Every company has access to voice of customer data. Every time your company sells a product, or provides a service, it has an opportunity to gather essential information about how your company is performing. That information comes from the customer and goes directly to your sales and customer service team, or directly to your marketing department. The only real difference is how companies use these data points. I already covered how companies can use VOC data with a Kano Analysis in order to define the costs of a product upgrade. However, now I want to show how your company can use that same strategies in order to define the costs of a customer service upgrade.
Your Customers Have All the Information You'll Ever Need
Your customers provide you with everything you need to improve your company’s product and service offering. They are constantly providing your sales, customer service, and marketing department, with feedback on your performance. All you need to do is decide what the costs are of any increase in your company's service levels. After all, it’s very difficult to meet each and every single customer request.
Your company must find that balance by defining what upgrades will help all customers, or most of your customers, versus those that will only help a select few. In this case, we’re looking to define A) how much the upgrade costs, B) the impact of the upgrade on gross profit and most importantly, C) whether the upgrade will increase sales, and help your company grow, or defend, its market share.
- How much does service level upgrade cost?
- Will service upgrade impact gross profit?
- Will service upgrade increase sales, and help you grow, or defend, market share?
Step 1: Gathering VOC Data Points
The first step is fairly straightforward and need not be too difficult. Granted, large companies in large industries require substantial customer sample portions. They must be cognizant of customer segments, and are often required to use surveys, focus groups, and customer interviews, in order to get a true depiction of customer needs. However, your company doesn’t have to go to such extremes to get this information. All you need to do is to break down these customer requests into their most common parts and use the VOC data to improve your product and service offering.
Step 2: Identify Most Common Requests
Again, this is where you amalgamate the most common customer requests from the first step. You could base this on prior history, on a sample of requests from the previous month or quarter, or call upon any emerging trends within your market. Now, the intention isn’t to imply that you simply follow your market by waiting for your competitors to take the first step in terms of improving their service levels. What it does mean is that you use this process to define the costs of any customer service upgrade you think will help your business win business.
Step 3: Itemize Costs of Service Upgrade
The third step includes defining the costs of the service upgrade. You may need to do this by customer segment. As such, you may need to determine those segments by customer size, geographical location, or other unique factors relating to how you segment your customer base. For instance, will you only provide a service upgrade to specific customers, ones who are in close proximity to your location, or ones who spend a certain amount with your company, or will you simply provide this additional service across the board to all customers?
Step 4: Define Benefits of Service Upgrade
It’s essential that your company have a clear understanding of the benefits of providing additional services to its customer base. It could be as simple as defending your current market share, or as complex as defining the additional business that will arise from improving your customer service. However, these benefits must be clearly defined.
Step 5: Review and Assess
Remember those aforementioned three questions? Well, here is where you'll answer them. For instance, how much is the service upgrade? Will it impact gross profit and if so, by how much? Finally, will the decision allow you to increase sales, grow market share or defend market share? Answering these three questions is just part of the assessment. Further review is required in order to gauge how customers are responding form the upgrade in service and whether or not that decision to move forward, is achieving the desired results.
An Example of VOC Data and a Service Cost Analysis
Let’s assume your company has come across the following requests: A number of customers want delivered pricing on all orders, and your best customers are asking for an increase in credit limits, or more flexible payment terms – such as net-45 days.
- A number of customers want delivered pricing on all orders
Will you provide this for all customers, your largest customers or those in a given geographical location? In our example, we'll base this decision on extending it to 60 customers, all of which are within close proximity to the company.
- Costs of Extending Terms to 45 days
Determining the costs of extending terms would include using your company's daily cost of capital. This cost of money is found in your company’s ability to finance its receivables and its inventory. For instance, if your company has a yearly interest rate of 4.5% on a business credit line, then your daily rate would be this 4.5% divided by 365 days in a year, or 0.0123%.
In our example, we’ve decided to extend terms from 30 days to 45 days to our top 20 largest customers. So, we would need to account for an extra 15 days of financing. You do this by multiplying the 0.0123% by the “COGS” or cost of goods sold across these accounts. The table below summarizes these costs of each service level improvement.
The video above talks about the importance of managing your customer's expectations and is from the post: The Importance of Managing Your Customer's Expectations
When it comes to upgrading your service, start by amalgamating your voice of customer data. Use this information to outline the costs of a customer service upgrade. In essence, it’s akin to using the VOC data to perform a cost-benefit analysis. Except in this case, you’re assessing the costs of providing additional services to your market and its customers. As such, you must always define the added costs of any improvement in service. Understand the impact on your company’s gross profit, and be sure to itemize the pros and cons of any decision. Ideally, you want a table similar to the one above, one where everyone can partake in the decision to maintain service levels as they are, or move forward with adding to those services.
The above video is from: 5 Simple Approaches to Maximize Small Marketing Budgets
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