Getting What You Want: Satisfied Customers
Currently, although 60%+ of Global 2000 firms have appointed business relationship managers (e.g., customer service representatives, business analysts), fewer than 15% of Global 2000 firms have achieved Phase 2 business relationship management, where the CIO is not the primary liaison between the business and the ITO.
By applying proven relationship management techniques, this number should grow to 35% through 2005 and to 60%+ by 2008. More importantly, through the exchange of best practices and lessons learned, by 2006, 25%+ of Global 2000 firms (versus the current 2%) will achieve Phase 3 business relationship management, where a customer-focused center of excellence is accountable and responsible for the health of business/IT partnerships.
During the past year, our research surveyed in great detail 18 ITOs that have made the successful transition from a Phase 2 level of business relationship management to a Phase 3 relationship (the highest possible level).
Based on these findings, achieving high levels of customer satisfaction boils down to two important questions summarized in one singular metric.
As demonstrated in consumer retail research (Reichheld, 2001), loyalty is highly correlated to profitable growth and to a business's willingness to partner with an ITO. The challenge has always been in measuring future loyalty -- that is, the willingness of the customer to re-engage in future IT services. As IT becomes more pervasive and familiar to business users everywhere, IT products and services become like general consumer commodities.
With cycle times diminishing, street-smart CIOs can now take advantage of known consumer metrics and methods.While many customer-focused and customer-centric ITOs measure customer retention or satisfaction, these measures are backward-looking. They tell an organization how fast customers leave rather than how customers stay. Especially when customers are held hostage by large switching costs, satisfaction scores can also mask how few loyal customers an ITO actually has.
Customer satisfaction scores are even less reliable. Over the years, META research shows there is a 75%+ chance satisfied customers will switch if given a better value proposition; for extremely satisfied customers, the chances are still 45%+. Therefore, satisfaction lacks a consistent connection to actual customer behavior and partnering.
One Metric That Matters
The defining metric for future customer loyalty then is, "How likely would you, the surveyee, be to recommend the ITO's services to a fellow coworker?" In the aforementioned studies, "highly likely" recommenders have been shown to be active promoters of the ITO's brand, products, services, and quality.
To gauge responses, a simple 5-point Likkert scale works well (i.e., highly unlikely, unlikely, neutral, likely, and highly likely). Successful ITOs work to get their LOB customers to be "highly likely" recommenders of future IT services.
Yet focusing on the promoters and enthusiasts in the customer base -- those who scored the ITO a perfect 5-of-5 -- is not a solitary activity. Since authenticity matters, experienced ITOs also concentrate on optimizing the quality of a customer's experience.
In other words, recommendations matter the most from those who also rank the quality of the IT experience a perfect 5-of-5. In short, on a scale of 1-to-5, customers who answer a 5 on the very high quality of the experience and a 5 on their highly recommending this service to a coworker serve as the best references, promoters, and users of the ITO.
When users genuinely promote their experiences to peers, IT credibility and perception simultaneously improve.
Keep It Simple
Another lesson learned from these 18 progressive ITOs is to keep customer surveys simple. Simple surveys generate timely data that management and the ITO can universally act upon.
Customer feedback becomes an operational tool, not a market research tool. Several of the studied firms did engage a third-party research firm to verify results. Examining their data only confirmed our conclusions -- simple surveys enable fast processing and improvement of the results. Customers with the highest quality of experience were more apt to promote coworkers to take advantage of said services.
Although many ITOs would have considered Phase 3 to be a state of IT nirvana, our research indicates a possible Phase 4, where ITOs and business partners understand the corporation's external customers and their loyalties.
In the same manner the ITO learned about the business, the business, in these cases, must learn much about IT for the entire team to be effective. This potentially includes understanding purchasing processes, multimedia channel branding, and entry and exit barriers. For a Phase 5 level of maturity, the business and the ITO must both understand the corporation's supplier/value network of external customers and their loyalties, where keiretsus (co-prosperity partnerships) compete against each other's networks of partnerships.
In outbound business relationship management, ITOs move from being reactive, to being proactive, to being collaborative. By focusing on whether a customer becomes an ITO enthusiast, ITOs will more rapidly achieve the goal of being true business partners, where information and technology create opportunities for increased corporate growth and profitability.
Street-smart CIOs now have an emerging, best-practice shortcut to attain long and successful tenures. By exploiting business relationship management and a singular, meaningful, forward-looking metric, focused executives can quickly evolve to become intimate with their customers.
Want to discuss the issues raised here? Take it over to our IT Management Forum.