Making Customer Feedback Visual

As practitioners in the customer feedback game, we are only too aware of customer voices falling on deaf ears. And with the explosion of social media the imbalance between "user generated content" vs "enterprise generated action" has become the herculean challenge. Which is why any mechanism that enables an organisation to listen more effectively is, well frankly, gold.

Hence our interest in data visualisation. It is no great surprise that despite building healthy online communities of tens or hundreds of thousands of members, or surveying customers to within an inch of their lives, big brands are sometimes lousy at listening or distilling what is being said by customers. Other than perhaps a Marketing sponsor or Community Manager who is going to take the trouble to trawl through a thread on a community forum or join the dots across polls, surveys and  ideas. Too much trouble for too little reward!

However, what if you can "dial up" your customer feedback like this. Or visualise relativities like this:

Making customer feedback data visual makes it difficult to ignore; and if it tells a story - particularly through the words of a real customer then you are tapping into something very fundamental about the way we communicate.

Stay tuned for some exciting developments in this area.

NPS: Do Promoters attract more valuable customers?

Recently we talked about the NPS-relevant study that shows how detractors (evidenced by the fact they leave as customers) influence those close in their social network to also defect. We have also discussed previously, a number of studies showing that Promoters (specifically 'influencers') promote product take-up ('diffusion' in social network speak) through recommendation.

Now, thanks to a tweet and post from Rick Pulito we have evidence that Promoters not only recruit customers for you, they recruit higher value customers.

Schmitt, Skiera and Van den Bulte looked at data from 3 years and 10,000 customers from a German bank. This institution (and most German banks apparently), offers cash incentives in a customer-get-customer program.

The findings?

  1. Referred customers had a higher contribution margin for the bank
  2. This higher contribution decreases over time, presumably as less profitable, less satisfied customers in the non-referred cohort, defect. 
  3. Referred customers are more valuable in the short and long term however, with their LTV 16% higher in this data. They stay longer.  
  4. Different customer segments vary in the amount of their extra value, confirming the wisdom (again) of 'treating different customers differently'. 

The great news? They also found that the extra value that comes from referred customers more than makes up for the expense involved in paying for the referral, giving an ROI of 60% over a 6 year period. This is even better when you consider that the cost of acquisition for a referred customer was 20 Euros lower as well...

Recommended reading for all of us looking to activate WOM as a tool to acquire high value customers.

The authors hypothesise some interesting reasons for these findings that should inform our relationship marketing;
  • customers who understand your products may do a good job of matching what you have to their friends who have the needs you address, making for happy more loyal customers.
  • both referrer and referee may feel better when sharing a company experience with others in their social circle.

 One interesting conjecture to finish - homophily (birds of a feather flock together) suggests that valuable customers are more likely to generate valuable referrals. Maybe we should consider varying the value of the referral rewards, based on the value of the referrer?

Birds of a feather demonstrating homophily
 

Broadening your brand conversation

This TED talk, Listening to Global Voices by Ethan Zuckerman is something of wake-up call. It is very easy for us - especially the digital us - to imagine that a global internet infrastructure means that we are all somehow automatically connected and gaining a broader worldview. Zuckerman illustrates that this is far from the case (we live in "filter bubbles" or worse, in a state of "imaginary cosmopolitanism") and that achieving broader connectedness requires a change in thinking - to break the human tendency to homophily ("birds of a feather flock together"). He sees a special role for people ("DJs") who are bridge builders between different worlds.     

At the level of brand conversations, it is a timely reminder of building broadly based brand communities and the strength of weak ties that we have posted on previously.

NPS: Do detractors beget defectors? 3 Lessons learned from a 'customer churn in mobile' study

In our NPS self-improvement efforts we read a lot of literature on the intersection of social networks and marketing and especially we take note of studies that use data from mobile telephone operators. Why? 

Because you can objectively determine who is in an "actor's" (customer) network and the relative strength of ties between customers. You can see who they call, how often and for how long.

This is exactly what 2 researchers have done in this recently published study.

My interest is in gathering insights that can help refine the application of bottom-up (transactional) NPS to the improvement of customer experiences - to increase the percentage of promoters and therefore returns for our clients.

Generally marketers look for positive case studies; NPS up then sales up. But this is a little unbalanced, as we have known since The Loyalty Effect in 1996 that customer churn reduces company profits as inevitably as loyalty increases them. And nobody I have read suggests that NPS and customer loyalty are independent. I am currently also reading Bob Hayes latest on Measuring Customer Satisfaction and Loyalty and he makes a strong argument that NPS and other customer satisfaction metrics in fact measure the same underlying psychological intermediary in our customers; loyalty. We think NPS makes it easier to measure.

If transactional NPS helps organisations identify process improvements that improve advocacy that improves results - we should also expect the opposite to hold true. Promoters attract more customers, detractors should cost us customers. Nitzan and Libai did not explicitly relate churn effects to NPS, but their findings are directly relevant to this discussion - and it would be very interesting to see if the defectors in their study were detractors & if the customers they influenced were fellow detractors or neutrals.

Nitzan & Libai found, in the database of a cellular phone company;

  • Defection of a network neighbour increases the likelihood of a customer's defection. By 150% in raw numbers, by 80% when allowing for tie strength and customer similarity (homophily).
    • Tie strength they measure by looking at the volume of contact between the 2 customers 
    • Homophily they measure by assigning points for each of 4 characteristics that were similar between the 2; gender, age, marketing segment, socio-economic status - it is important to control for homophily as a similar response to the same product by similar people may be mistaken for an indication of social influence when it is not.   
  • 'With their feet' detractors who leave impact customers more strongly the closer they are in social network terms; "...a 1% increase in a customer's tie strength with defecting neighbours is associated with a 2% increase in that customer's hazard of defection."
  • Similar customers are likely to act the same but at a much lower rate; "...1% increase in similarity between a customer and a defecting neighbour is associated with a 1.1% increase in the customer's hazard of defection..."  
  • The influence of a neighbour's defection decreases markedly with the passage of time  
  • A loyal customer is less likely to defect following a neighbour's defection - customer loyalty 'immunizes' against the effects of a defecting neighbour. (Loyalty was measured by an index of tenure and call volume, ARPU) 


 
An interesting study.

Lessons Learned?

  1. The NPS of network contacts should be considered when trying to understand and manage customer churn. This is likely to be easier in a B2B environment where network structures, the formal ones at least, are easier to discover and track. No customer is an island!
  2. If we needed more urging to respond to customer defection quickly here it is, "If a firm aims to deal with this possible influence, it should act fast, as close as possible to the neighbour's defection event". If you use member-get-member programs and a referrer defects, look to his referees asap.
  3. Customer loyalty has multiple benefits, making this whole 'Active NPS' endeavour worth it. Loyal customers;

  • provide higher profits for longer 
  • have higher social value as they influence others to adopt products AND as this study shows
  • loyal customers are less likely to be affected by the defection of others   

  


 React to bad customer news quickly!

Good to see 'common sense' backed by hard data - what do you reckon?

Darren Sharp joins Resonate

Resonate is pleased to announce the appointment of Darren Sharp as Senior Consultant, Community Management. Darren brings with him years of consulting and research experience in social media, online communities and user-led innovation. He has been particularly active most recently in the Gov 2.0 space working with a range of high-profile public sector clients on community engagement projects. Over to Darren who'd like to share his thoughts on some of the latest news related to customer co-creation activities. Jeff

Thanks Jeff - it's great to join the Resonate team and I look forward to helping evolve our unique customer engagement and innovation offering. There's been quite a bit of activity in the co-creation world with recent news that NikeID's platform generated over $100m (USD) in revenue for the 2009 financial year. Since 2007 Nike customers have been able to use a web-based toolkit to customise shoes which are then built-to-order before being manufactured and shipped. In this article on the subject Danny Wong suggests that customer co-creation has become more than just a trend because of i) greater alignment between consumer demand and retailer supply; ii) DIY co-creation toolkits have become highly useable and enable rich product visualisation; iii) the flexibility of the web allows business to better iterate; and iv) co-creation resolves the inefficiencies of mass production. 

On the research front Forrester just published a new report on "Social Co-Creation" that outlines how social technologies are being applied to Consumer Product Strategy to help customers co-create new products and improve existing ones. The report's author Doug Williams defines co-creation as "the act of involving consumers directly, and in some cases repeatedly, in the product creation or innovation process." Using Forrester's social technologies terminology Williams states that "through a combination of listening and embracing, companies can understand what unmet needs exist in the market today, recognise where current products are coming up short, tap the wisdom of the crowd to test ideas, ad develop relationships with engaged consumers to drive new concepts into the market.

Today's Social Technologies Unveil Product Improvement Opportunities
Image courtesy of Doug Williams Forrester Research

Many organisations are starting to realise the importance of leveraging customer knowledge and ideas for a range of co-creation activities. Yet the plethora of services available via the Social Web (Facebook and Twitter to name a few) presents marketing and product strategy teams with an often confusing overabundance of tools which aren't necessarily matched to an appropriate customer engagement strategy. 

Here at Resonate we see significant value in branded online communities established for insight (listening) and innovation (embracing). Co-creation usually involves building relationships with "lead users" that can become a company resource over time when given the right incentives and opportunities to participate. Branded communities create the right environment for these innovative customers to express their creativity and add value to marketing, product development and a range of other functions that up until recently were seen as the exclusive domain of internal subject matter experts.

So how do you co-create with customers and other stakeholders? Share your stories here or let us know of case studies that inspire you.

Whereto Social Software?

The software industry and its acolytes have always fascinated me - even moreso as some of its fundamental tenets are challenged. So it was with great interest that I read Gartner's take on so-called "social software". And to be truthful, I was pleasantly surprised with the clarity of their analysis. Afterall, this is an emerging market dominated by the behaviour of that most unpredictable stakeholder - you & I - in our various social guises of customer, employee etc....

In Gartner's framework, social software has matured enough to support at least three distinct software markets:

  • Externally facing social software: general purpose products that support communities outside the enterprise
  • Social software in the workplace: which focuses on the market for products that support social networking within an enterprises
  • Social CRM: that extend customer relationship management (CRM) processes into external communities to support sales, service and marketing 

In my humble opinion, Gartner astutely observe that organisations selecting external facing social software should not apply the same processes as they would for classic enterprise software purchases. The need is different: innovation is more important than integration or standards; capabilities that add unique value matter more than the best or most complete functions. Gleaning real-time insight from your more passionate customers in a large customer community (the fuzzy front-end!) is as much art (content!) as science - that's certainly our experience...

Again in my opinion, the Social CRM market will however ultimately become the elephant in the room - the inexorable grind for a clear business case will make sure of this.  

Gartner: Social CRM comprises applications with very different approaches for supporting communities of internal users, customers, partners and other stakeholders to assist with sales, marketing and customer service processes for the mutual benefit off enterprises and their customers. The main subcategories of social CRM applications include social monitoring, customer- and partner-hosted communities, enterprise feedback management (EFM), product reviews and sales contacts.

As the market for these types of applications mature, Gartner predicts (accurately I believe) that vendors will find it harder to gain an advantage by providing unique core functions for social CRM.

Differentiators will then become:

  • The ability to seamlessly interoperate between public social networks and private communities
  • The ability to integrate processes with traditional operational CRM applications
  • The ability to prove the ROI of the social CRM application
  • Partnerships with global systems integrators, or digital or interactive agencies and consultants, to promote and deploy the application

The last point is interesting as these social applications are way more dependent on domain expertise and content than traditional transactional systems and you do wonder whether this is a blind spot in the traditional Gartner approach - where flogging licenses unfettered by services or (or business outcomes!) has been the name of the game. Refer CRM  v1.0.

If you can put this big qualification to one side, the Gartner analysis of functional needs and emerging markets is very interesting and informative. 

Are some products too boring for buzz?

We initially got involved in conversational marketing through our work with an Australian Rules Football team. No lack of passion and emotional involvement with the product there! Customers almost pushed us out of the way to participate and contribute to the buzz of the online community.

Our next conversational customer gave us pause however. Groceries. Who would want to discuss grocery shopping in an online community of interest? We were concerned that the category itself lacked the interest levels required to build and sustain a community. 

We were spectacularly wrong, but the subject of category variability in Word of Mouth marketing impact has not disappeared in our discussions with clients.

Well, there is a new piece of research from MSI that makes me smile; "What Products Do People Talk About and Why" looked at the results from 335 buzz marketing campaigns (BzzAgents data) across a wide range of products including food, financial services, movies.

The headline findings:
  1. More interesting products are not talked about more frequently when you consider a multi-month campaign. Initially, yes, but this fades over time and interesting and dead boring products even out in WOM terms. The problem seems to be asking about intent - customers claim they will talk about interesting products more, but the realities of a routine life mean that...
  2. Products that are used more frequently are talked about more frequently and by more people - an increase of 4 additional product uses per week created a 10% increase in WOM. Communications matters here, as product cues generate a similar effect, with...
  3. The effect of cues strengthening as campaigns continue 

  'Products that are cued more frequently - either because they are used more frequently or bought to mind by a related stimulus - receive more WOM.'

If your product has infrequent use, but you want it talked about...Communicate with your customers frequently (and relevantly)!

Fascinating research.

Working for glory: collaboration in online communities

One phenomenon that no longer surprises us (though it still puzzles us in some product categories) is the considerable effort that some people will put into an online community that interests them.

And apparently for free.

But there are incentives for helping in a community, be it of interest, of practice, of place etc. A recent paper in the Open Innovation Forum aligns with our experience in thanking and rewarding heavy contributors in our Company-hosted Ideas Exchanges / On line co-creations communities.

This paper points out that the main incentives are;
  • peer recognition and
  • the value of the improvements that result from the collaboration. 

It is also true that these rewards encourage ongoing involvement in the community, not just for the duration of a particular co-creation task;

  • recognition requires interaction with people, fellow contributors, that you admire, respect - recognition is a very particularistic gift from the community to the contributor - leaving the community deprives you of this interaction
  • belonging makes all of us feel committed to the group - plenty of incentive to stay in the community and stay active 
  • hours of interaction and mountains of typing represents an investment that most of us will protect through to success, this is closely associated with   
  • stubbornness (more kindly decisiveness) that means once the contributors focus on a result, backing out is not an option. 

It seems to us that the implicit pleasure and satisfaction of team based problem solving is magnified by recognition from peers sharing the toil. Much more rewarding, but similar in kind, to the thrill of solving a tough sudoku. Secretly we all want to be recognised as a super hero at something. Who needs to be paid if you can be part of the Justice League?


 

Community health: the strength of weak ties

For those of us involved in building healthy online communities, or indeed anyone just curious of where the social web will go, the emerging science of social networks is fascinating. Tim touched on an aspect of this his last post and as practitioners we are all learning - both from academia (see Duncan Watts Six Degrees - the Science of Connected Age) and from real lessons on the ground.

The relative value of strong and weak ties is a critical aspect of this emerging science and it has some surprises.

The value of strong ties is understandably in the relationship itself. Online communities need a sufficient number of strong ties to sustain engagement and the  embeddedness of the most valuable contributors - so critical to growing a community. However, strong ties on their own are not enough - particularly in recruitment or periodic regeneration phases. Tim touched on this talking about the tendency to homophily in strongly connected groups; basically the danger of a small self-selected conversational gene pool talking about the same thing over and over...  

Gavin Heaton summarises some research going back to 1973 - the key findings being that the weakest ties are the most powerful in terms of disseminating information and in facilitating the move from first adopters to early adopters. A characteristic of innovators or first adopters is that they are often marginal or isolated with very small social networks; but have one-to-one or bridge relationships to larger groups. Early adopters, on the other hand, are keen to form such bridging relationships and to amplify their reputation in a broader social network.

The value of weak ties is not the (superficial) nature of the relationship but in their sheer number and diversity. Think about searching for a job. Your close friends are likely to go to great lengths to help you but their efforts are insignificant in terms of reach and effectiveness when compared with a broad set of weak ties - particularly when the internet has just lowered the threshold on taking action (how hard is it to forward a CV...). As Michael Wu points out, having a large number of weak ties enables us to crowdsource our weak ties for help.

My takeout: understand the value of both strong and weak ties in building and sustaining your online community    

'I follow 20,000 people on twitter. Could 20,000 people be wrong?'*

A popular way of constructing social media / Word of Mouth marketing campaigns is to first seek out and recruit consumers with large social networks. The implicit assumption seems to be that someone with 500 Facebook friends will spread your marketing message more effectively than someone with 100.

This has always caused me a smidgen of discomfort because it is so easy to create links in online social networks like Facebook. But having a link does not mean it commands mutual attention or that it will assist in the contagion of your marketing messages.

A recent research paper I stumbled upon helps put this into context for me; Modeling Relationship Strength in Online Social Networks by Xiang, Neville (from Purdue University) and Rogati (from LinkedIn).

Their thinking is that;

  • Homophily rules - people tend to form close ties with other people who have similar characteristics. Birds of a feather do flock together,
  • The stronger the relationship tie (close friends) the higher the degree of similarity 
  • Relationship strength directly impacts the nature and frequency of online interactions between a pair of users 

They rate relationship strength in their model by including interactions like; mutual posting to friend's walls, picture tagging and 'top friends' nominations. They verified the internal consistency of their model - stronger ties (classified through more active interactions) do predict more similar profile details.

Perhaps it would be better to approach / recruit the customer with 100 friends, 40 of which are strong than the customer with 500 friends, 6 of which are strong.

Not a great big insight, but it may balance the obsession brands seem to have with sheer numbers of customers who liked their Facebook page once with some interaction measures of 'true', active advocacy.

Just a thought.

Active friending

 
 * Quote from Sam the Social Media Guru

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