The Radio Show
Sales Effectiveness: Customer Recovery
Join host Simone Douglas as she discusses the keys to customer retention as presented on the IBGR Network – Results Radio.
Transcript
Introduction
It is easy to get distracted by all the noise in the business world at large but jump day is your chance to settle in and work on your business in ways that allow you to make the most of your opportunities knowing which to grab hold of with both hands and which to let go.
One of the challenges in an established business as you continue to scale is coming to the understanding that Service failures are inevitable. However, research shows that in many cases it is considerably more profitable for a company to keep customers who have experienced failures than to try to find new customers.
Regardless of a company’s experience and effort, some service failures are inevitable. Once a service failure has occurred, service recovery consists of anything a company does to restore customer satisfaction and loyalty to the pre-failure level. When customers experience a service failure, the key to customer retention lies in the service recovery effort companies make.
IBGR is committed to your success and our programming is designed to give you the tools and resources as well as the one percenters you might be missing that are the difference between feeling like you are in the pilots seat or preparing for a crash landing.
Have a fantastic week, hopefully we have turned your hump day into jump day and you are all fired up for success.
Listen>Apply>Engage
Show Objectives – The Why
“When it comes to service recovery, there are three rules to keep in mind:
Do it right the first time.
Fix it properly if it ever fails.
Remember: There are no third chances.”
In today’s show, we review the benefits of effective recovery and share some recent research that uncovers the components of recovery quality. We will also discuss the importance of considering customer expectations and profitability when making service recovery decisions. Finally I will run through a model of service recovery that assists you in designing and implementing cost-effective service recovery systems that lead to long-term profitability.
How do we identify at risk customers before they cease to be our customers?
What are our service recovery processes and when do we apply them to ensure maximum customer recovery?
What are the different levels of recovery within our organisation and who is responsible for them?
What is our success rate and how do we improve it?
Do we have a triage or direct action approach to our customer retention.
What You Need to Know – The What
The difference between triage based and direct action recovery methodologies.
The elements of a good service recovery contact
The elements of the service recovery task
How to use complaint management as an effective service recovery tool.
The impact of service recovery programs to your business.
Health check your customer journey for customer loss risks
Components of Essential and Attractive Service Recovery Quality Elements and how they apply to your business
Classifying Service Recovery Candidates
An effective service recovery system should classify customers in such a way that firms can recover the customers who merit greater recovery efforts. Executives must collect and analyze data on customer profitability, customer expectations, and quality element levels.
Determine and Perform Appropriate Recovery Efforts
Script your recovery procedure –
• Use the database to retrieve customer classification information.
• Make appropriate recovery efforts for each customer.
• Listen to the customer.
Written by Simone Douglas
The Publican & Licensee of the Duke of Brunswick Hotel, Executive Director for BNI Adelaide North one of the biggest networking organisations in the world, the driving force behind South Australia’s leading social media agency, Digital Marketing AOK and now best-selling author with her first book “Seriously Social – turning your online game into real-world gain”.
Existing Offer
Next: Episode C3.010 Customer Recovery
Written by Charles George
IBGR 0:02
You’re listening to IBGR our call sign for the Internet Business Growth Radio Network the broadcast frequency is our URL and it’s IBBR.network. We provide live and recorded shows 24 hours a day seven days a week on what an entrepreneur or small business consultant needs to grow their operation from zero to big. How big? Up to you. IBGR focuses on the 180 million English speaking small business owners around the world in four major markets North America, Australia, Oceania, the Indian subcontinent and United Kingdom, Europe and Africa. All of these six hour cycles are delivered in six major themes strategy operations, sales, people, ownership and consulting. The first four tracks strategy operations, sales and people are the day to day tactical issues all entrepreneurs face. The fifth track, Ownership, takes the conversation to the next level. How can an owner working in the business make the transition to an executive of a multi million dollar firm by working on it? Our last track consulting is for our brothers and sisters with the same vision as IBGR, helping small business owners grow. I bet you didn’t know that 57% of everybody on the planet is employed by a small business owner. Let’s team up and help business owners increase generational wealth for themselves in their family while creating good jobs in their local community. Our team has over seven decades of helping building businesses we have turned those years of exclusive radio shows and downloadable tools that any entrepreneur, whether you’re an independent contractor, solopreneur or business owner, can apply immediately. All you have to do is download listen, apply and engage. Download the show notes that address current issues in your business. Listen to the show live for as a podcast. Apply the information and tools engage us with your experience and feedback, and if you really want to maximise your time spent with IBGR join our community and have access to our toolbox. This just scratches the surface of what you will receive every day at IBGR the opportunity to grow with us is only limited by your imagination and persistence. Let’s grow together and put the world back to work. Thanks for listening.
Simone Douglas 2:34
Good morning Australia and hello world, you are listening to the IBGR network and known as International Business Growth Radio Network. I am Simone Douglas, your host for today’s seriously social journey into the humanistic approach to sales and marketing, and depending where in the world you are joining me from I hope you either have a great coffee or a good single malt whiskey. It’s early morning here so I am three coffees in and ready to get this party started. Throughout the show, I would love to hear from you. If you have questions or comments you can tag us on all the usual socials just search IBGR network, and if you tagged me in as well, I’ll be sure to get back to you. You’ll find my links on the show notes or just search Simone Douglas SM.
Depending where you are in the world today, you can listen live four times per day if you’re in Toronto, Canada, it’s between 2pm and 3pm every Wednesday, if you’re lucky enough to be in Australia, it is 10am to 11am Sydney, Australia time. If you’re in Mumbai, you’re joining me for the night shift from 11:30pm until 12:30am and London England you have me for the lunch hour, one till two. So this is Episode 10 in our C lane at IBGR.network sales and marketing, customer recovery. So go to our website, IBGR.network and download the show notes and that way you’ll be able to keep pace with the show as we go along. Today we’re going to be talking about C3010 Customer Recovery. One of the most painful moments is when we lose a customer. Not only does it impact on your top line sales and most likely your bottom line profit, but it takes up energy to replace them and often can impact on your mindset for the rest of the day or week depending how big a part of your wallet they were. It’s easy to get distracted by all the noise in the business world at large. But jump day is your chance to settle in and work on your business in ways that allow you to make the most of your opportunities, knowing which to grab hold off with both hands and which to let go. One of the challenges in an established business as you continue to scale is coming to the understanding that service failures are inevitable. However, research shows that in many cases it is considerably more profitable for a company to keep customers who have experienced failures than to try and find new customers. Regardless of the company’s experience and effort, some service failures are inevitable once a service failure has occurred, service recovery consists of anything a company does to restore customer satisfaction and loyalty to the pre-failure level. When customers experience a service failure, the key to customer retention lies in the service recovery effort that companies make. IBGR is committed to your success and our programming is designed to give you the tools and resources as well as the one percenters you might be missing that are the difference between feeling like you’re in the pilot’s seat or preparing for a crash landing. Hoping you’re going to have a fantastic week and we will turn your Hump Day into jump day as we continue to get you all fired up for another week of success. So what are the key issues for the owner perspective when it comes to customer recovery? Number one, how do we identify at risk customers before they cease to be our customers. So when it comes to sources of recovery, leads, the starting point for any recovery process must be a dissatisfied customer or a poorly delivered process. I call them leads in the sense that they’re opportunities to turn around customer perceptions of the organisation.
All customers do not contribute equally to company profitability. Research shows that for most types of businesses, one third of customers account for two thirds of company volume, the higher profit segment of customers produces 6 to 10 times as much profit as the low profit segment. The bottom 10% of customers contribute only one half of 1% to a firm’s revenue. So if we know that the high profit customers often buy in volume, pay a fair to premium price, influence other consumers and bring new customers to the company then we need to work hard to recover these critical customers. Many companies have implemented systems to classify their customers into tiers based on profitability, but how do we know that they’re at risk? This is where NPS scores or Net Promoter scores, sheduled check ins and social listening plays a key part in the process of identifying and beginning the customer recovery task. We then need to consider what are our service recovery processes and when do we apply them to ensure maximum customer recovery? The benefits of a service recovery process are appealing however, not just any recovery effort will suffice. Businesses seeking to enhance service effectiveness have to develop a high quality recovery system. And again, research has found at various types of service recovery activities in that contribute to the quality of the recovery system. In 1993. Socket could Strasser and Kennedy discovered two methods to alter customer perceptions through cognitive and or affective processes. Those were psychological and tangible recovery efforts. So psychological efforts are intended to appease the customer and include things like apology and explaining all that why the failure occurred, whereas tangible efforts focus on compensating the customer for perceived damages and that might be reviewing pricing or applying a credit or free product or service. So what are the different levels of recovery within our organisation and then who is responsible for executing them effectively and reviewing them to see whether they’re working. Recovering this satisfaction of all customers, especially those who have high expectations of recovery quality can be really costly to business. So business owners have to decide whether to invest in the additional cost of delighting some customers. We know that improved quality has been shown to decrease overall costs in some circumstances. Okay. But we have also learned that excessive cost to achieve minor quality improvements aren’t always warranted because we don’t get that return on investment. So service recovery costs include the investment of extensive employee training, the cost of correcting the service failure, and the expense of providing more than the primary service value to atone for the service failure. Okay, so despite all of this, the value of high quality service recovery offers often exceeds the expense. Recovery decisions will be different for each firm and must be made on an individual basis. Some industries require full recovery of a large percentage of customers after every service failure, while others allow more selection in which customers to recover. For example, companies with the following characteristics need to perform service recovery for a large majority of their customers, so if you’re delivering services that are highly differentiated, especially those differentiating on personalised customer service, if you’re delivering services with a contractual warranty, such as 100% service guarantee or services wherein there’s a legal liability that exists think auto services and things like that, you’re going to need to recover the bulk of your service or customer failures.
We then move on to getting our head around what is our success rate and how do we improve it. So grouping customers serves to target the customers who deserve the greatest recovery efforts. It becomes part of the customer retention approach and it increases your long term profits. The recovery candidate classification approach I use comes from the International Journal of Applied Marketing and is based on two levels of expectations, high and low, and two levels of profitability high and low. The four customer groups are labelled Angels, Royalty, Paupers, and Prima donnas, and we’re going to talk more about this in more detail later in the show, but suffice it to say classification is a critical success factor in profitable service recovery. Then we need to review whether or not we have effective systems for inviting and encouraging customers to complain and great guidelines for staff and latitude for staff to act and atone. Documentation and feedback loop that channels problems revealed three service recovery into an improvement or problem elimination process is a must, and clear protocols for handling customer complaints effectively. We also need staff skilled in service recovery that are aware of all of these protocols, able to listen non defensively, empathise, handle emotion, solve problems, and follow through right to the end. So do they understand the pillars of service recovery as well? Good service recovery programmes go beyond the quick fix. They include a process for tracking problems and compliants to help identify the source of the problem because some complaints arise from experiences with a specific person in the service process, which reflects the training problem or others are the result of a system failure that requires a totally different process to resolve. The tactic of assigning complaint letters received by the CEO to middle managers for resolution, as if they all reflect a one time event is not going to solve your problems. Many of the staff know immediately which situations will end up in the CEOs office and organisations with good customer service and service recovery programs are proactive and let the CEO know about situations right away so that the person can be contacted before they have time to file a formal complaint. So when it comes to service recovery, there are three rules to keep in mind, Do it right the first time, Fix it properly if it ever fails, and remember, there are no third chances in life. In today’s show, we’re going to review the benefits of effective recovery, share some recent research that uncovers the components of recovery quality, and we’ll also discuss the importance of considering customer expectations and profitability when making service recovery decisions. Finally, I’ll run you through a model of service recovery that assists you in designing and implementing cost effective service recovery systems that lead to long term profitability.
If this is your first time listening, Welcome to the world of Seriously Social Sales & Marketing, where relationships renew the sales. If you’re a returning listener, thanks for being part of my seriously social global business community. We’re now going to take a short minute break and we’re sorry short two minute break and when we return, we’ll get into the detail on what we really need to be looking at in order to successfully understand the difference between triage based and direct action recovery methodologies. What are the elements of a good service recovery contact, how to identify the elements of the service recovery task, how to use complaint management as an effective service recovery tool and the impact of service recovery programs to your business. Join the global community that is IBGR, become a member of our insiders network by going to our website and clicking the Join Us link. Don’t forget to connect with us in real time during the show. Just look for the pulsating orange question mark in the lower right corner of most pages on our website and click it to ask questions. You have been listening to Episode 10 in our C line and IBGR.network Sales and Marketing. Today we’re talking customer recovery on International Business Growth Radio Network. I’m your host Simone Douglas, and we will get into the nitty gritty and back to business after a very short break, so hang tight.
IBGR 0:05
This is William Eastman Managing Partner for Growth Works Media and Station Director for IBGR. One of my job’s is finding great on air talent, consultans and business owners presence and a story to tell. We’re expanding our broadcast team to represent our four core timezones North America, Australia, New Zealand, Singapore and the Philippines, the Indian subcontinent. And the last four, United Kingdom, Ireland, Europe and Africa. If you are a small business consultant or business owner would like to audition for an on air slot in our six hour show cycle, contact the station director and that is that programming at IBGR.network, we will respond to your email within one business day. Thanks for listening, and don’t miss this great opportunity to put the world back to work and grow with us.
AD 0:58
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Simone Douglas 2:34
Okay, and we’re back, you’re listening to the IBGR.network. More than a radio station, you’re now part of a global business family dedicated to helping you achieve your goals. I am your host today, Simone Douglas and this is episode 10 in our C lane IBGR.network sales and marketing. Today’s topic is Customer Recovery. You can go to our website, IBGR.network and download the show notes to catch you up on the show so far. So now we get on to what it is that you actually need to know. And the first thing that we’re going to look at today is the difference between triage based and direct action recovery methodologies. So we need to design the react process. Okay, so the best thing that you can do is run a process design workshop to create your reaction process. Make sure that you have all of the right people in the room, your customer service, operations, sales and so on, so that you can make decisions in the meeting and move quickly. There are two basic approaches that you can take to the design. The first one is triage and redirect. In this approach, you have one person or a small team responsible for receiving all of the consolidated requests for action or cases created from low customer scores, or complaints or anything else that you pick up in that feedback process. The team is then responsible for passing these requests out to the correct people in the rest of the organisation. They’re also responsible for following up to ensure that the case has been closed, and that the issues were resolved and what the outcomes were. Alternatively, you can look at a direct action approach. So when you use a direct action approach, you have the request directed straight to the applicable part of the organisation for action. In this case, you need to have someone or a group responsible for catching the request and actioning it within the business unit itself. Of these two different opportunities, Direct Action is the most efficient as you don’t need a coordinating group to manage the allocation of tasks. However, direct action is also the most difficult to implement. The key issue is how do you decide which piece of feedback to automatically direct to each group or person. Often it is easiest to set up the triage process in the beginning and when all of the kinks are ironed out, you can move on to the direct action approach. I think that’s important. to respond quickly and take action, whichever approach you take, you need to close the loop with the customer as quickly as humanly possible. Set some target times, whether it’s one business day or perhaps same business day, make sure that you make contact with the customer via their preferred channel, not necessarily yours. Often with a customer that’s going to be telephone or email, but it might be Facebook message or LinkedIn. You need to respond to them where they have contacted you, and let them know that they’ve been heard. Their first reaction will be shocked, probably that someone has even read their customer feedback form. And even more shocked that something is actually being done about their feedback, but once they get over that you can help them through whatever issue they have expressed. On average, the result will be a happy customer who is probably more loyal than before they had the issue. So what are the elements of a good service recovery contact? You can easily estimate your loss of business from an unmanaged complaint with this calculation, customers lost equals number of complaints times 25 times 46%. Revenue lost equals customers lost times average customer revenue. The 25 that I just talked about comes from the common finding that only 4% of unhappy customers complain. The 46% comes from some research that shows that 46% of complaints react by ceasing to do business with your company. So we go ahead and do a back of the envelope calculation for your business right now, to determine the value that you have to that you’re directly losing by not dealing with your customer complaints effectively. Then consider negative word of mouth. Have a look at all the ways that complaint complainants express and share their displeasure. The top of the list in a research paper that was done in 2013 is that they’ll tell their story to their friends and family. The third on the list is that they would never do business with that organisation again. Now, if you think about the word of mouth repercussions of this and more importantly word of mouse, we know that most people who are unhappy with a business or organisation go straight to their social media channels to have some friends to complain to about it. So it becomes very important. What are the elements of a good service recovery contact? A good contact does not have to be complex, it starts by simply calling the customer. But you do need to be clear about who should call. While, it seems like a good idea for the person who assisted the customer in the first place to call them back. It rarely is. In the case of a complaint or low customer feedback score, the staff member is likely to be defensive in such a situation. Is far better to have the call made by a team leader, or a person in a parallel role. As for when to call it’s going to depend a little on the source of the service recovery lead. If it’s come through on social media, you should try and contact the people within an hour. If it’s a net promoter score, or customer feedback survey survey faster is better. And we have clients who have a two hour Customer Contact KPI for low feedback scores. But anything within 24 hours is going to be reasonably well received. If it’s a direct complaint, it’ll be similar to the customer feedback surveys noted previously, and two hours to 24 hours would be a good time frame. Bearing in mind that you need to be clear about what it is that you can expect from this call. Contrary to what you might expect, the call is often likely to be a positive experience for the staff member making. The customer will often be mildly very surprised that anyone is even contacting them about their issue and will positively engage in the initial resolution process. The elements of the service recovery task actually reasonably simple. One powerful framework that you can use is Micah Solomon’s five part process. So number one, just apologise and ask for forgiveness. Make sure the apology is genuine, and give them with empathy for the clients position. This takes the initial confrontation out of the discussion. If you need to let the customer vent a little as well by all means do but don’t let it become a general complaint session. Getting the apology right is important and there is a right way to do it. There are six important elements. Number one, expression of regret. Number two, explanation of what went wrong in the service delivery process. Number three acknowledgement of responsibility. Number four declaration of repentance. Number five, offer of repair. And number six request for forgiveness. Sometimes an organization’s legal staff recommended against an apology. If this is the case in your organisation push back and find some middle ground the apology is an important emotional defusing element in the process. Without it, the entire service recovery process is far more difficult and apology is not an admission of guilt in the customers eyes, it just shows empathy. Then we need to review the complaint with your customer. So some active listening is needed at this stage to show this staff member understands the underlying issue and what the customer believes needs to be done to correct it. You also need to ensure that you understand what the customer is not saying. So don’t assume that you know what they want or the level of resolution they’re expecting. You’re going to have to uncover that. Then you need to fix the problem and follow up. Seems simple enough and generally is if the problem can be fixed immediately, you should do so and let the customer know, if it can’t be fixed on the spot, then you need to plan your communications to the customer while you are solving the problem. The person fixing the problem knows that progress is being made, but the customer doesn’t, so if the customer hears nothing, they assume nothing is happening, and that just makes them more angry and upset. Then you need to document the problem in detail because at the end of the process, you should know what went wrong how it was fixed so that you can use it in continuous improvement within the organisation. So how do we use complaint management as an effective service recovery tool? It becomes important that you encourage the use of complaints as a quality indicator tool. So let your staff know that complaints are valued and essential, display complaints in public areas to reinforce the value you place on them, and you can make it easy for customers and staff to complain by giving them direct access to channels to be able to do those things. You also want to establish a team of people to respond to complaints, including the team people from the frontlines as well as senior management. Use this time to develop plant protocols for service recovery of your most common service failures. None of us are perfect, we know that there are going to be service failures so we just want to make the most of our opportunities to rectify them and win customers back for life. We know that we need to resolve customer problems quickly and effectively through committing the organisation to resolving those complaints quickly, and avoid the waste of repeated contacts for no reason. You need to train and empower your frontline teams to resolve problems and give them the authority to fix those problems on the spot. You also want to have a complaint database so having a computerised database that catalogues the complaints allows you to use that database to identify trends is going to be really important. And then you need to commit to identifying failure points in the system. So how are we using that complaint data to identify what the root causes are of low customer satisfaction. We need to be really proactive and not reactive, and try and anticipate negative situations and avoid them occurring in the first place. We can then use all of this to track trends and use the information to improve our processes, so that we’re stopping handling problems one at a time, as if they have never occurred before. The impact of service recovery programmes on your business are huge. Studies indicate that when customers problems have been satisfactorily handled and resolved their loyalty and plans to use the services again, were within a few percentage points of those who had not experienced a problem. In other service industries, service recovery has proven to be cost effective. Also, retention benefits the bottom line because their word of mouth referrals and willingness to purchase ongoing services and premium products mean that customers retained over five years can be up to 377 times more profitable than a revolving door customer who uses your services once. We’re now going to take a short two minute break and when we return we’re going to cover off on the how. How we get to know our customers and classify them effectively? How do we determine and perform appropriate recovery efforts? And how do you script your recovery procedure?
Did you know that all of this season’s episodes are available on demand in our community of comments. You can get the complete one hour show in our community of comments instead of just the first 15 minutes segment in our podcast live playlist. Don’t miss the action steps in the third and fourth segments that you need to grow your business. Our complete season of podcasts are located in our community of commerce, you just go to our website at IBGR.network. Click the Join Us tab and I will be back.
AD 0:00
Is your CRM making your business grow. When surveyed, about 90% of business leaders admit that their CRM isn’t. The most common cause for that? Salespeople don’t use their CRM the way they should. Why not? Well, it takes them too much time and discipline to fill out this form completely. And if sales people don’t, the CRM system becomes useless. That’s why when we started Salesware, we asked ourselves, what if we build a CRM system that fills out itself? What if you build a system that serves existing data so that you know and remember all about your customers and never forget and disappoint another lead that’s what Salesware does today. It pulls in all the data buried in your emails, email signatures, calendar, full social data company database, email, web tracking, and offers it to you in an easy way so you and your CRM are always up to date. Want to see this for yourself? Head to salesware.com and get your free trial.
IBGR 1:03
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Simone Douglas 2:34
Okay and we’re back you are listening to IBGR.network. More than a radio station you are now part of a global business family dedicated to helping you achieve your goals and I am your host for today, Simone Douglas. This is Episode 10 in our C lane at IBGR.network sales and marketing. And today we’re talking all things customer recovery. Go to our website IBGR.network and download the show notes. You can listen to live four times per day every week. Join me here if you’re in Toronto, Canada you’ll be listening from 2pm to 3pm. If you’re in Australia, it’s 10am to 11am Sydney time. In Mumbai you are joining me for the night shift 11:30pm to 12:30am and London, England you have me for the lunch hour 1pm till two. So what is it that you actually need to do, and how are you going to do it? As we continue to talk about customer recovery, one of the first things that we need to do is health check your customer journey for customer loss risks. Your customer success team is responsible for nurturing relationships with your customers at each and every stage in their customer journey experience.
By understanding product and service needs, analysing usage, statistics and proactively resolving problems, you’re much more likely to keep customers happy and more of their business in the future and benefit from their recommendations to colleagues and friends. So, to measure customer satisfaction help ensure you’ve consistently meeting expectations, I recommend you develop a customer health check scoring system. First thing that you need to do is define customer health. To conduct b2b customer health checks, you first need to determine what outcomes you wish to measure and include both the good and bad scenarios, enabling you to plan for the best and prepare for the worst. Health checks can evaluate multiple outcomes assuming the correct metrics are in place. Tracking irrelevant or incorrect metrics will waste your time and can have a negative impact on your business because you might have an accurate reading of the score. So it’s important to get this first step right. Then we need to look for the signs. You need to establish predictive signals and the customer behaviours that relate to the outcome that you’re tracking. Customer health scoring involves making some assumptions about customer behaviour based on existing data, so we need to be sure to consider signals at every stage in a typical customer lifecycle, which includes the initial sale, onboarding, adoption, retention and expansion. Your monitoring should also reflect financial product, service, relationship and market inputs to provide a comprehensive view of the customer. For instance, signals in these categories could include total revenue added or days since last renewal, frequency of usage, depth of usage or activation time, the type of support ticket, service level agreements or training completion rates, communication, frequency, responsiveness, or the quality of issue resolution and market trends or competitor product or service updates. So basically, we’re looking at financial indicators, product indicators, service indicators, relationship indicators, and market indicators. Then we need to track the right metrics, so identifying key performance indicators and associated data points that you’ll need to collect to accurately assess customer health. For example, to evaluate customer churn rates, you might look at the customer satisfaction survey results, Net Promoter scores and product usage statistics. A lack of product adoption or narrow product use can indicate that customers may be at a risk of chance. So each KPI offers unique insights that provide an overall assessment of that metric. We break down three important metrics used in evaluating costs. Sorry, common areas of b2b customer health, so the customer churn, so customer engagement, such as small sorry, such as email marketing, click through rates, active days, measuring usage, time and date stamps, if it’s a software based service provision. Cost to retain the customer which would evaluate the total cost associated with customer success efforts. Lead Generation so reviewing the number of leads generated from recent marketing, business development efforts and how many of these leads became customers. As customers advance and become more loyal, we can measure cross selling and upselling demand per unit and engagement with company product or content. Then we look at revenue churn, so customer demands such as revenue at the start and end of the contract and service utilisation rates that measure the amount of your product or service consumed by the customer. Now you’re ready to assign a weight to each metric and institute a scale that will determine healthy, at risk, or stagnant customer relationships. Many companies use a stoplight colouring system so red, orange, yellow and green to indicate customer status while others use a numeric scale. I’m always been a big fan of the stoplight system. It’s really simple and easy for you to say at a glance whether you’re in danger with your customer base as a whole. Once you created that customised health scoring system, it will provide vital stats on your customer base and you can predict engagement opportunities over your customers lifetime. So calculating that score is the first step to improving the customer experience. The next step is to develop a plan for what you’re going to do with these scores. Businesses need to immediately act on scores to improve the experience and increase loyalty rates. So what are the components of essential and attractive service recovery, quality elements and how they apply to your business? So essential quality elements for and attractive ones have two types. They have tangible components and psychological components and these are the things that you need to understand. So the tangible components in essential quality elements, you need to understand and correctly diagnose the problem and fulfil original commitment to reach the primary service satisfaction level. Psychological components for the essential quality elements are apologising for the inconvenience and addressing concern respectfully, and empathetically. When we get to the attractive quality elements, under the tangible section, we’re thinking about reach, service, recovery, delight level by compensating for costs or inconvenience, you might rebate the current service, provide free or additional current service or discount future services. So those are all tangible things. The psychological components that fall into this attractive quality elements section are; following up to ensure successful recovery effort, express personal concern for the customer, and communicate that company values the customer as an individual.
Once you’ve got your head around that then we need to classify our service recovery candidates. We’ve done all this effort to score them, work out where they are, and now we need to classify them in terms of effort. Okay, so again, going back to our angels, royalty, pauper and prima donna. Angels are profitable customers with low service recovery expectations. These customers are prime candidates for recovery efforts as they contribute significantly to our profits, while requiring limited reasonable recovery efforts to retain loyalty. Royalty customers are the group that has high expectations but also contributes to the firm’s bottom line. Because recovery costs for this group will be offset by future revenue, retaining royalty is good for business. When you look at paupers, although expectations and thus recovery costs of this group are low, paupers contribute very little to our profitability. So the low level of expectations qualifies many customers in his group for recovery efforts to a degree, but not ones that are going to be costly in terms of dollars or resources. And then we have the prima donnas, these customers are a managers worst nightmare satisfying the demands of this group can be extremely expensive, yet the costs are not recovered to increase revenue. So each of these groups should be treated differently. An effective service recovery system should classify customers in such a way that firms can recover the customers who merit greater recovery efforts at all times. And then we need to determine an appropriate sorry, determine and perform appropriate recovery efforts. Recovery efforts for each customer group should include the appropriate combination of service and recovery quality elements to generate the desired recovery response from each group. Bearing in mind, angels have relatively low expectations for primary service quality and recovery quality because of the high profitability of this customer segment, a company by low costs are required to exceed the customers expectations. I would recommend that recovery efforts for angels reach a level that will certainly delight the customer, so we’re trying to get them back to the delight level. When it comes to royalt, the high expectations this group significantly increase recovery costs for this particular set of customers but their high end purchasers who whose expectations tend to be justified. Since they are profitable and influential customers are covering the loyalties the prior priority here, so where delight can be reached through reasonable cost, recovery efforts to delight this customer group are recommended. But if it’s an excessive effort that’s required to delight the customer, bringing the customer to the level of satisfaction as opposed to delight is just as good. Again, when we look at the paupers, it seems to be that we just want them to just come back to a satisfaction level. And with the prima donnas, it may even be the efforts to reach recovery satisfaction level may not be practical and you may let them go. So when designing groups of recovery candidates, companies should consider the percentage of profits that come from a given percentage of customers. While research shows that 80% of profits typically come from 20% of customers. These percentages are not the same for every company or organisation. An individual business demographics dictate the size of each customer group. So what you need to do is to consider while classifying customers, that this classification system needs to be fluid and health checked at all times. Then we move on to scripting our recovery process. So we need to script or recovery procedure for each group of recovery candidates, and then train our teams and the use of those scripts. So to do that, we need to use the database to retrieve customer classification information, make appropriate recovery efforts for each customer, listen to the customer. Okay, and then remember that knowing which customers to keep is fundamental to the cost effective service recovery.
So on average, we lose 20 to 66% of our customers every year. So this doesn’t mean company should seek to recover all their customers, but by following the processes we’ve gone through, you can successfully recover the loyalty of key customers, which is what really matters at the end of the day. We’re now I’m going to take a short two minute break and when we return, we’re going to bring it all together and look at why any of the things we’ve covered so far matter and what to refine and put in place to streamline your efforts. Go to our website at IBGR.network and click to the listen now tab and then show notes. Look for episode c 3010, and the show notes will help keep you on track. If you’re looking for help one to one degree businesses check out a business directory of vetted professionals. You have been listening to Episode 10 in our C lane and IBGR.network sales and marketing customer recovery. I am Simone Douglas your host and I will be back very shortly to continue our journey on making the most of recovering our customers.
IBGR 0:06
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Simone Douglas 2:36
Okay, and we’re back you’re listening to the IBGR.network. IBGR is our callsign as a radio station and I am your host today Simone Douglas. This is Episode 10 in our C lane at IBGR.network sales and marketing and today we’re talking about customer recovery. Go to our website at IBGR.network and download the show notes to catch you up. So we’re at the pointy end of the hour and it’s time to set yourself some homework to ensure your service recovery efforts are robust, balanced and for the most part as successful as possible. Many organisations already do some form of service recovery but without a clear process in place valuable opportunities can fall through the cracks. But they don’t have to. It has never been easier to streamline your service recovery and make measurable impact on your business. So where do we start? Well, first off, we need to start with leadership buy in. When creating any new process buy in from the right people ensures access to the resources and support necessary to launch the program. To get this buy in. It’s important to show how much business could be lost from negative service interactions. Remember also that the leaders are not always the ones with the managerial title. You need buy in from the power brokers within the organisation. So get them involved in the design process and make sure you cover off on what’s in it for them. The number of relationships saved by service recovery is a direct contributor to the future revenue and customer retention for your business or organisation. Leveraging these metrics using the ratios we covered last week, as well as the ones that we’ve covered in today’s show to get buy in will be a critical element in the success of designing your program. From there, you’re going to need to establish your recovery criteria. So consider your unique time budget and brand provisions as you established criteria around when to flag an interruption for service recovery. So some of us consider any rating below five stars as an opportunity for recovery. In other cases, especially if you have a small team you may only be able to tackle strong negative feedback and have to set specific thresholds to trigger a service recovery workflow. Now strong negative feedback would fall into Net Promoter scores that are in the detractor end of the scale as opposed to the neutral end. Whereas if you have a larger team or more room to play, then neutral customers are definitely ones, particularly if they fall into that royalty and angel section that we talked about earlier. They’re the ones that you’re really going to want to try and get into the promoter end of the scale. It’s entirely dependent on your team’s resources and priorities, and you can easily adjust over time as the program and your business scales and evolves. Then we need to look at creating your service recovery team. So once you’ve established your criteria, it’s important to decide who’s going to be responsible for acting on service recovery workflows, and how this decision will be informed by the specifics of the service recovery threshold that you have set. So if you’ve set your service recovery for one or two start interaction, you can assign all of the workflows to team leaders or managers. That said, if you want to tackle anything under five stars, you might want to create a team entirely dedicated to service recovery. In some cases, it’s gonna make sense for the account managers to handle the service recovery themselves. It really all depends on your team size, your overall objectives and the potential revenue outcomes. It may also depend on who within the organisation has the best skill set when it comes to active listening, and setting up those apologies in a way that they are heard and keep the customer happy. So once we’ve got our service recovery team in place, we then need to determine the protocols that they are going to work with in. So setting up a set of standards to help your service recovery triage, different types of negative interactions are going to be really important, how are you going to categorise the feedback with tags to help you and use this information to to create clear guidelines for each situation. So for example, if the feedbacks around pricing, service recovery teams should be able to easily find and execute the standard protocol, whatever that is. Whether it’s offering a refund, a discount or a store credit. So if I use the Duke of Brunswick, my pub as an example, all of my front of house team know that if they get a customer complaint, that they are allowed to do whatever they need to to resolve it. So whether it is to refund the customer’s meal, whether it’s to buy them a drink, whether it’s to give them a free dessert, their one job is to ensure that the customer comes back a second time. So they know that that’s a standard protocol, and they’re within their rights and empowered to make that work. So making sure that your standardised rules of engagement are there creates a safe space for your team to do what it is that they can to act quickly and resolve the situation quickly and profitably for your business. You also need to then resurvey the customer. So once the issue is resolved, you need to send a follow up feedback request to measure the impact of the service recovery efforts. Or you might even just pick up the phone and have somebody else in the organisation that wasn’t handling the complaint, actually just do a follow up call to see if they’re happy with the resolution. So once you’ve done that, it allows your team to measure and report on the impact of the program, but also gives the customer a chance to reflect on the positive service experience. So again, it’s cultivating that sense of delight, not just satisfaction, which is particularly important. That positive feeling translates into brand loyalty, repeat purchases, and ideally brand advocacy within their network. So they now become someone who is going to refer you through word of mouth. And that’s going to become very important if you want your service recovery protocols to be successful. Then we need to measure the impact over time, so closing the loop especially when it comes to leadership buy in is key. Measuring the full service recovery funnel by showing your customers journey from eligibility to successful recovery not only helps you and your team understand your impact, but it demonstrates the return on investment of your service recovery process. So by determining the amount of at risk customers who were retained, you can then track through and get some clarity around how much money you have added to the bottom line through successful service recovery and customer resolution. So to summarise and put all of these things to bed, realistically, you need to have just like you have your service recovery protocols, you need to be really clear about how you classify and categorise your customers. So being clear that if you’ve got someone that falls into that prima donna category and they’re not going to be a great customer for you to hang on to, sometimes those are the customers that we need to fire in order to take better care of the angels and the roalty customers. So again, start with clear expectations and start to get some clarity around what your customers expectations are and how often your service flows fall down. How often you fail to surprise and delight your customers in a positive way. Because as you start collecting that data, you’ll get some real clarity around what it is that you’re trying to do, and where your business is already failing. So the thing is, we are never perfect will be like an aeroplane, so you’re constantly making small and minor course corrections the entire way through your business. Even when you’re at the top of your game, the best question that you can ask yourself is, how can we be more successful? What is it that we have stopped doing that made us successful in the first place. So revisiting some of those processes will become really important. When you’re trying to identify where you fall within that service recovery protocol, we also want to look at things like reviews on your social media channels. On things like TripAdvisor and the like. You also want to definitely keep an eye on your Google star ratings and what’s happening there and make sure that part of those recovery efforts are that you’re responding to all those reviews in an effective manner so that when people are looking at your business as a whole, and then making up their mind about those decisions, then you have easily identified a lot of what those issues might be in are constantly resolving them and demonstrating to the wider digital landscape that you are a proactive, problem solving organisation and not one that is reactive or ignoring the problems as they appear. So bearing all of those things in mind, he then want to remember that the good data collection and analysis will always be critical in identifying the level of service recovery effort and the processes applied. We want to proactive and direct approaches. No one enjoys firefighting on key accounts when it could have been avoided.
Next week’s show we’re going to be covering off on sales metrics and earn rate now sales metrics is is a contact sport. Okay, as a sales leader, you should always be trying to increase your teams and right through setting solid sales processes, consistent training, good sales, coaching and sales and marketing support. It is possible to increase gradually and over time until a point thay’re sufficiently good and steady. But if you want to know what that looks like, I suggest you make sure that next week’s show is in your diary. The next episode of the day, you have the pleasure of listening to the dulcet tones of Richard Miller, a branding giant in the world of advertising and marketing. In his show, Building Brands and Selling Stuff, he’s going to take you through post sale customer feedback, why it’s important and how we can collect it, and what to do with it, which will be a really nice tie in today into today’s topic. Remember that you can listen to all of the previous shows on our website IBGR.network, which will allow you to make the most of your day. Setting aside some time either every day or at least every Wednesday to work on your business instead of in your business is definitely the best way to supercharge your success, but if you join our community of commerce online, then you have direct access to all of that on air talent and we are all there waiting to help you make the most of your business and helping you to turn Hump Day into Jump Day which is really what you want to be doing at any given time. You have been listening to Seriously Social – The Humanistic Approach to Sales and Marketing episode c 10, which is Customer Recovery. We want to make the most of our customer recovery to make the most of our profitability and as a c3 business we continue to scale and grow, all of these things are going to be important to you over time. So remember to go back to your show notes, and health check the processes that you have been applying within your business and make sure that you’re doing the things that you can do to maximise your customer recovery. Remember that negative word of mouth costs you way more than just the bad review that you see, and that most customers that complain are not going to return to use your business. I’m Simone Douglas and I have been your host today. I look forward to hanging out with y’all next week.