Delighting Customers Doesn't Pay

Sales and Marketing Management

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The emphasis on 'wowing' customers is misguided

ARTICLE | MON, 11/25/2013 - 00:00

This is the golden age of customer service. In a world of commoditization, many companies place an emphasis on customer service as a key means of creating a competitive advantage.

With companies such as online retailer Zappos enjoying exponential growth while touting a founding principle of “delivering happiness,” it’s no wonder that the conventional wisdom in business is that superlative customer service leads directly to loyalty.

But what if that’s wrong? What if the viral stories of delightful service that get told and retold are actually misdirecting business strategists away from a more sensible and effective mission?

The question was asked by a group of analysts from CEB, a leading executive consultancy. Their finding: Loyalty is driven by how well a company delivers on its basic promises and solves day-to-day problems, not on how spectacular its service experience might be.

“Most customers don’t want to be ‘wowed’; they want an effortless experience. And they are far more likely to punish you for bad service than to reward you for good service,”
state Matthew Dixon, Nick Toman and Rick Delisi in their new book, “The Effortless Experience: Conquering the New Battleground for Customer Loyalty.”

Are you a hassle to deal with?

Customers operate according to a broad and simple set of rules. Either you make things easy or you don’t. The authors of “The Effortless Experience” argue that the primary role of customer service is not to boost loyalty by delighting the customer, but rather to mitigate disloyalty by reducing customer effort.

Their data from more than 97,000 customer surveys shows emphatically that the strategy of delight doesn’t pay. The authors state there is no difference at all between the loyalty of those customers whose expectations are exceeded and those whose expectations are simply met. Loyalty actually plateaus once customer expectations are met.

The two most important takeaways from this finding are that companies tend to grossly underestimate the benefit of simply meeting customer expectations and massively overestimate the loyalty returns from exceeding customer expectations.

“If your goal is to increase loyalty, it turns out that whatever additional resources, energy or budget you need to consistently exceed expectations brings almost no corresponding financial return at all,” they state. “Once you’re consistently meeting the expectations of the majority of your customers, you’ve already done the most economically valuable thing you can do.”

From a customer’s perspective, when something goes wrong, the overriding sentiment is “Help me fix it.” Resolving problems quickly and easily, allowing the customer to carry on with his or her task is all that’s required.

Delight is rare

The argument that shooting for consistently meeting rather than exceeding expectations makes more sense is supported by the authors’ finding that customers’ expectations in their study were exceeded a mere 16 percent of the time. An overwhelming 84 percent of the time, customer expectations were not exceeded
(and, indeed, often not even met).

“Delight is a tough target to hit with any regularity, and we typically miss that target. That it is so exceptional is what makes it so memorable,” they state.

What’s more, the authors say their global survey found no statistical relationship between how a customer rates a company on a satisfaction survey and their future customer loyalty.

In fact, 20 percent of the customers who reported that they were satisfied by their service interactions also expressed intentions of taking their business elsewhere. And equally confusing is the fact that 28 percent of customers who reported being dissatisfied said they intended to remain loyal.

“When we present this data to senior leaders, the immediate reaction typically resembles something like the stages of grieving,” the authors write. “First, there is denial…but eventually there is acceptance.” 

Why You Should Be Targeting Grandparents This Holiday Season

Engage Boomers If your demos are up to it....no pun intended..Check out the essay below..Philip Jay LeNoble, Ph.D.  By Derek Dunham Monday, Nov. 25, 2013

Yes, it’s the holiday season again. From now through January, most businesses are trying to find ways to reap their share of the most frenzied shopping time of the year. While some marketers will look for this season’s killer product or promotion to drive sales during the year-end spending spree, who you target and not what you’re selling may be the difference between a hugely profitable holiday sales season and making less than spectacular numbers.  Many retailers and brands typically focus on parents (the spenders) and children (the influencers) but the often overlooked grandparent – mostly Baby Boomers – might get you more bang for your marketing buck this year. Boomers represent close to 80 million U.S. consumers and have 70% of the disposable income in the U.S. If you really want to talk to the audience that can both afford and is looking to spend money on toys, consumer electronics and non-essentials, look no further.  Baby Boomers represent 35% of the U.S. population, the largest market segment and the wealthiest, with spending power projected to reach $15 trillion by the end of the decade. No group reads more, watches more TV or listens to more radio. And they are actively engaged with technology. Seventy-one percent of Boomers spend time online every day, 53% are on Facebook and 66% use text messaging. In fact, Boomers spend an average of $650 per month on technology, more than Gen X or Millennials. But with less than 5% of advertising spend aimed specifically at this age group, advertisers are either not seeing the opportunity or don’t know how to engage this audience. So dedicating a part of your holiday marketing efforts at this group could really pay off. Grandparents are Grand Givers According to Grandparents.com, 72% of Boomers state that being a grandparent is the most important and satisfying thing in their life. This translates to big numbers in terms of buying for grandchildren: Boomers spend $52 billion on their grandchildren alone. And herein lies the secret to harnessing Baby Boomers for holiday marketing: don’t focus on deals and the best prices, focus on tapping into the incredibly strong bond between grandparents and their grandchildren.  The way you can potentially take advantage of this is by starting to pay attention to Boomers in your marketing outreach. Few brands focus on this group because advertisers are obsessed with youth culture and figure that Baby Boomers, who consider themselves “forever young,” will respond in kind. But that isn’t always the case.  Doing a just a few, simple things have the potential to really pay off in your holiday marketing efforts.  Here are some easy ideas to get started: Add a layer of messaging aimed at the grandparent/grandchild relationship. You can capture attention by helping Boomers solve the “What do we get for the grandkids this year?” challenge. Emphasize that you’re there to help and that you can help them look good while expressing their love through gift giving. Recommend specific gift solutions through direct campaigns. Boomers still read and respond to snail mail and are also some of the most active email users. Get Boomers excited about mobile apps and services for grandchildren vs. traditional toys. Remember they have a growing propensity for technology.  Use social media like Facebook and a company blog to educate Boomers on the latest trends in toys and gifts by age group so they can look smart and connected without having to ask their grandkids what they want. E-tailers can curate gift content in the same way and strike a chord with this audience. Create inviting holiday environments for brick-and-mortar stores that create the tastes and smells of the holidays without going overboard with decorations the way that big box retailers tend to do. Highlight the convenience of in-store shopping and personalized attention to find the perfect gift.  Silver Shoppers It’s not just about the grandkids. Your business may not focus on gifts for children and teenagers but Boomers are huge consumers in their own right. Boomers account for 42% of all consumer packaged goods spending! But where most marketers fall down is that they are not always able to create lasting emotional connections with older consumers. That’s the true litmus test of a brand. Boomers don’t want to just buy products they need or, for that matter, spend solely on their children and grandchildren. They have the money and the desire to splurge on things they truly want and are redefining what it means to grow older. The more you can tap into these desires, the more successful you’ll be in tapping into their massive spending power this holiday.

Trad Media Revs To Remain Steady, Newspapers' Digital Revs Will Rise

MediaDailyNews

by Wayne Friedman, Nov 19, 2013, 10:13 AM

Local media is expected to grow at a faster rate than previously estimated over the next five years -- but overall still at low single-digit percentage increases.

BIA/Kelsey sees local media climbing 2.8% to $151.5 billion by 2017. It projects 2013 levels to be at $132.9 billion.

Traditional media -- TV, newspapers, and outdoor -- will remain essentially flat for the next five years, getting to $107 billion in 2017 from $106.4 billion in 2013. This represents just a 0.1% growth rate over that time span.

Television remains the leader with the largest share, dipping slightly in five years to 14.6%. Radio will take the No. 2 position -- sinking a bit to a 10.6% share. Newspapers will also decline, with a 9.1% share, while Yellow Pages will take a 1.5% share.

Newspapers' local digital efforts will have the largest share for local digital activity, at 2.4%, followed by Yellow Pages digital revenues at 1.9% share; TV’s online business at 0.7%; and radio’s digital revenues at 0.5%.

The most rapid growth will occur in the local online/digital arena -- climbing at a 13.8% annual compounded rate to $44.5 billion in five years. Estimates are that local digital advertising revenues will be at $26.5 billion. Local mobile advertising will hit $10.8 billion in 2017 -- which BIA/Kelsey says will account for 52% of all U.S. mobile ad spending.

Digital To Drive 20% Of Local Media Ad Sales, Hit $23B In 2013

ONLINEMEDIADAILY

by Mark Walsh, Nov 19, 2013, 7:00 AM

Digital ad spending in local media is expected to grow at a compound annual rate of 14% in the next five years, to $23.1 billion in 2013 and $44.5 billion in 2017. More rapid digital growth is predicted to drive a 2.8% increase in total local media ad sales to $151.5 billion by 2017.
 
BIA/Kelsey defines local advertising as some form of targeted messaging to specific geographic markets spent by national and regional companies, as well as small and medium-sized businesses. It gathers proprietary and secondary information by segment, using third-party and public company reports to adjust forecasts during the year.
 
Its latest study highlights the gradual transition from traditional to digital ad spending in the coming years, although the latter will still make up the vast majority of local ad spending in 2017. Digital spending -- including on mobile devices -- is expected to increase to almost 20% of local ad spending this year, before going up to almost 30% in 2017.
 
Mobile local ad spending is projected to grow especially fast, partly because it’s starting from a smaller base. That total will more than double from $1.4 billion to $2.9 billion in 2013 -- and will reach $4.4 billion in 2014 before hitting $10.8 billion in 2017, or a quarter of overall local digital ad revenue.
 
Local mobile advertising will account for 37% of total U.S. mobile ad spending this year, before increasing to 52% in 2017, according to the study.
 
After a 6% gain in 2013, BIA/Kelsey projects that local digital ad sales will jump almost 16% to $30.7 billion next year as a result of various factors, including a slightly improving U.S. economy, a more positive investor outlook, and the 2014 elections and Winter Olympics. The rollout of the Affordable Healthcare Act is also expected to generate higher local ad spending.
 
To highlight the inroads that digital will make in the local ad business, the report compared the proportion of dollars that online and traditional media will represent in 2017. Newspaper print, for example, will fall to 9.1% of spending, while online newspapers remain steady at 2.4%. Yellow Pages print will decline to 1.5%, while increasing to 1.9% on the digital side.
 
The gap between traditional radio and TV and their digital counterparts will remain wide, however. Terrestrial radio will see its share of spending fall slightly to 10.6% by 2017, while digital radio will claims just 0.5%. Spending on local over-the-air TV will also decline a bit to 14.6%, while dollars going to local TV Web sites will amount to 0.7%.

Sales Commissions Going The Way Of Buggy Whips

Marketing Daily: Top of the News

by Thom Forbes, 10 hours ago

The salesforce commission is going the way of the 15% media commission if stories in the New York Times and Wall Street Journal this morning are any indication. And in at least one case, few tears will be shed. “Say Goodbye to the Car Salesman,” reads the hed over Christina Rogers piece on the WSJ, “No-Haggle Price, Online Selling Transform Auto Retailing.” 

We’re all familiar with the transparency inherent in online shopping (although there’s a bit of “mumbo-jumbo” involved with concepts such as “invoice price,” as we covered earlier this month). But the net result is that people like 30-year-old Mia Morris are becoming the “new face of auto sales,” Rogers reports. She “doesn't work on commission, isn't interested in haggling over price and spends more time online conversing with customers than on the showroom floor” at Nissan of Manhattan.

That’s because you’ve already decided what you’re going to pay, presumably. 

“The whole process of buying a car has been flipped flop from what it used to be," Alison Spitzer, VP of Spitzer Auto Group in Elyria, Ohio, tells Rogers. “Today, customers find the car first, then the dealership.” Spitzer’s salesforce operates under a “no haggle” policy that salaryman Jeff Dietz, also 30, says “doesn’t make me seem as pushy.” 

In “For Some, Paying Sales Commissions No Longer Makes Sense,” the NYT’s Stacy Perman ledes with a Chicago software company, ThoughtWorks, that “decided to upend one of the sacrosanct principles of sales” by putting its entire 40-person global salesforce on straight salary a couple of years ago after nearly 20 years of doing things the way that they’ve been done since … oh, way back in the 1950s.

“The United States has been responsible for many great innovations but not all have turned out the way the inventors, architects or innovators intended. One such miscalculation was the introduction of ‘commission-only’ salespeople” in the post-World War II era, Sue Barrett informs us in Australia’sSmartCompany.

Historian Peter Finklestein tells Barrett that with factories churning out more goods that Americans could consume after the war, “it was decided that additional salespeople would be engaged on a sell-and-earn-basis. Salespeople were therefore paid for selling something and if they made no sale they made no income. These salespeople were not employees and this kept business costs down.” 

But ThoughtWorks president and COO Craig Gorsline tells Perman that “commissions were getting in the way of a proper dialogue with our customers.” And he’s not alone, although the elimination of commissions may seem like “blasphemy” not only to managers but also to top-performing salespeople. (The co-president of the firm of the group that owns Nissan Manhattan tells the WSJ’s Rogers that more than 75% of his sales staff went elsewhere after the policy took force.)

On the other hand, “proponents of ditching commissions believe they foster negative behaviors, such as focusing on an individual’s profit over the company’s, emphasizing short-term outcomes and encouraging unproductive competition among sales representatives,” writes the NYT’s Perman. “Even companies that pay commissions can face costly turnover as representatives chase more lucrative offers.”

Meanwhile, over at Forbes.com, Jacquelyn Smith weighs in with a piece this week that asks, “Is A Commission-Based Sales Job Right For You?” Art Sobczak, president of BusinessByPhone.com, tells her that “you have to have an insatiable desire to succeed” and “if you're content with your work and you're never willing to take the extra step, this isn't the right job for you.”

Despite the increasing loss of performance incentives at the last link in the demand chain — or perhaps because of it — “marketers around the world showed growing confidence during November,” according to Warc's latest Global Marketing Index (GMI), which rose 3 points from 54.8 in October to 57.8 in November's with all regions performing strongly.

The GMI figure takes into account marketers' expectations for trading conditions and staffing levels as well as marketing budgets; where values above 50 indicate a positive trend. Europe led the way with a 3.9 point “surge” — its highest ever, according to the Warc report, and the usually trendsetting U.S. did not fare too poorly either considering the 16-day government shutdown at the beginning of last month. It rose 3.1 points to 57.5. 

What’s more, the outlook for marketing budgets leaped 6.3 points in the Americas during the period. Time to hire some salespeople willing to take the extra step despite the lack of commission, no?

Engage Teens: Trends For 2014 (And Beyond)

MediaPost By Melanie Shreffler Thursday, Nov. 21, 2013 Teens are the gatekeepers of cool, always willing to try new things and setting the standard for what’s hot and what’s not. They are early adopters and an important barometer for brands. Following are a few trends we’re seeing take off with teens, pointing to what will be hot or not on the horizon. While some present challenges for youth marketers, some also offer opportunities for us to better understand and reach today’s teens. 1) The End Of Oversharing As teens migrate from Facebook to new social sites like Tumblr, SnapChat, and Vine, the effect is that they’re actually saying much less online. Instead of lengthy status updates that lead to drama, they’re posting an image with a hashtag or a mini video with a brief caption. What’s more, many of their posts are merely re-posts of something they found online or in another person’s stream, occasionally adding their own quick quip about the image or video. For teens, social media has become less about their personal lives and more about their personal interests and staying in the know. Youth marketers no longer have mountains of verbatim data to dig through to understand teens’ lives, but instead we can study the trends on these new forms of social media to form a picture of what teens are most interested in.  2) The Use-It-Then-Lose-It Mentality Teens have come to prefer when things aren’t permanent, a behavior they’ve learned from apps like SnapChat that erase their old messages. That coupled with Millennials’ general disinterest in “owning” items from cars to clothes to movies makes teens a unique type of consumer. Teens are less attached to possessions (well, except for their phones) because they know they can always find a way to get what they need when they need it. And after an item has served its purpose, they don’t want it cluttering up their lives or becoming a burden of responsibility. When they want a special dress for prom, they’re perfectly happy renting it rather than buying it. Instead of owning a bike to ride around town, they’re hopping on rental bikes that free them from the hassle of maintenance and alleviate worries of bike theft. This trend means brands targeting teens need to be able to deliver popular products in a just-in-time fashion, while also making it easy for them to get rid of the item when they’re done with it. 3) Tuning Out TV At the recent Business Insider Ignition conference, we asked a panel of nine teens if they watch TV – only three raised their hands. That’s not to say they never consume TV shows. The teens quickly explained that there are very few shows they care to watch live (such as “The Walking Dead”), instead preferring to watch shows on Netflix or other online sources. And they’re quite content to watch on a computer or tablet instead of a big screen. Watching TV in the traditional sense seems archaic to teens; they can’t fathom the concept of sitting through commercials or having to wait until the next week to see what happens. One girl on the panel said that she put off watching “Breaking Bad” when it aired on TV so she could binge-view later when it arrived on Netflix. Teens’ dislike of traditional TV makes it harder for marketers to reach them with commercials, but on the flip side, teens’ engagement with shows during on-demand and binge viewing sessions means product placements can be more impactful. 4) Spy-Level Technology It’s no secret that teens are attached to their phones, but now their phones can literally be attached to them! The wearable tech market has expanded from devices that track athletic performance to iPod Nano watches to Google Glass; it was only a matter of time until a tech company gave us a device that could make even James Bond jealous. Items like Samsung’s new Galaxy Gear make it possible for teens to strap their favorite device right to their wrists, bringing social media updates, text messages, and all their favorite music even closer than the palm of their hand. Considering the popularity of the iPod Nano watch among younger consumers (a teen boy once told me it was his most prized possession), we see this type of technology being a big hit with teens who will look forward to more ways to wear their phones. For marketers, these personal portals represent yet another (tiny) screen for advertising messages. However, tread carefully – teen consumers aren’t happy when devices that feel so personal are taken over by ads.  5) Random Is The New Funny Humor has always had a strong influence on teen consumers, but lately it’s taken on a whole new tone. While adults scratch their heads at the latest video from Ylvis, teens (and the rest of the youth population) are cracking up. Random humor has become mainstream and youth marketers are starting to use it to great effect, from Skittles’s long-running campaign to Kmart’s recent commercial puns to the Dodge Durango spots featuring Ron Burgundy. The tactic is key for youth marketers today; with teens’ media saturated lives, it takes random, unexpected humor to grab their attention. This trend gives marketers the freedom to try just about anything in their ads, which can be a blessing (when an idea works) and a curse (when a concept falls flat). As an added bonus for advertisers that take the risk and succeed, teens love to share random humor, helping to spread the marketing message. Although loathsome to list them above, the following are just a few examples of best TV shows for by Teens...(Mostly Girls): The Following. Pretty Little Liars, Teen Wolf, Vampire Diaries, Criminal Minds, Grimm, Revenge, Arrow, Beverly Hills 90120, Gossip Girls, Once Upon A Time....Philip Jay LeNoble, Ph.D. Editor

The Transformation Of Marketing's 4th 'P'

By Jon Last Tuesday, Nov. 12, 2013

I still remember the first session of my introductory marketing class at Wharton, where the professor outlined the enduring marketing mix concept of “The Four P’s.” Product and price were intuitive and obvious…among the first things that one might surmise from an uninitiated consumer’s perspective. Promotion also seemed obvious, as it was what a wet-behind-the-ears student got most excited about. I initially perceived promotion to be all about the glamour side of marketing, encompassing advertising, brand positioning and my former life in public relations.  I wasn’t totally correct, there, because there was the important intersection of promotion and pricing that was of particular interest to our very quantitatively oriented professor. But regardless of how “promotion” was defined, “place,” the fourth “P” was the wild card surprise. Simply defined as distribution and channel strategy, “place” was less intuitive, and something that I hadn’t previously perceived to be in the direct purview of marketing management. Now as I am a couple of decades past that first class and still applying the marketing mix construct to the world of sports, one recognizes that of all four of the “P’s,” place has undergone the most seismic transformation. In our world of sports marketing and consumer behavior and research, there has been a sea change in the distribution mechanisms that deliver sports brands and properties to the target market.  Yet, what we are witnessing is far from the breaking down and replacement of old tried and true channels that one might perceive to be the norm, from the more provocative marketing speak headlines. Rather, we are at a fundamental inflection point where the number of “channels” of importance have been multiplied, and as our most valuable targets are often engaging in all of them (often simultaneously), the understanding of “place” in the marketing mix requires some new thinking.  How Do I Communicate With The Customer? The default and clichéd answer to the above question is that if the target is under the age of 45, communication and dissemination of brand message is all about social media, and mobile delivery systems. To reach such a blanket conclusion strikes me as fundamentally wrong, and we’ve had the good fortune to have recently completed some interesting proprietary studies for multiple sports properties that prove it. Illustration number one comes from research with a property that was assessing the impact of paperless ticket delivery and learned that it wasn’t just demographics that drove fan preferences. Our research identified a number of motivations and benefits that would lead one to prefer physical hard tickets, rather than an electronic version. Similarly, in several studies that we have been engaged in, it has become apparent that multiple and alternative choices of delivery mechanism can both enhance the consumer’s experience and also amplify the message points that a property is seeking to deliver. Further, this research strongly suggests that the dynamic at work here is more than just a byproduct of traditional reach and frequency optimization, but part and parcel to how today’s consumer digests and processes marketing messaging. Media Proliferation—More is More Concurrently, we’ve been immersed in a number of sports media utilization research initiatives that support the above observations and my overall assertion that with the rampant increase in available delivery channels, the most engaged and valuable consumers of a sport are actually increasing their year-over-year utilization of both traditional and new media. The presence of new media has not been a substitute for legacy channels; rather, it has complemented them and enabled consumers to enjoy a more immersive and value-adding experience. This doesn’t make media mix allocation any easier, but it certainly dispels the notion that we are seeing a rapid migration from the traditional to the new. Rather, the research informs us of the relative strengths and weaknesses of each medium as well as opportunity pockets that each vehicle delivers in optimizing reach, frequency, and perhaps most importantly, engagement levels. The Venue as a Differentiating Delivery Mechanism Last but not least, the importance of the 4th “P” remains a central opportunity for leagues and properties that have focused more attention of late to adding value to the experience of sports as live, in person entertainment. I’ve used this space before to assert the unique environment that is physically attending a sporting event. To that end, we’ve conducted numerous studies over the past few years that definitively demonstrate the uniquely engaging environment of the event site, which accrues to the benefit of advertisers who activate through the ever improving capabilities of the new breed of video boards and enhanced sound systems. As leagues and venues continue to invest in upgrading wi-fi bandwidth capabilities, the interactive opportunities to engage fans in ways unique to the onsite experience, will only further grow the myriad of message delivery mechanisms and require even more rigor to optimizing the ways in which the 4th “P” becomes a more critical element of the sports marketing mix.