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You've been on hold for 20 minutes. It's not the first time you've called this company's contact center. You've keyed in your account number via a maze of IVR menus, none of which sounded like what you needed. You tried to use the speech recognition feature, but it did not recognize anything you said. Frustrated, you hit "0" for an agent. The recording alerts you to long wait times. You finally get an agent and they ask you for your account number. You wonder why, since you just punched it into the key pad. You've called six times before, but previous calls aren't logged into the system. You explain the situation AGAIN. There is a long pause. The agent says something you can't understand. When you question it, he gets rude. You ask to speak to a supervisor and he says none are available. At a cocktail party later that night, you tell 20 of your closest friends about your customer experience and they all agree never to buy from that company again.

How many companies are providing poor customer experiences? Recent research shows that while 80 percent of companies believe they deliver a superior customer experience, only eight percent of customers agree. The research also shows that 43 percent of customers leave due to the attitudes and behaviors of a company's employees. In service-related situations, the number jumps to 73 percent. Research from Purdue University shows that 85 percent of a customer's perception about a brand is based on their interaction with the call center and agent. If the experience is poor, 63 percent will stop shopping with the company. Now that the SEC requires C-level executives to correlate an executive's performance to the achievement of the company's goals, a company can no longer implement projects without linking them to bottom-line results. At a time when research from analysts shows the customer experience is the only differentiator remaining since competing brands are so similar, how does customer experience affect the bottom line? Executives must look at customer relationship management (CRM) and call centers as cornerstones to providing great customer experiences be it through a new financial lens.

Calculating Revenue Loss Due To Poor Customer Experiences

Research shows that on average:

70 percent of customers will have a positive experience;

30 percent of customers will have a poor experience; and

2 percent of all customers complain.

To calculate the cost of a poor customer experience, let's use a hypothetical company with four million customers and an average annual revenue of $100 per customer, which would result in a potential annual revenue of $400 million. If 30 percent of customers have a bad experience, that amounts to 1.2 million dissatisfied customers. (4 million x .30 = 1.2 million dissatisfied customers. See Figure 1.) If two percent of those complain, that leaves 98 percent who don't say anything, or 1.176 million customers (1.2 million x .98 = 1.176 million. See Figure 2.) The potential revenue lost from that 98 percent is ($64,680,000 + $52,920,000) = $117.6 million (see Figure 3) (1.176 x $100 = $117.6 million).

The Cost Of Lost Customers Is Greater Than Just Losing Customers

Research has shown that the costs of handling unsatisfied customers include those of handling contacts twice plus those of lost business. This results in a cost per customer that is two or more times the cost of a satisfied customer. Depending on the industry, between 30 to 70 percent of dissatisfied customers leave, which means new customers must constantly be acquired. The additional money acquiring new customers only pays off if the customer remains loyal. Unfortunately, data from an analyst's report in 2006 stated that 75 percent of customers who defect to a competitor claim that they had been satisfied with the previous organization. Thus, more money is spent without ROI.

Additionally, effects from negative word-of-mouth propagate the cost of poor customer experiences far beyond one person. Dissatisfied customers tell between 10 to 20 people about their experience. YouTube and other Internet viral methods spread bad word-of-mouth quickly. With all the ways companies are either knowingly or unknowingly increasing losses, it is obvious reducing the number of dissatisfied customers needs to be the number one revenue- and profit-generating objective.

The Gap Is The GAAP

Business has traditionally measured the bottom line in one of two ways:
Quantity of gross profits and

Quantity of net profit.
Generally Accepted Accounting Principles (GAAP) anchored to accounting principles developed centuries ago are out of date because they leave out "customer experience." The lack of customer experience in the GAAP model may be why companies are experiencing poor returns and earning ratios.

In addition to outdated accounting principles, the other bind confronting decision-makers is that of contradictory business goals. On one hand, the edict is to create long-term value and growth. On the other, it's to deliver against short-term goals that reduce costs, but in many cases, like in the call center, destroy long-term value. However, in light of customer-experience data from analysts, the old paradigm of cutting call center costs is bad business.

Brand Equity Secret: Customer-Centric CRM And Customer-Centric Contact Centers
Because business is unsustainable without customers, decisions that drive customers away can't be tolerated. Analysts' research shows as little as one-third to one-half of most companies' stock market value is derived from hard assets such as property, plant and equipment. The growing share of value lies in intellectual property. It is a myth that the customer experience is immeasurable and has little or no affect on the bottom-line. With these types of tangible calculations, call centers and CRM, once thought of as strictly cost centers, become financial assets that either build or destroy brand equity and financial corporate stability.

The Solution: A Financial Customer-Centric CRM And Contact Center Strategy

The five steps to creating a financial customer-centric CRM and call center strategy are:

1. Making business decisions that put customers first;

2. Aligning corporate financial goals with CRM and contact center goals;

3. Designing the customer experience from the customer's point of view;

4. Choosing technology that ONLY enhances the customer experience; and

5. Dedicating resources to managing the change and risk for ROI.

Making Business Decisions That Put Customers First
While the data are staggeringly negative, the good news is there is great opportunity. Because the customer experience is poor across so many industries, companies dedicating their financial strategies to the customer experience will quickly increase the bottom-line by being the first to acquire and retain customers, leaving other companies in the dust. That strategy means EVERY decision in the company, whether about people, processes or technology, has to pass through a superior customer experience lens.

Align Corporate Financial Goals With CRM And Contact Center Goals
A second strategy is aligning company financial goals with CRM and call center expenditures and goals. CRM issues aren't with technology, systems integrators or the company buying products. The problem is CRM and contact center goals aren't directly connected to the bottom-line. In fact, a Peppers and Rogers study showed:

Three out of four executives would give up economic value in exchange for meeting their numbers;

More than half would delay starting a project to avoid missing an earnings target; and

Four out of five would defer maintenance and research spending to meet earnings targets.

Using customer experiences to align company financial goals with the call center and CRM may mean new questions arise from boardrooms and call center mangers alike:

While these decisions may result in reduced operating costs (relieving short-term financial corporate pressures), do they increase revenue, customer loyalty and repurchase probability?

How will these decisions affect the relationship and experience with a customer or the brand's value and thus the shareholder's value, market share and profits?

Designing The Customer Experience From The Customer's Point Of View
Companies new to the concept of designing customer experiences may think customer experience management is too vague to be designed. We can look to companies like Disney to know it isn't. Consider that each time a customer comes into contact with a business, the customer's experience results in an opinion. The customer's collective set of experiences shapes their image of the brand. The trick is to make sure at every customer point — phone, fax, e-mail, Web, chat, etc. — the experience exceeds the customer's expectation. These touch points must be assessed with respect to customers' expectations via feedback.

Choosing Technology That ONLY Enhances The Customer Experience
Many companies spend millions on large software implementations — CRM, call center, ERP, etc., without an ROI. There are huge debates about why this continues to happen. CRM technology is largely responsible for the customer experience, but it can only enable people in the company to be more efficient and effective. If technology is to provide an ROI, an understanding of the connection between people, process and technology is required. The features and functions of the technology must provide customer-centric benefits. The decision criteria in choosing technology must then weigh the pros and cons with the weight given to creating long-term, loyalty-inducing customer experiences. Because most technology solutions cannot deliver great customer experiences without some level of customization, resources for customizing are more standard than not.

Technology and Customer Experience: Put Yourself in Your Customers' Shoes. A great way to understand how technology affects the customer experience is recall the last time you called an 800 number. Two good examples of how CRM technology affects the customer experience are computer-telephony integration (CTI) and knowledge management.

The Benefit of True Computer-Telephony Integration. Despite the fact a customer punched in her account number on the phone keypad, why do some agents ask for the same information? The reason is CTI functionality — the more functionality, the higher the cost. Low-level CTI functionality just routes the call to an agent. Higher-level functionality means the call is routed to the most skilled, knowledgeable agent and the keyed information is delivered to the agent's desktop. The agent sees the customer's name, keyed information, the last time they called, whether there's an outstanding order and if it was resolved. That's how technology creates fantastic customer experiences. Thus, the higher cost of the CTI technology must be evaluated against the decision to deliver an irritating, brand-eroding customer experience.

The Benefit of Using a Contact Center Knowledge Management System With NLP Search Technology. Now assume the call is with the right agent and they can see the information. How can technology help that agent answer questions? Let's say a cell phone company is competing in a tight market. Their increase in market share is directly related to new products (like Internet access, e-mailing, etc.) and new service plans (for the family, business travelers, nationwide roaming, etc.) so every three to four months marketing launches new ones.

Now picture the agent trying to keep up with all the new products and features in enough detail to answer any question that gets asked. It is nearly impossible for an agent to memorize that information or find it on a cheat sheet at his or her desk.

If the agent, as part of the desktop application suite, has a robust knowledge management (KM) system with natural language processing (NLP) search capability, he or she can quickly search for answers. KM and NLP search technology is also important for searches conducted on the company's Web site. Research shows that nearly half of Web-based transactions are completed with help of an agent because of poor search technology choices. NLP technology, in contrast to keyword searching, provides higher customer satisfaction and more first-time resolution, but is also more expensive and takes more time to implement. Here, the cost of a poor customer experience must be weighed against the cost of technology driving that poor experience as well as the cost of driving calls to the call center.

Additionally, if agents are trained and given time to learn how to use the features of the new technology, the agent becomes an effective, efficient user of the technology, which is when the ROI kicks in. If not, customers get wrong and/or inconsistent answers. Studies show agents become stressed when they can't provide good service and quit as a result, which increases attrition costs. The resulting technology expenditure is a compounded loss, including, but not limited to, the technology cost itself, loss of agent productivity and agent attrition costs, not to mention the cost of a poor customer experience.

Dedicate Resources To Managing The Change And Risk To ROI
Today's executives are accountable for delivering real financial results from their investments in corporate initiatives by SEC regulations. Because compensation decisions need to be grounded by strong business cases, rationale and accountability, executives not only need a new process to ensure the objectives, goals and initiatives are reached, but they also need a reliable method to ascertain risk and mitigate it, as well as an analytical measurement method and tools to determine the economic value provided to shareholders. CRM or call center projects impact many departments, so an integrated approach to measuring and managing change is required. By doing so, studies have proven companies can obtain greater economic value faster by effectively developing, deploying and aligning a company's assets to the CRM and call center initiative.

The Benefit? Increasing The Bottom Line
By investing in the contact center, agents as brand ambassadors, and effective and efficient CRM systems, a company can quickly add to the bottom line. But employees must have the right tools to deliver the promise of a great customer experience. What is it worth to your company to ensure customers are receiving the best care and experiencing customer service excellence? Your bottom line?

The economic modeling and some of the data on customer behavior contained in this article represents research and statistics authored by John Goodman of TARP Worldwide. For more than three decades, TARP Worldwide has been on the forefront of the customer experience revolution. Today, TARP continues to create innovative solutions to help clients Release the Profit of Interaction™ through strategic research partnerships and proven contact center solutions.

Natalie L. Petouhoff, Ph.D. is a director and thought leader with Hitachi consulting. She writes white papers, articles and books based on her many years of practical experience in CRM, change management, customer experience and contact centers. Brian R. Johnson is a managing vice president for Hitachi Consulting. He is responsible for profitable growth and intellectual property development in the areas of sales, marketing and customer service optimization and automation. Hitachi Consulting provides business and IT solutions to Global 2000 companies.

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