RSR Research: The ROI of Customer Passion
Commentary by Nikki Baird, Managing Partner
Through a special arrangement,
presented here for discussion is a summary of an article from Retail Paradox,
Retail Systems Research’s weekly analysis on emerging issues facing retailers.
At
an executive summit on cross-channel recently, I asked a colleague if he believed
that there is an ROI to be had around customer passion. It was late. Perhaps
I was inspired or just tired, but coming back to it, I’m dangerously close
to making that my watch-phrase of the year.
I became passionate about this topic
after seeing a fantastic
video from the folks at trendwatching.com.
My favorite part is towards the end, when they ask people if there are any
brands that "care" about them. The answers are amazingly insightful,
even from people that you would not expect to be very sophisticated about marketing.
When ad industry people say that consumers are more savvy (and jaded) about
marketing than ever before, I think the people in this video are exactly what
they mean.
So, deep down, do you care about your customers? And more than just
in the health of their spending? Do you have any measures in your customer
satisfaction scores that include "enthusiasm" or "passion" or
even "joy"?
Do you get what I mean, or do you think I’m being frivolous?
As one example,
the kiosk has been resurrected for a brief comeback tour. Retailers who
think about customers as a dollar value tied to a customer’s lifetime think
like this: "Let’s put a coupon kiosk at the front of the
store, and consumers can come in and swipe their loyalty card and get coupons,
many of which will be targeted based on their purchase history. Everybody loves
coupons, so this will be great!"
The problem is that consumer research
has shown an extremist kind of split among shoppers. There’s the laser-focused "I
have three items and five minutes and I left my kids and my dog in the car
illegally, and it will take me longer to dig my stupid loyalty card out of
my purse and swipe it than it will for me to run in here and get my three items." That
customer will never, never use the front-of-store kiosk.
At the opposite
spectrum there’s the "I’m bored, and there’s 20 minutes
before have to go sit down at the movie theatre so I’m wandering. If something
catches my eye, I might buy it, but mostly I’m just looking." For this
group, trips are won because of retail brand or location, not because of deals
or products.
So in the end, coupons neither work for those seeking ultimate
convenience, or entertainment, especially when they are not relevant. Nowadays,
like it or not, coupons are a base expectation, and consumers are increasingly
expecting them to be highly relevant. Coupons aren’t something that consumers
need or desire. Products aren’t even the things that consumers need or desire
— yes, even food products. Do you buy vegetables, or do you buy meal ingredients?
Ultimately,
it’s meals that people consume. So think a little harder about your customers
and why they come to see you. If you can find a way to make their lives easier
— if you can show that you care about their lives — then you can create the
kind of engagement that only comes with passion. And with passion, I promise
there is an ROI, even if it can’t be calculated directly in a spreadsheet.
Discussion Questions: What’s
the closest a retailer can get to measuring ROI around customer satisfaction? Is
measurement necessary?
Yes, of course, we should try to engender passion in our messaging, etc. But please don’t mix in concepts like “ROI” with it. How will that be received by other senior managers–particularly the CFO who really understands what ROI means and uses it every day to help run the business?
Let’s only measure what we can measure–and not even pretend to do it when we can’t.
Will we have yet another set of initials to throw, with consultative erudition, against the retailing wall–ROP? Is there no end to our creative searches?
If shoppers, retailers, suppliers and consultants, were to concentrate on resisting their passions in today’s world, it would seemingly be more from their weakness than from their strength. American’s passions have often been discovered before Columbus’s landing, but have always been hushed up. Have we opened a retailing Pandora’s Box with ROP? I doubt it.
As Nikki points out, there are many factors that must add up to produce a satisfying customer experience. These can include: value, friendliness, ease of use, saving time, and human contact. What all of this comes down to is, does the consumer feel valued and did she receive value during the shopping experience? When she does, passion is created. And passion leads to positive word of mouth, which creates more business.
Do you really think it’s possible, or even desirable, for a brand to “care” about us in the true sense of the word? If I’ve had a bad day and I walk into a store, should the associate engage me in a conversation about my problems or issues? No. I do think they should pay attention to us when we engage with them and deliver a pleasant experience surrounding their products, and provide products and solutions that fulfill our particular needs. Don’t ignore me when I walk in your store or tell me you don’t know when I ask a question. That tells me you and your organization don’t care. Or when I attempt to take care of a billing error, don’t send me on a telephone wild goose chase with no resolution in sight.
For retailers, caring means respecting your customers and giving them the time and attention they require and deserve in order to satisfy their needs and keep them coming back. Caring equals customer service, and customer service is personal.
Customer satisfaction and ROI are not the same thing but are definitively related.
Customer satisfaction is a qualitative and comprehensive response garnered with time, repeat purchases, multiple products, and corporate responsibility. It’s a fluid and continuous process, while ROI is quantitative measurement with defined beginning and end.
A successful brand will have positive qualitative and quantitative measurements.
I feel the video, while entertaining, is rather superficial. Simply asking “why?” to all respondents would provide an honest answer and understanding of their concept of brand. As to the respondents who claim they don’t love a brand, they are being dishonest. Everybody has brands that are an intricate part of their lives, and everyone fits into a pattern that can be communicated to and persuaded to purchase a product or service.
While an ROI can’t be placed on customer satisfaction, the general health of a brand is defined by its role in the consumer’s life. As fluid as that role can be, it is ultimately used in whether or not a marketer decides to continue the life (development, brand extensions, advertising) of a brand. Measurement is crucial.
I love the concept of customer ROI. Thanks to RSR for forwarding the discussion.
Years ago I developed a model for talking about benefits from a retailer’s point of view. This has been useful to many salespersons and retail execs in developing ROI models.
It is interesting to look at these seven in the context of the consumer. I believe it establishes holistic framework for consumer ROI.
1. Reducing expenses. Can the consumer reduce their costs of shopping? This is a minor point in the overall scheme of things having to do largely with drive time.
2. Increased productivity. Can the consumer buy what they need in less time? Here the metrics are drive time, shopping time, check out time, and market basket quality.
3. Increased return on what they buy. Can they a get a great deal of utility from what they buy from you? Here the metric is frequency of use and length of service as well as other emotional factors such as how they feel when they use their purchases.
4. Increased return on what they bought. Can they lengthen the life, or increase the utility, of their current possessions? For example, a stylish scarf can add years to last year’s fashion. A DVD player can add years to yesterday’s stereo.
5. Reduce prices. Does your price offering compare favorably to your competition? Here the metric is companion purchases of promoted items, and comparative pricing.
6. Improved relations. Are your best shoppers buying ensembles, outfits, or sets as opposed to items? What is the frequency of visit? Is it improving? Is the customer engaged in multiple channels and multiple touchpoints? Do you rank well in customer sat?
7. Improved knowledge. Is the customer fully aware of what you do and why you are better? Here the metrics are their perception of your range and services.
In making this list, it occurs to me that it is quite possible to infer customer ROI based on the market basket quality, transaction frequency coupled with survey data.
There is indeed a relatively straightforward measure of ROI on customer satisfaction. Using credit sales, track the home addresses of a statistically significant segment of sales transactions. Overlay these on a map of your stores that highlights your locations as well as your competition. If there is a significant number and/or a positive trend of customers driving by your competition to get to your store, you have superior customer satisfaction in the truest sense. If you don’t, you are a convenience store, regardless of your format.
I love the concept, Nikki, and I think customer passion is one of the key differentiators for the independent retailer. I just wish more of them understood this.
I don’t know if you can directly measure customer passion, but I do believe if you measure employee satisfaction it can tell you a lot about customer passion. I’ve always believed that to be a great place shop you have to be a great place to work, and so those retailers who are passionate about customers are also passionate about their own people.
There are many things to do to measure customer passion. I love that term, customer passion. Too many of us in business today have forgotten the key ingredient to continued success: the customer continuing to return to your store and spend their hard earned money with you. Without that, what do you have? You can cancel your cleaning service because there will be no one coming in to dirty the store but the staff.
I believe we spend too much time developing and analyzing statistics when the best statistic we have is customer satisfaction and word of mouth. That is the key indicator to make the cash register go “Ka-Ching’. Yes, point of sale records the buying habits of your clientele; thus giving you the buying statistics you need to prepare for the next round of buying. That is not the only stat needed; but it is a key to continued success. Yes, I believe in statistical analysis. But I do not believe it is the only area to look at.
Customer passion is like any passion; it is either there or not on first meeting and it will dissipate quickly after several consummations. The marketer’s task is to make sure the love lasts after the passion is gone. Otherwise, your customer will be running off with that newer product in the store.
The question isn’t so much whether there is a return on investment in the passion a retailer can generate, it’s whether it’s quantifiable and measurable.
I’ve long believed that successful retailing required the skillful blending of art, craft and science. While I applaud Nikki for asking the question, and pursuing an answer, this is a question I think most retailers would be better off thinking of as part of the art and craft of creating a memorable customer experience.
Certain retail models are built around the concept of customer passion — Costco, American Girl, Trader Joe’s — and luxury brands like Louis Vuitton all come to mind. They’re certainly quantifying the ROI of passion, and it doesn’t seem much of a stretch to extrapolate those lessons learned to larger, more diffuse brands. My son, the barista, keeps talking about the patrons who visit his Starbucks twice or three times a day.
I think it’s all about scale. When a brand is small and entrepreneurial, the owner and senior management are often spending time in front of their customers and getting a first-hand sense of the level and value of their passion for (or against) the brand.
As companies scale up, this direct contact tends to dissipate. Customer sentiment becomes anecdotal or buried in some obtuse CRM report. The level of customer passion or satisfaction with a brand becomes hard to aggregate in a meaningful way.
So, can passion be measured and converted to ROI? I doubt it. Can it be articulated, expressed and felt by the people that work for a brand? Absolutely. And perhaps that’s the best ROI of all.
I’m not sure this gets all the way to “customer passion,” but we have had success with some clients in quantifying how much, and under what conditions, increases in measured satisfaction lead to future increases in spend. In hotels, for example, we’ve seen great results and even have written a whitepaper on the topic.
It doesn’t work everywhere. In fact, in many mundane retail environments, sales often go up when satisfaction goes down–precisely because whatever increased sales also made the store more crowded. Airlines are the ultimate examples of this. I am far more satisfied when the plane is half empty, because it is half empty!
ROI…it’s good after all these years, evolving issues from customer satisfaction, to “ambiance,” to passion, to personalization, to “make believe.”
We have evolved and most of the comments go around it. Consumers–us–we are not numbers any more, the things we buy are not SKUs any longer. We are the people who create, make, and feel.
Congratulations retailers and brands, marketers and manufacturers. We are in this together, all for one to “Make Believe.”
The consumer has intelligence, awareness, specific needs, and emotional insights. They all add up together to form a certain “make believe” that requires satisfaction. If that satisfaction is not achieved, then that person will most likely walk out and never look back. Kiosks, coupons, retail re-designs, state-of-the-art technologies, sensors, etc. Give that customer the “make believe” she/he is desiring the minute she/he walks in.
Figure that out then you’ll have your ROI.
This is a little off the mark but when I think of brands that care about me, Southwest Airlines jumps out at me. While it would seem that every other airline is trying to nickle and dime every cent out of every passenger Southwest has embarked on an entirely different tack. They have taken what was standard service and made it seem like much more. They offer fare prices and don’t play games with fares. They allow carry on and checked baggage without charging an extra fee. The get checked baggage up about twice as fast as their competition.
Do they care about me personally? I don’t really think so. Do they seem to use common sense to satisfy their passengers? I believe they do. It would seem that they are the Publix of the Airline industry. Management makes decisions without the help of consultants or MBAs. If cost controls are needed they will raise fares rather than nickle and dime their customers. Do they respect their customers? All actions would indicate they do. Are they growing? Like a weed!
Before you can identify ROI around customer satisfaction you must have a process in place that considers what drives satisfaction with your brand. This means developing a program that pinpoints factors that drive customer loyalty, as well as factors that detract from customer satisfaction.
While it can be difficult to internally develop metrics to measure CEM performance, it is possible to do. However, this varies based on your brand and what you hope to achieve. One of the common metrics for measurement is the Net Promoter Score — “Would you recommend this brand to others?” It’s important to identify (and leverage) those who are actually turning those positive answers into reality and willing to actively promote your brand. The goal is to turn those recommenders into brand advocates. Maintaining a loyal customer base can translate into ROI, as recommendations hold a lot of weight among consumers. Some retailers even use coupon-sharing tactics in the social media space, which can have significant results when shared among friends who recommend a brand (and tracked for in-store or online redemption).
While not all customer satisfaction can be measured in terms of ROI, having a comprehensive program to track sentiments (and implement changes accordingly) will allow a retailer to improve the customer experience and drive loyalty. Maintaining a regular plan to conduct surveys can likewise help retailers track why consumers are visiting their establishment. Did they see an advertisement? Read about you in the newspaper? Hear about a special promotion? Get a recommendation from a friend? If 80% of people say it was a recommendation, that’s certainly an indication that you’re doing something right in terms of customer satisfaction. Only once you have built a more loyal customer base that is encouraged to recommend your brand, will you then begin to drive more revenue for your business.