Archive for the ‘customer satisfaction’ Category

Customer satisfaction drives profits

Most of the customer-facing employees don’t know that short-term and long-term profit of a company heavily depends on customer satisfaction. This is especially true in Germany.  

By not addressing customer satisfaction, company’s management doesn’t utilize the full financial potential of the company. The management may not provide the right incentives to its employees to foster customer satisfaction, like tying compensation to customer satisfaction. Or even worse, it doesn’t understand this dependency itself. So, if employees know about the relationship between customer satisfaction and profit, they may not care. 

But understanding profit drivers is not rocket science. Since the goal of every for-profit company is to make profit, as the name implies, every company should know its internal and external profit drivers and be able to control at least the internal ones. Since customers are those that through purchase of services and goods generate revenues for the company, making customer satisfied will drive revenues. This satisfaction doesn’t depend only on the services and goods sold to customers, but also on the overall experience they have when dealing with the company before, during, and after purchase. In the service industry it is especially this experience that drives customer satisfaction. 

Every company has processes in place for how to develop and deliver goods and services to customers. These internal processes are developed by company’s employees, as are the actual goods and services. While developing the goods and services and the processes behind them, employees need to keep customers in mind to ensure customer satisfaction. 

This concept of employees driving internal processes, these processes driving then customer satisfaction, and customer satisfaction driving at the end company’s profit is best captured by the balanced scorecard framework. The balanced scorecard framework has been developed in 1992 by two Harvard professors, Robert Kaplan and David Norton, and has been implemented in thousands of organizations worldwide. 

In addition to not realizing how customer satisfaction drives profits, most companies also don’t realize that poor service experienced by a customer doesn’t impact only the future life time business with that customer, but also may impact the business with other customers. A customer shares his or her service experience, especially the poor one, on average with seven other people within immediate circles of family, friends, and colleagues. Hence, a company not fixing a negative service experience is running the risk of losing life-time business with eight existing or potential customers. 

It is advisable for German companies to understand how customer satisfaction drives profit. And they should then pay attention to all drivers of customer satisfaction in order to fully utilize the financial potential of the company.

Process again

How process execution is important in Germany, regardless of implications on customer satisfaction, is evidenced by the following examples.  

During a recent taxi ride from the airport home, I asked the taxi driver to take a particular route, which is shorter than the typical one that most taxi drivers take and has usually less traffic. The taxi driver wasn’t pleased with me giving him directions since this apparently didn’t fit with his process. He not only mumbled something unintelligible, but also threw in a nasty comment after dropping me off. When I tried to confront him, he drove away. This shows how deeply embedded the process execution is, where a taxi driver doesn’t realize the impact of his customer unfriendliness on his business.  

This wasn’t unfortunately the only bad experience with unacceptable taxi service. On another occasion the taxi driver was driving so fast through the city that he scared some pedestrians. When I asked him to slow down, he started to argue that it’s not my business how he drives. Although I was able to convince him otherwise and he then drove me home at appropriate speed, he too threw in a nasty comment after dropping me off. 

Another example comes from Edeka, a grocery store chain. Unlike most other stores, Edeka had a policy to require additional proof of identification when paying with electronic cash for purchases over 100 Euros. The cashier had to write down the ID info on the store receipt, which didn’t only slow down the checkout process for the paying customer, but also for all other customers waiting in line. Now the store has a special card reader for purchases over 100 Euros. However, there is only one special card reader to be shared among five checkout stands and one that requires special activation by the supervisor. You can imagine the impact on the checkout time. Edeka simply doesn’t get it.

Process, process, process

Let’s look today at three examples of how predefined processes are executed in Germany regardless of whether they address customer needs.

The first example shows how German companies are worsening their already low service perception by making it difficult to return a product. Customers at V-Markt, a discount department store chain, are required to deal with four store employees to return a product: (1) signature at the store entrance that the product is being brought in, (2) signature by a department manager that the product is being returned in a new condition, (3) signature by the cashier supervisor authorizing payment return, and finally (4) return of payment by the cashier. And when the customer complains about this ridiculous process, the answer is “this is how it is”.

A disregard for customer needs is reflected in the reimbursement process of private health insurance companies. The customers need to pay upfront for each doctor visit, hospital stay, or prescription and then submit claims for reimbursement to the insurance company. Is this process really customer friendly? Why can’t the health service providers submit the bills directly to the insurance company eliminating this process for the customers, like it’s typical in the
US?

The general lack of customer service also impacts road traffic. At a recent highway construction, two lanes of a four-lane road were closed to enable the construction work. But after 6pm on a Friday when the construction workers went home for the weekend, the two lanes were still closed impacting traffic the whole weekend. In the US or Japan, on the other hand, the construction work happens between 11pm and 5am, the road is then temporarily paved and all lanes are available during the typical traffic hours. In Germany, of course, labor unions have a strong say in activities like these, but decisions makers there have the “customers are last” mindset and this is exactly my point.

In Germany, process comes first, regardless of its impact on customer satisfaction.