Uncommon Service: How to Win by Putting Customers at the Core of Your Business - By Frances Frei and Anne Morris
Date read: 2017-02-22How strongly I recommend it: 8/10
(See my list of 150+ books, for more.)
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How to provide the best customer service with several examples from great businesses. It also debunks common myths about how you should create exceptional service.
Contents:
- YOU CAN'T BE GOOD AT EVERYTHING
- SOMEONE HAS TO PAY FOR IT
- IT'S NOT YOUR EMPLOYEES' FAULT
- YOU MUST MANAGE YOUR CUSTOMERS
- CULTURE
- GETTING BIGGER
My Notes
You can’t be good at everything. In services, trying to do it all brilliantly will lead almost inevitably to mediocrity. Excellence requires sacrifice.
To deliver great service on the dimensions that your customers value most, you must underperform on dimensions they value less. You must be bad in the service of good.
Great service, it turns out, is not made possible by running the business harder and faster on the backs of a few extraordinary people. It’s made possible—profitable, sustainable, scalable—by designing a system that sets up everyone to excel.
The Four Service Truths
- You can’t be good at everything - Excellence requires under-performing on the dimensions your customers value least so that you can overperform on the dimensions your customers value most.
- Someone has to pay for it.
- It’s not your employees’ fault.
- You must manage your customers - You must be deliberate about involving your customers in creating — not just consuming — your service experience.
Progress requires sacrifice. Some part of your service offering must be thrown under the bus.
When your weaknesses are enabling your strengths, reducing the gaps between you and your competitors can actually undermine performance, turning a well-intentioned improvement effort into a strategically dangerous paint-by-number exercise.
The impossible triangle: A customer can expect two of the following three things: speed, quality, and price. You can get good quality built quickly, but it will cost you. You can get something built fast and cheap, but the quality will suffer. Or you can get good quality for a competitive price, but the wait will be painful.
Have a diagnostic phase where you create your own attribute maps - on the vertical axis, list the distinct elements of the service offering, in order of importance according to your customers. On the horizontal axis, chart how well you’re doing, again from the perspective of the customer. Then add to this how well the competition is doing along the same dimensions.
Do the exercise twice; once internally without input from customers or competitors, and then with external data.
Step 1: Create an Internal Attribute Map - After your customers’ priorities have been entered on the vertical axis, it’s time to rank yourself and your competitors along each dimension. Use a basic scale of 1 to 5, and rank yourselves and your primary competitors.
Step 2: Create an External Attribute Map, by talking to your customers.
Step 3: Analyze Your Performance - Rate the performance of your company relative to your top competitors, with 5 as the highest and 1 as the lowest, and then plot those ratings on the graph. And remember, the rating is from the customer’s perspective.
Step 4: React - Some organizations don’t simply respond to customer preferences; they actively work to rearrange those preferences.
There is an important distinction between marketing and operating segments. Marketing segments tell us how to identify and communicate with different kinds of customers. Operating segments tell us how to serve customers differently. There is rarely a one-to-one mapping between these segments.
There are two key ways to improve service: 1) meet your customers’ existing needs more effectively, or 2) convince your customers that they need something you already do well.
The most successful service models incorporate a mechanism for reliably funding an exceptional experience. Without a reliable funding source designed directly into the model, organizations risk delivering service that customers happily consume but never pay for.
There are four ways to pay for excellence:
- When Customers Are Happy to Pay More.
Palatable pricing - finding ways to charge the customer more for your service without pissing them off. Example: Commerce Bank offered an interest rate on deposits that was half a percentage point lower than the rate the competition was paying. Customers essentially paid for the service every day, whether they used it or not.
The less palatable the pricing, the more irritated customers tend to get over every penny extracted from them.
Here’s the definition of a true loyalty program: you provide additional service features to your best customers—say, invite them to special events or give them access to company leadership. In return, their commitment to your brand and willingness to pay for services go up. Nothing gratuitous here.
When companies pay customers through discounts to remain customers, it’s a customer retention program. When companies pay customers to try out their products and services, it’s a customer acquisition program. When companies invest in activities that increase customers’ willingness to pay a premium price, then they have a loyalty program. - When Reducing Costs Improves Service.
Sequence matters, start with costs - The kind of innovation represented by Progressive’s immediate-response vans requires a specific sequence. Progressive started out by targeting its biggest buckets of cost—fraud, disputed claims, and legal fees — and then worked out from there to find ways to dress up the cost savings as value-added service. - Improving Service Lowers Costs.
Improving service in one part of your business can substantially lower costs elsewhere — thereby funding the premium experience. - When Customers Serve Themselves.
Method 1 is the simplest, at least from a design perspective. Methods 2 and 3 are the most reliable. Method 4 gets the most attention.
Step 1: Examine Your Cost Structure - Begin your search for ways to fund uncommon service is with your biggest buckets of costs, which often represent your biggest buckets of potential savings. (When people get stuck here, we suggest starting by reducing the time involved in a customer-facing process. This will often yield better experiences at a lower cost to the organization.)
Step 2: Monetize Your Strengths - Ask yourselves, “What can we do better than anyone else?” Think about a value-added service that allows you to benefit operationally from your excellence — bonus if you can make your competition uncomfortable along the way.
Step 3: Unleash Your Customers.
For self-service to be part of an uncommon service experience, customers must prefer self-service to a full-service alternative.
The average employee is drowning in complexity. And the outstanding employee, the one who has a chance of keeping up, is a much scarcer resource than many managers are willing to acknowledge. We’re designing jobs for superhumans, and it turns out our people are flesh and blood.
Successful employee management systems have four main components: selection, training, job design, and performance management.
The nemesis of good job design is complexity. Complexity has a bad habit of creeping into your systems and jobs over time, as you respond to dynamic market conditions and chase new sources of revenue.
Be prepared to go all the way in integrating technology into job design, from great software and functional hardware to effective training and regular user feedback.
Performance management is about creating incentives to do a job well — and disincentives to do it poorly.
You should include controls such as scripts and checklists that make it difficult for employees to stray too far.
Customize your strategy to the unique needs and opportunities of your own company. Resist relying exclusively on standard performance levers, no matter how entrenched they are in your industry.
Money may not be the most powerful incentive for your employees. Research keeps piling up that recognition and status may matter even more, along with a sense of purpose and belonging. Everyone needs to believe that what he or she does matters.
Your performance management system has to be both internally consistent and integrated well into the rest of your business model.
Watch out for mismatches between your employees and the jobs you’ve tasked them to do.
First try to get a sense of the size of the employee-job gap:
- Go Undercover (Estimated Time: One or Two Days) - Talk frankly with your people about their experience on the job, what makes it easy or hard, and how their roles have changed over time. Watch them in action. Try to do an average employee’s job for a day, and see how you fare.
- Chart Complexity over Time (Estimated Time: Fifteen Minutes) - Try to graphically plot how the operational complexity experienced by your employees has changed over the past five years (this can be done for any job). Then plot the change in employee sophistication over the same time span.
- Close the Gap - Change the people or change the job.
Go as far as you can on the people front, and then address system complexity. Decreasing it outright or by decreasing the amount of complexity experienced by each employee. Starting with back-end complexity that’s adding little to the customer experience.
Break down a job into smaller tasks and assign them to specialized employees.
Customers don’t just consume service; they also participate in creating it. And they’re not always good at their job. We call them customer-operators.
You can manage customer chaos in essentially two ways: by reducing or accommodating it.
Performance can’t be sustained by placing customers on a pedestal and indulging their every desire.
The successful customer management system includes:
- Customer Selection.
- Customer Training - Your training program has to feel good to customers, whose tolerance for discomfort is reliably low.
- Customer Job Design - Be deeply thoughtful about what you’re asking your customers to do. Customer job design, especially self-service design, works best when you first work to increase the quality of the service experience, to make the service more convenient or customized (or whatever drives value in your business). Then consider costs.
- Performance Management.
Start by:
Phase 1: Getting Control - Surface your operating assumptions. Get in touch with whatever conclusions you’ve reached about the impact of customers on your operations. Now test your assumptions with data you probably already have.
Phase 2: Actively Involving Customers.
Phase 3: Going All the Way - There can be tremendous advantages to getting your customers to help you create the value they ultimately consume and every company has to change its customers’ behavior at some point along the way. Get them to behave differently and like you even more for it.
We’ve seen three distinct patterns in these organizations’ relationship to culture:
- Clarity: knowing exactly what kind of a culture you want to build, and how this culture is critical to achieving your most important performance objectives.
- Signaling: relentlessly communicating the organization’s core values, particularly in moments when people are likely to be most receptive to these messages, such as during recruiting and orientation.
- Consistency: reinforcing the culture at every turn and rooting out cultural violations, that is, misalignment between the desired culture and organizational strategy, structure, and operations.
In most organizations, it’s behaviors we want to change, and so the questions that matter are: What’s the problematic behavior? What are the shared basic assumptions driving that behavior? What can we do to change those assumptions?
You basically have two choices when it comes to growth: do more of what you’re already doing, or do different things.
If you want to grow your existing service model, you must first take control of it. This typically means that you have to increase your standardization.
Customize where you can deliver real value and get paid for it without wreaking havoc on your operations — but not where you make a few customers happy at the expense of large swaths of employees, stockholders, and other customers.
Do not run your business by the comment box. It may feel good, at least at first, but here’s the catch: customers typically don’t understand the implications of their requests. It’s your obligation — to them and to you — to put their demands in context, to evaluate the trade-offs of expanding your offering.
Alternative to scaling a standardized version of your existing service model: build multiple models within the same organizational structure.