Loyalty - What's It Worth To You?

Back when I started this blog I committed to talking about customer loyalty. I figure since I have recently focused on technology that I will take these next few posts to discuss this most important business issue.

Loyalty is something that I personally take very seriously because much of the bread on my table is directly tied to the loyalty of my customers. What's interesting is that if you are working for any company, even a non-profit, the loyalty of your "customer" effects you as well. It does not matter if you are a business analyst, systems administrator, HR Manager, Director, VP, or CEO, loyalty should be top of mind. Not only is loyalty a nice-to-have, but loyalty and its primary leading indicator - retention - can be directly linked to profitability. According to Frederick Reichheld, founder of Bain & Company’s Loyalty Practice and author of the international best seller, Loyalty Rules, How Today's Leaders Build Lasting Relationships, a 5% increase in retention translates to a 25-100% increase in profitability.

But what about satisfaction? Most companies, yours is probably included, measure customer satisfaction. In fact, companies often boast about their CSI (customer satisfaction index). Geico is famous for their 97% customer satisfaction tagline. While that sounds impressive, satisfaction is an essentially useless measure to determine the health of a business. Here are some facts:

• A recent automotive study showed that of the 90% of customers who said they were satisfied, only 40% became repeat buyers
• 25% of customers who experience a problem with your company don't tell anyone at the company
• Only 1-5% of customers with a problem tells management

Satisfaction is an indicator of what has happened, but in no way predicts what will happen. Measuring satisfaction is like driving while looking in the rear-view mirror. In my mind, loyalty comes down to this...if something better comes along (as perceived by you the customer), would you leave, or stick around? Switching costs have decereased in so many markets, making loyalty even more important. Next, I'll review measuring loyalty and using it to your competitive advantage.

Success in Business Rules

Every business has rules, from the notification process for vacations, which I am sure many of you recently exercised or soon will, to qualifying an applicant for a home loan. What I have oftened wondered is why business rules engines have been a luke warm market segment, eclipsed by more exciting technologies like Business Intelligence. It sounds like a great idea, identify your rules, reduce them to a series of variables and just plug those into some software that automates them. Done... nothing to worry about. Right?

Unfortunately like a whole lot of enterprise software, often the marketing hype and situational reality are a bit disconnected. But it is not all the fault of the marketers, some of the blame falls on us humans. We tend not to like rules, or better stated, follow rules. They are constantly changing and everyone has a different interpretation of what the rule is, or means. Just look at our legal system. Vendors strive to make business rules engines easy to use and some have been quite successful, Global 360 just partnered with Corticon, a leader in Gartner's Business Rules Engine (BRE) magic quadrant. They have an excel-style user interface that is quite slick and powerful, yet easy for us non-techies. I do not believe that a bulk of the problem resides with the ability/inability to use a particular system, as a few pundits have theorized, but it is the fact that mapping out rules is difficult and there are implications to changes...and we love to make changes.

The information for specific rules is dispersed throughout an organization and many are quite complex, rarely independent, and a change to one component can invoke the law of unintended consequences. That is why, especially with BREs it is critical to start with something small and easily manageable, map it out completely, and then use the software to automate the rule. Doing so will make it easier to make changes when necessary and will set expectations appropriately from the start. The BPMInstitute had a webinar on 6/9 that explored some of these issues. You can check it out here.

The Soft Launch

Today I am "soft launching" this blog to customers and colleagues. For my new visitors, I hope you enjoy perusing the posts while providing comments that benefit others. And be sure to pass the link along ( enterprisekarma.blogspot.com ) so we can build a diverse community of opinion.

It has been and continues to be my goal to make each post valuable to you by incorporating extensive research, experience, and a commitment to making sense out of the complexity that plagues Enterprise Software.

• To start from the first post back in April, click here
• To add this blog to your RSS Feed provider (e.g., Google Reader) , making it more convenient to access my latest posts, select one of the "rss feeds" under the heading in the right column
• To review archived posts, check out the "archives" heading on the right column

As the blog continues to evolve, please let me know what you think and be sure to return. Thanks for visiting.

Try Before You Buy

Essential to optimizing your business processes is the ability to simulate changes. A pilot who spends hours in a controlled environment before actually taking off can simulate hundreds of scenarios that include both ideal and adverse conditions. In this way a pilot can remain safe, while learning how to overcome potentially hazardous pitfalls. By simulating environmental changes, significant risks can be mitigated, while critical expertise is developed.

Unfortunately, business leaders have never had this critical capability necessary to confidently implement process changes. That is, until now. Leading Business Process Managment Systems can provide organizations with simulation capability. While the extent of this capability varies considerably amongst vendors, even the most basic simulation can be helpful before major process changes are undertaken. Even when the simulation capability is manual, a business analyst can test numerous scenarios to determine optimal processes for a variety of given situations. Like a pilot simulating landing in high winds, on ice, with failed landing gear, an organization can use simulation to develop business processes for a dynamic business climate, driving efficiencies, improving customer service, and gaining a competitive advantage.

Optimization Should Never Stop

By definition, optimization of your business processes should never stop. I could give all of the clichéd reasons like: "in this day-and-age, business never stops changing...neither should your processes" or "your competition never stops innovating... neither should your business," but you already know all of this. The problem for medium to large organizations is that it is difficult to make changes to business processes. This is especially true for ad-hoc changes, while being confident that the modifications will have a positive effect on service and the bottom-line. Change for change sake not only does not make sense, but can have a detrimental effect on your business. Most of us already know this, which makes organizations reluctant to effect change. But this extreme reaction can also have an adverse effect.

The key is to start by focusing on a specific set of business processes. Trying to tackle the super-set will, at best, result in minor improvement, at worst, have a detrimental effect across the organization. This is especially true since most processes are inter-related. By mapping out a process subset, incorporating all of the components and variables associated with the processes, and identifying goals and key performance indicators (KPIs), implementing changes will be less risky, provide measurable results, and act as an excellent learning experience. An excellent path to process optimization is through simulation.

Why The Hiatus?

I have not posted for 2 weeks for good reason. I recently had a new addition in my family, which as many of you must know, is an all-consuming experience. As understanding as she may be, my wife would have been less than thrilled had I been blogging while she was in labor. Since that is now over and everyone is healthy, I will be resuming regular posts, picking up where I left off. Thanks for your patience.