21st Century Management

WHY CLIENTS LEAVE YOUR BUSINESS

Author LynnThomas , 7/9/2013

Many people believe that price is the reason why clients leave most companies. However, a careful analysis fails to bear this out. If price were the driving force behind how we buy, we would live in the cheapest houses, buy the cheapest clothes, eat the cheapest food, buy the cheapest cars, etc. This is clearly not how we live – we buy according to perceived value!

The three studies about why clients leave companies concluded that 67%-68% of client departures result from presumed indifference on the part of the company. Price accounts for only about 9% of departures.

What is indifference and how does it look to your clients? Indifference can be defined as a lack of interest or concern by employees toward clients, whether real or perceived. Examples include failing to return a call or e-mail promptly, not following up on or missing a promised deadline, or the body language or tone of an employee’s voice when speaking with a client. Indifference communicates clearly, “I don’t care about you or your business” and it’s all too rampant today. As clients, we’re accustomed to employees who show their indifference toward us. In some companies, this is the norm.

Thus, when an employee truly takes a moment to connect with us, says “Hello,” or asks “How can I help you,?” it can make the difference in where we choose to place our business. Would you rather interact regularly with indifferent employees or with those who show that they care about you?

I was recently at a client’s office, when she told a customer service representative, told by, “You saved my day!” The CSR replied, “Thanks very much, have a good day.” her response fell flat because it was rote and failed to match the enthusiasm that the client was expressing. Better responses would have been, “I’m happy that I saved your day,” “I love saving a client’s day,” or “I hope your day stays great.”

Also, every positive interaction with a client increases his/her loyalty by 20% or, if negative, decreases loyalty by 20%. These situations offer golden opportunities to delight clients and increase their loyalty when interacting online, or speaking directly in person or telephone.

This statement highlights the vast difference that a caring employee can make with a client who is about to leave.

“I went to the Chase branch across the street from the corporate area where I work, intending to close my recently opened account because I had not received my debit card in the mail nor my account information to establish direct deposit within the promised time frame. This happened to be a Private Client location.

Before I could reach the door, an employee opened it, greeted me, and asked how they could help me today. I stated that I wanted to close my account and they responded with concern immediately and took me to an office. I expressed my horrible experience with Chase during my very brief relationship with them. The representative empathized with my situation and excused herself for a moment.

She returned quickly with a debit card that had my name printed on it, along with a folder containing my account information, a printout with a voided check to set up direct deposit, and her business card.

She then told me, "Mrs. XXX, if I was in your situation, I would be frustrated and I would close my account as well. All I am asking f is the opportunity to make things right with you. I’m sure that we can meet your banking needs and prove to you that we deserve your business.

When I agreed to keep my account open she followed up by saying, "You have my business card and I want you to contact me with any need or concern and I promise to take care of you." Needless to say, I was impressed by the less than 10 minute interaction and am now loyal to Chase.”

This client has become fiercely loyal. Why? Because the representative took time to ask her a question, listened to her reply, empathized, took immediate action, gave the client her business card, promised to help with any future problems, and then asked her to stay. Simply and brilliant!

Most businesses could imitate this type of response and reap similar results. You need to trust your employees’ judgment, train them in how to listen and respond to the concerns of clients, empower them to do the right thing on the spot, and finally, back them up! If you’re not willing to invest in giving your employees the skills they need to work effectively in this rapidly changing marketplace, clients will perceive them as indifferent. We know what indifference does – it provides clients with a negative experience. If nothing changes, eventually they will have enough reasons to leave your business for a company whose employees show that they truly do care about them.

Dare to care, make a difference – and reap the results! 

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THE EXCITING ROLE OF THE COMPANY MARKETING REPRESENTATIVE

Author LynnThomas , 2/15/2013

I recently read a thoughtful and insightful article about the powerful role of an insurance company’s Marketing Representatives. These are the “faces” of the companies. An agency sees these people much more frequently than their underwriters or other company employees, and thus Marketing Representatives can make or break key profitable agency relationships with carriers. They form the most important link between the future growth and profitability of the company and its agencies.

With all of this money and growth riding on the Marketing Representatives, I’ve found that all too few companies invest in giving them the best training to be able to deliver superbly managed profitable agency relationships, day in and day out

Their jobs are manifold and require highly talented and motivated independent self-starters. Marketing Representatives need to have in-depth skills in communication, sales, conflict resolution, business development, time management, listening, performance reviews, giving and receiving feedback, motivation, leadership, coaching, managing change, team building, empowerment, mentoring – and even a few more. Few people have these skills innately, and most companies don’t recognize the broad scope of skills needed to be a successful Marketing Representative.

I believe that this stems primarily from the days when the executives of most insurance companies knew most of the owners of their top agencies. Because senior management believed that they had good communication channels with these agencies, the role of the Marketing Managers was an additional, rather than primary, channel of communication.

Today, with companies growing larger and increasingly splintered into different roles and departments, Marketing Representatives emerge as the key players for the company’s growth, stability, and profit. They are the only people who physically walk into the agencies, shake hands with the CSRs, producers, and owners and have many discussions in every visit. Marketing Representatives have a wealth of information about the agencies: sales, communication, management, new initiatives, turnover, client retention, training of staff, hiring practices, geographic benefits, challenges, etc.

Companies need to do a better job of valuing these people as their eyes and ears in the marketplace. They have accumulated priceless knowledge from numerous visits and in-depth conversations about their agencies. I hope that many companies will capitalize on this vast wealth of knowledge to learn how they can help their agencies to grow and become even more successful.

Marketing Representatives form the vital link between the insurance company and its revenue sources. Given the powerful role of the Internet in reducing the share of insurance written through the Independent Agency System, companies need to do as good a job of valuing, rewarding, and training their Marketing Representatives as as they do with their agencies.

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The Hazy Future of Personal Lines

Author LynnThomas , 11/13/2012

by Lynn Thomas

I recently read an article which stated that by 2020 almost all auto insurance will not be sold by independent insurance agents. This statement became more believable when I heard GEICO has entered the Massachusetts regulated automobile market. Massachusetts is one of the least financially attractive auto insurance markets in the country. If GEICO can make money in Massachusetts today, then in the future, auto and homeowners insurance could become true commodities. What does this mean for the future of Personal Lines and the independent insurance industry? What can your agency do today to possibly keep some of the Personal Lines business and expand into other services to remain profitable and sustainable?

Based on my experience and knowledge of the insurance market, approximately less than 12% of independent insurance agencies deliver true value-added services to their high-end Personal Lines Clients. This is a foreseeable outcome since few agents can distinguish the value-added that they bring to the application and renewal processes. GEICO has already proven that human interaction is not required for automobiles to be properly insured. I will state that with the technology advancements, most homeowners insurance will follow the automobile insurance exit trajectory unless you decide to radically change course.

You can stop this exodus if you are willing to do three things. First, focus on your top 20% of your Clients that generate 80% of your revenue. Second, conduct thorough annual reviews demonstrating your knowledge and analysis. Third, consistently add additional valuable services.

First, focus on the 20% of its Clients that generate 80% of your revenue. You want and can keep these Clients; they are the engine of growth for your agency. You need to add value which cannot be replicated with technology. Mostly, that involves you having two to three meaningful interactions annually with your top Clients over the telephone, email, or in-person.

Second, the annual review stands out as the most obvious area that you can create an important value-added service. If annually is too frequent, than I propose you offer to conduct one review at least every three years. The housing market has not stabilized and thus as insurance experts, you need to make sure your Clients are not under or over insured. The amount of coverage that any homeowner needed three years ago is less than they need today. You may lose some commission but you will gain a lifetime of fiercely loyal Clients.

In the late 1980’s in Massachusetts, one agency visited its top Clients in their home for their annual review. Client after Client after Client told us that they were fierce loyal since they recognized the agency lost money each year, but their repeated annual reviews showed them that they had the interests of the Clients foremost in their mind. These Clients said many strong statements about their loyalty but the one that best summarizes it is that “it would take an Act of Congress” for them to leave this agency.

Third, you need to broaden the range of the services that your agency offers. Some agencies have added services like payroll processing or others through strategic relationships with vendors. Either model can work but you must continually seek to add value and offer new valued services.

Implement this strategy systematically, and you will never be replaced by technology. Why? Because like doctors, dentists, attorneys and accountants you provide valuable advice on managing you top Clients’ insurance risks. Your advice is based on your detailed understanding of your Clients’ needs. The winning equation for compelling insurance advice is: human understanding of Clients’ needs + your expert probing questions + knowledge of the insurance companies’ offerings, + your caring about your Clients = a compelling, detailed and personalized insurance analysis of their needs and your recommendations.

This type of detailed analysis and follow-through is what is your Clients always have wanted. Give it to them joyfully and you will create a base of raving fans that will supply you with referrals and keep your business filled with top Clients.

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Bundling Creates Happiness

Author LynnThomas , 10/10/2012

by LynnThomas

The insurance industry received some great news recently. Possibly you that have heard about JD Powers’ latest research indicating that bundling other policies with Homeowners created the greatest increased levels of satisfaction from 2011 to 2012. Bundling Homeowners with auto created the greatest improvement of 19% in satisfaction compared to 10% for those who have auto with another insurer.

One of the study’s most significant findings is that bundling additional products creates higher Client satisfaction levels with the insurance companies. There is a hidden and great surprise – bundling increases the Client’s intent to renew their policy by 18%! If the Clients have one policy, they are 28% likely to renew rather than 46% for those with two policies. That 18% increase is big news on which agents can capitalize.

This is an outstanding opportunity for insurance agencies to proactively create loyal Clients by delivering a positive bundling experience while they deepen their penetration into their Clients’ life. Remember, the more policies and services Clients have, the more difficult it is for them to leave. Why? Because they need to recreate each product and service with another agency and that is time-consuming and cumbersome. Think of each product or service as a thread. Three to five products creates a string and after three to four years there is a rope. It is far more difficult to cut a thread or string than a rope.

The major takeaway from this research is to always bundle policies. This is a win for everyone. If new Clients do not give your agency all of their business, then tell them that by renewal time next year, if you do not receive all their business, you will not renew them. Those Clients that do not give you all of their business would have left you anyway; save your valuable time to focus on those Clients that value your expertise and knowledge.

The second is to know that by asking about and educating a Client regarding your agency’s other services will help them to have more positive experiences. You are not bothering them, you are serving them. The third is that annual reviews are important as they give you an opportunity to demonstrate your value to your Clients every year. Do it every year; if the Client

does not want it annually, mandate it every three years. Your accountant wants to see you annually as does your doctor and dentist. Professionals stay on top of their Clients’ issues by establishing good timelines when a review is warranted and three years in this economy and marketplace is probably the outside limit.

The fourth is that through bundling, the Client usually receives a discount of 10% -15% which saves the Client money as well as allows the agent to customize the insurance to meet the Client’s needs.

These last two value bonuses: the annual review and discounts are priceless opportunities. They allow the independent agents to differentiate themselves from the pack, and this differentiation is necessary to have you and your agency easily thrive. This is a very good day for the independent agent!

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First Magic Number to Achieve High Levels of Profitability

Author LynnThomas , 9/18/2012

by Lynn Thomas

The latest research reveals that the top 20% of your Clients generate 160% of your profits. On the other hand, the bottom 20% of your Clients can drain up to 80% of your profits.

This finding surprises most people. Long-term profitability is mostly achieved by focusing on your most profitable Clients or the top 20% of your Clients who generate 80% of your business’ revenue. You want them to generate up to 160% of your profits.

To do so, you need to gather Client intelligence from these top Clients such as why did they initially decide to place their business with your company, why have they stayed, are they willing to refer and cross-buy? These are a few examples of Client intelligence that can drive your sales to consistently yield higher profits.

Most companies make decisions based on anecdotal stories and gut hunches. But the marketplace and especially the insurance business have changed. The new rules to generate a consistent profit include using reliable and valid Client intelligence to successfully implement the subjective anecdotal stories and gut hunches.

Your top 20% of Clients today will be the sources of your company’s future growth over the next five years. In fact 80% of your company’s future growth will come from them. They are priceless and in order to replicate and duplicate them, you need to understand how they make decisions. How did they learn about your company? How did they become a top Client with your company and four other questions you must ask to generate the revenue growth? These are not responses that you can afford to guess at. So are you willing to change your mindset and have 50% of your top Clients generate over 220% of your profits?

The research continues to reveal the importance of focusing on the bottom 20% of your Clients. Let’s think about your bottom 20%. How much are they costing your business each year to keep them on the books? Why are they Clients if you do not make a profit with them? Most businesses do not have unprofitable Clients on their books year after year. Banks and other businesses would charge higher fees to make their profit. Other companies would raise their prices to generate profits.

In reality, your top Clients are subsidizes your bottom 20%. Have you ever thought of it that way? The bottom 20% are usually high maintenance and drain employees’ energy and enthusiasm, slow payers, shop frequently, and usually have more claims. Your top Clients are the easiest to work with, they trust you, they value your advice, etc.

What would your company be like if you eliminated the bottom 20% that drain your profits? You may want to consider “firing” your bottom 20%. Let’s be clear, they are draining your profits, up to 80% of your profits. They are not, and few will ever be, profitable to your company. So you can increase their premium to make them profitable, tell them you will not renew them unless you write more business since currently they are not profitable, or tell them that you work only with Clients that give you all their business, as that is where you excel. When you have all their business, you can be most effective in eliminating and reducing their risks. Like dentists, you cannot just have a Client’s upper or lower teeth, just some of their business, but you need to have all of their business.

Let your competitor figure out how to make them profitable. Your best competitor can be running around serving more unprofitable and high maintenance Clients which in turn will give you the additional time to spend with your top Clients to dazzle and delight them. In turn they will stay for life and be fueling your agency’s growth while everyone is enjoying their work and having more fun!

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Seeking Mittens

Author LynnThomas , 8/28/2012

by Lynn Thomas

Recently, I was seeking a warm pair of mittens. A simple purchase and many places to choose.

After I dropped my daughter off at school, I knew some stores might not yet be open, but I went looking.

Walgreens only had gloves, so I continued on to four other stores. One store appeared open with cars in the parking lot and people inside the store. I got out of my car and followed a young man towards the store. A woman inside opened the door for him, as I deduced he was an employee. She said to me, “We will open at 9:30, which is in seven minutes,” and then closed the door in my face. Huh?

I stood there a bit shocked. It was very cold outside, and there I stood, eager to be a customer and one of the people who pay her salary. None of these realities were acknowledged. I felt she was totally indifferent to whether or not I would wait. I wished she had been trained to say something like, “I am so sorry. This man is an employee, and I need to let him in so he can help me and the other employees get the store ready for you and other customers. We do not open for seven more minutes, and unfortunately I cannot let you in. I do hope you will wait, even though it is cold outside. I will be more than happy to help you find what you want when we open.” Nope. And the employee she let in did not say anything to me either.

I am surprised at how many opportunities to Wow! and delight customers and create super-glued relationships with them are either not seized upon, or worse, how often employees communicate indifference to a customer, which is the slippery road to losing them for life.

I used to really like this store, and I told many people about it. It was a Wow! store for me. Great selections, friendly help, good prices, good locations, etc. Now I will never go out of my way to shop there and will definitely never recommend the store to anyone. In fact, I have and will continue to warn people about the possible rudeness of their employees. That manager’s 30-second communication just lost that store about $700 annually. If you multiple $700 times the twenty (or more) people I would have recommended to this store, the total is approximately $14,000 annually of lost business. If you add in the negative word-of-mouth advertising that I spread, they could lose another 10 potential customers, which is another $7,000 lost, for a total of $21,000 annually. And all this does not include the number of people these potential customers might turn away.

This store was my first choice for many purchases. Now it will probably be my last. My rough estimate is that this store just lost a minimum of $210,000 over the next 10 years. That was a very expensive 30-second communication, as each second cost this store $7,000.

If training is viewed as unnecessary or too expensive, the decision to not invest in training is a colossally costly and horrifically uninformed decision based on perception rather than hard numbers and reality. You can quantify bad customer service. It is easy. Most companies do not know how to do it, nor do they understand its powerful economic consequences, and, as a result, they do not seek out professionals to assist them.

The attitude that we do not need to upgrade our “Humanware” on a regular basis is what separates the companies that keep growing, even in difficult economic times, from those that struggle to keep afloat, or worse, do not survive.

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Retaining Your Most Profitable Large Clients

Author LynnThomas , 8/14/2012

By Lynn Thomas

Introduction

The continuing weakness in the economy encourages large Clients to switch insurance companies to gain even minor improvements in cost or service; this will markedly increase the competition for these most profitable Clients. Any failures to retain these large Clients will result in significant reduction in your company’s revenue and profitability.

It is now harder than ever to replace lost large Clients. With today’s economy exerting more financial pressure on companies than anytime in the past 80 years, the pool of potential large Clients is decreasing due to the high number of mergers, bankruptcies, and acquisitions.

Not only is losing Clients a financial loss, but the average insurance company needs to spends thirteen times more to attract a new Client than to retain one. This high expense can dramatically reduce your company’s profits even if you manage to replace every lost Client.

This increased expense means that your profits will be reduced even if a new Client produces similar revenue to that which was produced by the former Client. However, your company will most likely need multiple new Clients just to generate the same amount of revenue. However, this is not an apple-to-apple exchange. Now your company has additional risks on its books, needs to work with additional brokers, has more risks it needs to underwrite, has more renewals to handle, has more Clients who are statistically more likely to leave within the next 24 months, and more Clients who will generate higher loss ratios in the first year than existing Clients. This is not a financially prudent strategy to operate a profitable insurance company.

Because the lackluster economy is creating fewer large Clients, it is more difficult than ever to replace the ones which have been lost. Even if your company can replace them, it will take four to six years to recoup the high acquisition costs. After that, your company will need to recoup the higher first year claim costs. Then your company can start to make a profit.

Opportunity

Increasing Client retention can preserve, or even increase, revenue and profitability by millions of dollars. The best companies in the Insurance industry have a 94%-97% Client retention rate.

High Client retention rates are known to generate high profits. This economic relationship was first introduced to the business world in the 1989 Harvard Business Review article, “Zero Defects Comes to Service.” The authors cited that a mere 5% improvement in customer retention could boost profits by 25% to 85%. The importance of Client retention did not escape tops CEOs. In 2002, The Conference Board, a global organization about management, surveyed global CEOs and asked then to identify their most important challenge. The hands-down winner was customer loyalty and retention. This is the issue that most CEOs cited as their biggest concern.

The wide range of increased profits is based on two factors: Client acquisition costs and how often the sales cycle is repeated. The insurance industry because of its high Client acquisition costs and annual sales cycle will benefit the most from increasing its retention rates.

Thus, if you want higher retention rates, where do you start? Choose an outside market research firm that has extensive experience working in the property and casualty insurance industry and with Client retention. This industry specific firm will generate two results: First, it will produce the most powerful, reliable, and accurate Client intelligence because it has the knowledge and experience to gather, analyze, and implement the best solutions for Clients. Second, it will uncover the best strategies to generate highly satisfied Clients and thus, will produce the highest possible large Client retention rate for your company.

You may think any market research firm can write a survey, gather the results, analyze them accurately, implement improvements, and increase retention rates. Unfortunately, it is not an easy undertaking especially with large and complex Clients.

We wanted to show you some common and significant errors that we have seen in surveys used by Fortune 100 companies. If any of these errors are in a survey, the reliability and validity declines significantly.

First, all questions need to be tested to eliminate ambiguity and thus generate valid and reliable results. Few companies understand the importance of utilizing only tested questions and do not choose to invest the time necessary to test each question and rewrite the questions so they are unambiguous.

Second, most companies do not realize that the order of the questions is vitally important to generating reliable and valid results. The order can also increase the respondent’s trust level and response rates. The first few questions need to be easy to answer for the respondent to gather momentum and have some time investment in the survey. Then questions that require some thought or analysis will more likely be answered than skipped. The survey needs to have a rhythm to it by alternating between some easy questions and then some more thoughtful ones as well as the format of the questions and the responses.

Third, few companies take the time to select the best response format for each particular question. Is open-ended, multiple choice, forced rank response format, etc. the best? Most surveys use mostly closed ended questions since they are the easiest to ask, analyze, present, and also eliminate ambiguity. However, respondents then have no room to explain, qualify, or clarify their answers and thus some respondents write in responses, or do not answer the question.

Fourth, generally, large Clients have businesses that are much more complex than smaller Clients. This is also true for the large Clients’ interactions, issues, and relationships with your company. Close-ended questions elicit the least accurate and complete answers for large Clients. There is no place for the finer nuances or distinctions of a situation to be expressed. Many large Clients find many close-ended questions about important complex issues quite frustrating and just skip the rest of the questions. This then reduces the response rate as well as the reliability and validity of the results.

Fifth, an independent third party will generate results with the highest validity and reliability. Many Clients do not honestly answer questions asked by internal people. Why? Because they are usually concerned that if what they say is negative, the person who caused the problem will learn about it. Since the Client will most likely continue to work with that person, the possible ensuing unspoken tension in their relationship is simply not worth it. So, they are more likely to respond with positive comments to questions that are asked by an employee of the company or not at all.

Sixth, there are four questions that Clients need to answer for you to accurately know if a Client is a Client-in-Jeopardy and when the Client will most likely leave. Then specific, detailed, and actionable questions need to be asked to determine what your company can do to proactively intervene and save the Client. Few companies know that four questions are needed to ascertain the likelihood of a Client leaving, know what the questions are, and what the exact wording of each question has to be.

Seventh, the questions need to be asked objectively without any leading statements. For instance, if a question asks: “How enjoyable was your dinner?” it may appear to be objective, but it is not. It is a leading question, for it implies the dinner was enjoyable. A more objective alternative way is: “Please rate your experience of your dinner on a scale of “1” to “5” where “1” is Poor and “5” is Excellent.” This will elicit a more accurate and valid response.

Eighth, the market research company with the most experienced and knowledge about your industry will generate the most valuable and relevant results. Why? First, the company can ask questions using “industry speak”; this increases the credibility and comfortable level for all Clients, but especially for the large Clients. Second, the questions can be more specific and detailed to uncover truly actionable results that everyone can easily understand and implement.

Ninth, since the market research company is knowledgeable about the insurance industry, it will interpret Client intelligence more accurately. For instance, if a Client is upset about his/her relationship with the broker and the underwriter, which one is more important for your company to address to retain the Client? A market research firm with insurance experience focused on Client retention knows that the relationship with the broker is the most important. Why? Because the Client’s relationship with the broker has a very high correlation with the Client’s decision to stay or leave your company, whereas the relationship with the underwriter has a lower correlation with a Client’s decision to stay or leave your company.

Our Proven Route to Outstanding Success

21st Century Management Consulting has more than 23 years of experience working with over 450 property and casualty insurance companies, agencies, and TPAs to increase their Client retention rates. We know how to address all of the potential problems raised above with precision and generate solid and powerful results. Our advanced and highly customized Client intelligence gathering methodologies and analysis can unlock insights that are hidden in your Clients.

Our expertise is in eliciting carefully selected intelligence from profitable and complex Clients; this intelligence will enable your company to know if a Client is likely to stay or leave. This knowledge will also allow you to focus on these Clients which will produce the greatest ROI for your efforts – those for which your extra efforts are likely to make a difference. We can predict when and why these Clients may leave and provide you with proactive, compelling, and timely strategies to intervene to retain them.

For Clients that are already likely to stay, we will uncover precisely what needs to occur to not only retain them, but to delight them, so they will stay for the foreseeable future, and likely become sources for referrals and cross-selling. This intelligence will include their “Hot Buttons,” retention and quality scores, their referral and cross-selling potential, a tailored communication plan, and whatever else is important to them. Our results are very extensive and comprehensive. Every important issue will be uncovered and addressed to ensure these profitable and complex Clients are retained.

By utilizing this Client intelligence, your company will more successfully retain your most valuable large Clients, acquire more like them, and consequentially will improve your company’s profitability by millions of dollars.

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The Challenge of Achieving Excellence

Author LynnThomas , 8/6/2012

By Lynn Thomas

I read a quote the other day, and it really struck a chord in me.

“Excellence requires some effort. You need to give your people a compelling reason to push beyond their comfort zone.” – Tony Schwartz

If we look at most companies, the above quote rings true. Most companies are average. There is nothing horrible about the company, and conversely nothing truly excellent either. If a company wants to stand out among the crowd, it needs to create “a compelling reason [for its employees] to push beyond their comfort zone”.

If we stop for a moment and think about companies that are known for delivering excellence, FedEx, L.L. Bean, Four Seasons, Disney, etc., what makes them different? Each company has its own recipe for its brand of excellence. They did not copy a competitor or leader. They gave their employees a compelling reason to push beyond their comfort zone. Each of these companies has its own feeling of success. You can literally feel it when you interact with someone at their company.

What are some of your company’s possible recipes for excellence? Your flavor of excellence needs to be a compelling reason for your people to push themselves into the uncomfortable zone. It cannot just be attractive or appealing – it must be compelling! That is a tall order, but these times call for people to create tall orders.

I suggest that you do not generate just one, two, or even three possible recipes for success. What about 20? The more options you have, the greater your chances of success. If you create one option, or only a few options, they are probably what most other companies have already developed. When you push yourselves extra hard and force yourselves to dig deep into your intelligence and creativity to generate 20 possible solutions, the last five or more will probably be truly unique and become the winning recipe.

What is your company’s flavor of excellence? Ask many people to participate in its creation. What does it look like, smell like, sound like, etc.? Make it real, and if possible, make it tangible by creating a written statement of excellence. Be sure you invite all of your employees to participate in this process. As each person stirs the recipe, their participation also increases your company's chances for success. Do not rush this organic process. You and everyone else will know when you have created your company’s success recipes. It will be clear and obvious. Be patient and keep stirring as you add in new ingredients, and delete others along the way, as you reach your company's own unique formula for excellence!

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Satisfaction, The Seductive Illusion

Author LynnThomas , 7/24/2012

I heard alarm bells ring inside my head when I read a recent article by J.D. Power and Associates that stated customer satisfaction with property claims increased in 2011 to 833 on a 1,000-point scale. That is roughly 8.3 on a 10-point scale. The photo that accompanied the article showed a woman with a big happy smile. I am assuming this is viewed as good news.

That’s my concern. 60% to 80% of us switch to a competitor even though we are “Very” or “Highly” satisfied with the current company. Satisfaction has no glue.

Based on work I did for AT&T during the time it was breaking into the Baby Bells, they conducted a customer satisfaction study (scale was 1 = Poor, 5 = Excellent). The results showed that 94% of their customers gave the telephone company a rating of 3, 4, or 5, yet the company was losing market share.

We were asked to track individual customers for approximately three years. What we discovered was shocking. Of the customers that gave a rating of 3, 50% stayed and 50% left. So satisfaction alone is needed to be in the game, but it has no staying power. Of those who gave a rating of 4, 85% stayed and 15% left. Of the customers who gave the company a rating of 5, 94% stayed and 6% left.

Subsequent to this study, we discovered that when a Client gave a satisfaction score of 4.7 or higher (which was calculated based on their response to four different questions), the Client was six times more likely to stay, six times more likely to refer, and six times more likely to cross-buy. Those Wow!, delight, superb, “over the top” satisfaction levels are something to cheer about because Clients who give these ratings become your unpaid sales force. Isn’t that what you really want?

For some companies, this is not their strategy, or it seems too high, or they say, “We could never reach that level.” Well, it is possible, it is being done, and it works. It depends on your making a choice to become a truly outstanding company. It is a simple decision and focus – and with that, magic can happen.

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Customer service representatives can make very creative excuses.

Author LynnThomas , 6/27/2012

I ordered an item that I needed in five days, and the company assured me I would have it in three days with the method I had chosen for shipping. I still wanted that extra cushion, because sometimes deliveries take longer. I kept the tracking number that was emailed to me just in case.

The item did not arrive in three days. On day five, I opened the email with the tracking number and saw that the item I had ordered had reached a warehouse forty minutes from me on day two. Yesterday, it was scanned as received in a warehouse eight miles from me. This morning it was placed on a truck at 6:07 a.m. for delivery today.

I periodically checked its status throughout the day, wanting to believe that it would be delivered today. I called at 8:45 p.m. and was put on hold for about 10 minutes. The representative told me that their company makes deliveries until 9:00 p.m., it was only 8:45 p.m., and I should call back at 9:00 p.m. if it was not delivered.

“It has been on the truck for about 15 hours with no delivery,” I said, “Do you really think that it will be delivered within the next 15 minutes?”

The representative replied, “Yes.”

I had very deep and serious doubts, but I really had no choice.

At 10:00 p.m., I checked to be sure the package was not left on the doorstep and then called the delivery company again. I also checked the delivery status again and saw that their records had been changed! There was no evidence that the package had ever been on a truck for delivery! A note said, “Emergency Conditions Beyond XXX’s Control.” I was outraged that the company's records had been changed to hide the fact that it was out for delivery and had not been delivered!

After I was put on hold for about 10 minutes, a woman finally answered and said it would be delivered tomorrow. I said, “That was what I was told yesterday and it was not delivered today. Furthermore, your records now do not indicate that it was scheduled for delivery today! I do not appreciate a company that changes its records to hide that it missed a delivery today.” She said nothing.

She then mentioned the Emergency situation. She said it was most likely the snow. I replied, “Today is the warmest day we have had in two weeks. I cannot see where snow would have been a problem.” I offered to drive to the warehouse and pick up the package. She said that was not possible, as the warehouse was closed, so I had to wait until the next day.

Neither of these representatives ever acknowledged my problem or my upset. My feelings toward the company would have been so much more positive if only one had said, “I am sorry that this package was not delivered today, and I can understand that you are upset. Let me see what we can do to make sure that it will get to you tomorrow.” Neither thanked me for my business or acknowledged that I relied on their company’s promises to my detriment. They both seemed indifferent and just kept referring back to their logged notes, which further angered me.

The next morning I saw that my package had been placed on a delivery truck at 1:05 a.m. for delivery that day. I called the company and was on hold for about seven minutes. A more compassionate woman answered and started with, “I am so sorry this has happened to you and I really mean it, and I am not just saying that, I really do.” Wow, what a difference! I felt she was genuinely sincere and cared. She said that she would look at the truck’s historic delivery records to see when it usually delivered in my area and asked me to hold a minute. It was a true minute! She said it would most likely be delivered between 2:05 p.m. and 7:04 p.m. What a breath of fresh air!

These were tools that the first two representatives could have used to give me information about my package, but they did not. They could have been more honest with me and said, “It is 8:45 p.m., and based on the truck’s historic delivery data, the chances are slim that it will be delivered tonight since the latest that truck usually delivers in your area is 7:04 p.m.” I would not have liked that response, but at least she would have been straight with me and the company would have retained more credibility and goodwill.

Maybe the representatives did not want to be honest with me. Maybe their evaluations are based on how long they are on the telephone with a customer, so the longer they spoke with me, the worse it was for them. Maybe they were not as experienced as the last woman and did not know about the truck’s historic delivery data. Maybe the company did not hire the right people or train and monitor them to be certain they were providing their customers with exceptional experiences.

Whatever the reason, it is not my problem. This is the company’s problem. As the customer, I can easily tell when a representative is indifferent. And that indifference is the reason that I and 68% of customers stop doing business with any company. Indifference is the slow strangler of customers’ loyalty.

Teach your service people how to be compassionate. Tell them that they really need to care enough about their customers and place themselves in the customers’ shoes. Reward them when they go the extra mile. Tell them to first apologize and really mean it. If they cannot do all the above and be absolutely delightful every day, then they should find another job.

Why? Because your company cannot afford to hire uncaring and uncompassionate representatives. Each indifferent person slowly strangles your customers’ loyalty, your value proposition, your competitive advantage, the extra hard work you and others have put into the company to make it successful, and ultimately your business’ profits.

Be willing to annually invest in upgrading your “humanware”. It may seem expensive, but the alternative is to have untrained people ineptly and clumsily handling your most valuable assets – your customers! Having untrained people is not a viable or wise choice in today’s market, yet most companies unconsciously make that choice every day.

As a country, we are so used to crappy customer service that it has become the acceptable norm. The alternative is so much smarter and easier. It creates happy and productive employees and happy customers with super-glued relationships to your company. In turn, these customers will reward you by buying more, staying longer, referring more of their friends, and giving you priceless word-of-mouth advertising. In the end, you will have higher and higher profits!

It is a choice. And for those companies that really get it, it is the only viable choice.

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