Creating Customer Lifetime Value

Customer lifetime value (CLV) is the dollar amount that represents a customer’s worth to your business from first transaction to last.

CLV calculation=revenue x gross margin x average number of repeat purchases.

The CLV is a powerful metric because even small increases in CLV can lead to huge gains in overall revenue. For example, get 1,000 of your customers, who pay you $50 per month, to stay with you for a year instead of 10 months, and your annual revenue grows from $500,000 to $600,000.

But the benefit is not only incremental. First of all, customer profitability tends to increase over the life of a retained customer. Second, on average, it costs up to seven times less to sell to customers with whom you already have a relationship. After all, you’ve already attracted and educated them.

While customer acquisition will always be a driver for businesses, research has shown that customer retention is a faster route to revenue growth than customer acquisition.

An infographic from Invesp Consulting shows that increasing customer retention by 5 percent can lead to an increase in profits of 25 percent to 95 percent. The infographic also illustrates that the likelihood of converting an existing customer into a repeat customer is 60 to 70 percent, while the probability of converting a new lead is 5 to 20 percent.

Brands have learned that three key factors contribute to customer retention. They are: Keep the customer happy, reduce customer effort and deliver excellent customer service.

To improve CLV, companies should offer a mix of the following customer retention strategies:

  • Keep the customer happy
    1. Build relationships with customers through shared values that foster loyalty. Use social media sites to connect, like Facebook and Twitter.
    2. Through expertise and education, become the customers’ trusted advisor.
    3. Track customer satisfaction. Consider using a Net Promoter Score survey that primarily asks your customers whether they would recommend you to someone else.
    4. Make great customer service the norm. To go above and beyond, surprise your customers with small customer appreciation gifts, handwritten notes or even a personal email to say thanks.
    5. Re-emphasize your value: It’s reinforcing to know you’re getting the best bang for your buck.
  • Reduce customer effort
    1. Connect with customers on the channels they prefer.
    2. Optimize your onboarding. Give customers simple and clear instructions for product usage.
    3. Make it easy to reach you—a button on every Web page, for example.
  • Deliver excellent service
    1. Take a proactive approach to customer service to eliminate problems before they occur.
    2. Set customer expectations early and a little lower than you can provide to eliminate uncertainty about the level of your service and to ensure you always deliver on your promises.
    3. Go the extra mile.
    4. Personalize communications to strengthen the bond with your brand.
    5. Empathize with your customers/understand their pain points. They’ll appreciate and remember the respect you’ve given them.
    6. Ensure that customer care staff are empowered to resolve issues quickly.
    7. Be authentic and sincere when addressing customer concerns.

Remember: If you can keep your customers happy, you’ll keep your customers.

Small Gestures to Make Customers Feel Valued

We live in a data-driven and digital-first world, making it easy for companies to overlook the value of genuinely connecting with customers.

Even as consumers yearn for self-service options to speed up transactions with brands, and even as they opt to research products and services long before contacting a vendor about a purchase, they still welcome small gestures of appreciation from the businesses they patronize. What’s more, they develop loyalty to the brands that show them respect by going the extra mile to meet their needs.

Consider how top customer service companies like Amazon, Nordstrom and Hyatt Hotels work harder, smarter and more effectively to satisfy their customers, making them feel valued and prone to repeat business. For example, on top of offering incredibly fast response times and seamless returns, Amazon empowers employees to sacrifice an immediate sale or their time for the sake of resolving a customer’s issues. When customer satisfaction is a company’s primary focus, customer retention is often a given.

Businesses without the processes or machinery to compete with multibillion dollar companies like Amazon are not, however, without resources that can impact customer relationships just as notably and favorably. Sometimes a personal touch—from a friendly smile to remembering a customer’s name to a waived fee—goes a long way toward building a lasting relationship.

For example, some insurance companies give their associates the option of sending customers celebratory or sympathy cards, or the authority to send a hand-written message.

Developing the necessary customer-centricity that encourages customer devotion to a brand must start at the top of the company hierarchy. This is where strategies for understanding and meeting customer need must start and then flow to employees, aligning them with the vision. This may mean loosening the reins of scripted interactions, which also means boosting hiring practices to ensure that the right people are in place—with the right emotional predilections—to address customer concerns with aplomb.

Companies that limit customer service due to time or budget constraints are missing the opportunity to grow their business. Remember when Starbuck Chairman and CEO Howard Schultz closed all Starbucks locations for three hours during normal business hours to give employees a refresher course on the art of making expresso? He also discussed the importance of getting to know customers and greeting them by name.

Yet, simpler measures—like bringing hotel guests extra towels, or presenting restaurant patrons with a free drink on their birthdays—can be just as effective.

Don’t neglect to leverage your company’s data to deliver personalized services. For example, your customer relationship management (CRM) solution makes it easy to map a customer’s phone number or email address with a customer record. Airlines do this all the time to automatically alert passengers of a flight delay or cancellation. When a passenger calls in, an automated system recognizes them and can quickly offer assistance.

If you notice a gap between customer expectations and the customer service you provide, make it a priority to get a leg up on your competitors by showering your customers with tokens of appreciation for the value they provide to your business. Small gestures will go a long way toward enhancing the customer experience and reducing customer churn.

It’s Not About You: Keep Your Employees Focused on the Customer

When customers call into your contact center, they are looking to have their issues resolved as quickly and effectively as possible. A recitation of your customer service processes and policies does not necessarily serve their interests. An ideal customer care experience will instead focus on the individual, not your business’s imperatives—except for the one that says “put the customer first.”

A customer care Communicator who responds to an inquiry with a statement of policy is anathema to the reason for customer service, as it puts up a wall between Communicator and customer. It shows disrespect for the customer as an individual. Instead, Communicators who feel they can’t positively resolve a customer’s issues should find someone within the organization who can.

Indeed, the experience you create for your customers will directly impact your business’s bottom line, oftentimes significantly, according to a 2017 Forrester report. While Forrester acknowledges the challenge of connecting customer experience (CX) quality with revenue growth, the research company demonstrated—using its own CX Index data—how CX improvements, for the most part, drive customer loyalty and, subsequently, greater profitability.

More important than being right is being considerate and helpful. Customers rate companies more on how they handle issues than whether their products or services have minor issues.

To improve the customer experience in your contact center, try to abide by the following list of do’s and don’ts:

Do:

  • Acknowledge the validity of the customer’s complaint, and show empathy for his or her trouble.
  • Seek help from an expert in the organization for customer questions you can’t answer.
  • Listen! Don’t be so committed to your script that you miss connecting emotionally with your callers.
  • Consider backing up your customer service actions with a promotional gift, such as a discount on a future purchase, to inspire the customer’s loyalty and good will.
  • Be human/authentic. That is, avoid sounding robotic and/or disinterested.
  • Treat the caller as a unique individual. Don’t lump his or her complaint into a global category that makes addressing it unlikely.
  • Connect customers with someone in service who speaks their language.
  • Distinguish between personal and professional behavior. While the Communicator may not be personally responsible for a product defect, for example, he or she is professionally responsible as a representative of the company.
  • Be polite and friendly.

Don’t:

  • Use foul language. Ever.
  • Label customers or call them names, like stupid, fat, rude and obnoxious. (It’s happened.)
  • Quote policy.
  • Expect customers to know or care about your processes.
  • Pass the buck. If you can help, then do help; don’t ask an associate to do it for you.
  • Blame the customer for the product or service issue.
  • Refer the customer to another support source, such as a doctor or the Internet.
  • Say there’s nothing you can do to help.
  • Contradict the customer. If he or she says something happened, assume it did.
  • Be sarcastic; don’t act frustrated or angry. Be empathetic instead.

Is Social Customer Care As Successful As We Think?

Every business puts “customer care” at the top of its priority list, particularly in today’s highly competitive environment where consumers have so many choices and loyalty is at a premium. Social media service has been touted as the next big thing, and headlines heralded that it would soon make the old fashioned call center a thing of the past. However, a recent news article revealed the fact that social customer care may already be falling behind, even though it seems to be just hitting its stride.

Customer care delivered via social media may not be as effective as once hoped for several reasons. For one, there aren’t enough well-trained customer care professionals handling social media inquiries. While phone-based customer service is often delivered with a personal touch and a professional attitude, people may lack understanding of how social media works. It is also difficult to finesse a complicated service conversation or complaint over social media without special training and know-how.

For social customer care to be successful, customer care specialists must handle social media interactions must with the same poise, compassion, and professionalism that they bring to telephone or in-person interactions. Social media service shouldn’t be looked at simply as an “add on” or “extra.” Instead, service professionals should strive to fully develop it as a service channel. There are fine points to communicating via social media, and the rules for high-quality telephone interactions should also apply here—such as resolving problems quickly, reducing the need to repeat information, and providing courteous service.

With the right education and understanding in place, social media can become a fully fledged and effective customer service channel, but right now the risk is that it will fall behind and out of customer preference.

The Impact of Speech Analytics in the Contact Center

Speech analytics is a powerful tool for improving customer service. It turns every phone call into a valuable source of customer data. Collectively, it provides a holistic view of the thoughts, feelings and desires of a company’s customer base. Contact center managers can use insights gained to improve performance metrics, better and more quickly handle customer issues, and even make changes to existing products that can boost sales. In short, the technology gives users a competitive advantage over non-users.

So, what is speech analytics? In a nutshell, it’s the process of analyzing recorded calls to identify words and detect emotions. In the contact center, speech recognition software is used to quickly identify the calls that need attention. It then communicates information about these calls to the customer care Communicator, who is then in a much better position to handle the issue. This often shortens issue resolution time and call duration.

A reduction in average handle time improves service and can even increase company profits.

Since its introduction in 2003, the scope of speech analytics, which was originally called audio-mining, has evolved to amplify the voice of the customer beyond what could be gleaned from representative samplings. The tool evaluates 100 percent of calls, and has the ability to amass, organize and evaluate large amounts of unstructured data available through customer interactions.

With a big picture perspective, managers can more easily recognize trends in customer interests and needs. They can leverage the information gained to develop new products and/or enhance existing ones, ultimately driving sales.

Managers can also use speech analytics to ensure compliance with many regulatory and consumer protection requirements. It can even work to increase revenues when used for debt collection.

In addition, the technology ramps up quality assurance with real-time monitoring of agent engagement and script compliance. It can gauge the effectiveness of greetings and closings, and isolate words, phrases or tone of voice that signal customer dissatisfaction—while there is still time to save the relationship.

Consider speech analytics for your contact center if you would benefit from a better understanding of why your customers call in. The technology will give you greater knowledge about key behaviors on the parts of your Communicators and customers. This will help you pinpoint coaching or training opportunities for the former, and acquisition, retention and upsell opportunities for the latter. What’s more, the technology will give you greater insight into the customer sentiments that most impact your customer relationships.

Speech analytics can turn the contact center into a fountain of information for the whole business. Its applications are growing, and it is positioned to become an indispensable industry tool.

 

The Future of Measuring Contact Center Performance

Contact center performance ratings are currently based on scorecards that attempt to balance the reporting of key metrics across the spectrum of efficiency, effectiveness and customer experience. The customer experience portion—the most critical reflection of contact center performance—is typically gathered by surveying customers post-contact.

New ideas about measuring contact center performance are focused on tracking actual customer behavior—not what customers say they’re going to do, but what they really do—post-contact. The ability of a contact center to implement this tracking and use it to optimize performance will depend upon how well contact center leaders respond to the following evolving contact center trends:

Technology: Thanks to gigantic technological gains since call centers were born 40 years ago, integrated contact center software, especially in the cloud environment, can generate a holistic view of the customer journey. Insights gained are allowing contact center managers to personalize communications for a better customer experience. It won’t be long before a single set of unified software technologies emerge that will further coalesce and analyze data, improve operational efficiencies and heighten customer satisfaction.

Communication channels: Today’s communication channels—including voice, chat, email and social media—will continue to expand, challenging contact centers to keep up with user demand. Video chat, anyone? SMS, or texting, has vast potential, as a communication tool, as evidenced by millennial usage of the technology. In fact, a Gallup poll found that text messaging is the dominant form of communication for Americans under the age of 50. Fully 68 percent of 18- to 29-year-olds said they texted “a lot” on the day prior to being interviewed.

Self-service: To optimize contact center performance, decision makers will also need to expand self-service options across channels. Yet in tracking the customer journey in the days ahead, companies may find that customers are reaching out to each other in collaborative forums instead of engaging with their contact centers. If this is not an ideal scenario for your organization, you may want to put processes in place to enable your facility to deliver value and information not attainable elsewhere.

The ongoing digital transformation will enable contact center managers to learn how customer interactions impact future customer behavior, including repeat purchasing and retention. This information will enable forward-thinking leaders to adjust processes to enhance the customer experience.

Critical Conversations in the Contact Center

Your brand voice, as well as the customer experience you deliver, can be either buoyed or destroyed for a customer by one poor interaction with a customer care Communicator. It all comes down to that single individual and how effectively he or she resolves the customer’s issue.

That’s a lot of pressure on Communicators—and their managers, who must ensure their front-line staff are prepared to deliver the best possible customer service. Toward this end, it’s critical that Communicators are equipped with the training and tools they need to meet customer expectations.

Those components determine the quality of the conversations between callers and Communicators. Training and tools need to be dispensed in line with contact center priorities and trends. For example, top customer service trends during the past year included omnichannel, mobile, self-help, social media and customer experience.

Start improving conversations by collecting and analyzing your contact center data. With the right tools, you’ll discover the journey your customers take before they call your facility. This will help you determine the level of service they’ll expect upon their arrival.

Contact center technology solutions also give managers the ability to understand how Communicator training/coaching and tool usage are impacting customer service—and, ultimately, the bottom line. While statistics, such as average handle time, tell part of the story, decision makers more and more are looking at metrics that indicate how the customer is being affected, such as level of satisfaction.

By truly understanding customer expectations and how best to meet those demands, as well as empowering Communicators with the appropriate tools and knowledge, contact centers will be primed to foster stellar conversations between employees and customers.

Web-Based Workforce Management Solutions for the Contact Center

Modern workforce management (WFM) solutions allow contact center managers to integrate Web-based scheduling and resource planning, enabling real-time connections with team leaders and Communicators. This sort of visibility into contact center operations helps managers make every second count as business requirements change.

WFM tools also facilitate certain work-life balance options, such as working from home. Empowering remote Communicators is one way that today’s contact centers are creating workforces that can more easily scale up and down as business fluctuates.

The latest Web-based tools, previously sold as add-on modules, are now being included as part of WFM packages. They are designed to perform on a range of browsers, encouraging collaboration and promoting transparency among managers and Communicators.

Let’s look at the ways these new WFM solutions are benefitting contact centers:

Agility: Operationally, the latest Web-based resource planning and scheduling tools put team leaders and resource planners in control of their contact centers at all times, even across time zones. They can modify team schedules on the fly to accommodate seasonal peaks and valleys—or daily unforeseen shifts in traffic volume. Managers have the ability to compare actual Communicator status against schedules and contracted hours to make better-informed decisions to improve workflow.

Skills-based routing: Using the powerful search functionality embedded in Web-based solutions, team leaders can group Communicators by various criteria, e.g., location or expertise. This allows someone like a resource planner to search cross-company for Communicators with a specific skill, such as the ability to translate Spanish to English. Features include the option to group by multiple criteria, such as performance rating, which allows managers to resolve issues or make improvements more quickly.

Collaboration: The entire operations team gains clear and accurate visibility into Communicator activity at all times. Advanced search, sort and editing functionality enables team leaders to alter shift times and allow substitutions when Communicators request a swap. Daily workforce activities and requests can be managed with quick clicks in a single, integrated platform.

Performance improvements: Web-based WFM tools support development of a winning front-line workforce. Managers can track schedule adherence, and monitor individual and team performance, which allows them to easily identify training gaps and set up relevant coaching sessions. All this can be done from the desktop in real time.

Contact centers still relying on paper-based manual processes, or even using non-integrated WFM modules, for forecasting and scheduling are missing an opportunity to excel in customer service delivery. Both over- and under-staffing costs money: overpayment for idle Communicators, and missed revenue opportunities and customer dissatisfaction, respectively.

For contact centers that mean to look after their customers’ needs at the highest level, centralized resource planning and visibility into workforce activities is the new ideal. With a Web-based workforce management solution, it’s easy to keep tabs on staff and keep Communicators engaged and happy by reducing inefficiencies.

Issue Resolution: The Primary Prerequisite for Customer Satisfaction

When customers call into contact centers, they are usually experiencing one of two problems: 1) a billing issue, or 2) product or service assistance. And quick resolution is their aim. Unfortunately, this is not happening regularly. Along with this complaint, customers are growing impatient with companies’ interactive voice response (IVR) systems. Together, these issues have caused the Contact Center Satisfaction Index (CCSI) to drop to 68—the lowest it’s been since 2007.

Released last month by CFI Group, the latest CCSI score, based on a 0- to 100-point scale, slid four points this year. CFI reports that just 52 percent of issues are resolved on first contact (down 6 percent from 2015) and one-third of consumers fail to resolve their issues through self-service options. Especially frustrated by these hurdles are today’s young adults—those individuals born between 1980 and 2000 known as millennials.

Raised in an on-demand digital world, millennials—the nation’s largest demographic—expect readily available information they can easily tap into themselves.

To meet the demands of this generation, and consumers in general, contact centers must better align their processes to exceed customer expectations. Here are some key points to guide these improvements:

Get on board the omnichannel train: Consumers want to interact with brands using their preferred channels. The top five of which are telephone, email, live chat, online portal/FAQ and search engine, according to a 2015 report from Microsoft. Despite telephone’s popularity, Microsoft found that 57 percent of people in the U.S. typically begin brand interactions online; 35 percent begin with the telephone.

First call resolution: Customer satisfaction with contact centers goes hand in hand with the first call resolution (FCR) metric. In addition, even when FCR is achieved, satisfaction is decreased if the caller has to speak with more than one Communicator. On the flip side, the length of time it takes to achieve FCR is not a factor unless the call lasts more than 30 minutes.

Yet, most U.S. customers won’t wait on hold for service no matter how quickly their issues can be resolved. Only 43 percent of Microsoft’s respondents reported a tolerance for even a one- to five-minute wait.

Personal customer care: Even the best technology, wonderful as it is at helping contact center leaders to forecast call volume and deploy skills-based routing, cannot replace the human touch. When customers are frustrated or angry, no IVR or self-help portal is going to be able to de-escalate emotions the way a responsive, empathetic Communicator can.

Whereas a 2012 Amdocs survey found that 75 percent of consumers would prefer to use online support if it were available, a new Verint study shows that human involvement is a critical component in solving queries, especially when complex or sensitive. In fact, four out of five of the 24,000 respondents to Verint’s interview prefer that customer service continue to include human interactions.

Your contact center is critical to creating a customer experience that can differentiate your company in the marketplace. Deploy technologies and strategies now that will show your customers how much you value their business.

 

How to Resolve the Top Three Most Frustrating Customer Service Experiences

Microsoft’s annual U.S. State of Multichannel Customer Service Report is filled with helpful insights about customer expectations for service and engagement, and it confirms something most of us already know: A full 98 percent of U.S. consumers say that customer service is very important or somewhat important in their choice of, or loyalty to, a brand.

There will always be challenges in achieving the highest level of customer service, though. Some of those issues were brought to light in the report, which asked consumers to name what they consider to be the most frustrating aspects of a customer service experience. Let’s take a look at the top three customer frustrations and consider how they might be addressed in any one of our contact centers. Who knows—maybe next year we can bump these off the list entirely (or at least move them to the bottom of the list!).

  1. Being passed between agents was cited by 22 percent of respondents as a frustration, topping the list as a whole. Interactive voice response (IVR) systems can go a long way toward resolving this frustration. While IVR is already widely in use in contact centers, it’s not always used to its full potential. IVR is great for automating simple, repetitive tasks, but it can also direct calls to specific individuals who are most qualified to help. Assignments are made based on selections chosen by the callers as they progress through the system. But don’t stop there—take customer surveys to get actionable feedback to improve your IVR. Continuous review and redesign of the system will ensure that customers reach the right party every time, with no bouncing around. If a Communicator is forced to transfer a call, be sure you have the technology available to pass customer information from one employee’s screen to the next.
  2. Having to contact a brand or organization multiple times for the same issue was cited by 21 percent of respondents as the second-greatest frustration. Before you fix anything else, be sure your Communicators aren’t being incentivized to wrap up calls quickly. If your performance metrics emphasize average handle time, you may be unwittingly cutting off calls before they come to a full resolution. Rather than get rid of the metric altogether, combine it with other metrics that focus on customer satisfaction. Some businesses are making a concerted effort to resolve problems on the first call by training Communicators to dig deep for answers—putting customers on hold while they contact other parties in an effort to find an answer. Still other businesses are providing Communicators with a robust knowledge base to serve as an information resource, which could be useful for solving a host of problems.
  3. IVR automation/not being able to reach a live person was cited by 18 percent of consumers as a major frustration. IVR is often cited as a customer pain point, but again, a more thoughtful implementation delivers better results. Some IVR systems don’t offer customers a way out, so make sure yours does. To keep the use of this “exit strategy” to a minimum, simplify your menu options. Providing four or five options is considered optimal, and prioritize them so the most commonly selected ones are stated first. Only include essential information, and incorporate a callback feature to prevent too-long holding times. Very often IVR is the beginning of the customer service journey, so it should be considered as important as any other channel in the contact center. If you dedicate the appropriate funds, time and effort into getting it right, you’ll reap the benefits in happier—and less frustrated—customers.

Click here for a brief summary of customer expectations around the globe as presented in the Microsoft report.