customer satisfaction – Deep-Insight

The CX Factor

Posted on November 29, 2021 at 12:28 pm.

This blog is a shortened version of The CX Factor which originally appeared in the October 2021 edition of Modern Lawyer. Modern Lawyer is published by Globe Law and Business.

Download the article, including the case studies with Baker McKenzie, DWF, Shoosmiths and Travers Smith by clicking on the image below.

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SUMMARY

There’s a lot of talk at law firms about client relationships. For many clients these can still seem hollow words based on one-way relationships.

Robert Millard and John O’Connor explore how firms that are trying to embrace true client centricity are setting themselves apart.

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The CX Factor

Much has been written over the years about how diﬃcult it is for clients to diﬀerentiate between one law ﬁrm and the next. From a client perspective, law ﬁrms all look remarkably similar. Trust, reputation and brand generally play an unusually important role in buying professional services.

Appearing in directories such as Chambers & Partners, Legal 500 and International Financial Law Review are also important as are word-of-mouth recommendations. These are recognised to be among the most compelling means of winning new clients.

But what keeps clients loyal? What drives client relationship longevity? Except for the most complex or unique of matters, a range of ﬁrms exist from which clients can choose. Those ﬁrms are all staﬀed by highly competent, capable lawyers.

Making the Transition from Client Listening to Customer-Centricity

Within ranges, all charge roughly similar fees for similar matters. All are highly attentive to service quality. Most engage in at least some form of client listening. They claim to mould their services and service delivery channels around the needs of clients. But have they?

In our opinion, few have transitioned from client listening to becoming truly customer-centric.

This article is aimed at helping law ﬁrms to make that transition. The content is based on client- centricity work that John O’Connor has done with many large corporates and ﬁnancial institutions, including DWF Group plc. It is also based on Robert Millard’s unparalleled understanding of modern law ﬁrms.

It was informed by interviews with Baker McKenzie LLP (Ana-Maria Norbury and Deanna Gilbert), DWF Group plc (Zelinda Bennett), Shoosmiths LLP (Peter Duﬀ and Gaius Powell) and Travers Smith LLP (Julie Stott and Charlie Rogers) about their CX journeys. All of these were exceedingly generous with their time and insights. We thank them most sincerely.

Clients’ Demands are Shifting

Across many industry sectors and geographies, customers are shifting the ways in which they choose suppliers and service providers. Current research in the United States shows that the percentage of clients recommending law ﬁrms is at an all-time high of 69%. That’s up from 49% in 2020 and from 47% in 2019.

This increase is remarkable. But those results are not from superb skill in solving legal problems alone – the focus on service quality has given way to one of client experience (CX). For all but the most complex and diﬃcult of services, service quality is no longer a source of sustained competitive advantage. It is a prerequisite to be even considered.

Clients now demand that their experience with the ﬁrm advising them be hassle free, transparent and even emotionally uplifting. They also expect law ﬁrms to look further than the legal advice. They expect them to help solve business problems.

Law ﬁrms are changing their business models in line with these shifting client requirements. But too slowly, in our view. The time has come to accelerate. Bluntly, modern law ﬁrms must move from client listening to more detailed conversations, and act decisively on what they discover.

No UK law ﬁrm has what a leading corporate or ﬁnancial service client would acknowledge to be a world-class CX programme, or true customer-centricity. Pockets of excellence do exist though, and some of these can be seen in the case studies at the end of this article.

CX is Different to Service Quality

The concept of ‘quality’ emerged from the total quality management (TQM) movement of the 1950s. In the early days, the focus was on product quality. The emphasis moved in the 70s and 80s to service quality as economies in the western world became more services-based economies. ‘Client satisfaction’ became a prominent metric.

Client experience (CX) is diﬀerent. It means that a ﬁrm’s core focus is on its entire relationship with its clients – not just on satisfaction. Contemporary research shows that CX is generated through a long process of interaction between a ﬁrm and its clients, across multiple channels and through generating both functional and emotional eﬀects.

To achieve this requires ‘client-centricity’ which, in simple terms, means putting clients at the very heart of the ﬁrm. This transcends quality, to mean all the ﬁrm’s lawyers and business services professionals viewing every aspect of the ﬁrm from the client perspective. In this article, we use the terms ‘client centricity’ and ‘CX’ interchangeably.

For clients, quality assurance is diﬃcult in legal and other professional services. Lawyers and other professionals frequently have more knowledge of the topic in hand than do their clients. This creates a ‘power asymmetry’. Work product is frequently co-created with clients, or at least based heavily on client inputs. Consistently poor performance leads inevitably to reputational damage, sanctions for professional negligence and, ultimately, failure.

The Intangibilty of CX in the Legal World

That much is clear. How, though, does a client assess whether services rendered in a speciﬁc matter were merely ‘good’, or ‘excellent’?

It turns out that it is far easier for clients to assess how they feel about the services and about their experience, than the objective quality of the service received. Clients must trust the professionals that they instruct to be technically competent and diligent. Such trust is not necessary to assess their reaction to their experience – their ‘gut-reaction’ – to dealing with the ﬁrm and the way in which the ﬁrm deals with them.

At an event held at White & Case’s oﬃces in London some time ago, the former chairman of Allen & Overy (A&O), David Morley spoke of a very complex, challenging transaction where A&O was pitching for the legal advisory work against the usual range of premium London law ﬁrms. A&O won the engagement and, he said, he was later told by the client’s general counsel that the reason for that was that they felt that when, late at night in the midst of the deal when pressures were immense, they believed that A&O’s lawyers would be the easiest to deal with.

This is an excellent example of how intangible CX can be.

Professional Services are Different

Professional services have always been recognised as being distinct from products, and from other types of services. More than two decades ago, professional services were deﬁned as:

highly knowledge intensive, delivered by highly educated people, frequently linked to cutting-edge knowledge;
involving a high degree of customisation;
involving a high degree of discretionary eﬀort and personal judgement on the part of the professional creating and delivering the service;
requiring substantial interaction with the client; and
being delivered within constraints of professional norms of conduct, including setting client needs above proﬁt and respecting the limits of professional expertise.

For much of the past century, this has been an accurate description of the services delivered to clients by lawyers. Ask any lawyer if they are concerned about their clients, and the quality of services that they deliver to them, and the answer will almost always be: “of course I do!” And that response would be sincere and truthful – to the extent even that the question might be regarded as facile.

Commoditisation

Yet the statistics for clients defecting to rival ﬁrms in recent years have been alarming. Legal services are also changing. On the one hand, the complexity of legal issues increases continually and exponentially.

On the other, it is becoming diﬃcult to justify including the more process-driven ‘commoditised’ services under the umbrella of professional services. This does not mean that law ﬁrms need to discard these services. They form an important part of the business of many law ﬁrms.

The term for services that are not ‘professional’ is not ‘unprofessional’. It’s ‘technical’. The fact is that clients view technical legal services through a diﬀerent lens, and the proﬁt drivers of these services are diﬀerent to those of professional services. The ﬁrm’s business model needs to be more granular if the tensions between these client expectations and proﬁt drivers are to be managed.

As the ‘4th Industrial Revolution’ unfolds, more of the services now delivered by people will be better delivered by technology. Some lawyers will focus on using ever-more complex technological tools to advise clients on meeting their own increasingly diﬃcult, complex needs. The business of law is also being disrupted by emerging digital technologies and the geo-economic impacts that they spawn. Some firms will build highly proﬁtable legal service platforms (LegalZoom being a good current example) to focus on more mainstream legal needs. Best CX practice will evolve diﬀerently for each.

These tensions can and must be managed. CX has proved a valuable tool for banks, retail organisations, airlines and others to improve levels of customer satisfaction. It is now gaining rapid traction with law ﬁrms and might even be a new frontier on which law ﬁrms are competing. Many ﬁrms, however, appear to be struggling to separate the concept from similar ones such as ‘service quality’ and ‘client relationships’ and ‘client listening’.

What to Measure?

Metrics are obviously crucial. One of the best-known CX metrics is Net Promoter Score (NPS), created by Fred Reichheld based on his work at the consulting company Bain & Co. In his book The Loyalty Effect, Reichheld stated that clients should be valued according to the net present value (NPV) of the future revenues to be earned from them. This has given rise to the notion of client lifetime value (CLV).

NPS is based on the proven premise that client relationship longevity can be predicted by a client’s response to a single question: “how likely would you be to recommend our ﬁrm to a friend or colleague?”

Reichheld’s research showed that surprisingly high NPS scores are required to indicate long-term client loyalty. The NPS of a ﬁrm overall is calculated by subtracting the percentage of clients who allocated a score of 6 or less (Detractors) from the percentage who allocated a score of 9 or 10 (Promoters).

NPS scores can theoretically range from –100 to +100. An average NPS for a European B2B company is around +10 while an average score for European professional services ﬁrms is around +30.

But is NPS the best metric for law ﬁrms? We mentioned earlier how A&O won an engagement based on the general counsel’s level of Trust in the ﬁrm’s ability to deliver when the going got tough. Few companies measure trust explicitly – yet it is the fundamental building block of any client relationship.

Customer Relationship Quality (CRQ)

An alternative to NPS is to view the client relationship more holistically. Client relationship quality can be visualised as a pyramid comprised of three diﬀerent levels (see Figure 1).

Figure 1. The Customer Relationship Quality (CRQ) model

Three levels of Customer Relationship Quality

The ﬁrst and most fundamental is the Relationship level. Do your clients trust you, are they committed to a long-term relationship with you, and are they satisﬁed with that relationship?

The second is the Uniqueness level. Do your clients view the experience of working with you, and the solutions you oﬀer, as truly diﬀerentiated and unique?

At the top of the pyramid is the Service level. Are you seen as reliable, responsive and caring?

If law ﬁrms score well on all six elements of customer relationship quality (CRQ), their clients will act as ambassadors, generating a high NPS.

NPS and CRQ scores are highly correlated. Law ﬁrms should track their NPS but in order to understand what that is really telling you – and what you have to do to improve that score – law ﬁrms also need to measure and understand all six elements of the CRQ model.

Turning ‘Client Listening’ into an Effective CX Programme

Client listening is obviously more than just the score and the verbatim feedback that is captured. A fully-ﬂedged CX programme is also far more than a client listening survey. It includes what we refer to as ‘hard side’ and ‘soft side’ activities (see Figure 2).

Figure 2. Deep-Insight CX framework

The four quadrants are:

LEADERSHIP. The most important quadrant. Good customer excellence (CX) programmes are always led from the top.
STRATEGY. Good CX programmes link customer, product, operational and organisational strategy explicitly to customer needs.
EXECUTION. Success requires properly resourced teams that are brilliant at executing the strategy.
CULTURE. Finally, customer excellence must become integral to the DNA of the organisation: “it’s how we do things around here”.

The hard side activities of Strategy and Execution are important. These include setting up the CX programme, determining what to measure, executing the survey process, and using the client feedback to update company strategy. However, one of the key lessons from interviews with corporate leaders is that successful CX programmes require heavy investment in ‘soft side’ activities if they are to generate real long-lasting results. This means spending signiﬁcant amounts of time with law partners and client teams planning for success.

All four quadrants are necessary for a successful CX programme. Many law ﬁrms start at the execution quadrant and are often disappointed when their client-listening programme produces no meaningful result or change. In our experience, the soft side is often overlooked and almost always under-resourced. Leadership is the most important quadrant while culture is the most challenging.

Step 1. Drive change from the leadership level

Client relationship longevity is a crucial building block of the ﬁrm’s client value proposition (CVP). It deserves the attention of the ﬁrm’s most senior leaders. Without active and highly visible senior leadership support, a ﬁrm is unlikely to achieve the CX results that they need to build sustained competitive advantage. It is crucial that the ﬁrm’s leaders themselves be truly client-centric. The must:

Be genuinely passionate advocates for the ﬁrm’s clients and their interests;
Take personal ownership of enhancing client- centricity in the ﬁrm;
Have an intuitive understanding that client satisfaction drives ﬁnancial success;
Use client-centricity as a lever to eﬀect organisational change; and
Be relentless about execution.

This list might appear daunting, but it is crucial. Too often, a ﬁrm’s CX initiatives founder because the task is delegated to mid-level teams who have no more than lukewarm support from senior leadership. The result? They are unable to drive the degree of change that can really make a diﬀerence. The need for active and visible senior leadership support is evident in the comments of Peter Duﬀ, chairperson of Shoosmiths, in Case Study 1.

Step 2. Link Strategy Explicitly to Actual Client Needs

Once the leadership for the CX programme has been secured, the law ﬁrm must use the voice of the customer to drive all aspects of the ﬁrm’s strategy. This can, and often will, involve major organisational and operational change. It will also require changes to the ﬁrm’s business model (CVPs, resources and proﬁt model). O’Connor and Whitelaw devote an entire chapter of their book Customer at the Heart to the strategy of client-centricity.

In Case Study 2, Zelinda Bennett speaks of some of the major strategic changes that DWF Group have made in order to serve their global clients more eﬀectively. Reorganising the business into global divisions and acquiring an alternative legal services provider (ALSP) were bold and decisive actions taken precisely because DWF wanted to become more client-centric.

Strategy must involve all aspects of the law ﬁrm’s business. It includes HR (hiring, training and promoting the most client-centric lawyers) as well as ﬁnance (investing only in initiatives that will have a demonstrable impact on clients). It must pervade the entire organisation. Every department in the law ﬁrm must see its role through the lens of the client.

Step 3. Build a CX Execution Capability

Besides strong leadership, a successful CX initiative also requires an ‘execution’ capability to ensure that the voice of the client is both captured correctly and acted upon. Execution is more than setting up a client listening post. It involves turning the outputs from those client conversations and collaborative explorations into tangible actions that solve real client problems.

In today’s world, the client personnel involved in buying and consuming legal services extend far beyond the legal department. The client’s voice needs to extend beyond just the GC and her or his legal team. Law firms must think about the ‘inﬂuencers’ who are telling those decision makers that “We have to work with Firm X” or “Firm Y really aren’t delivering value for money – we should be looking elsewhere”.

One of the better examples of a good execution capability is Baker McKenzie’s Reinvent programme (Case Study 3). Reinvent started by using client listening to map existing client interactions with the law ﬁrm – ‘journey mapping’ as it’s often referred to – but then moved to the next logical level. Baker McKenzie started working with clients to re-engineer processes and even co-creating new services and solutions. The Reinvent programme was developed to establish the governance, skills and infrastructure required to support better client outcomes. This programme focuses both on re-engineering speciﬁc processes and services with clients, as well as a way to develop teams across the ﬁrm – empowering execution at a grassroots level. Such an approach is a highly eﬀective way to build engagement with the CX process and commitment to its success.

Step 4. Embed Client-Centricity into the DNA of the Organisation

Lawyers are consummate professionals. But are they truly client-centric? Most legal professionals entered the legal industry to practise law. They wanted to advise clients and to mitigate risk. They didn’t join to help CFOs and procurement professionals to cut costs. However, that’s what partners in law ﬁrms are being asked to do these days.

Embedding behaviour changes and aligning the ﬁrm’s culture with the ‘voice of the client’ takes patience, persistence and continuous eﬀort over a long time. Engagement with clients must be ongoing. Building and sustaining the momentum required to be true client-centric needs a constant stream of input from clients. It also requires constant conversations within the ﬁrm about what that input means, and how clients can be better served.

In Case Study 4, we look at Travers Smith’s ability to embed the culture of client-centricity into the DNA of the ﬁrm. Silos have been broken down. Close collaboration between lawyers and business services has been achieved. International clients are serviced almost seamlessly. The ﬁrm’s senior leadership takes a very active lead in this.

The reason why most law ﬁrms are lagging behind might be not that they are inattentive to clients (that is usually patently not the case). It is more likely to be that they simply do not have the systems and processes in place that are required to get input of the quality and detail that can drive continuous improvement. A properly designed CX programme delivers that. Over time, measurable results emerge both in terms of client loyalty (NPS and CRQ scores) and also, more importantly, economic performance.

Conclusion

Earlier, we said that many companies start with Execution. We strongly believe that the ﬁrst step in a successful CX programme is gaining the right Leadership commitment to putting the client at the heart of everything a law ﬁrm does.

Once that leadership is in place, it becomes easier to get the law ﬁrm’s strategy aligned to what clients actually need and the CX execution tasks become much easier. With leadership, strategy and execution in place, culture change automatically follows.

As David Morley’s earlier anecdote reveals, the primary impactors of CX emerge when things go wrong. Clients report four major areas where the law ﬁrms that advise them are inconsistent, namely: keeping them informed; dealing with unexpected changes; handling problems; and meeting scope. Feel free to work on these immediately, of course.

But if you want to achieve a step change, that starts at the top.

Should Customer Experience and NPS Surveys be Anonymous?

Posted on November 2, 2021 at 11:52 am.

Written by Rose Murphy

CX and NPS feedback – should it be anonymous?

Should Customer Experience and NPS Surveys be Anonymous? The simple answer is NO – anonymity is not required for a B2B CX or NPS programme.

But the answer is not that simple. Let’s start by defining what Confidential and Anonymous mean in the context of surveys. This may sound obvious, but I have been amazed at the number of times I have needed to discuss this:

ANONYMOUS: No person or application can associate the answers you give with any identifiable information about you
CONFIDENTIAL: Any identifiable information about you will be held confidentially, and stored in an appropriately secure manner
OPTIONAL CONFIDENTIALITY: Any identifiable information about you will be held confidentially, and stored in an appropriately secure manner unless you specify that you would like to be identified (in other words, you decide to waive your right to confidentiality)

So for the rest of this blog, I am not longer going to dwell on anonymity. It’s simply not needed.

Confidentiality – now that’s a different matter

In any setting, when a third party asks for your opinion about someone, confidentiality is important to ensure a really open and honest response. In personal relationships this goes without saying but in the B2B world this is also true. It’s especially true if your staff are doing what you need them to be doing – building strong and personal relationships with clients.

Of course, many of your customers will indeed give you an honest response regardless of whether it is confidential or not. But many won’t. Cultural differences will mean this statement is truer in some parts of the world than others. However, regardless of where your customers live, there will always be those who will not respond, or who may not be as open as you would like them to be, unless their responses remain confidential.

Example 1

This example is an actual Deep-Insight client.

Company A ran a Customer Relationship Quality (CRQ) assessment (Survey 1) and told respondents that they had the option for their responses to remain confidential. Six months later Company A ran the survey again, but this time told respondents the option to remain confidential was removed.

The impact on their average Net Promoter Scores (remember NPS is a measure of advocacy on a 0 to 10 scale) was as follows:

Individuals’ responses in Survey 1	Completion Rate (Survey 2)	Average NPS (Survey 1)	Average NPS (Survey 2)
Chose confidentiality (did not share details)	55%	6.3	7.5
Waived confidentiality (shared details)	70%	7.1	7.2

For respondents who had shared their names with their responses in Survey 1, there was no significant impact. When asked to complete Survey 2, 70% did complete and only a small uptick in scores was noted (7.1 to 7.2).

However, where respondents chose to keep their feedback confidential in Survey 1, there was a much bigger impact. For starters, only 55% of these individuals chose to complete Survey 2. For those who completed Survey 2, there was also a significant increase in scores (from 6.3 to 7.5). In fact, ‘Confidential’ respondents went from scoring more poorly than average to scoring more positively than average when forced to share their details with the response.

Example 2

Here’s another client of ours. Having received very high scores for several consecutive surveys, Company B decided to introduce the option of confidentiality to ensure the integrity of what it was measuring. The findings were interesting, especially for newly-included respondents:

26% of respondents opted to remain confidential overall but for newly-included respondents the figure was 38%
‘Confidential’ respondents scored more poorly than those who agreed to share their responses – but not significantly so
Newly-included respondents who opted for confidentiality scored significantly more poorly than other respondents

“…but my teams are frustrated by these unactionable ‘Confidential’ responses”

In both examples above, the organisations had good business reasons when they chose not to include confidentiality in their CX process:

Improved usefulness as an account management tool as ALL feedback is provided to account management teams
All raw data can be fully integrated with internal systems, allowing ongoing re-segmentation of responses (this is limited when responses are confidential)

But the argument that your CX or NPS programme should include ‘Optional Confidentiality’ is far stronger. If you don’t include optional confidentiality, your most unhappy customers will either not respond or will not give you a completely honest response.

This puts your entire CX or NPS programme at risk. You will end up making decisions based on inaccurate or incomplete data.

So should NPS Surveys be Anonymous? No. Should they include ‘Optional Confidentiality’? Absolutely!

“Is there any way to convince ‘Confidential’ respondents to share their details but still give an honest response?”

Maybe, but this will take time; people are people after all.

If a customer is at a point in their journey with you that they do not want to share their details, but they are willing to give feedback, that’s OK. Of course, you can explain the benefits of what you can do if they agree to share their details with you (you can address their issues more easily) but don’t push too hard. There is a trust issue here. Pushing won’t help.

You have a much better chance of convincing this customer by including them in your ‘Close the Loop’ process even though you don’t have a response from them. Over time you will gain their trust, both in the CX or NPS programme as well as in your organisation. You’ll eventually win that shared response.

Quality is Free (so Invest in Service Excellence)

Posted on May 17, 2021 at 4:39 pm.

Written by John O'Connor

Customer centricity is all about doing the right thing for the customer. Doing the right thing also means doing things right. That means service needs to be excellent. All of the time.

Sounds expensive?

Actually, it’s not. The main message in my last blog about the Service Recovery Paradox was that quality is free so make sure to build quality in from the start so you do things right first time.

The Service Recovery Paradox

By the way, the Service Recovery Paradox is a well-known management concept. It states that a service failure followed by a good service recovery can lead to more loyal customers.

The only problem is that there is no compelling evidence to show that the paradox is true. In fact, the opposite is the case.

Loyalty and Repurchase Intentions do not return to a higher level after recovering well from a service failure. There is evidence to show that Satisfaction levels can end up higher than ever before if the service recovery is managed well, but customers are less likely to repurchase.

Our own experience is that this is particularly true where there are repeated service failures. Quite often, repeated failures are symptomatic of underlying issues that have never been adequately addressed. That’s why the service fails, and fails again and again.

The implications are profound. If you want to retain clients and increase revenues and profitability, you simply cannot afford repeated service failures. The good news is that service excellence is achievable for all companies. The even better news is it doesn’t cost anything but it does mean that you need to have a good quality system in place to identify, eliminate and prevent further service failures.

Quality is Really Free?

‘Quality is Free’ and ‘Right First Time’ are references to a 1979 book by Philip Crosby. Crosby was one of the founding fathers of the Total Quality Management (TQM) movement in the 1960s and 1970s. He had previously been a senior executive and Quality Director with the US manufacturing company ITT. In the early chapters of Quality Is Free he outlines the impact of the quality programme at ITT which at the time employed 350,000 people across the globe.

Crosby’s philosophy was a simple one. Rework is very expensive. It is less expensive to do it right the first time than it is to pay for rework and repairs. So focus on doing it right first time.

Much of Crosby’s work was for manufacturing companies but the principles are exactly the same for services firms. And probably more relevant. Crosby believed that manufacturing companies wasted about 20% of revenues fixing things that had been done wrong in the first place. According to Crosby, this figure could be as high as 35% in services firms.

Crosby’s Fourteen Steps

Crosby summarised his approach to quality in 14 steps. Even though they are over 40 years old, the steps are worth repeating here. They are as critical today to retaining customers as they were in 1979 when Crosby wrote ‘Quality is Free’:

#	STEP	COMMENTS
1	Management Commitment	Get senior management buy-in from the beginning. Leaders – particularly the CEO – must be personally committed to the quality programme. Without this, nothing will happen.
2	Quality Improvement Team	It’s senior management’s job to assemble a team and equip them with the right tools to make the programme work.
3	Quality Measurement	What gets measured gets managed. The corollary is also true. If you don’t have a measurement system, little is achieved.
4	Cost of Quality Evaluation	Calculate the cost of poor quality. That provides the business case for investing in quality. Remember that quality is free if the investment is lower that the cost of rework.
5	Quality Awareness	It’s all very well for senior management to know the cost of quality. Everybody in the company must understand it as well. Make sure they do.
6	Corrective Action	This is where we start identifying and fixing problems – with products, processes, service levels.
7	Zero Defects Programme	Set ambitious targets for 100% quality. They may not always be achievable, but the ambition must be visible.
8	Supervisor Training	The concept of supervisors may be old but investment in training for management is not. And it’s critical.
9	Zero Defects Day	This is related to Point 7 and makes a statement that one day each year must be dedicated to ensuring that a Zero Defects ethos pervades the company.
10	Goal Setting	Crosby recommends 30-day, 60-day and 90-day goals. The emphasis is on teamwork to achieve those goals.
11	Error Cause Removal	Ask individuals to describe any problem that prevents them from performing error-free work. Fix those problems.
12	Recognition	Recognise and reward excellent performance. Crosby recommends that rewards for outstanding work should NOT be financial.
13	Quality Councils	The purpose of these councils is to bring professionals together on a regular basis so that can share stories and best practices.
14	Do it Over Again	Most programmes last about 18 months before they need to be refreshed. Senior management must sustain the focus on quality so that it becomes part of the company’s DNA.

Customer Centricity = Service Excellence

At Deep-Insight, we help B2B companies become more customer-centric. By doing so, they will improve retention rates, revenues and profitability. Customer centricity is all about doing the right thing for the customer. A lot of Deep-Insight’s clients think that a core part of being customer-centric is being able to bring Innovation to the table for their customers. Service excellence is far more important.

Don’t get me wrong, I’m not saying that innovation should be ignored. It’s a hot topic in boardrooms these days. Even so, all of our experience suggests that if companies are failing to deliver the basics well, their customers have little interest in discussions about innovation.

You need to earn the right to talk about innovation. That’s why Service Excellence is critical. Consistently good service eliminates the day-to-day ‘noise’ that gets in the way of working with clients on exciting new and innovative ideas. Service excellence also helps improve customer retention rates. That’s the core message from the Service Delivery Paradox blog.

Invest in Service Excellence

Remember: service excellence first, innovation second. So do the right things, do them right and get them right first time.

Remember also that quality is free so there is no reason NOT to invest in a Service Excellence programme for your organisation. You know it makes sense.

Do contact us today if this blog sparks any ideas and you want to have a chat about improving retention rates, revenues, and profitability.

Service Recovery Paradox – Fact or Myth?

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

Written by John O'Connor

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.