I’m blogging from Barcelona this week, as I attend the TSIA Technology Services Europe conference. Thursday afternoon, I heard a presentation from Dr. Florian von Wangenheim, who serves as Professor of Service and Technology Marketing at the Technische Universitaet Munich Business School. The Professor discussed studies he has conducted related to “connected services.” During his presentation, he asked a provocative question:
“Why are you asking your customers if they are happy or what features they are using when you could be building products that already tell you the answer?”
In essence, he put the entire exercise of collecting and analyzing customer satisfaction data into question. And I must tell, there are three factors that tell me he is on to something big.
We know from our benchmark data that a majority of technology companies have formal customer satisfaction programs in place. And I am sure technology companies have spent millions of dollars creating satisfaction surveys, begging customers to fill them out, and analyzing the results. Despite this massive infatuation with improving customer satisfaction scores, I am not convinced the exercise is driving incredible business value. I know this is heresy, but hear me out.
Factor 1: No Linkage Between Customer Sat and Compensation
Even though companies invest to collect satisfaction data, the common practice is to base very little service employee compensation on satisfaction results. I know there are exceptions out there, but I am stating the common practice. Why is this? Because a majority of technology companies don’t care about customer satisfaction? Hardly—they care greatly. Or, is it because companies don’t trust the data enough to penalize hard working employees when the numbers are weak. I think that assumption is closer to the mark.
Factor 2: Customer’s Lie
There is a good reason technology companies are not willing to base significant portions of compensation on customer sat results: customer’s lie! Or at least, they are inaccurate with their responses. Professor von Wangenheim noted that his research found that customer’s are often inaccurate when reporting how they used a product, how much they used, will they purchases again, etc. This gap becomes apparent when a company can compare customer survey responses to actual data collected from monitoring software.
Factor 3: Can’t Quantify the Impact!
Finally, and perhaps most importantly, VERY FEW technology companies can accurately quantify the economic impact of changing the customer satisfaction rating. If customer sat improves by 10%, how much more money does the company make? Can’t answer that question with confidence? I asked that question to our audience in Barcelona. Less than five hands went up. In fact, investing money to improve customer satisfaction scores is simply a “leap of faith.” You hope better customer satisfaction will help revenues—but you don’t know for sure.
Where to Invest?
So if tracking customer satisfaction is a weaker value proposition than previously believed, what is the alternative? Professor von Wangenheim was clear on this point: “Invest in capabilities that provide actual customer usage data.” These are his “connected services.” Use that real usage data to create services that improve product adoption and improve the customer experience.
Will actual usage data be a more reliable predictor of customer loyalty and renewal rate? I have not seen data, but my intuition is obviously yes. Instead of taking a “leap of faith”, would it not be wonderful to say “when usage rate of this feature increases 20%, renewal rate increases 50%.”
Of course, adding product and process capabilities to accurately capture and analyze customer usage data will take investment. Where could the investment come