IBP_Whitepaper Customer Care - too much goodwill?
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IBP_Whitepaper Customer Care - too much goodwill?

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In an age where margins are being squeezed hard, telcos are seeking to differentiate themselves through higher quality service and better customer care. Does goodwill achieve this target effectively ...

In an age where margins are being squeezed hard, telcos are seeking to differentiate themselves through higher quality service and better customer care. Does goodwill achieve this target effectively or is it merely an act of unnecessary charity? Our research shows that too much goodwill is not only redundant, but can also be damaging to the outcome of the customer problem resolution process.

What is therefore the real and rightful role of goodwill? How can telecom companies optimize the goodwill payout process to result in success for all stakeholders; the agent, business and customer? We evaluate industry (best) practice and innovative research in order to present a catalogue of possible measures and argue that the choice of measures is not a one-size-fits-all story, but a firm specific and at best an iterative process. Setting up a functioning feedback process is essential to measuring impact and identifying further improvement potential.

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IBP_Whitepaper Customer Care - too much goodwill? IBP_Whitepaper Customer Care - too much goodwill? Document Transcript

  • IBP ViewCustomer Care: Too much goodwill?
  • Customer Care: Too much goodwill? IBP ViewNovember 2012Iskander Business Partner GmbHNora Egressy, Max LülingIn an age where margins are being squeezed hard, telcos are seeking to differentiate themselvesthrough higher quality service and better customer care. Does goodwill achieve this target effectivelyor is it merely an act of unnecessary charity? Our research shows that too much goodwill is not onlyredundant, but can also be damaging to the outcome of the customer problem resolution process.What is therefore the real and rightful role of goodwill? How can telecom companies optimize thegoodwill payout process to result in success for all stakeholders; the agent, business and customer?We evaluate industry (best) practice and innovative research in order to present a catalogue ofpossible measures and argue that the choice of measures is not a one-size-fits-all story, but a firmspecific and at best an iterative process. Setting up a functioning feedback process is essential tomeasuring impact and identifying further improvement potential. 1
  • Problem: If in doubt show goodwill be labeled correction – rightly compensating the customer for an inconvenience e.g. in-What is goodwill? correct pricing. With correction, a goodwillThe Oxford Dictionary defines goodwill as component e.g. extra 10%, rounding up to"friendly, helpful, or cooperative feelings or nearest unit, may often be included.attitude" A positive customer experience is often takenAn example of a goodwill gesture could be to to be synonymous with customer satisfaction,donate money to charities. While businesses increased loyalty and less churn. Thesemay well engage in charitable activities, unless connections are all plausible. The weak link isthey are an NGO (non-governmental organi- the assumption that higher goodwill leads tozation), their core business is and should not increased customer satisfaction. And that thebe based on charity. A good Business is foun- marginal spending on goodwill justifies theded on providing a quality product or service marginal change in customer satisfaction.and making revenue from this. Goodwill in thebusiness context therefore takes on an alter-nate meaning: Declining marginal CSI benefit for every"the established reputation of a business € spentregarded as a quantifiable asset" ILLUSTRATIVE CSICustomer Service Centers play a large role interms of building and maintaining a good re- 2putation. In theory, this can primarily be CSI²achieved by treating customers fairly and aconsistently. 0 CSI° CSI - € bIn practice however, there are many examples optimumof Customer Service Centers behaving like acharity. The telecoms industry is not immune Suboptimalto this behavior. The motto "if in doubt, show Zonegoodwill" fits well with some mobile companies’traditional focus on customer experience. € €² €°Goodwill payments are handed out in the caseof a customer mistake, whereby the firm takesresponsibility for something that is not their • Marginal increase in Customer Satisfaction (a) isfault e.g. customer did not read tariff info. not proportional to increased spend on goodwillWhen an operator is at fault, the payments can • More money does not buy much more happiness2
  • In this paper we will consider the customer Customerscomplaint process and argue that goodwill has Expect to receive fair value for money andan important but restricted role to play. good service. Satisfaction will depend on aFurthermore we will illustrate that less good- number of factors including how issues arewill is more and provide some measures to handled and complaints are resolved.optimize goodwill payments. Finally, we willillustrate that feedback is a gift that can be The key to a successful complaint handlingused to sustainably improve the goodwill process is to recognize the limitations of eachpayout process. group and unite ABC around a common goal. It is critical that the tools used to handle pain e.g. goodwill are used correctly.The ABC of customer complainthandlingThe truth of the following statement is widelyacknowledged"A customer who has had an issue handledwell is more loyal than a customer without anissue."In order to handle issues well and create loyalcustomers, it is important to be clear about thegoals, roles and limitations of the customercare ABC:AgentsAgents aim for resolution, as fast and pain freeas possible. They are often incentivized by calltimes (average hold time - AHT) and have alimited toolbox at their disposal.BusinessThe universal aim of the business is to makerevenue for its owners or shareholders. Toachieve this, the firm must simultaneouslyensure customer satisfaction through servicequality and a good reputation. 3
  • Efficient use of goodwill 1. LISTEN - Understand the issue and value theMuch of the confusion and misuse of goodwill customerstems from a misunderstanding of its role inthe customer complaint process. It is a com- 2. PLAN -mon belief that throwing money at a problem Apologize for the problem and plan awill make it go away. This idea is misguided resolutionand at the same time damaging – both to thefirm and the customer. 3. ACT - Communicate action/what will be doneLet us put ourselves in the customer’s shoes.When the customer approaches the service 4. COMPENSATE -provider with a complaint, they are frustrated Provide fair & just compensation forand angry. They exude a negative energy. The problemagent should play a critical role in terms ofneutralizing this negative energy by conse- A turning point will occur in the conversationquently following the steps below: when the agent is no longer removing negative residue, but adding positive value. This step may occur at 3 – by demonstrating clarity and proactivity, the agent builds on the firm’s repu-4 steps to successful resolution tation. If the scale has not yet tipped positive by 3, offering just and fair compensation to the customer will do this. The role of compensation is therefore that of a+ 4 COMPEN- sweetener. While real understanding and real SATE measures are needed to reinstate customer confidence in the long run goodwill removes 3 ACT the bitterness of the experience in the short run. 2 PLAN As an agent survey demonstrates, to custo- 1 LISTEN mers goodwill reinstates the meaning of steps 1-3 that they have been taken seriously. It is the principle that is valued here, that of a symbolic payment, not the amount of payment.4
  • What makes a customer satisfied – be used to illustrate the point better.the principle that he receives payment • Customer paid out EUR 180 for lost phoneor the amount?  encourages lack of customer responsibility (moral hazard) 29 • Customer rewarded on every call  encourages customer to "hunt" down free money – bad behavior • Customer issued EUR 600 for no solution 7  encourages customer to demand money 3 rather than solution • Money thrown at the customer Principle Amount Both  creates the expectation that money is freely available but solutions not.Thus if a complaint resolution process isrunning smoothly, the role of goodwill is In all of these cases handing out less money inrightfully restricted to the end of the process goodwill would have lead to a better solutionand importantly more money is not more. for both the genuine customer and the busi- ness.Consequence: Less is more How to get from more to less –In fact handing out smaller sums in goodwill A catalogue of measuresand working on the problem can be moreconducive to achieving all ABC goals. Agents An in-depth analysis of industry (best) practiceare more successful with complaint resolution and a series of expert interviews have revealedsince the focus is on problem solving rather various roads leading to a more efficientthan burying the problem with money. goodwill policy. The length and steepness of the road are analogous to the time require-Business hands out less money on the EBITDA ments, resource intensiveness and depen-level and improves their reputation through dencies connected with each measurebetter service. Last but not least, customers (feasibility).are more satisfied since they are takenseriously and their issues are addressed. The potential impact in turn depends on the AS-IS situation e.g. reporting systems in place,Some real case examples taken from a detailed differentiation between goodwill/correction,analysis of complaint cases by an operator can agent training etc. 5
  • A one-size-fits-all solution is therefore difficult our research. Included is an illustrative busi-to prescribe – it brings more value to speak of ness case to represent the impact of eacha catalogue of measures and assess suitability measure (measures are not mutually inde-based on firm specifics and an evaluation of pendent). Measures have different impleme-impact and feasibility. We illustrate items from ntation requirements and timelines.the catalogue through case examples of im-plemented measures and innovative ideas fromFeasibility/Impact Matrix ILLUSTRATIVE High 1 Reporting tool 2 Black list Differentiated treatment 3 Reduce credit item limit Reporting on based on customer value team level 4 Reactive handout policy 6 Agent tool 7 8 5 Strict guidelines 12 Improve documentation 9 Reduce goodwill handout radically Redesign UCP Incentivize based on cost efficiencyIMPACT 10 11 Mindset change 13 15 Provide goodies Differentiate according to churn probability 14 16 Goodwill budget per agent 17 Introduce specialist team Low Low FEASIBILITY HighMeasure is Payment Payment Agent Supporting Standalonebased on: amount/type process behaviour Reporting measure measure6
  • 1. Reduce goodwill limit radically – liquids/damage to hardware). A mobile Decrease limit for goodwill radically. A operator set up a black list for treatment of mobile operator decreased the maximum business customers containing some two credit item limit for goodwill to a single dozen items. EUR digit. In addition agents were in- centivized to offer bonuses first, using cash 3. Introduce restrictive handout policy – as a last resort. A DSL operator introduced a strict guide- line instructing agents how to behave in2. Introduce black list – different cases. The operator also trans- Define list of cases when no goodwill ferred goodwill payout to level 2. payment should be issued (e.g. issue withExample business case & implementation ILLUSTRATIVE Measure Impact (p.a.) Implementation € 3.0 – 4.4 m • Prerequisite: differentiation between Reduce goodwill limit goodwill & correction in place (20% disputed value, max €25) • Introduce rule in knowledge database 30 - 44% & train agents € 1.5 - 2.5 m • Develop payment matrix Customer differentiation • Match to customer value (based on current Tarif) 15 - 25% • Introduce in knowledge database € 2.0 – 5.3 m • Collect black list items Introduce black list • Develop documentation (lenient to strict) • Hold agent workshop 20 - 53% Reactive handout policy € 2 - 1.8 m • Prerequisite: differentiation between (Assumption: 40-60 % of goodwill & correction in place customers demand credit item) 12 - 18% • Introduce rule & train agents *Based on random sample analysis (n=100), Assuming original goodwill p.a. of EUR 10 m Note: Measures are not independent, cannot sum impact of multiple measures 7
  • Innovative ideas Efficient use of goodwill Introduce reactive handout policy – What can we learn from the measures that Agents only offer goodwill when this is have been implemented? More importantly: did demanded by customer (evidence shows any feared side effects materialize? that only 1 in 3 customers demands pay- ment during the first complaint call) 1. Reduce goodwill limit radically – Agents welcomed flexibility in terms of Customer differentiation à la retention – offering different forms of compensation Differentiate goodwill value according to (goodies), business benefited through customer value (CLV) – more valuable lower costs, customer loyalty was not customers receive more goodwill affected Agent incentivization structure – 2. Introduce black list – Incentivize agents based on cost efficiency/ Agents praised increased transparency and performance consistency in terms of customer treat- ment, business introduced specialist team Intelligent approach to compensation – to deal with difficult cases, customer com- Provide alternative forms of compensation plaints did not increase – newly introduced to money – e.g. goodies such as bonuses, hotline felt no increase in calls free apps… 3. Introduce restrictive handout policy – Agent decision making tool – Agents profited from clear guidelines, Develop tool to aid agent decision making business saved significant money, but also e.g. define goodwill value, show customer incurred follow-up costs due to removal of characteristics first level support, customer satisfaction remained constant What all these real-life experiences have in common is that in significant savings were made (up to 75% with the introduction of a bundle of measures) with no negative reper- cussions for customer experience. Another shared characteristic however, is that none of these firms got it right the first time – optimizing the credit note process is an iterative exercise that can best be achieved by8
  • trial and error and close monitoring of impact trying out the innovative ideas presented(especially if adequate reporting systems are above with low risk (e.g. pilot groups, simu-not yet in place). Setting up a practice inter- lations).nally to monitor and review progress canidentify new and better opportunities for opti- With such potential, it would be a mistake tomization. It can create a good test-bed for not use feedback wisely.Continual optimization through KPI and analysis driven feedback loops Project phase Goals Sample Standard Ad hoc analysis reporting reporting Ziele Inlife management enablers Success tracking KPI control Proactive & feed- measures back mgmt Implemen- tation Reactive measures Analysis driven optimization Analysis Feedback driven optimization 9
  • The authorsNora Egressy Max Lülingis a Consultant at Iskander Business Partner. Max Lüling is a consultant at Iskander BusinessShe has 2 years of consulting and project Partner. Throughout his 10 years of consultingmanagement experience and has worked on a experience in the mobile sector he has mana-variety of international projects. Her focus ged and led projects in the diverse areas ofareas include strategy development, business marketing, business customers, sales, finance,case development and market analysis. customer service and technologies.Nora has worked previously for CSMG Global in Before joining Iskander Business Partner heLondon and has completed internships with specialized in heading customer value andDeloitte LLP in the UK and Roland Berger in business intelligence projects working for theHungary. consulting company SHS Viveon AG. Max has a Masters in Business & Sales and has added the PMP and Scrum Master certifications to his name.10
  • Iskander Business Partner is and international management consultancy with a strong focus on thedevelopment and implementation of growth projects for the High-Tech industries. We pride ourselveson being highly competent professionals who think as entrepreneurs.Company and philosophyWe develop concepts with a focus on results and implementation hand-in-hand with our customers ina reliable, pragmatic and application-oriented way. We believe in partnership, mutual trust and goalorientated management consulting with a focus on successful implementation – our concepts forproduct-, marketing-, sales- and CRM-Strategies ensure a path of sustainable success.Since the foundation of the company by Armin Iskander in 2005, our success has been growing onsolid foundations. Our expansion is based on attracting entrepreneurial employees who play an activepart in shaping our firm strategy and supporting our clients. Passion for our job, a readiness toassume personal responsibility and close customer contact are the sails that carry us to success. Flathierarchies and a down-to-earth attitude ensure that we never lose sight of the horizon. Instead ofproviding theoretical concepts, we offer the implementation of concrete solutions. We are partners ofthe enterprises we consult - being experienced, well-trained experts and consultants, we are able tonavigate through shallow waters and to negotiate these to the benefit of our customers. Our strongcrew is safely heading for success. In our team, every single member counts, our co-operationensures successful bearing towards our destination. Our result: satisfied customers and highlymotivated employees.www.i-b-partner.com 11
  • Iskander Business Partner GmbH Paulstraße 19 85737 Ismaning/München Telefon: +49 89 99 650 861 Fax: +49 89 99 650 862 office@i-b-partner.com www.i-b-partner.com