Brian Herron


The pit of despair – when customer experience tanks

Do you recognise the shape of this graph?

Image of a line graph: The graph describes customer satisfaction
Image of a line graph: The graph describes customer satisfaction

You might if you work in banking, insurance, enterprise software, telcos… You get the idea. We see it across all of the industries we work with. The graph describes customer satisfaction from the moment of purchase through first experience and onwards into general usage of a product or service.

It shows the moment of purchase as the high point of satisfaction – when customers are all hope and trust. But it quickly plunges as customers become frustrated before eventually levelling off into a kind of fatigued acceptance. They don’t even care enough to be angry anymore. The x is where you risk losing your customer.

You want examples of what this looks like in real life?

  • You sign up with a utility company that offers a significant honeymoon deal. You’ve seen your bills creep up significantly over the last three years, but the company is still going gangbusters with attractive sign up offers to new customers – even better than the one you were offered. Where is the love for you as a loyal customer?
  • A life insurance investment product purchased over a fifteen year term. You’re putting away significant amounts of money each month into an account to go towards a kid’s third level education. You’re excited at first to get moving on this. But then it’s hard to access the information about the policy to see how you’re doing. And when/if you get your yearly statement by post, you’re surprised that charges are negating any growth on the capital. This doesn’t look like what was promised.

This graph is what happens when basic expectations are not met, when the promise of the product doesn’t match the reality, or there is no perceivable ongoing value for the client. We call it the Pit of Despair – you remember Westley in the Princess Bride on the Machine sucking out years of his life at a go while our hero weeps? This is customer experience in 2017.

Once the sale is made, people start using the product or service. They start to measure your sales pitch against the actual customer experience. This is where the dip starts.

It could be an actual screw up: a poor onboarding experience, a problem with set up, an early mistake on a bill, a mis-sold product. Or, depending on the product, a company might go completely hands off – you only hear from them when they want to market something to you.

When we show something like this, based on research, to our clients, they ask what is causing this and how can we fix it? And that usually leads to a very long conversation.

Because nearly always this is ‘death by a thousand cuts’. There is often no single feature or issue that causes this tanking. Therefore there is no single solution.

What we say to our clients is: your customer feels like a sucker. Usually we say it in a nicer way.

Part of the reason for this is that the blue chip corporates tend to view their business too narrowly – they’re self orientated on their own needs and quarterly KPIs. They treat the organisation’s acute symptoms of customer dissatisfaction, rather than the customer’s chronic causes.

Let’s look at two reasons why this graph happens, and then talk about what to do about it.

1. The obsession with acquisition

Sales are important. Revenue is important. It makes sense for companies to pour their resources into acquisition.

The problem is that many big industries are, at least to some extent, commoditised. They primarily differentiate on price or short term gimmickry (think student banking offers). But none of these things contribute to real long-term loyalty. In fact they arguably contribute to further commoditization and ultimately drive down price.

This hunger for new sales is actually at odds to the economic drivers of the business. The irony is that acquisition costs a ton, so profitability usually comes from long term or repeat customers.

The most profitable customers, across banking, insurance, life insurance and utilities tend to be multi-year, multi-product customers. The costs of acquisition even out over the years of engagement, and you are afforded the ability to upsell or cross sell over time.

It would makes sense for companies to work hard to keep these customers. But they don’t.

In fact, many companies – Telcos particularly – have switched from purely acquisition metrics, to Net Churn. This is the leaky bucket mentality. Fill the funnel to offset the leavers.

The balance is off between acquisition and retention.

2. Mistaking inertia for loyalty

A research participant – a taxi driver – we once spoke to talked about his attitude to loyalty in car insurance. He stayed with the same provider year after year, knowing that they’d increase his premium every 12 months by €200-ish. Every year he’d call them up, point to his record and then get them down by €100. That was it. An annual game that he played with them. The moment they they don’t fulfill his expectations of meeting him halfway on the annual increase, he’s gone.

He’s been with the same insurance company for 22 years.

Insurance, with it’s annual sales cycle has it’s own issues – particularly in the current market. But in banking, life insurance, utilities and telecoms many customers take a long time to switch. Many blue chips mistake this type of retention as ‘loyalty’. But it’s not. They are relying on the customer inertia rather than the quality of their product.

This is the reason why you’re still with the bank you joined in university. This is why you don’t remortgage your house every five years. This is why you don’t change your cable TV every 12 months.

And this sort of loyalty is dangerous because it’s profitable. Companies have no incentive to change or serve existing customers until they are faced with market disruption by either a new, agile, customer-centric entrant to the market, or by an incumbent that has committed to innovation.

For examples on the risks banks face, read my colleague’s post.

If you rely on loyalty by inertia, your customers are already halfway out the door.

Acknowledging this churn risk, the company forms a retention team which are given the authority to offer discounts. Again, the company is back to competing for your loyalty on price. If all your customers care about is price, then you haven’t given them anything else to care about. If someone is calling up to quit you’re already losing.

This is all about value exchange

Value exchange is the fundamental of business. But in a service or product that you repeatedly use, renew or re-purchase over a number of years, many companies seem to have forgotten this. The existing – most profitable – customer base tends to be embarrassingly underserved. Take car insurance – what other product do you buy for €800 a year and then see nothing back?

We’re not arguing for a huge unprofitable giveaway, Chase style. We’re arguing for fair, perceivable exchange of value.

So what’s a good value exchange

Value means the thing that a customer values.

Recently a colleague (more financially prudent than I am) was contacted by her bank to offer her a premium account. The features of the programme were almost entirely additional products that she could avail of: loans, overdrafts and credit cards. In other words, debt. (Slightly better value debt than for the rest of us rubes.)

There is nothing less valuable to you, and more valuable to the bank, than debt.

A business leader in an insurance company we worked with once suggested that we give an extra 10k contents cover after a Christmas period. The rationale was that people might have more expensive items in the home following the commercial madness of the holiday season. But is an extra 10k cover meaningful to people? Do people know off hand what percentage increase that means to their existing cover? Would they care? What if they’d had a tough year and expensive presents were thin on the ground, would this seem insulting? I don’t know…

These two examples seem like benefits to the customer on the face of them but the more you look at them the more you ask, “so what?” These are examples of businesses reaching for the tool kit they have to hand. Not only are these things of questionable ‘value’ to the customer they could also be copied in ten seconds flat by a competitor.

Climbing out of the pit of despair.

The really depressing thing about the pit is that it’s hard to climb out of. Which means more churn. More churn means more pressure on acquisition to fill the funnel back up again. Which means fewer resources to pour into serving your existing customers. So how do you start to get out.

1. Do the simple things well

In the case of Zurich International we were able to create a transactional NPS swing of 13 points. The value proposition of the product we helped launch was simple: easy access to your policy information. We did this by fixing registration, improving the policy information pages, and making it responsive and fully-featured across all devices.

All the flashy functionality we could have added would not have been as valuable as up to date information on investments, laid out clearly, and accessible on your phone.

Meet your basic obligations to your customers. They may not notice it when they’re there, but they sure will when they’re not.

2. Reward the right people

You don’t need every customer to be loyal. Just the right customers.

Customer satisfaction alone isn’t a good enough measure of a valuable customer. You need to match it to profitability or potential profitability.

Segment your book of business. Find the valuable groups. Discover what these groups want and tailor your value offerings to them.

A call out of the blue to give them the retention discount they’re ‘entitled' to could work… but intangible benefits can be equally great: convenience, recognition of needs, product fit.

Adjust their deal so that it’s always fair.

3. It’s not better until it’s better for them

Make small improvements often. Almost as important, make sure the rhetoric of your improvements matches the reality. If you’re driving “operational efficiency”, make sure that your self serve doesn’t create worse customer satisfaction outcomes: if you’re automating a service you better make sure that it’s genuinely better for the customer and not just better for you.

Are these things easy? Of course not. They often require significant changes in corporate mind set and a renewed focus on customer experience in product and/or service.

But it’s the only way to avoid the pit.

Value exchange, retention, loyalty – these are things we at Each&Other really care about. We’d love to talk to you about how we can help your business change your customers attitudes to your business.

Credits: Illustration – Tom Cunningham Editing & ideas – Laurence Veale, Billy Fitzgerald and the Each&Other team.

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