How to manage your customer service to have the biggest impact on your profits

I have spent the last few months studying how to provide an exceptional customer experience, largely as a way to help grow gaming businesses. This learning has helped me identify best practices in creating a WOW experience but my perception of the opportunity changed after reading The Effortless Experience by Matthew Dixon. Unlike many of the other customer service (CS) books that focus on how to provide exceptional experience, Dixon’s book is data driven and challenges some basic assumptions.

In particular, his work shows that exceptional service does not drive the KPIs that matter (revenue and loyalty). Instead, these engagement KPIs are actually most impacted by how much effort a customer has to expend to achieve their goals while high effort translates to disloyalty. As the ultimate goal is to increase lifetime value (LTV) of your customers, and retention is the biggest driver of LTV, limiting disloyalty will have a much bigger impact on your profitability than creating WOW experiences. Dixon writes, “[c]ustomer service drives disloyalty, not loyalty. The average service interaction is four times more likely to make a customer disloyal than to make them loyal…. While most companies have for decades been pouring time, energy, and resources into the singular pursuit of creating and replicating the delightful experience for their customers, they’ve ironically missed the very thing customers are actually looking for—a closer-in, more attainable, replicable, and affordable goal that’s been sitting right in front of them all this time: the effortless experience.”

The beauty of The Effortless Experience is that it is data driven, not anecdote driven. Dixon analyzed more than 97,000 customers and found that there is virtually no difference between the loyalty of those customers whose expectations are exceeded and those whose expectations are simply met. He defined loyalty by measuring three behaviors

• Repurchase (customers continue to buy from your company)
• Share of wallet (customers buy more from you over time)
• Advocacy (customers say good things about your company to family, friends, coworkers, even to strangers).

When Dixon looked at data from the 97,000 customers, “rather than a ‘hockey stick effect’ — where loyalty skyrockets upward — loyalty actually plateaus once customer expectations are met.”

Why customer delight does not work

Since the data shows that great service is not going to create better loyalty, and thus improve your customer lifetime value (LTV), the next step of analysis is how customer service can improve LTV. What Dixon found is that a customer service interaction is four times more likely to drive disloyalty than to drive loyalty, so you want CS to avoid leading to churn.

This data driven insight resonated upon reflection with my personal experiences. I could think of many companies I stopped purchasing from due to a bad or disappointing CS experience (online retailers, restaurants, department stores and even a car company) but it is very hard to think of one I am loyal to because their service went above and beyond what I expected. Dixon writes,“you could probably fill up a list a mile long with companies you’ve stopped doing business with because of the bad service you’ve experienced: the cable company that makes you take a day off from work because they can’t do better than an all-day service window, the dry cleaner that ruined your favorite suit and refuses to reimburse you.”

What customers want

While customer service cannot make customers more loyal by providing incredible experiences generally, it can help retention by solving customers’ problems. Dixon’s data shows that when something goes wrong, “the overriding sentiment is: Help me fix it. No need to dazzle me, please just solve the problem and let me get back to what I was doing before.”

Reinforcing this finding, Dixon’s data shows that 94 percent of customers who had low-effort experiences reported that they would repurchase from the company, but only four percent of customers experiencing high-effort interactions planned to make another purchase. What is more, 88 percent of customers with low-effort experiences planned to increase spend with the company, while only four percent of customers with high-effort experiences were going to increase spend. This phenomenon extends to word of mouth, where only one percent of all customers with low-effort experiences said they would spread negative word of mouth about the company but 81 percent of customers with high-effort experiences said they would spread adverse sentiment.

A strategy focused on customer delight does not work because delighting customers is rare, and even when delight does occur, it does not make customers much more loyal than simply meeting their expectations does. It does not work because customer service interactions are four times more likely to drive disloyalty than loyalty. Operationally, since delight does not work you should focus your resources, investments, performance metrics, and incentives on reducing and eliminating the sources of customer effort that make customers disloyal.

Where to focus your customer service strategy

As the data shows customers are not looking to be delighted, you should focus your customer service on fixing things when they go wrong. Rather than trying to get customers to feel you exceeded their expectations, you should be getting customers to think you made it easy to resolve their issue and avoid follow-ups.

To achieve this goal and reduce the effort (and perceived effort) your customer must exert, Dixon identified four best practices:

1. Low-effort companies minimize channel switching by boosting the “stickiness” of self-service channels, avoiding customers contacting CS in the first place.
2. When customers are forced to Live Chat or email or call, low-effort companies do not just resolve the current issue for a customer; but power their reps to head off the potential for subsequent calls. This is done through employing next issue avoidance practices. Low-effort companies understand that first contact resolution is not the goal —
   it is only a step in the direction toward more holistic, event-based issue resolution.
3. Low-effort companies train their CS team to succeed on the soft side of the service interaction. Rather than soft skills that are about being nice and friendly, agents are trained to actively manage the customer interaction through experience engineering (I will elaborate later).
4. Companies that understand the Effortless Experience empower their agents to deliver a low-effort experience with incentive systems that value the quality of the experience over speed.

Even if you understand the value of a low-effort experience, many companies fail because they try to focus on everything, creating exceptional as well as delivering low-effort. As I have previously written, when there are multiple goals you fail to achieve any. Thus, you need to align your CS org on providing the effortless experience. If you are correctly optimizing for loyalty, you need to focus on finding ways to eliminate or reduce the hassles, hurdles and extra customer effort that leads to disloyalty.

KPIs, good and bad

To implement and optimize a successful strategy, you need to understand and track the KPIs that lead to the desired outcome. In the world of customer service, many of the commonly used KPIs and perceived best practices do not correlate with an effortless experience of increased loyalty. Dixon found virtually no statistical relationship between how a customer rates a company on a satisfaction survey and their future customer loyalty. He also looked at arguably the most common customer service KPI, CSAT score, and found that the data shows a strong CSAT score is not a very reliable predictor for whether customers will be loyal: whether they will repurchase, increase spend and say good things about your company to friends, family, and coworkers.

Dixon points out that it is unfair (and useless) to ask customers if their issue is fully resolved. They will not know that they need to start another ticket in a day or a week. Repeat contacts are by an order of magnitude the single biggest driver of customer effort. Having to contact a company again because an issue was not fully resolved is a customer experience killer and quite expensive.

To highlight how traditional CS measures fail, Dixon also uses an example of a customer whose problem was fully resolved by a rep who went above and beyond (that sounds great, but it tests relatively neutral for increased future loyalty). Unfortunately, this was the second time the customer called about that issue (a huge negative). If you were listening to this call, you would have to conclude, “We did a great job there.” But since it took the customer two tries to get to that moment, and knowing the huge negative impact that repeat contacts have on the customer experience, this person is still very likely to end up more disloyal. Thus it means there is less of a chance the customer will repurchase, less of a chance they will spend more, and a greater chance that they will say negative things to other people, despite the fact that the agent who eventually solved his problem went above and beyond. In this example, if you simply classify this experience as positive, that does not indicate whether it benefited or hurt your company.

The core metric to measure effectively whether your team is delivering an effortless experience is CES (customer experience score). When Dixon compared CES to CSAT, he found CES was 12 percent more predictive of customer loyalty. The most recent CES metric is based on a statement, “the company made it easy for me to handle my issue,” after which the customer is asked to answer (on a 1–7) whether they agree or disagree with that statement. You should then review CES against a normal distribution (10–20 percent of interactions would score as very high-or very low-effort, but most would be somewhere around the mean). Looking at the distribution to understand areas of opportunity can be far more helpful than just considering how your average CES compares to competitors.

While CES should be at the core of measuring your CS efforts, a robust customer effort measurement system includes three components. First, at the top of the pyramid, you want to understand the customer’s overall loyalty to you as a company, I am a big proponent of using NPS.

Following NPS you want to understand the amount of effort in the service transaction. As discussed above, CES is a good way to measure that. Dixon also recommends “that companies cross-check their CES results by looking at some of the operational data that underpin effort& #8212 for instance, number of contacts to resolve an issue.” CES provides a formidable indicator of transactional customer loyalty, clearly highlights friction points in the customer experience and helps you spot customers at risk of defection due to high-effort service interactions.

According to Dixon, “the next level down is to understand how the customer’s service journey unfolds — in other words, the number and type of touchpoints they used to resolve their issue, in what sequence those service touchpoints occured (e.g., did the customer just call the contact center or had they first visited the web site?), and the discrete customer experience within each channel (for example, assessing the clarity of information delivered by a service rep or the ease of finding information on the web site).”

Key tactics to achieving an effortless experience

While Dixon provides compelling evidence in in the value of creating an effortless experience and there are KPIs that can deliver an understanding of how well you are doing, the key to success (in everything) is execution. To create an effortless experience, you need to minimize channel switching, avoid repeat contacts, appropriately “engineer” the customer service interaction experience, build the control quotient, create the right culture and optimize the purchase experience.

The danger of channel switching

Channel switching is when a customer initially attempts to resolve an issue through self-service, only to have to then send an email or pick up the phone and call, and it has a disastrous impact on customer loyalty. Each time a customer switches channels, it has a significant negative impact on customer loyalty.

One of the core issues leading to channel switching is that many companies, mistakenly, believe they know how customers want to be served, but they are wrong. Customers do not prefer high touch interactions (Live Chat or phone), they see just as much value in self-service as they do in phone interactions. Dixon found that executives, however, expected customers to prefer phone: a 2.5-to-1 margin in favor of phone service.

Customers who attempt to self-serve but are forced to pick up the phone are ten percent more disloyal than customers who can resolve their issue in their channel of first choice. 58 percent of customers who are forced to switch from web to phone and fall into the “lose-lose” scenario costing companies more to serve and end up being less loyal as a result.

To avoid channel switching, you need to create a robust self service system. Dixon writes, “the more controllable drivers of channel switching (47 percent in B2C settings and 37 percent in B2B) can be categorized into three groups: The customer couldn’t find the information they needed. The customer found the information, but it was unclear. The customer was simply using the web site to find the phone number to call the company.”

As I have written frequently, more choices often results in lower satisfaction or performance (choice overload) and it is also a problem when designing customer service. Based on Dixon’s review of CS data, it “became clear that the variety of options to resolve an issue — all of which were presumably added in an attempt to improve the customer experience — were actually detracting from it. It’s an illustration of what’s known as “the paradox of choice”….[C]hoice is not nearly as powerful as we might have expected. Instead, guiding customers to the pathway that will require the least amount of effort is much more likely to mitigate disloyalty and create the best experience.”

Another cause of channel switching is when customers do not understand the self-service information. The goal is not simply to get customers to try self-service, it is about getting them to stay in self-service. Dixon suggests several ways to mitigate this problem:

• Simplify language. Rather than being creative or trying to show how sophisticated your company is, write copy in a way that is very simple and easy to understand. A good way to check your copy is the Gunning Fog Index, your text should score an 8 or 9.
• Eliminate null search results. Look for customer searches that yielded no responses as well as low-relevance searches. You will probably find that customers often use different words than what you used
• Chunk related information. Chunking is condensing related information and spacing it apart from other text, allowing readers to scan content easily.
• Avoid jargon. Many companies use phrases and words common to the company or industry but unknown to the customer (in the casino space, a word like “hold”). Scan your web site pages and FAQs carefully for internal jargon, industry lingo, and terms that would generally confuse the average customer.
• Eliminate what is not vital. Most service sites fail not because they lack functionality and content, but because they have too much of it. Dixon argues, “the key to mitigating channel switching is simplifying the self-service experience.”

Avoid repeat contacts

The second key to creating an effortless customer experience is helping your customers avoid repeated contact with customer service. Repeat contacts are the single biggest driver of customer effort (and it is not even close). Needing to call a company back or send another email or start a new live chat because an issue was not fully resolved is a customer experience killer and hugely costly.

In Dixon’s research, he found a huge disconnect from what companies were judging as resolved and what customers experienced. Customers reported, on average, that only 40 percent of their issues are resolved in the first contact, which meant that an additional 30–40 percent of issues in which customers would disagree with the companies’ assessment that the problem was solved. This disconnect is driven by the company fixing the explicit issue but leaving implicit issues.

There are two main types of implicit issues driving these repeat contacts that companies are missing. The first are adjacent issues, which according to Dixon’s data account for 22 percent of all callbacks. These are downstream issues that might initially seem unrelated, but are ultimately connected to the first thing the customer called about. The second major source of repeat contacts is experience issues, which constitute 24 percent of all repeat contacts. These are primarily emotional triggers that cause a customer to second-guess the answer they were given, or double-check to see if another answer exists.

To mitigate this issue, you should focus on next issue avoidance. Next issue avoidance starts with a totally different mind-set than simply asking a customer if you resolved their issue. Agents are trained and coached to ask themselves, “How can I make sure this customer doesn’t have to call us back?” Simply letting a customer know that you are trying to save them from having to call back later and deal with another related issue goes a remarkably long way.

The fundamental difference when applying this tactic is you are not looking to simply solve the current issue, but also head off the next issue. According to Dixon, “the best companies think of issues as events, not one-offs, and teach their reps to forward-resolve issues that are related to the original issue but typically go unnoticed by the customer until later.”

Experience engineering

The third element of creating an effortless customer experience is “experience engineering.” Experience engineering refers to managing a conversation with carefully selected language designed to improve how the customer interprets what they’re being told. At its core, experience engineering reflects the importance of perception.

Dixon found “that the customer’s perception of the experience actually counts for fully two-thirds of the overall ‘effort equation.’ Put differently, how the customer feels about the interaction matters about twice as much as what they actually have to do during the interaction.” The exertion required from the customer makes up only 34.6 percent of how they evaluate customer effort. But the interpretation side — the softer, more subjective elements based entirely on human emotions and reactions — make up a shocking 65.4 percent of the total impact.

Many customer interactions that do not require a lot of exertion still feel like a lot of effort to customers. Also, most companies have been strategizing about how to reduce customer effort without focusing on the customer’s perception of the experience. Instead, Dixon proposes a three step process to engineer successfully the customer experience so they do not perceive high effort:

• First, experience engineering is purposeful. It’s about actively guiding the customer and taking control over the interaction through a series of deliberate actions.
• Second, experience engineering is designed to anticipate the emotional response of the customer. Agents who engage in experience engineering are trying preemptively to offer solutions that the customer will find agreeable.
• Third, an experience engineering approach is focused on finding a mutually beneficial resolution to customer issues. This means matching the customer’s actual and often unstated needs with what the company can offer.

Following these steps a can significantly change outcomes, by preempting a high-effort interpretation and getting the customer to feel like it was very little effort. Dixon writes that, “reducing the interpretation of effort, particularly in situations where there’s nothing else that can be done to reduce exertion, is the ultimate win-win-win—best for the customer, best for the company, and best for the individual reps who are in the hot seat delivering bad news on a daily basis….Reps need to find a way to both be truthful (because the answer in many cases is, unfortunately, still no), but in a way that doesn’t trigger the negative emotional reaction and all the bad outcomes that come along with it.”

Delivering this bad news can be alleviated with the use of positive language. Dixon writes, “In their first attempt at positive language, many people struggle: ‘Uhhhhh, the park closes whenever the magic stops.’ (No, the park actually closes at 8 p.m.) ‘The park closes whenever you leave.’ (No, if you’re still here at 8: 01, you’ll probably get some Disney version of the bum’s rush.) Ultimately, the most correct answer is some version of, ‘The park remains open right up until 8 p.m. Then we reopen for even more fun tomorrow morning at 9 a.m. Hope you can join us then!’ How could a customer possibly have a negative reaction to that?”

To drive experience engineering, you should start by analyzing your highest-volume incoming customer requests and see how your agents responded if the customer was not going to get what they wanted. You want to train the agent so they act as the customer’s advocate, the person who’s on the customer’s side and doing everything to make it an easy, low-effort experience. An example Dixon uses is a restaurant server being trained to respond to a customer who wants a Coke while the restaurant does not serve it, responding, “I’m happy to get you a Pepsi.”

The salient point is for the agent not to be fast with the saying no. Suggesting an alternative is better than immediately sharing what is not available.

Another element of successful experience engineering is learning more about your customer so you can “engineer” their experience. Rather than putting a customer on hold or asking the customer to wait during a Live Chat while they look for the answers to the customers questions, agents can strategically use those moments when looking at their screen for information as an opportunity to learn something about that customer and their needs that could become useful later in the conversation.

By listening to the customer, agents can categorize them. For example, you may segment your CS requesters into four categories: The Feeler, who leads with their emotional needs. The Entertainer, who loves to talk and show off their personality. The Thinker, who needs to analyze and understand. The Controller, who just wants what they want, when they want it. When a customer feels that the agent they are interacting with understands them, a lower-effort experience is much more likely.

Giving different experiences to different people based on what the agent has learned (or the company has learned previously) moves from the target from consistent service where the customer service management team defines what “good” is and then expects all frontline reps to conform to this standard, to consistently tailored service, where each individual customer is treated individually. Dixon writes, “it cannot be accomplished simply by telling employees what to do in every situation. It is readily apparent that this notion of consistently excellent service will require a serious rethink about how to manage customer service employees.”

Build the Control Quotient

Another element of creating an effortless experience is giving your agents control, what Dixon refers to as the Control Quotient (CQ). Judgment and control differentiate today’s best agents. With increasingly complex live service (phone, Live Chat, real time email, etc) and heightened customer expectations due to simple issues being resolved in self-service, the most important competency for reps to possess is CQ. CQ is the ability to exercise judgment and maintain control in a high-pressure, complex service environment.

Dixon three distinct keys to unlocking CQ that are within the control of customer service leadership to enable:

1. Trust in agent judgment
2. Agent understanding and alignment with company goals
3. A strong agent peer support network

According to Dixon, “these three factors — with all other things being equal — are the difference makers that transform average organizations into world-class low-effort service providers….Frontline reps are made to feel that they are free to do whatever is right to serve that one customer they are interacting with right now.

Having high CQ is necessary to achieve consistently excellent service because you cannot have great service by treating all customers the same. Standardized service cannot be great because all customers are not the same. Customers have different personalities, different needs and different expectations. Their ability to understand and verbalize their problems and issues is also very different. Dixon explains, “when a company mandates that every customer call include all the standard, company-imposed criteria, and takes away the rep’s ability to deal with the customer at a more natural, spontaneous, human level, the interaction is reduced to a mechanical, rote exchange.”

While CQ is the greatest differentiator of rep performance, the reality is that most agents have moderate to high CQ potential. Instead of training effort reduction, you can coach it. Although training is helpful for building awareness, effort reduction involves frontline behavior change that can only be delivered and sustained through effective frontline supervisor coaching.

One issue is that many companies inhibit reps from exercising CQ due to the environment of strict adherence they have created and reinforced historically. Judgment and control are not welcomed in these environments. Dixon suggests you “give control to get control of the front line. To allow reps to activate their latent CQ potential, companies need to demonstrate trust in rep judgment. Approaches include deemphasizing or eliminating handle time and the QA checklist, clarifying reps’ alignment between what they do and what the company is trying to achieve, and allowing reps to tap into the collective experience and knowledge of their peers to make smart decisions.”

Only by coaching and empowering your agents will you reduce the effort your customer experiences when dealing with customer service.

Create the right culture

Another key to improving customer service by creating an effortless experience is creating the appropriate culture. You need to create a clear contrast between old and new behavior. Then explain to your team how and why an effort reduction approach differs from the current service philosophy. Given the power of stories, use a change story to continually reinforce why teams need to focus on effort reduction, what’s at stake, and the nature of support they’ll be provided.

In my experience, transforming your customer service approach cannot be another flavor of the day project. You should not make effort reduction another ask. If you are just adding effort reduction to a long list of requirements, it will signal a lack of commitment and competing priorities. Instead, remove requirements such as handle time or strict QA forms to allow pilot teams truly to focus on reducing customer effort, helping your team determine the right ways to change behavior.

You also must make effort reduction easy. Dixon writes, “asking reps to ‘go out and reduce effort’ without a clear sense of where and how will surely be met with failure and confusion.” Instead, start with a pilot with clear tactics and goals. This may include forward resolving a specific type of service issue, or using positive language techniques for a small number of common issues. Finally, provide heightened support and coaching, as pilot teams get comfortable with these approaches.

Purchase experience

The final element of creating an effortless experience is around the purchase journey. Dixon’s research showed that reducing customer effort in pre-and post-sales customer touchpoints has a strong impact on loyalty. The ease that customers can learn about products or services, make a purchase, and obtain post-sales service and support provides a dramatic opportunity for brand differentiation.

An effortless experience is the recipe for increasing LTV

Reorienting your customer service from creating great experiences and cool stories to reducing customers’ effort feels counter-intuitive and is not easy but the data is impossible to argue with. Your goal should not be to have a customer service experience you can feel good about but one that improves loyalty, and the effortless experience will have the biggest impact on loyalty (and thus LTV).

Key takeaways

• Data shows that trying to create an exceptional customer experience has virtually no impact on loyalty and engagement, however, reducing the effort the customer must exert does improve loyalty,
• The best way to measure this effort is CES score, which is based on a statement, “the company made it easy for me to handle my issue,” after which the customer is asked to answer (on a 1–7) whether they agree or disagree with that statement.
• The keys to implementing successfully an effortless experience program are minimizing channel switching, avoiding repeat contacts, engineering the customer service interaction experience, building the control quotient, creating the right culture and optimizing the purchase experience.