BLOG — Does Exceptional Customer Service Really Translate into Customer Loyalty?

The short answer is no. The Kool-Aid that companies have been imbibing since forever is that customer service is the single most important part of the retention process. The gold standard that propels most customer service strategies is to “exceed expectations.” But you can’t retain customers unless you’re starting with a top-notch product or service. No amount of customer service can fix a broken commodity.

As a sales associate for GM’s Saturn, the edict was to make our clients “customers for life.” We were even required to read the book Customers for Life: How to Turn That One-Time Buyer Into a Lifetime Customer, by Paul B. Brown. I wrote thank you notes to my customers in long hand after their purchase. I offered to drive customers to the airport in their new cars and store their cars at the dealership, wash the cars and pick up the customer up when he or she returned. The dealership was allocated new cars not on how many cars were sold out of inventory, but on the dealership’s customer satisfaction surveys. Customers didn’t want to haggle, so Saturn instituted a one-price fits all strategy to level the playing field for non-savvy car shoppers. They tried to make the experience as easy as possible. The result: Saturn’s out of business because there were much better cars on the road.

Producing a superior product or service is job number one 

Customer service is number two. But these two must go hand in hand. Product quality and brand reputation account for the biggest piece of the pie. Service is a much smaller portion, but a significant ingredient when it comes to retaining customers. In their article Stop Trying to Delight Your Customers, Matthew Dixon, Karen Freeman, and Nicholas Toman contend that, “First, delighting customers doesn’t build loyalty; reducing their effort—the work they must do to get their problem solved—does. Second, acting deliberately on this insight can help improve customer service, reduce customer service costs, and decrease customer churn.” Together these two elements give mobile companies a great shot at generating repeat — loyal — customers.

Apple is another prime example. In my experience, their products are so reliable that customer service rarely comes into play. I don’t remember ever interacting with Apple customer service and I’ll always remain faithful to their products because I trust them.

There’s no doubt that repeat customers are good for business

However, previous research that asserts it costs more to acquire a new customer (CAC) is a fallacy. The theory says that with repeat customers, you’re spreading your initial acquisition costs over the number of purchases a loyal customer makes. The more purchases, the less investment per customer. Simple math. That’s the problem. It’s much more complex as pointed out in Loyalty Myths: Hyped Strategies That Will Put You Out of Business — and Proven Tactics That Really Work, by Keiningham, Vavra, Aksoy, and Wallard. Math is hard and this theory falls by the wayside when you examine it more closely.

So, how do you keep mobile customers coming back for more?

The Endowed Progress Effect: How Artificial Advancement Increases Effort describes one variation of the “free on free” tactic. For example, let’s say two bowling alleys have a customer reward program. Bob’s Bowled Over Lanes offers one free game when you complete eight games. Across the street, Betty’s I Can’t Believe it’s Not Gutter Lanes offers one free game when you complete 10 games. Who do you think customers will be loyal to week after week? Wrong. It’s Betty’s. Why? Because when Betty presents the patron with their reward program punch card, she punches the first two squares and informs them that their first two games are free. But, again, that’s just a tactic.

Leave no stone unturned

What’s more important is to find out why good customers leave and create a strategy to keep them on board. So what’s the answer? The answer begins with four fundamental questions:

1) What do your customers want — what value are they seeking from your product or service?

2) What adverse situations or your reactions to these situations make customers unhappy?

3) What does it take to get current customers to recommend your product or service?

4) What will it take to make your customers true evangelists?

Discover the answers to these preliminary questions and you’ll be well on your way to crafting a strategy that will provide your customers with an exceptional experience that will keep them loyal and your make you mobile operation flourish.

BLOG — Dark Cloud On the Horizon for the Managed Hosting Services Industry

What every operations department needs to know about the troubled future of outsourcing, managed hosting, and the cloud.

What’s on the managed hosting horizon?

A significant divergence is coming for all IT outsourcing, including managed hosting and “the cloud.” Commodity, low-end, public cloud services will devolve further into a commodity price footrace to the bottom — where no company ever wins. We saw this occur with both Transit and the CDN markets in the last decade and it’s déjà vu all over again with cloud computing.

And the same thing is already happening for low-end “server schleppers,” that deploy dedicated hardware, Virtual Private Servers (VPS), and other commodity systems with no customization or IT subject matter expertise.

The only way for any managed services provider (cloud or otherwise) to survive is to go beyond growing their number of features, to offering more subject matter expertise. Service Providers must do more for their customer, not just offer more stuff, if they want to continue to earn their customers’ business.

There is only one problem with this entire scenario:  the business model of many managed server companies in existence today makes this impossible .

What the market needs today and how it will shape the future tomorrow

More and more companies are realizing the benefits of removing the distraction and expense of staffing and running an entire in-house operations department. In time, companies will readily embrace outsourcing — not just cloudsourcing — if they are guaranteed better:

• Scaling
• Uptime
• Performance
• Features
• Security
• Economics

I’ve got good news and bad news…

First, the bad news:

1.  Private Cloud is simply putting lipstick on the same ol’ pig of dedicated servers and virtualization that the industry has been selling for years.

2.  Public Cloud is:

• Costlier (link to cloud economics page on website)

• Slower (link to cloud performance page on website)

• Crippled from repeated catastrophic outages

Failing to offload staff

 The entire industry is moving more toward automation, so customers can do it themselves. While this is a noble goal for the service provider’s investors, is this what the provider’s customers really want? Would you rather have more tools for your staff to do the work, or just have ALL the work taken care of by someone else?

Companies who have already put a toe into outsourcing to manage service providers, especially “the cloud,” have run into two major obstacles.

• They still pay an in-house staff to run “the cloud,” and
• The economics are much worse than expected.

The simple truth remains: profitability and customer service are competing goals. Public companies must have a trade off between shareholder return and customer experience. Period.

Public companies, or those planning an IPO, systematically put the squeeze on core competencies to increase their profitability.  Common ways to achieve this are to:

• Minimize the amount of time customers spend with their staff
• Provide support and answer questions through an API, FAQ, or GUI, and
• Cut corners on redundancy, hardware quality, and services offered.

The bottom line is: They believe that the LESS customers interact with staff, the MORE money they’ll make.

Now the good news: It’s simple economics
A few progressive hoting companies believe the exact opposite. MAXIMIZING the amount of time architects, engineers, and support staff spend working with customers allows them to pre-buy five important objectives:

1)     Performance from the right architecture and applications for your company.

2)     Seamless upgrades and migrations optimize your applications, systems, design, architecture, and business needs.

4)     Economic value to help reduce/minimize staffing and spending.

5)     Renewals for a long-term relationship dedicated to helping your business grow.

It’s a very different philosophy to ask, “What’s the most we can do?” vs. the industry’s, “What’s the least we can get away with?”  Make no mistake; there’s nothing magical about a progressive hosting company’s seasoned staff, servers, or data centers.  The unique point of difference is their mission to maximize your experience, not their investor’s profits.  This dedication to your business is insurmountable and unobtainable for public and pre-IPO companies. The best hosting companies simply realize that profits are the byproduct of great work, not the goal in and of itself.

Please be big and small at the same time

At the end of the day, companies want their managed hosting service providers to be both big and small at the same time and for very different, but equally important, reasons.  Customers want managed hosting providers to be big, in order to:

• Stay in business, and

• Maintain the staff, capacity and whatever means necessary to handle any situation a customer has, no matter what.

However, companies also want their outsourced managed hosting providers to be small, in order to:

• Lavish attention on their businesses without being lost in the shuffle, and
• Respond quickly with customized solutions.

Your best bet is to find a hosting company that is large and stable enough to handle all your needs any hour of the day, every day of the year — regardless of the skill-set, size, or complexity you require. It should also focus on its customers to be able to provide individual, customizable configurations and deployments vs. cookie-cutter mass scaling.

How does high-touch support scale?

Look at the managed hosting industry today and you’ll notice that the biggest inconsistency is not the redundancy or performance of the hardware, but the amount of support customers receive.  At one end of the spectrum, Amazon Web Services solves customers’ issues through emails, API, FAQs, and GUI.  At the other end of the spectrum, is Rackspace promised fanatical Platinum support and the perception that they will manage everything.  However in both cases, the majority of the work still requires the customers to support themselves — which defeats the purpose.

Companies (both public and pre-IPO) are continually squeezing new ways for the same staff to support more and more customers. In their worldview, this eases their scaling ordeal of hiring, training, and meeting payroll while also increasing bottom line profits. The only way companies can achieve their goal of scaling horizontally very wide is by never scaling vertically very deep into their customers’ environments. This trade-off is detrimental to you because it leaves the burden of support on your staff and neglects the many opportunities for customization, performance boosts, uptime improvements, and innovation that you need in order to take your company to the next level…and beyond.

Boil it all down for me…

At the end of the day, ask yourself , “Why does my managed hosting provider exist?”  It’s not about what they do, but why they do it.

Why should they exist? To enable you to focus on your core competency, going beyond the rest of the managed hosting industry’s offerings to actually make good on the promises of “the cloud”.

Against whom does your hosting company compete? The focus of many companies in the managed hosting industry is maximizing shareholder return by minimizing their staffing expenditure through automation and forcing the support and heavy lifting back onto their customers.

Who would you rather work with? The choice seems pretty simple to me. If it does to you, too, learn more by downloading our free white paper.

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