Perfecting Service Management

Issue #68

Tuesday, April 12, 2005

Mergers & Acquisitions: It's All About the Customer Base
by Kurt Jensen

Multi-billion dollar mergers and acquisitions are headline news. With the battle for MCI taking novel twists, bubble companies still consolidating and the renewed discovery that slugging it out with your competitor often ends up serving a quiet sideline player, it is easy to get caught up in the 'bigness' of it all. Call it "revenue stream" or "footprint density," but all of these situations have a common player: the customer base. Whether you're acquiring, being acquired, or merging as equals, don't forget about the customer, during due-diligence or post-merger integration.

Due-Diligence

When acquiring a company, look at customer churn to help determine your return on investment. For a situation without a significant number of tangible assets, you are most likely relying on the health of the customer base. Ask questions such as: how often does the customer base churn; what dollar value does that churn cost; and, what efforts have been made at reducing churn? The lower the churn, the higher the value of each customer. Along these lines, do you anticipate being able to slow churn? If so, you may be able to pay for a high-churn customer base and slow its turnover rate, thus increasing your return.


When being acquired, highlights of customer base stability will help you increase value. You have heard it before: the cost of customer acquisition far outpaces the cost of keeping a customer. Churn reduction investments not only contribute to immediate incoming cash, but increase the value of the transaction. Investing time to highlight low churn (rates as a %), value ($ over time) or some other way is time well invested. Ultimately, the more in order your metrics are, the easier it will be to convey your value.

Post Acquisition/Merger Integration

Merging disparate personnel, procedures, systems, and cultures can be a daunting task. Often, integration is driven to achieve bottom-line ROI results projected to justify the transaction. This means cutting and consolidating as quickly as possible, often without regard to how this transition is perceived by the customer. With so many aspects to consider, it's easy to forget about the customer. Keep in mind that customers don't care that your personnel costs are reduced; they care that they continue to get the same good service they've always received. This means customer touch-points and operational procedures need to be uniform, and where they're not, their differences must be transparent to the customer.


There are literally thousands of considerations related to mergers and acquisitions. Customer Centricity can help you through any stage of your merger/acquisition activity. While the bottom line matters, your success will be measured, in part, by the health and stability of your customer base.


Becoming Customer Centric - Respond to the Customer
by Craig Bailey

This step in your Voice of the Customer program could be considered the icing on the cake. Now that the organization is performing various elements of the VoC program, it is time to share the results with the customer. In summary, this will demonstrate to the customer that your firm truly values their feedback by responding in ways to improve the experience they have with your firm. Responding to the customer has two main aspects:

  • Responding to immediate needs
  • Letting customers know individually (where applicable) and overall (the broader customer-base):
    • What was heard/learned
    • What has been done
    • What will be done

We will start by providing an overview on how to effectively respond to the customers' immediate needs uncovered in your VoC activities.

Immediate Response Required

During the process of administering a VoC program, the customer may express items requiring immediate attention. These items could include leads for new business, up-sell and cross-sell opportunities, or areas of significant dissatisfaction from an irate customer. This is the moment of truth in the eyes of your customer.

Promptly responding to these items demonstrates to the customer how much you care about their business. Not doing so gives the customer the perception that you don't care, or (in the case of their sharing this information as part of a survey, interview or user group) is wasting their time by asking them to participate. A customer that has a need for additional services will now have time to shop the competitor. And, a customer that is dissatisfied with the product or service will only be further convinced of the lack of performance of your organization. The goal is to take this opportunity to show the customer how much you truly care about their needs.

The key here is ensuring that those customer touch-points, which are part of the VoC program, have the means to engage the normal channels of business to facilitate an effective response. It should go without saying that if a customer-facing person (such as sales/account management, customer service, etc.) observes a situation that would require immediate response, he or she should leverage normal operating procedures to do so. However, there may be other (internal or external) organizations that are not "as connected." For example, many firms have a specific department, or engage a third party, to perform their customer satisfaction survey. These entities may not "fully" appreciate the level of impact that the firm's products/services have on the customer, or know the most effective approach to facilitate a timely response to a customer's need. In either case, the person administering the survey needs to be able to identify those situations requiring immediate response and have a process for doing so in an efficient and effective manner.

For the purpose of this discussion, let's refer to these cases as a HOTLINE. There are three steps in setting up a process to effectively respond to HOTLINES:

  • Establishing the HOTLINE criteria
  • Implementing a HOTLINE team
  • Management Reporting

Establishing the HOTLINE criteria: The first step in setting up a HOTLINE process is establishing criteria for which real-time response is warranted. Examples could include identifying keywords that a customer may use when responding to a survey, or indicating that if a customer provides at least one response of "totally dissatisfied" to any survey question it is a qualified HOTLINE.

Additionally, the person administering the survey must be prepared to capture the complete context of the customer's comment. There is nothing worse for a dissatisfied customer than to go through a dissertation during the survey, on their areas of concern, only to receive another call from someone asking "so, why are you dissatisfied with our service?"

Implementing a HOTLINE team: The next step is to define, within the organization, the subject-matter areas (in most cases, normal channels of business) that are empowered to effectively respond to customer HOTLINES. This includes ensuring the team has the ability to immediately engage support personnel to resolve the customer's service issues, or be able to initiate the order process to fulfill a customer's requirement for new/additional services. For many companies, it makes sense to establish the HOTLINE process such that service issues go to the Customer Care department, and up-sell and cross-sell opportunities go to Sales.

A customer's dissatisfaction is in direct proportion to the gap between what they "believe" they were to receive and what they "perceive" they are receiving. This can be a contractual gap or it could be based on a misunderstanding of what they acquired. As such, the HOTLINE team must be knowledgeable about the customer, the products/services the customer presently has or is entitled to. They must also understand any prior complaints the customer has made. The outcome is that the HOTLINE team may need to explain that a particular item or service was not included in their purchase or lease. They should also be prepared to discuss how they may be able to obtain this added level of service, if it is an available option and they so desire it. This team, therefore, must be very knowledgeable about the firm's products and services as the appropriate response may simply be to reset the customer's expectations.

Management Reporting: The final step of the HOTLINE process is to produce management reporting on a frequent basis, with the goal of ensuring that appropriate attention is paid to HOTLINES.

Reporting should occur on a monthly basis, at the least. Information on the HOTLINE report should include the customer's company name, contact name, brief description of the HOTLINE, when it was detected, when it was initially acted upon, when it was closed-out and what the final resolution was.

Now when a customer satisfaction survey is administered, the team conducting the survey (the department or survey partner) has an approach to facilitate timely response if/when they sense that a customer's situation warrants it. They will know what criteria initiates this process, what information they should capture, and how to engage the appropriate personnel in the organization to follow-up with the customer.

Effectively responding to HOTLINES uncovered in the survey process simply requires a closed-loop process between those that administer the survey and the normal channels of business. This is a critical step to fulfill a customer's unmet needs and respond to their concerns that may have been previously unknown to the firm. In all cases this is a win-win situation.

In the next edition we will provide an overview of how to respond to specific customers and the customer-base overall, to demonstrate your commitment to listening to the "voice of your customer."


If you'd like to review an outline of the complete VoC program, feel free to download the presentation recently delivered to PDMA's VoC conference.

View previous articles in this series.

Contents

+ Mergers & Acquisitions
+ Becoming Customer Centric
+ Recommended Reading
+ Reader-Input Incentive Plan
 


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Recommended Reading

The customer-centric approach works - just ask Best Buy Co., Inc., North America's leading retailer of consumer electronics. Best Buy announced last week (BusinessWire, 4/1/2005) that it "plans to accelerate the conversion of its stores to its customer-centricity operating model" in fiscal 2006, after a successful trial program where recently converted customer-centric stores outperformed other U.S. Best Buy stores "in terms of the comparable store sales gain for the fourth quarter."

To learn more about this case-study in customer centricity, check out Best Buy Rolls Out Customer-Centricity Program by Martin Middlewood in CRM Buyer.

Reader-Input Incentive Program
Do you have opinions or input on any of our articles? Send us feedback you think might be useful to our readers. If we publish it, you'll get your pick of an item from the Customer Centricity Online Store.


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