35 customers.pdf
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BY ROB MARKEY, FRED REICHHELD,
AND ANDREAS DULLWEBER
Closing theCustomerFeedback
LoopII'
I If
In a resource-challenged economy,
empower your frontline employees
to respond fast.
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a transaction to his account - grabs her
attention. The client has indicated that
he'swilling to discussthe issue in a follow-
up call, so Pasquale makes a note to try
to reach him that day. Surprising as it
may seem, she usually looks forward to
such calls.They giveher a chance to findout what's on customers' minds and solve
their problems - and potentially turncritics into fans.
Every day, managers at each ofSchwab's 306 branch offices and fivecall centers conduct a similar drill. It's
an integral part of a new focus on di-rect customer feedback that the firm's
founder, Charles Schwab, credits with
turning around the company. When hecame out of retirement to take its helm
in 2004, the business was struggling."We had lost our connection with our cli-
ents - and that had to change;' Schwabconfessed to shareholders in the annual
report. The new customer feedback sys-
tem has helped reestablish that connec-
tion. In 2008, the firm saw its revenues
increase by 11%and the scores that cus-
IDEAIN BRIEF
.It's never been more impor-tant to keep the customers
you already have - it's much
cheaper than acquiring newones. But elaborate customer
research may be beyond this
year's budget.
. Many companies have suc-
ceeded at retaining customers
by asking them for simple
feedback - and then empower-
ing frontline employees to act
swiftly on that feedback.
. European manufacturer
Grohe, for example, turnedaround a decline in market
share and used its sales force
more effectively after imple-
menting a simple feedback
loop from the distributors whosold the company's products.
out to spend time in the field can gener-
ate fresh insights, but few managementteams sustain such efforts - and even if
they do, they often struggle to convert
of the customer experience, which they
draw upon to make process and policy
refinements.
The strongest feedback loops domore
than just connect customers, the front
line, and a few decision makers in man-
agement, however; they keep the cus-tomer front and center across the entire
organization. A number of tactics, such
as hiring "mystery shoppers" to test cus-
tomer service or arranging periodic fo-rums between employees and customers,
help strengthen this organization-wide
focus. One approach that we believe
works well across a range of industries
is the Net Promoter Score (NPS), which
one of the authors of this article, Fred
Reichheld, created seven years ago.
NPS immediately categorizes all cus-tomers into one of three groups - pro-
moters, passives, and detractors - allow-
ing employees throughout a company to
see right away whether a customer ex-
perience was a successor a failure - and
why.NPS isgenerated by asking custom-
ers a single question, "How likely would
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ing it from 0 to 6 are detractors. NPS is
the percentage of promoters minus the
percentage of detractors. Customers arethen asked to describe why they would
be likely or unlikely to recommend the
company. The insights gathered from
their answers enable employees to
quickly identify issues that create de-
tractors - and the actions required to ad-
dress them. (For more on NPS, see"The
One Number You Need to Grow;' HBR
December 2003.)
Gathering Feedbackon the Front Line
Saythat thousands oftransactions occur
daily between customers and frontline
employees at your company. Each is an
opportunity to create a new promoter.
But which customer experiences matter
the most? Wehave learned that the most
important interactions are "moments of
truth;' those relatively few points of con-
tact that hold the greatest potential to
delight - or alienate - an organization's
customers. As they mine the steady
flow of customer feedback, companies
Eachtransaction is an opportunityto
create a new promoter.Butwhich
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CustomersClosing the Customer Feedhack Loop
claims facility, and call center maintain
a "compliment database;' where theyregister feedback that praises frontline
employees by name. Individual employ-
ees' successes are celebrated at regular
office "town hall" meetings hosted by
a senior Allianz executive.
Managing Change Through
Customer Feedback
For many companies, the route to the
end customer is circuitous. They sell
their products to distributors, retail-
ers, and other intermediaries. Frontline
sales reps typically have little incentive
or ability to reach beyond their imme-
diate customer and connect with the
people who end up choosing or using
the products.
That was the situation that Grohe, a
European manufacturer of premium
kitchen and bathroom fixtures, found
itself in. Grohe sells its products in 130
countries through more than 20 divisions,
to customers like home-improvement
chains, hardware stores, and building
GiveCustomersaVoice
inRunningYourBusiness
Many companies have discov-
ered that closed-loop customer
feedback systems can energize their
frontline workers. To inspire customer-
centered learning throughout an orga-
nization, however, you also need feed-
back loops in the executive suite and
the middle ranks. There, customer input
can influence decisions on everything
from where the company will compete
to product development, pricing, poli-
cies, and processes.
The top-level strategy loop.
Direct input from customers can help
make strategies coherent. Allianz, a
Munich-based financial services firm,
uses Net Promoter Scores to bench-
mark the strengths and weaknesses
of its major business units around the
world. Annual NPS surveys measure
how each operating enterprise (OE)
Integration into the learning loop
with customers can help functional
managers avoid the wrong trade-offs.
For instance, instead of trying to hit Six
Sigma quality levels at every touch-
point - which can be prohibitively ex-
pensive - companies can learn to focus
on the few that really build or destroy
loyalty.
For American Express, one of those
touch points was the replacement of lost
or stolen charge cards. While combing
through Net Promoter Scores and cus-
tomer transactions, company analysts
saw that initial requests for card replace-
ments went unresolved at about twice
the rate of other call center requests.
Even more alarming, the analysts
discovered that the customers request-
ing replacements were some of the
company's biggest spenders. Follow-up
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easeof installation, dependability - that
were Grohe's competitive advantages.Grohe quickly launched programs
to address these shortcomings. Sales
reps began sponsoring workshops in
distributors' showrooms to teach con-
tractors how easy the products were to
install. They provided new floor and win-
dow displays to showcase the products'
decorative appeal. And they recruited
a select group of high-volume distribu-
tors into an elite "Grohe Club," offering
incentives and extra sales support. To
close the feedback loop and determine
whether the techniques were boosting
customer loyalty and sales, Grohe con-
ducted regular NPS surveys with the dis-
tributors. In the year after it launched
the new program, Grohe saw its NPS
climb more than 20 percentage points.
The company also uses NPS in con-
trolled experiments to field-test ideas
before rolling them out systemwide. For
example, in one of its markets, the com-
pany began tracking how often sales
reps visited their customers and what
effect the number of visits had on NPS.
It found that scores spiked at three visits
and began to fall off with more frequent
contact. By cutting back on the unpro-ductive extra calls in most of its sales
territories, Grohe freed up an estimated
25%of its selling capacity.
At companies where strong customer
feedback systems take hold, business-
unit leaders and frontline employees
start to own customer loyalty the same
way they own their targets for revenue,
profits, and market share. Indeed, in-
creasing positive customer feedback
and meeting conventional financial ob-
jectives are becoming one and the same
goal. Analysts at Grohe, for instance,
have calculated that a 10%improvementin NPS correlates with a six- to seven-
percentage point increase in revenue
growth.
As employees at Grohe, Schwab, Alli-
anz, and other companies we've worked
with have seen, you can't fix problems
you don't know you have. And unlessyou keep the customers you already have
coming back for more and recommend-
ing your company to their friends and
colleagues, it's hard to grow a business. \J
RobMarkey ([email protected])
is apartner in the New Yorkoffice of
Bain & Company and leader of thefirm's
global Customer Strategy and Marketing
Practice. FredReichheld (fred.reichheld
@bain.com) is a Bain Fellow and a lead-
ing authority on customer loyalty. He is
the author of The Ultimate Question:
Driving Good Profits and True Growth
(Harvard Business Press, 2006). Andreas
Dullweber (andreas.dullweber@bain.
com) is a Bain & Company partner
based in Munich, where he leads the
firm's European Customer Strategy and
Marketing Practice.
~
Reprint R0912C
Toorder, see page 131.