Archives for October 2010

The social conscience of social business

I’m sure this subject has been written on thousands of times.  And while my mind has been turning it over for quite some time as well, conversations with several folks over the past week brought this to a boil.

We talk about social business in terms of customer engagement, internal and external collaboration, listening more, shouting less; all those good things.  Then there are folks that are using social media to do really amazing things to improve humanity.  And then finally, there are organizations and companies that are mashing the two together to make doing good, make money. 

Is this the new business model? Pay it forward the new payback?

The Giving Pledge campaign is an awesome example of the incredible charity possible when wealthy folks decide to give all that wealth toward the betterment of us all.

I’m seeing more and more social business folks with the same mindset before they even earn their first dollar.

Think of the possibilities.

Retention Tension

With every new post, every new article, there seems to be a different spin on the topic of customer retention vs. acquisition and which is the more cost effective strategy to pursue.

I’ve written about this before.  But I think it’s worth revisiting in light of this post I saw from Spoken Communications this week.  I really respect @spokencomm and the wonderful content they bring to the conversation.  I did take pause however, when this most recent post, referring to data from Flowtown, started with:

“We’ve all heard the saying that it costs more to acquire a new customer than to maintain an existing customer.  But Flowtown actually did the math”

So, I’m here asking for help.  I don’t see the math in the information presented.  I do see another claim suggesting it’s 6 to 7 times more costly to acquire a new customer than retain an existing one.  But, I’ve yet to see a rigorous statistical analysis to prove the claim.  I’m looking for the formula.  What are the variables?  Flowtown suggests some “costs associated with finding new customers”.  But, I’m not seeing the hard empirical data.  Flowtown also suggests that profits from satisfied customers come from: Reduced price sensitivity; Reduced switching to competitors; Increased referrals and Increased repeat purchases.  In what industries? What type of customers?  These seem like broad generalizations.  And, by the way, can’t new customers be satisfied also?  What is the time period that needs to elapse before a customer is considered ‘existing’?  Flowtown is mixing comparative data.

As Ron Shevlin wrote in a post back in June where, at least in banking, he effectively debunked these types of claims, there is no standard definition of what costs to include in trying to calculate the cost of customer retention or acquisition.  As Flowtown demonstrated, it’s very subjective.  And, Ron’s example calls out the fact that in some cases, especially in the Long Tail, customer acquisition costs can approach zero.  While on the other hand, the cost to service those customers to the level required to deliver the price elasticity, referral and loyalty results that Flowtown suggests would be significant.

These types of articles and claims resonate with many folks because they fit with our intuition about how the customer relationship works.  On a superficial, intuitive level, I get that.  But intuition doesn’t resound with the CFO.  If your goal is to build a plan and the request investment for a customer retention program, you’ll need hard numbers.  You’ll need to first define what “cost” means; define whether your company is in growth mode (meaning revenue will be more of a focus) or you’re more of a mature company focused on profitability.

So, I’m not here to suggest heresy against the value of customer relationships and loyalty, think of it more as my Friday public service announcement.  Without a clear definition of terms and rigorous analytic process, this discussion becomes a tennis volley of splashy headlines.  And as any of us that have attempted it and gotten skewered, trying to sell a tag line into the executive suite just creates too much internal tension.  And who needs more tension?

Finally joined the mile-high club

Ok, so that title was a cheap tactic to get you here.  It’s true in a sense thought.  Because I don’t fly for business nearly as much as I used to (my family kind of digs that), I haven’t had much chance to do the in-flight wifi thing.  Well, I’m doing it now.  Blogging, that is.  From about six and a half miles up actually.

I’m on my way to San Francisco for the annual conference of the Society of Consumer Affairs Professionals (SOCAP).  Historically, the content of this conference, and the attendees, has been very focused on in-the-trenches issues that consumer affairs – a unique band of customer service people – professionals deal with day to day.  Such topics have included crisis management, adverse events, handling product recalls and performance management metrics.  That model is about to erupt; giving way to what I think will launch this organization, and its members, into a whole new strata.

Starting back in the Spring of this year, the first of these semi-annual events covered various topics around social business pretty hard.  This was a pivotal conference that really started the transformational thinking of SOCAPs members about what it means to be a social business and deliver social customer services.

My thought is that, after this next three days in San Francisco, that train is going to be heading down the track, full steam ahead, with no breaks.  And that’s a good thing!

One review of the agenda and keynotes for the conference and it’s clear to even the passer-by that SOCAP is getting recognition as a forum for driving change in the way companies think about and interact with the social customer.

As one of the keynote speakers, Charlene Li first described in her book Groundswell, the attendees of this event will own the groundswell in their own organizations come Thursday.  Attendees will be the drivers of change.  I’m bullish on the prospects for consumer affairs to radically transform itself.

Some attending the conference have already made great strides towards in their transformation.  Anticipating a focus on collaboration and a demonstration of the spirit of social business, I can’t wait to land and get into the SOCAP and business of social customer service.

If you’re interested in following the event, I’ll be live tweeting during the conference at hashtag #SOCAPac10.  I’ll probably be back here once or twice as well for some reflection as things heat up.  

Social Customer Service and The Nile Perch

If you’ve been a frequent reader of Seth Godin’s blog for some time as I have, you get to a point when you finally appreciate the subtlety of Seth.  After reading enough of his stuff, you get the sense that he often has a personal experience or specific target about which he’s writing.  But his genius lies in the fact that he rarely takes the easy pot shot or calls out that target by name.  Instead, he focuses on the lesson, remaining broad and vague enough to allow you, the reader, to connect the dots to your own experiences, thus making an infinitely more valuable tool for driving change.

I had one of those moments this weekend, when Seth’s Beware the Nile Perch crossed my reading list directly after this story about twitter revolutionizing airline customer service, posted by James Sorensen in the #custserv daily

Twitter is revolutionizing airline customer service?  Isn’t this a bit of fools gold?  So, the airline’s ability to revolutionize its service delivery and radically alter the customer experience is based on a new tool?  A new channel?  Because some tech-savvy customer tweets the fact that they are angry, and now the airlines know its cool and hip to monitor twitter and respond, we now conclude that the entire industry is going to revolutionize its service delivery model?

In case you don’t click through to it, the gist of Seth’s post is that, like the Nile perch that is easy to catch and a potentially abundant food source, making it tempting to introduce it into waters all over the world, introduction of foreign species where they don’t belong can be devastating to the entire ecosystem.  Twitter and other social tools are the “bright shiny objects” that have the potential to mask the real issues with the airline service experience, garnering positive press like in the article above and allowing the industry to use words like “revolution”.  All this, while service continues to erode, the customer has never felt more abandoned and survey ratings show the airlines among the absolute worst performers in terms of customer service.

We’ve seen this scenario play out once before.  And while the final chapter isn’t written, the cable industry has experienced its own Nile Perch.  A small band of rebels led by a super human being Frank Eliason figured out how to exploit Twitter to address customer service issues for a small subset of cable customers, while gaining a tremendous amount of positive exposure for their employer.  But, what about the masses?  Those that don’t tweet?  Customer satisfaction ratings across the cable industry still scrape the bottom.

So, while its tempting to load up the covered wagon and join the rush to social customer service, it might turn out that this fool’s gold isn’t even real, but merely a mirage.

Things Aren’t Always As They Appear

When presented with a new problem, an unknown entity, it’s human nature to compartmentalize that new quantity under a heading that is well known and familiar.  This process helps us make sense of things.  It helps us apply our experience and existing knowledge to the problem in an effort to simplify and solve.

But, bucketing new concepts like that can often limit our thinking, stifle the creative process and create blind spots and business risk.

I’ve been observing this problem solving method growing in application as relates to how social media and social CRM will impact customer service and the contact center. 

So, here are five key considerations to weigh before you conclude that social media is “just another customer service channel”

1. Style vs. Substance – I was at a conference of customer service folks recently where the subject of communication style came up.  Specifically, many faced the challenge of “undoing” the training that has been engraned in agents to communicate properly and formally, in order to appear more “real”, less corporate and to speak in the manner that “social” customers expect.  This is not an easy task.  And many at this conference are struggling especially with agents having to flip back and forth between styles, depending if they are tweeting, talking on the phone or emailing.  This is not an insignificant change management quandary.   
Impact: training, culture, quality, recruiting

Recommendation: why not ditch the stuffy corporate speak regardless of the channel?  You’re really not connecting with your customers in any meaningful way anyway when you start your email response with “Dear Sir”.  You’re not establishing rapport by reading some contrived, impersonal phone script.

2. Organizational Structure – This is a really broad topic.  But how customer services reports up through the organization can impact its role in customer engagement via web 2.0 and beyond.  In some organizations, consumer affairs or customer service report into Quality or Manufacturing.  In those scenarios, the focus is very different than customer service integrated with marketing, brand management or PR.  There have been a lot of models put forth in terms of how to organize the social organization, like this early rendition from Jeremiah Owyang: the hub and spoke model.  Depending on where customer service resides, it will engage the social customer in very different ways, for very different reasons.
Impact: corporate strategy, organizational design, performance management, culture 

3. Service Levels and Performance Management – At the same conference where the crowd struggled with communication styles, the discussion also turned to the subject of KPIs.  Because this was a very senior group of veteran contact center folks, they were working within the framework of traditional production-based and cost-centric metrics.  So, I heard KPIs like: posts viewed per hour and responses per hour and average speed to respond.  In social media circles, if you talk about bots and auto DMs and the like, you’ll get a pretty stern response.  Many feel these things cut against the grain of the spirit of social networking.  So, you might want to think twice before trying to automate the process of social customer service engagement, whether via a bot or a human on a timer by applying traditional performance management systems.
Impact: compensation, financial management, training, recruiting, culture, quality management

Recommendation: As in #1 above, perhaps social media and the social customer are giving us a general wake up call in customer service that the tried and true approaches to customer engagement need an overhaul.  Business typically needs an external catalyst for initiating change.  Social media and the social customer are that catalyst.  We lament that customer service has historically been relegated as a cost of doing business.  Yet, we as practitioners in many ways perpetuate that by applying dated business models and metrics.  Its time for different thinking

4. Data & Channel Integration – The techie in me had to raise this issue.  In our traditional contact center customer service world, a customer calls and we collect their entire dossier in the process of the interaction.  We know their name, phone number, email, address….When we engage on twitter, we know their twitter handle and, depending on the tools you’re using, their email address.  Which in my case is not the same email address I use in other parts of my life.  So, who is this @bsdalton I’m talking to?  Check the CRM.  Wait!  I don’t have a field called “twitter ID”.  Ok, so I’m over simplifying this issue.  Way over simplifying.  But, hopefully, you get the idea.  As we add more and more channels of communication, we run the risk of fragmenting further the quality of our customer data.
Impact: marketing, IT, voice of the customer, reporting, customer experience, customer segmentation, routing      

5. Scalability – While very cool and a great start, the two CSRs you’ve taken off the phone and sat in front of Hootsuite and Facebook to engage with your consumers is not scalable.  If we all believe that the social customer will continue to drive engagement in the manner in which they choose and the volume will continue to grow, it will require significant change in the processes by which that volume of interactions is handled.  Best Buy has taken a shot at this problem with their Twelpforce, leveraging the concepts of unified communications to handle the demand for service via twitter.  Technology vendors such as Avaya and Cisco are coming to market with solutions that are addressing this question.  As we start to blend social web interactions with interactions via phone, email, chat and others, new routing strategies, new methods will be needed to scale operations in order to prevent the degradation and, more so, enhance the customer experience.    
Impact: technology, data, training, performance metrics, service levels

So, while there are others, hopefully this is a thought starter that drives your thinking from a different perspective.  Social CRM is not a channel.  Its not a technology.  Its not always what it appears.

A Pterodactyl and an iPad walked into a bar…

So, the US Postal Service submitted a request to raise first class rates again this week and got shot down.  And, I thought to myself “what’s the point?”.  The USPS will lose about seven billion dollars this year, up from around four billion last year; even after eliminating over 35,000 jobs.

Sorry folks, but this dinosaur is ready for the tar pits.

Is it fair that the USPS is forced to deliver junk mail to the most rural, remote reaches of this country that goes directly from the mailbox to the recycling bin?  No.  Is it reasonable that US Postal workers receive the kind of retirement benefits that leave most of us green with envy?  Depends on your perspective.

But, what makes no sense to me is why there has been absolutely no receptivity within the Federal government to allowing the postal service to evolve.  What would have happened if the Postal Service was privatized as some have argued for years?  I’m guessing the business model would look nothing like it does today.  And I’m guessing the customer experience would be just a wee bit more engaging.

Post Privatization Business Plan

Day one: outsource delivery, sorting, collecting and processing of mail.
Day two: focus on developing and bringing to market value-added services that help direct marketers (the biggest customer of the USPS) find more profitable methods for reaching their target consumers.

Need a role model? I offer you Deluxe Corporation.

Who is Deluxe? 

Those are the guys that used to print your checks from your bank.  “Today’s Deluxe is the indispensable partner for unleashing the growth potential of small businesses and financial institutions” 

Seems like Deluxe was looking out the windshield instead of the rearview mirror and saw the way that whole check printing business was going.  Good for them!

Do they still print checks?  Yes.  Specialized checks for people that want the souvenir.  But, the drivers of their business include such things as branding services, promotional products, fraud protection services, cash management. Knowledge management!  ON LINE SOCIAL COMMUNITY HOSTING!!! Get out!

This ain’t your grandfather’s Deluxe Corp. 

This is a really cool story of a company that came to a fork in the road on its business sojourn and had two choices.  Do things the way they’ve always been done because thats what they know.  That’s what’s worked.  That’s what’s safe.  Or do something completely different.  Which is more risky?

Business doesn’t have to change, survival is not a requirement.  Deluxe not only decided to survive.  It decided to thrive.

Remember Apple 15 years ago?  Is your business the pterodactyl or the iPad?