perceived service quality for a major European public transport provider. During the observation period, the company experienced several service crises caused by extreme winter weather, which was unprecedented in the recent past.

Consistent with the argument of the Nobel Prize winners Daniel Kahneman and Amos Tversky, we find that negative experiences – drops in service performance – have a much stronger negative impact on perceived service quality compared to improvements in service performance. However, our results also show that the detrimental impact of such crises goes beyond a stronger immediate negative impact. What is even worse for companies is the fact that this negative impact also lasts longer. Losses not only loom larger than gains, but they also linger. Any improvements in objective service performance will only have a short-lived effect on perceived service performance, whereas deteriorations in objective service performance will have a lasting negative effect on perceived service performance.

Picture9

The role of history

The ultimate impact of a mass service crisis may depend on the history of a company’s service performance. Customers can be more forgiving if the company has a good track record. On the other hand, an unexpected crisis may be of such an extreme disconfirmation of their (high) expectations that it can result in extreme anger. On the other hand, when the company has a history of bad service, customers may already have become cynical. A new crisis would not add any new information: the company is simply living up to the (low) expectations. But it may also become the final drop for these customers, infuriating them even more.

Our results show that, in case of a “business-as-usual” scenario with a relatively stable service performance, the following picture will emerge: improvements will have short-lived positive effects, and deteriorations will have lasting negative effects. In case of “sustained gains”, an upward spiral of ever better service, a new improvement will result in lasting positive effects (customer delight: the customer gets an even better performance than expected), but a sudden deterioration will have a strong lasting negative effect (extreme negative disconfirmation). When the company is already in a downward spiral (“sustained losses”), an additional deterioration will not have much effect anymore; the damage has already been done. A sudden improvement, on the other hand, will not add much either.

So, what to do?

Even though service companies would love to avoid such mass service crises, they often have little real power to do so, no matter how well prepared the companies are. Restoring the customers’ appreciation of the service quality to the pre-crisis level can only be attained by a continued service performance at a higher than pre-crisis level. A crisis will raise the bar for the future, and improving once is not enough. The customer needs to see that the company succeeds consistently in providing a better service. This is all the more important for companies with a good track record who suddenly face a crisis. Such crisis is an extreme deviation of what customers are used to, and has a strong detrimental effect. Getting back to the old pattern of good and significantly better service is crucial. A silver lining is that when one is already in a downward spiral, an additional negative experience will not further decrease the customers’ judgements in the long term.

Picture10

In sum, companies should focus on a stable (and good) service performance level. Such performance level has the best outcomes for customers’ service assessment, and takes much less effort compared to constant adjustments needed in response to peaks and troughs in service performance. A good and stable performance, in turn, is a strong argument for companies in their communication to customers, as it may engender favorable perceptions of the service quality.

This post is based on the article “Losses Loom Longer Than Gains. Modeling the Impact of Service Crises on Perceived Service Quality over Time” which is co-authored by Maarten Gijsenberg (University of Groningen, The Netherlands), Harald van Heerde (Massey University, New Zealand) and Peter Verhoef (University of Groningen, The Netherlands). It is published in the Journal of Marketing Research (Volume 52, Issue 5, October 2015; ).

_________________________

MJ Gijsenberg PictureMaarten J. Gijsenberg is Associate Professor of Marketing at the University of Groningen, the Netherlands. He holds an MSc in business engineering, and a PhD in marketing (both from the University of Leuven, Belgium).

His research focusses on the econometric modelling of marketing decisions (timing and size of investments, targeting of actions) and their effectiveness, with special attention to the over-time dynamics of the latter (due to e.g. the impact of both macro-economic and firm-specific crises on consumers’ behavior), and main focus on advertising. His work has been published in the Journal of Marketing Research and the International Journal of Research in Marketing.

He was second runner-up of the 2010 EMAC McKinsey Marketing Dissertation Award, and his research has also been awarded with a Marie Curie Fellowship of the European Commission. Recently, his paper on advertising effectiveness around major sports events was selected by the Marketing Science Institute as one of the “2014 Must-Read Articles for Marketers”.

A Great Customer Experience Isn’t Something You Can Script

John_Abraham_headshot2By: John Abraham

Several years ago, I met a successful customer service director in a retail bank. She had led the charge to bring customer experience thinking into the bank’s branch operations and call centers, defining how the company’s brand promise should be reflected in customer interactions. In fact, they had developed a specific greeting that employees were supposed to use. Every time a customer entered a branch or called a call center, the bank employee greeted them with exactly the same phrase.

While there is a good reason to set standards for customer experience delivery, this example raises an important question about the best approach to take. When customer experience standards become too rigid and scripted, interactions that should feel personal can lose their authenticity — leaving customers with an awkward feeling at best.

Too much rigidity can also get in the way of basic customer needs being met. Research from McKinsey & Company has found that over 50 percent of customer interactions occur as part of a multi-event, multi-channel journey. When customer experience standards try too hard to script how an individual interaction should play out, they leave less flexibility for employees to deal with the nuances associated with each customer’s unique situation. You can’t predict every customer’s needs — and often, customers won’t distinguish between an employee who is not allowed to adapt their approach and one who is simply unwilling to help.

So how can companies deliver experiences that feel personal without adding harmful inconsistency?

Often, the most impactful strategy is to find small, systematic ways to demonstrate an understanding of each customer’s perspective. Accomplishing this starts with learning more about the underlying needs behind different customer interactions. Digging deeper into the customer’s perspective — often though a journey mapping process — can reveal the higher-order concerns customers bring to individual interactions. It’s also helpful to let employees follow up on relevant customer feedback, so they can learn to spot these concerns in the context of real conversations.

Armed with this knowledge and intuition, employees will be better able to anticipate common questions and sources of anxiety for customers. Being offered the right solution without having to ask can feel almost magical — and shows customers they’re dealing with someone who really understands them.

USAA offers an excellent example of this approach. The company is famous for its military-inspired employee training courses, but its insight into its servicemember customer base extends deeper than knowing the sound of an angry drill sergeant or the taste of an MRE. USAA is committed to learning about the professional and personal events that inspire even the simplest customer requests, so its employees always know how to respond. Wayne Peacock, USAA’s Head of Member Experience, said of this approach, “We’re serving our members from the time they’re teenagers and young adults all the way through the adult years and leaving a financial legacy, so we thought it would make a lot of sense to have them talk to us about what’s going on in their financial lives.”

Of course, even the most perceptive and well-informed employees need the flexibility to do something with their knowledge. This does not have to mean eliminating all customer service rules, or following Ritz-Carlton’s example in giving employees discretionary funds for creating customer delight. Rather, a good approach is to remove specific policies that your frontline knows are getting in the way.

Windstream Communications, a leading provider of voice and data networks, offers an example of this strategy. After noticing frequent miscommunication between customers and servicing technicians, the company decided to allow customers to contact technicians directly rather than going through a scheduler. Windstream found that this strategy helped individual technicians learn specific customers’ needs over time and use that understanding to provide more personalized service. And Windstream’s customers got a dedicated, familiar ally, rather than a sequence of different technicians.

Ultimately, moving away from the script can feel uncomfortable. It puts a heavier burden on front-line employees to know their work and their customers. But don’t underestimate the impact of investing in thoughtful policy changes and customer-oriented training. When you give your employees deeper insight into customer needs — and the freedom do something with that insight — they can move successfully beyond the script to deliver a personalized experience that is consistent with what your brand aspires to be.

____________________________

John Abraham leads the Medallia Institute, which develops educational programs in customer experience best practices. Prior to joining Medallia, John was GM of Net Promoter Programs at Satmetrix, a consultant with both Andersen Consulting and Booz Allen & Company, and a marketing executive in the software industry for more than 10 years.

Join the Center for Services Leadership at Compete Through Services Symposium on November 5th, 2015, to hear John Abraham, Medallia Institute, and Michael Morton, Best Western International, speak on Breaking Barriers Between Service Metrics and Customer Experiences.