Relying on metrics to make decisions? You're taking a big risk.
Metrics help guide small and large business decisions. Numbers assist us in deciding which course of action is the best to take. But relying solely on metrics to help inform decisions is simply not enough, especially when it comes to making decisions that will impact your customers. The risk of making a wrong – and potentially very costly—decision increases when the thoughts, feelings, wants and needs of customers are lacking in the decision-making process. Companies like Netflix, Amazon, and Apple know this well. It’s the reason they all heavily use the customer’s voice to inform their decisions. If these companies rely on hearing their customer’s voice in making decisions, is your company doing the same?
THE MIND COMES SECOND
Talking about emotions, wants, needs and desires in a business environment can be awkward. It’s easier to focus on less emotionally charged items like processes, strategies, and metrics. The problem with not including the emotions, wants, needs and desires in the decision-making process is that humans initially use emotions to make decisions.
In 2006, neuroscientists discovered that humans make decisions based on emotion first and then rationalize those decisions second. This emotional-cognitive process can happen in milliseconds, or it can take minutes, days or weeks. This emotion-cognitive process is found in all humans, including your customers.
Customers judge a company, its products, its services, its brand, and its actions by emotions first. Customers then rationalize those emotions with hard evidence or their experience with the company. Vonage, a leading telecommunications company conducted a study in 2020 to discover the top reasons why customers switched telecommunications providers. Vonage found the top reason why customers switched brands was because they felt unappreciated.
Another study, conducted in 2009 after the economic downturn caused by the mortgage crisis in the United States, found that the retail stores of an international home improvement company that focused on increasing customer engagement, outdid their competitors by 26% in gross margin and 85% in sales growth. The study found that stores which focused on increasing their customer engagement—and making customers feel better—had customers that were more loyal, spent more, and returned more often.
Humans make decisions based on emotion first. Customers leave or stay based on how they feel. If customers feel they’re getting value and are happy with your company, they’ll stay. However, if customers don’t feel they’re getting value or they are frustrated with their customer experience, they’ll leave.
Adding the customer’s voice to the decision-making process reduces the risk of a decision that may increase a customer’s negative emotions. As the two studies above show, the better a customer felt, the more likely they were to remain as customers. And we’ll see shortly, the inverse is true—the more negative emotions a customer feels, the more likely they are to leave.
The Voice of the Customer
There are several ways companies can gather the voice of the customer. One is through formal feedback methods like surveys, focus groups and interviews. The second way to gather the voice of the customer is via informal routes like social media comments, reviews, and support calls. Formal feedback methods like surveys, focus groups and interviews are proactive and focus on a pre-determined line of inquiry determined by the company. Informal voice of the customer feedback like social media comments, reviews and support calls is passive, allowing the customer to choose the topic and the focus.
Just how impactful is customer feedback? A report by the global research powerhouse Gartner found that companies that collect formal customer feedback can increase their upselling and cross-selling success rates by as much as 15% to 20%. The report also found that formal customer feedback methods can also help decrease the cost of retaining those customers. Lastly, the report discovered that companies that actively engage in Voice of the Customer programs, spend 25% less on customer retention than those companies that don’t.
A Voice of the Customer (VOC) program is a research strategy comprised of both formal and informal feedback methods that attempt to understand the thoughts, feelings, wants and desires of customers. Voice of the Customer programs provide the context around the metrics and help explain the ‘why’ behind the numbers. And it is this ability of VOC programs to explain why customers behave as they do that is of incredibly valuable for decision makers.
Knowing the true thoughts, feelings, wants and desires of the customer reduces the risk of making a costly, wrong decision by reducing the reliance on assumptions, guesses, inferences, or postulations. It’s the reason why Amazon, Apple and Netflix have heavily invested in formal customer feedback methods like surveys, focus groups and customer interviews.
VOC programs do 3 things exceptionally well:
1) reduce the risk making costly wrong decisions
2) deliver incredible insights into metrics
3) deliver cost-saving, revenue-enhancing value
IN THE INFORMATION SECURITIES SOFTWARE INDUSTRY, CROSS-INDUSTRY BENCHMARKS SHOW THAT COMPANIES THAT HAD A VOC PROGRAM AND BETTER CUSTOMER EXPERIENCE HAD:
• 50% + higher revenues per customer
• 40% lower cost to serve vs. low loyalty customers
• 30% lower customer churn
• 40% lower customer acquisition costs
Gain or Lose?
If you’re still on the fence as to the power of a VOC program to help reduce the risk of an expensive wrong decision or on the fence that a VOC program can power such enormous cost-saving and revenue-enhancing benefits, just think back to when you were a customer and were so frustrated or unhappy with a company that you left. If you have done this, so have your customers.
And those churning customers are expensive.
When customers leave, there’s not only an immediate revenue loss but also the loss of very profitable, future expansion revenue opportunities like upsells, cross-sells, renewals and referrals. These future second-order revenues can be a jaw dropping 2x your current Customer Lifetime Value.
Ever asked someone you trust about their experience with a company? If their experience was good, they’ll likely suggest you buy. If they’re experience was poor, you likely will consider their experience and look to a competitor instead.
Negative customer experiences hurt a company’s brand. On average, customers tell 9 people about a positive experience with a brand, but if they’ve had a negative experience customers will spread that experience to at least 16 different people. A study by Oracle found that in some industries 89% of customers left a company after 1 poor customer experience.
REDUCE YOUR RISK
Your company is likely collecting a lot of informal customer feedback like social media comments, reviews and support calls. Your company is also likely collecting survey data like NPS, Customer Satisfaction and maybe even Customer Effort Scores. But these efforts are not enough.
To reduce your risk of making a costly wrong decision that will increase the likelihood of a negative impact on customers, you need deep formal feedback systems. Focus groups, and customer interviews along key points in the customer journey will tell you exactly how your customers think, feel and why they behave the way they do. Customers churn or stay loyal because of their feelings about their customer experience with your company.
Let me ask you—
Do you know how the top 20% of your customers feel about your renewals process?
Do you know the myriad of expectations customers have from your most profitable and least profitable segments?
Do you know how your customers feel and think about your competition?
Or how about this–
Do you know what it would take to make your top 20% of your customers so unhappy they consider leaving?
If you’re unsure about the answers to these questions, it’s ok. A VOC program with a focus on formal customer feedback can help ensure that you can confidently answer these questions in the future.
If you’re curious to know more about creating a VOC program to reduce the risk of making an expensive wrong decisions or if you’re looking to increase the proper amount of formal customer feedback into your existing VOC program, Anita is Growth Molecules’s VOC professional that can help you.
You can contact her at VOC@growthmolecules.com and talk about how the powerful benefits of a properly run VOC program can help you, your company and your customers.
About the Author:
My passion is getting businesses to see that the better they know their customer, the better they can help their customers succeed and the better they can create an amazing customer experience. And the more their customers succeed and have great experiences, the more loyal they are.
I work with companies that want to do better for their customers by making the success and experiences of their customers the top priority.