The ‘C’ word

Customer Experience (#CX), Customer Service, Customer Journeys, CRM, multi-channel – these are all complex, modern day challenges that current businesses face. There isn’t a single business today that doesn’t mention the ‘c’ word somewhere in their offices, in their stores, on their website or in their brochures – the customer is king, long live the king! And, throw in social media (word of mouth to the uninitiated), and we all know a company’s brand can be enhanced or destroyed based on the most trivial of vignettes or sound bites.

So, these are all modern day challenges in the 21st century – right? Well no ,you’re wrong! Every tradesman or business has had to deal with these same challenges since……the year dot actually! When the very first man (and it probably was a man!) decided to exchange something he had made, raised or grown for some form of currency, these same challenges existed except they didn’t have the same buzz words that we use in business today.

In 1996 Dr Christian Grönroos, a leading Finnish academic, published one of his seminal papers about a merchant in ancient China, which encapsulates all of the above.

In a village in ancient China there was a young rice merchant, Ming Hua. He was one of six rice merchants in that village. He was sitting in his store waiting for customers, but the business was not good.

One day Ming Hua realised that he had to think more about the villagers and their needs and desires, and not only distribute rice to those who came into his store. He understood that he had to provide the villagers with more value and not only with the same as the other merchants offered them. He decided to develop a record of his customers’ eating habits and ordering periods and to start to deliver rice to them.

To begin with Ming Hua started to walk around the village and knock on the doors of his customers’ houses asking how many members were there in the household, how many bowls of rice they cooked on any given day and how big the rice jar of the household was. Then he offered every customer free home delivery and to replenish the rice jar of the household automatically at regular intervals.

For example, in one household of four persons, on average every person would consume two bowls of rice a day, and therefore the household would need eight bowls of rice a day for their meals. From his records Ming Hua could see that the rice jar of that particular household contained rice for 60 bowls or approximately one bag of rice, and that a full jar would last for 15 days. Consequently, he offered to deliver a bag of rice free every 15 days to this house.

By establishing these records and developing these new services, Ming Hua managed to create more and deeper relationships with the villagers, first with his old customers, then with other villagers. Eventually he got more business to take care of and, therefore, had to employ more people: one person to keep records of customers, one to take care of bookkeeping, one to sell over the counter in the store, and two to take care of deliveries. Ming Hua spent his time visiting villagers and handling the contacts with his suppliers, a limited number of rice farmers whom he knew well. Meanwhile his business prospered.”

As you read through this story, I’m sure you will have recognized some familiar themes – the importance of having a direct dialogue with your customers, understanding your customers’ needs, delivering a service that meets “their” requirements, multi-channel, keeping records on your customer preferences, and delivering a differentiated and reliable service that ultimately provides value to your customers.

So, businesses today face the same challenges as businesses did in the past, which is somewhat reassuring given how easy it is to get lost amongst all the jargon of our day!

Why the utility industry has lots of synergy with the insurance sector

If we had a choice none of us would “choose” to spend our hard earned money on utility bills – gas, electricity and water. Whilst all essential services, they just don’t have any aspirational value to us living in the developed world. A huge amount of infrastructure and capital investment has been made over the past decade assuring our utility services in the UK, so we tend (rightly or wrongly) to expect these services to “just work” and be there when we need them. This makes it difficult for utility companies to create a relationship with us – their customers – as most don’t want, or see, any value in having any contact or a relationship with our utility companies.

Typically, there are four journeys we will take with a utility company:

  1. To register or amend our details, or leave the provider. Currently for water companies this can be a relatively rare event given the current lack of competition and choice in the industry and we see our water bill more like an additional tax
  2. To query our bill. For gas and electricity companies, this is the most likely reason we will contact a utility company today, as the majority of the industry still runs on estimated bills. The planned roll out of Smart meters, however, will dramatically change bill queries, which in turn will drive down customer interactions
  3. To complain – the most frequent reason for us to contact utility companies! According to the Institute of Customer Services the utilities industry remains rooted to the bottom of the UK Customer Satisfaction Index (UKCSI)
  4. To report a fault, for example, when a loss of service occurs. This is the time when we expect and demand a high level of engagement, given the inconvenience the service loss will cause

These “customer” journeys tend to be very similar with the insurance sector. A small amount of contact occurs at the time when we register for an insurance policy, amend our details or exit. We might query the price at the time of renewal, although more and more, we do this through price comparison web services. The insurance industry ranks higher for customer service than the utility companies in the UKCSI so customer complaints tend to be fewer in number, but do still occur. And, when we have a problem – typically an event has occurred where we need to make a claim – we expect that claim to be processed with ruthless efficiency and by staff who show huge empathy to our circumstances.

This final customer journey, processing a claim, is one where the insurance companies have invested in heavily to differentiate themselves. Expensive advertising by insurance companies will often focus on how they manage claims, recognising the distress we may have at such times. Therefore, utility companies should invest in their people, processes and systems as well to provide much needed support during a loss of service – a very stressful time, particularly for vulnerable people.

Finally, insurance premiums, like utility bills, are ones we would all prefer “not” to pay but we know we “need” to ensure we have insurance policies to cover our loved ones, property, vehicles and possessions.

Utility companies should aspire to benchmark themselves against the leading insurance companies. Aspiring to align themselves with the best in class customer service organisations, such as John Lewis or Amazon is a flawed strategy – the companies at the top of the UKCSI all offer a product or service that we “want” rather than we “need”. Perhaps this is why British Gas has picked an insurance industry veteran, Mark Hodges from Aviva, to be their new Managing Director?