The Case for Customer Service Training

"Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence."
John Adams

Research makes it clear that a formidable plan and distinct culture encompassing customer service/care is critical to the life of an organization. Customer service affects every aspect of an operation including, and not limited to, customer satisfaction and loyalty, RevPAR, profitability, overall experience and asset value.

Source: White House Office of Consumer Affairs - Concerning unhappy guest

  • 96% do not complain to anyone who can help them
  • 90% with unresolved complaints will never return
  • 60% with resolved complaints will return
  • 95% will return if they feel their complaint was resolved quickly

This study reveals that:

  • On average for each customer who was "wronged," there are approximately 25 others who remained silent.
  • On average each person in this silent majority will, by word of mouth, tell between 8 and 16 people - an average of 12 - about their complaint. (Over 10% will tell more than 20 people)
  • When you do the math, a potential 300 people can be influenced by just one negative situation.

The impact:

  • Input your number of dissatisfied customers:
  • Take this number of dissatisfied customers and multiply it by the silent majority who don't speak out of "25" equates to _________ potential dissatisfied customers.
  • Take this total of dissatisfied customers and the 25 each ones tells and multiply times the 12 other people they will tell and potentially influence not to buy your product or service = ________
  • Multiply times an estimated average daily rate of $______ which equates to the potential lost revenues of $_________.
  • The research also indicates that if you make a sincere effort to remedy these complaints and regain customer's good will quickly, 82-95% will stay with you. Based on this with a proactive process of customer service the recovered revenue would be $______. This is a key foundation of what has led competitive brands to offer the 100% guarantee which holds hotels accountable and motivates them to solicit and solve the problems quickly and proactively.
  • In addition, this math only takes into consideration the 4% of guests actually complain. Consider the impact of the other 96 out of 100 who never complain.

Source: J.D. Power North America/D.K. Shifflet customer-satisfaction-important

  • Two of highest rated consumer satisfaction evaluators in the hospitality industry are J.D. Powers and D.K. Shifflet. These consumer satisfaction evaluators give a brand insight into how they are performing and also let the consumer know what experience and value proposition they can expect.
  • Research also indicates that the higher the level of customer service created the more value perceived. Consumers associate value with price. The higher the value the higher the price the customer is willing to pay. Price has a direct affect on RevPAR and overall profitability.
  • J.D. Powers and D.K. Shifflet results affect the buying patterns of our customers.
  • The hotels that ranked 1st through 5th on the J.D. Powers guest satisfaction study have either had intensive customer service initiatives that remain a priority or customer service is a brand foundational core value.

Source: Harvard University Survey & Business Review Research

Happy employees create happy customers and lowering turnover delivers both more revenues and higher profits

  • Retaining 5% of your business is a huge financial advantage to your business. It can increase the profits from between 25 to 75 percent.
  • The cost to replace a manager is estimated at $5000 in total. Unhappy employees leave and replacing them has a direct impact on profit.

Source: Executive White Paper - SITE Foundation (The importance of caring for the internal customer)

  • Industry turnover rate hovers between 78.3 percent and 95.4 percent nationally as an average.
  • Overall, higher levels of motivation and motivated performance translate into a 53 percent reduction in worker turnover.
  • It will cost roughly 100% to 200% of a line level employee's base salary to recruit and train the replacement.

Source: Why Guests Don't Return - (U.S. News and World Report)

  • 1% They die
  • 3% This was a one time trip, or they were relocating and staying while doing so
  • 5% Loyal to another hotel
  • 9% Competition took them because they were stronger at the time for this guest
  • 14% Product was not a match fore the guest
  • 68% Attitude of indifference

Source: "The Service Profit Changing: How Leading Companies Link Profit & Growth to Loyalty, Satisfaction, and Value" by James Heskett, W. Earl Sasser, Jr. & Leonard A. Schlesinger

Service Profit Chain

  • Leading global companies increasingly realize that their success or failure hinges on their ability to retain the best customers and create value around them.
  • Costs imposed by dissatisfied customer are perhaps more important. The dissatisfied customer buys less over time, demands more service than a satisfied customer and has the power to dissuade potential customers from doing business with your company.
  • Localized or property specific standards and practices around customer engagement may vary. The processes that lead to customer alignment and satisfaction need to be consistent on a global basis. It is important to understand the sales or buying cycle prior to beginning the measurement process.
  • A team analyzed a company and obtained data from two quarters. The sales data for each individual company was linked to the satisfaction scores for the same company. The analysis of the relationship between customer satisfaction and quarterly sales growth indicated units with stronger satisfaction scores also had stronger sales growth. In fact, a 6 percent change in the proportion of customers who were highly satisfied was associated with a 5 percent change in profitability.
  • The overall study results of several companies indicates a clear correlation between customer satisfaction and sales performance:

Customer Satisfaction

Sales

+6%

+5%

+3%

+2.5%

+1%

+.7%

-1%

-.9%

-3%

-2.5%

  • The service profit chain puts the link between customer satisfaction and profit at the center of the model. This is the focus of Heskett, Sass and Schlesinger. The model connects customer satisfaction to several key organizational variables such as employee satisfaction and tenure, as well as financial performance. However, the key link is between customer satisfaction and profitability.
  • Research demonstrated that a highly satisfied customer is six times more likely to re-purchase than a customer who is merely satisfied. This is a significant fact when applied to your business. It sounds easy, yet the statistical relationship between satisfaction and profitability can be obscured if proper and careful methodologies are not followed.
  • Authors' related conclusions:
    • The stronger the guest satisfaction, the stronger the sales growth.
    • This is imperative with short buying cycles like a hotel. Longer cycles take more time to impact guest satisfaction.
    • Satisfied customers stay customers.

Source: Customer Satisfaction and Profitability: The Link - 12-14-06

  • Research demonstrated that a highly satisfied customer is six times more likely to re-purchase than a customer who is merely satisfied.
  • Research found that there was a statistically significant relationship between customer satisfaction and profitability with satisfaction accounting for between 1 and 10 percent and 10 percent variance in the profitability.
  • In fact, a 6 percent change in the proportion of customers who were highly satisfied was associated with a 5 percent change in profitability.
  • Research of a major hotel-resort company communicated to all stakeholders its commitment to award-winning customer service through its "Five-Star" service. Employees received extensive training on how to provide superior service, and have their compensation and awards tied to satisfaction and meeting customer expectations. Shareholders saw this commitment as a key focus of the Chairman's message in the annual report, and perhaps most significantly in the 20 percent increase in profitability the company recorded over a 3 year period.
  • Train, motivate, and organize human resources to support the customer mission: leading companies build an organizational structure, capabilities and incentive systems to support a customer-centric strategy. Departmental cross training programs are popular in this area.

Source: Customer Care and Increased Profits - from the 1995 Customer Care and Profit White Paper

Heskett, James L., W. Earl Sasser, Jr. and Leonard A. Schlesinger (1997). "The Service Profit Changing: How Leading Companies Link Profit and Growth to Loyalty, Satisfaction, and Value," The Free Press, New York.

  • Firms that delivered better customer value than the competition grew and prospered. Firms that delivered worse customer value withered and died.

The Value Proposition Component

  • Understanding what factors shape a customer's value perception is important. But equally important is anticipating where a value proposition will be in two, three, or four years.
  • Studies have shown that the best predictor of share of spend is the customer's perception of value. The greater the customers' perception of value, the greater the share of pocketbook that a firm will have.
  • Good value leads to higher customer loyalty and retention. Good value leads to higher market share. Good value leads to reduced operating costs. Good value leads to more positive attitudes among both customers and employees. These improved performance measures then lead to improved profitability and better stock market performance.
  • Delivering good value enhances market share by:
    • Enhancing sales and marketing effectiveness.
    • Customer turnover is normally highest among new customers, those who have dealt with a firm less than one year. By providing high value, a firm will retain a larger proportion of these new customers. This means fewer new customers have to be acquired to replace those who defect.
    • By delivering good value, the firm will lose fewer customers of any type.
  • In some industries, value is the single best predictor of market share.

The Cost Reduction Component

  • Firms that deliver high value typically have lower cost structures than their competitors. High value firms pay more attention to the customer; they listen better to what the customer says, and then they use the customer as the key driver for continuous process improvement.
    • For example, GTE Directories, a Baldrige Award winner, achieved annual cost reductions of 3.5 - 5% as it became more customer-focused.
  • A second major reason for cost savings flows from a more stable customer base. Churning customers, adding new ones while old customers depart, is costly, and new customers are heavy users of customer service activities.
    • For example, Hewlett-Packard finds that over 70% of its millions of calls annually at its customer service center come from LaserJet printer owners who have purchased their printer within the past two months.

The Employee Component

  • Employee attitudes and employee retention are higher at firms that deliver high value to their customers. In particular, the linkage between employee satisfaction and the customers' perceptions of service quality are strong and positive. Positive, enthusiastic employees build positive relationships with customers. Disgruntled employees convey negativism both directly and indirectly. The employee-customer relationship is directly influenced by employee attitudes.
  • Satisfied employees are willing to suggest ways of innovating and improving an organization. Disgruntled employees are often cynical about changes and are usually not willing to improve. The result is that intra-organizational communication, trust, and employee satisfaction are strongly related to innovation and continuous improvement.

The Complaint Component

  • The customer is truly the ultimate judge of quality. But a customer satisfaction program alone is often insufficient. We must proactively develop relationships with our key customers to learn their future needs, where they will be in one or two years. Since few organizations are perfect, we must develop customer complaint handling systems that transform disgruntled customers into satisfied, loyal customers. And for those cases when a firm loses a customer, we must be able to pinpoint exactly why the customer departed and use the situation as a learning experience. For a firm to be truly customer driven, all elements must be harmonized and focused on the customer.

The Profit Component

  • Firms that deliver high customer value, relative to the competitors in their industry, are more profitable. They grow faster and have higher profit margins.
    • The American Customer Satisfaction Index surveys several hundred firms across numerous industries. Their research shows that firms delivering high customer value are consistently more profitable than firms with lower value perceptions.
    • The PIMS studies (Profit Impact of Market Strategies) involve thousands of firms and over five thousand business units. The primary goal of the PIMS studies is to determine which factors drive profitability in a business unit. Though not traditionally measuring value, the PIMS studies found the market perceived quality (how customers viewed product and service quality relative to the competition) was the single best predictor of market share which in turn lead to higher return on investment.

Source: Customer Satisfaction Profit Report

Customer-centric organizations can deliver satisfaction improvements effectively by following four principles:

  1. Drive customer focus into business and strategic objectives: leading companies make customer focus a key element of the company's overall strategy to differentiate themselves from competitors. Satisfaction becomes a primary theme for top management in communications with broad range of stakeholders. Putting the customer first becomes part of the corporate positioning and differentiation in the market. Senior managers spend a significant amount of time personally driving and preaching the doctrine of satisfying their most valuable customers.
  2. Re-design customer interactions and supporting processes to serve high-value customers: companies should redesign customers facing processes and systems based on their understanding of the priorities of hi-value customers. A leading hotel chain has established separate check-in procedures for business and leisure travelers to better focus on the distinct needs of each group.
  3. Train, motivate, and organize human resources to support the customer mission: leading companies build an organizational structure, capabilities and incentive systems to support a customer-centric strategy. Departmental cross training programs are popular in this area.
  4. Apply rigorous "end-to-end" measurement: leading companies constantly refine their understanding of customer economics and the drivers of satisfaction based on clear metrics. Continuously assessing customer satisfaction and soliciting feedback from customers to improve understanding of their needs is critical.

External Industry Guest Satisfaction Models

Source: Southwest Airlines

  • SWA's culture is strong because they are fanatically committed to a culture/cause resulting in low turn-over and highest customer service ratings in the industry.
  • Culture is one of the most precious things in this company so they believe they must work harder at it than anything else. It encompasses beliefs, expectations, norms, rituals, communication patterns, symbols, heroes, and reward structures.
  • Cornerstones are the foundation that define beliefs.
  • Hiring practices - The company is religious about hiring the right people - people who fit into their culture first.
  • Obsessive about top down demonstration of the culture.
  • SWA believes employees come first.
  • SWA is only interested (hires) in people who are motivated to help other people - this is at the core of their culture and customer service success.
  • SWA has become a loving place to work because of the people who work there.
  • Love is their cornerstone and it is defined as action-oriented, patience, kind, generous, courteous, affirming, compassionate, extends grace and forgiveness, doesn't guarantee approval, is tough and gutsy, and embraces humility.

Source: Safeway

  • Top down demonstration of culture is a must.
  • Core values - sincerity, support, respect value, friendly.
  • Employees are instructed to greet each guest and execute a five foot rule.
  • Company hires undercover evaluators to ensure accountability.
  • Escort guest to product.
  • Anticipate guests' needs.
  • Sincerity.
  • Employee first culture.
  • Strategic direction and expectations about customer service standards are initiated from the company. Each store is empowered to determine the guidelines they will use to integrate these expectations. Tough on strategy, easy on tactics.

Source: Trader Joes

  • It is about the culture not service training
  • Focus is on hiring the right talent and then incorporating a fun work environment.
  • Don't have a manual - it is about being friendly and fun.
  • Their strength is hiring people that match the customer experience they want to deliver and smart buyers.

Other Information

Rewards & Recognition

  • Corporation spending on customer satisfaction exceeds $600 million dollars annually.
  • Effective compensation systems must link to customer satisfaction and should integrate
    • What your customers expect
    • Integrate the customer satisfaction survey results
    • Clearly identify what factors should affect rewards
    • Balance customer satisfaction with employee productivity and return on investment (ROI)
    • Source: Inside Research
  • Associate satisfaction with the job and positive environment/morale impact the likelihood of retention. According to McKinsey and Company, 65% of respondents in a study cited not "feeling valued" or "insufficient recognition or reward" for leaving previous employer
  • Source: War for Talent, 2000
  • "Recent studies conducted by the business Research Lab (Hauppauge, N.Y.) have shown that the correlation between the length of time people intend to stay with their current employers and "soft" factors - like recognition given for work well done or pride in the employer - is more statistically significant that the longevity/monetary reward correlation" (BCP Handbook). Praise and Recognition in the forms of notes, cards, or public presentation among teammates share the sense of accomplishment. This supports a culture that focused on employees to gain in the customer satisfaction game.
  • According to a Wichita State University study, the top five NMR motivating techniques are:
    • Personally congratulating employees who do a good job;
    • Writing personal notes about good performance;
    • Using performance as the basis for promotion;
    • Publicly recognizing employees for good performance; and
    • Holding morale-building meetings to celebrate successes.
  • Key to the Customer Service training is a blended approach to rewards and recognition

Renie Cavallari is CEO and Chief Inspirational Officer for Aspire, an international training and consulting company positioning organizations to achieve optimum performance. For more information on how to improve your manager's effectiveness and get more with the staff you have talk with Renie directly at www.aspiremarketing.com/blog or call 602-392-0700 to sign up for coaching training.

define customer service, customer retention, Customer Service Training, free customer service training material, why customer satisfaction important

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