Loyalty Research

During Walker’s recent Customer Experience summit in San Diego, we focused on two major releases from Walker experts –  Customers 2020 which looks into the future of B-to-B customer experience, and Driving Results which provides a practical guide for using CX to drive action, real change and business results.  Along the way, I heard many people talking about CULTURE.  Some are just plain lucky – CX professionals that inherit a true customer-oriented culture find it to be one of their most important accelerators.  For those who aren’t so fortunate, of course, they want to know how to take steps to get there.  Usually, the place to start is leadership and securing genuine awareness and support.  But there are grassroots efforts that can change the landscape too.  Here is one such story I was fortunate to witness:

The setting…   New Voice of Customer program, with inside sales teams being asked to approach “hot alert” follow-ups with customers for the first time in a formal way

What happened?…   One particular person came on strong as an early adopter – his name is Corey.  Within a matter of days, he single-handedly contacted dozens of customers, and was able to pull from some of his roots in customer service to engage in a very positive and natural way with customers.   This activity was a natural fit for Corey and he got the job done.   Later, when Corey was asked to share his experiences at a monthly CX leadership team meeting, what started as a good thing turned into something bigger - something that could actually ignite a culture change.

So what happened next?…   Corey stood up and shared his story with 25 leaders newly charged with CX responsibilities.  With great confidence and pride, he went on to share his viewpoint:

• This was an amazing move for the company – most customers wanted to tell a story, and through this process they had the opportunity to do just that. 
• Customers were truly impressed that someone actually reached out to them about their feedback, especially this quickly.
• Despite the complexity of the business, many issues could easily be diffused within the first contact.  For some, there was simply a disconnect, and now a chance to be able to educate those customers a little bit more. 
• With great enthusiasm he said he was “very proud to be part of a company that does this and honored to be involved in this capacity by being the first touch back with customers.”  

For his efforts and probably most of all his renewed and positive attitude, he was given a big round of applause from the team.  As CX professionals, we know that closing the loop with customers can have a direct positive impact on both loyalty and future response rates, but sometimes we forget what effect it can have on the staff that participates in the process.  This type of attitude and willingness to engage with the customer is what is needed for employees to transform an organization’s culture to truly be customer focused. 

Krista Roseberry

Vice President, Consulting Services

I have spoken to many HR professionals who talk about the difficulty of finding talent, even with high unemployment.  Well buckle up because it is just going to get worse, which is bad for HR but if you are a highly skilled employee, is good for you.  Mike Hicks, Director for the Center for Business and Economic Research, recently spoke at Walker and then was interviewed on Inside Indiana Business.  He has been studying job markets during the past several recessions and has concluded we are at an unprecedented time where the jobs of low skilled employees are not coming back, leaving these employees in a difficult position.  What it also does is place a premium on employees with key skills as the Indiana economy shifts from a manufacturing economy to a more service based economy.   Employees who are educated will be in demand as organizations will not be able to find the critical positions due to lack of employees with necessary talent.

This will also place a premium on employee loyalty and keeping top talent as it is going to be increasingly difficult to replace the loss of top talent.  Therefore, companies must get rid of the traditional ways of doing work and come up with new and creative ways to work.  I predict a fundamental shift in how work is done in the future, by that I mean no longer the traditional 8-5 in the office Monday-Friday, and I also don't mean the traditional come in, do your work and get your paycheck.  Work is going to becoming increasingly flexible and more give and take will happen in the workplace.  The reason is, if you aren't progressive in work and the workplace, employees will find a company that is, it will become a recruiting tool and a way to improve employee engagement and loyalty. 

I wrote a blog containing a pictograph of employee loyalty, I think it might be time for many HR and business leaders to becoming familiar with this, because this is the challenge they will be wrestling with more and more. 

I recently conducted a radio interview on the 5 R's of employee loyalty and retention with MyLocalJobNetwork.com, this was the second interview with them.  The first interview can be heard here.  This interview were based on the HBR article I blogged about previously and we discussed the 5 R's of employee loyalty along with some employee loyalty trends in the national workforce right now.  To listen, click here. 

Indiana, as a state, is fat.  According to the CDC:

• 65.9% of adults are overweight, with a Body Mass Index of 25 or greater
• 29.6% of adults are obese, with a Body Mass Index of 30 or greater

With the rampant obesity problem and the continued implementation of the Affordable Care Act, more emphasis is being put on wellness.  I see a lot of companies talk about wellness, but last night on the news, I saw a company that not only preached about wellness, but is taking steps to do what they can to improve the wellness of their employees.  The company is Brown & Brown, Indiana's largest employee benefits company.  It is encouraging to see a company that provides wellness consulting and expertise with its clients, actually practicing what it preaches.  They have purchased two treadmill desks where the employees can sign up for half an hour blocks.  I spoke with Andrew Lockerbie, SVP at Brown & Brown, and at first they weren't sure how receptive employees will be to utilizing these desks but the slots are full weeks out and the treadmill desks are almost always in use.  He is a regular user of it and has been able to shed a few of those unwanted winter pounds just by walking a couple of miles a day.  You can view the video here.

At Walker, they pay for a portion of a gym membership, which I love.  I would never join a gym but when they began paying for a large portion of it, I was quick to sign up and regularly work out over lunch, of course that led to a major knee injury which I blogged about here.  We have also recently begun offering fruit, granola bars, oatmeal and other healthy snacks and will pay for entry fees into marathons, mini-marathons, triathlons, etc. 

So my blog is about employee loyalty, what does wellness have to do with employee loyalty?  One of the key drivers of employee loyalty is a company that shows genuine care and concern about an employee.  Providing opportunities easy methods of being healthier is a way to show you care about the employee.  It is also helps differentiate the company from the competition so if any employee is looking for a job, or receiving an offer for a job, it is one of the perks that would need to be factored in when deciding to leave or stay.  It is kind of sad that companies have to make it easy for employees to exercise but that is the state we are in and companies that are doing it, will be differentiated from others in the marketplace and it will help attract talent.   

A few weeks ago I had a truly extraordinary customer experience. The Chris Tomlin Burning Lights Tour came to town. The concert was fabulous and we had a wonderful time!  But, that wasn’t the extraordinary part. My story is actually about the process of getting tickets.

Wanting to surprise my husband, I went online to the Ticketmaster website in search of tickets.

• They make everything easy to do yourself online. But that wasn’t the extraordinary part.
• Having a question, I called customer service and spoke with a representative who was able to help me and ensure everything was taken care of. But that wasn’t the extraordinary part.
• The tickets were sent electronically, just as promised. But that wasn’t the extraordinary part.
• Then I received something in the mail from ticketmaster. Here it is...the extraordinary part.

The customer service representative had sent a handwritten note thanking me for my patronage and saying to have fun at the concert. Wow! That note was above and beyond anything I expected. Because of that experience I have an extremely favorable impression of Ticketmaster and I want to tell everyone I know about it. That doesn’t just happen.

So, how does an extraordinary experience happen?  One place to start for your customer strategy is with creating a journey map of the customer experience. By investing time in understanding the path a customer takes, the people and functions they interact with along the way, and enablers and obstacles, a journey map will provide a complete picture of the customer experience. Insights from your customer feedback program will help you in this process. The next step is to identify the opportunities and changes needed to provide an extraordinary customer experience. 

What are you waiting for? According to Kerry Bodine at Forrester Research, one prediction for 2013 is that emotional insights will take center stage. “The idea that happy customers are more likely to remain loyal, try new products and services, and spread good news about their experiences, has started to catch on.” 

Kitty Radcliff
Vice President
 

Customer experience professionals are often called upon to share customer insights and recommendations. Consider these four must-haves for your next presentation:

1. Compelling & Relatable: Your audience is looking to learn something new; something they don't already know. Highlighting an unexpected insight will grab (and keep) the attention of your audience.
2. Concise & Relevant: The recommendations must be well thought out. Focus on the elements that tie to your customer retention & growth strategies and the activities that are important to the audience. Be on-point and specific with your recommendations.
3. Balanced:  Try to avoid using customer survey research terms and use terms your executives uses. This will help make the information relevant for the audience.
4. Actionable:   Frame your recommendations with the Call to Action(s) clearly stated, prioritized and obtainable.

An emerging trend in the study of relationships is how dependent the parties are on one another for success. When there is a good balance of power, there is a greater likelihood of success in the relationship. However, when one party holds the upper hand, the door opens for issues related to trust, conflict resolution, and unfairness to creep into the relationship.

Dependency has been seen to take a couple of forms in channel relationships. The first is a cost-based dependency. For the partner, this comprises the margins made on a supplier’s products, the costs for becoming and maintaining the level of partnership, as well as any potential switching costs to move business to another provider. The higher these are, the more that power favors the supplier, with the supplier being more dependent on the provider than vice versa.

The second type of dependency is more benefits based. Again, in the partner’s eyes, this would be types of things like brand awareness, promotional consideration, innovation, and the ability to add value to existing products provided by a supplier. This could also be exclusivity to sell certain products, early access to product announcements, trainings, and networking opportunities/lead generation, among other things. The higher these factors are again raises the level of dependency the partner has on the provider.

To mitigate this dependency, partners also have some tools to rely upon. First, they can develop a services-orientation approach, to help to implement and support products from a provider, often times doing so in competition with the provider (with lower overhead costs associated with it).  Secondly, they can diversify their own portfolio, maintaining a relatively level of status with several providers to be able to offer many options to the end consumer, focusing more on breadth and flexibility, rather than low cost and depth with one provider.

When power is evenly distributed, there is much greater likelihood that the relationship will be more collaborative, with flexibility demonstrated by both parties to achieve a mutually successful outcome, and less likelihood that contracts provide the foundation and boundaries for the relationship, which can cause strife between parties. At the end of the day, reviewing relationships in light of the distribution of power may be essential to determining the best pathway to growth, increased market share, and enhanced profitability, for both the partner and the supplier.

Brad Harmon

VP, Consulting Services

Walker Information

When designing a voice of the customer (VoC) program, one common desire is to have some perspective of how your performance stacks up. Here are three options:

1. Add benchmark questions to your survey: Ask the customer to evaluate a benchmark company – this could be direct competitor or a "best supplier."
2. Benchmark against yourself: Companies can answer the “good or bad” question by looking at key segments within their business and creating a "best-in-class" score.
3. Look at scores over time: As a customer survey research program matures, it is natural to look at changes over time – evaluate your performance based on how your own scores are improving.

Are channel partners interested just in incentives, profits, and compensation for their efforts with customers? The direct compensation VARs receive in return for their investment in a provider relationship is no doubt important, as it contributes to the viability of a partner today and in the future, but will partners recommend a product purely based on the incentives associated with it?

Across several partner-focused studies conducted by Walker that look at aspects driving preference of one provider over another, the Product Quality has much more influence than margins, rebates, and other incentives. This suggests that providing Products that VARs can count on, contribute to fewer implementation problems, require less ongoing support, and are interoperable across platforms are most effective in guiding partner recommendations.

VARs stake their reputation on the trust being placed in them by their customers, and regardless of the compensation associated with a particular provider or product line, Quality wins out most of the time, over other aspects like being Easy to Work With, Sales Enablement, or even Profitability.

Interestingly, while many customer feedback efforts allot significant focus on gathering product-specific feedback, most partner feedback initiatives only scratch the surface in identifying perceptions of the partners on Product Quality. Much more attention is spent on feedback related to Onboarding, Enablement, Training, and new or evolving Marketing Programs and Incentives.

Given the strong influence that partners play in their customers’ decision making process, more time should be spent understanding the concerns VARs have with individual products, and where their biggest successes are found. This information can be combined with customer feedback to identify the biggest areas of potential growth that will appeal to both partners and customers.

In addition, if partner perceptions are preventing new products from reaching large groups of customers, identifying and removing those barriers, with the help of product groups and engineers, will allow for additional customer feedback opportunities in the future.

Are you getting the right feedback about the quality of your products? Or, are you spending most of your time reacting and responding to feedback based on the incentives you provide to VARs?

A few years ago, I wrote a blog about the “Groupon Phenomenon”.  At the time, Groupon was booming.  Everyone was talking about it.  It’s hard to imagine that today the company seems to be barely hanging on, or at least not enjoying the same success they were in 2010.

So, what happened?  At the end of February, CEO Andrew Mason was let go from the company and offered some parting thoughts to employees, which included two things I wanted to call out specifically:

1. Have the courage to start with the customer.
 

2. The moments he regretted the most where the ones where he let a lack of data override his intuition about what is best for the customer.

Let’s start with item #1.  Have the courage to start with the customer.

Easier said than done, particularly in companies where product is king.  However, it is an important point that we as customer advocates need to consistently promote.  We need to have the courage to stand up within our organizations and make sure that customers have a voice and a vote on every agenda.  It’s ok for organizations to have a strong focus on products and operations, but there has to be a balance of customer focus as well.  Otherwise, it could be a very slippery slope.

Item #2.  Letting a lack of data override intuition about what is best for the customer.

We all fall into “prove it to me” mode, but we also need to trust our intuition.  We know our businesses, and we do know ultimately what customers want if we stay in tune to their needs.  Our decisions need to be based not only on strong data points, but ultimately also by using our gut.  Know what customers want and act upon it.  Don’t let the red tape get in the way.

I love a few things about Andrew Mason’s departure letter, including the humor.  However, what I most admire is his honesty to admit that he did fall short on being focused on the customer and was urging his company to not go down that path again.  It was an inspiring turning point to hopefully what will be a new start for Groupon.  We’ll see.

Katie Kiernan
Vice President, Consulting Services

How do you know whether or not making acquisitions is a smart decision? Here are three success factors to consider:

• Know the risk of the customer base you are buying. The due diligence process is critical. This includes predicting the future loyalty and growth of the customer base, in addition to understanding historical trends.
• Find the hot-spots. An acquirer doesn’t have to know every single area that needs improvement within the target company, but having indicators of weaknesses or hot-spots will give a clear indication of whether or not that company is a good fit.
• Use customer input in determining the integration strategy. Voice of the Customer feedback can help the acquirer to understand the strengths and weaknesses of the target firm; comparing this to a similar analysis of the acquiring company can identify leverage points that will increase the probability that the acquisition will be accretive in an accelerated fashion.

We have coined a phrase around our company:

Be Customer Intelligent

For years we have studied customer relationships and now, probably more than ever, customer continue to change. They are more demanding and they expect you to know them and deliver products and services in a manner tailored to their wants and needs. More options are available. Switching is easier. Companies you never saw as competitors may now be your biggest threat. 

Companies must rise to the challenge. They must know each of their customer's next moves. They will need to be sophisticated at monitoring what their customers are saying and doing, and they must have a big appetite for using customer insights to make better decisions. 

So what does it mean to be customer intelligent?

My colleagues and I came up with a list of ten things. In fact, we even set up a website and printed  cool posters of them! You can order free copies here. 

It means ...

You can never know too much about your customers. 

You know your customers' business objectives -- you are informed.

You listen intently to your customers in many different ways.

Big data about your customers is a big deal. 

You know your customers well enough to predict their next move.

You take action on customer insights -- right now!

Your company is completely aligned with customer needs. 

You understand your customers through the supply chain. 

You use insights to personalize your customers' experiences. 

Your success depends on the success of your customers. 

Patrick Gibbons
Principal/SVP
Walker

This blog series focuses on some trends and themes that I predict will have a great impact on the discipline of customer experience in 2013. In my last blog, I forecasted that we will continue to see great volatility in customer sentiment in 2013; this time, I want to focus my attention on a topic that is getting immense attention – big data.

“Big data” has become the buzz word du jour; like many buzz words, there seem to be different definitions of what this means, which results in different expectations on its impact. For purposes of this discussion, I would posit that “big data” relates to the collection and synchronization of disparate data sources with the intent of having a more holistic view of a system and its component parts. When looked at from this perspective, big data does not seem like such a radically new notion – after all, companies have always had customer lists, financial data, employee data, etc. The key point is on the notion of synchronization – in the past, most of these data sources were not able to talk to one another.

Big data reflects the realization of the promises of CRM – that is, firms can now not only look across a wide variety of data that is organized and linked in an efficient (if not complex) manner, but they can also begin to mine this data to reveal the underlying relationships that may not be evident to the casual observer. While I would offer that the full realization of CRM’s promise is yet to be achieved, we have certainly made great strides over the last decade.

How does this relate to the work of customer strategists? I would offer a few observations:

• As more behavioral data become available, we have the ability to identify meaningful customer segments; this will be especially valuable in identifying cross-sell and upsell opportunities.
• Linking survey-based data with behavioral data will become more the norm, not the exception. More emphasis will be placed on linking customer listening exercises to hard financial outcomes.
• Having a mechanism and process by which we can understand the inter-relationships of various data provides greater opportunities – and more imperative – to take a more action-oriented analytic approach. Stated differently – analyses that do not focus on action (and business outcomes) will have little value in organizations.
• The complexity of the data systems will require that customer strategists be skilled (or at least conversant) in the theory of data structures.
• As the volume of transactional data grows, the opportunity (and demand) for sophisticated longitudinal analysis and/or complex predictive analytics will increase. Customer strategists will need to be not only more data-savvy, but also will need to be more skilled in the use of complex predictive analytics.

Big data represents a great opportunity for the customer experience industry; however, it will require customer experience professionals to evolve. Here are my recommendations for staying ahead of the curve:

Continue to learn – Being conversant in data structures and analytics are a must. Even more important is to be more comfortable and capable in dealing with financial concepts and models in order to link customer experience work back to business outcomes.

Build new relationships – Learning new skills does not necessarily mean going back to school; expanding your business network beyond the boundaries of customer experience to include IT and financial resources will provide go-to resources who can aid in your ongoing learning.

Be proactive – Look for ways to embrace big data before you are asked; doing so shows initiative, and will speak to your ability to think strategically.

How is big data impacting your organization? What advice would you offer to customer strategists? As always, I welcome your comments.

Mark A. Ratekin
Senior Vice President, Consulting Services

Through our employee loyalty program here at Walker this year, a priority that was identified was an increased focus on mentoring.  As such, we have charged an internal team to re-energize our mentoring program.  There are three primary objectives for this:

1. Stay Competitive: increased competition drives the need for continuous learning, and talent development can yield competitive differentiation in a crowded market.
2. Stay Connected: increasing remote/virtual communications, social media, etc. are decreasing human connections and relationships, and mentoring offers proven ways to share our knowledge, experiences, and best practices (often in face-to-face, personal methods).
3. Stay Ahead: mentoring is shown to improve leadership elements such as retention rates, employee morale, individual self-confidence, trust, organizational commitment, job satisfaction, accelerated leadership development, reduced stress, stronger/more cohesive teams, and heightened learning.

A 2011 Sun Microsystems survey (a study conducted over 5 years) cited additional statistics to support the advantages of mentoring:

• Mentors are promoted 6x faster than those not in a program of this type
• Mentees are promoted 5x faster than those not in a program of this type
• Retention rates for both mentees (72%) and mentors (69%) are significantly higher than those who did not participate in mentoring (49%)

In addition, our own exit interviews and employee survey results show people want to stay when they are invested in relationships within the company.  With its impact on employee satisfaction and loyalty, mentoring contributes to the Service Profit Chain linking internal development investments to business success:

As the diagram depicts, mentoring can be a contributor to higher Employee Loyalty, which translates to better customer service and customer experiences, which influence stronger Customer Loyalty, which aligns with and impacts a company’s improved financial performance leading to success of the business.

Bottom line, not only is the decision to invest in mentoring reap internal benefits (such as retention, morale, trust, stronger teams, and deeper talent), but it also is strongly related to external advantages that give a company a competitive edge and a leadership advantage.

Please share your own experiences where being mentored or mentoring someone else led to a positive outcome for you in your career.

Brad Linville,

Walker Information

In my last post I made the case that the future of business will require more reliance on powerful, computer-based analytics that interact with (not supplant) skilled data scientists who bring both analytic and business context knowledge into the process. Modern, effective customer insight analysis requires this kind of efficient cooperation between the analyst and the analytic engine to meet the business objectives of our customer insight function.

While this cooperation between analyst and the analytic tools is critical to effectively producing useful customer insights, it is equally critical to getting those insights implemented within the business. This is especially true when attempting to apply predictive analytics to the way we manage and interact with our customers. We need a system that is designed around the people for whom the insight is produced - a system that allows the insights to support the decision-making of the people and processes that directly impact your customers.

I have been part of many predictive analytics projects over the last 5 years. Nearly all of them have successfully extracted a set of useful insights that have impacted the way companies think about or interact with their customers. However, very few of them have made an impact on the specific actions taken toward specific customers, which is necessary to experience the full power of predictive analytics. For instance, I once built a model that predicted whether or not a channel partner's revenue to the OEM was going to decrease in the following year. It was a very accurate model, and it highlighted a number of key reasons behind declining revenue. The drivers of decline were immediately seized upon by channel management, and task forces were put in place to better understand and fix them. However, no one was able to find a use for the ability of the model to identify specific partners who were likely to decline in the coming year.

There are many reasons that customer (or partner) focused predictive analytics fail to impact specific decisions made about specific customers. A majority of the reasons I've encountered can be attributed to an excessive gap between the point of insight production and the point where the insights result in actions toward specific customers. In the pioneering book on enterprise decision management - Smart (Enough) Systems - Neil Raden and James Taylor dub this phenomenon the 'insight-to-action gap.'    

In my experience, there are two critical reasons that this gap exists for customer-focused predictive analysis projects:

1. The analysis project was not focused on a specific, customer-focused decision-point. Many insight projects start with the goal to see what we can find that will predict an increase in revenue. This is not a bad thing. Sometimes we need to start this way to understand where to dig further. Just don't expect these projects to yield quick and specific action.

2. There was no forethought or buy-in to the process by which insights will be delivered to the front-line employee for action. This often happens when a customer strategy group gets access to previously unintegrated datasets about the customer and has been tasked with providing insights about a particular issue like low renewal rates. They, rightly, decide that predicting who will and will not renew is more actionable than just looking for drivers of renewal, and a predictive project is launched. I fully support this thinking except there is no definition around getting the 'actionable' insight into the hands of those who will act.

The reason both these situations yield a gap between the insight and action is illustrated in the figure above. After an insight is developed, the next defined step is developing a report and presenting it to group of managers or executives. We bring our amazing project and results, and lay it out for them to approve or disapprove of. The best case is that they approve and say, "We need to use this information to intervene and stop the predicted bad things from happening while capitalizing on the predicted good things!" Then what? Then a group of people, which may now include at least a manager of those who will take the action, is convened to create a strategy for operationalizing the insight. By the time the insight actually impacts a customer it could be months later.

Thankfully, there is a better way, and it's all about beginning with the end in mind. Start by defining the specific customer outcome you want to predict - not something broad like customer revenue, but a specific aspect like customer spend on new products. The next step involves identifying the decision or interaction point at which you will intervene. This requires involving the group who will be responsible for the intervention and designing the process/system to do it. Then we move on to identifying and integrating data, running analysis, putting the insights into action, via the pre-defined and agreed-upon process, and validating the impact. An upcoming post will discuss this process in more detail, but the most important step is knowing exactly what to predict and what you will do with that prediction when it comes. Without that, your well-crafted insights are likely to stagnate. We need to mind the gap.

As January comes to a close, I thought it might be beneficial to pause for a moment and provide some thoughts on what trends we see emerging in the science of customer listening. Over the next several blogs, I will comment on a key trend and discuss the implications for customer strategists. Before delving into our first prediction, we need to discuss what we saw in 2012 from a customer loyalty perspective.

Loyalty in 2012: More of the Same

Source: Walker calculations based on data from http://finance.yahoo.com

It may go without saying that 2012 was a volatile year – the chart above shows the progression of a $100 investment on 1/3/2012 in each of the major stock indices – the Dow 30, S&P 500 and the NASDAQ Composite. The values are not as important as the shape of the curves – it demonstrates that 2012 had many ups and downs in the market. There are a number of reasons for this – the broader global economy, geopolitical unrest, the year-end drama related to the fiscal cliff, and so on. In this period of volatility, the impact on customer loyalty is not surprising – among Walker’s client base, the percentage of customers who are Truly Loyal was flat between 2011 and 2012; on a quarterly basis, we saw more variance in the loyalty scores with a drop in the last quarter of the year.  This is not isolated to Walker; many of the other industry benchmarks suggest that customer sentiment was flat at best in 2012 (and some have not yet published Q4 results).

Source: Walker Benchmark Database, B2B-Oriented Programs

Is Loyalty Dead (or Even Achievable)?

Despite some claims that customer loyalty is dead (or dying), I would offer that loyalty is still achievable – however, the bar is higher. The underlying reason for this relates to the divergence of expectations vs. reality – that is, as the economy has tightened, funds have become more scarce; this scarcity means that buyers are more selective in how they use their funds. This results in customers not only being more price-sensitive, but they also have heightened expectations on what they will receive. At the same time, providers have been forced to scale back on resources (as a result of constrained growth and/or uncertainty in the market), which ultimately means that they are ill-equipped to deliver on these expectations. This creates a “perfect storm” of dissatisfaction, which means that customer loyalty is harder to achieve.

So, this brings me to my first prediction/forecast for the coming year:

Quarterly loyalty scores will remain volatile as long as there is excessive uncertainty in the markets and/or the economy continues to be challenged.

What can we do about this? I would offer the following strategies for consideration:

1. Review your workflows to ensure an “outside-in” perspective – Conducting a review of the experience that your customers have with your organization can be quite revealing. Conducting a customer journey mapping exercise can help to highlight where gaps exist and can assist you in re-tooling processes to ensure an optimal customer experience. This is particularly critical among companies that have recently merged with or acquired another company.
    
2. Communicate – both externally and internally – During periods of economic turbulence, it is better to over-communicate. From a customer perspective, seek to gain an understanding of not only their expectations, but also what drives those expectations. Understand how their business works and how your products and services can help them to achieve their goals.
   
   From an internal perspective, reinforce the role that customer centricity plays in your strategy; on the front line, managers should spend time with their direct reports to identify how to integrate customer perspective into their day-to-day operations. Above all else, though, leaders must walk the talk – leading by example communicates better (and louder) than words.
    
3. Control what you can control – Much (if not most) of the volatility in the markets are outside our control; it is tempting, then, to throw our hands up and surrender – that is, just let the chips fall where they will.

Rather than take a sit-and-wait approach, we would recommend that you identify (from the steps noted above) what aspects you do control – for example, you control how your organization approaches the customer experience, you control how you choose to innovate, and you control how you respond to competitive threats. Focusing on what you control – and then acting on it – can be much more empowering that waiting for the winds of change to blow in your favor.

Even though customer loyalty is more difficult to achieve in these economic times, those firms who successfully crack the code will find that they have one of the few sources of long-term sustainable competitive advantage in their strategic arsenal. I would argue that the payoff is worth the effort necessary to realize customer loyalty.

Over the next few blogs, we will review the other factors that I am forecasting will be the trends and themes that customer strategists should be thinking about in the coming year. In the meantime, I would be eager to hear your thoughts – what are the themes and trends that you are tracking?

Mark A. Ratekin
Senior Vice President, Consulting Services

Five things a CEO should know from their customers:

• How much revenue is at risk? Aligning Voice of the Customer feedback with purchase behaviors pinpoints how much revenue is at risk and where there is potential to grow market share.
• How do we stack up?  Customers can provide insight into how the organization performs against the competition.
• What’s driving customer loyalty? With an understanding of what influences customer loyalty, executives can allocate the appropriate resources.
• What are the changing needs of customers?  Design with the customer in mind by understanding their current and future needs.
• What about key customers? Customers have unique needs and companies need a system for retaining and growing their most important customer relationships.

Here are six guiding principles to follow that will help you build on or enhance your customer strategies:

1. Vocal and visible executive engagement:  gotta have it, hard to get it.
2. Employees are a powerful influence – internally and externally, ambassadors are key.
3. Broad communications, internally and externally, embed thinking about the customer experience into corporate culture.
4. Complex analysis adds value, but must be distilled to simple messages that drive action.
5. Roadmaps help stakeholders understand that customer experience improvement is a journey, not a one-time effort.
6. Small steps and quick wins build momentum.

A recent TED Talk by Shyam Sankar (also the subject of this recent blog post by Leslie Pagel) nicely argues that man-machine cooperation is the real story of technological development. In a 2010 article, chess grandmaster Garry Kasparov, who famously played IBM's Deep Blue in the late 1980s, relays a wonderful anecdote illustrating the power of this symbiosis between humans and computers. In 2005, a freestyle chess tournament was held where humans and computers could work together or play separately. At this point in history, a computer program running on a standard laptop could routinely beat many grandmasters. However, this freestyle tournament produced two interesting and relevant results:

1. a strong human player with a weak laptop soundly defeated even the best stand-alone chess computer, and
2. the overall winner of the tournament was not a grandmaster with a powerful computer, it was a pair of amateur chess players using three relatively weak laptops. 

According to Kasparov analysis, the team's winning edge was a superior interface between all humans and computers that effectively counteracted the superior chess knowledge and/or computational power of their opponents.

From this story both Kasparov and Sankar conclude that the decisive factor for determining the analytic capability of any human-computer combo is the friction between humans and computers. By designing a better interface that reduces the friction, you increase the analytic capabilities derived from the same human and computer at an ever-increasing, convex, rate.

While I completely agree that designing friction out of the interface is a decisive factor, I think there is one critical element behind the success of the human-computer team that both Kasparov and Sankar overlook - the rules of the game favored a cooperative strategy. The rules of freestyle chess require players to make moves much faster than regular chess. Therefore, the ability to have a computer crunch the data and provide the human player with a short list of potential moves is a critical advantage. Given more time between moves, the experience, knowledge and creativity of a chess grandmaster begins to override the speed, computational power, and efficiency of a computer chess program.

These two elements of success in chess are perfectly relevant to customer predictive analytics and customer-focused decision-making.

• First, useful predictive analytics require the smooth interaction of a skilled data scientist and a powerful, but usable, analytic workbench and process. It is not uncommon for an analyst to only spend 10%-40% of their project time actually running analysis and extracting usable insights. The rest of their time is spent transforming and merging data or getting outputs into usable/shareable formats. We need more work on reducing the friction between the analyst and the analytic tools if we are to realize the full benefit of predictive analytics. 
• Second, data scientists need to fully understand the context they are working in and the rules that apply to it so they can apply predictive analytics in the right place and using the right approach. For instance, conducting a predictive analytics project within a strategic accounts group with a small set of accounts and deeply embedded account managers is not going to produce as much return as a similar exercise in an outbound call center where fairly inexperienced sales reps are each responsible for hundreds of accounts.

The future of business will require a reliance on powerful, computer-based analytics that easily interact with (not supplant) skilled data scientists who bring both analytic and business context knowledge into the process.

In a recent HBR article, the authors give five things companies need to be doing to retain employees.  You might be wondering why employee loyalty is important right now.  It is important because they found 40% of employees plan to start looking for a new job and 69% are passively looking for a new job right now.  Obviously there is a big difference between looking for a new job and actually leaving a company.  However, I have found once someone starts to disconnect by seeing what is available, their loyalty is impacted and they eventually believe the grass is greener somewhere else.  I know there are some who find out what they have is pretty good, but I believe many have the perception that somewhere else is better than where they are so they begin to disconnect and ultimately, leave the organization. 

The authors give five things (and I think these five are a great summary) to do to keep employees:

1. Responsibility. This does not mean you pile on to what the employee is already doing, but find strategic things that help the company, while developing the employee. 

2. Respect. I think this is pretty straightforward conceptually, unfortunately not always executed daily.

3. Revenue-sharing. I have blogged about this before, I love this, and ensures everyone has skin in the game and motivates employees at all levels to help the company be successful. 

4. Reward. While this is similar to revenue-sharing, this goes beyond just compensation but finding ways to reward the employee on a more personal level.

5. Relaxation Time. I have blogged about this before with ROWE or in companies that don't have formal time-off policies.  Employees need to have time to get away and relax as it will ultimately make them more productive. 

Like I said, I think this is a great, concise way to remember key things that will drive employee loyalty and ultimately organizational success.