I read the article that follows on the Taipan Publishing Group website. While this blog usually focuses solely on market research news and issues, I found this article thought-provoking, especially given its focus on the linkage between quality customer service and macro financial performance. So, with permission of the publisher, the article is presented in its entirety. I hope you enjoy.

Comments welcome as always.

Dr. Bob

Companies That Ignore Quality Customer Service Are in Trouble

Todd M. Schoenberger, Managing Editor, Taipan’s Tipping Point Alert
Wednesday, July 07, 2010

Perfect customer service used to be the norm for American companies. Many can remember a time when full-service gas stations had a crew checking the oil, washing the windows and filling the tank – all without extra fees, excuses and pushback.

Or, companies recognized more for improving customer loyalty in hopes of receiving additional business in the future. You rarely hear stories about cultivating relationships with customers, and more tales about one-dimensional transaction-based interactions.

It’s discouraging, and many companies are overlooking the one true asset they can offer that costs virtually nothing: Excellent customer service.

During these tough times, consumers are more likely to remember how they are treated now and will reward those businesses when the economy fully improves. But it goes even further than this.

Have you noticed the companies with a reputation for great customer service are also the companies that have seen better performance out of their stocks during these difficult fiscal times? Think of Southwest Airlines (LUV:NYSE) and Apple (AAPL:NASDAQ) – companies known for going above and beyond for their customers all the while their stocks have appreciated 65% and 86%, respectively, over the past year.

Then, you look at hard-nosed companies like Comcast Cable (CMCSA:NASDAQ), Home Depot (HD:NYSE) and Bank of America (BAC:NYSE), companies that have barely beaten or lag the S&P 500 over the past year. Consumers have choices and are not stupid, yet these companies continue to disrespect the one group that helps keep the lights on in the building.

I’m sure there are countless examples of what you have personally experienced over the past two years that will probably have you returning – or ignoring – those places of business. It’s about how the company treats its customers that will set the tone for future revenues and higher equity valuations.

If you have a company you have had the pleasure, or displeasure, of dealing with, feel free to post a comment and let us know. We appreciate your thoughts.

At first glance, the numbers are both dismal and daunting.

Telephone surveying is undergoing a sea change.

According to the Pew Research Center (based on figures from the National Center for Health Statistics), 25% of U.S. households are cell phone only.

Households are jettisoning landline service at an accelerating pace.

Cell only households are more prevalent in various subgroups of the population: half (49% of adults aged 25 to 29) and 30% of Hispanics are cell only.

As Pew states, “survey researchers…face a difficult decision as to whether to include cell phones in their samples. Doing so adds significantly to the cost and complexity of surveys at a time when respondent cooperation is becoming increasingly difficult to obtain.”

Some in the market research community have opted for Web-only surveying as a replacement for telephone. But this presents an even larger issue. In spite of the shift to cell service, phone service overall is near ubiquity. Only 2% of U.S. households have neither landline or cell service. Some 38% of U.S. households do not have internet service at home.

The market research industry is arguing furiously about how to solve the problems with telephone surveying. Thus far, there is little consensus. But the effort must continue.

Meanwhile, market researchers in the corporate world can rest relatively easily. Surveying out of customer databases by phone continues to work and continues to be statistically robust. The challenge on the corporate side is in sampling and data collection outside their own customers. Hybrid phone surveys, combining both cell and landline, are still relatively untested and their reliability is still largely unknown with unanswered questions about the representativeness of surveying via cell in dual landline-cell households.

Market research will clearly become only more challenging in the near future, at least.

But, I guess that’s why market researchers get paid the big bucks, right?

With a smile,

Dr. Bob

In the prior post on this site, I discussed the challenges in market research surveying of measuring consumer behavior.

For years, consumer market research has found that consumers support Green, while their actions in the marketplace belie this support.

A recent study published in the Journal of Personality and Social Psychology highlights shifts in Green thinking and behavior among consumers, showing that the Green movement might benefit from encouraging consumers to be conspicuously Green.

Researchers developed a series of experiments in which college students were offered equally priced products in both green and conventional versions. Indeed, the green models were less feature-rich than the conventional products. The test group was then primed to increase their awareness of status while the control group remained neutral.

Both groups then made their product selections. A significantly higher percentage of the test group chose the green products.

The study suggests the motivation for this difference: “costly signaling theory says that although costly, altruistic acts may benefit the altruist indirectly, by establishing a ‘reputation’.”

In a telling follow-up study, researchers found that preference for Green lessened among the test group as the price of the Green products were lowered.

For companies marketing Green, market researchers may want to measure these possibilities.

For more details about the study, click here.

Dr. Bob

Market researchers tend to explore the realms of consumer and customer perceptions and attitudes. Depending on the topics being investigated, a long history of both qualitative and quantitative research methodologies have established norms for obtaining valid and relatively precise data from respondents.

However, caution is required in market research when dealing with consumer and customer behavior.

A recent report by the Economist newspaper on the state of television illustrates this continuing issue. The Economist reports on the findings of Sarah Pearson, a research from England, who has almost 100,000 hours of recording of consumers watching television. As the Economist says, “There turns out to be an enormous gap between how people say they watch television and how they actually do….In surveys they almost always underestimate how much television they watch, and greatly overstate the extent to which they watch video in any other form.”

The accompanying data from Nielsen shows that consumers understate their television consumption by some 40% and overstate their consumption of online video by more than 100%.

Market researchers do well to proceed with caution in assessing the validity of self-reported behavior, such as product and service usage.

Comments welcome.

Dr. Bob

[Note: A subscription to the Economist is required to access this report online. It is available for purchase on their website.]

Market Research as an industry is tripping over itself in its rush online. Web surveys, market research 2.0, surveying via social networks, and mobile research applications are the rage. Traditional ways of collecting data have been declared dead. But is the industry simply succumbing to a fad?

On May 1^st, the Economist published a special report on television called “Changing the Channel.” Arguing that television is weathering the Internet storm better than other types of media, the Economist cited data from the Kaiser Family Foundation from 2009 reporting that 8 to 18 year olds in America are watching more television than they were in 1999. Thanks to multi-tasking America’s youth spend about half of their media time with television and the other half spread across movies, music, print, video games and online (computers).  (Note: the Economist requires a subscription to view past special reports online. The reports may be purchased at the site.)

Moreover, while the average YouTube users in the U.S. spent 26 minutes watching videos a day, the average television viewers spends 5 hours watching television. Note as well that television has far greater ubiquity than online service among the U.S. population.

Combine these facts with a new study reporting that 90% of television viewers are interested in more interactive television and a majority would reduce their time online if their televisions were so.

Television is still, by far, the medium of choice among Americans. What happens when television competes directly with online services for personalization?

Maybe the future of market research resides on television as well.

Comments welcome.

Dr. Bob

Recently perusing posts on market research, I read a blog reporting recent data about YouTube viewership. The blog stated that “American internet users…watched an average of 200 videos a day in the month of May….According to comScore Inc., a globally-accredited Marketing Research company, about 183 million Americans are tuned in YouTube every month watching 34 billion movies online. This means that there is an average of 186 videos watched per person in the US, based on comScore’s Video Metrix service.”

Hmmmmm. Every American internet user watched an average of 200 videos a day. Let’s assume for a moment that each video is 3 minutes in length. That’s 600 minutes, or 10 hours per day, spent watching videos on YouTube. Even if we assume a length of 2 minutes, that’s 400 minutes or 6.67 hours per day per user.

Plausible? No.

A quick consult of the data originator reveals that “183 million U.S. Internet users watched online video during the month….U.S. Internet users watched nearly 34 billion videos in May” or 186 videos during the month. With an average length of 4.3 minutes, according to comScore, this equates to 0.45 hours (26 minutes) of viewing per day per user.

Plausible? Yes.

Errors happen, of course. As market researchers, we have a responsibility to both check our facts and to subject our results to a plausibility test. Our credibility, and our ability to influence, are at stake.

Dr. Bob

Dr. Bob: But what about the bureaucracy that seems to invariably slow everything down? Inspections, custom forms, clearances, shipping manifests and the like?

Chetan:  On the B2B side of e-commerce this is all coming online. It’s an issue of scale. With such large volumes moving literally around and across the world, all the systems are adapting. There is a real push out there in the B2B world to move online, not only for the speed improvements but also for the accuracy of the information and the ability to track the timing of movement within the supply chain.

E-commerce connects all the entities in the supply chain together. Everyone can know precisely what each other one is doing, and can intervene if and when problems arise. So now, as a manufacturer I know there is a problem and I help fix it immediately rather than have a shipment of parts arrive only for me to then find out there was a problem.

And transparency is key. Each entity is responsible for their jobs in the process flow so that every piece can work in tandem and in sequence.

Dr. Bob: Thanks for that explanation! One last question: if B2B e-commerce is exploding, what is holding back B2C?

Chetan: It’s a combination of factors. Consumers can shop for pretty much everything online now, but they still want to walk into a store and touch and feel. They may do their research online, but they are still enjoying the tactile experience of shopping. The trend is moving, but very slowly.

Dr. Bob: What needs to happen to improve the transition rate?

Chetan: Online retailers have to find ways to increase both security and trust for consumers. And they need to be better organized internally by being proactive and more dynamic. In B2B, e-commerce is moving large quantities of a relatively small number of different items. In B2C, everything is being sold in small quantities. More e-commerce in B2C will require systems and can manage and fulfill in that environment.

Dr. Bob: Thank you, Chetan. How can readers contact you?

Chetan: They can visit www.digitalsabre.net or if they email you, Dr. Bob, on your Contact form, I’m sure you will pass it on to me.

Dr. Bob: Yes, I will!

Comments welcome!

Dr. Bob

Sometimes management is insistent on working to turn around very dissatisfied customers as an organizational imperative.

“Well,” I have heard, “they are satisfied and they are staying as customers. Why spend money to make them more satisfied?”

Good question.

Here is why: companies need to build positive satisfaction bank accounts, so to speak, with customers. With a positive account, a customer will be more likely to forgive (but not forget) the next time they encounter a curt customer service rep, or have to wait twenty minutes to talk to one (while listening to a recording telling me there is heavy call volume and they really value my business [wouldn’t valuing my business really translate into putting more resource into answering my call more rapidly?]).

Here’s a personal story to this effect. I was a customer of one of the satellite television providers. I was reasonably satisfied with them. If they had ever asked, I would have given them a four on the one to five scale.

But, their standing with me was constantly based on the next encounter. They had flunked the installation test at the beginning of our relationship by both failing to show up as promised (they did not show at all) and then I had to call them to complain and reschedule.

The service had been okay. The few times I had technical problems, their reps were helpful.

Then I received a flyer from them in the mail, pitching me an introductory offer to start service (I am already a customer!) at less than half the price I was paying after being subscribed for more than five years. That certainly made me feel warm and fuzzy toward them. Moreover, they would not make the same offer to the existing customers.

My conclusion: they valued a new customer more than they valued me, a long-standing customer. My satisfaction is decreasing……………………………..

The kicker came when I was moving. I called to transfer the service from myself to my significant other who did not have an account and was not on my account.

So I made a phone call to their customer service center. The rep I spoke with confrontational, rude, and insistent that I would have to pay to cancel my contract (which had expired after two years of service; I was on month to month).

What did I do? I called their competitor and established service with them. They were more than happy to help, as you might imagine (and are continuing to provide good service three months later—right now, I would say they are a five).

The first provider had no reservoir of good will with me.  And I left when the opportunity (and timing) presented itself.

What could they have done? In the case of the final straw, probably nothing short of free service for the grief they gave me. I am a realist: that was not (and did not) happen.

But if their management was less focused on shoveling new customers into the pipeline and more focused on retaining customers who had proved their value, the distasteful encounters I had with them might not have happened and I would still be their customer.

More to follow.

Comments welcome!

Dr. Bob

My issue with focusing on turning very dissatisfied customers into satisfied one is this: psychology tells us, and qualitative (and I would argue quantitative) market research confirms that there are some people, some small percentage of the customer/consumer base, that simply is never going to be satisfied. No matter what you do for them, they are never going to be happy with you. The damage is done.

Now I am not a psychologist (but I do play one on tv, ……er, no!). But as an experienced focus group moderator, I have observed over the course of thousands of groups that there are people who are simply unhappy. Why? It is not for me to say or speculate. But they are. You have probably observed this as well if you have set in enough focus groups or in-depth interviews.

This small group (the two to three percent) walk around with thunderclouds over their heads perpetually……and it’s raining!

Most of us have bad days where something happens and we are upset. We may snarl at the dog or get upset that the checker at the grocery counter is not enforcing the ten item rule (that guy has got eleven items!!!). But we get over it.

I suspect that the two to three percent do not.

That may be one reason why the dissatisfaction level in customer satisfaction surveys is so relentlessly stubborn.

But then what about the issue of motivating the organization to higher levels of achievement?

Your observer postulates that this lies in moving customers up in satisfaction level, from somewhat dissatisfied to neutral, from neutral to somewhat satisfied and from somewhat satisfied to very satisfied.

In my experience, many companies who have a solid customer satisfaction measurement (and improvement) system in place report satisfaction as top 2 box and bottom two box (assuming a five or seven point scale).  Maybe it is time to revisit this practice.

Rather than focus on eliminating the “1”’s (very dissatisfied), a more potentially productive path might be to focus on implementing change that will make the satisfied even more so.

More to follow.

Comments welcome!

Dr. Bob

I have yet to see any definitive research to indicate either the continuing validity or the abrogation of prior market research findings that for every customer with a problem another nine or ten have the same problem but are silent and that an unhappy customer will tell five other people while a happy customer is generally quiet.

But let’s speculate a little.

First, we might ask if consumers or customers are more unhappy than in yesterday. Probably not. Customer satisfaction market research suggests that consumers are generally getting happier with products and services as quality controls, technological advancements, and more rapid distribution networks have evolved.

But there is a lingering cloud of discontent that is consistently measured in customer satisfaction. For companies using one to five scales, very dissatisfied to very satisfied, many continue to see the very dissatisfied percentage of customers remaining stubbornly in the two or three percent range, with the somewhat dissatisfied range slightly higher, typically three to four percent.

What is going on here? If customers are that dissatisfied, why don’t they vote with their feet? (Or are they, and then are simply being replaced with equally dissatisfied customers.)

A few years ago, your observer ran a customer satisfaction measurement process for a major company. The client was the Quality Assurance group. The director of the group (a Board level position) and I would often speculate on what was so upsetting these very dissatisfied customers. He was pushing hard to continually up the bar.

This organization was one of the pioneers of driving a portion of employee bonus pay (all employees) based on the customer satisfaction results. The director wanted the employees to constantly work toward improving their performance and a logical way to measure their improvement was to look at increasing satisfaction scores (or decreasing dissatisfaction scores).

He and I had some interesting debates on this topic. My observation, then as now, is that it is a Sisyphean task to set a compensation-based goal of continually increasing customer satisfaction scores by reducing the percentage in the very dissatisfied category. Now, that might seem odd coming from a strong believer that businesses must measure and act on customer satisfaction market research to up their game and continue to be successful.

More to follow.

Comments welcome.

Dr. Bob