On a recent business trip, Cheryl arrives at her hotel and is delighted to find a plate of warm chocolate chip cookies waiting for her in the lobby. A week later, when she needs a duplicate copy of her misplaced bill, however, she is frustrated with the number of phone calls and emails required to get it.
Does Cheryl’s delight at the cookies outweigh her frustration at trying to get her bill? Which experience has more of an impact on her loyalty to the hotel chain?
Delighting customers, may create “feel good” moments, but doing so has low impact on loyalty or repeat business.
The hotel’s effort to delight Cheryl is a classic play for customer loyalty. In an era of commoditization and customer empowerment, organizations seek to differentiate their products and brands with exceptional customer service. Service leaders believe that if they can exceed, not just meet, customer expectations, they will boost loyalty — exponentially.
“Companies told us that they try to delight customers because they believe there are significant economic gains to be made by exceeding the service expectations of their customers,” says Nick Toman, group vice president at Gartner and co-author with Matthew Dixon and Rick Delisi, principle executive advisor, Gartner of The Effortless Experience, Conquering the New Battleground for Customer Loyalty (Portfolio/Penguin, 2013).
In reality, exceeding expectations, or delighting customers, may create “feel good” moments, but doing so has low impact on loyalty or repeat business.
Why effort matters more than delight
In 2013, research leaders with CEB, now Gartner, set out to answer three critical questions for customer service leaders:
- To what extent does customer service matter in driving customer loyalty?
- What can customer service do to drive customer loyalty?
- How can customer service improve loyalty, while also reducing operating costs?
They conducted a quantitative research study with hundreds of customer service organizations and 97,000 customers to investigate their service interactions. The data uncovered four major, and unexpected, findings.
Finding No. 1: The delight strategy doesn’t pay
After analyzing the responses of 97,000 customers, it became clear that there was virtually no difference between the loyalty of customers whose expectations were exceeded and those whose expectations were simply met. In fact, loyalty actually plateaus once customer expectations are met.
Just because your customers are satisfied, doesn’t mean they will keep buying from you
“Delight, it turns out, is expensive,” Toman says. Roughly 80% of senior leaders surveyed said the strategy of exceeding customer expectations cost 10% to 20% more in operational costs.
“If we look at the customer data, their clear preference is for organizations to simply solve the problem,” he explains. “There’s no customer need for delight.”
Finding No. 2: Satisfaction doesn’t predict loyalty very well
Many companies still consider customer satisfaction (CSAT) rates as the barometer for customer service success. Unfortunately, data from the survey shows that a strong CSAT score is not a reliable predictor for whether customers will be loyal.
“When we reviewed the data, we learned that 20% of customers who reported they were satisfied with their service interaction also expressed at the same time that they were actually intending to leave the company and buy from somebody else,” Toman says.
In other words, just because your customers are satisfied, doesn’t mean they will keep buying from you. “You can liken it to a customer of a local steakhouse who loves his steak dinner but will be sure to try a new steak restaurant when it opens,” Toman adds.
Finding No. 3: Customer service interactions drive more disloyalty than loyalty
Think of customer service like lifeguards; they’re usually called upon when something goes wrong. Yet the research shows that a customer who requires a service interaction is four times more likely to drive disloyalty than to drive loyalty.
While a life may not be at stake, a positive experience is. That’s because the data shows that people talk much more frequently about a negative customer service experience than a positive product experience. And they spread negative reviews far wider than positive endorsements.
Drivers of disloyalty hinge on the amount of effort customers must use to resolve a service issue
“The data from our study showed that 45% of the people who had something positive to say about a company told fewer than three other people,” says Rick DeLisi, principle executive advisor at Gartner. “However, 48% of people who had a negative experience told more than ten people.”
The goal for customer service leaders, then, is to focus resources on mitigating customer disloyalty. How?
Finding No. 4: The key to mitigating disloyalty is to reduce customer effort
It turns out that the drivers of disloyalty hinge on the amount of effort customers must use to resolve a service issue. While delighting customers with “wow” moments—such as freshly baked cookies—might warm their hearts, it won’t be the key ingredient for them to book another night at your hotel.
Here’s what would: If when Cheryl emailed the hotel to request the bill from her stay, she received it within ten minutes, along with assurances that, next time, it would be emailed to her immediately after check-out.
Customer loyalty depends on how easy you make it for your customers to do business with you
“We found that the majority of customers, notably 96%, who had high-effort experiences reported being disloyal, compared to only 9% of customers with low-effort experience,” says Toman.
The key sources of effort include:
- The need to contact a company more than once
- Being treated like a number or what’s referred to as “generic” service
- Having to repeat information
- The customer’s perception that it takes additional effort to resolve an issue
Furthermore, customers want to contact companies through newer, self-service channels, and service organizations can reduce effort by alleviating opportunities for the next issue to arise.
4 principles of low-effort service
Based on the findings from the survey, the team at CEB, now Gartner, embarked on a multiyear study to discern the sources of customer effort and what service organizations can do to minimize those efforts. The results are four best practices shared by low-effort service organizations.
- Boost stickiness of self-service channels so customers don’t have to call the company if they want to resolve issues themselves online.
- Use “next issue avoidance” practices by moving beyond first contact resolution to help reps head off the potential for subsequent calls.
- Succeed on the emotional side of effort by teaching reps how to actively manage the customer interaction with psychological and behavioral practices that reduce the “feel” side of a customer’s perception of effort, even if the number of things they have to “do,” or the complexity of the interaction, can’t be changed.
- Reward quality over efficiency by giving reps greater control to manage individual interactions.
Imagine teaching your service reps to focus on these tangible techniques to reduce effort. It’s easier to measure how many customers use self-service channels or never call back than whether they ate the cookies or even like chocolate.
Wowing customers requires high investment and relies on subjective tastes. And as the data shows: Customer delight won’t bring them back to your brand. Rather, customer loyalty depends on how easy you make it for your customers to do business with you and that’s when they’ll return your service with their repeat business.