Yikes. With numbers like that, and with the economy facing a strong headwind, I wouldn’t be surprised if prescriptions for Prozac have increased in New York and Charlotte.

Not surprisingly, the conclusion of this study was that financial institutions need to communicate more often and effectively with their customers. A shocking conclusion given that Thunderhead provides those services.

But before discounting this study as self-serving, there were some interesting and unexpected nuggets within.

The study indicated that the vast majority of consumers said they wanted the option of receiving communications via email, and two out of five said they preferred to get info like this from personalized web portals.

Here’s the biggie: half of the consumers surveyed said that it was “very important” to receive communications in real time. Even if the other half all said this is “not at all important,” if it was feasible to make half of your customer base happy and this was cost effective, wouldn’t you jump at the chance?

Somewhat less believable, but interesting just the same, some number of consumers actually want offers or communications directed to them on social networking sites like FaceBook or MySpace. Imagine chatting with your peeps on MySpace and MegaBank pops in and offers you a quarter point bump on your savings interest rate if you and ten of your friends sign up today.

This is a new age indeed.

Lest we lose focus on what’s important, however, the big finding here is the large number of consumers who don’t feel any loyalty to their financial institutions. With interest rates still high, higher approval standards for loans, and the proliferation of more creative “non-interest income opportunities” (i.e., fees), most financial services companies wear a black hat these days.

Communication with customers is often a critical element for creating and maintaining customer relationships. Companies that study their own customers, and evaluate what’s best to measure for their businesses will be able to confirm for themselves whether any of these recommendations or findings are relevant for their customer bases.

In the meanwhile, I’m going to print out this blog entry and use it to wrap all of the new Prozac and Zoloft prescriptions bottles in major financial centers throughout North America.

This work indicates that it’s the size of the online basket that makes all the difference.  New customers buy 10% less than existing customers, and are less engaged with the retailer and the buying process in general.

Not surprisingly, marketing budgets for online retailers reflect this disparity, with more than half being spent on acquisition, and only about 20% being spent on retention or loyalty.

Yet another reason why knowing what’s best to measure is more important than traditional marketing methods or metrics.

Consider this scenario:  You’ve just purchased the cool new MyVu video glasses and you decide that it is better than sliced bread.  Likely, before making this purchase, you used an Internet search engine like Google to see what others were saying about this new device. 

Your results show reviews on engadget and Gizmodo as well as some for sale listings on merchant sites like Amazon.com.  Sure enough, clicking through to any of these not only provides you with an editorial review but also user comments and ratings.  Based upon the information you’ve gleaned, you plop down your credit card and buy the MyVu glasses.

A week or so later, after you’ve come up for air from watching back-to-back movies on your new device, you decide to share the love.  Back to the search engine, and you put in your two-cents worth at all of the sites that you found valuable for your choice information.

This example illustrates the burgeoning power that Social Media can play in the purchase decision.  But if you were an online mogul, and your business’ success rests on how well you do with sophisticated customers who rely on the Internet for their info, how can you ignore the power of this medium?

Through the use of Internet scraping and scanning tools, text analysis and some nifty algorithms, it’s entirely possible to mine Social Media sources for suggestions of your brand’s health.  This could be incorporated into your Brand Health Index or used in convergent analysis to convince Finance, senior management or venture capitalists that you’ve got a hot thing.

Social Media seems like more than a fad, and judging from its ballooning usage, it is becoming adopted by more than just gossipy teenagers.

How do you see Social Media being used in your Voice of the Customer efforts?  Do you think that information gleaned from Social Media might be useful as part of your company’s Core Customer Metric?

While not shocking or surprising, it is true that much less to do is made about building loyalty among business to business customers than among business to consumer customers.

Thinking through some of the core measures that are prevalent today, most seem to be not especially well-suited for B2B applications.  For instance, the much discussed Net Promoter Score relies upon the the predisposition of loyal customers to want to recommend the companies they like.  While it makes sense for cars, audio equipment, movies etc., I’m not sure that physicists go to cocktail parties and talk about what brand of test equipment they’re using.  Or maybe they do, and that’s why I’ve never seen a physicist at a cocktail party.

The article raises some interesting nuances worth thinking about.  For instance, B2B surveys that focus on the end-user in the company are more predictive of loyalty than are those that focus on decision-makers.  While this may seem simplistic, most B2C surveys focus on the household decision maker’s attitudes (e.g., Dad buys the soap) rather than the users (e.g., everyone in the house uses the soap).

Apparently there is no magic bullet available for B2B companies, just as there isn’t one for B2C.  The most important distinguishing characteristic between successful and less successful companies will be the PROCESS they went through to arrive at their core customer metric — not the metric itself.

What B2B loyalty metrics do you think are most effective for a particular company or industry and why?

The Wise Marketer reports that Harley-Davidson and Best Western are co-promoting a loyalty program aimed at H-D motorcyclists. Benefits include, according to the article, “special wipe-down towels at check-in, access to a bike wash, tar remover, lip balm and sun tan lotion” among other things.

Why is this so cool (other than the convergence of my favorite pastime and my favorite business topic)? Because Best Western has delved deep into segmentation or other market assessment work and came up with motorcycle touring as an opportunity. The loyalty of Harley-Davidson customers is renowned throughout the marketing business. Many companies would hand off first born progeny to have access to that loyalty.

However, among the many co-promotions cooked up by companies and The Motor Company, most simply use H-D logos, or make weak attempts at biker chic to win over the notoriously skeptical H-D customer. I will tell you from personal experience, people on motorcycles ARE often discriminated against at public conveniences. Seems that the biker mystique has its positive and negative edges.

So, when Best Western announces that they are now “biker friendly” and promise tangible benefits to motorcycle tourists and travelers, they will quickly find out whether their customer experience is up to the road test of real bikers.

If they meet this challenge and provide the kind of customer experience they promise, word of mouth will surely do the hard work of validating this brand promise in the motorcyclist community. Other hospitality chains will follow suit, perhaps going after the same Harley-Davidson customer, perhaps going after different parts of this travel segment. Regardless, Harley-Davidson customers win.

Conversely, if Best Western drops the ball and are unable to meet expectations or deliver poorly, they will likely do themselves long-term damage, as the word of mouth spreads that Best Western is a “poser” (the worst insult a motorcyclist can level at someone else).

It will be interesting to see how Best Western keeps track of their success in this new endeavor. Clearly loyalty will be a core customer metric to watch and measuring positive impressions or intent among prospective customers will also help gauge how well they are doing.

Not surprisingly, the concept relies upon both current and expected information for its calculation.  First, one assesses the current value of a customer (revenues less costs) for a single financial period. Next, using various techniques for projecting this information, you calculate the expected annual value of this customer for each subsequent year, as well as an expected tenure. 

Given the “start-up” costs for many industries (acquisition, product cost, servicing and fulfillment costs, etc.), it isn’t a shock that after the initial few periods of amortizing these start-up costs, even modest customers can become very profitable over time.

The Wise Marketers point out that this calculation differs greatly by three important factors: 1) the industry Sector; 2) the product; and 3) the period of analysis.  Even if your calculation of the Customer Lifetime Value isn’t 100% accurate, it does give you a way to compare various customers in your customer base.  If you are in an industry that can provide differentiated service, this allows you to guide your front-line employees to provide better service to customers who have higher CLV’s.

The weakness, of course, is that CLV relies upon a lot of assumptions about tenure, future product purchasing and future costs.  A 30 year old woman with a low financial services wallet might have higher costs and lower revenues for you today, but over her lifetime, IF you keep her, and IF you get your fair share of her wallet over time and IF she doesn’t cost you and arm and a leg to service, should be a good investment.  But those are some pretty big ifs.  And, once you’ve decided that your high CLV customer is worth your time, what aspects of her relationship do you need to actively manage in order to keep her a customer?  The crux of a Core Customer Metric is that it is one that isn’t just predictive of the financial outcomes, it inherently includes some relative measure of stickiness or loyalty.

The best Core Customer Metric not only points to which customers are sticky or loyal, but which aspects of the Customer Experience are critical for increasing or decreasing the metric.

(Graphic used with kind permission from Adelino de Almeida’s blog: Profitable Marketing http://adelino.typepad.com)

Satmetrix recently released a study that puts an economic value on Promoters and Detractors in a business.  The article, found here, doesn’t give much detail about methodology, but assuming it’s solid, the findings rely upon Referral Economics (how much a referral — or lack of one — is worth) and Buyer Economics, the more traditional customer value info you might expect.

The article I saw gives an example from the computing hardware industry.  In it, each Promoter is worth an average of $2,634 — $203 more than the typical customer.  Detractors, on the other hand, are worth $1,457 on average — about $158 less than the typical customer.

The Referral Economics piece is interesting.  Each Promoter is responsible for contributing 0.5 of a new customer (acquired through word of mouth, and important caveat, I presume), while Detractors COST the company 0.84 of a customer (with the same caveats, but the article doesn’t elaborate.

I like the idea of segmenting and valuing the customers you have, and the notion of associating some amount of new business to referrals (and reciprocally, subtracting some amount of business for bad word of mouth) is somewhat intuitive.

The hard part, as always, is knowing which customers are going to promote or detract your company BEFORE they do so, so that you can intervene with the potential detractors and ensure continuing good experience for promoters.

In companies that rely heavily upon word of mouth for their new business, this will be exciting news.  For those that don’t, a solid investigation into which core customer metric is their leading indicator of business results will remain the task at hand.

Number 2 on this list was “The End of Customer Service.” They pointed to self service lines in airports, grocery stores, hotel lobbies and movie theatres.

But is this really the “end of customer service?” I think most people would point out that in most of these examples, these are simply places where we conduct a transaction, and where human intervention is often slower than machine help in many instances. More importantly, these are places where people wait in line to transact. Waiting is not something we are good at.

So, while Time Magazine might be calling for the end of Customer Service, I see that we are simply automating routine tasks so that people don’t have to wait. I sure don’t relish standing in box office lines, check in lines at the airport or behind a person with a cart full of groceries when I just have my two items to pay for.

More importantly, and more germane to this blog, how will we measure the Customer Experience when parts of the experience are automated?

We already face this in many industries, particularly financial services. Banks have offered ATM’s and online banking for a while now. The same with airlines. So many passengers check in before they get to the airport that many do not even go to the ticket lobby unless they need to reprint a boarding pass or check a piece of luggage.

It is sensible that automation be measured when we are measuring the Overall Customer Experience, but what are we measuring when we do so? As many banks do, they look at problem handling as a key indicator of whether customers are getting what they needed to do done. Customers are probably OK with your automated solution so long as they can complete their task. When they aren’t, it is pretty important that you provide a way to fix the problem.

As more things become automated, it will be interesting to see what Core Customer Metrics are being used to understand the changing landscape of the Customer Experience. If you have a good example of how this is done at your company, please share.

We continue to receive frantic pleas from clients to explain why or why not the Net Promoter Score might be the metric for them. After talking this poor researcher off the ledge and listening to their business issues, inevitably, this is what is occurring with frequency in American corporations.

The CEO/ CIO/ CMO/ CXO wakes up one lazy Sunday afternoon and reads how GE or Enterprise Rent-A-Car or American Express is using the NPS. This well-meaning executive takes the torn-edged article from the Wall Street Journal, or Marketing News or some other paragon of business wisdom and hands it to someone in the organization, with the instruction to “make this happen.”

On down the slope this goes, until it lands on the desk of the hapless researcher, with the edict, “management wants this.”

The huge sum of money the company is spending against capturing the Voice of the Customer is clearly at stake. The company is already asking the Recommend question, so what might be the harm?

Probably none, since people who work with Customer Experience data know, many of the outcome questions in this work are so multi-correlated that you’re likely capturing the main effect with any one of the numerous outcome questions you’re asking.

But business wisdom has never come from a single book, article or conference presentation. Business wisdom comes from crafting a decent theory about what is true about your business, and testing to see if you are right.

I certainly can’t imagine Finance decisions being made using the “wisdom of crowds.” If shareholders are important enough to do some diligence with the financials, certainly your customers are worth the same effort.

This is certainly not a slam against the idea of Promoters. It is an admonition that your business is too important to shortcut the process of investigating which Core Customer Metric is the best one — one that is both predictive of business results and easily communicated to the rank and file. What do you think?

I asked how many felt their organization had successfully selected and implemented a core measure of customer loyalty, and more than half of the 200 in attendance raised their hands. However, when I asked how many clearly had been able to show how their organization’s loyalty metric is linked to financial or other key business outcomes, only three attendees raised their hands.

In earlier posts at this site, we have tried to argue that an effective Core Customer Metric should provide a valid leading indicator of changes in revenue, market share, customer retention, and other business performance measures. This requires demonstrating the link between the CCM and such business measures. So it seems a little ironic that, while a majority of managers attending the Linkage Strategies 2008 Conference believe they have the “right” Core Customer Metric in place, less than 2% have validated it through linkage to business results.

Yet, this is very similar to what we found in results of the 2007 Maritz Voice of the Customer Challenges survey of managers in Blue Chip companies. The survey found that:

• Seventy (70) percent of the managers we surveyed reported having developed an effective method of “selecting the right customer survey metric for their organization and business.”
• However, only thirty (30) percent of these same managers reported having developed an effective method to demonstrate “the link between customer survey measures and financial and/or other key business results.”

Managers and executives may all agree that they’ve identified the best CCM for their organization because it “makes sense” or because other organizations have found it to be effective. An organization might even be tempted to select a CCM that is “in vogue” in the latest management circles or business publications.

However, at some point, no matter what their stated beliefs or commitments, executives and shareholders will demand evidence of the “bottom-line” impact of customer loyalty. They will want proof that investments in and efforts to measure customer loyalty, for the purpose of making relevant process and quality improvements, actually contribute to growth in revenues, profitability, and other financial and market outcomes. This means that the link between an organization’s Core Customer Metric and key business results must be established.

Has your organization successfully linked its core customer metric to business results? How did you do it?

If not, what barriers are preventing this?