Last week we talked about Reputation Management, and I pounded into your head the fact that Reputation Management starts with great customer service, and collecting customer feedback.
Today we’re going to dive deeper into that idea. We’ll talk about how customer relationships work, from a high level. Then we’re going to talk about how you can efficiently and effectively measures your customer satisfaction, and use that to improve your business, and ultimately, increase your revenue.
Recurring Revenue for Service Businesses
The way B2B recurring revenue business models typically work is: they start the year with 100% ARR – that’s Annual Recurring Revenue. It’s the total amount of recurring revenue they can expect from existing clients throughout the next year.
They start off with 100% ARR but then a few things happen:
- Lose about 9-and-a-half percent to customer churn
- Lose 8.7% to down-selling: customers that go from a higher-cost option to a lower-cost option
- Gain about 1% via cross-selling services or products
- Gain about 2.1% via up selling
So if you’ve been following the math, what do you end up with at the end of the year? You end up with 84.8% of what you started out with. That’s a total loss of 14.2%. That’s not great. In fact, if you have a small number of clients, or a smaller profit margin, that can be pretty catastrophic.
Now, that assumes that you’re not making sales. And, of course you are. So you can lose that 14.2% year over year, but still grow because you’re making it up in new sales. We’re skirting around that fact here, and so I wanted to make sure that we acknowledge that.
But what we’re going to talk about is: how can you stop that reduction in ARR? Or at least slow it down a little bit?
The Solution: Customer Feedback
You need a system in place. Not a system that makes it harder for clients to cancel, or anything like that. We all know companies like that, and none of us like them. Don’t do that.
What I’m alluding to is a system where you can capture and act on relevant, meaningful, actionable customer feedback.
Last week I gave you a very simple system for asking customers for feedback. If that feedback is positive, I said to ask for a review. And if it’s negative then you try to fix the problem.
That’s a very simple but effective solution. It’s sufficient if you’re trying to improve your online reputation. But if you’re trying to stop that year-over-year decrease in existing ARR, then you need a little bit of a higher-level view.
You can get that through targeted customer feedback.
Two Measurements for Customer Feedback
There are two main ways that you can measure customer satisfaction.
These are your KPIs (Key Performance Indicators), adoption rates, consumption analytics, etc. It’s the hard data that you can put into a spreadsheet or a data frame, and come up with some analytics for. Most business owners understand the Quantitative measures, and so I’m not going to spend a whole lot of time on this.
Now these can be a little more difficult to measure. To an extent, this is what your reviews are. They allow you to get inside the head of the customer and understand their experience. But the truth is that reviews are often just not very helpful from a customer satisfaction standpoint.
They’re pretty binary. Either the customer is happy or they are not. Sure, you can get a 4 stars instead of 5, but there may or may not even be a stated reason connected to that.
The better way to capture and measure customer feedback, is through customer satisfaction surveys. Many people dislike Customer Satisfaction Surveys. In fact, statistically – between 60 and 80 percent of people just ignore them.
However, there are ways that you can improve that. Having a great customer satisfaction survey – or rather, having the results of those surveys – can give you the tools you need to improve your processes, and better serve your customers. Ultimately doing this leads to greater customer retention, and more revenue.
Types of Customer Satisfaction Surveys
There are two types of Customer Satisfaction Surveys that are non-intrusive, and can provide you with great customer feedback.
Transactional Customer Surveys
Consider sending out a tech for a service call. They go out, they do the job and fix the issue, and they come back. Maybe later that day you send the customer a survey asking questions specifically about that service call.
What is the goal of that survey? You want to know how satisfied they were with the experience overall. Ask questions like:
- Was the service ticket responded to in a timely manner?
- Has the issue been resolved completely?
- Was the issue resolved in a timely manner?
- How did the technician act? Were they professional, courteous, and knowledgeable?
That’s a transactional customer survey: you provide a service or product, and then you follow up to ask about the experience.
Annual Relationship Surveys
This gives you a chance to touch base with your long-term customers and have a candid discussion about how you’re doing. It’s not intrusive and it gives you actual metrics that you can use to evaluate that relationship.
What do you ask about on an Annual Relationship Survey? Well it’s hard because you want to get a good 1000-ft view of what’s going on, but you want to do it in as few questions as possible. Your customers are busy.
A good place to start is by having a list of a few things to focus on. For example:
- Overall satisfaction with services
- Satisfaction with products
- How easy is it to work with you?
- How is the sales process?
- How is the billing?
By focusing on just 4 or 5 areas, you can keep the survey non-intrusive while also getting a somewhat-well rounded idea of what the customer experience is like.
Getting Better Customer Feedback
The average response rate for Customer Surveys is typically between 20-40%. However, there are things that you an do to improve that. I encourage you to really think about what you can do – something that is unique to your business. The more unique and customized it is, the better.
But I will share some ideas to help you get started:
- Make it easy. Make it as easy and friction-less as possible.
- Keep it short. It should take less than 2 minutes to complete. So try to limit the survey to 4 – 5 questions.
- Consider providing an incentive. Offer an incentive – preferably tailored to your business and your customers – to show that you really do appreciate and value their feedback.
- Send a reminder – don’t be annoying about it, but it’s okay to send a reminder email after a few days.
- Remember to thank them for giving you their feedback. That relationship should be important to you, and you need to let your customers know that.
Using Customer Feedback to Improve Services
In a recent TSIA webinar, they talked about this topic: how to use customer feedback to improve service. They gave 4 steps, and it was so good that I’m just going to share them with you:
Step 1: Make sure that everyone in the company – especially your front-line folks, the customer service reps, account reps, and especially your technicians – understands how important customer satisfaction is and what “good customer services” means.
Step 2: Track performance and discuss it with your team on a consistent basis. Talk about the transactional customer satisfaction surveys you get back. You don’t necessarily need to name names but talk about what went wrong and what went really well.
Step 3: You need to have a budget available to address the factors that will improve customer satisfaction.
Step 4: Align your employee incentives with customer satisfaction. If you have an employee who is knocking it out of the ballpark when it comes to customer service, maybe their bonus should reflect that. And if you have someone who’s struggling, perhaps put together an improvement plan that includes the possibility of incentives for improvement.
You Can Use Customer Feedback to Increase Revenue
The takeaways here are:
- You are losing revenue due to losing customers.
- You can stop – or at least reduce that.
- You do that by collecting customer feed back, and…
- By using that feedback to improve your customer service in a meaningful way
This is a powerful topic because as you do those things, you’ll be able to retain more of your customers, improve your customer relationships, and ultimately get more revenue.
And it all depends on having a system. If putting together that type of system is something you need help with, or if you’d even like us to automate the process for you, contact us today, and we’ll help you get started!