FREEDyourMind

Customer 2.0: An Online Customer Centricity Summit for E-Gov

We are excited at ForeSee Results to be holding our first Customer 2.0 Summit on May 1st in Washington, D.C. for e-gov practitioners.

So what is the this summit all about?

We at ForeSee Results are bringing together a great list of subject matter experts including:

• Megan Burns, Forrester Research Senior Analyst – Best practices to help organizations measure the online customer experience and to deliver better customer experiences across multiple channels.
• Dr. Claes Fornell, Professor of Business and Director of the National Quality Research Center (NQRC) at the University of Michigan – Discussion of the role of customer satisfaction in the public versus the private sectors
• Lee Rainie, Director of the Pew Internet & American Life Project – Research-based perspectives on “Understanding Internet Users”
• Larry Freed, President & CEO of ForeSee Results (that's me) –update on new products and applications
• Case studies and panel discussion – real-world examples of the power of customer satisfaction analytics
• Product demonstrations – new and emerging product developments
• Meet & greet — members of the ForeSee Results Client Services team

The goal of the summit is to create a dialogue on the importance of the online customer (or prospect, or visitor) with a focus on public sector organizations along with non-profits, associations and quasi government organizations. We are expecting over 250 attendees including many ForeSee Results customers along with others.

Watch for a similar event to be held in early September in Ann Arbor. The September event will have a focus that will cover all industries. More information coming soon!

Customer 2.0

We hear a lot about web 2.0, but what is Customer 2.0?

We have entered a new era. The customer is in charge! The web has created a world where the consumer is no longer captive. No longer is the company in control.

But why?

Location. Location, location, location used to be a rallying cry, the three most important words in your business strategy. But with the web, location as an advantage, and as a barrier to switch, has been greatly reduced.

Transparency. The web has made consumers more aware. More aware of price, more aware of product information, more aware of product quality and reliability, more aware of competition and more aware of what other consumers think. We now have smarter customers.

Low switching costs. The cost for a consumer to switch has been greatly reduced. When we are in a store, there is a cost for us to try another store (time and hassle). But on the web we can clone ourselves. The competition is only a click away, or better said, only a browser window away. We can be in two (or more) places at the same time.

So what does Customer 2.0 mean?

It means that companies need to change the way they think and act. They need to be aware that the customer is a smarter, more informed customer. That the captive hold we may have had on our customers is going away.

It means that those who meet the customer’s needs and exceed the expectations will win, both short term and long term. In other words, if you satisfy your customers you will get great returns. Sales, retention and loyalty! And that will lead to financial success.

Customer 2.0 means the impact of satisfaction is bigger and faster than ever before. The alternative choices are more then ever, and only a browser window away. Accelerated Darwinism; only the satisfied survive; and it happens in a blink of a browser window!

In closing, a quote from Claes Fornell.

"As long as repeat business is important, and as long as customers have a chance to go somewhere else, employees must deliver a high level of customer satisfaction for a company to be successful."

--Claes Fornell, University of Michigan, Ross School of Business

  Comments

1.    
         Gard Gibson      
          
         January 30th, 2007      |       6:56 pm      
      

   This seems to be an obvious point. Customer satisfaction has always been a primary driver. What you didn’t mention was the effect that the social networking dynamic has now that it did not have as early as 2 years ago. Now that frustrated customer may actually have influence online because of their own blog/site or the ear if someone who had influence. Now instead of the water cooler, you have a browser.

        
2.    
         Annie Martin      
          
         January 31st, 2007      |       2:51 pm      
      

   Another aspect of social networking is customer reviews (when they’re honest and not “reviews for purchase” like BzzAgent), where some critical comments can color opinions of purchasing a specific product or from a specific retailer. My daughter appreciated both the positive and negative comments about some speakers she was planning to purchase — she felt she could live with the negative (comment had more to do with the reviewer’s audiophile preferences) and the positive reviews reinforced her purchase decision.

 

Smoke and Mirrors: NPS and the Pet Rock

The Pet Rock. That is the first thing that comes to mind when I hear people talk about Net Promoter (NPS). OK, if you aren’t old enough to know about the pet rock, check it out at wikipedia, http://en.wikipedia.org/wiki/Pet_rock , better yet, ask your Mom or Dad.

So, what do the Pet Rock and NPS have in common? They are both fads that have no value.

Pretty strong statement considering all the press it gets, considering all the fantastic claims its creator makes. While I could go on for days about all the problems, let’s just focus on a couple of highlilghts (or maybe lowlights is a better way to describe them).

First myth of NPS: NPS predicts revenue growth. Time for stats 101. At best Reichheld tries to show correlation between NPS and revenue growth. Correlation and causation are very different. Causation predicts the future, correlation tries to explain the past, but often confuses coincidence with relationship. That is the first problem. How about an example. Did you know that the amount of damage caused by a fire is highly correlated to the number of firemen fighting the fire? But, the amount of firemen fighting the fire does not cause more damage. Hmmm. So what is the cause. It is missing from the equation. If we introduce the size of the fire, we see that the size of the fire causes more firemen to fight the fire and the size of the fire also causes more damage. That is causation. So, let’s bring that back to NPS. Customer Satisfaction causes revenue growth and customer satisfaction causes the number of recommendations to increase. That is the causal and predictive relationship we should care about.
The second problem is even bigger. Take a close look at the data that is presented to demonstrate this correlation. It compares revenue growth over a period of time, and then looks at NPS at the tail end of the period (pages 192-194 of the book).  For example, comparing ISP providers three-year growth from 1999-2002 and NPS scores from 2002.

Now, if we want to take the leap that correlation could be interpreted as causal, we would add a time dimension. Something that happens today being correlated to something happening in the future. It is a leap of faith, but at best, that is what the data presented could show us. The data presented in the book and papers would actually suggest that revenue growth drives NPS. Is that possible? Well, let’s look at the psychology of recommendations and human nature. When we make a recommendation it reflects back on us. So, we are inclined to recommend those things that are popular (experiencing revenue growth), even if we haven’t experienced them. That explains the possibility that revenue growth drives NPS. The exact opposite of the NPS claims. The real issue here is, when you have a theory, use data to prove it. Bottom line, I have not seen that data for NPS.

Now for my pet peeve (I guess that goes with the theme of the Pet Rock). All those people that should know better, but are jumping on the NPS bandwagon. You know who you are! Many don’t know better (ignorance can be bliss), but many are jumping on the bandwagon because they can capitalize on it, and monetize it. You should be ashamed of yourself. It is time you gave back your pet rock…and got back to reality. Remember those key principles we learned in school. Things like the scientific method. Reichheld himself states in his blog “Frankly, we see little value in continued debate about cause versus correlation, timeframes, or statistical methods”. I guess we should throw out the hundreds of years of great research. Who knows, maybe the world is really flat.

Check back for the second myth.

  Comments

   

      FREEDyourMind.com » More Bad News for Net Promoter      

       

      October 1st, 2007      |       7:11 pm      

   

[…] I don’t really expect that this new round of criticism and research will change the minds of true devotees, and perhaps Bob Thompson’s prediction that this will pass in a year is a bit optimistic. Besides, as Bob points out, NPS will just be replaced by the next fad (like the pet rock?) As Bob said, kudos to Reichheld for bringing the idea of loyalty to the forefront and starting the discussion about it. Now it’s time for business leaders to stop looking for easy answers and do the hard work of figuring out how to measure AND influence loyalty. October 01st 2007 Posted to NPS […]

What Worked This Holiday Season?

Many online retailers had great success this holiday season. Early results point to a 25% growth year over year for online retail. In an industry (retail) where we see low to mid single digit growth, we continue to see superb growth in the online retail space.

It begs a couple of questions.

Can it continue ?

Yes! No doubt about it. We continually see that consumers are more satisfied with online retail experience then with traditional brick and mortar experience. Consumers will go where they are satisfied…and more and more, that is the internet. And they are going there for a few different reasons that we like to call the 3 Cs.

• Convenience: the anytime, anywhere value of the web. From the comfort of your own home, while you sit in your pajamas, watching a game on TV, you can go shopping. No crowds and no parking hassles. Sign me up!
• Consistency: we always get the same answer online. How many times do we get different answers from sales associates or from call centers. Consistency leads to higher quality. Have you ever called a call center, not gotten the answer you want, hang up, call again, and get a different answer? I have. No such thing on the web.
• Clear view: or transparency, the ability to know what products are available, the detail specs of those products and the price. As transparency happens, the consumer is now in charge. The web provides us a level of transparency that we cannot get elsewhere.

What drove the success this past holiday season ?

• Free shipping with no restrictions had a significant positive impact on consumers satisfaction and their likelihood to purchase. When restrictions exist in those free shipping offers we see no positive impact on satisfaction or purchase. Those free shipping with restrictions offers might have a positive impact on average order size, but it is having no positive impact on improving satisfaction, improving retention and improving loyalty. 63% of online holiday shoppers surveyed in the ForeSee Results Holiday top 40 online retail satisfaction index recall seeing free shipping offers.
• Customer product reviews had a significant impact on improving customer satisfaction, customer retention and customer loyalty. Customer product reviews was a powerful influencer of the purchase decisions for consumers that were first time buyers from the retailer.
• Promotional emails were a very successful strategy for the top 40 online retailers. More visitors to the top 40 websites listed promotional emails rather than search engines and shopping comparison engines as the primary reason they visited the retailer’s site. The email driven consumers are more likely to purchase and more likely to be loyal than the search engine driven consumers.

What are the take aways:

1. Offer free shipping, with no restrictions
2. Offer customer reviews
3. Continue to use promotional emails to drive traffic and sales

Check out out our research on the subject here.

  Comments

1.    
         Analytical Engine » How can a Retailer Exploit Loyalty Program Data      
          
         March 20th, 2007      |       1:22 pm      
      

   […] Ron (commenting on Larry’s post) identifies loyalty program as a key reason for the holiday season success of online channel of retailers. Apart from driving sales, loyalty programs generate valuable data which can be analyzed to determine tactical strategies like cross-promotional programs, estimating discounts on bundles etc. Here is a four step actionable process to exploit the loyalty card data, and use it to broadly target customers with effective offers, even those who are not members of the loyalty program. […]

        
2.    
         Anshuman Acharya      
          
         March 20th, 2007      |       4:47 pm      
      

   Interesting…

   A question -

   The free shippign with o restrictions- was this idea tested on a smaller sample or smaller range of products before being launched.

   ‘Coz, it might have worked here but might have backfired in the case that the cost of shipping is more tahn the margin on the items sold.

   Was it?

        
3.    
         Larry Freed      
          
         March 22nd, 2007      |       1:03 am      
      

   The free shipping analysis was done across the top 40 online retailers based on their various offers of free shipping that existed during the holiday season.

   Keep in mind, that the cost of carrying and selling a product in a brick and mortar environment is significantly greater then in an online environment. And in most cases will far exceed the cost of shipping.

   The one question about the free shipping research, was free shipping with restrictions did not increase satisfaction or loyalty, but did it increase average order size. This study did not focus on that aspect.

   -Larry

        
4.    
         Anshuman      
          
         March 28th, 2007      |       1:00 pm      
      

   Ok.

   Regarding “did it increase average order size”, I guess you’ll need some loyalty data on the customer to realize how his current basket compares to his regular purchase.

   Just one caveat, given the holiday-effect, we would have to “deseasonalize” the data for a meaningful comparison.

   I work on testing promotions and products for CPG industry.

   This sounds like a good idea to test. But alas, it is for my clients to see the idea here .

The BCS Championship

Although I am a big College Football fan, I am not going to comment on Ohio State vs. Florida. Although it is time for a playoff system!

The real BCS is “Best in Customer Satisfaction”.

ForeSee Results recently published our Top 40, that is the “Holiday 2006 Top 40 Online Retail Satisfaction Index”.

Why is Satisfaction important?

First what is Satisfaction? The simple definition is a combination of what you get and what you expect. Expectations play a major role in determining how satisfied we are with an experience. If we to a fast food restaurant our expectations our different than when we go to a 5 star restaurant. The meal may be better at the 5 star restaurants, but we may have been more satisfied with the fast food restaurant; because it did a better job of meeting and exceeding our expectations. Now that is a simple definition, but satisfaction is also a very complex structure. It is all things about the experience including the merchandise, the price, the ease of purchasing and more.

So why do we care? Isn’t it just about if they purchased? The answer to that is no! In very simple terms, where consumers have freedom of choice, they are going to do business where their needs are being met and their expectations are being met or exceeded. In other words, consumers are going to do business where they are satisfied. When we think of a multi-channel retailer, sales alone do not tell the whole story of how successful our website is. How many times do you research a product online and purchase it offline? I know I do it quite often. Also think about the typical sales cycle. I recently purchased a new HDTV. I researched online and offline before making the purchase. And I finally purchased it about 30 days after I started the process. But the experience I had on those websites at the beginning of my purchase evaluation greatly influenced where I purchased from. So a great experience today (where I am satisfied – my needs met and my expectations exceeded) can lead to a purchase in the future.

The reality is that the best performance metric, the best measurement of the success of the website in contributing to the future value of our organization is the level of satisfaction.

Who did we measure?

We chose the top 40 online retailers in online revenue as determined by Internet Retailers Top 500 guide from last spring. We collected data using FGI Research’s SmartPanel. We focused on consumers visiting the websites. And we analyzed the data using the proven methodology of the American Customer Satisfaction Index (ACSI).

Who came out on top?

Netflix was number one for the second year in a row with a score of 86 (on a scale of 0 to 100), up 2.4% from last year. Amazon came in second with an impressive score of 84. They were followed closely by LLBean and QVC. The top traditional brick and mortar, multi-channel retailer was OldNavy with a score of 79, up 6.8% from last year. They also were near the top in terms of year over year improvement. The top 10 sites follow. Find the complete list here.

Retailer	Holiday 2006	Holiday 2005	Year-Over-Year Change
Netfix.com	86	84	2.4%
Amazon.com	84	82	2.4%
LLBean.com	80	80	0.0%
QVC.com	80	80	0.0%
Apple.com	79	76	3.9%
OldNavy.com	79	74	6.8%
Quixtar.com	79	76	3.9%
HPShopping.com	78	74	5.4%
Newegg.com	78	79	-1.3%
Barnes&Noble.com	77	77	0.0%
Dell.com	77	74	4.1%
Williams-Sonoma.com	77	77	0.0%

Who were the big gainers?

Somewhat surprising was the biggest year over year improvements were by traditional brick and mortar multi-channel retailers, Sears, JCPenney and OldNavy. Considering the fact that the top of the list is led by online only retailers, it is a great sign for consumers that the traditional brick and mortar retailers are making great strides forward in terms of providing a more satisfying online experience. The mutli-channel retailers have the advantage of offering more channel choice to consumers. It appears that many are ready to take advantage of that and compete strongly with their online only retailers.

Retailer	Holiday 2006	Holiday 2005	Year-Over-Year Change
Sears.com	73	68	7.4%
JCPenney.com	76	71	7.0%
OldNavy.com	79	74	6.8%
SonyStyle.com	73	69	5.8%
Target.com	74	70	5.7%
HPShopping.com	78	74	5.4%

What else did we see in the research?

More to come in upcoming posts, but here are a couple of the highlights.

• User Reviews played a major role in influencing purchases.
• Free shipping with restrictions has little impact on influencing satisfaction      and customer loyalty
• 25% of the visitors reported that promotional emails were the primary reason for visiting the site. This is up from 20% a year ago. And nearly double the amount of people driven to the sites by search engines and shopping comparison sites.

Take Away Comment:Free your mind from only measuring success of your website by the dollars