Empathica s Approach to Customer Experience Management
2121 Argentia Road, Suite 200 Mississauga ON L5N 2X4 CANADA tel 905.542.9001 fax 905.542.8170 www.empathica.com Retailers must measure, manage and improve the experiences of their customers, in order to grow their businesses effectively. Customer retention and continued business growth depend on retailers proactive ability to manage customer satisfaction and to ensure timely and effective customer complaint resolution. The financial effect of poor customer service quality can be devastating, but may not become apparent for some time. In a typical retail environment, customers may visit the same store only once every two to six weeks. Depending on the frequency of repeat business, it can take anywhere from several weeks to several months before lagging sales become an indicator that there are quality concerns. By the time it is noticeable, the damage to an individual retail store may be irreversible. To prevent such customer erosion, two elements are required. First, a complaint management system can be brought into play to serve as a critical listening post for issues at the local unit level, at the district/regional level, and at the corporate governance level. To be effective, such a system must immediately sort and route complaints to the appropriate business roles within the organization, to ensure timely responses and management accountability. The second element required is actually more critical to retail survival and success. It is a sensitive measurement feedback system that continuously listens to the unspoken complaints that occur when the promise of a great service experience is not met. hile a complaint management system picks up more catastrophic failures (e.g., product availability, staff mistreatment, etc.) the near misses in providing excellent service experiences during each and every customer transaction create silent complaints. As they accumulate, these silent complaints can be potentially more lethal to a retail business. The research Empathica has done over the past several years confirms this notion. A recurring pattern Empathica has uncovered across several customer satisfaction tracking studies is one in which the findings indicate that a 3 on a five-point scale is a negative, not neutral, score and that a 4 is not good enough. Most service failures go unmentioned and, as such, are potential silent killers of future business. That is customers often do not complain to management if they have had a less-than-desirable experience at a critical moment of truth, for the simple reason that they wish to avoid the additional unpleasantness associated with a potential confrontation.
The Return on Investment of Empathica s Customer Experience Management System is clearly evident when we look at the impact of service success on the share of wallet obtained by moving 3s to 4s and 4s to 5s. These 5s are Top Box performance standards that will help local retailers grow their customer share of wallet. So: are all the problems that customers experience disasters that automatically move customers to being highly dissatisfied? Absolutely not: Empathica research suggests the opposite. Every misstep, if handled well, provides an opportunity to demonstrate commitment to customer service. Graphically, the results typically demonstrate that satisfaction ratings overall are higher if a problem occurred and was handled well versus if no problem occurred at all. Handling a problem well involves conveying to customers a sense of control and that someone is taking immediate ownership of the problem. For businesses that have low involvement with customers, this finding is often even more dramatic, as the problem resolution experience may prove to be the only substantive point of contact that the company has with customers at all. It is critical, then, that companies Impact Of Satisfaction Levels On Annual Profit For 100 Customers (Profit = 30% of customer spend) Annual Profit have systems in place to both measure and manage customer experiences, converting customers with complaints into customer advocates. In Empathica s view, the only way to achieve Top Box performance is to hold each and every local manager accountable for this level of service experience. Ownership of outstanding customer service must reside at the location level and cannot be perceived as a corporate office initiative. Local managers must be informed, educated and motivated to build the best retail experience in the business. To do so requires statistically accurate feedback. Feedback must be both easy to access and to read, with a compelling story that benchmarks local unit performance versus predefined metrics (i.e., Peer Group, Best Practice, Local Competition and Overall Corporate Goals). Furthermore, such a report should be directly linked to an actionplanning tool that facilitates issue resolution based on organizational Best Practices. So how does Empathica ensure that the right questions are being asked those that will drive increases in satisfaction and ultimately, retailer success? hether it is at the onset of a new client relationship or later in the life of a customer tracking program as market pressures/conditions change, Empathica will test and verify that the right questions are being asked in the survey process. Strongly Disagree Disagree Neither Agree Nor Disagree Agree Levels of satisfaction Strongly Agree QSR BRAND A Averaging 2.7 visits per month @ $7.50 per visit QSR BRAND B Averaging 4.3 visits per month @ $8.50 per visit FULL SERVICE CASUAL Averaging 4.6 visits per month @ $15.00 per visit PETRO-C Averaging 4.7 visits per month @ $19.00 per visit 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 2
e do so by constructing a long survey from which a sub-set of questions will be chosen, whose answers will be continuously tracked. This long survey is tested randomly among a sample of customers/guests, ideally across all sites over a one-month period. The survey covers all major attribute categories, including service, product, facility, image and business outcomes (e.g., satisfaction, recommendation, revisit intent, price/value, etc). step 1: Empathica s analysis involves discovering how questionnaire items can be grouped together, according to how customers experience the brand. From these, we produce a set of new, underlying variables that efficiently represent the entire set of original items. e also determine which items can be dropped without losing any of the explanatory power of the original data groupings. step 2: After running anywhere from 10 50 iterative statistical models, Empathica reduces the original long survey to 10 20 attributes that are now organized by customer experiences of a brand. Conceptually, what we obtain then is a picture of how customers view their experiences with a brand, rather than pre-conceived notions of how senior managers view it. step 3: This step involves determining what impact these new items will have on driving customer loyalty. In simple terms, Empathica takes the knowledge of what s inside the minds of customers and makes a prediction of what will drive these customers to be more loyal. Statistically, Empathica examines the complex patterns of relationships among underlying the variables discovered in Step 1 above. Modeling is conducted that calibrates the relative impact each set of survey attributes has on each other and the business outcomes of interest (e.g., satisfaction, recommendation, price/value, etc). Graphically, the process is as follows: long survey developed data collected analysis step 1 analysis step 2 analysis step 3 60 80 questions covering key attributes of the customer experience: l Service l Product l Process l Facility l Image l Outcomes (Satisfaction, Recommendations, Revisit Intent, Price/ Value, etc.) 500 1000 surveys completed via internet and/or IVR How do customers organize their experience of their brand? hat are the optimum number of survey items we can ask to capture this experience? hat is the impact on customer loyalty of increasing these attributes? Net Result: 10 20 attributes that are powerful indicators of business success, including customer retention.
From these analyses, we can be confident: l That the issues of most importance to customers are being asked l That only a short list of the right questions need to be asked l e know the potential loyalty benefits that will accrue from improving these attributes Let us look at a quick service restaurant example. The statistical model that follows demonstrates, for this particular brand, six key factors captured by 14 survey attributes. Their combined total effect explains over 90 percent of the variance in customer loyalty to this brand. The approach is preferable over traditional linear regression-based key driver analyses. Empathica s modeling provides several benefits over traditional analytic techniques, including: 1. Producing highly stable models, 2. Modeling paths (e.g., a to b to c, not just a to c and b to c), 3. Assessing multiple outcomes simultaneously, and 4. Accounting for a dramatically higher percentage of the variance in the outcomes of interest (e.g., overall satisfaction, etc.). The counsel that Empathica provides from this type of analysis is clear, compelling and drives local action. Friendly Greeting Smiling Eyes Moved Quickly Undivided Attention Thanked ForComing inviting service employee service Employees Enjoying Their Jobs 92% Feel Valued Good Menu Variety Exterior Clean & Inviting facility cleanliness loyalty food quality food offering Good Food Presentation Interior Clean Clean & ell Maintained Tastes Fresh Overall Food Exceeded Expectations Overall Satisfied Revisit Intent Recommendation
filtering through the noise Even though all local management operates under the same guidelines, policies, standards and procedures, Empathica typically uncovers a wide degree of variation across retail outlets for any brand. For this reason, Area Managers must be provided a view of these key drivers across multiple locations, comparing local unit results and identifying Best Practices and areas that need to be addressed. By combining grass roots local action planning with regional and head office stewardship, the basis for excellence in customer experience management is set. The Empathica approach allows clients to obtain feedback from the entire cross-section of their customer base, from heavy to light users, and loyal to new customers. Ensuring a positive experience retains loyal customers and grows share of wallet among those who have heard of the great service being offered. the best trust Empathica #1 FOOD SERVICE COMPANY GLOBALLY FINANCIAL SERVICES COMPANY GLOBALLY #1 CASUAL DINING CHAIN IN NORTH AMERICA PETRO CONVENIENCE (OIL & GAS) COMPANY GLOBALLY COFFEE RETAILER IN CANADA DRUG CHAIN IN EUROPE DEPARTMENT STORE IN NORTH AMERICA
about Empathica em path ica/em- pa-thika/(empathica) e provide a Customer Experience Management system that combines the efficiency of web-based software, the visibility of performance reporting and the expertise of business intelligence consulting. Empathica helps retailers improve profitability by enabling them to measure, manage and improve the quality of their customer experiences. e offer: l Deep Retail Knowledge l Best-in-Class Hardware and Software Systems l Exceptional Business Linkage Modeling Capability l Obsession with Great Service Our clients include category leaders in food service, petro-convenience, grocery and general retail. For more information, visit www.empathica.com or contact our sales team at 1 888.633.1633, ext. 268.