This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

Barriers to Service Innovation and Barriers to Service Innovation and How to Overcome Them How to Overcome Them

John Goodman, Vice Chairman, TARP Bentley University June 18, 2009

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About TARPAbout TARP• Founded in 1971—38 years delivering dramatic impact

– White House sponsored studies of client service (instigated 800#s)– Malcolm Baldrige (influenced criteria)– Assisted 6 Baldrige winners and 43 Fortune 100 companies– Initiated concept of “word of mouth” (TARP/Coca-Cola 1978 Study) and “word of

mouse” (eCare and Click & Mortar studies 1999)

• Credited with developing approach for quantification of impact of service and quality on revenue for companies like Neiman Marcus, Mayo HS, IBM, American Express, Qualcomm, Honda, Chick-Fil-A, Toyota/Lexus, USAA, Xerox, and Motorola

• New book, Strategic Customer Service, published by American Management Association, May 2009.

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Formula for Satisfaction & Brand LoyaltyFormula for Satisfaction & Brand Loyalty

Customers will:

Buy again

Buy more

Tell others to buy

Buy your other products & services

+ =DOING

THE JOBRIGHT THE FIRST

TIME

MAXIMUM CUSTOMER

SATISFACTION & LOYALTY

EFFECTIVECUSTOMERCONTACT

MANAGEMENT

ImprovedProduct & Service

Quality

Respond toIndividual Customers

Identify Sourcesof Dissatisfaction

Conduct RootCause Analysis

Feedback onPrevention

This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

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Barriers to Service InnovationBarriers to Service Innovation

• Misunderstanding of the causes of dissatisfaction

• Assumption that no news is good news

• Assumption that everyone is price driven

• Demand for interactions that are consistent and delightful

• Benchmarking that causes complacency

• Single source Voice of the Customer

• Financial and Marketing cynicism

This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

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Causes of Customer DissatisfactionCauses of Customer Dissatisfaction

- Products and services don’t meet expectations

-Marketing miscommunication- System fails- Units fail to coordinate

- Fails to follow policy

The majority of dissatisfaction is not caused by employee errors or attitude.

Customer20%-30%

Company 40%-60%

Employee 20%

- Wrong expectations- Customer error

-Fails to follow policy-Attitude

- Products and services don’t meet expectations- Marketing miscommunication- Broken processes

This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

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No News Is Not Good News: Health CareNo News Is Not Good News: Health Care

Mollified2

30%

IQuestion/Problem

Experience

II ContactBehavior

IIIContact Handling

HealthCare Clients Complainers

5-25%

No problem

experience50%

Problemexperience

50%

Experience suggests three strategies:Prevention, Solicitation of Complaints, and Response

IVMarketImpact

% Definitely/Probably

Recommend/repurchasefrom same organization

Dissatisfied3

20%

Satisfied1

50%

90%

93%

30%

60%

50%

Non-Complainers

95-75%

6This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

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Problems Raise Sensitivity to PriceProblems Raise Sensitivity to PriceProblems vs. Dissatisfaction with PriceProblems vs. Dissatisfaction with Price

10%

22%

46%

74%

0%

10%

20%30%

40%50%60%

70%80%

90%

No problems 1 problem 2 to 5 problems 6 problems ormore

% D

issa

tisfie

d w

ith p

rice

or fe

es

Percent of customer dissatisfied with fees rises with number of problems.

This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

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Flexibility and Explanation Trump Consistency, Flexibility and Explanation Trump Consistency, Accessibility and MoneyAccessibility and Money• No Unpleasant Surprises• If Trouble Encountered

– Accessibility – Taking Ownership– Apology– Tailored action – flexible response – Clear Explanation – so that I believe I have been treated fairly – often more

important than money

• Handle on First Contact Results in 10% Higher Satisfaction and 50% Lower Cost

This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

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Impact of Delightful Experience on Top-Box Impact of Delightful Experience on Top-Box Loyalty by Type of ActionLoyalty by Type of Action

Delight experience Average lift to repurchase or recommend (Top Box)

Service beyond expectation 12%

Assistance during a crisis 14%

No unpleasant surprises 22%

Friendly interaction with staff 25%

Personal relationship over months 26%

Tell me of new product or service I can really use

30%

Consistently good service 32%

Proactively provide information on how to avoid problems or get more out of your product

32%

This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

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Traditional Views of Benchmarking and Voice of the Traditional Views of Benchmarking and Voice of the CustomerCustomer• Benchmarking of processes is good – benchmarking of

performance is problematic– Performance is local– If tied to incentives – can be disheartening

• Voice of the customer tends to be only surveys or fragmented– Surveys, contacts, internal operations and employees– Marketing and sales are usually not the focus of feedback

This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

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=

=

=

=

x xx

=

35

153

306

1500

1994Total customers at risk

10,000Customers

withproblems

Z%Dissatisfied

Many notrepurchasing

Some notrepurchasing

X%Satisfied

Almost allrepurchasing

50% Do notcomplain

50%Complain

Y%Mollified

Some notrepurchasing

Revenue Impact Of Service Can Be 20 X The Cost ImpactRevenue Impact Of Service Can Be 20 X The Cost Impact

This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

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Word of Mouth Impact Can be EstimatedWord of Mouth Impact Can be Estimated

20%delighted

80%satisfied

xTell a few

Tell one

x

=

=

600

800

1,400

1,000clients

1400 Referrals X 1 Actions30 Referrals

= 47 New clients

Example Calculation of Potential Impact

This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

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Ten Myths About ServiceTen Myths About Service

1. Always exceed customer expectations2. Answering the phone really fast is the key to success3. People always prefer talking to people4. The customer is always right5. Complaints are down, things are getting better6. Employees are the cause of most dissatisfaction7. Price and cost cutting is the key to success8. We’re at 90% satisfaction – let’s declare victory!9. Measure Net Promoter and we’re done10. We have a 100% satisfaction guarantee – everyone is happy.

This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

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Contact Information for Papers MentionedContact Information for Papers Mentioned

John Goodman

jgoodman@tarp.com

(703) 284-9253