Everybody talks about it, but we hardly have any good examples of the relationship between customer satisfaction, loyalty and repurchase behavior – especially examples that businesses like to share. I just found one of these examples that give an idea about the relationship between customer satisfaction and loyalty. Maybe it is helpful to you the next time you need a practical example.

[…] for several years, Xerox has polled 480,000 customers per year regarding product and service satisfaction using a five-point scale from 5 (high) to 1 (low). Until two years ago, Xerox’s goal was to achieve 100% 4s (satisfied) and 5s (very satisfied) by the end of 1993. But in 1991, an analysis of customers who gave Xerox 4s and 5s on satisfaction found that the relationship between the scores and actual loyalty differed greatly depending on whether the customers were very satisfied or satisfied. Customers giving Xerox 5s were six times more likely to repurchase Xerox equipment than those giving 4s.

This analysis led Xerox to extend its efforts to create apostles – a term coined by Scott D. Cook, CEO of software producer and distributor Intuit, describing customers so satisfied that they convert the uninitiated to a product or service.

Found in Putting the service-profit chain to work by JL Heskett, LA Schlesinger, Harvard Business Review, 1994,

Alternative download link: http://www.favaneves.org/arquivos/artigoextra6-5.pdf

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Increasingly companies that have originally been focused solely on products are shifting their focus towards services and the combination of their products with services in order to countervail the commoditization of their products. In this process of “servitization of products” businesses see themselves confronted with the challenge of scaling their service operations to maintain growth and profitability.

IBM is a great example of a corporation that has successfully shifted from a hardware business that was faced with price erosion and increased competition towards a service business. In 2007 revenues from service business represented more than 55% of IBMs revenues compared to 32% in 1997, in the same time-span hardware revenue declined from 47% to 21% (see Annual Report 1997 and Annual Report 2007).

This shift was not without problems as the Financial Times article “Big blueprint for IBM services” shows.

At the same time, Big Blue was facing a problem experienced by many services businesses that rely on a heavy element of direct interaction with customers. The more that sales increased, the more people it had to recruit, in a linear progression that would ultimately have been unsustainable.

In order to overcome these challenges, IBM approached this from three perspectives:

Standardization

In effect, IBM set out to standardize the way it “manufactures” services, so that exactly the same processes determined how an as­signment was carried out in Egypt as in the Philippines. “The real scale comes out of doing the work in a codified way,” says Mr Daniels. “The key breakthrough was to ask ‘How do you do the work at the lowest-level components?’”

Technology

The technology IBM has applied to services comes in two parts. One involves raising productivity by automating some repetitious work. Turning repeatable processes into software that can be used widely in similar assignments has played to an IBM strength, since it is the world’s second biggest software company, after Microsoft.

The second technology development holds the greatest promise for the future, says Mr Daniels. It involves inventing new ways to solve customers’ problems, by applying the sort of deep computing skills that have long lain at the heart of IBM’s business.

Anthropology

[…] the services research arm employs anthropologists and other social scientists to investigate how to make services engagements more effective.

Overall, in spite of the increasing use of technology, Mr Morris says of services: “It is fundamentally a human enterprise.”

How does this impact your customer experience?

Designing a service that provides a remarkable experience is one thing, consistently delivering this service with the expected quality is even more important. Businesses that ignore the service delivery aspect will see themselves confronted with the problem that their services – as remarkable as they might have been on a small scale – simply don’t hold up when they need to be rolled out on a larger scale.

And if you cannot consistently deliver a service, all your efforts to create interactions that lead to remarkable experience will have been to no avail.

Read the full Financial Times article “Big blueprint for IBM services”.

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What is “the customer experience”? A lot of people wonder is meant with customer experience. The problem is that the term customer experience is used ambiguously and too often just to present old wine in new bottles.

Customer experience management is not the successor of CRM, it is not a better word for call center management and it is not about “staging” some interactions with customer services.

Jeff Bezos, CEO of Amazon (shown in the picture above presenting the Kindle 2 ebook Reader), explains his understanding of customer experience in the BusinessWeek article “How Amazon Aims to Keep You Clicking”:

“Internally, customer service is a component of customer experience,” he says. “Customer experience includes having the lowest price, having the fastest delivery, having it reliable enough so that you don’t need to contact [anyone]. Then you save customer service for those truly unusual situations.”

So a customer experiences includes all encounters and interactions that customers have with your product, services and brand. The core is to deliver customer value through each of these three areas and not just by doing “a little bit customer experience management in the call center”.

With such an understanding you also see that the biggest potential for remarkable customer experience lies in the core functionality and price of your offerings.  Only if you shift your attention to these areas, you can truly create a remarkable different customer experience.

Amazon and the Kindle:

Looking at Amazon from this perspective, it becomes clear why an online retailer would develop an eBook reader like the Kindle. This device would significantly improve what is most important for an online retailer: instant availability of books and cheaper prices of electronic editions while at the same time revolutionizing the book industry.

Read the full article “How Amazon Aims to Keep You Clicking”.

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Did you ever think what your life will be in 2019? How will your company change in the coming 10 years? Will you still be working at the same company?

While it is impossible to predict the future, it is possible to envision the future and understand the factors that might influence work and life in the coming years. Personally and Professionally.

Microsoft just published a series of videos where they envision the future of work and life in the year 2019. From their websites, the Microsoft Office Labs:

Take a step into the future and get a glimpse into how technology may transform the way we live and work in the years ahead. Explore some of our concepts for how leading edge technologies might be used in real world settings – such as health care, manufacturing, banking and retail – over the next 5-10 years.

Here is the video that summarizes the different future visions.

<br/><a href="http://video.msn.com/video.aspx?vid=a517b260-bb6b-48b9-87ac-8e2743a28ec5" target="_new" title="Future Vision Montage ">Video: Future Vision Montage </a>

Other concepts

Other concepts that are shown on their site (some of them are already a little bit older) are about using Touch Walls, Health Future Vision, Manufacturing Future Vision, Banking Future Vision and Retail Future Vision.

What is the value of such "predictions”?

First of all, these are not predictions. The future is not predicted but created – these videos should merely act as inspiration and vision to help understand what the influencing factors are.

The point is not to say that “this won’t come true” but instead “how could this come true”. Understanding the emerging technologies and evolving trends through experience prototypes provides the basis to not just image additional scenarios where these technologies might come into our lives but to actually realize them.

What are the trends that might impact your personal life, your professional life and your organization in the future? If you have never thought about it, then maybe times of economic and financial uncertainty are exactly the point where you should do this.

Image courtesy of MichaelMarlatt

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