white paper | 2010

Capitalizing on Customer Feedback

Creating Measurable Value from Voice-of-the-Customer Programs

Capitalizing on Customer Feedback

Creating Measurable Value from Voice-of-the-Customer Programs
Executive Overview
Everybodys doing itor, so they think. Gathering customer feedback has become increasingly commonplace, with over three-quarters of companies now having a customer listening function.1 Yet, less than one in ten describes it as innovative or cutting edge,2 for good reason.

Lack of proactivity. Too often the gathering of customer feedback by the company is
an attempt to react to a problem that has already occurred (e.g., a decrease in customer retention) rather than an act to prevent its occurrence.

Contents
Executive Overview __________2 Thinking Anew About Customer Feedback __________4 Realizing a Return ____________6 Achieving Accountability ____10 Conclusion __________________12

Lack of practicality. Too often the customer feedback doesnt drive noticeable changes
to customers experiences with the company, as a consequence of descriptive analyses that are deficient in delivering proscriptive insight.

Lack of performance. Too often companies lack the discipline and the capabilities to
demonstrate the linkage between the savvy use of customer feedback and an improvement of business results. Capitalizing on customer feedback requires more than the occasional sending of surveys in response to ad hoc business needs. It requires a strategic and ongoing dedication to hearing, listening, understanding and acting upon the voice of the customer (VOC) through a formal program built upon:

Active listeningan always on mechanism providing all customers the opportunity

to share their compliments, complaints and comments about their experiences with a companys products and services

Pulse monitoringa reoccurring and systematic means of tracking changes in business

outcomes, their leading indicators, and the influential drivers by periodically surveying a statistically representative sample of customers Listening to customers has always been essential. It hasnt, however, always been effective. Creating and implementing a thriving VOC program begins with an expanded vision for the role and importance of customer feedback, continues with an awareness of the challenges and best practices for succeeding, and concludes with demonstrated accountability that links the investments to the observed returns. This white paper addresses these three themes, and provides the reader with examples of the principles in practice.

Man with a Folding Chair3

A sales manager at Siemens AG often carried a folding chair into internal meetings. At first, the other sales representatives in the meeting were puzzled. Who are you expecting to join us? some asked. Shouldnt we just get some more chairs brought in here? others suggested. No, the manager replied, this is my customers chair. I brought it into the meeting so my customer can sit right here and listen to our discussion. The simple presence of the folding chair always changed the character of the conversation. It reminded everyone of the importance of customers and caused all to ask, What would our customer say? and How would our customer react? The sales manager eventually became known as Der Mann mit dem Klappstuhl or the man with the folding chair. The lesson he taught was powerful: always remember to consider the customers perspective in every decision. Hearing, listening, respecting, and responding to the voice of the customer makes this principle come alive.

2010 Peppers & Rogers Group. All rights protected and reserved.

Key Concepts
What is a VOC Program?
A voice of the customer (VOC) program is a channel for acquiring business insight about customers and what is important to them. The central facets, from both a companys and a customers perspective, include: Company Perspective Importance, as an ongoing strategic initiative central to the success of the company Centralization, with integrated data from multiple source of customer feedback Accessibility, with the timely dissemination of customer feedback (at individual and aggregate levels) throughout the organization to empower change Responsibility, assigning the task of responding to a customer to an appropriate individual in the organization, and the monitoring of the timeliness of completing that duty through case management Actionability, with distilled insights from the feedback having practical and potent applicability in real-time Accountability, achieved by quantifying the linkage between actions to improve the customer experience and business outcomes Comprehensiveness, encompassing both qualitative and quantitative customer feedback Customer Perspective Availability, giving customers the opportunity to share feedback whenever they choose do so Anonymity, with the option of allowing customers to provide feedback without disclosing their identity to ensure forthright comments; and simultaneously allowing the company to individually respond and carry on a dialog Responsiveness, providing a reply to a customers feedback in a timely manner

We see engagement as positive, proactive involvement. When it happens customers and employees are more than satisfied and loyal they are engaged.

What Is Engagement?4
We see engagementfor both customers as well as employeesas positive, proactive involvement, explains Don Peppers, founding partner of Peppers & Rogers Group. When an individual is engaged with a company, she or he is involved. Interactions occur, information is exchanged, operational friction is reduced, and the cost of switching increases over time. According to Allegiance, strong engagement also involves a strong emotional bond to a company. Involvement is a necessary but not a sufficient condition for engagement to be present, however. For involvement to rise to a state of engagement it must also be proactivenamely, the individual must be self-motivated and must be the one initiating the participation, setting in motion a sequence of events. A proactively involved customer may recommend the companys products to friends or colleagues and take a personal interest in the companys success or failure. A proactively involved employee wont wait for management to explain that a problem needs to be fixedshe or he will see the need and solve it now. Finally, the proactive involvement must be of a positive natureconstructive, beneficial, and helpful. The intent of the proactive involvement must be to foster the ongoing development of the relationship. When all three pieces are presentpositive, proactive involvementcustomers and employees are more than satisfied and more than loyal: they are engaged, notes Peppers.

2010 Peppers & Rogers Group. All rights protected and reserved.

Thinking Anew About Customer Feedback

You cant be in all places at all timesyou need eyes and ears and feet on the street for you. A voice of the customer program clones you, and places you in the midst of the marketplace to get an accurate understanding in real-time. Chris Cottle, Vice President of Marketing at Allegiance In the end, all revenue comes from customers. Building productive and profitable relationships with customers is the key to sustainable, long-term business successbut, relationships cannot be built in a vacuum and cannot be developed in the absence of shared knowledge. This is the fundamental strategic reason why a company must be in tune with the voice of its customers, hearing and acting upon their expressed perspectives, improving their experiences and thereby enhancing the strength of their relationships with the company. The alternative to knowing about customers is guessing about customersand, that has proven to be neither wise nor a recipe for winning. This strategy manifests itself in numerous ways, and delivers benefits that can extend throughout nearly all parts of the enterprise. Historically, companies have viewed the application of insights from a VOC program too narrowly, explains Kyle LaMalfa, Best Practices Manager & Loyalty Expert at Allegiance. Today, insights based upon customer feedback have the potential to impact and to improve the performance of many areas in a company. It is important, because a company dedicated to competing on the basis of customer relationships knows that all parts of the enterprise directly or indirectly influence those assets. For a customer centric company, every function is ultimately customer facing. Consider the breadth of applicability of VOC programs throughout an enterprise.

In the end, all revenue comes from customers. Building productive and profitable relationships with them is the key to sustainable growth.

C-Suite. For senior executes, a VOC program becomes an indispensable tool for crafting the
companys strategic vision. Deeply understanding customers needs allows a company to identify a path to position the company to fulfill those needs in the future, by more clearly seeing both the to be as well as the as is states.

Sales. Understanding the drivers and the leading indicators of changes in customers perspectives toward the company allow sales management to proactively detect (and enable corrective action against) trends in business outcomes. Unlike sales tracking systems, the thrust of a VOC program allows sales professionals to see beyond what happened to what might happenand, to understand the reasons why.

Customer Service. Today, for many businesses, the primary interaction point between the
company and the customer occurs when service is needed: a question to be answered, a problem to be solved, or a confusion to be clarified. Getting it right is a golden opportunity to strength the relationship, and a VOC program allows a company to understand what works in successful company-customer interactions and to monitor customers perceived satisfaction with those interactions.

Marketing. For marketing to work well, it must be relevant to its audience. A VOC program
facilitates the development of effective positioning and messaging by incorporating the vocabulary and the viewpoints of customers, the identification of purchase decision factors, and the structure of the most beneficial segmentation schemes based upon customers expressed needs.

Product Development. In a rapidly evolving marketplace, companies must continually improve existing products as well as identify future products. A VOC program contributes to the achievement of both goalsand, in the process, allows a company to broaden the depth and breadth of their relationship with the customer, resulting in improvements in share-of-wallet.

2010 Peppers & Rogers Group. All rights protected and reserved.

 Finance. The foundation of finance is moneymore specifically, customers money spent

with the company. A VOC program can help align finance professionals with the realization that all money comes from two sources: what customers spend with the company today, and what they are likely to spend in the future.5 Both sources of customer equity are highly influenced by customers perception of and experience with the company, and knowing and monitoring the quality of those perceptions and experiences is as important to the health of the business as knowing and monitoring cash flow.

Human Resources. A VOC program provides insights into those specific employee traits
that contribute to the development or to the destruction of customer relationships, knowledge of which may be utilized in hiring decisions, in performance evaluations, and in training programs. For example, with a VOC program, it is possible to understand that the intention of showing empathy and concern most effectively manifests itself through specific behavioral cues such as (a) reflecting upon and reiterating what the customer said or (b) validating the customers emotions. Organizations are, by nature and by design, highly differentiatedconsisting of a collection of distinct but integrated functions. The efficient performance that results may, however, incur a steep price: an increase in the psychological distance separating employees from the customers whom they are privileged to serve. A VOC program can help to minimize this problem, by continually infusing the customer perspective into the collective consciousness of the company, across all functions. Doing so is now more important than ever before, because the old business model of make & sell is being supplanted by sense & respond, in which companies must now detect and react to unpredictable and unstoppable change by becoming highly adaptive.6 A VOC program can play a pivotal role in this process, and deliver other key business benefitsbut, only if it embraces a proven set of practical principles.

A VOC program continually infuses the customer perspective into the collective consciousness of the company across all functions.

Figure 1: Organizational Areas that Use Customer Feedback

The use of customer feedback may extend throughout numerous functional areas within an enterprisewith substantial opportunity remaining to further its penetration in many companies.

Sales Customer Service Customer Insights Group Product Development/R&D Market Research Product Marketing Public Relations/ Corporate Communications
0% 10%

38% 38% 57% 57% 19% 19% 37% 37% 31% 31% 50% 50% 16% 16%
20% 30% 40% 50% 60%

Source: Aberdeen Group7

2010 Peppers & Rogers Group. All rights protected and reserved.

Realizing a Return
Discovery is the journey; insight is the destination. You must become your own seer. Gary Hamel, world-renowned business thought leader Like any business initiative, an investment in a VOC program isnt guaranteed to realize a return for the company. However, when the design and delivery of the VOC program is tightly aligned with a small set of proven principles, success is nearly assured.

PRINCIPLE 1: Attain clarity on the business problems to be solved

A VOC program may deliver many unexpected and serendipitous benefits along the way, but it begins with a focus upon an organizations most pressing points-of-pain. Stray surveys are not a substitute for sound strategy, and in the absence of explicit goals customer feedback may lack clarity and coherence. To be maximally effective, the definition of those pain points begins with a business end: enhancing customers share-of-wallet, retention, or lifetime value, for example. For each such objective, ask two questions: (1) what are the leading indicators (e.g., customer engagement) that portend a change in that outcome; and (2) what are the drivers (e.g., customers feeling confident and informed) which, if positively altered, will be most influential in affecting those leading indicators? These questions will lead to testable hypotheses about the causal chain connecting tactics to results. Additionally, this clarity will guide decisions about what data to collect, from whom, and at what frequency; plus, it will suggest how the data are to be analyzed and reported.

PRINCIPLE 2: Analyze customer feedback to separate signal from noise (and, to discover diamonds in the rough)
Customer feedback may be the consequence of a company initiated action (e.g., sending a periodic survey) or of customers own initiative (e.g., completing a contact us website form). In both cases, the feedback may be structured (e.g., quantitative responses on a rating scale), unstructured (e.g., qualitative input as comments), or a combination of both (see Figure 2). Analyzing these data to produce business insight has historically been a challenge for most organizations, due to the lack of a centralized and integrated database combined with the absence of powerful (but yet straightforward) statistical tools. Business professionals want answers, not more programs to be learned and problems to be solved. Todays VOC platforms allow companies to overcome these obstacles in several ways. Standard reporting and custom dashboards provide a consistent view of the customer feedback information over time, organized so as to be directly applicable to the companys business objectives for the program. Predictive analytics allow companies to understand cause-and-effect (e.g., the influence of an employee training program upon customer delight) and to forecast changes in a business outcome (e.g., purchase intent). Segmentation allows the company to drill-down and to identify a subset of customers of interest (e.g., those experiencing the greatest change in willingness to recommend the company to friends and colleagues). Classification and regression modeling produces a tree-like graph subdividing the customer population into the most opportunistic subsets (e.g., to grow revenue).

When the design and delivery of a VOC program is tightly aligned with a small set of proven principles, success is nearly assured.

2010 Peppers & Rogers Group. All rights protected and reserved.

 Preset alerts notify the company when criterion thresholds (e.g., quantity of complains per day) have been reached, permitting a rapid response to a developing situation. The use of sophisticated text mining allows the automated distillation of free-form commentary into sentiments (e.g., percent positive, neutral, or negative comments) and into clustered themes (e.g., product usability). For analysis to be maximally effective, it must be guided by principle 1: attaining clarity on the business problems to be solved. Undirected data mining is worthwhile and can sometimes yields serendipitous surprises, but directed and focused analysis in tight alignment with the original business problem should be the top priority. Seek first to solve the companys pointsof-pain, and then explore the data with an open mind to discover unanticipated associations. Through all these mechanisms, customer feedback is transformed from data into information and knowledge, and from hindsight into insight and foresight.

Figure 2: The Spectrum of Customer Feedback

Gradations of customer feedback exist along unstructured/structured, qualitative/quantitative and customer/ company dimensions. A good VOC program will encompass the entire spectrum of options.

Open-End Discovery

Episodic Viewpoint

Flexibility

VOC
Unstructured Qualitative Customer Initiated Company Initiated Structured Quantitative

Hypothosis Exploration

Longitudinal Viewpoint

Consistency

Source: Allegiance and Peppers & Rogers Group

Listening to customers has always been essential. Doing something with the feedback is becoming critical.

2010 Peppers & Rogers Group. All rights protected and reserved.

PRINCIPLE 3: Act on customer feedback

Unless the company alters some aspect of its behavior toward its customers, it will fail to realize a return on its investment in a VOC program. Those actions can occur at the individual customer level (case management), at an aggregate customer level (change management), and an organizational level (knowledge management). Individual Customer Level. When individual customers provide feedback whether a compliment, complaint or commentthey are providing information that is of value to the company and, as a result, the company should reciprocate and response with value: at a minimum, a prompt acknowledgement of the receipt of the feedback and a statement of appreciation. The timeliness of the reaction is key: as the response time increases from minutes to days, the percent of customers who will not buy again more than doubles.8 In the case of complaints or problems, a companys ability to resolve the issue in a timely and thoughtful fashion engenders more loyalty than existed before the negative incident.9 Making it happen requires an automated case management process in which the subject of the customers feedback is automatically recognized, the communication is routed to the appropriate person within the company according to a set of business rules, and the persons responsibility to reply is tracked (and escalated and reported to management if delayed) to ensure that the loop is actually closed with the customer. Treating a customer in this respectful way serves to repair a damaged relationship or to strengthen a developing one. Aggregate Customer Level. Though the application of principle 2, the analysis of aggregate customer feedback may uncover opportunities for the company to institutionalize improvements in how it delivers the customer experience through a change management process. For example, it may be found that customer engagement is enhanced by interactions with employees in which they go beyond what is expected. Acting on this customer feedback requires translating the abstract insight into tangible employee behaviors (e.g., offering an unexpected product suggestion by asking, Did you know you can also do...?), training on those behaviors, and incorporating them into reward and recognition systems. These behaviors become new clues that customers detect, resulting in an enhanced customer experience.10 Organizational Level. Acting on customer feedback also has a knowledge management component. For example, in the case of a bank with many branches, one of the locations may test and discover a particularly effective technique to overcome a problem identified through the VOC program. By capturing and disseminating that knowledge throughout the enterprise, the business benefit is multiplied. In all these cases, acting on customer feedback implies the sharing of information within the organization. For this reason, a good VOC platform must support row level database security to ensure that the companys business policies concerning access to the customer feedback are enforced.

When an individual provides feedback a compliment, comment or complaint they are providing information that is of value.

2010 Peppers & Rogers Group. All rights protected and reserved.

PRINCIPLE 4: Embed customer feedback into the company culture

When the attitudes, behaviors, beliefs and values concerning the importance of customer feedback become a socially accepted standard inside the organization, then customer feedback has been engrained in the companys culture. Under these conditions, the customer perspective gained through a VOC programis systemically persuasive throughout the enterprise and becomes a central facet of the companys customer-centric purpose and vision. Getting there starts with principle 3acting on customer feedback. When employees throughout the organization see that the voice of the customer is actually being heard, they begin to internalize the criticality of customer feedback to the companys success. Thus, the act of acting of customer feedback itself serves to elevate the importance of the VOC program and, more generally, helps to sustain a customer focus over time. An owner and leader for the VOC program, whether started within a department or across all divisions, helps to ensure its continued visibility and viability. Managing the overall process, setting priorities, coordinating multiple listening channels, and ensuring that results are achieved are all vital. Those results, when broadly communicated, accelerate the embedding of customer feedback into the culture. Consider reporting upon the current state of customer engagement in company town hall meetings and in employee communications, and use storytelling to illustrate how customer feedback is making a difference. Finally, remember that what gets measured gets managed. Linking employee recognition and reward to changes in customer feedback metrics aligns incentives with goals and provides momentum for the VOC program.

What gets measured, gets managed. This principle is especially relevant with VOC programs.

Figure 3: Customer Feedback Strategies

The top two strategic customer feedback actions (planned or underway) to alleviate business pressures (e.g., increasing customer loyalty) are depicted.

Tie employee compensation to performance ratings from customer feedback Establish voice of the customer weightings (i.e., prioritize customer feedback by customer/segment value) Develop alert to drive immediate action based on customer feedback Integrate customer feedback into centralized data repository Link actions taken in response to customer feedback to increased revenues and other financial outcomes Establish method for responding to customer feedback Define best practices for utilizing and deriving actionable insights from customer feedback Create a team or committee dedicated to customer feedback management Create a shared understanding of what customer feedback metrics are important
0% 5% 10%

17%
17%

14%

14%

15%

15%

19%

19%

21% 21% 23% 23% 21% 21%

19% 19% 15% 15%
15% 20% 25%

Source: Aberdeen Group7

2010 Peppers & Rogers Group. All rights protected and reserved.

Achieving Accountability
A VOC program isnt about vapidity of confidencebut, about demonstrated value on capital. Gary Rhoads, Ph.D., Loyalty Expert and Co-Founder, Allegiance Achieving accountability for an investment in a VOC program is widely recognized as being important by a majority (68 percent) of senior executives; yet, less than half that number (29 percent) are actually linking feedback to ROI2. It is not an impossible task, but it does take discipline and dedication, involving the steps of: 1. Identifying the business outcomes of interest 2. Documenting the existing baseline state of those business outcomes 3. Introducing an initiative to enhance customer engagement and assessing improvements in the business outcomes over the baseline

1. Business outcomes. Begin at the end, and consider those identified business outcomes
that are of most importance to the company (see principle 1, page 6), such as customers shareof-wallet or retention. Though independent academic and applied research, it is commonly recognized that these outcomes are influenced by customer engagement. Share-of-wallet, for example, is 23 percent higher for fully engaged as compared to average customers;11 and 80 percent of executives believe their companies customer engagement practices impact customer loyalty12with research evidence supporting that conviction.13 The task, however, is to show that these generally reported effects manifest themselves specifically within your own company.

2. Baseline state. To achieve accountability, it is necessary to understand the existing baseline association between customer engagement and the business outcomes identified in step 1, since every company already has in place some initiatives that drive customer engagement (e.g., customer service and customer relationship building activities). A pulse survey process, in which a representative sample of customers are contacted monthly is used to gather information about their customer engagement level plus reported information on the business outcomes (see months 1-3 in Figure 5). In the case of share-of-wallet, for example, knowing the number of products owned and multiplying it by the average revenue per product converts an abstract share-of-wallet concept into a tangible economic metric on the scale understood by all business professionalsnamely, dollars.

When computing the ROI of a VOC program, the sum of all of the changes in the business outcomes must be considered.

3. Introducing an initiative. Next, an initiative designed to enhance the drivers of customer

engagement is introduced. It could be an enhancement to the VOC program itself, such as a closed-loop complaint management process (see month 4 in Figure 5); or it could be a specific tactic identified through the VOC program that addresses a deficiency in customers experiences. The impact of such an initiative isnt immediatethere will nearly always be a time lagbut, if the initiative is successful, then the business outcomes will trend upward following its introduction (see months 5-7 in Figure 5). The difference between the average post-initiative and pre-initiative business outcomes, divided by the pro-rated expense of the VOC program plus the cost of the initiative, yields an ROI.14 Note that a single improvement in customer engagement yields a positive impact in multiple business outcomes (e.g., both share-of-wallet and customer retention in Figure 5). Thus, when computing the ROI on a VOC program, the sum of all the changes in the business outcomes must be consideredand, in the way, the full range of the impact is captured.

2010 Peppers & Rogers Group. All rights protected and reserved.

10

Figure 4: The Evolution of VOC Impact

VOC programs progress along a developmental path, [1] beginning with the collection of a single metric (e.g., Net Promoter Score), followed by disillusionment and disappointment because it provides little guidance for improvement. [2] The adoption of leading indicators of business outcomes defines the next step in the journey, followed by an unease about how to impact those indicators. [3] A focus upon drivers of those leading indicators takes an organization to the next level, raising concerns about the tactics which may have the greatest influence upon them. [4] When an organization links drivers to leading indicators to business outcomes, it progresses to the next phase, followed by a realization of the need to forecast changes in those outcomes. [5] Finally, with the use of predictive analytics, companies are able to deeply understand the interdependencies and estimate future benefits. Across all these phases, the business impact is enhanced as the sophistication of the VOC program moves from an emphasis on hindsight to insight to foresight.
5a. Predict business outcomes 4a. Measure business outcomes 3a. Identify drivers

VOC Impact

2a. Identify leading indicators 1a. Collect a single metric

4b. But how to forcast them? 3b. But how to impact them?

2b. But how to influence them? 1b. But sowhat?

Hindsight

Insight

Foresight

Source: Allegiance and Peppers & Rogers Group

In addition to comparisons over time, the ROI of a VOC program may also be estimated in a similar way by comparing organizational units during the same period, which has the advantage of controlling for exogenous marketplace factors (e.g., changes in macroeconomic conditions). For example, a bank may contrast the business performance of those branches in which the initiative has been introduced versus those where it is absent, observe differences in customer engagement levels, and correlate those differences to branch profitability. Alternatively, an independent estimate of the quality of the execution of the initiative for each bank branch can be obtained to assess if improvements in the implementation of the initiative are correlated with improvements in the outcomes. For example, in one research study using this technique, bank branches that executed a customer relationship initiative well increased both loyalty and satisfaction of their customers, while those branches in which the execution was poor actually depressed both measures.15 The business justification for a VOC program may also be strengthened by considering: Curtailing cost. Some organizations have 100 or more surveying and feedback tools in use,16 and replacing those with one VOC solution may reduce both the expense of the tools as well as the expense of maintaining (and optionally integrating) diverse databases. Also, improvements to the customer experience identified by feedback have allowed enterprises to reduce expenditures on customer retention programs by 25 percent.17 Improving resource allocation decisions. Should a bank invest in hiring more tellers or in the training of its existing staff? A VOC program may show, for example, that the wait time in line at a bank branch is one of the least important factors in enhancing customer engagement, while the training of tellers in how to make an emotional connection with customers is quite important. In this way, a VOC may guide the wisest allocation of scarce resources. Reducing risk. By catching a problem early through customer feedback and correcting it, the companys exposure to risk may be mitigated. For example, one lawsuit avoided by a
2010 Peppers & Rogers Group. All rights protected and reserved. 11

The business justification for a VOC program can include curtailing costs, improving resource allocations, reducing risk and enhancing marketing effectiveness.

hospital due to a product or process defect may be worth a significant sum; or, reducing the likelihood of a new product failing in the marketplace because it doesnt satisfactorily meet customer requirements may be of substantial value. Enhancing marketing effectiveness. When customer feedback is integrated into a CRM system, it may improve campaign productivity. For example, when leveraging customer sentiment gathered through the VOC program, the response rate to a referral promotion may be improved, or the effectiveness of a customer retention program for at risk individuals. When in doubt, send a scout, advises Rhoads. For companies contemplating a VOC program, using a pilot program incorporating surveys to customers allows a solid economic estimate of the value of improving customer engagement. If the number of engaged customers grows by as little as one percent, the value of improvements in share-of-wallet and customer retention may be significant.13

100
Introduction of Compliant Management Process

$4

Figure 5: Demonstrating ROI for a VOC Program

The comparison of the value of business outcomes (e.g., customer share-of-wallet and retention) before and after the introduction of a VOC initiative allows a company to estimate an ROI (see text for additional explanation).
Business Outcomes ($MM)

80 $3
Customer Engagement Index

60

Customer Engagement Index Share of Wallet Retention

$2 40

$1 20

4
Month

$0
Source: Allegiance and Peppers & Rogers Group

Conclusion
Feedback is the breakfast of champions.Ken Blanchard, author and management expert A VOC program is so much more than the occasional sending of a survey. It is a recognition of the importance of customers to a companys success, and a commitment to include their perspectives in decisions being made throughout the enterprise. It begins with clarity on the business problems to be solved, continues with the practical and insightful analysis of customer feedback, and concludes with the deployment of initiatives guided by that analysis to demonstrably impact those business problems. Through iterations of these steps, customer feedback is embedded into the company culture. Acquiring customer feedback is an essential element of a learning relationship,18 explains Peppers. It allows a company to learn more about its own strengths and weaknesses, and to use those insights to improve the efficiency and effectiveness of its strategy and tactics. n

2010 Peppers & Rogers Group. All rights protected and reserved.

12

CASE STUDIES

Texans Credit Union:

Continuously Improving through Customer Feedback
With assets of $1.7 billion, Texans Credit Union operates 28 branches and serves over 140,000 member with the aim of being their financial institution of choice for banking, wealth management, and insurance products and services. Achieving that vision requires a focus upon members to engage them with the credit union, and that in turn requires the collection, analysis and use of customer feedback. We recognize the importance of engaged and satisfied members, notes Melissa Wozniak, Market Research Manager at Texans Credit Union. For example, shifting five percent of customers from modestly committed to highly committed can drive an additional $1 billion in deposits for a bank with one million customers, according to J.D. Power and Associates.17 We have a long history of using customer surveys, but needed to overcome two critical problems, explains Wozniak. The first was that survey data were scattered around the organization in distinct databases and collected with different tools: employee surveys in one department, episodic customer transactional surveys (e.g., new account openings) in a second, and longitudinal customer satisfaction surveys in yet another. This resulted in silos of information, making cross-analyses very difficult and hindering our ability to draw conclusions. Different wording of survey questions combined with the use of varying rating scales further complicated our ability to hear the voice of the member and take action upon those insights. Second, Texans Credit Union struggled with gaining easy access to its customer feedback data. The use of different data collection tools inside the organization and the use of outsourced vendors that provided only summary findings made the problem worse. The credit union considered creating its own tool to address these needs, but because the time and costs were too great, decided that it was better to buy than to build and acquired the Allegiance feedback platform. It not only overcame both obstacles, but caused the credit union to focus on what matters most. You cant approach all your flaws at once, or youll only create more flaws, Wozniak says. Allegiance points us in the right directionthat solving this problem will have the most impact and so this is where you should focus and have the biggest impact on the bottom line.19 It also allows the discovery of low hanging fruitproblems that are easily solved. From our members, we received unstructured and unsolicited feedback about our monthly statements asking that additional information be included. The request made perfect sense, notes Wozniak. The recommendation was easy to implement, required little cost, and yet demonstrated the credit unions commitment to its values, which include both member satisfaction as well as continuous improvement. The feedback platform is used by the credit union to log and track not only inbound communications from members, but also outbound responses from the credit unioneven telephone calls which are captured by adding a note to the case describing the conversation. If a response or a
continued

This is something that we always wanted to do, but previously we just didnt have the tools to do it.

2010 Peppers & Rogers Group. All rights protected and reserved. 13

CASE STUDIES

resolution of a customer complaint doesnt occur within a specific period, the case is automatically escalated to a manager for attention. The credit union also sends a monthly survey to a representative sample of one-twelfth of its members, so that any single member only receives the survey annually in order to avoid respondent fatigue. This survey allows the credit union know the pulse of member engagement and business outcomes (e.g., willingness to recommend) on an overall basis and by branch location. We found, for example, one branch that excelled in customer engagement, and upon closer inspection of the qualitative comments, learned what they did differently than other branches: they used the names of members when servicing them. We now coach to that behavior in our employee training, says Wozniak. These data are soon to be incorporated into the scorecard used by sales, to reinforce the fact that the quality of service is as important as the quantity of production; and it will impact incentive compensation. This is something that we always wanted to do, says Wozniak, but previously we just didnt have the tools to do it. The commitment to hearing and acting upon the voice of its members is evident among senior leadership. The CEO personally reviews all member feedbackand everyone in the organization knows it. Furthermore, the senior executives are evaluated in part upon the state of member engagement, so accountability for and visibility of the goal are clear.

Nicor National
Using Feedback to Unify Culture and Delight Customers
Nicor National provides energy-related products and services to over 500,000 customers in 15 states, including warranties on home appliances, energy efficiency programs, and heating and air conditioning sales and service. Every year the company has over one million interactions with its customers. Through initiatives that focus on hearing and acting upon the voice of customers (VOC)and the voice of employees (VOE) who serve those customersthe company is building positive relationships and furthering its goal of becoming the leading provider of energy management and warranty solutions across the nation. We listen, we empathize, we solve. We know that just one call or home visit creates a lasting impression of us and our partners, explains Barbara Porter, Vice President of Business Development and Customer Service at Nicor National. For this reason, the company has put in place VOE and VOC solutions from Allegiance to capture and capitalize upon insights from both unstructured comments and structured surveys. As we continue to grow, our biggest challenge is maintaining an unfiltered relationship and communication with front-line employees, notes Porter. Using the VOE platform, the company is able to capture the feedback of those employees in its contact center who directly interact with customers,
continued

2010 Peppers & Rogers Group. All rights protected and reserved. 14

CASE STUDIES

reply to that feedback, and track the performance of its response. We have been able to improve employee retention in our contact center and thereby reduce new personnel training costs that are hundreds of thousand of dollars annually, says Porter. And, a number of great product and service suggestions have come forward that had not been considered previously. The VOE platform is also being used to provide insight about the employees perceptions of how well their managers and leaders are living the companys values. Every time employees starts the VOE system on their desktop, they are given the opportunity to provide feedback on how management is impacting the culture of the company. The importance placed upon creating a unified culture isnt accidental. In fact, building a culture of employee engagement is one of the critical goals for the company, and one of its primary justifications for the investment in a feedback platform. The other is a clear recognition of the importance of retaining customers. We know that a one percent shift in customer retention impacts our bottom-line by hundreds of thousands of dollars annually, explains Bob Bean, Vice President of Marketing at Nicor National. To better understand its customers perspectives, the company has enabled customers to provide unstructured and unsolicited feedback through a contact us link on its website. This feedback is routed to the appropriate group within the company based on the customers concern. Additionally, the company deploys outbound customer satisfaction surveys following a contact center interaction, with open-end comments captured and transformed into customer voice incidents so that they can be addressed and tracked. Almost 30 percent of these outbound surveys have a follow-up action associated with them, so managing them properly is a key component of the customer experience. We have learned, for example, that the customers perception of the value of our energy and warranty products is changing, notes Bean. Through our customer feedback processes, weve been able to keep a finger on the pulse of the evolving needs of our customers. Customer feedback has also helped the company redirect its marketing campaign activity for improved effectiveness, identify new sales channels, and support strategy discussions around pricing. Nicor National provides its energy efficiency and warranty services to utilities and markets them under their partners brand. Those utilities want to know the degree to which we are providing exceptional customer service, notes Porter. And our customer feedback platform allows us to answer that question, thereby providing us an important point of competitive differentiation. As the marketplace continues to change, Nicor National is using its VOE and VOC platform to ensure that the mindset and motivations of employees are aligned with customer needs. Its all about Positivity at Work. Through our customer feedback processes, weve been able to keep a finger on the pulse of the evolving needs of our customers.

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Q&A with Don Peppers

Customer-Focused Business Strategy Leader
Don Peppers, Founding Partner, Peppers & Rogers Group, shares his insights on VOC programs.

Q: Are VOC programs more important today than ever before? A: Yes. Simply stated, the era of the silent customer is gone for good. Customers will make their voices
known one way or another. With a VOC program, a company can channel some of that energy and maximize its value to the firm. In a time when the business environment is extremely volatile, its important to understand what your customers like, what they dont, and why. A company cannot settle for reading the tealeaves of transactional databases anymore in an attempt to detect customers needsits critical to hear directly from customers. Companies should hear what customers want to say, in all its unstructured richness. Filtering feedback through the lens of what companies want to ask has it place, too; but never forget that qualitative input can be especially valuable. The objective is to get the most honest and straightforward feedback as possible, from as many customers as possible, as quickly and continuously as possibleall with the ultimate objective of enhancing customers experiences with your company in order to build stronger relationships.

Q: What are the most common misconceptions about VOC programs? A: Too many companies think that a VOC program is something nice to have, if the money were available; rather than something needed to drive business results. A VOC program may be misperceived as a soft assetbut, its actually hard and real. The faster you can get, understand and use customer feedback, the faster you can respond to it. The faster the response, the more agile the organization. And, the more agility, the greater the likelihood of continued success. A second misconception is that getting worthwhile feedback for making business decisions requires no sophistication. In actuality, it takes not only a companys commitment to hearing the voice of the customer, but also a companys investment in capabilities to collect, analyze, report and act upon that feedback. It also takes the application of scienceinvolving the design of the program, the feedback collection methodology, and the analysis approaches.

Q: Is there a secret of success for realizing a return on a VOC program? A: Think of a VOC program as an integral part of the marketing planning process. To maximize the value of
a VOC program, use the customer feedback to sharpen and focus product development and launch plans, for example, and to supplement and guide other marketing research and database analysis activities (e.g., segmentation studies). In this way, the impact of the VOC program is multiplied.

Q: What is your advice on how to best demonstrate the value of a VOC program? A: The most persuasive arguments are almost always anecdotal. First, look for opportunities to capture stories about how a customer suggestion beneficially influenced a business decision, or about how a customer complaint was resolved with great success. Second, share these stories with managementand, with employees throughout the company to vitalize and to sustain the commitment to the VOC program. You need to maintain the numbers, too; keeping counts of the number of customer feedback suggestions received, for example. And, you need to be able to connect-the-dots, showing that customer feedback has guided the selection and the design of initiatives to enhance customer engagement, and that improved levels of customer engagement do, in fact, deliver enhanced business results.

2010 Peppers & Rogers Group. All rights protected and reserved.

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Allegiance, Inc.
Allegiance, Inc. offers next generation feedback and voice of customer (VOC) management software to help organizations grow customer and employee loyalty and engagement. The Allegiance Engage software platform facilitates survey creation and gathers responses and unsolicited comments in real-time into a centralized online system, saving time, effort and money. Allegiance solutions measure customer and employee engagement, revealing precise actions to grow engagement and increase revenue. Allegiance Enterprise Feedback Management (EFM), predictive analytics, and professional services combine to help businesses capitalize on feedback and engagement. In 2009, Allegiance was ranked 5th on the list of fastest growing, privately held software companies in the U.S. by Inc. Magazine. For more information about Allegiance, visit www.allegiance.com.

Peppers & Rogers Group

Peppers & Rogers Group is dedicated to helping its clients improve business performance by acquiring, retaining, and growing profitable customers. As products become commodities and globalization picks up speed, customers have become the scarcest resource in business. They hold the keys to higher profit today and stronger enterprise value tomorrow. We help clients achieve these goals by building the right relationships with the right customers over the right channels. We earn our keep by solving the business problems of our clients. By delivering a superior 1to1 Strategy, we remove the operational and organizational barriers that stand in the way of profitable customer relationships. We show clients where to focus customer-facing resources to improve the performance of their marketing, sales and service initiatives. For more information, visit www.peppersandrogers.com

Author
With over fifteen years of marketing experience and advanced study in cognitive psychology, research methodology, and statistics, Thomas Lacki, Ph.D., is privileged to contribute to the creation of higher value solutions through best thinking for the clients of Peppers & Rogers Group. In the role of Senior Advisor, 1to1 Faculty, he leverages his own expertise in understanding individuals behaviorally and analytically to achieve measurable relationship marketing results today, and to elevate the practice of relationship marketing tomorrow. Tom has shared his insights with conference audiences throughout the world, and has published research and white papers about CRM.

2010 Peppers & Rogers Group. All rights protected and reserved.

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Endnotes
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Vittal, S. and Frankland, D. (2009) How Customer Intelligence Can Bridge the Social and Offline Divide. Forrester Research, Inc. (2009) Voice of the Customer (VOC) Industry Research Report: Insights and Trends for Todays VOC Practitioners. Retrieved November 15, 2009 from: http://www.allegiance.com. Peppers, D. and Rogers, M. (2008) Rules to Break & Laws to Follow: How Your Business Can Beat the Crisis of Short-Termism. Hoboken, NJ: John Wiley & Sons. Peppers, D. and Beauchine, F. (2009) To Spur Success, Engage and Enable Employees. Retrieved November 15, 2009 from: http://www.1to1media.com Peppers, D. and Rogers, M. (2005) Return on Customer: Creating Maximum Value from Your Scarcest Resource. New York: Doubleday. Haeckel, S. (1999) Adaptive Enterprise: Creating and Leading Sense-and-Respond Organizations. HBS Press. Zabin, J. (2009) The ROI on Customer Feedback. Aberdeen Group. LaMalfa, K. (2009) The Nine Habits of Leading Customer Feedback Managers. Retrieved November 15, 2009 from: http://www.allegiance.com. (2009) Turning Customer Complaints Into Profitable Opportunities Using the Six Sigma Tool Kit. Retrieved November 15, 2009 from: http://www.sixsigmaiq.com/article.cfm?externalid=388. Berry, L., Carbone, L. and Haeckel, S. (2002) Managing the Total Customer Experience. MIT Sloan Management Review, 43(3), 85-89. Flade, P. (2006) Unlocking Customer Service Excellence. Retrieved November 15, 2009 from: http://gmj. gallup.com/content/20764/unlocking-customer-service-excellence.aspx. (2007) Beyond Loyalty: Meeting the Challenge of Customer EngagementPart I. Retrieved November 15, 2009 from: http://www.adobe.com/engagement/pdfs/partI.pdf. LaMalfa, K. (2008) The Positive Economics of Customer Engagement. Retrieved November 15, 2009 from: http://www.allegiance.com. Discontinuing the initiative and observing a return to the baseline performance further strengthens the argument; however, the opportunity cost of doing so may be prohibitively large. Colgate, M. and Danaher, P. (2000) Implementing a Customer Relationship Strategy: The Asymmetric Impact of Poor Versus Excellent Execution. Journal of the Academy of Marketing Science, 28(3), 375-387. Thompson, E. and Kolsky, E. (2006) How to Decide Which Feedback Management Tool Is Right for You. Gartner Research (G00140842). Kolsky, E. and Moaz, M. (2003) Using Customer Surveys to Improve Business Processes. Gartner Research (SPA-19-1128). Peppers, D. and Rogers, M. (2004) Managing Customer Relationships: A Strategic Framework. Hoboken, NJ: John Wiley & Sons. Sisk, M. (2009) Customer Satisfaction: Find and Nurture Your Biggest Fans. Bank Technology News, 22(6), 28.

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