The Great Customer Advocacy Hoax

The Journal of Marketing recently published a study titled “A Longitudinal Examination of Net Promoter and Firm Revenue Growth” that is gaining currency among us NPS bashers. The authors conclude that:

We find no support for the claim that Net Promoter is the single most reliable indicator of a company’s ability to grow. We found that when making ‘apples-to-apples’ comparisons, Net Promoter does not perform better than the ACSI (American Customer Satisfaction Index). Managers have adopted the Net Promoter metric on the basis that is superior to other metrics. Our research suggests that such presumptions are erroneous.”

This study has important implications for firms considering whether or not to adopt the NPS metric as worthy of measurement. For me, though, the issue isn’t whether or not NPS is a better metric than customer satisfaction.

The first issue is about money. Measurement costs money.

Over the years, many companies have built an infrastructure around measuring customer satisfaction. Yet, on the urgings of ONE book, a growing number of firms have gone out and spent millions more to measure a new metric. Where’s the ROI on that investment? Was this the best place to spend a firm’s limited funds? I don’t think so, but go ahead — try to convince me that it was.

My second issue is with how the NPS groupies define customer advocacy — as the customer “advocating” for the company through a willingness to provide referrales to family and friends. Few people seem willing to see customer advocacy through another lens: The perception on the part of the customer that a firm does what’s best for the customer, and not just its own bottom line.

This is how Forrester Research defines it, which just published its annual Customer Advocacy ranking of financial firms. Overshadowed by the rankings is a key finding: Across the banking, brokerage, and insurance arenas, consumers that rate their financial providers as doing what’s best for the customer are far more likely to consider buying from those firms in the future.

The third issue I have with all this is the lack of theories about causality. Neither the NPS groupies nor the ACSI supporters make a case for why their favorite metric drives growth.

Which is why I like Forrester’s definition of advocacy. It implies that if you do what’s right for your customer — or at least create that impression — then it will result in satisfied customers who refer the firm to friends and family. And create customers who want to do more business in the future.

Maybe someday more executives will come around to this way of thinking. In the meantime, I guess we’ll just have to live the NPS groupies’ great customer advocacy hoax.

See Larry Freed’s blog for more discussion on this study.

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Managing Customer Expectations

I wrote a few weeks ago that the one question to ask customers is: “What are your expectations of us and how well are we meeting those expectations?”

Well, here’s a little more fodder for that discussion. In the March issue of the Journal of Consumer Research, researchers found that:

People take notice when they feel worse than they thought they would, but—oddly—not when they feel better than expected. The message for marketers is that too much hype can hurt a company when people realize that their expectations haven’t been met.”

The article noted that people make predictions about how they’ll feel in the future, but often predict wrong. The researchers coined the term “affective misforecasting” to describe the gap between anticipated and actual feelings. The authors concluded that marketers shouldn’t overhype their products.

My take: You probably think I’m going to say “Told ya so! You have to understand your customers’ expectations.” But I won’t — I’m above that.

Instead, I want to refer you to a discussion on the Open Source CU site. Trey quoted from the blog of a credit union customer, who really ripped into his credit union regarding some errors they made with his account, and the firm’s subsequent handling of the problem.

I’d like to suggest something counter-intuitive: That this bad “review” was actually good for the credit union. And that, in general, bad reviews (of your firm or your product) could actually be good for your marketing efforts.

I’ve mentioned before that I’m a Cranky — I just want the firms I do business with to NOT make mistakes, be easy to deal with, and to stay out of my face.

But not all consumers are like me (you don’t all have to say “thank god” at once). Some consumers — especially in the world of financial services consumers — want help making the decisions they have to make. Even for seemingly simple products like checking and savings accounts.

What these consumers need — and want and value — is objective advice, guidance, and information to help them make their decisions. But when all they see and hear are the positive raves of the “net promoters” and the hype from the firms themselves, two things happen:

1) They’re expectations are artificially raised, and
2) They don’t get the pros and cons they need to help them make an informed decision

For a certain segment of financial services consumers, the most important job that marketing has is not to communicate the superiority of its firm’s products and services. It’s to help its customers and prospects make the right decision for them. And to set and manage their expectations appropriately.

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Right-Channeling Isn’t Rocket Science…But You’ve Got To Do It Right

In a recent 1:1 magazine article, experts debated whether or not firms should try to change their customers’ channel behavior. One was quoted as saying:

“If you asked me two years ago if we should push customers to specific channels I would have answered yes….but I see some emergent behavior in the online world that shows me that customers are much more mercenary than they used to be. They won’t go to the channels you want them to go to….to say we can have relationships that are so strong we can influence channel behavior is tough right now.”

That’s not stopping firms from trying, however. On his Rattling The Kettle blog, the author shared an email he received from his bank, which tried to persuade him to stop getting paper statements and receive them online. The benefit it tried to sell him on? “Live the clutter-free life by replacing your regular statement with an electronic one.” The blogger’s reaction:

What a GREAT DEAL!!! I can’t believe [my bank] is willing to give me paperless statements for FREE! What a great bank, not charging me to receive my statements via email!

Seriously, if you want me to authorize you to stop sending me paper statements, as required by federal law, PAY ME.

You want to cut costs, fine. But, please, stop treating me like a f*ing idiot who will jump up and down and salivate when you dangle a shiny email in front of me. You want me to waive one of my legal rights in order to benefit your bottom line? Give me something in return. [My] credit union gave me $5 to end paper statements. Since you’re not as nice as them, I’ll need you to at least double that. You can just deposit directly in my account. Thanks.”

My take: You can change your customers’ channel behavior, but there’s a right way and time to do it and a wrong way and time to do it. The bank cited in the story above must have smoking something when it sent out that email. What will consumers who have been receiving paper statements for the past 20 or 30 years do when they get their first statement through email? PRINT IT OUT. End result: No reduction in clutter. Just one less envelope in the mail box.

The blogger (a fellow Cranky, no doubt) was absolutely right — the bank needed to provide a financial incentive. Ingrained behavior is hard to change — even if there’s a better way to do something.

But it’s not the only way — getting something faster as a result of doing it online can be a compelling benefit. If an interaction or transaction will take three days to be resolved, but can be done immediately online, then some consumers will change their channel behavior. But there are two considerations here:

1) There may be a good reason why the customer is transacting offline. Firms should be cautious about trying to right-channel an interaction in the middle of that transaction. I recently called a firm I do business with for some information and was told — before being given my information — that I could have done this online. My reaction: “Yes, I know — and if I was somewhere where I could have logged on and avoided wasting MY time talking to you, I would have.” (OK, I didn’t really say that).

2) You set future expectations. If a customer can perform a transaction and have it completed in real-time, then why can’t other transactions be done immediately. For a good example, see the post that talks about the 30-day hold that Alain’s bank put on his online account opening.

The lesson: Right-channeling is a feasible and smart strategy, but — like any good strategy — it must be beneficial for both the customer and the firm. It just needs to be deployed at the right time with the right customers.

Done right, right-channeling won’t negatively impact customer loyalty. After all, wouldn’t you want the firms you do business with to provide you with easier and faster ways to do business with them (and to make sure you know those ways exist)?

Done right, right-channeling is about customer advocacy. Not “the customer advocates for the firm”, but advocacy as in “the firm acts in the customer’s best interest, and not just its own bottom line, and the expense of the customer.” (A big reason why I hate the NPS, Denise).

Done right, right-channeling is about improving the customer experience.

It’s not rocket science.

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You Should Only Hope For Frequent Contact With Your Customers

As part of a special section on “Building A Better Customer Experience,” American Banker re-published an article (pw req’d) yesterday that reported the extent to which consumers viewed financial firms as acting in the customer’s best interest (in contrast to acting in the interests of its own bottom line). A quote from the managing director of a New York-based consulting firm, explaining why banks scored lower than other types of FIs, caught my eye:

Most people interact with their banks more often than they do with an insurer or a brokerage, so there is more opportunity for error. People have more frequent contact and more types of contact with their bank, so things like hours and fees seem onerous.”

My take: Frequent contact with customers is a blessing, not a curse.

A few years ago, I was speaking at a conference about the impact of online banking on customer loyalty, and I presented the results of a study that Bank of America did that showed that — all else being equal (e.g, demographics, tenure with the bank, starting balances) — over time, online bill pay customers grew balances and number of products owned faster than other customers.

I wondered out loud why that would be — after all, what was it about paying bills online that made someone more loyal to his or her bank?

I found that there are (at least) two possible answers. The first has to do with consumers’ motivations and expectations. For some consumers, the strength of the relationship they have with their bank is predominantly driven by factors relating to convenience. As a result, the convenience that they experience by paying bills online strengthens their emotional connection to their bank.

But the second explanation — the one most relevant to this post — came from someone sitting in on my presentation that day. Neal Burns, a University of Texas at Austin professor of advertising, told me that according to research he’s done, “repeated, positive interactions with a brand strengthen a customer’s connection to that brand.”

Insurers get few chances to create that positive impression — but when they do, they’re usually good opportunities, since insurance claims are typically high emotion interactions. Brokerages — particularly discount brokerages — may get that chance even less frequently, especially if they don’t have an advisory relationship with the customer.

Banks should be thankful for the frequency of contact they have with their customers. That their scores in the survey are lower than other FIs isn’t because of “opportunity for error”. It’s better attributed to:

  • Organizational conflict. The product-centric nature of most banks creates conflicting goals and incentives that make it difficult for those firms to always act in a customer’s best interest. Can we really expect a mortgage specialist to tell a checking account customer that he might get a better deal on a loan by going across the street?
  • A focus on the wrong experiences. I don’t mean to downplay the importance of customer service interactions, but I believe that the scores reported in American Banker reflect the dissatisfaction and missed expectations that consumers have with their sales experiences. It’s in these interactions where they receive product recommendations that they perceive to be best for the bank and not for them, and where their expectations of what it’s like to do business with the bank are established. Expectations that, in some cases, are not lived up to.

Banks that build trust with their customers earn forgiveness when (and if) they do make a mistake. Having the opportunity to build that trust through frequent interactions is a bank’s advantage — not handicap.

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The Stories Loyal Customers Tell

Becky Carroll’s post on Stories and the Personal Touch reminded me of the stories I’ve heard from loyal financial services customers:

#1: A man in his late-50s, when asked by his bank in a focus group interview
why he was a loyal customer, hemmed and hawed for a few moments before saying “it’s because of Jenny, the branch manager where I bank.” When asked what made Jenny so special, he replied, “I don’t know. But one time I came into the branch to make a deposit, and the pen at the counter was out of ink. Although Jenny had a customer in with her, she somehow knew that pen was out of ink, and came out with a batch of new pens. That’s Jenny for you.”

#2: A magazine reporter and her partner were trying to adopt a child, and had
received word from the adoption agency that a child was available for adoption. But they needed a short term loan in order to make the trip to China to pick up the baby. According to the reporter, her bank “bent over backwards to approve the loan and get her the money in 24 hours” and for that she would “never leave them.”

#3: An IT executive traces his loyalty to USAA back to a single phone call. He called the firm to cancel a credit card and insurance policy. The rep said “I hope I’m not overstepping my boundaries, but we’ve found that many customer often cancel products because of events that aren’t related to USAA like a divorce or other family matter. We’ve set up a special department to help customers with these kinds of matters, is this something we might be able to help you with?” Since he was in the middle of the divorce, he took USAA up on that offer and has been a loyal customer since.

These may sound like unrelated stories, but there are lessons to be gleaned:

  • It takes more than just “great customer service”. I recently commented on the expectations that consumers have of the firms they do business with, one of them being “interpersonal excellence.” The man in story #1 is an example of this. It wasn’t any single interaction that drove his loyalty to the bank — it was the personal attention he received from Jenny and the connection he had with her.
  • Convenience isn’t enough. For banking customers, the added convenience of late branch hours or multiple ATM locations may be important, but the produce the stories that customers tell. In story #2, it was the bank’s operational excellence — its ability to turn the loan app around in 24 hours — than helped produce the story that woman tells.
  • It’s the high-emotion interactions that count the most. Examples #2 and #3 highlight the fact that stories are more likely to be formed during highly emotional situations — like a loan application or divorce. [Colin: This is why the JetBlue response to its Valentine’s Day travel disaster is so much more important than WordPress’ handling of down time. Sitting around an airport is much more stressful than waiting for your blog site to come up]. McKinsey calls these “moments-of-truth”. The challenge many banks — and other firms — have is recognizing these high-emotion interactions when they happen.

So what should Marketing do?

1) Strategerize its “test and learn” agenda.
That’s what USAA did. It posed the question: Why do customers leave? (NOT: What can we do to try and salvage a defection — when it’s probably too late to do so anyway)? Analytics execs should reexamine their group’s test and learn agenda to determine if they’re really asking the important strategic questions — or just refining their knowledge of campaign-level results. (This is a good example of Marketing focusing more on the “macro” and less on the “micro”).

2) Better integrate.
The advertising folks use the term “integrated marketing” to refer to ad campaigns that are coordinated (or the same) across channels. That’s all well and fine, but for many marketing departments the bigger challenge is internal integration — and one prime example is the need for integration between analytics and market research. The two groups need to work a whole lot closer to develop and test theories about customer behavior.

3) Redefine customer segments.
The stories that customers tell are clues into their expectations and the drivers of their satisfaction. Firms that continue to define customer segments by products owned or profitability miss these clues — clues that are more valuable to understanding how to sell and service customers than product propensity models that predict what to sell.

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Are You Satisfied? Are You Satisfied?

It’s funny how the mind can come to associate things.

For example, whenever I think about customer satisfaction suveys, I can’t help but think about a particular scene from the 1976 movie Marathon Man. In this particular scene, Laurence Olivier, who plays an evil dentist, is torturing Dustin Hoffman by drilling his teeth. Hoffman’s brother was a CIA agent (or something like that), and Olivier thinks Hoffman has some secret info. As he’s drilling, Olivier is asking “Is it safe? Is it safe?” Hoffman has no clue what Olivier is talking about. But, finally, the pain is too much, and Hoffman yells “It’s safe! It’s safe!”

This is how I feel with customer satisfaction surveys. It seems, sometimes and with some firms, that after every transaction or interaction, I’m getting asked “Are you satisfied? Are you satisfied?” And I just want to yell “I’m satisfied! I’m satisfied”, just to make them to stop asking.

Apparently, some consumers have the opposite experience. Listen to what Bill had to say about his experience with a homebuilder he did business with:

The sales associate said that the company sends each customer a survey to take after the home is complete. But…in the same breath [he] said, “and for those that come in and fill out the survey with me, I will give them a $50 gift certificate to the place of their choice.”

I’m not trying to disparage customer satisfaction surveys. This isn’t just Marketing’s problem (for a change). It’s Marketing’s and HR’s. Whenever you tie bonuses and incentives to something like customer surveys, you’re bound to get employees who will try to game the system. Marketing and HR have to step up to plate and (at the least):

1) Determine who needs to be surveyed for their opinion and how often. Isn’t it more important that a firm’s best customers (current and future potential) be satisfied? But how many firms limit satisfaction surveys to their best customers?

2) Create policies that forbid “buying” good scores. It won’t stop everyone — but it’s a start.

Let’s reward the people who earn the satisfaction and referrals of the right customers.

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