The Friday just gone, in a blast from the (near) past, I attended Getronics Financial Services Forum. This is an annual event at which bankers come together to discuss a key strategic issue for the industry. This year, the theme was "Managing the Customer Experience", and the stand out presentation was from Peter Georgi, Director of Channel Management at Citibank Germany.
He was speaking of the service line improvements that the bank is making, and how they look at the cost and benefit of each in the context of the overall customer experience. He described an interesting methodology that was striking in the fact that it spoke not only of improving the customer experience, but also reducing it. He argued that on occasion, reducing the level of service that a customer receives can actually improve their overall perceptions.
The basic premise of this approach is that you should first examine the customer’s expectation of the experience they anticipate. If their expectation is met, their perceptions will be good ones. If exceeded, they will be delighted. And, obviously, if not met at all, they will come away with a very bad impression of the bank. Here is the key point which is not obvious: if you reduce a customer’s expectation, you are able to create delight without changing the service you provide.
When you think about it, that is a counterintuitive position for someone in the retail channel to take. You want your customers expectations high. That way, they will choose you over competitors.
The thing is, as Peter pointed out, you might get a customer through the door with high expectations, but you certainly won’t keep them if those expectations aren’t met. ING Direct actually have quite poor service delivery: no branches at all, and limited access to funds through other channels (you often have to perform a transaction to get funds across into a current account). However, customers love their ING Direct accounts and ING keep growing that business. Why? Their expectations are being exceeded, which is easy because the expectation (of full access to their money like a current account) was low to start with.
Managing customer expectation, then, is the key thing to do if you want to delight customers.
But Peter takes this one step further, and speaks of optimising the cost of the customer experience as well.
Those who have been reading here for a while know that I think we are presently in an arms race to provide the best service to customers (read about that here and here). The services arms race has, as a key characteristic, declining marginal returns on investment in customer experience. Peter provides us an avenue from which we can get out of that spiral.
When optimising the price of the customer experience, explains Peter, one should be looking at the "zone of indifference". This, he says, is the area surrounding the point that customers expectations are met by a particular service, and which extends just to the point where they are dissatisfied (the bye-bye zone) on the downward axis (representing cost), and just to the point where they are delighted (the wow zone) on the upward. You can do anything you like in this indifference zone and customers won’t be affected in either direction.
The example he used was statement delivery. If a customer expects to receive their statement in 3 days, but it arrives in 4, that will probably not be a significant issue. In fact, they are most likely to not notice. His argument, therefore, is that for any service which doesn’t get you to the Wow Zone, drop its delivery (and associated customer expectation) to the lowest point in the zone of indifference you can. Remember, this is all about matching the customer experience, and optimising the cost.
On the other hand, if you have a particular service and it is possible to get to the Wow Zone, by all means raise customer expectation appropriately. But, says Peter, make sure you are really in the Wow zone, and not just delivering something that customers don’t care about. It is expensive to have the best branch redesign on the planet, but maybe customers don’t want coffee and cake when they come to the branch. They will expect it ever-after, however, if you raise their expectations.
The insight for me: it is as OK to lower the expectations of customers and then exceed them, as it is to raise them and then meet them. Lowering and meeting is a good way to manage cost whilst focusing on what is really different about your institution. In other words, if there truly are declining marginal returns from customer experience investment, invest where you get the biggest bang for the buck, and stop early.