Forrester Customer Experience Index & Stock Performance

Last June, I recommended that organizations consider incorporating the Forrester CxPi (Customer Experience Index) into their CEM programs. The CxPi makes an outstanding experience metric, with a strong positive correlation to loyalty. Depending on industry, Forrester reports a very high correlation to willingness to repurchase, a high correlation to likelihood to recommend, and a medium correlation to reluctance to switch. Now Jon Picoult, founder of Watermark Consulting, a customer experience consultancy, has shown a potential correlation to the performance of company stocks as well.

Jon conducted an analysis contrasting a portfolio of the top 10 loyalty leaders, as identified by their 2007 Forrester CxPi scores, against the bottom 10 performers ("Laggards") and against the S&P 500 index. Jon found that the top 10 leaders generated "cumulative total returns that were 41% better than the S&P 500 Index and 145% better than the customer experience Laggard portfolio."

Check out "Yes, Virginia, There Is A Return On Customer Experience Investments" for full details of the analysis, including important caveats and cautions.

No, this analysis is not as convincing as that which has been done for the ACSI Score, which predicts stock market performance for indices as well as individual stocks and even correlates to CEO bonuses. Nor has the CxPi yet been validated by academic research, as the ACSI model has.

But this analysis does point to the promising potential of the CxPi. If you haven't considered testing it with your customers to see what insights it provides, I encourage you to incorporate it into one of your customer satisfaction surveys on a trial basis. Your investors may thank you.

Panel Management & Online Communities

For many organizations, panel management is the first step on a path to building online research communities. Once panelists have become accustomed to being surveyed, a natural next step for them is to log into an online portal where they can interact with one another. While not every panelist wants to take the time to participate in an online community, a vocal minority does; their participation will give your organization a rich source of qualitative information.

The great advantage of an online community over a panel is that community members will raise and discuss issues that your organization would have never thought to have researched. This is a wonderful way to develop a broader understanding of your customers. That said, just because an issue becomes
a popular topic in your new online community does not mean that it is an issue across your customer base.

The word quantitative in quantitative research means that you can quantify the wider population based on the research results. The reasons most communities are not representative is because of the self-selection bias for joining the community (similar to the self-selection bias that makes online polls unrepresentative). Even in closed communities, those who agree to participate in communities may represent positive or negative extremes, since agreeing to participate in a community is even more time consuming than agreeing to take a survey. Further, most community managers do not ensure that the community demographics match the overall audience demographics.

For all these reasons, to achieve representativeness, and determine how widespread views of the community are in your wider customer base, you must reach beyond the active community members.

Properly performed panel management can provide a critical source of quantitative research for B2B market researchers and ecommerce sites. In fact, panel management remains of critical importance even after--especially after--an organization has formed online communities.

The best mix of qualitative and quantitative research is to use the online community for qualitative research and to then use the panel for quantitative research.

Want to learn how to set up your own customer panel? Download a complimentary copy of my white paper, Customers as Confidants: Customer Panel Management Made Easy.

Employee Morale Snapshot Surveys

Some organizations, including the University of Minnesota, conduct employee satisfaction surveys every other year. Yes, every 730 days management makes certain to ask if employees are satisfied.

Of course, most organizations, such as Butler America, are twice as interested. They measure employee satisfaction annually.

Don't get me wrong. Annual or biennial in-depth employee-satisfaction research is vital to organizations that wish to become and remain preferred employers. And asking every employee to complete 60 to 100 questions, a la the Employee Loyalty Benchmark from Walker Information, is not something you want to do too frequently. But you should certainly supplement that detailed research with satisfaction snapshots.

To do this, conduct a monthly or quarterly pulse survey. If your organization has 2000 or more employees, use a random sample of employees rather than attempting a census (yes, it's a good idea, even if Scott Adams pokes fun of it in Dilbert). Ask 10 or 15 high-priority questions that will help you track morale and other HR KPIs (key performance indicators). In fact, after you decide on the key initiatives that will address the issues identified by the most recent major survey, modify the snapshot survey to include questions about those issues. Also make certain to collect open-ended responses, in order to discover new employee concerns.

At the least, this snapshot survey will give you a scorecard to see how you are doing on your key HR initiatives and to keep tabs on overall employee morale. Most likely, it will also alert you to problems sooner, helping you to keep your organization on track to being a preferred employer.

Employee engagement should never be a once-a-year concern.

Survey Translation from 30,000 Feet

Nancy Porte, VP of customer experience for Vovici, presented this morning to the Technology Services Europe conference in Barcelona on "Joining Voices:  Understanding and Leveraging Multi-National Customer Feedback". One of her key points was that, too often, novice researchers think of translation as a front-end task in the survey design process, when in fact the needs of translation must be considered at each stage of the survey process: Study Design, Survey Design, Fielding and Analysis.

• Study Design - After you decide which languages you need to conduct research in, hire the appropriate translators and develop a conservative schedule that takes into account the many pitfalls that await the international researcher.
• Too often, translation is "insourced" to employees who do not have the requisite experience. The best translators have an excellent understanding of the originating language, the target culture, the industry and survey research itself, since survey translations are more demanding than traditional translations. Find and contract with native speaking professional translators (preferably certified translators) where possible.
• The biggest mistake in designing studies with translation is creating unrealistic schedules. Budget for lots of extra time: time to translate the final questionnaire into each target language, extended time in the field to account for local holidays, and time for translating and post-coding open-ended comments.
• Survey Design - A common mistake is to finalize the questionnaire in the source language and then send it off to be translated into the target languages. Instead, you need to design a master questionnaire that will be localized, not just translated. Structure it for translation:
• Avoid jargon, slang and technical terms. Rewrite for readability.
• Use as few open-ended questions as possible.
• Use closed-ended choice lists tailored for local markets and brands.
• Use country-specific skip patterns since entire sections of the questionnaire may differ, depending on the structure of the industry being studied in that country.
• Make certain to prepare back-translations from the questionnaires to ensure quality and accuracy. You can also turn to panels of respondents to assist with translation, as InSites Consulting is pioneering.
• Fielding - When inviting people to complete surveys by email, send them an email in their language. If your database list does not specify their language, or you are concerned about the accuracy of your data for that field, send them a generic language picker with a unique link for each translation. While you can set online surveys to automatically route to the appropriate translation based on the primary language set in the browser, respondents' browser settings do not always match their native language.
• Analysis - While fielding a multilingual survey, one of the best feelings in the world is analyzing in real-time the results to closed-end questions. Thanks to your earlier work translating the questionnaire, you can immediately chart the answers as they pour in despite being completed in dozens of different languages (assuming you have the right survey software). Open-ended questions, of course, take more time to analyze. During fielding, you can use machine translation to get the gist of what respondents are saying, but for accurate final analysis rely on human translators. By all means compare and contrast behavioral results across markets and languages, but take care with attitudinal data, which can often be subjectively different-better to use that information for exploring attitudes of different segments within the country or for establishing a baseline for future trending.

Nancy gave the case study of the multilingual surveys of one airline, a Vovici customer with over 3000 flights a year to over 200 international destinations. The airline fields a satisfaction survey in ten different translations: Chinese (two dialects), Dutch, English, French, German, Korean, Japanese, Portuguese and Spanish. Local translation companies in each market were used for the questionnaire, which measures satisfaction with flights and with the frequent flyer program. Over 100 email triggers are used depending on what passengers are dissatisfied with. The survey was fielded in four weeks and initially ran well in every country except Japan, which suffered from suboptimal response rates and high abandonment rates. In the past year, over 2.2 million responses have been collected and analyzed, informing decisions about seat selection options and benefits of the frequent-flyer program. As a result, the program is now being rolled out for general passenger satisfaction research.

When conducting your first multilingual study, make certain to consider the impact of translation on the entire process, not just questionnaire design. Of all the research projects you will do, multilingual studies will require the greatest coordination of resources and general project management skills. With proper planning, though, your multilingual survey will have a smooth flight!

The Nancy/Bruce Project

Have you seen the Oscar-nominated movie Julie & Julia?  Julie Powell spent a year perfecting the recipes of Julia Child and reporting on her journey.  She blogged each step of the way, providing insight into her successes and failures.  This year, I'm looking for the perfect recipe to get our customer experience program to the next level.  First, let me tell you a little bit about where we are.

Last year, I was asked to develop a formal Voice of the Customer program at Vovici.  With many VoC experts in the company, we already had a strong focus on gathering customer feedback. Yet, when Greg Stock joined the company as CEO, he envisioned a world-class program and asked me to take the lead in making that vision a reality.

As a side note, I'd like to tell you how excited I was to have the opportunity to develop a VoC program.  I've had a lot of terrific jobs in my career, building and managing customer service departments.   However, as I talked with customers, I realized it wasn't just customer service satisfaction that determined their loyalty to the company.  It was their combined experience with the product, sales, onboarding, customer service, training, etc.  I always thought the perfect job would be to have the responsibility for the entire customer experience for a company.  And now I had that perfect job!

Six months later, I still think I have the perfect job, but I have a new respect for the work involved in the development of a formal VoC program.  We've developed surveys and are gathering data at 7 points in the customer lifecycle.  This data is being reviewed by the cross-departmental Customer Insight Team and recommendations for customer initiatives are being made on a quarterly basis.  Data is being shared both internally and with customers.  But we have a long way to go. 

So, back to the perfect recipe.  Bruce Temkin's blog, Customer Experience Matters, is part of my daily reading.  I was inspired by his recent recommendations for Customer Experience programs that want to "get real" and succeed in 2010.  This is the recipe that I intend to perfect in 2010. Here are his 7 keys to Customer Experience in 2010:

1. Drop the executive commitment facade. It's very easy for executives to say "customer experience is important." But it's much more difficult for them to dedicate the time and energy required to make it a real priority. So in 2010, executives should either get actively involved in customer experience transformation or drop it from their agendas.
2. Acknowledge that you don't know your customers. When market research teams require long lead times and expensive projects to answer questions about customers, too many organizations go without this insight. But the path to customer experience success requires significantly deeper customer insight. So in 2010, companies need to develop voice of the customer programs that provide ongoing and continuous access to customer insights.
3. Keep from getting too distracted by social media. Twitter, Facebook and other social media sites may seem sexy, but they aren't the only channels for customer feedback. Other channels like comments on surveys and calls into the call center can often provide even richer insight. So in 2010, companies need to learn from social media feedback, but not overreact to it.
4. Stop squeezing the life out of customer service. My research shows that consumers care more about good customer service than they do low prices... But companies often treat customer service as an unwanted stepchild, focusing almost exclusively on aggressive cost-cutting. So in 2010, companies need to start viewing customer service as a strategic asset.
5. Restore the purpose in your brand. True brands are more than just color palettes, logos, and marketing slogans, they're the fabric that aligns all employees with customers in the pursuit of a common cause... Unfortunately, many companies have lost this sense of purpose in their brands. So in 2010, companies need to redefine their brand and embed it in the hearts and minds of all employees.
6. Don't expect employees to get on board. Employees are often the most critical element of any customer experience effort. But firms can't just hope that everyone will participate in these change initiatives. So in 2010, companies need to actively focus on engaging employees at every level across the organization in their customer experience efforts.
7. Translate customer experience into business terms. My research uncovered a strong correlation between customer experience and loyalty. An average $10 billion company can generate $284 million of additional revenues from customer experience improvements... So in 2010, companies need to identify how customer experience impacts their financial results.

Periodically, I will post to Voice of Vovici and let you know how I'm doing.  Like Julie, I'm committed to perfecting my technique and skills but will report honestly on each effort -- whether it is wildly succeeding, stalling or just plain failing.  I invite you to join me on this journey by adding comments on your 2010 plans - or simply providing insight on what special ingredients and techniques have worked for you and your company.  For now, I'll sign off...I have a lot of "cooking" to do!

CE Competence Center

At the Clarabridge Customer Connections conference, Troy Powell, Ph.D., vice president of statistical solutions, of Walker Information discussed creating customer experience competency centers. Troy said, "A Customer Experience Competency Center is a cross-functional unit that drives and supports customer experience management efforts through the collection, integration, analysis, communication, and delivery of customer information." It is a central hub around which the data rotates. The goal of the CE competence center is to create better, more customer-focused decisions.

The five key components of a customer experience competency center are People, Information, Analysis, Communications and Delivery.

• People - One Walker client calls their competency center its "Customer Stewardship Program" and charges its staff with determining how they can be stewards of their most precious resource, customers. Each department has at least one person who is a "customer steward" and is part of this cross-functional team (typically part-time). This has resulted in a massive decrease in customer complaints. Other organizations have built customer advocacy networks, with a customer strategy owner at the center, with support from an executive sponsor, program managers, regional and business unit liaisons, researchers and analysts, marketing, IT, third party consultants and finance.
• Information - The Walker vision for customer intelligence includes creating a central repository for all customer experiences and feedback, with data gathered from multiple sources and aggregated in the repository, which is accessible throughout the company and used to develop strategic and tactics to grow and serve customers. The IT process can be the most challenging to overcome for many organizations as they seek to collect and integrate information from as many listening posts as possible.
• Analysis - As Troy said, "The competency center is not and should not be responsible for conducting all analyses [but] should be responsible for coordinating analyses of customer information."
• Communications - To be successful, the competency center must market itself internally and externally. Internally, to get buy in and contributions from across staff and departments, and externally in order to maximize the feedback collected. Develop a launch marketing plan as the competency center is developed, and craft a sustainable campaign of monthly newsletters or other periodic communiqués to keep people informed on how the organization is learning and acting on feedback.
• Delivery - If Communications is about educating groups, Delivery is about targeting individuals. The CE competence center needs to provide the right information to the right person at the right time in the right format for action. The insights are delivered in a wide range of formats: an account management application, online reporting tools, BI tools, sales playbooks, iPhone apps, SFDC apps, iGoogle gadgets, scorecards and RSS feeds.

Troy presented a case study for one Walker client who set up a CE competency center that aggregated feedback from customers, conducted focused analyses (contact requests, low scores, high scores, key opportunity identification) and followed-up with accounts. Based on an internal assessment of the success from the first-wave implementation of the competency center, the client estimated that $32M in revenue was saved from at-risk accounts and $45M was generated in new business opportunities, for a total impact of $77M.

For the large organization especially, CE competency centers can have a dramatic effect on the top line.

Customer Service Discussions as a Research Input

The first of the six key trends that Bruce Temkin discussed in his Clarabridge user conference keynote was that "Customer service is moving from a cost center to a loyalty driver." This thread ran throughout the presentations.

Hal Bloom of Sage pointed out that customer service has an extreme influence, both positive and negative, on satisfaction and loyalty. "When customer service is helpful or knowledgeable, it is typically the number-one positive category influence. When customer service does not live up to expectations, it is one of the top negative category influencers."

To leverage this information, you need to: Capture, Categorize, Connect and Close the Loop.

• Capture: As Diego Lomanto from Verint said, "A conversation with a customer over the phone is one of the richest forms of data that you can acquire." Once you use speech analytics to turn those conversations into text form, you can add them to other textual records of customer service: chat logs, email correspondence, web-form submissions, social-media streams and service satisfaction surveys. Inventory all these records of customer-service interactions and set up an automated process to aggregate these listening posts into one input stream.
• Categorize: While IT is implementing Capture, begin analyzing an ad-hoc sample of the logs to develop a categorization tree. John Georgesen, Ph.D., senior director at Convergys, said, "One of our clients is a cable/satellite TV provider. The customer service group has poor satisfaction levels, and executives felt they were unfairly penalized for issues outside their control. In building code lists, we looked at whether service was breaking down at people, process or technology? It gave us a really rich set of data, so that we could categorize the source of issues and identify what was in the contact center's control."
• Connect: As Michael House, division vice president at Maritz said, "When building a categorization list, connect it with actions. It's not enough to build this construct: you want the meaning of the codes to align with the actions down the road. Connect poor service at retail outlets to the actions they can take."
• Close the Loop: Take action! Help individual customers! As John said, "If you are going down this road [of using questionnaires designed for text mining], you have to put a service recovery mechanism into your research efforts, so that you are escalating issues to a service desk or other escalation team. Look for keywords associated with negative behavior, look for later behavior."

Why go to all this effort? Chris Jones of Intuit put it well. "Never forget the power of one post, of one YouTube video that goes viral. People are much more vocal about our products and services. Every person who has an issue, regardless of how big or small, should be important. If you miss it, it might be the one person you miss who records that video. Every time we let a customer down, we take it personally."

Henry Ford on Market Research

It's practically a Godwin's Law of market research: "As a discussion of new product development grows longer, the probability of a citation of Henry Ford approaches 1."

You know the quotes:

• "If I asked my customers what they want, they simply would have said a faster horse."
• "People can have the Model T in any color--so long as it's black."

Ford is making the point that customers don't know what they want and can't articulate their needs. He was also in favor of constraining choices in order to reduce manufacturing costs. As Sheryl Connelly pointed out in her AMA MRC presentation "Envisioning the Future at Ford", every Model T was black not from any consumer preference but simply because black was the fastest drying paint.

Well, to quote Ford again, "History is more or less bunk."

The horse, as noble and beautiful an animal as it is, makes for pretty impractical transportation. Speed was probably not one of the major concerns of horse owners.  Imagine interviewing those owners about what they wanted. Those who weren't farmers owned a horse as transportation. They had to feed it, groom it, exercise it and--yikes--muck out the stable, even on days they weren't going anywhere. If Henry Ford had asked me, I would have said I wanted a horse that didn't eat and excrete.

Michele Harris of Applied Marketing Science put it well:

The bottom line is that customers usually aren't very good at describing solutions. But when properly asked, they're very good at describing their needs - what they like, what they don't like, what makes their lives hard or easy, what they wish for, and what they're trying to get done. And after all, it's not the customer's job to come up with the solution - that's the developer's job! Their job is just to articulate their needs.

Our job as market researchers is to thoroughly identify sources of dissatisfaction with current products and services. Sometimes we can identify solutions to those issues, but the majority of times the research and development arm of our companies and our clients will need to use those items of dissatisfaction as a source of inspiration. Working together with market research, R&D can uncover the next automobile industry or smart-phone industry. They can invent the "faster horse".

For some additional quotes and commentary that segue from our modern Henry Ford (Steve Jobs) to Ford himself, see Apple Does No Market Research So You Don't Have To Either.

CRM & Customer Satisfaction

Not many academic studies look at the effect of CRM applications on CSAT. One that does is the Journal of Marketing article, "Why Do Customer Relationship Management Applications Affect Customer Satisfaction?" The authors are Sunil Mithas, M.S. Krishnan and Claes Fornell, best known for his work pioneering the American Customer Satisfaction Index.

The authors tested the following four hypotheses:

1. The use of CRM applications is associated with an improvement in the customer knowledge that firms gain.
2. Firms with greater Supply Chain Integration are more likely to benefit from their CRM applications and achieve improved customer knowledge.
3. The use of CRM applications is associated with greater customer satisfaction.
4. Customer knowledge mediates the effect of CRM applications on customer satisfaction.

Here's my take on graphically representing these hypotheses:

To test theses hypotheses, the authors used CRM and IT data from an Information Week survey of 300 large U.S. firms and used the ACSI database. For analytical purposes, the authors used the Information Week results to develop an IT/CRM index of 13 items and an SCI index of 5 items. Their conclusions:

1. CRM applications are positively associated with an improvement in customer knowledge.
2. The joint hypothesis test for the IT/CRM index and interaction between the IT/CRM and SCI indices was statistically significant.
3. A positive association exists between CRM applications and customer satisfaction.
4. Firms reporting an improvement in customer knowledge from CRM had ACSI scores 4.3 points above those who reported no gains. Besides this evidence of an indirect effect of CRM on CSAT, CRM applications may also have a direct effect on customer satisfaction.

While our own CE IQ research was less rigorous, and focused on CRM and loyalty rather than CRM and satisfaction, we found similar CRM/CEM benefits: 0.47 positive correlation between loyalty and having a standard CRM system, 0.49 correlation between loyalty and integrating other applications with CRM, and so forth.

For another take on the role of CRM and customer knowledge, check out this diagram from Forrester on EFM as a CRM hub.

The research from Mithas, Krishnan and Fornell gives us another way to consider and prioritize CRM initiatives. CRM projects that improve our knowledge of customers--and this would include most social CRM initiatives--are the most likely to improve customer satisfaction. As the authors conclude, "Overall, our results suggest that firms that make investments in CRM applications reap significant intangible benefits, such as improved customer knowledge and customer satisfaction. Achieving such customer-focused business objectives is a critical ingredient for success in increasingly competitive markets."

Vovici Reports Record Revenues and Profitability in 2009

Last week we announced that Vovici's SaaS (Software as a Service) revenues in 2009 increased approximately 30% over 2008 and our third and fourth quarters represented the largest and most profitable in company history.

"It was an amazing year for Vovici and I am truly proud of our accomplishments," said Greg Stock, chairman and CEO of Vovici.  "Since I joined the company in July, we have crystallized our vision and are executing on our strategy to be the dominant player and the technology leader in the Feedback Management market.  It's clear that this formula is working, as we delivered back-to-back record and profitable quarters, while adding more new customers than at any time in our history." 

Vovici accomplishments in 2009 include:

Corporate and Financial

• In July, Vovici's board of directors appointed long-time, technology industry and marketing executive Greg Stock as the company's chairman and CEO
• In September, Vovici was named one of the fastest growing software companies in the world for the Software Magazine Software 500
• In October, Vovici was named one of three finalists for the SSPA STAR Award for Service Excellence in Emerging Business Support
• In November, Vovici was named to the SmartCEO Future 50, recognizing its leadership and strategic vision as one of the highest-growth companies in the Greater Washington area
• SaaS Revenues in 2009 increased approximately 30% over 2008, and Vovici's third and fourth quarters represented the largest and most profitable in company history

Customer Successes

• Vovici closed more than 250 new customers and saw its greatest revenue traction in large organizations with expansive user bases; new customers included: Harley Davidson, Coleman, AARP, FMC, Girl Scouts USA, TeleTech, Volusion, Epson, Navy Installation Command, CPA Global, NPR, The SCOOTER Store, Air Mobility Warfare Center, Navy Manpower and Analysis Center, Sallie Mae, Leerink Swann, Fair Isaac, McKesson Health Solutions, and Autotrader.com
• The company expanded its solution rollout with 80% of existing customers including Nielsen, Oracle, Intel, and the US Coast Guard to name a few
• The company published more than 20 customer success stories, case studies, and testimonials from companies such as SYKES, Oracle, and Rightmove for reaching new records for response rates; Caterpillar for managing Six Sigma initiatives; and NPR and Plymouth Rock for driving research costs down while capturing more customer information

Product Innovation

• Vovici delivered its next-generation EFM solution; Vovici v5 enables a systematic approach to feedback, with innovative features including Respondent Health Scoring, Global Panelist View, and powerful Survey Campaign Management
• Vovici doubled the size of its development team, expanding offshore teams in Ukraine and unveiling its Vovici Predictive Agile^TM development methodology that quadruples release frequency

Thought Leader

• The Vovici blog created by founder and vice president of strategy, Jeffrey Henning, is the leading enterprise feedback management blog, having broken consecutive visitor records nearly every week in 2009
• Vovici webinars on feedback management attracted 17,000 registrants
• Organic search traffic to the Vovici website increased more than 500%
• Vovici's Vision 2010 User Conference (May 2010) was announced with keynotes from Jeb Dasteel (CCO, Oracle), Jeanne Bliss (author, customer experience expert), and Bob Hayes (author, customer experience consultant)

"Our forward momentum gives us great confidence in our strategy," continued Stock. "There are now more articles being written about Vovici than any other player in this space. Our pipelines have swelled to all-time highs, and we continue to ramp up in development, professional services, sales, and marketing. It is clear to me that we have leapt to the front of the pack in the EFM market, and we intend to distance ourselves from that pack in 2010."