Nobody likes unpleasant surprises, particularly if they signal missed opportunities and avoidable missteps that bring losses to the organization . . . lost market leadership, recalls, lost profits, and lost market share.

Have you ever encountered any of the following experiences?

• A product problem that resulted in a spike in support calls, a recall, or regulatory action that seemed to come out of the blue.
• A competitor introduces a product or service that is clearly superior to yours that you could have also produced had you recognized the opportunity.
• Complaints from customers or channel partners about quality issues when products leaving the factory meet specs literally 100% of the time.
• Completely contradictory input from sales, service and operations or manufacturing on what an updated product or service should look like.

The underlying cause of all of these surprises is the lack of an actionable Voice of the Customer (VOC) process. The call center is in the perfect position to rectify this weakness because the call center is constantly receiving the most timely, comprehensive input from customers. This article first suggests the critical functions required for an effective VOC Process and then discusses how a consumer relationship system may be deployed to establish this process.

Why have an actionable Voice of the Customer process?

At the macro level, a Voice of the Customer process is logical because an accepted key to success is being responsive to your customers. However, TARP has observed that only about half of companies have a coherent VOC process, and of those, over half are not very effective. Therefore, three out of four companies really do not have an effective VOC process. Why is this? And why should you care if your company is in the three quarter majority who are non-performers?

Quantify the damage to revenue when customers' needs are not met.

TARP's first study for the White House Office of Consumer Affairs in the 1970s revealed that those consumers with problems who did not complain were less loyal and shared their unpleasant experience with friends. However, those who did complain and had their issues resolved were more loyal and spread positive word of mouth. This research, in part, motivated Powell Taylor of General Electric to launch the GE Answer Center, which he led for almost two decades.

Subsequent studies over the last 20 years continue to confirm initial findings that every problem presents an opportunity to bond with customers and address their concerns. Consider these research highlights:

Traditionally, half of all consumers complain about a serious problem to a front-line retail representative. In business-to-business environments, three quarters of all customers complain to a front-line rep about a serious problem. If the rep is an employee of a distributor or retailer, chances are the problem will never be reported to the manufacturer or corporate office. Recently, however, TARP is observing a decline in complaint rates due to growing cynicism that complaining does not do any good. (We call this behavior "trained helplessness," which adopts the mindset that it's futile to bother complaining since nobody will change the policy.) These rates concern serious problems, as defined by the customer. Problems that are only an aggravation have complaint rates one tenth as large.

Only 1% to 5% of customers escalate complaints to a local manager or corporate headquarters. For packaged goods and other small-ticket items, 96% of consumers either do not complain or complain only to the retailer where they bought the product. For large-ticket items, the complaint rate is higher, rising to 50% reporting it to a front-line rep, and 5% to 10% escalating it to the local manager or corporate office. A toll-free 800 number to the corporate office can double the volume of complaints received. However, only one out of 100 to 500 is ever addressed to a senior executive.

Complaint rates vary by type of problem. The costlier the problem, the higher the complaint rate -- e.g., 5 to 10% for minor problems and up to 50 to 75% for expensive or very serious issues. Problems due to mistreatment, quality, or incompetence evoke only 5 to 30% complaint rates to the front-line rep. This is ironic because mistreatment and incompetence often result in five times more damage to customer loyalty than do monetary concerns.

In a study for a leading soft-drink manufacturer, TARP discovered that, on average, five persons heard about a good experience while 10 heard about a bad experience with a small-ticket packaged good. A subsequent study for a domestic auto manufacturer found that, on average, eight persons were told about a good auto repair experience (big-ticket cost), whereas 16 received negative news about a bad experience.

Recent studies have revealed that personal interaction over the phone has up to 20 times more impact than advertisements in terms of shaping customers' opinions about a company and generating personal referrals.

On behalf of a domestic auto company, we compared the cost of placing ads that target new customers to the goodwill expense to retain a current customer. We discovered that it was five times more expensive to win a new customer as to keep a current customer through superior complaint handling. Depending on the industry, the ratio can vary from 2 to 1 to as much as 20 to 1.

TARP finds that only 20% of dissatisfaction is caused by improper employee actions; 40% to 60% by corporate products, processes, and marketing delivered as intended; and up to 40% is by customer mistakes or incorrect expectations.

Quantify the payoff of exceeding customer expectations.

The challenge in making delight a part of your marketing strategy is quantifying the payoff of specific delight experiences in order to target those actions that lead to the greatest increases in customer satisfaction, loyalty, and positive word of mouth referral.

Customer feedback regarding delight experiences indicates that they tend to fall in common sense categories like those outlined in this chart. As the chart indicates, all delight experiences create tangible increases in loyalty. However, our research findings in a variety of industries indicates that actions that take the most effort by the company, such as handholding during a tragedy and expediting complex transactions, do not necessarily result in the greatest lifts in loyalty. The most frequent delighters that provide moderate to high lifts in loyalty are those easiest to execute -- no unpleasant surprises, consistently good service, and a personal relationship. None of these practices should require any extra effort or training for employees. The key is doing the basics well. Finally, many of the delighters creating the greatest lift in loyalty, like cross-selling and proactive education, actually make the company money and reduce customer problems and, therefore, service expense.

Quantify the payoff of soliciting and handling complaints well.

In most consumer products and services industry sectors, a customer who complains and is satisfied by the follow-up resolution is 30% more loyal than a non-complainant and 50% more loyal than a complainant who remains dissatisfied with the follow-up resolution. Below are two simplified cost-benefit calculations for getting customers to complain and to satisfying them, and spending more to satisfy customers rather than leaving them dissatisfied. In both models the assumptions are (1) that the customer is worth at least $30 in profit over a year's time, (2) the cost of handling the complaint is about $5, and (3) the company satisfies at least 75% of callers.

For small-ticket items, for each complaint heard, between 10 and 100 problems of a similar nature are either unarticulated or handled by other touch points or organizations. Extrapolating what you receive to the whole marketplace, you can estimate the revenue impact on the marketplace as a whole of the issues flagged by the complaints.

Calculation for moving a customer with a problem from non-complainant to satisfied complainant: Typically, moving a customer with a problem from non-complainant to complainant to a satisfied caller raises loyalty about 30%. Conservatively, that means handling a customer at a cost of $5 will yield a payoff of (.30 increase in loyalty) x (.75 satisfied) x $30 value = $6.75 or a return on investment (ROI) of 29% ($1.75/$5 cost to handle). If, conservatively, one out of 10 satisfied customers produces a positive word-of-mouth referral (one new customer for every 40 who hear good things), that adds an additional $3 payoff for each customer satisfied, raising the ROI to 95%.

Calculation for the payoff after using resources to move complaining customers from dissatisfied to satisfied by spending an additional $5 on talk time and goodwill: Moving a customer from being dissatisfied to being satisfied usually produces a 50% increase in loyalty. For the above situation, the calculation of impact is (.50) x $30 = $15, for a 50% ROI ($5/$10 cost to handle). With word-of-mouth referral payoff added, the ROI rises to 80%.

Key requirements of an effective VOC process

• Unified ownership of the VOC process by a single executive. If a committee is tasked with developing it, no one person is ultimately responsible for it.
• Provision of unified collection and use of customer data so that effective analysis and reporting may be implemented.
• Integration of customer data from across multiple channels for a comprehensive picture of company-customer relationships.
• Reporting of the customer data in a manner that is tailored to the audience and pushed to them in a visible and timely way that provides useful information to various internal audiences.
• Linking of the VOC data to company revenue and profit implications to identify specific aspects of the customer experience where improvement will yield a significant ROI.
• Inclusion of formal processes for translating customer response into specific actions and incentives that will improve company performance.
• Enabling the company to track the impact of change at various levels (branch, headquarters) and channels (Web site, contact center).
• Having buy-in and support across the company and being part of management's day-to-day decision-making process.

The most prevalent weaknesses, as well as the most challenging of these requirements to implement, are creating the integrated plan, executing the integration, quantifying the results, and providing actionable reporting. What makes the process actionable is the level of granularity captured, stored, then analyzed and reported.

In most companies, there are two key sources of the VOC. The first is a series of transaction satisfaction surveys. The second is an overall relationship survey. The problem is that most serious customer issues are more general than a single transaction, but they are much more detailed than a dimension of the overall relationship, like sales rep responsiveness or product performance. TARP has found that the most actionable level of VOC tends to be at the issue level, either as a problem, a delighting action, or a value add. The challenge is that such a level of detail requires a very granular level of data collection that neither survey nor customer service centers like to collect due to the potential volume of information implied. We will return to identify how the appropriate data collection system can reduce the challenge presented by this level of detail.

The benefits of a call-center-based VOC process

Why base the VOC Process in the call center? It gets the most robust, timely data on the customer experience. Many companies view their survey process as their VOC. But, surveys are a lagging indicator, reporting experiences days or weeks after they occur. Further, phone surveys often have a 5-15% positive bias due to a customer's desire to get off the phone quickly. Also, the call center tends to have easy access to operations data that is not available to the market research units that often administer the surveys. For example, at a delivery company, the operations data indicating the package missed its connecting flight, the phone call from the customer inquiring why it has not been delivered and the survey two weeks later concerning their experience all describe the same set of events. The call center is in the middle and in the best position to collect and integrate all the data into a unified picture of the customer experience.

There are several more reasons to base VOC in the call center. Here are a few key ones:

Reduced problems leading to lower cost and higher loyalty.

For example, a VOC identified that a spaghetti sauce received many complaints about mold after the preservatives were eliminated for marketing and health reasons. Further interviewing of consumers found that the complaints arose after the sauce was stored in the refrigerator for over two weeks. Prominent labeling stating, "May be refrigerated after opening for up to seven days," led to a dramatic reduction in complaints by both reminding consumers of the need for refrigeration and the time limit due to no preservatives.

Improved products by eliminating customer frustrations.

A number of years ago, Avis Europe commissioned TARP to identify the key pain points in car rental. TARP's examination of both complaints and survey data identified that the single greatest frustration was standing in the check-in line at the airport while a customer's airplane boarded and departed. This led to the creation of the computerized check-in as customers drove onto the car rental lot.

Higher margins are another benefit of reduced problem levels because price sensitivity is highly correlated with problem experience. The following chart shows consumer sensitivity to price compared to recent problem experience.

A survey of 3,500 retail banking customers indicate less problems result in lower sensitivity to price. Less sensitivity to price means that companies with better service can achieve higher margins. Customers say, "You are expensive, but you are worth it because I seldom have problems." This is what we call "the Neiman Marcus effect."

Reduced regulatory and risk costs are also a benefit of an effective VOC.

A power company raised the visibility of its consumer appeals group via publishing its 800 number in large print above the required notification that consumers could complain to the Public Service Commission. Complaints to the PUC went down 45% in a three month period to the degree that the PUC put out a press release saying that the company's service had improved and complaints were down dramatically. What had really happened is that consumers had given the company another chance because of the more aggressive message soliciting complaints.

Adopting a disciplined actionable Voice of the Consumer process has also enabled companies to make their service process a word-of-mouth management process.

For example, research for one auto finance company asked consumers if they had a delightful experience with the company and, if so, to please describe the experience. Of those whom had a very positive experience, two thirds had to do with a positive service experience, whether face to face or over the phone. On average, each of those consumers had then told four other consumers about their experience. TARP then asked the consumer making the referral how many of those told had acted upon the recommendation. The result was a surprising one out of four--meaning that for every customer delighted, the company received at least one customer pre-purchase inquiry or lead.

Companies such as 3M, American Express, Bath and Body Works, Canadian Tire, Chick-fil-A, Daimler Chrysler, Honda, Neiman Marcus, Sargento Foods, Toyota, USAA, and Yokohama Tire have created VOC processes that operate at the granular level, integrating multiple sources of data.

These VOC processes routinely solicit customer input and respond as needed to the individual issues reported. But they also capture and report levels of problems and their impact on satisfaction and loyalty. The contact center also estimates the revenue and cost impact of not acting on the issues, thereby creating the economic imperative for action.

The Four Most Prevalent Barriers to Developing an Effective VOC Process

With so many great stories of how VOC processes can benefit companies, giving them competitive edges and reducing costs, why are so many tolerating ineffective systems? We have identified four major pitfalls and/or excuses.

Fear of asking for genuine input from customers

Call center directors or their executives view aggressive solicitation of complaints as "just asking for more work," which will require more budget to handle and often results in bad news. But, it is always better than not knowing. The quality executive of a major beverage company pointed out: "if we had received more complaints up front, we would have recognized this impending disaster sooner and avoided the worst aspects of it."

Failure to aggressively collect and systematically log what input you are already getting from quality, channels, customer service/consumer affairs, and market research.

The amount of information available from all customer touch points is overwhelming. To ask staff to record that data seems unreasonable and a waste of time, given that most believe it will not be useful, or worse, will be used to punish them. But, if you don't log it, you can't analyze it.

Poor systems that are barriers to painless logging, integration, analysis, integration and reporting of data, tracking trends, and determination of whether issues ever got fixed.

An effective VOC process requires collection and integration of data from contact centers, survey processes and customer data bases, as well as internal quality data bases. This collection and integration is a tall order for most companies, even those that are computer and Internet companies on the cutting edge.

Failure to convert the data into revenue implications and effectively communicate them to management.

The data must be converted into an estimate of how much it will cost for each month action is not taken, and then that economic imperative plus a suggested course of action needs to be clearly, simply communicated to the business leader.

The solution: Develop a strategy that proactively manages the customer relationship to maximize connection.

Solicit complaints and customer input.

Most executives would rather know about an unhappy customer than not know, but they fear that if they solicit complaints, then they will hear from customers with "illegitimate" problems. TARP has found that less than 2% of customers are trying to game the system or get freebies. Even if the number was slightly higher, we subscribe to the American Express approach that most customers are honest, and why force the other 98% to run the gauntlet to catch the few who are dishonest or bending the truth?

A related action is to give customers feedback on what you have done. At one company that makes a leading detergent, when they send letters with coupons to the 2,000 consumers who had complained about the scent, describing how it had been modified and asking them to try it again, they got dozens of letters saying, "I am amazed that you actually fixed the issue," along with over a 60% redemption of the coupons.

Deploy a consumer relationship system to enable both effective logging of contacts and an actionable VOC process, the by-product of actively managing the company's relationship with customers.

Contact centers of consumer products companies provide an essential buyer/seller liaison that fosters buyer loyalty and seller success. The centers help resolve customer issues and problems by feeding complaints to development and manufacturing for the improvement of product quality. Centers also assist in managing liability by monitoring consumer responses for early alerts of product faults and logging verbatim reports of issues.

The centers help maintain and enhance consumer satisfaction through customer care and retention programs by supplying constructive consumer feedback to internal customers. Such companies, many among the world's largest and most respected, benefit enormously from listening to the voices of their customers (VOC) and responding effectively to their consumers' insights.

A key enabler of processes that solicit, log, respond to, and assure use of a VOC is the consumer relationship system that efficiently automates processes and workflows of VOC-driven contact centers and interfaces with other VOC data sources. A pioneer in providing a consumer relationship system, Wilke/Thornton uses the Web to optimize consumer affairs in consumer product companies to operate effectively in diverse markets. Many have deployed e-consumer affairs services worldwide.

In 2001, the Gartner Group concluded that "due to the inexorable increase in demand for customer service, organizations that do not exploit the Web will find themselves stuck in a losing battle against increasing calls and cost." Further, TARP has found that even for older customers who are stereotyped as not being Web-savvy, a large percentage are very demanding and as Web-savvy as those who are in their teens and twenties. This is especially true of the more affluent senior citizens who have said that an ineffective Web site is the greatest barrier to selecting a particular organization to do business with. So the consumer relationship system (CRS) provides consumer affairs contact management and information sharing tools through Web browsers, and Web forms provide consumers an increasingly more popular self-service channel to convey their responses to company products and services.

The Web-based consumer relationship system provides capabilities that enable:

• Logging contacts and submitting inputs from customer and consumer letters, calls, faxes, emails, Web forms and chat with enough granularity to assure actionable output
• Replying to customer and consumer requests and complaints by fulfilling them quickly and appropriately with information, coupons, refunds, or replacements, educating, selling and up-selling when appropriate
• Maintaining a reportable history of consumer experience and company replies
• Managing marketing surveys and sales promotion campaigns
• Analyzing response and reporting insights to internal customers

The CRS should have capability for staff and management to routinely listen to live consumer/agent dialogues and/or listen to recordings to make sure they stay tuned to customer sentiments--the needs and preferences that drive company success.

How does a consumer relationship system optimize VOC-driven contact centers? Consumer affairs performance is measured by key indicators such as number of issues resolved on first contact, number of contacts processed per agent per period, increase in customer satisfaction, and provision of valuable consumer insights to internal users. Such measures contribute to company condition, factor into return on investment (ROI), and reflect in financial results.

The CRS automates labor-intensive mechanics of processing volumes of daily inquiries through a "rep desktop" that integrates information resources, making them instantly available to agents as they handle contacts. The rep answers a call. The system captures a caller's telephone number and retrieves a caller's current address, verifying accuracy or populates a new contact record with verified data. Simultaneously, another system resource determines caller propensity to purchase specific company offerings based on coded demographic intelligence, available at various granularity--by neighborhood, family, or individual profile criteria. Such information may trigger cross- or up-sell dialogue.

As the consumer-agent dialogue progresses, the CRS brings to the rep's desktop detailed information about the caller's past purchases and inquiries, and current information about the product or service issue at hand, retrieving specifics from "knowledge bases" so the agent may reply instantly with accurate information to resolve the issue or stimulate a new sale. Similarly, the issue may trigger an "embedded" survey that the agent conducts with the caller.

As the agent determines the most appropriate reply, the system drives workflow to generate all necessary follow-up to the inquiry. A reply letter may be generated with the agent's customized input and pre-approved attachments, such as "how to" instructions, premium or discount coupons, refund checks, new product samples, or a replacement for a damaged or faulty item. If a caller asks where to buy a product, a sub-system using current syndicated purchase data identifies the nearest store where the item is available.

Benefits from optimizing consumer care centers with Web-based consumer relationship systems include reduced operating costs, increased service quality and enhanced customer relationships. Providing Web-based consumer response meets consumer expectations for a live response, satisfying their mantra: "I want it now, I want more of it, and I want it my way!"

Intelligence from consumer insights gathered from contact centers benefits companies enormously. Marketing and public relations see increased brand loyalty, and more word-of-mouth referrals that lead to increased sales. Better consumer understanding of products and services increases usage and reinforces loyalty.

Early detection and warning of product and service quality issues help companies avoid costly litigation and negative publicity and reduces warranty, repair, and replacement costs. Receiving consumers' ideas for product improvements and new products increases customer satisfaction and improves company understanding of consumers' needs and behaviors when using products and services.

Create the analytical framework to allow translation of the VOC into revenue, word of mouth, and bottom line impacts that can be easily communicated and accepted.

To convert the VOC from the contact center into bottom-line implications, you must be able to do or know the following calculations:

• Estimate, for each contact received, how many others exist in the marketplace. This is called the multiplier and is usually between 10 and 200. See TARP's other articles on how to estimate this factor.
• Estimate the damage to loyalty and word-of-mouth for each consumer who encounters the problem.
• The value of the average customer or consumer (Be very conservative. You need to convince the CFO.)
• Other key impacts of the customer experience including regulatory impacts and impact on risk (e.g. 97% of consumers with an injury do not sue. How their first complaint is handled is a key predictor of risk and legal expenses.)
• Roll up the above into an overall estimate of the economic opportunity of each issue or customer problem set so that priorities based on payoff are obvious and compelling.

While you must develop the above analyses, your clients in the company--Quality, Marketing, Risk, Legal and Regulatory and Operations--must understand them and have access to the data themselves. This implies that you must do the necessary education so that they understand and accept the analysis. Also, each department should have access to the data via a centralized CRS reporting system so that they can track issues without your active intervention.

Cases: Deploying a consumer relationship system assures success -- the ROI of automated actionable VOC process.

Household-name consumer product companies--some with global scope--have developed actionable VOC processes using consumer relationships systems that effectively address the above requirements. For example, Coty Prestige now better understands and satisfies its customer expectations across forty countries with twice as many brands. Del Monte Foods is now dedicated to monitoring customer satisfaction levels. H. J. Heinz focuses on continuous improvement in customer satisfaction. Kellogg Company consumer affairs can now provide management with global customer response reporting. Kimberly-Clark Corporation has optimized its consumer email handling. Sargento Foods' chief customer officer gathers consumer insights directly by calling back dissatisfied customers who have contacted their center. And, Yokohama Tire is now providing personalized premium customer care to its distributors, dealers, and end-user customers.

Packaged Foods Company Optimizes Consumer Response

The CRS integrates email, consumer demographics, and a where-to-buy item finder for this packaged foods company's contact center. Representatives reply to consumers who acquire its products from groceries and a Web store of specialty items. To optimize costs, the company outsources the center. Trained reps draw on pre-approved texts to compose their personalized replies to callers. Caller inbound communication mode and issue determine whether the agent replies by email, fax, letter, or phone. Refund, discount, premium or rebate coupons may be included or attached. Sensitive issues escalate to specialists, should legal or insurance remedies apply.

The Web-based consumer relationship system is independent of company systems whose performance might degrade from the burden of other activity. "We are extremely happy with the online service," reports one manager, who notes it pays for itself by relieving IT resources to attend to other needs. "The item locator returns its value daily by satisfying caller demand for instantly finding items at nearby stores." The item locator draws on current item availability from over 38,000 grocery stores, mass merchandisers, and convenience-store pharmacy chains. The CRS' reporting enables quality assurance to use consumer insights in performance reviews. Consumer verbatim reports enable marketing to interpret unfiltered reactions to product features, packaging, and promotions. Item detail and summary inquiry reports give management the issue-level actionable VOC intelligence they need to guide their enterprise.

Household Goods Maker Sells Worldwide.

English may be the international business language, but one company's consumer response representatives reply to contacts in their native languages, using country-specific product names and descriptions. Having a multinational product information resource available online requires high performance. For queries and reports, reliable high speed access is essential for operating the consumer relationship system effectively. Connections between the company's worldwide centers must meet 70-100 millisecond response.

An online product catalog aligns multinational products in unified hierarchies, indexed by location and subject. Production codes match shipment information for correct reporting. A product, location, and subject hierarchy database maintains thousands of items with links to reference documents for quick rep retrieval. The company protects a proprietary knowledge base in a highly secure location to minimize loss of access and loss of information risk.

Most of this center's inquiries are for product information--characteristics, performance and marketing. The rest are for where-to-buy items, satisfaction testimonials, and questions about packaging and handling. Agents draw from prepared electronic letters and paragraphs to compose personal responses. Depending on the response, agents may enclose coupons or a check with reply letters. Integrated email processing applies rules as it scans messages for keywords and then sorts them in priority queues for agents to respond quickly. The intelligent triage queues emails by arrival date-time. Agents respond to routine inquiries, and supervisors handle sensitive matters.

This frontline position enables the company to use the Web-based consumer relationship system to conduct market reaction surveys before and after product introductions. Multiple surveys may run concurrently. Decision support staff analyzes survey results. The consumer affairs center performs annual customer satisfaction surveys. And marketing and quality staff study results to glean insights for improving product characteristics, packaging, and marketing. These enable agents to survey contacts during live dialogues, as well as via email and Web form. The center is valued for providing timely consumer feedback.

As they reply to inquiries, agents refer to instructions and illustrations linked to the system. Sometimes they record calls for verbatim reporting. To integrate consumer response data with other departments' data, the center exports it to the enterprise system. The center produces hundreds of reports daily and posts weekly and monthly reports to the company intranet for corporate, legal, marketing, manufacturing, quality, sales, and safety staff. The consumer response data repository feeds the enterprise with fresh intelligence that can be digested quickly.

An effective call center based Voice of the Customer process is worth its weight in gold. But developing it requires hard work, risk taking and very effective systems. It is not for the faint-hearted because it assures that management hears bad news on occasion, along with the good. The payoff is that you hear the bad news early enough to take corrective action before it becomes serious, and you identify opportunities before your competitor does. With an effective consumer relationship system driving an actionable VOC process, your call center will make your company much more nimble and, likely, much more successful than those that don't.

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John Goodman is Vice Chairman of Tarp. Email him at jgoodman@tarp.com.

Mike Wilke is President of Wilke/Thornton, Inc and can be contacted at mikew@wilke-thornton.com.

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