Customer Loyalty

The real key to creating the eternally fantastic experience

April 14, 2022By Mike Hohnen

The Kano model teaches us that a service experience has 3 layers. There are basic attributes that need to be in place and that all services in a given category need to have to even qualify as a service. Then there are the performance features, attributes that define the better experience from the very basic experiences. And finally, there is a category of attributes that we call delighters. Things that make our most loyal customers come back again and again. Not only do they come back, they also tell all their friends.

But as we saw in my previous blog post, the trouble with delighter is that they have a tendency to fade over time. There is this notion of drift. Free high-speed internet in a cafe is a great example of this. So this puts all service providers under pressure to constantly innovate. They need to come up with new ways to delight their audience or risk fading into oblivion.

But there is actually another way to do it. There is one type of delighter that somehow never goes stale, that always stays fresh, and that is incredibly difficult for your competition to copy.

The key to understating this is likability.

Think about your own patterns. There are some services that you’re frequent not because of their physical attributes or technical specifications. You may even visit these services despite them not being quite up to par on some of these physical attributes. But there is one or often a whole crew of people that you find likeable. When I lived in Cape Town, we often used to go to Roberto’s. It was not the smartest cafe in town. It was also not the most elaborate culinary experience. But Roberto’s had one thing none of the smart cafes could match; there was Roberto and Roberto was immensely likable. Ah, you may be thinking, but that is a question of DNA, the Italians, the Greeks they know how to do to that, the rest of us don’t have those genes.

Not true.

As Rohit Bhargava explains in his lovely book Likeonomics, research has made the secret available. We know the components of likability and we can apply them to our own way of working and when can train our crew to practice these principles as well.

The key ingredients are: Truth, Relevance, Unselfishness, Simplicity, and Timing.

– Truth: you trust them. When the waiter says the special today is delicious, you know he would not say it if he did not actually mean it. He knows you and when he says you won’t enjoy that wine, you are so grateful

– Relevance: The service provider is not trying to upsell you like a robot (I so hate that expression “upsell”). They make relevant suggestions that actually enhance your experience.

– Unselfishness: They go out of their way no matter what to make sure that you have a great time, even if it is not always the most convenient for them. A hotel where I have conducted workshops recently has two crews working the restaurant. One crew always sets the lunch table for my group in the window area where there is a pleasant view and lots of light. But it is the furthest from the kitchen. The other crew always sets the lunch table at the other end of the restaurant, not nearly as nice. But it’s closer to the kitchen. One crew is likeable, the other one much less so. It comes through in all the little details of how they work because likeable is also an attitude.

– Simplicity. As my vegetarian chef friend says to create a great salad, use only three ingredients; that is what makes it delicious and elegant. As opposed to the salads where they dump the whole fridge into your salad bowl, they mean well I know, but…

– Timing: The person servicing you understands empathy. They are aware of what is going on for you and they adapt their service delivery to suit you. They understand the difference between coming in for dinner before a movie and coming in for dinner to celebrate your spouse’s birthday. And that is all about timing.

Now think again about some of those service experiences that you keep returning to again and again. I will bet you that it is because they are likeable.

And if you can implement these basic ingredients into your service experience, you have discovered the Holy Grail of delivering fantastic service experiences. The concept is simple. The execution is what makes it hard.

Check out the book: Likeonomics: The Unexpected Truth Behind Earning Trust, Influencing Behavior, and Inspiring Action

If you are not familiar with the intricacies of the Service Profit Chain, we have a special treat for you:

You can download Mike’s book Best! No need to be cheap if … for FREE using this coupon 8WG55DP7C3. This is only available for a limited number of 30 people so first come first serve!

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What is the difference between service levels and service standards?

April 13, 2022By Mike Hohnen

Service levels and standards

A key part of implementing the Service Profit Chain’s thinking is to work on consistency; in order to do that, we need to have a clear understanding of what the difference is between service levels and service standards.

The easiest way to understand this is to look at a few examples.

Many independent restaurants have high levels of service. But they may not have high standards. On the other hand, McDonald’s has a relatively low level of service, but has very high service standards, while Ritz-Carlton hotels have both high levels of service and high standards of services. And the greasy spoon down the road has neither service levels nor high standards.

Service Levels.001

Standards are all about consistency. We do things in a certain way, always. Levels of service are all about how much time and effort you put into the delivery process.

Many independent restaurants and other small service businesses go out of business because they lack service standards. Their delivery is inconsistent and creates confusion in the marketplace.

Our level of service needs to fit with our overall value proposition. How much service does this customer segment need and are they willing to pay for it?

Understanding this is crucial to building loyalty.

This blog post is part of a series of answers to frequent questions that I get around the concept of the Service Profit Chain. In future’s posts, we will continue to explore other key points. If you would like the full concept served up in one go, you will find Mike’s book “Best! No need to be cheap if…” HERE.

If it is all about loyalty, does satisfaction matter?

April 13, 2022By Mike Hohnen

Consistency

It is true that in the Service Profit Chain framework, there is a huge emphasis on establishing loyalty; loyalty is the key driver of profit and growth.

Before we can even hope to establish a relationship that will lead to loyalty, we must ensure that we have a firm grip on the basics and that we can deliver on our promise every time. The keyword here is consistency, the key driver of basic satisfaction.

Consistency or lack of consistency is also one of my pet grievances. Consistency is the flip side of reliability. If as a customer I had a great experience last week, you as a service provider have implicitly promised me that I will have the same experience when I return next week.

If not, you are not only unreliable in my eyes, but you are also performing below my expectations, and we all know that meeting expectations is the first key to customer satisfaction.

This is a balancing act because, on the one hand, we would like to see creativity and initiative on the part of our teams, but on the other hand, we need to deliver a product that is as expected.

The name of the game is to generate repeat business. Customers return to get more of what they enjoyed the first time. If they don’t get that, then they could just as well have gone somewhere else.

Just think back for a moment about how many times in your life you had a great experience somewhere, and then went back only to find that what you had last time was not what you got the next time. Did you go back a third time just to make sure?

Probably not.

Where do you go frequently? Most probably to a place that is very consistent in some aspect of their service delivery that is important to you. That consistency is what brings you back.

Requiring consistency in the delivery process is universal across all types of services. It is the foundation of your success, and that applies to all service businesses, the way your insurance company processes your claim, the way the consultant interacts with you, how your auditing firm performs the audit. You return to the same supplier in all of these situations because you liked the way he or she did the work.

Together with emotions, consistency is an important element in our ability to recall one service experience more easily than others. You remember the consistently good experiences. They stand out. You have a much harder time remembering inconsistent experiences because you easily confuse them with all of the other inconsistent experiences that you have had.

Customers come back to experiences that consistently live up to their expectations. When that happens, we call it loyalty. Loyalty is built on consistency. Never forget that.

So take a good hard look at your basic processes, are they consistent?

How does one design a great experience?

April 13, 2022By Mike Hohnen

Positive Experience We talk a lot about the customer experience. We even talk about an experience economy. But what do we actually mean, and when can we qualify something as an experience?

Firstly, let be clear. Everything is an experience. Unless we have managed to shut down every sensor in our system, we will be experiencing something. The challenge is that experiences come in three broad categories: God, bad and indifferent. Most of your experiences belong to the last category – indifferent. If I ask you ‘So how was your train commute this morning compared to the same Monday last year?’, you would probably give me a rather blank stare.

This Monday last year? Sorry, I can’t remember at all what that was like.

Why not? Because the experience was bland, it was no different from all your other morning commutes. To put in very simple terms, there was no emotional trigger.

What makes us remember one experience and not the other depends on to what degree our emotions were stirred. Remember your first teenage date? Most of us do. Or the birth of your first child? The stronger the emotion, positive or negative, the more the experience is etched into our memory.

So most of our experiences are quickly forgotten. There is no emotional trigger. What we retain are the negative and the positive experiences.

So what do we mean by positive and negative in this context? Do I need to bring in a 12 man Mariachi band for this wedding party to be successful or would a 3 piece Jazz trio work just as well or better?

It’s not about the ‘thing’.

It’s about the customer and their perception of what is going on. You see, what causes a shift in our emotional makeup is tied to shifts in the circumstances that we happen to be in. When circumstances change to the better (compared to what we expected), then we are slightly happier; if they shift to something much better than we expected, we are very happy. On the other hand, if they shift to something worse than we expected, we are miserable. And if everything is running exactly as we thought it would, we are … indifferent.

Once we understand this, we have a great design tool at our disposal. We need to work on managing expectations. So standing in a queue at the airport security for 10 long minutes is hell on earth if you thought you would be through in a breeze; but it’s actually not too bad if there is a sign that says from this point on just 10 more minutes, and if we then get through in 8 minutes is actually a good experience.

In most types of customer journeys, there will be things that need to happen that may not be easy to frame as positive. Queuing is one, having a tooth fixed at the dentist might be another. It is not always possible to turn negative experiences into something positive but we can often neutralise them by putting the customer more in control, helping them set their expectations. So my dentist will say ‘In a moment I am going to do this. It might be a bit painful but it’s quick and you will feel much better afterward.’ Now I know what to expect. Ouch! It happens exactly as she said, so no shift in my emotions. Then she finishes up and we have a little chat about my last vacation and what I plan to do next weekend. She is such a nice lady. And there you go. The negative aspect was neutralised and she ended on a positive note making a personal connection: Man I just love going to the dentist.

So if you want to design a great experience, you need first to map out the customer journey, touch points by touch points. Then you make a note, for this type of customer persona, would this be considered positive, neutral or negative? Then, make a plan to eliminate or neutralise the negatives, upgrade a few of the neutrals to positive and make sure that whatever else happens, you end the experience on a positive note. Nothing affects our emotional state as much as the way things end. A movie that ends on an unhappy note is rarely a success. It just doesn’t work.

And finally, what is the one thing we can always do that consistently exceeds our customers’ expectations at any touch point? Be nice and make a personal connection. It blows them away.

What do you need to focus on if you in order to create a dream team?

April 13, 2022By Mike Hohnen

In my view, the three cornerstones in the thinking behind the concept of the Service Profit Chain are:

Customer Loyalty – as the key objective
Value – understanding the true need of the customer
Dream Team – the people that actually make it happen

We have already looked at Loyalty and Value in the previous post.

In this post, I would like to explain the 6 key ingredients in creating a dream team:

The Right People

Careful selection of new recruits. Hire for attitude. Train for skills. Coach for performance and that includes dealing with the bad apples.

Continuous Improvement

Best in class training and development at all levels in the organization. Continuous improvement is considered one of the great benefits of the job. “In this job, I grow”…

Great Support Systems

Service is not just something the frontline does for our customers. Service is our culture. Employees and managers, who do not have customer contact, service the employees that do. (Our IT department is not the IT-Police – it is an internal service department that supports the frontline in getting the job done.)

Empowerment/autonomy

The best service employees take pride in solving the problem on the spot. So the freedom to act is hugely motivating. Southwest Airlines famously tells its employees, ”You may do anything you are not uncomfortable doing to solve a passenger’s problem.”

Clear Expectations

In the same way, that anyone who has made it to a great sports team knows what is expected of them, employees in the best service organisations also know what is expected of them. It is part of their motivation to be part of a team that is not afraid to set the bar high. Candour is a key element of high-performing teams.

Appropriate Rewards and Recognition

Focusing on what works, celebrating success, and acknowledging each other’s contributions makes work meaningful.

The principles are not complicated. There is no magic involved. But it requires commitment and persistence to get it right. When you do, the benefits are amazing.

You can download the Dream Team checklist below and benchmark yourself!

Dream Team Questions

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How is customer value created? And who does it?

April 13, 2022By Mike Hohnen

Service

In a previous question, we looked at what value is to a customer, how they calculate it in their mind if they received value or not. In this post, we will look at how and by whom is the value then created?

If we go back to the basic definition of service, then we know that Service = Result – Experience.

The experience part is relatively straightforward. We need to provide a good experience at all the touch points and most reasonably successful service organisations understand that.

We can get back to how to do this in a future post. But what truly separates the great from the good is their understating of the result bit.

If I walk in to a store to purchase a hammer of a certain size and make, and I leave the store with exactly that hammer then it is relatively easy. My primary result was to purchase a hammer and that is what I did.

But what is the result that I am looking for when I have a two hour layover in an airport? Or what is the result that I am looking for when I as the CEO organises an offsite meeting for my top ten managers at a conference center? What is the result I am looking for when I check in to a hotel?

The mediocre service providers assume that it is the primary product that is the result. The bed to sleep in. A conference room with a projector etc. But that is not the point. The hotel bed is the solution to a need, and the need may be a good night sleep. The conference room is the solution to a need that could be about undisturbed workspace with no distractions.

When I say ‘could be’, it is because we can’t be sure. Most of these service needs are highly subjective and individual.

So we have two choices. We can give everybody the standard solution and hope that it covers some or most of their needs. Or we can take pride in discovering what the real result is that they are looking for and deliver a customised solution.

When I explain this during my Service Profit Chain seminars, I often hear grows of protest at this idea: “But we don’t know. How on earth should we know what the need behind a conference room booking is other than they obviously want a conference room? We have hundreds of guests each day, how are we to understand what each and everyone’s different needs are. How are we going to do that?”

It quite simple: Ask!

Initiate a conversation that tries to explore and uncover what the need is behind the request for a product. Just like your doctor does. You don’t go to your doctor and say hey could you give me a box of the blue pills, they were wonderful last time. No, your doctor will investigate, and question and use his intuition and experience in order to determine what he thinks is the real need. Once that is identified, he prescribes the best product to solve the need.

That is exactly what our best service providers do as well. What makes them outstanding at their craft is that they investigate, question and use their experience and intuition in order to understand what the real need is. Once they understand that, then they use their professional expertise and knowledge of their product to propose the best possible solution to exactly that need. And funnily enough, that always creates an exceptionally happy customer. Go figure.

If it is a complex service delivery then it requires a lot of time and effort. If it is a simple service delivery, it’s easier to do. Here is a simple example:
Two people come into our restaurant and ask for a table for two. Seated, we give them the menu and let them know we will be back shortly. We come back. They order. Food arrives. They eat, pay and bye bye. Standard solution, that was the product the client asked for. they were not unhappy you could claim.

Let’s rewind.

Two people come into our restaurant and ask for a table for two. Seated, we give them the menu and ask so have you been here before? Their answer will give us valuable information about what’s next to say (Do they need help in understanding our restaurant concept / menu or do they know it well and need help to learn about new initiatives specials etc.?)

Then, we ask casually: So you look really happy tonight are you celebrating something? With a bit of luck, we get some really valuable information back:
a) Oh no we just escaped from the kids and we are off to a movie (Meaning they are on a limited timeframe and we need to adapt to that.)
b) Yes we are actually. It’s my wife’s birthday today. (Meaning they are here for the evening and they would like it to be special somehow. Just sticking a flare in their dessert is already a much better experience than the standard solution we started with if you get my point.)

A skilled service provider will ensure that they not only have the evening they dreamed of but they will probably also spend more than they would have if we had not had this opportunity to really understand their need. The better we understand the more values we create.

And that brings me to favourite peeve. I am not mad about the expression ‘Up-sell’. It sounds like we are force feeding them more than they need. But I do encourage the service sale, which is the sale you make once you have understood that here is a deeper need than what was originally voiced by the customer. By letting them spend more on achieving their real need, you are giving them fantastic service.

So how is value created? By uncovering the true need: Understanding what is the real result they are looking for and then customising your delivery to fulfill that need in the best possible way.

This blog post is part of a series of answers to frequent questions that I get around the concept of the Service Profit Chain. In future post, we will continue to explore other key points. If you would like the full concept served up in one go, you will find Mike’s book “Best! No need to be cheap if…” HERE.

What is the difference between satisfaction and loyalty?

April 14, 2022By Mike Hohnen

Loyalty and Satisfaction

In a world of abundance, too much of everything, what we also sometimes describe as hyper-competition, understanding the difference between satisfaction and loyalty is also the key to profits and growth.

There are many different ways of defining loyalty out there but this is my favourite one (not one invented but I can’t for the life of me remember where I found it): A loyal customer is someone who is willing to pay a bit more for your service than they would have to pay somewhere else for a similar experience.

Think about that for a moment…

If they are paying the same price to you as they would pay anywhere else, they are not loyal. It is just convenient for them to do business with you. And if they are paying less, you have just bribed them to stay with you.

So there you have it, satisfaction is manly about avoiding dissatisfaction: Delivering on the primary results in a consistent and reliable way, what Tom Peters so famously called Ho-Hum.

There is no loyalty in satisfaction. It is just Ho-Hum.

Loyalty is about a connection. Loyalty is emotional, not rational. Loyalty is Wow! You have this ‘feeling’ about a place, a product.

Just think about all the stuff that you own. Of all the things in your possession, which ones are in your eyes brands and what are just products?

It’s quite simple: A product or service becomes a brand when you have a feeling for it.

And then we are back full circle to the Service Profit Chain because things do not create emotions, people do. When I think of a certain hotel or café that I am very fond of, it’s the people. They have some people who have made an effort and established a connection with me, and yes I will gladly pay a premium for that emotional connection. It makes my day.

What is value to a customer?

August 17, 2020By Mike Hohnen

Or, Why Value Is Not about Money.

In the old economy, the one dominated by goods, value was created through the transfer of ownership. I create or produce something; and when I transfer the ownership to you, you give me money in return. The way you check the value of what you bought has to do with the specifications. Whether you are looking for strawberries or a new car, it is about product attributes. This ‘widget’ is _______ (stronger, faster, slimmer, tastier…) than the other ones you have looked at.

In the new economy, the service economy, value is created in use.
When I rent a car, use a consultant, or search for a great place to stay for my vacation, there is no transfer of ownership. It is all about utility – I need something, and my preferred service is the one that best takes care of that need. When my need is met, it translates into a result for me. And most of us are more than happy to pay for getting the result we need.

So, if our aim is to create a great customer service experience, the starting point is to make sure that what we are offering matches the value expectation of the customer.

In order to do that, we use the Value Equation – a tool that originates from the research conducted to produce the Service Profit Chain framework. The Value Equation has four elements:

R Is for Result.

What is the result that the client is expecting or looking for? Do we understand the need? If I buy an airline ticket from Paris to Rome, and we end up in Berlin, the airline did not deliver the result that I was expecting. So, no matter how cheap the ticket is or how many drinks they serve, it is a lousy service experience. Do you book a table in a restaurant because you are hungry? Maybe. More often, you have a different need. Maybe you are looking for a special moment, an occasion to celebrate or an ideal setting for a special conversation. Whatever it is, the food is just an instrument in providing the real result that you are looking for.

This means that for every service product we create, we need to ask ourselves, “What is the result they are looking for?”

P Is for Process.
You can fly from A to B with many different airlines. In general, they will all get you to where you planned to go; but each one does it their way. The difference comes out in their process.

From a customer’s point-of-view, process has five elements. Each plays a part when evaluating to what extent the value proposition actually covered their needs.

Time: How does time play into the need or result that they have? Is it important that we are on time? Is it important that we are fast or slow? If my wife and I are having dinner before the cinema, we are looking for one kind of time experience. If we are celebrating her birthday the following week, we are looking for a different kind of time experience. Same people, same restaurant, but different situations.

Reliability: Do we do what we say we will do? Are we consistent?

Competence: How does the customer experience the competence level of our employee at a given touch point? How well do our frontline teams respond when asked a question or a request for help?

Empathy: To what extent are our employees able to see the situation from the client’s point-of-view? When a customer feels understood, we are more than halfway to solving their needs.

Proof of service: Do we provide a service that the client does not notice? Are there ways that we could remind the client that we are servicing them?

Under the fraction line we have:
$ for price and E for effort: The client pays a price for our service; but depending on the service package, they also put in more or less effort themselves. If you buy a sofa from IKEA, the price is low; but you put in quite a bit of effort yourself. If you fly Virgin Upper Class, they will pick you up at your office and take you and your stuff right to the plane; A different experience than flying Ryanair, and, to be fair, also at a different price point.

So, there you have it.
If you want to understand how customers perceive value, the value equation is your key. And, your starting point for developing a great customer experience is to understand how you tailor your customer value proposition to each segment using the Value Equation.

I would be happy to send you a copy of the Value equation at a glance – just fill in your email below.