John O’Connor – Page 5

Service Recovery Paradox – Fact or Myth?

Posted on April 8, 2021 at 9:55 am.

This blog is about a well-known business concept called the Service Recovery Paradox (SRP).

What’s SRP? It’s a pretty simple theory. A good recovery following a service failure can turn angry, frustrated customers into loyal ones. Service managers have known about this paradox for years.

The concept was first discussed in a popular Harvard Business Review article as far back as 1990. The authors – Christopher Hart, James Heskett and Earl Sasser – are all extremely well-respected academics and business practitioners.

But are they right? Let’s take a closer look.

Service Recovery at Slack

Why don’t we start with an example.

Ever heard of the American tech company Slack? Several years ago, Slack had a major service failure:

Tuesday, November 23, 2015 started out like any other day at work for James Crenson. Coffee, check email, prep documents for weekly meeting, solicit input from co-workers on slack. Um, Slack?

Outage

At 8:50am, popular workplace messaging service Slack suffered a massive outage, leaving over a million users around the world unable to send or receive messages and files for almost three hours in the middle of the workday. Angry users took to twitter and other social messaging sites to complain about the inconvenience. The situation had the potential to explode, but Slack was ready.

The team messaging tool had a solid plan in place for mass outages. A well-coordinated group effort handled support issues including a comprehensive social media blitz to contain the negative customer experience (CX). Over the few hours that the service was down, the official @SlackHQ account tweeted over 2,300 times with humorous, thoughtful, and most importantly, personalized – responses to customers complaining about the service outage.

Response

Not only did the all-out response wow users, but @SlackHQ gained over 3,300 followers – 7x more than average – on a day that could have gone down as the worst in company history. Slack was able to quickly contain the damage, took complete responsibility, kept its customers well informed and handled a stressful situation with humor and efficiency.

Throughout this process, Slack deepened the trust of existing customers by demonstrating that the company was prepared in times of crisis. Its expert handling of a negative situation enhanced its relationships with existing customers, boosted the brand’s reputation and even served as a springboard for an expanded customer base.

This is an exceptional demonstration of the value of the phenomena known as the “service recovery paradox.”

The graphic below explains the Service Recovery Paradox.

Loyalty generally increases over time when service is delivered consistently well. It falls rapidly if there is a service failure but loyalty increases again when service is restored and the service recovery is handled well. In fact, loyalty becomes greater than if no failure had occurred in the first place. That’s the paradox.

Fact or Myth?

The Service Recovery Paradox is generally accepted as fact. But where is the evidence for it?

Some years ago, Celso Matos decided to find out. He and a couple of colleagues from the Federal University of Rio Grande do Sul in Brazil conducted a ‘meta-analysis’ of all academic articles that discussed SRP. In total, they found 24 documented examples of recoveries following service failures. 19 of the 24 examined the impact of service recovery on satisfaction; 12 examined the impact on repurchase intentions; six looked at word of mouth (advocacy).

Their results were very interesting and not encouraging for companies with a poor service ethos.

Matos concluded that “satisfaction increases after a high service-recovery effort” but that “repurchase intentions are not increased by a high service-recovery performance.”

Service Recovery does NOT lead to greater loyalty

Matos and his colleagues explain that “customers are willing to make a positive evaluation of a firm providing a high recovery effort, but they are not likely to repatronize this firm”. They go on try to explain why this might be the case.

One explanation is that satisfied customers are not necessarily loyal. We know this from our own analysis at Deep-Insight. Another explanation is that people will give you a lot of credit for pulling out all the stops to recover a bad situation after a bad service failure. However, they will still doubt your ability to ensure no similar service failures occurs again. That’s pretty important when your 12-month or 10-year contract is coming up for renewal. They might give you good customer satisfaction (CSat) scores, but will they sign up for another contract?

In general, satisfaction levels do recover if a Service Improvement Plan (SIP) is put in place but loyalty does not. This does not mean the Slack example discussed above is not true. It just means that you need to go to extraordinary lengths to win back the trust and loyalty of clients when they experience a service failure.

The Relationship between Service and Trust

Some years ago I wrote a blog called Trusted Relationships = Consistently Good Service. It was based on our analysis of tens of thousands of customer feedback results from Deep-Insight’s database gathered over a period of 15 years. The analysis showed that of all the elements in our Customer Relationship Quality (CRQ™) methodology, Service Performance was most strongly correlated with Trust.

It stands to reason, if you think about it. What happens when you deliver a consistently good service to a client? Their levels of trust in you and commitment to your company increase. Fail to deliver the service consistently, and their trust erodes quickly. Consistently fail to deliver, and both trust and commitment levels can disappear completely. Trust and commitment also take a very long time to rebuild.

‘Quality is Free’ so make sure to get it ‘Right First Time’

There’s a really important lesson here. Service failures are the sworn enemies of long-term profitable relationships. That’s why it’s worth investing time and effort to minimise the chances of a service failure ever happening in the first place. You may never succeed completely but it will be worth the investment. In fact, it won’t cost you anything.

This is where the old Total Quality Management (TQM) principles come into play. In 1979, Philip Crosby wrote a seminar book called Quality Is Free. His basis message was that it costs absolutely nothing to build quality into products and services. If anything, you’ll make money by reducing the cost of re-work and failed business relationships.

Quality really is free, so if you’re in the service business, make sure to get it right first time.

If you operate in the B2B world, ask yourself the question: “Is CSat the right thing to be measuring in the first place?” Maybe you should be measuring something different.

UPDATE: 27 APRIL 2023

We have just written a follow-on article on the Service Recovery Paradox in B2B companies. Click here to read.

If Trust is so important, why do so few companies measure it?

Posted on October 17, 2020 at 4:41 pm.

Written by John O'Connor

Most people understand implicitly that good Business to Business (B2B) relationships are built on a strong foundation of trust. But if Trust is so important, why do so few companies measure it? It’s a question that has always intrigued me. I must admit that I’m still struggling to find the answer.

The fact is that CEOs keep tabs on all sorts of KPIs. For operational performance, there are lots of service level agreements (SLAs) and other three letter acronyms (TLAs). Logistics companies even have five letter acronyms like DIFOT – Delivery In Full On Time. For financial performance, the CFO has an eye-watering array of metrics. For customer performance, there is customer satisfaction (CSat) and Net Promoter Score (NPS).

But rarely, if ever, is there a metric for Trust that is discussed by the leadership team or reported to shareholders.

How Important is Trust?

A couple of weeks ago, I ran a short poll on LinkedIn, asking people what they thought was the most important element of a strong B2B relationship. It wasn’t a trick question as we believe at Deep-Insight (based on pretty good academic research) that the three key pillars of a great B2B relationship are Trust, Commitment and Satisfaction.

I wasn’t surprised by the winner but I was intrigued by the margin. It appears that Trust really is seen as the cornerstone of a strong B2B relationship.

Trust, Commitment and Satisfaction

How are they all related? Here’s how we explain it.

If you take a purely commercial view of any business relationship – and you shouldn’t – it’s all about the revenues you can generate from that relationship over the long term. I know that’s a bit mercenary but that’s how some people view things. The greatest predictor of a long-term relationship is Commitment and it’s important that you measure your clients’ commitment to you. We ask that question quite bluntly to our clients’ customers: “Are you committed to a long-term relationship with [Name of Client]?”

It turns out that the answer to this question has the highest correlation with the likelihood of the company buying from our client again in the future. The opposite is also true. A poor score is the best predictor that the customer will defect to the competition.

But remember: commitment to a long-term relationship is only the outcome of other factors. Two of the most important factors are Trust and Satisfaction. Trust is all about fairness, honesty and acting with integrity. It’s a reflection on what clients think of your brand but, more important, it’s their perception of how trustworthy your people are as well.

Satisfaction, on the other hand, is a measure of how well you meet (or exceed) a client’s expectations. It’s more transactional than Trust, and also more volatile. For example, you can be satisfied with your IT service provider today, but deeply unhappy tomorrow when the network crashes and your factories or stores can’t operate. When the IT service provider pulls out all the stops and fixes the problem in double-quick time, you’re both relieved and satisfied again. Satisfaction scores can fluctuate wildly. Trust scores? Not so much.

Trust at Serco

One of our clients that takes Trust seriously is Serco. It’s one of Serco’s four stated values: Trust, Care, Innovation and Pride.

Serco is quite clear about both what Trust is, and what it is not. Here are the behaviours it expects from its people:

Do what they say they will, try their best and see things through

Consistently provide the highest standards of customer service

Have a can-do, will-do attitude

Are open and honest

Communicate truthfully, clearly and concisely

Aim to always do the right thing and never compromise our values

Think through the consequences of their decisions

Speak out when they see something wrong

Understand who our customers are, listen to them and act upon their feedback

Challenge assumptions in an appropriate way

Acknowledge when they make mistakes and take responsibility for correcting them

Similarly, Serco believes Trust is not demonstrated if employees or the leadership:

Make promises that we cannot keep

Rush to provide solutions before listening to others’ needs and opinions

Fail to keep customers and colleagues informed

Are not straightforward and transparent

Allow disrespectful or discriminatory behaviour

Knowingly use Serco’s resources for personal gain

Break our Code of Conduct or the law

Falsify or misrepresent information

Ignore and don’t speak up when we see something wrong

Choose to ignore adverse criticism

Blame others for mistakes we have made or things we have missed

Shift our responsibilities to others

Why do so few companies measure Trust?

How many companies measure have identified Trust as a core company value and measure it in a systematic way? The short answer is that very few B2B companies measure Trust at all. Serco is one of the few that even identifies it publicly as a core value. Isn’t that strange? Business magazines and articles are full of ideas and tips for becoming trusted advisors. A lot of CEOs and company boards talk about “trusted relationships” with clients in their annual reports to shareholders.

Interestingly, the same CEOs and boards talk about trusted relationships but then quote the company’s Net Promoter Score (NPS). Now don’t get me wrong. There’s nothing wrong with NPS but it’s not a measure of Trust. It’s a measure of Advocacy. Yes, the two are related but it you’re going to talk to shareholders and clients about “Trusted Relationships” or “Acting as Trusted Advisors” then you really should go and measure your performance directly.

Sometimes NPS isn’t enough. It’s a good metric – simple and easy to understand. But it’s one-dimensional. If you really want to understand how trusted a relationship you have with your clients, you need to measure Trust as well as NPS of CSat (Customer Satisfaction). As a CEO or Sales Director, you need to understand if your key clients are Ambassadors who trust you implicitly, or Stalkers and Opponents who want to get out of the relationship because levels of Trust (and Commitment and Satisfaction) are so low.

If you want to know more about measuring Trust, have a read of this blog.

Alternatively, get in touch with us today.

Free Draw!

Posted on September 5, 2020 at 2:45 pm.

Written by John O'Connor

Interested in a Free Book for your Late Summer Holistays?

Of course you are! Everybody likes a freebie. A free draw.

Sitting on the beach; chilling out; reading a book. But which one? Or which beach? Given all that’s happening in the world at the moment, few of us are traveling long distances to get away this year. Holistays and staycations are big in 2020.

We can’t solve the issue of having to stay at home but we can provide you with a little light reading material for the back garden, couch or bathtub – you choose.

How to Enter Our Summer Giveaway

From Jun to October, we’re giving away a free Kindle edition of Customer At The Heart to a few lucky winners each week.

OK, it’s not quite Sally Rooney’s Normal People or even Gabriel Garcia Marquez’s Love in the Time of Cholera but it should be of interest to any CEO, Sales Director or Chief Customer Officer in a B2B company who is interested in increasing revenues and reducing customer churn.

If you’re interested if throwing your name in the hat for a free electronic copy, all you need to go to our Contact Us page and tell us that you’d like to enter. Easier still, just send us an email with the phrase Customer At The Heart in the subject of your message.

It’s as simple as that. Enter every week if you like! We’ll announce the winner every weekend and send out a Kindle voucher to the lucky winner.

By the way, we take data privacy seriously – we’ll only use email addresses to send a copy of the book to the winner each week and we’ll delete all email addresses at the end of each weekly draw.

Stay safe.

John O’Connor
CEO, Deep-Insight

Footnote

Have you ever wondered when the words ‘staycation’ and ‘holistays’ came into common usage?

staycation noun
/ˌsteɪˈkeɪʃn/

a holiday that you spend at or near your home

“Turn off your phone and computer—you’re on staycation, remember?”
“UK holidaymakers opt for a staycation in Britain.”

I used to think they were both very recent inventions. I certainly never heard of the terms before the last global recession a decade ago. Well, it turns out that both words were in fairly common usage from 2003. There’s even some research from Merriam-Webster that suggests the word ‘staycation’ originated as far back as 1944.

The other thing I didn’t realise is that the words have slightly different meanings in Europe and the USA. Americans tend to use the term for activities that can be carried out within driving distance of their home where overnight accommodation is not required. Europeans – or British people at least – use the phrase to describe a holiday that is spent in one’s home country rather than abroad.

Key Account Management – First Principles

Posted on August 10, 2020 at 3:44 pm.

Written by John O'Connor

When we wrote Customer at the Heart, my co-author Peter Whitelaw and I interviewed several senior executives in large international B2B companies. Some were CEOs. Others were Sales Directors. Many were CX Directors or Chief Customer Officers. To be honest, the really fun part of writing the book was the interview process. Assembling all those interviews into a coherent book was a chore.

All interviews were excellent and insightful but some went off in directions that we had not planned at the outset.

This blog is about the fundamentals of Key Account Management (KAM) but that was not the topic I had in mind when I interviewed Joe Edwards.

I wanted him to talk about his time as Sales Director at Atos (which we did cover eventually). Before we got to that point, Joe talked about his first job as a sales manager at HP. This led us to a really interesting discussion on account management, key account management and account planning.

I hope you enjoy this short excerpt from Customer at the Heart.

John O’Connor
CEO, Deep-Insight

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Key Account Management

Account managers are called different things in different companies. And in different countries. Sometimes they are referred to as sales managers although less so in Europe than in America. In Europe, ‘selling’ is still regarded as a second-class profession. The ‘salesman’ is a person who deals in used cars or snake oil.

Across the pond in North America, sales is a true profession. Most of today’s sales techniques and approaches have been developed in the USA. In Europe, the term account manager (or some variation thereof) is more frequently used than salesperson. Business development manager (BDM) is a commonly used term in Australia. The titles may be different but the roles are generally similar and involve client management as well as increasing the level of sales within a particular account or portfolio of clients.

For very large clients, there may be a single account manager dedicated to the account. In most cases, the account manager will have a portfolio that might range from 5 to 50 accounts. The decision as to whether an account manager should have a portfolio of one, five or 50 accounts is an important strategic one.

Joe – We’re Doubling Your Quota

To illustrate this point, consider Joe Edwards, the sales director for Atos UK & Ireland whom we interviewed for this book. Edwards started his sales career with Hewlett-Packard (HP) where one of his clients was Boots, the pharmaceutical and retailing company. Senior management at HP then made a strategic decision to reclassify Boots as a key account as they believed it had significant sales potential.

Joe Edwards: After about a year as a sales executive at HP and having a dozen or so accounts, the company turned around and said, ‘Actually, Joe, we just want you to focus on Boots Pharmaceuticals, and we’re going to double your quota.’

I learned that I was skimming the surface with Boots for a year and it was nice and comfortable because I had lots of other accounts I could fall back on if I wasn’t getting the numbers out of Boots. Then the company said: you don’t have a choice; you either make your numbers out of Boots, or you don’t.

That drives a very different set of behaviours, and I thought to myself: “how am I going to do this?”

Key Account Management

One of the most fundamental strategic decisions a company can make in its journey towards customer-centricity is the segmentation of its clients. The reason that it’s important to have a clear agreed approach to segmentation is that it drives much of the account management strategy and often the operational strategy needed to service those customers. It also requires a fundamental change in mindset for the account manager.

Joe Edwards: I had to understand what Boots was all about as a business. That meant spending a lot of time on-site to the point where I spent about three days a week with them.

I used to hold clinics in the canteen and anyone who was about who had an IT problem would come and see me. Bit by bit, I built up a set of relationships and trust that convinced them that I wasn’t just in it for taking the order, but I was in it for the long term.

I was trying to improve service and the relationship between the two companies for mutual benefit. As a result, I learned a lot about account planning from the perspective of getting further penetration into the client company. I didn’t know enough about the supply chain or stock room in Boots which we had some opportunity in. I needed to understand the customer from a business perspective, not just from an IT point of view.

“If you don’t have a ‘Plan’ you’re going nowhere”

Joe Edwards: The lesson I took from it was ‘The Plan’.

If you don’t have a plan, you’re going nowhere. And if you don’t create ‘customer intimacy’ in the sense of understanding what your client is, what market they’re playing in, and what new things you can bring to the client to excite them on a regular basis.

If you’re not bringing anything to the table, and therefore the relationship starts to decline.

Key Account Plans

Joe took these lessons with him to his subsequent sales roles. At Atos, account planning for key accounts became systematic and strategic for all key accounts. When Joe was Sales Director for Atos UK & Ireland, the company had almost 10,000 staff and Joe Edwards’ task was to deliver annual revenues of nearly £1 billion from its customer base. Account planning was critical, particularly for key accounts.

Joe Edwards: What that means is not just putting the plans in place and monitoring every quarter as usual. We would, in our top accounts, have account reviews with the executive board. It was making sure that the CEO and the CXO were all over our accounts on a regular basis.

On those top accounts, we’re going to spend time with them. We’re going to prioritise our time and make several calls a week where we get out there and start talking properly to this client base.

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Customer at the Heart

That interview with Joe Edwards – and many others – was taken from Customer at the Heart: How B2B Leaders Build Successful Customer-centric Organisations by John O’Connor and Peter Whitelaw and is available in hard cover or on Kindle.

Your Feedback on our Performance

Posted on July 9, 2020 at 4:23 pm.

Written by John O'Connor

Cobbler’s Children

There’s an old saying that “the cobbler’s children are the worst shod”. In the past that definitely applied to Deep-Insight. We advise clients like Atos, BT and Serco to build customer centricity through:

– Annual strategic assessment of all clients
– Clear plan for choosing the right contacts and getting them to commit to giving feedback via an online survey
– Comprehensive review of the feedback to agree strategic initiatives for the next 12 months
– ‘Close The Loop’ meetings with each client to agree actions to improve the relationship

In Deep-Insight’s early days, we even struggled with the first point. We thought the survey couldn’t be completely independent and honest as it was not being administered by a third party. We got over that objection pretty quickly. It’s true that our scores are a little inflated because the survey is not anonymous, but that’s not the point. The numbers aren’t the most important thing. Any customer feedback is invaluable. We have now been running CRQ assessments with our own clients on an annual basis for several years. Last year, we got our best ever scores.

The only problem is that in 2019 we probably didn’t include as wide a selection of contacts as we should and we could have worked harder at getting a higher completion rate. Last year, our completion rate was 49%. That’s not bad but this year we agreed we wouldn’t be happy unless we hit 60%.

So how did we do? Were we still the cobbler’s children?

Deep-Insight’s 2020 CRQ results

We were definitely more determined this year in getting commitments from you to give us 10 minutes of your time for feedback.

It worked – we achieved a 66% completion rate so my first message is to say ‘Thank You’ for such a wonderful response. Our results were very good too: a CRQ score of 5.7 and a Net Promoter score of +44%. Not as high as last year, but I’m still really pleased by those scores.

Retaining our Unique Status

We also retained our ‘Unique’ status which means that we are in the top 10% of our own database of scores. Uniqueness requires a combination of a winning ‘Solution’ and a wonderful ‘Experience’ for the client.

Areas for Improvement

Even though our clients see us as Unique, there are still areas we need to improve upon. Our core product offering is seen as really good but, in some places, we’re not seen as innovative enough and there are a few areas where we could invest more in our technology.

Closing The Loop

At this point, we have been in touch with most of our clients and scheduled a ‘Close The Loop’ meeting to discuss their feedback on us, and to agree some actions. One of the areas we will be seeking further feedback on is where we focus our development efforts in terms of ‘Innovation’ and ‘Technology’. Here are the three areas that we are trying to prioritise:

1. Further development of Deep-Dive. Deep-Dive is our online analytical portal. It has become an invaluable tool for us to extract insights for our clients but it’s not as intuitive as it could be.

2. Integration with Salesforce. Many, if not most, of our clients use Salesforce as their corporate CRM tool. Some of our clients import the CRQ and NPS results (as well as verbatim comments) from our assessment into Salesforce so that account managers and service teams can see instantly what the most recent feedback was.

3. More Benchmarking & Industry Comparisons. We have 20 years’ worth of benchmarking data and although we’re not big believers in industry averages, many of our clients would like to know if they’re in a particular quartile or decile for their industry.

Cobbler’s Children

We’ve tried hard this year so hopefully we’re no longer the cobbler’s children. Thank you again for your time and input into this year’s CRQ customer assessment. I really do appreciate it and we will make changes based on your feedback – particularly around where we should focus our efforts in the next 12 months.

John O’Connor
CEO, Deep-Insight