Fusion Management Briefs - Issue 7

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BRIEFSEssential Insights for Automotive Professionals

FUSION JuLY, 2013

Execuive Insight: Peter Nocher, MD for Harley-Davidson Australia

The Art of Service Recovery

How to create outstanding customer service in your company

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AuSTRAlIA

CONTENT

AbouT uSFusion Business Solutions is a performance-focused consulting group that offers a range of client solutions, including training, consulting and in-business coaching. We also operate a wholly owned software division called Op2ma, which provides leading-edge web-based management and customer feedback tools. With our Head Office in Adelaide, Australia, we operate in most markets throughout Australia, New Zealand, the Pacific and Asia. We have offices in Melbourne, Sydney, Perth and Shanghai (China). Our philosophy is to offer our clients profit-enhancing solutions, both cost-effective and innovative. With the business and retail landscape becoming increasingly complex and challenging, companies must adapt and change, or risk falling further behind. Our clients see an ever increasing need to enhance skills and processes such as pro-active financial management and employee performance management.

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ExEcuTIvE INSIGHT - AN INTERvIEw wITH PETER NocHER - MD foR HARlEy-DAvIDSoN

THE ART of SERvIcE REcovERy

How To cREATE ouTSTANDING cuSToMER SERvIcE IN youR coMPANy

Peter Nocher, Managing Director for Harley-Davidson Australia discusses the secret of how Harley has built such a strong brand with a devoted following of loyal customers.

This article talks about effective customer recovery strategy and how to turn a negative situation into an opportunity for creating a loyal customer.

How to build a customer-centric culture within your organisation and thrive in today’s ultra-competitive environment. This article provides some tips on how to gain a sustainable advantage over your competitors.

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How to build a customer-centric organisation

An interview with Peter Nochar of Harley-Davidson Australia

I have been with Harley 5 years and in fact like other employees with the same tenure it is marked with a small gift from Head Office, which is a pleasant touch. This has been the fastest 5 years of my life, a wonderful experience, working with excellent people and motivated, passionate dealers. Whilst I have ridden bikes since I was 16, my career was in automotive starting in retail with Ford, moving to manufacturers, Peugeot, BMW and Volkswagen. I have been fortunate to have worked for excellent companies in the UK, Japan and now Australia, which is now my permanent home, except during the Ashes.

How do you monitor customer satisfaction in Harley-Davidson? Is there anything special that you do to connect with your customers? At Harley-Davidson the bond between the Brand and our customers is unique and special, so the customer experience whether it is related to buying a key ring, motorcycle or service is crucial.

We utilise CSI questions, aligned across several markets with a few specifically for Australia and New Zealand. Initially this was done as a paper survey but when we switched to an online survey, managed by Fusion, participation went through the roof. We now regularly get a fulfilment rate of more than 70% and the scores are currently more than 90% for both sales and service, which is a remarkable endorsement of our dealers’ work.

What do you think are the characteristics in a company that lead to exceptional customer satisfaction?We use a thought at Harley, which is ‘One Company, One Team, One Direction’, which at first sounds simple, but when applied is extremely powerful. When that Company, Team and Direction is all about putting the customer first in everything we do some extraordinary things start to happen. Measuring customer satisfaction and supporting that with a bonus keeps attention and interest. I am a believer in

that saying which is, “if it’s measured, it matters”.

What insights about service in the automotive industry can you share with us?Selling the bike and exceeding expectations at that point should only be considered the first step in what everyone should want to be a long relationship. Excellent service is like a consistently good restaurant—both are hard to find, but when you do find a good one you stay with it, then recommend others. It is often the Achilles’ heel in a dealer network and we have seen some amazing improvements in the quality and efficiency in our dealer workshops in the past 3 or 4 years. We expect to have close to 100 Master Techs in Australia and New Zealand by the end of this year, we have a second year of apprentices under training with a third intake in 2014. Efficiency, productivity and profitability are all rising and our dealers now make more profit from Service, Parts and

Executive Insight

Peter Nochar, Managing Director for Harley-Davidson Australia.

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Accessories than they do from bikes, which is a significant turnaround from the past, and we expect it to grow further.

With brand loyalty, Harley-Davidson’s customers are among the most loyal but also the most demanding. How do you create a culture that supports such customers? It is not uncommon for people to walk into dealerships with a piece of paper with a precise list of the bike they want and a list of accessories they want with it, then to say they have been saving and planning for that moment for 10 or12 years. Dealers know this, understand it and go out of their way to make the experience the first of many. With Harley you are not just buying a bike; you are buying lifestyle, if you want to, you’ll meet some wonderful, likeminded people, who just want to ride and have fun. You will get a personal sense of freedom that can’t be replicated and once or twice a year you can join one of the ‘Thunder Runs’ when several hundred bikes will ride in convoy and all you’ll see is chrome and smiles.

How do you think Harley-Davidson has built such a loyal customer base all over the world? What is the key for turning customers into brand advocates? People often ask me about the secret sauce or recipe of the company’s success, but I believe it is the composite of many things, on one level it’s a Brand with community, it is totally egalitarian, on the other hand every bike is different, what you ride, how you ride it and look on it are an expression of individuality. I believe ownership exceeds expectations, worldwide we have around a million members in our HOG club (Harley Owners Group) so this magic is spread across the World.

This year Harley is celebrating its 110th Anniversary, surviving then thriving for that long suggests you know your customers and have the power to extend that appeal to new groups of younger riders and female riders.

In today’s business environment, customer satisfaction is no longer enough to build brand loyalty and advocacy. What’s your take on this? In any business environment, but particularly in a more difficult climate success boils down to two things. Product and Customers. If you produce excellent products people will want to buy them, if you link wonderful product to a culture that puts the customer first, you will prevail. Working with great products and by training and encouraging our dealers to deliver great service we have grown market share and delivered record sales in a market, still significantly down from the peak. We expect to further build on that in time.

What characteristics do you look for in a Harley-Davidson Dealership that would support this culture? We like to work with like-minded people who want to work with us to deliver the Harley Experience. It’s no secret that if you hire great people, train them and make sure they are fully engaged in the business results will follow. Teamwork, clear direction and leadership all play important roles but it’s who you work with and how they are treated that makes the difference. Energised staff connecting with excited customers is a powerful combination.

What are the challenges in the future for delighting customers?People that don’t really know our bikes in detail sometimes think they don’t

change much, they think a Harley is a Harley, but every year we spend hundreds of millions of dollars on new products and product development. We’ve invested hundreds of millions of dollars modernising our plants and processes to make great bikes better and better. We have a process of continuous improvement embedded in our culture and that continuous improvement is applied to the way we greet and care for our customers. We are not planning anything earth shattering just a day by day, week on week year by year improvement with all we do, our goal is to put the company in a good place to be around for another 110 years.

How do you keep the Harley-Davidson brand exciting and relevant?We focus on our core business, we do what we are good at, we know our current customers and look after them whilst making strategic decisions to promote initiatives to attract and engage young adults and women to expand our business in new directions. We have just launched the most fantastic e-commerce platform in the US, which will be rolled out worldwide in due course, and that will open our doors to new friends for the brand. A few years ago in a study, 47% of customers that bought a bike had previously bought another item like a Tee Shirt or Jacket so the more people we can get into the stores the brighter the future will be. Our dealers have invested plenty of money upgrading their stores to make them more visible and friendlier so if you are in the neighbourhood check one out, I think you will get a pleasant surprise.

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BUSINESS COLLEGEA division of Fusion Business Solutions

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Any sales or service organisation will at some time or other lose sales, or more accurately, lose customers. Losing customers is normal. However, accepting these losses as normal is not acceptable. Replacing them might not be easy and will lead to a downward spiral in sales. Surprisingly, this loss, if considered temporary, is also an excellent opportunity to create customer loyalty! Therefore, an effective customer recovery strategy staffed by the best employees is necessary.

using the MessCustomer loyalty can be created out of the loss of a customer. Although an unintended mess, this can be turned into a relationship-building tool. The failed installation, or the repair that never fixed the problem, might be a problem and a headache for both the service provider and the customer. These might well result in a lost customer, but in reality, if handled well, can present opportunities for bridge building.

The Art of Service RecoveryThis chance of bridge building must not be lost. Sometimes seeing a difficult customer problem as “tough” will mean the adoption of problem—avoidance tactics focused on minimum damage, and not on the maximum advantage of relationship—building.

The minimum damage approach comes with an attitude of rejection, avoidance, or disagreement. Familiar phrases are, “That’s not such a big deal…”, “Surely nothing works all the time…”, “Give it time, the problem will go away…”, “Wait, wait, let’s see what happens…”, and “How can it be our error, it’s always the customer making a mess and blaming us…”.

What we forget when minimising damage is that the customer is also facing the mess and having negative feelings of loss and dread. The feeling of loss is from unmet expectations, and that of dread because of the impending problem of dealing with the complaint-making process.

From the Customer’s View PointPlace yourself in the customer’s shoes. How would you feel if your calls to the plumber who fixed your taps are unreturned, and the “fixed” taps are leaking all the time? Will they ever get fixed? If so when? Will it take forever? The customer of your dealership goes through the same emotions when your mechanic says, “there isn’t any big noise at 60 miles an hour. It is just the wind…”.

You would feel annoyed if your problem, any problem, was dismissed, and you were treated poorly; your customer feels the pattern of immediate loss and impending dread as they prepare for the agony and toil of getting their problems attended to.

In reality, customer loyalty is the first driver of profitable growth. Outstanding performance of service recovery is the quickest road to loyal customers. Conversely, the common road of rejection, avoidance and disagreement leads only to lost customers.

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In a situation of dealing with customers so used to continual rejection, complaint avoidance, and disagreement to all suggestions, consider the effect of acceptance, accountability and action.

Surely the client will be more than impressed with an impressive service recovery approach, and be pleased not only by the actions but also with you and your organisation as well.

Such impression and resultant pleasure, leads to loyalty and word-of-mouth recommendations to others. A complaining customer is now converted into a very valuable asset. A roadmap to service recovery follows:

Developing a Service Recovery Strategy• The first step towards service

recovery is a changed attitude. What was a problem to be dealt with must now be seen as an opportunity to build customer loyalty.

• Next, the existing “minimum-cost-minimum-effort” problem resolution strategy must change to a “best-effort-permanent-fix-create-loyalty” service recovery strategy.

• Then look at the efficiency measurement-based quick-fix strategy. Aim at changing it to a count of loyal customers that have been created.

• Obviously, but most importantly, the team must participate and willingly accept the crafting of the service recovery strategy.

The Process of Development Once the attitude is changed, some practical steps must be taken. These are:

• Tracking of lost customers – rather than tracking customer retention as a percentage of the business – the actual number and the identity of the lost customers must be noted. This entails a process of caring about the customers, rather than the statistical focus of percentages and their influence on the balance sheet. Thus, the quantification of lost sales and lost customers must occur.

• Segmentation and identification – Not all lost customers have the same effect or value on your business, especially if it is a high-volume business. Therefore, when recovering customers, some difficult decisions might have to be made. All customers do have value, but segmentation will help the prioritisation of customer recovery.

• Respect, reason and reconciliation – Once the decision on customer recovery is made, reach out to them on the phone. If a long list of such customers is necessary, initially, executives should call the first 10

departed customers in the prepared list, and solve the problems that made them leave. The list is then taken over by trained and available staff, who know the intricacies of recovery conversations. These are not sales pitches. These skills must be developed and can be a task assigned to the best staff and even to exceptional managers, but should never be outsourced.

• Categorisation and action - An opportunity now exists for identification and categorisation of the problems that made customers leave and any trends can be tracked. A comparison of the customer with lost revenue will aid prioritisation. This process will ensure that the most crucial problems are identified and that there is no doubt about priority. The process can now give feedback on the frontline service that met with the customer and might have caused the departure of the customer. The feedback received is potent, and as particular information becomes available, future frontline staff coaching will become more productive.

Creating a Service Recovery StrategyService Recovery is not only a strategy or a process but also a philosophy supporting continued profit and customer loyalty. This philosophy is based on the following:

• immediate accountability • taking responsibility • quick response • engaging the best resources and • enthralling after care

Immediate accountability Whoever is on the spot, assumes immediate and full accountability for the resolution of the problem. In translation, this means, an elimination of all negatives. These vary from “I have to talk to my supervisor” to “Are you sure you did nothing wrong?” and goes on with “Our policy is …”

Having a service recovery strategy means that the person taking the call can begin the process immediately and no permission is needed. The problem receives a lasting solution and the

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customer believe your only concern is fixing the problem.

Taking responsibilityIf you made a mess, the first thing to do is apologise. If you are advised that admitting a mistake means legal liability, remember that lost customers mean no profit. The customer is not an idiot and deserves to be treated respectfully and with integrity. Both you and the customer know what the problem is and who caused it – why not accept responsibility and impress. Do not insult their intelligence and always apologise if necessary.

If you are sure that the mess was not caused by you, or are not sure who did mess – empathise. Letting people know that their problem and its implications are understood, is a process of hearing - grasping-relating that cools tempers and opens the door to dealing with the facts of reality. The feelings are dealt with before the facts are handled!

Quick response Having created a “we-will-fix-it-as-it-is-our-responsibility” atmosphere means there is no time for hot air. The customer would like to believe you, but cannot. A quick response and fix is needed. Time must not be wasted in finding the solution and implementing it.

Ensure that those who have been assigned the task of fixing the problem are enthusiastic about the work. Instil them with fire, and keep the customer informed on progress. Convey a daily report if needed; if it is a big job it could be less frequent, or a smaller job might need more frequent updates. Tell the customer what has been done, what the outcome was, and what will be done next.

Keep the lines of communication open, and be apologetic if needed and build on empathy.

Engaging the best resources A service recovery strategy is best implemented by your best employees. The best and brightest, including managers, love to show their skills and in being allowed to thrive and shine, they also help fulfil the need for customer loyalty.

Enthralling after care Here the intention is to create awe. Although the customer is pleased the problem was resolved with accountability, responsibility and quickly by your utmost, the final awe factor comes from extended after care. The original expectations were met, the cause was fixed, and the problem resolution is over, yet the awe factor remains. Do something that goes the extra mile….

From having corrected the problem, a step must be taken to provide something else of value. This will mean that the customer now has a story to tell, becoming an asset to you. Doing something extra also means that you and your team too are satisfied, and have had fun. Customers are important, treat them well.

Your TeamFinally, it is your team that will have a major effect on your service recovery strategy. They must fully understand and grasp their responsibility to create an atmosphere of service recovery, and fulfil their commitment. You will have to communicate it to them, train them, coach them and underline the value of the process.

The team must see real-world examples of real customer problems. These might vary from mere irritants to plane crashes and must be focused on linking concepts to reality. Role-playing is an excellent tool as is coaching on “extreme” thinking that will turn a problem into a customer “wow” experience. Your team should also be enthralled with the service recovery strategy to make it work effectively.

Expected Results The process of customer recovery is fruitful. High levels of customer departure can now be countered with high levels of customer recovery. There will be an improvement in frontline service based on feedback from customer recovery calls.

While ensuring that the process of contacting, resolution and reconciliation is well set up, there must also be a focus on fixing the problems that caused the customer loss. The customer problem must be fixed, and the company – your company – must be fixed as well. The customer recovery process brings back lost revenue and prevents future revenue loss too.

It takes discipline to overcome old attitudes. Both you and your team will have to work hard to overcome the pattern set by old procedures on customer problems.

On the other hand, a service recovery strategy or attitude will give you first place in your particular marketplace. Reaching first place in the marketplace, achieving customer loyalty and having fun on the way – why not try it?

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An organisation that focuses on maximising customer satisfaction, and bases its function on the principle that its success depends on its customers, might be considered customer centric. This organisation makes its customers the centre of focus in every interaction with them. In return, the organisation looks for appreciation of this focus to be shown by customer loyalty.

A customer-centric organisation looks for increased sales, more profit and product success because of its loyal customers. The organisation thus does not overspend on agent commissions, and it gains business from its competitors. Statistics show existing loyal customers are indeed the most profitable group among consumers. Instead of higher

How to create outstanding customer service

in your companycosts on advertising in acquiring new customers, a customer-centric organisation uses its resources to sustain the loyalty of currently existing customers.

A customer-centric organisation will work toward identifying the needs of its customers. It does this by segmenting the customers into groups with common characteristics, then decides the most suitable level of attention for each group. This segmentation might be based on:

Size Buying purpose Nature of products purchased Revenue Growth potential

Geographic location Required level of specialisation

Data might be collected using surveys and from stored data from each customer interaction. These interactions include:

Sales Customer-service events Complaints Return of goods Third-party sellers

In implementation, a customer-centric organisation forms itself around its customers. Its entire strategy, even its structure, processes of function, internal reward system and its staffing are aimed at the maximisation of customer satisfaction. Some indicators:

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A focus on creating products that existing customers need – not finding customers for its products.

Rewarding managers who build customer relationships – not those deadline focused

Employees focus on customer retention – not on market share

Put more directly, creating a customer-centric culture is about grasping your brand value and its consistent delivery to customers. The focus is not on fulfilling every customer request, but more of providing what they value most, while maintaining the overall business strategy and fulfilling the brand promise. A simple example would be a budget airline where the primary attraction is price. Any passenger might appreciate more leg room, but not if it meant higher airfares.

The move towards customer centricity has many stages, and no two organisations might be at the same stage. A good starting point would be defining what customer centricity will mean for the business, then assessing the meeting of customer expectations that your organisation provides. Usually, there is a large gap between what is needed, and what is provided.

Statistics indicate that while many organisations think they have delighted customers, the truth is their culture and systems are designed for disappointment. One global survey indicated while 56 percent of organisations were self-described as customer centric, only a lowly 12 percent of their customers agreed. Organisations need to focus on

the customer experience to ensure that this gap is closed.

Customer-service values must be communicated to people who might have only bad-service experiences or had only negative models on treating people. After defining what to do, explaining why might be more difficult, but it must be done. The explanation, now your philosophy of business, must soak the entire organisational culture, and must permeate each process, to have a full influence.

It is not merely about treating customers in a particular way; it is about how we treat each other, our peers and our suppliers, as well as our customers, and sometimes the world at large. A system, and probably even a philosophy is needed, that leaves room for self-reflection, that means meeting workday challenges effectively, then assessing that response and look for ways to improve.

Key values the drives a customer-centric cultureTransforming an organisation into being customer centric is not merely a matter of changing its customer service methods. Detection of the needs of the customers is primary. The organisation then uses its resources to meet the most common needs, and in the process, builds relationships with their customers. Each business functionary of the organisation, even those without the remotest contact with the customers, now fulfils their roles with the customer in focus.

Despite each organisation being different in almost every way, some common

values identify customer centricity. These are:

Being Respectful: “Have we been respectful at all times?” is the first consideration. Respect must come from equality, and not derive from any social or other status, or be forced by those in authority. Another way of expressing this value, is that respect must come from common humanity, and not because someone has power or authority.

Being Responsive: “Have we been responsive to people’s needs?” The difference between reacting and responding must be clearly understood. Reacting seems based on emotions rather than logical thought processes, and the preferred option is always responding. Observation, listening and understanding, all help solve any problem, positively and quickly.

Being Realistic: “Have we been realistic about what we can or cannot do?” Realism is important when faced with impossible requests or tasks. Striving to achieve goals is needed, but realistic expectations of and from clients, suppliers and others, is the key to success. Setting unrealistic expectations is akin to assuring failure. Potential roadblocks to progress must be assessed accurately, and a realistic rationale for service delivery must be set.

Being Responsible: “Have all of us taken personal responsibility for outcomes?” A functioning business can be compared with a never ending relay race, where runners are continually added. The baton pass occurs more times, and as in a relay, everyone must take responsibility for not

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only running their section, but also for their entire work task and that of others. The workplace is strengthened by this constant communication.

Being Remembered Positively: “Will our actions allow us to be remembered positively?” If nothing else, whether a problem is solved, it should be possible to walk away from any interaction, engagement or problem, being sure that memories of that event will be positive. Being remembered positively should be inherent to the company culture.

Changing the organisation’s culture into a customer-centric cultureChanging the culture of a company takes time. It is easy to say, “We want to change our experience”. Connecting that desire for change into organisational customer centricity is what will effectively change the customer experience.

Straightforwardly put, a “product-centric” or “internally-focused” organisation will only produce “product-centric” or “internally-focused” customer experiences, despite all attempts at change. Conversely, a “customer-centric” organisation will easily supply a customer-centric experience.

The customer experience might be at various stages of effect and each organisation might be at any stage at any time. Every person recruited, the systems of measurement, the processes, leadership figures and styles, and the organisational culture itself all affect the customer experience.

Therefore, it is initially necessary to do the following:

Make sure you are serious about changing the customer experience.

Ensure that executives understand the proposed customer-experience concepts

Customer-experience councils must be implemented, where support for everyone in the organisation to pull together is assured by reviewing end-to-end experience.

Change the measurement of performance so 20-40% weightage is given for customer relationships

Every customer experience must be emotionally engaging rather than merely transactional.

Once the preliminary work is done, some steps follow logically. They are:

Having a clear, customer-centred vision

Knowing the customers needs and expectations

Clear communication to every employee on the importance of customer-centric behaviour

Every business decision must be in tune with the customer-centric vision

Customer-service approaches must be dynamic; they must be interactive and consideration for ROI must be paramount. The experience must be challenging even up to uncomfortable levels if needed. Consistency of delivery of service and experience must be seen at every opportunity to meet customer expectations. The result will be a customer-centric organisation,

with measurable and sustainable improvements not only in customer satisfaction, but also in employee engagement and sales results.

Is customer centric important for future success? Business environments are highly competitive, so much so customer centricity is not only to be aspired to, but essential. Achieving genuine customer centricity might not be easy, but can be made to happen by using properly formed strategies, tools and professional support.

As global trends head more and more towards personalisation and mobilisation, there is fundamental change in human behaviour. Customers are more discerning, better educated and more demanding. There will only be greater challenges for organisations to face, in building brand loyalty, and customer relationships that last and are sustainable.

When there were monopolies, and while markets were still growing apace, most organisations did not need to worry about losing customers. Now, competition is global; the Internet has a major role in sales, and these among other factors, force organisations, even those reluctant to do so, to give focus to the customer experience.

In this dynamic marketplace, it is only customer-centric organisations that will succeed. Those organisations that do not move towards customer centricity, will struggle. They will not retain customers; far less increase customers. Their solutions will not be on-target, and will rarely satisfy their customers’ expectations. Customer centricity has come to stay.

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Fusion Management Briefs - Issue 7

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Transcript of Fusion Management Briefs - Issue 7