Customer Service Problems Driving Churn as fast as advertising delivering customers
February 21, 2010 Leave a comment
Advertising spend is increasing again in 2010 (hurrah), but the ‘Theme park bad-visit effect’ may hurt the advertisers as we exit an 18 month period that has decimated staff morale and general goodwill.
The Theme park study is research that found that 1 bad visit to a very well known US company’s theme parks requires 7 positive subsequent visits to restore the customer love and consistently result in positive word of mouth from the customer.
It is implied that companies halt advertising when they have serious customer service problems yet companies have an instinct to go the other way and ramp up marketing spend to talk their way out of their problems. This only brings more of their total available universe of customers in to a negative environment that they will bounce out of and be xx% more expensive to ever acquire again.
We know UK staff have just come through a tough environment which tends to dent morale, a key component of great customer service.
Research my wife did at IAC Interactive Corp years ago showed that 2 negative experiences in less than a year more than quadruples normal abandonment (detailed research I cannot share but it statistically modelled experience to frequency and emotional involvement of customer interaction and the order of the events)…roughly speaking…rude Bentley salesman is dead in water at 1st move, rude corner shop guy is an allowable inconvenience that should be avoided after 2nd or 3rd time.
At 3 or above negative experiences (over say 90 days) it becomes almost impossible to use marketing alone to win the customers goodwill back and even more to get them to be a brand advocate. Both will usually be at a cost that exceeds the customers LTV.
Recently I noticed a slump in UK customer serviced and I like to talk from facts and not opinions so over the last 6 months I have used my old investigative journalism skills to look at some companies I am a regular customer with, and also look at a 10 year old case I was involved with.
***This research is limited to a part time qualitative research, opportunistically asking high gain questions when I have a few minute spare in course of my personal consumer relationship with the company. Case studies drawn from conversations with the staff and management of each company who are often extremely open. No brands stated***
Case 1: The Restaurant that has fast staff running out the door
This large chain of trendy restaurants recently has developed a very high staff turnover, evidenced by stressed looking shift leads hovering behind the tills doing real time training on POS and processes. Too many floaters/floor walkers can be a signal of high staff turnover in a business.
(If you see INS floaters at a US airport immigration point, get a good book out and forget that connection).
The increase in food delivery delays caused by communications errors alone rather than sheer workload is a consultancy touchstone, usually drawing your attention to potential problems in organisations management.
These highlight poor training and team cohesiveness issues and not just, ‘Jeez these guys’ are busy and growing fast. Cold but seemingly fresh looking food is a signal of poor communications and teamwork in a restaurant as is lots of movement by staff without plates/condiments etc…They are usually doing communication runs.
In this restaurant morale has collapsed at some branches and the trendy reputation is being replaced by word of mouth ‘sweatshop / move on to somewhere that cares’ reputation in staff circles. The loss of unique culture triggered by a management ‘work harder, faster, more more more’ led to some original store managers leaving and now a good willed but inexperienced management is leading many restaurants. The trendy reputation was a rod for their back, attracting great people with high expectations who in themselves were hard to buy back from the edge when the company ‘went corporate’ which is almost inevitable in any company that intends to grow.
Perhaps the tragedy is that throughout the recession they were a very busy and profitable chain benefitting from the downgrade in eating out that increased their average customer visits. However at a guess I imagine someone in the business wanted to feather the bank account for harder times ahead and by doing so risked the business, or they wanted to fund new store openings which are now fast and frequent.
In the case of expansion whist wages are capped, a basic business rule may have been broken.
Don’t spend large amounts of money in a noticeable way whilst staff are on a wage or benefit freeze.
Only CEO’s and CFO’s feel the warm glow of strategic advancement while pay is frozen. The foot soldiers probably didn’t take a pay cut to £1 year like a CEO, but neither will they have been likely to have been coincidentally awarded £6m in stock. They just leave or stay and act up to the point they drown out the diminishing hero staffers that remain. The wheels start falling off.
In this restaurants London branches I’ve now witnessed numerous disappointments at tables near me but few complaints, though the rate is increasing many times faster than their food prices which are at an inflation busting (12% up y/y) on some items. While I’ll tell the manager when I’m not served well, and always ensure I get the food as I like it (and come back), my table buddies often shrug and just don’t come back. Luckily these restaurants advertising budget is low and customer loyalty unusually strong. Store openings are rapidly increasing at around the same rate as the collapse in customer service culture. This chain will be here to stay, but it is going to get painful soon.
Case 2: The Big Utility who wanted everyone to love them
Management were worried about losing customers to a more nimble competitor and increasing commoditisation of their services. They were experiencing high customer churn due to poor customer service and sluggish customer growth due to slow productisation of their otherwise industry leading innovations. The management went on a kind of ‘love thy customer drive in the way you attempt to buy an upset child’s affections’ drive, This empowered huge swaths of staff to issue credits to complaining customers.
The simplistic manner in which account credits were enabled should have been a red flag from day one. A senior manager potentially feeling under pressure (and probably months behind due to procrastination/politics) declared “let’s keep this simple so everyone understands and we get fast results”. I imagine this senior type was measured to soft metrics such as brand loyalty or maybe harder metrics such as retention … but not a complex financial scorecard.
The cry of ‘let’s keep this simple’ drowned out any notion of ‘let’s do this right’ or more business speak-phrased ‘ensure effective and efficient management of it’.
Talking to one of the programme leads years later they corrected me and said ‘that’s consultant doublespeak Bill…’effective and efficient..you are repeating yourself’. They probably were still not ready for the lesson in how you can be very efficiently ineffective. But the attitude alone was interesting and belied a righteousness that is remarkable based on what happened next.
Several months after the initiative launch the execs found out that the ‘call centre monkeys’ (one 22 year old managers phrase not mine…I was ex ‘Monkey’ in his language!) had outsmarted them and given away huge sums to boost every possible stat you can imagine a call centre person has. In an environment where you have to put a code in your phone that times how long you are at the toilet, there is no love lost.
In fact the incentives for customers even drove down the quality of retained staff..Imagine you are on your third customer complaint of the week for poor interpersonal skills and about to get a HR visit.
“Err..my managers not in right now but I’ve realised this must be frustrating for you, let me give you £100 off your bill.”
Ta Da..Happy customer who may even write in and say how great you are and get you promoted!
The cat starts buying lives with his owner’s money.
I used to work in a call centre many moons ago, like bars and hairdressers…they are an environment where the underrated and underappreciated can run riot while the spotty faced fast track management stream get eaten alive (and don’t notice the first few hundred gnaw marks).
I once had to fire half a dozen call centre staff in a day for unrelated schemes that a MENSA member would have been hard pressed to think up. (There is a reason very senior call centre managers are rumoured to be paid as much as NHS surgeons)
The simple rules had meant all staff of a certain grade were equally able to dish out cash or credits, irrespective of their personal track record or alignment or knowledge of the way the company measured our strategic goal.
Call centres are often considered cost centres not profit centres and so are measured quantitatively rather than qualitatively. In a world where you don’t feel human relationships with your upper management and the only human connection is at the end of a phone, nice people do favours to nice people.
Long story long…it was a financial disaster.
A year in to the programme someone senior went to spend more time with their family and the pendulum swung. Now you’d be hard pressed to give the customer 50 pence if a company van had just driving through their living room for a laugh. The disproportionate swing saved a fortune, even more than before the ‘buy their love’ campaign. But locally managers lost almost all their discretion as part of an exec culture not to trust the monkeys again.
The best people left and it took years and tens of thousands of customers before a well thought out system, fraud limited and nuanced to customer expectations re-emerged. No one ever admitted the ‘lets rush it and do it simple’ rather than right was the main cause’. The new system for refunds was not simple and required someone who bothered to read the documents and flow charts. By virtue this meant most disputes ended up with someone who had a clue, had professional personality.
As far as I know that system and its creator are still around in the company and the stats look ok.
Bill Staples ---/--- Bill on Business 