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October 1998 Volume 3.01
A Mission For Your Customers Continues
2.0 Respondent List Design and Management -------->
In order to have information that is timely, comparable, accurate
and actionable for senior management, there has to be a review with
managers to determine what they want to know.
Another key question that needs to be answered is, “Who makes the
key decision and/or is a key influencer to repurchase, recommend
my product or service?” This step requires analysing the market
and/or key customer processes in conjunction with subject matter
experts. Pooling together all of the available market
information for the waterfall of customer needs assists to determine
who needs to answer the survey. Initially, the databases
must be brought up to date. While many companies claim to
have excellent databases, a sure-fire way to ensure that your database
is current is to have the customer representatives review the contact
list information prior to survey fieldwork. Additional issues
to consider when developing the respondent contact list are the
following: random sampling, geographical and segment breakouts,
focusing on responses from the top 20% of your customers, competitor
customers and tracking lost customers (this is one way to get responses
about competitor performance).
The preparation and planning in this step ensures minimising the
omission of critical information for senior management to make decisions
about how to run the business. Additionally, achieving
the following 9 steps will flow better due to having a solid base
of customer information. Watch the following newsletters for more
information about the next 9 steps…
Susan Moore
Previous Step
1.0...
Next Step 3.0...
File Your
Flight Plan and Check Your Progress
Make Reliability a Reality
In 1994 Continental Airlines was losing 50 million dollars every
month, yet the company had been on a massive cost cutting exercise
over the previous few years. When Greg Brenneman was brought
in as the new Chief Operating officer, he found that the previous
management team had cut costs by removing services that were important
to customers. This cost cutting had driven customers away
so that the company lost further revenue which resulted in further
cost cutting. The company was in a doom loop.
The previous management had done things such as reward pilots with
bonuses for using less fuel. Sounds a good idea doesn’t it?
The pilots had achieved their bonuses by skimping on running the
air-conditioning, and flying slow. These actions forced costs up
because Continental had to pay for accommodation and rebooking caused
by late arrivals and missed connections. Another cost cutting
idea was to cut back on cleaning. By cutting the frequency
of cleaning by two-thirds substantial savings were achieved, but
the cabins were untidy. So the passengers ended up hot and bothered
as well as fed up with the dirty planes, so they moved to competing
airlines.
While much market research reports what is important to customers
a key difference of the Customer Value Added approach is that it
provides information on what impacts customer purchasing behaviour.
Customer Value Added provides this crucial piece of information
that allows managers to decide what cost cutting will work, and
also what new services customers would value. Investment possibilities
can then be prioritised. For Continental working out what
customers valued meant asking the high revenue frequent business
travellers the right questions. As Greg Brennan says, “There
is a huge gap between what people want and what they are prepared
to pay for. Make sure you know the difference.” What
Continental found was the things customers valued were: planes that
flew to places they wanted to go to, clean attractive terminals
and planes, on time arrival with the customer’s luggage, and food
served at mealtimes.
The first step in breaking the doom loop was not to start fixing
service. It was to beg forgiveness. The senior executives handled
customer complaints personally, apologised to travel agents and
corporate accounts, and cut the advertising budget in half.
They realised that it is offensive and insulting to advertise a
defective product.
The next step in the flight plan was to provide the things that
customers valued so they set about updating the appearance of all
planes and terminals then keeping them clean. They managed
to get flights that ran on time by ensuring that the flight operations
people and the flight-scheduling people worked together on the scheduling.
To ensure they were working towards their goal of becoming an airline
of preference, they established a set of 15 internal service metrics
to track on-time performance, baggage mishandles, customer complaints,
and denied boarding. Their goal was to be in the top 50% of
the industry for delivering these customer needs.
Once they had schedules that could be run on-time and a way
of tracking performance they aligned their recognition schemes with
the needs of their customers. For every month they finished
in the top 5 airlines for on time performance they gave each employee
$65. How could a loss-making airline afford to do this?
It turned out this payment was self-funding. They had previously
been paying other airlines $6 million a month to rebook people from
missed connections caused by Continental’s late arrivals.
The on time arrival policy reduced the rebooking cost by $5 million
while the bonus scheme only costs $3 million a month.
Today Continental is making a profit of over $30 million a month.
The doom loop is well and truly broken and the company is moving
ahead by focussing on providing what customer value.
Alexandra
Landing at Queenstown between two snow covered ranges is always
awesome. Today I am headed on from Queenstown to Alexandra which
at this time of the year is the blossom capital of the world.
The orchards present every shade from white through pink to red.
With the annual blossom festival at the end of the week the lush
flowers seem to only just stay on the branches. The annual
blossom festival is off to a quiet start with a photographic exhibition.
It would be good to remain in Alexandra for the procession on Saturday
and see the floats and enjoy the bands, marchers, and dancers.
While I can visualise a float with a blossom portrayal of “Skating
through the seasons”, I wonder about what “Into the 2000s with the
Teletubbies” will look like. But such is the life of the consultant,
two days is long enough to spend anywhere and I must be off to work
with other clients.
Regards,
Rodger Gallagher
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