The real value of customer feedback lies in closing the loop - Omoto

The real value of customer feedback lies in closing the loop

Many companies spend a considerable amount of time listening to customer complaints or apprehensions and collecting customer feedback. However, very few are actually able to do something about them. To add to this, there are customers that never showcase their true thoughts, making it all the more difficult for companies to take suitable course-correcting actions.

Let’s look at a hypothetical situation at Charles Schwab, a leading financial services company. Cheryl Pasquale is a branch manager and she spends a significant amount of time looking at feedback reports that show the most recent responses from her team’s clients, which in this case are majorly investment firms.

She scrolls through the results, viewing the feedback on the six financial consultants she supervises and sorts through the aggregate scores from customers. She also religiously reads the comments of individuals that have given high or low ratings and checks whether any particular kind of interaction has elicited praise or complaints. There are several complaints such as customers finding it difficult to access the information kiosk and there are other issues with forms. Also, there are critical events like ‘manager alerts’ raised by clients that receive immediate attention. Subsequently, Cheryl plans a different approach to troubleshoot each one of these issues.

Every single day, managers across different branches at Charles Schwab conduct a similar drill. During 2004, the business of Charles Schwab was struggling; it lost the connection with its customers and was losing business to competitors. The new customer feedback system, however, caused an increase of 11% in terms of revenue and 25% in terms of customer scores.

Getting Customer Feedback Right

Very few companies are happy with the outcome of the customer feedback collection effort. There are drawbacks with each one of the techniques adopted. For example, elaborate satisfaction surveys that involve proprietary research models can be expensive and are less practical. Also, the results are not always accurate. Further, most customers who end up defecting to another business declare themselves “satisfied” or “very satisfied” in such surveys not long before jumping ship.

Besides this, very few companies can afford to send employees in the field to collect fresh data and insights. Even fewer companies can change these insights into prescriptions that frontline employees can follow. There is no well-designed way – heavy spenders can talk about their experiences but employees can’t easily learn about their own behaviors from them.

Firms are starting to build their feedback loop from the frontline instead of building elaborate, centralized customer research mechanisms. The employees get on one-on-one conversations with willing customers and receive evaluations of their performance directly from the customers. Over time, organizations compile the data into a baseline of customer experience, which they draw upon to make process and policy refinements.

A strong feedback mechanism keeps the customer at the core, always. One of the most obvious but underused ways to find out what your customers experience when they use your service is to be a customer yourself. This can be done by going through each step of the customer journey and perceiving things from the customer’s viewpoint.

Some tactics towards achieving this can be hiring mystery shoppers to test customer service or arranging periodic forums between employees and customers to establish a common vision across the organization.

One parameter that can help in the customer feedback process is the Net Promoter Score, commonly known as NPS. Going by this method, customers are organized into three groups—promoters, passives, and detractors—allowing employees to get a true sense of the success or failure of customer experience. In this method, customers are asked whether they’re likely to recommend the company on a scale of 1-10 to someone they know. Customers that give a score of 9 or 10 are called promoters, the most loyal customers. Those scoring their experience as 7 or 8 are passives, and those scoring it from 0 to 6 are detractors. NPS is, then, calculated by subtracting the percentage of detractors from the percentage of promoters.

Empower the frontline employees

There are many transactions occurring between customers and frontline employees every day – and each one of these transactions is capable of adding a promoter or detractor. How should one measure CX in this scenario? Which are the touchpoints that matter?

This was the rationale of Allianz CEO Michael Diekmann when he set out to bring his global financial services enterprise closer to its customers. It was in 2004 that the leadership team realized that their frontline employees are the best ones to pinpoint the make-or-break customer experiences—and come up with effective ways of improving them. Soon after this realization, the company built a strong customer-facing team that would report directly to the board and would develop and test a feedback system that would be used in 70 other countries later on. NPS was chosen as the core metric.

The system was mostly driven by frontline employees. After each transaction, an independent polling firm would conduct a survey with the customers and, depending on the customers that had given the permission to call back, the frontline employees would make a follow-up call. Because the frontline employees took responsibility for enhancing their work unit’s feedback scores, they met frequently to devise service improvements, both large and small. Very often, it was seen that they were the ones that would come up with the best solutions.

Successful execution of a closed-loop process requires strong leadership and cultural reinforcement. As in the case of Allianz, the top executives would call the customers personally and recognize the top performers. The managers would have a ‘compliment database,’ whereby they would praise the frontline employees by name.

This entire closed-loop process gives a voice to the customers in running the business.

Apart from the frontline employees, closed-loop systems are also required in the executive suite and middle ranks. Customer input can influence decisions on everything, right from where the company will compete to product development, pricing, policies, and processes. It also plays a major role in structuring a coherent strategy. Organizations have used NPS as a measure to compare the performances of their operating enterprises (OE) and, based on the wide success, have decided to set improving customer experience as their core mission.

Once the feedback system starts taking hold, business-unit leaders and frontline employees start to own customer loyalty in the same manner that they own their targets for revenue, profits, and market share. Indeed, increasing positive feedback runs in parallel with generating more revenue – and that’s where the focus of an organization should lie.

The article has been inspired by this HBR research.

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