Beyond Customer Satisfaction to Customer Loyalty by Keki

Beyond Customer Satisfaction to Customer Loyalty by Keki R. Bhote Book Summary 1

Focusing on the Customer : The Unacceptable Costs of Dissatisfied Customers • Dissatisfied customers will tell nine other people about a negative experience • 13% of dissatisfied customers will tell twenty other people • 98% of dissatisfied customers never complain - they just switch to a competitor Consequences of Customer Dissatisfaction : • Lost customers are lost for life • Dissatisfied customers can turn potential customers into noncustomers • Long-term customers generate higher profits than one- or twotime customers; thus lost customers hurt long-term sales even more 2 Source: Bhote, Keki R. Beyond Customer Satisfaction to Customer Loyalty. AMA Management

Focusing on the Customer Why companies do not pay sufficient attention customers and their satisfaction : to • Possess little knowledge or conviction that their main objective is to provide added value products or services • Employees unable to to go beyond company policy in dealing with customer complaints and concerns • Believe that they are in the business of making products or rendering services • Company policies and procedures are designed without the customer in mind • Employees label themselves in terms of professions instead of customers satisfied. • Overbearing and short-sighed management create indifferent employees who subsequently are indifferent to customers • Employees feel too removed from the customers • Inter-departmental competition prevents focused teamwork on customer satisfaction • Products developed by the company, instead of the customer 3 Source: Bhote, Keki R. Beyond Customer Satisfaction to Customer Loyalty. AMA Management

Focusing on the Customer : Ten Inviolate Principles of Customer Loyalty 1. Base partnerships on ethics and uncompromising integrity 6. Be active on all elements of customer enthusiasm (next slide) 2. Add value in a customersupplier partnership 7. Focus on the unexpected that generates customer delight 3. Build mutual trust - it is the “Self-Fulfilling Prophecy” 8. Develop a “closeness” with the customer 4. Share technology, strategy, and 9. Demonstrate genuine interest in cost data with core customers the customer after the sale is consummated 5. Build mutual, concrete help 10. Anticipate the future customer between supplier and customer needs and expectations companies 4 Source: Bhote, Keki R. Beyond Customer Satisfaction to Customer Loyalty. AMA Management

Focusing on the Customer : A Network of Elements of Customer Enthusiasm C O M M U N I C A TI O N 5 Systematic Listening Feed Forward Information Handling Emergencies Easy to Contact Non-Verbal Skills Making Customer Feel Important Source: Bhote, Keki R. Beyond Customer Satisfaction to Customer Loyalty. AMA Manageme

Focusing on the Customer : Demonstrating Customer Commitment to Employees • Pay attention to customer satisfaction metrics • Reward employees who provide excellent customer service • Maintain uncompromised integrity • Communicate customer focus to media and in annual reports • Trust employees • Encourage feedback from employees • Personally spend time with customers • Establish customer satisfaction as a key part of periodic meetings • Give customer-contact employees authority to make their • Correct any customer own decisions satisfaction deficiency in a product 6 Source: Bhote, Keki R. Beyond Customer Satisfaction to Customer Loyalty. AMA Management

Focusing on the Customer : Walking the Talk 12 steps on how to focus on managing what matters to customers : 1. Say what you’re going to do in simple, concise steps 7. Set boundaries, then get out of the way 2. Do what you say you’re going to do 8. Fight “scope creep” and get closure 3. Convince influencers to become champions 4. Tell stories to connect employees to what matters, in their terms 5. Put every improvement idea to the “what matters to customers” test. 9. Recognize and reward closure 10. Make failure for the right reasons OK 11. Make skeptics part of the solution 12. Acknowledge the past and learn from it 6. Ask only for feedback you intend to act on 7 Source: Maguire, Brian. “ 12 Steps to Walking the Talk”. National Productivity Review. Autumn 199

Focusing on the Customer : The Customer Window Model Wants Customer wants it and does not get it Customer wants it and gets it ) (Danger : Move to (Bingo!) Does not Gets Customer does not want it and does not get it Cost Reduction Customer does not want it and gets it anyway Does not want 8 Eliminate Source: Bhote, Keki R. Beyond Customer Satisfaction to Customer Loyalty. AMA Manageme

Focusing on the Customer : Principal Modes of Customer Feedback 1. Mail Surveys 6. Soliciting former customers 2. Telephone Surveys 7. Inputs from customer-contact 3. Focus groups, round tables, clinics, panels personnel 8. One-on-one interviews 4. Top management visits 9. Mass customization 5. Soliciting non-customers 10. Learning relationships 9 Source: Bhote, Keki R. Beyond Customer Satisfaction to Customer Loyalty. AMA Management

Focusing on the Customer : Sample Customer Satisfaction Index (CSI) = (T/5 Y) x 100 = (260/490) x 100= 53% 10 Source: Bhote, Keki R. Beyond Customer Satisfaction to Customer Loyalty. AMA Management

Focusing on the Customer : Important Lessons about Customer Loyalty 1. 15 -50% of satisfied customers defect from a company each year 2. Fewer than 2% of all companies are able to measure bottom-line improvements resulting from documented increases in customers satisfaction 3. Totally satisfied customers are six times more likely to repurchase a product 4. A 5% reduction in customer defection can increase profits 30 -85% 5. A 2% increase in customer retention is equivalent to cutting operating costs by 10% 6. It costs five to seven times more to find new customers than to retain them 7. New paradigms are needed : from zero defects to zero defection, from mass marketing to mass customization. 11 Source: Bhote, Keki R. Beyond Customer Satisfaction to Customer Loyalty. AMA Management

Focusing on the Customer : Return on Investment in Customer Loyalty 12 Source: K Bhote, Quality for Profit. Strategic Directions Publishers,

Focusing on the Customer : The Four Key Points In the end, an organization should concern itself over the customer’s response to the following four points : 1. 2. 3. 4. Satisfaction with Quality Likelihood to Refer Likelihood to Repurchase Overall satisfaction 13