Understanding Customer Lifetime Value: A Non-Geek's Guide | Blackboard equations

Understanding Customer Lifetime Value: A Non-Geek’s Guide

Understanding Customer Lifetime Value: A Non-Geek's Guide | Blackboard equations

What is Customer Lifetime Value and Why Is It Important?

Customer Lifetime Value (CLV) attempts to determine the economic value a customer brings over their “lifetime” with the business.  At the heart of understanding CLV lies the recognition that a customer does not represent a single transaction but a relationship that is far more valuable than any one-time exchange.

However, CLV is not about any one customer; it is about stepping back and taking a look at your customer base as a whole — understanding that while some never return and some never leave, on average there is a typical customer lifetime and that lifetime has a specific economic value.

Understanding Customer Lifetime Value is incredibly important for customer service professionals and for businesses of all types. Why?

Because if you don’t know what a client is worth, you don’t know what you should spend to get one or what you should spend to keep one.

For instance, if it costs you $100 to acquire a customer, and your customer’s CLV is $75, then we’ve got a problem Houston.

Understanding CLV allows you to drill down and understand the economic value of each customer, so you can make sound decisions about how much to invest in acquisition and retention.

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Paper Smile Face, Business Concept

National Customer Service Week 2011: What’s Your Plan?

This week, October 3-9, marks National Customer Service Week (NCSW). NCSW was established by proclamation of President Bush (#41) in 1992. The beginning of the proclamation reads:

In a thriving free enterprise system such as ours, which provides consumers with a wide range of goods and services from which to choose, the most successful businesses are those that display a strong commitment to customer satisfaction. Today foreign competition as well as consumer demands are requiring greater corporate efficiency and productivity. If the United States is to remain a leader in the changing global economy, highest quality customer service must be a personal goal of every employee in business and industry. (Read the full proclamation.)

Of course, if your organization is committed to the customer experience, every week should be customer service week; however, “official” weeks like this are a great opportunity to generate discussions with customers and team members and to take the time to do a little extra.

 

National Customer Service Week: A Roundup of Ideas

Paper Smile Face, Business Concept

Sometimes, it’s as simple as a smile.

Thinking of doing something special for National Customer Service Week? Take a look at the ideas listed below from some great customer service minds. Included is my favorite idea from the author’s list and a link to the author’s full post.

Shep Hyken: Ten Customer and Employee Focused Ideas for NCSW
  • Once a day throughout the week, distribute an article about customer service to all of your employees. 

(Shep has some great tips on his blog you can use.)

Richard Shapiro: National Customer Service Week, Ten Tips for Repeat Business
  • Say hello and smile. In this era of technology, people are more stressed than ever. Getting a big, warm hello can go a long way in giving a customer the feeling of “Hey, this company is really happy to see me.”

(Perhaps turn this into a contest — which CSR can get the most “you are so friendly” compliments this week.)

The Official Customer Service Week Website: Tips for a Successful Celebration
  • Distribute Certificates of Appreciation, Service Awards and small gifts… to those unsung heroes in other departments who make a great effort to meet customers’ needs.

(This website does sell commercial items for NCSW but also has some good information on the event.)

Kate Nasser: National Customer Service Week – Celebrate People Skills
  • Celebrate People-Skills. As your customer service teams celebrate with contests, parties, and picture taking, celebrate people skills (aka soft skills) with a thought for each day!

(Kate’s post was from last year’s NCSW, but I’ve been becoming a big fan of hers lately and loved her daily ideas).

 

One More Idea for National Customer Service Week

In addition to the ideas above, set aside a day or a morning/afternoon for an “Open Line to Management.” Have a manager and/or owner available to take calls from customers. Send out an email to your clients mentioning that, in honor of National Customer Service Week, we are setting aside a time to listen to our customers one on one. Encourage them to share any feedback they have, positive and negative. Possibly offer an incentive for anyone who calls.

 

So, had you heard of National Customer Service Week before? What was your favorite idea? Are you going to celebrate it in your business.

Pride Creates Bad Customer Service

How Your Pride Is Losing You Customers

In customer service, pride is a double-edged sword. Pride in your organization can cause team members to go the extra mile. However, pride of the don’t-disprespect-me variety can cause team members to respond unfavorably to upset customers. When the personal reaction to an unhappy customer trumps the professional reaction, pride has won, and your organization has lost.

Pride Creates Bad Customer Service

Upset with our service? Sounds like personal problem.

As much was we strive to setup customer service systems that proactively create great customer experiences, we will fail our customers on occasion. Sometimes it happens because we failed to deliver, sometimes it happens because of circumstances beyond our control, and sometimes it happens because even flawlessly executed our performance was not to the satisfaction of the customer.

We can be as proactive as we want; there will always be times when we need to react to a dissatisfied customer.

And it is in the reaction to dissatisfied customers that pride becomes a problem.

 

Way Too Proud to Beg

In many years working with employees and management on customer service, one of the biggest impediments I have seen to giving great reactive service has been the professional’s pride. From a psychological standpoint, most of us have been programmed to take the reactions that are typical of upset customers as disrespect or rudeness. Raised voices, sharp comments, angry ultimatums — all of these reactions are part and parcel of servicing customers, but they are also actions that can provoke a undesirable subconscious response.

Upset customers will push people’s buttons (if you don’t agree, then you’re not in retail). And it is your job as a customer experience professional to un-press those buttons, to react as a person whose job it is to delight the customer and not as a person who needs to buoy their self-esteem by “winning” the argument. If you want to create a world-class experience for your customers, then always remember…

Unless you are the company’s legal counsel, taking crap from customers is your job.

And therein lies the challenge. Personal reactions are natural reactions. However, part of what separates humans from animals is the ability to supplant instinctual reaction with conscious decision making.  As a group, we are able to overcome our reactions, and act within the context of a larger framework. As individuals, some of us are better at it than others.

 

Why Everyone Is Not Right for Customer Service

The inability of some to depersonalize conflict behaviors is one reason I disagree with the assertion that anyone can be trained to be great at customer service. While I do believe that anyone who has the ability to be a good employee has the ability to deliver a create proactive customer experience (in other words anyone who cares enough to go beyond the bare minimum), when you get into reactive service, particularly into problem management, the subset gets smaller.

Some people just aren’t constituted to handle it well. They cannot detach themselves, and they take the customers’ criticisms personally. They get their back up and being right becomes more important that winning the customer over.

If you win the argument, you almost always lose the customer.

I think the issue of pride in customer service is rarely talked about because it is difficult to address. It’s easy to drop platitudes like always be professional (I do it too), but in my experience, platitudes are not enough to over come basic human emotions and reflexive reactions. You need something stronger than professionalism — you need a mission. A mission to make sure that every customer has a great experience, and a mission to try to right the wrong when that does not occur. To succeed at that mission, team members need the self-awareness to not sabotage their own dedication to the mission with reflexive responses and subconscious defense mechanisms.

 

Attempting to eliminate pride from the service experience is a challenge. Each individual is different and trying to suss out these traits in the interview process will not always be easy. Like any organizational position, success comes from hiring people with the right temperament for the position and giving them the tools to be successful.

I will discuss techniques for helping customer experience professionals overcome prideful reactions in a future post. For now, when training for customer service, discuss pride openly. Help your team become more self-aware. And then, most importantly, heed your own advice.

 

So, does pride goeth before a bad customer experience? Have you ever had someone give you bad service because they wanted to be right not helpful? Have you ever delivered service below your own standards because your pride got in the way?

What is Excellent Customer Service Survey

What Is Excellent Customer Service?

Customer service is one of those topics where it is easy to speak in broad generalities. Sayings such as the customer is always right and service begins with a smile easily convey basic, unqualified principles that mask the fact that what defines excellent customer service will always be incredibly individual in nature.

However, while superior service is inevitably in the eye of the beholder, a focus on universal principles can provide organizations a worthwhile starting point to providing a customer experience that surpasses expectation. In evaluating what constitutes superior service, two basic ideas apply to almost any business.

 

What is Excellent Customer Service SurveyWhat is Excellent Customer Service?

Excellent customer service is a level of service delivery that manages to be both unnoticeable and remarkable at the same time.

 While these two conceptions might seem diametrically opposed, they are both part of a customer experience that defies the expected by delivering the expected — and then some.

Excellent Customer Service Is Unnoticeable

Awhile back I was discussing some challenges with a key vendor when I commented to her, “If you are doing your job right, you’ll be invisible to me. I shouldn’t think of you unless I am paying your invoices or there is an emergency.” You see, the regular problems were making the service erratic — sometimes great and sometimes terrible — and the regularity of the problems was enough to make the stand out moments unimportant.

The fundamental building block of excellence in customer experience is consistent performance of the basics in a way that meets expectations. And while meeting expectations is not an end goal, it is the base upon which superior service must be built. The product should work as expected, and the service should be provided as expected. Without this consistency of met expectations, stand out moments of above-and-beyond service will have little resonance. It is important to remember that…

Remarkable experiences will not save inconsistent performance.

Before you can truly provide excellent customer service, the basic expectations communicated by your brand promise must be met regularly and seamlessly.

Excellent Customer Service Is Remarkable

What takes customer service to the level of excellent or superior? Moments or processes that stand out in the customer’s mind. It is the extra touch at the end of a service, the same day turnaround for the need-it-now product, or the extra follow up at the end of a sales call.

Excellent customer service is created by layering moments of differentiation on top of consistent performance.

 How do you know if you are achieving these levels of service? You start receiving comments like these…

“I can’t believe you had that waiting on me, I am blown away”

“Jane really makes every visit a pleasure; make sure you keep her.”

“I’ve been getting this type of service for twenty years; this is the first time anyone has ever listened to what I was saying.”

 

In the end, each business must chart its own path to excellence by knowing its customers and its model. And while the details will vary by industry and application, the above basics are a sound starting point for all businesses. Create systems and training to produce your product or deliver your service consistently, and then look for ways to stand out in your customers’ minds.

 

When was the last time you had excellent customer service? What made it excellent? What steps do you take in your business to provide customer experiences that are consistent and/or memorable?