The big queue at an ATM in Masalli, Azerbaijan, 2008 (Source: Wikimedia Commons)
Ideas for Leaders #345

Customer Loyalty: Easy Does It

This is one of our free-to-access content pieces. To gain access to all Ideas for Leaders content please Log In Here or if you are not already a Subscriber then Subscribe Here.

Key Concept

A number of companies have begun to measure ‘customer effort’ (CE) – how easy (or difficult) it is for their customers to interact with them. The experience of these firms is that CE is worthwhile, offering a good indicator of customer loyalty. Whilst it should not replace other key measures, such as customer satisfaction and ‘net promoter score’ (NPS), it should be considered alongside them.

Idea Summary

Customer effort research has been around since the 1940s but the debate gained momentum following a 2010 article, ‘Stop Trying to Delight Your Customers’, in the Harvard Business Review (HBR). In particular, the HBR paper raised interest in how CE and, in particular, customer effort scores (CES) could be used as an indicator of customer loyalty. The HBR article claimed that 94% of the customers who reported low effort expressed an intention to repurchase and 88% said they would increase their spending. Conversely, 81% of customers who had a hard time solving their problems reported an intention to spread negative word of mouth.

This paper examines how some companies are now using measurement of effort. All the ‘early-adopting’ companies interviewed had tried to see how CE could be used to increase loyalty. Business-to-consumer (B2C) companies simply added effort questions to their existing customer service questionnaires. As business surveys are less frequent and based on smaller samples than B2C, business-to-business (B2B) companies also used complaint tracking.

For B2C companies, implementation was focused on improving customer services whereas B2B companies had a broader view of making their company easy to do business with. In both, it was felt that using the term ‘easy’ was a lot more intuitive and understandable than ‘effort’, and an approach based on these questions was a good way to capture the voice of the customer.

It’s not a choice between measuring customer satisfaction, NPS or CES – “they all measure different things so the best answer is to measure all of them and then be smart about interpreting the results”.

A significant advantage of the CES approach is the ability to produce actionable data that can be used to help design customer experiences. Companies use NPS to provide a comparison of their company against others but they saw CES as an approach to drive improvements in services to customers. The B2C companies felt that the effort questions gave them a clear focus on their shortcomings. The B2B companies introduced effort questions as a key part of continuous improvement initiatives, starting in customer services before spreading through the company’s functions.

Effort and loyalty are correlated: it isn’t just hype. The companies that have applied CE are finding it provides them with loyalty data that goes beyond customer intention (which is where NPS works) and into actual customer behaviour.

The B2C companies had data analysis to prove that the CES is a strong indicator of loyalty, particularly where there are high-effort experiences. To quote BT, which has pioneered a customer ‘net easy score’: “The rate of customer loss for the ‘easy’ scores was found to be significantly less than for the others and showed a 40% reduction in their propensity to churn.”

Business Application

The HBR article suggested that we should ‘stop trying to delight customers’ because ‘customer delight’ may not add a huge amount to loyalty behaviours. This research suggests that the better strategy might be ‘delight your customers, but only where they value it’. This may run as counter-intuitive to many customer service excellence strategies. The challenge now is to identify where customers expect low- or high-effort experiences and deliver against these expectations.

The examples of areas for focus suggested by the original HBR paper, including things like better-trained and more knowledgeable staff, are certainly relevant. However, the advantage of the CE approach is that it is not prescriptive and allows companies to identify and correct the issues that are applicable to them. One size doesn’t fit all in implementing a CE approach. Effort can be used to help identify changes that are required to individual channels, such as the contact centre (including interactive voice response systems) or the website, but can also be used as a company-wide continuous improvement programme. 

Contact Us

Authors

Institutions

Source

Idea conceived

  • December 2013

Idea posted

  • March 2014

DOI number

10.13007/345

Subject

References

Real Time Analytics