Appeal to greed to persuade executives to accept cx changes
Why is it so difficult to secure funding for cx initiatives?
Ceo bob thompson recently told me that his discussions with cx executives are fraught with complaints about a lack of legitimate top management support and a refusal to finance cx initiatives. Why is it so difficult to gain management’s commitment?
Why Does top management reject cx investment?
Four facets of consumer actions are not understood or appreciated by top management.
50-90 percent of the time, customers with severe issues do not complain. Also in B2B markets, the noncomplaining tip of the iceberg will range from 75 to 90 percent. top management falsely assumes that “no news is good news.” 1st
Problems have a major negative effect on customer satisfaction and price sensitivity. A severe issue reduces loyalty by 20% on average and doubles price sensitivity. You can’t charge a higher price for a product that causes issues.
More than a third of consumers struggle to read instructions or contracts, resulting in a slew of avoidable unpleasant surprises. This isn’t just an issue for consumers; I recently polled 250 ceos of small to medium businesses (10-100 million dollars) and found that a third of them said their company customers struggled to read contracts and misunderstood at least some key aspects of the partnership.
negative word of mouth is fueled by problems and bad service (WOM). According to the ccmc 2020 national rage report, three times as many people learn about a traumatic experience as they do about a positive one. [two] WOM is a significant source of new clients, and it is the main source in B2B.
The main parameters of their company are out of reach for executives.
Problems and how they are treated, or not handled if the customer does not complain, account for about half of all customer turnover. While the sales department often claims that the contract was lost due to price, the real explanation may be that the customer judged the performance and service to be unsatisfactory for the price paid. Most executives don’t even know what consumer turnover is, let alone what causes it. Attrition is seen as natural in many other businesses; sales would simply create new customers.
The leaky bucket illustrates this situation: turnover drains consumers from the bottom, while sales works hard to get in new customers at the top.
Consider the implications of halving turnover while maintaining the same pace of new customer acquisition. In most cases, this will mean annual incremental growth of at least 10-15%.
The cheapest source of new customers is a good experience, but less than a quarter of the executives I talk with can tell me the percentage of customers acquired from WOM referrals. The Cheesecake Factory’s president reported that their marketing expenses were one-fourth of their competitors’ due to strong positive word-of-mouth. wom management processes include service and customer experience.
many executives are unable to calculate the marketing/sales expense of acquiring a new client. In the 1980s, we calculated that it costs five times as much to gain a new customer as it does to retain a current one. [three] The rule still holds true, but the ratio is even higher in B2B situations.
top management places a strong emphasis on short-term time horizons, resulting in a demand for quickly quantifiable costs and payoffs.
Executives are unable to take any investment on faith and prefer to link revenue to acts directly. The return on investment from loyal clients, on the other hand, comes from potential sales. Despite the fact that most salespeople are order takers, the sales department still takes credit, even though the source of sales is difficult to attribute.
The majority of finance executives do not accept that guaranteed returns are based on loyalty or word of mouth, and they demand proof up front. These executives must be trained on both the aforementioned consumer actions and the lifetime value of a customer (LVC), which necessarily incorporates the longer time period needed to justify cx investment. To gain approval of LVC and the Chief Financial Officer’s help, two methods can be used (CFO). To begin, use a painfully conservative lvc – ask the CFO what he or she thinks is fair and then reduce that number by 20%. Second, commit to rigorously verifying the effect of the CX initiative on revenues. We studied 8,000 frequent flyer accounts for 18 months at a major us airline to show that while customers had less issues, loyalty was 50 percent higher. The CFO took up the cause.
Top management is scared of losing and will not take any serious risks.
Failure and bad news terrify executives. It’s not fun to figure out what’s causing turnover and lost revenue. poor news is perceived as unfavourable. dissatisfied consumers must be recast as an opportunity to increase profitability by attracting customers, reducing turnover, and improving positive word-of-mouth.  It is important to acknowledge that not all experiments will be successful. “As a company expands, everything needs to scale, including the size of the failed experiments,” Jeff Bezos wrote in his 2018 shareholder message. You won’t be inventing at a scale that will really shift the needle if the size of your failures doesn’t grow.” (5)
Three Steps to boosting executive support for Customer Experience Investment
1. using survey findings and real-life consumer stories/testimonials to inform executives about customer actions and its effect on loyalty.
Calculate the number of unhappy customers and the income associated with those customers. Link this consumer knowledge to the executives’ own experiences. Inquire of the cynical executive how he acted the last time he received poor service. When I asked the cynical CFO of a major japanese electronics firm about his satisfaction with his car dealer, he shared his dissatisfaction with the dealership’s poor service. I then inquired about his complaint conduct (he had not complained), loyalty, and WOM behaviour, and he immediately recognised and comprehended the customer behaviour I was describing. He founded himself as a strong supporter.
2. Build a status quo business case using industry behavioural data where your own data is missing, based on your company’s turnover, engagement, and WOM parameters.
Link disappointment to granular points of pain in order to rank order the most important opportunities based on both frequency and harm per incident. Be sure to double-check the numbers for Finance and Marketing ahead of time. When presenting the business case, use a painfully conservative calculation of the LVC so that the CFO’s only complaint would be that your lvc value is too poor and your business case is too conservative. Demonstrate how much money is being squandered by acknowledging current levels of attrition. Make the argument that by improving the customer experience, you can eliminate 50% of turnover. This will persuade the rest of top management that your business case is sound.
3. Collaborate with the Quality/performance improvement team to run quick trials focusing on two or three of the most visible consumer pain points that lead to attrition.
To improve credibility, use careful calculation and, where possible, A/B checks. Per year, Amazon conducts over 10,000 A/B tests. [number six] reframe pilot tests and trials as a learning activity in which failures are used to learn from.
Study of a Case
The following is a case study of a major electronics manufacturing company whose behaviour led to a solid, long-term commitment to customer service.
Step 1: executive education
The organisation had been experiencing stagnant nps scores and market share losses in many regions. The firm was difficult to do business with, according to complaint data and surveys. The business, on the other hand, was highly profitable and a market leader in a variety of its industry segments. In the division that serves small and medium businesses, a new cx role was established. She was able to show that the NPS of 26 meant that 22% of customers were very disappointed detractors, based on the estimate of 48% promoters and 30% passives, leaving 22% as detractors. This 22% was similar to the number of customers who did not make a second order. She believed that if only half of the turnover could be reduced by better service, divisional revenue could grow by ten, if not twenty percent. She was given the task of performing a points-of-pain survey and repairing the top three pops if no big capital or IT investment was needed.
Step 2: Build a business case for the status quo that is connected to unique, granular points of pain.
Using a granular points-of-pain survey, the cx vp discovered that over 60% of customers had issues, 20% would not recommend the company, and 30% were unsure; this is exactly what the nps survey showed. Furthermore, five points of pain were putting 17 percent of overall sales at risk, the most severe of which was the difficulty in getting a price quote quickly. Customers who got delayed quotes went on to the next supplier and did not return for subsequent quotes. stale website details, failure to communicate shipment status when delays occurred, and non-empowered service reps were among the other POP.
An employee dissatisfaction survey of front-line service and sales workers was conducted concurrently with the POP report, and the results mirrored the POP. one concern raised was how much time is wasted each time an issue arises, implying that over 20 full-time equivalents (FTEs) of employee time (worth well over $1 million) were wasted hunting down quotes and permission to act from other departments. [nine] Management gave the CX VP a mandate to make substantial investments in dealing with the pops due to the tens of millions of dollars in missed sales and the $1+ million in wasted time.
Step 3: Work with Quality and Performance Management to find fast solutions.
Delayed quotes and front-line empowerment needed nothing in the way of resources; all that was required was the development of internal service agreements and better direction from various departments. A team targeted the website’s stale results, concentrating on the most popular items first. While more IT investment is needed, proactive communication of delayed production and shipments was started, concentrating on the most important customers first.
As a result, revenue increased by $40 million, and customer loyalty increased by double digits. Management is now persuaded, and POP studies have been launched in nine other divisions, totaling over $10 billion in revenue. The divisional cx executive has now been promoted to Corporate, reporting to the entire company’s COO. She also oversees the whole Voice of the Customer process as well.
In order to win executive commitment, the best strategy is to cater to greed. Demonstrate how much money they’re squandering due to bad customer service. Estimate the number of dissatisfied customers and the income they reflect using whatever data you have. When you combine that information with existing attrition rates, you can see how at least half of that money might be recovered if a few key points of pain were removed. When comparing the cost of addressing the POP to the cost of attracting the same number of new clients, the cost of addressing the POP comes out on top. In almost every scenario, the cost of acquiring new customers is 5-10 times higher than the cost of retaining existing customers.