European World Class Support Showcase

Oct 28th, 2004

Munich, Germany

Top Box Measurement - Creating

Customer Loyalty
John Hamilton
President
Service Strategies Corporation
San Diego, CA

www.servicestrategies.com  Jhamilton@servicestrategies.com
John Hamilton
President & CEO
Service Strategies Corporation

John is the founder of Service Strategies Corporation. He has more

than twenty five years of service industry and software engineering
experience. He has significant international expertise from working the
Americas, Asia-Pacific and European regions. In addition to his service
management knowledge, John has a well-rounded background from
managing engineering, quality control, and training organizations.
About Service Strategies Corporation
Founded in 1999 and headquartered in San Diego, CA, Services
Strategies advances service excellence for quality-minded
organizations through industry-standard certification and training
programs that ensure delivery of consistent, high-quality customer
service and support.
“Top Box Measurements - Creating Customer
Loyalty”

We’ve all heard about “top box” scoring. But what does
it mean? What is its correlation to delivering world-
class service and reaching beyond customer satisfaction
and creating customer loyalty?

In this session, you’ll learn in detail about the various

measurement methodologies and rating scales and how
they can impact the economics behind providing
exceptional service in the IT industry. We’ll discuss the
fundamental differences between delivering good and
exceptional service, how it affects your customer loyalty
and customer retention efforts, and how top box
measurement fits into the picture.
 Agenda

 IT Industry Loyalty Trends

 Customer Satisfaction versus Loyalty
 What is Top Box Measurement ?
 Customer Loyalty Management
 Customer Segmentation
 Return on Investment
 Best Practices to Drive Customer Loyalty
IT Industry Loyalty Trends

In the days of a booming economy,

IT companies based their success
on continuous product innovation.

During an economic slow down,

customers need more than product
Features to earn their loyalty.
 IT Industry Loyalty Trends

IT companies claim an 80% average rating

from customer satisfaction surveys

What do customers really feel about

loyalty?
 IT Industry Loyalty Trends
LESS THAN HALF OF IT
CUSTOMERS ARE TRULY LOYAL
 Only 44% plan on doing business with
current IT vendor
 30% feel trapped and are unhappy
 23% are high risk and unlikely to continue
relationship
 3% are vulnerable to competitive product

Source: 2004 Walker Information Benchmark study for the IT

Industry
 Customer Satisfaction versus
Loyalty

Satisfaction = Meeting minimum expectation

Loyalty = Exceeding customers expectation

and securing future commitment

Retention = Satisfaction + Loyalty

 Loyalty Factors

1. Product capability and quality

3. Customer service experience

5. Ease of doing business

7. Price versus value

9. Company reputation
Customer Satisfaction Measurement

 Most Service Vendors have a survey process to

measure customer satisfaction
 Periodic surveys
 Event/Transactional surveys
 Establish required sample size, target
response rates and confidence level
 Quantitative results and verbatim feedback
gathered
 Results are analyzed and communicated
 Customer Satisfaction Rating Scales
 Customer survey rating scales have
“Satisfaction” set at the mid-point or
just above

Example from seven point scale

Extremely Very Very Extremely
Dissatisfie Dissatisfied Satisfied Satisfied Satisfied
d
 Top Box Measurement

“TOP BOX” IS SIMPLY A TERM USED TO

DESCRIBE THE 80TH PERCENTILE OF THE
SURVEY SCALE
 Definition from the “Support Center Practices”
Certification program
 Highest rated measurement to better
understand customer loyalty and retention
 Question:“Overall,
Question: how satisfied are you with the
support provided by your vendor ?”
Top Box Measurement Scales Rating
10-Point
Scale

10 
Extremel
80th
y
Percentile 9
7-Point Satisfied
Rating Scale 8
7 7

6 6 Satisfactio
4-Point n
Rating Scale 5 5
4 4 4
3 3 3
2 2 2
 Extremely
1 1 1 Dissatisfie
Customer Loyalty Management

Companies need to hang on to every

customer. Acquiring new business is
difficult and costly.
 CLM is a method to predict future customer
behavior
• It is forward-thinking
• Understand how customers feel about you
• Its strategic and tactical
 Customer Loyalty Management
Strategic and Tactical
Strategic Tactical
 Measure loyalty across  Distribute information to
the organization owners of relationships

 Segment by region,  Discover and act on

product, customer type customer problems
etc.
 Engage in one-to-one
 Discover customer issues loyalty management with
each customer
 Forecast churn rate
Four Categories of Customer loyalty
Benefits of Truly Loyal Customers

 Immunity
 Inoculated against competitive threats

 The big “R’s”

 Relationship and revenue
 Reference-ability
 Repeat business
 Customer Segmentation

 Segmentation of customers for loyalty

analysis
 Top revenue accounts – 80/20 rule
 Geography
 Products and Services
 Markets
 ROI for Loyalty

There are no scientifically proven

methods to accurately measure
customer loyalty and associated ROI.

HOWEVER,

“Top Box” is a good starting point along

with customer specific financial metrics.
 ROI Loyalty Measurement Approach
1. Segment customers - select top 20% of
revenue producing clients
2. Plot 12 months of “Top Box” loyalty results
from satisfaction surveys
3. Establish customer specific financial metric
(revenue/customer, margin/customer etc.)
4. Plot alongside the loyalty metric
5. Observe linkage between the two metrics and
determine the impact each has on the other
6. Create a Customer Loyalty INDEX
 Life Time Value Analysis

 LTV is a method for determining the complete

financial relationship with a customer
 Analysis includes cost and revenues:
 Cost of acquiring customer
 Cost to sustain customer
 Revenues generated over lifetime of relationship
 Typically, 60% of a company’s revenues come
from existing customers
 Reducing the support demand or cost to
support a customer can increase LTV
Best Practices to Drive Customer Loyalty

1. Account Management
2. Compensation linked to satisfaction &
loyalty
3. Complaint process
4. Service performance metrics
5. Quality programs
6. Lifecycle and Retention measurement
 Account Management
 Technical Account Management role
 Prime interface, dedicated to taking care of
the customer
 Become an extension of the customer
organization
 Manage service problem escalation and
resolution
 Customer advocate
 Compensation Linked to
Customer Satisfaction & Loyalty
 Management goals and incentives tied
to loyalty
 Service employees compensation also
linked to customer satisfaction
 Customer - Employee Loyalty Link
 Loyalty targets established and
reviewed periodically
 Complaint Process

 Company wide process that will

expedite the resolution of all customer
complaints
 Complaint ownership
 Follow up on negative comments from
surveys
 Complaints are opportunities to increase
loyalty
 Service Performance Metrics &
Monitoring
 Performance metrics that have a direct
impact on customer satisfaction
 Responsiveness
 Resolution
 Status and follow-up commitments
 Defect tracking and patches
 Product release commitments
 On-time delivery and order fulfillment
 Quality Programs

 Monitoring of service interactions

 Supportability feedback included in
product
 Customer feedback included in product
 Release standards
 Defect per KLOC
 MTBF rates
 Uptime guarantees
Lifecycle and Retention Measurement

ONE SIZE DOESN’T FIT ALL CUSTOMERS

 Service product need to evolve with
customer needs
 Understanding customer retention rates
 Method for capturing WHY customers
leave and how to prevent defections
 Determine cost of a lost customer.
 Ultimate Loyalty Indicator
Renewal Scorecard – Reason for not renewing

Won’t Renew Possible Renewal Definite Renewal

 Pricing
 Service & Support
 Product
 Corporate
 Other
Characteristics of Companies with
High Customer Loyalty
 Customers define quality
 Provided a variety of services
 Services are customized to suit client
 Convenience of services
 Timeliness of services
 Understand expectations and set customer
service standards well above these
expectations (to “delight” customers)
 Scorecard


Employee Satisfaction

Accountability


Customer Satisfaction
& Loyalty 
Financial
Results
 Conclusion

Loyalty is the commitment you must

EARN from your customers in order
to maintain an ongoing profitable
relationship