Fine-Tune the Member Experience

CU360
October 20, 2009 | COMMENTS

The challenging economy is putting consumer companies such as airlines, retailers and financial firms in the difficult position of cutting back service levels that members or customers have come to expect. Companies are closing retail locations, reducing hours, and making do with less staff in stores and call centers. As a result, satisfaction levels are reversing their previous upward trend, according to research from McKinsey & Company.

How can consumer businesses make necessary investments in service while confronting the pressure on revenues and cost? One strategy for maintaining service is to minimize wasteful spending while investing in drivers of satisfaction. Companies should challenge and test their beliefs about service. Many will discover that long-held assertions about what customers really want are outdated.

Consider average time-to-answer—one of the most common metrics used in call centers. Service levels are set by call-center managers and used to calculate staffing requirements. But service levels are challenging to maintain and costly to improve. Raising them by 10% requires much more than a 10% increase in staff.

Companies that closely manage the customer experience are, in some cases, saving money without degrading satisfaction. These companies measure the “breakpoints” to find their customers' true sensitivity to service level changes. One company found that its customers had two breakpoints, measured in seconds, on incoming calls. Answering immediately produced delight, while leaving customers on hold too long produced strong dissatisfaction. Customers were fairly indifferent at intervals between these two points, and the company's average-time-to-answer was only loosely managed between those points.

The company considered raising service levels to the “delight breakpoint” or reducing them to just above the “patience threshold.” They chose the second option: relaxing service levels but guarding against crossing the patience threshold. The drop in customer satisfaction was negligible, but the savings in staffing were significant.

This scenario isn't an isolated example. The same principles apply to setting up a new account, scheduling an appointment, answering a non-urgent e-mail, or having members wait in line. McKinsey research shows most companies that analyze their service levels find that some wait times are more important to customers than other wait times. Overstaffing to hit service targets that customers don't care about is costing companies money.

Overinvestment often involves capital and technology. In one example, a bank scrutinized a costly ATM upgrade aimed at improving the user interface and adding screening barriers around the machines to enhance user privacy. Analysis later showed that changes to equipment were only moderately important, driving 5% of overall satisfaction. But more mundane factors—the existence of enough ATMs and the consistent availability of cash—were about 50% more important. Consequently, the bank pulled the plug on plans for ATM upgrades and redirected funds to accessibility and cash-out conditions.

Other potential overinvestment includes marketing campaigns, and excessive use of bill credits and adjustments. Business reasons for these customer approaches can include unrealistic assumptions about how they will increase referrals and retention. Often, there is no business case.

Finding savings requires rigor in customer-experience analytics—and the willingness to question long-held internal beliefs often reinforced through repetition. The executive in charge of the customer experience needs to have the courage to raise these questions, along with the instinct to look for improvements. Successful companies are figuring out what matters most to customers, eliminating investments that don't count, and financing the ones that do.