Chapter 1 Introduction Introduction Rackspace Hosting Lanham Napier CEO San Antonio TX obsessed with customer owners but doesn t like using that term this company provides IT hosting services for its business customers Rackspace s success 1 Carefully selects its customers 2 Provides them with easy access to its customer centered teams 3 Provides them with personalized fast responses to their needs 4 Listens to and acts on their reactions and suggestions Rackspace s results 1 Impressive customer satisfaction and loyalty levels 2 High referral rates 3 Low marketing costs 4 High annual business growth rates between 2003 to 2007 Rackspace Continued Rackspace has the capability to have such results even though their rates are higher than most companies Bc of their standards their customers show intense loyalty commitment engagement take responsibility for the company s success Company calls their employee s rackers 3 Introduction A customer who behaves like an owner is worth more than a hundred typical price sensitive customers over the customer owner s lifetime with an organization The lifetime value of an employee who can promote customer ownership is priceless An organization that learns how to cultivate an ownership attitude creates a self reinforcing relationship between customers and frontline employees Definitions one who tries a product or service is so satisfied that she returns to buy more states a willingness to tell others of her experiences actually convinces others to buy provides constructive criticism of existing offerings and even suggests or helps test new products or ideas Some customer owners even help select new employees take satisfaction in creating value for customers exhibit their sense of ownership through loyalty referrals of other high potential employees to the organization and suggestions for improving the quality of processes and work life as well as the org s overall effectiveness in serving customers Emp owners are most important in contributing to comp s customer ownership quotient OQ the proportion of all employees who are satisfied loyal committed to the value offered by the org that they contribute ideas for further improvement and help recruit high potential friends to join the cause Ownership quotient Customer ownership quotient defined above Employee ownership quotient defined above Concerns of this book Who are these potential customer and employee owners How can you identify them How can you expand their ranks and nurture their sense of ownership How can you track the results of your efforts Which companies are leading the way and what can the rest of us learn from them Customer ownerEmployee owner Advancing the Concept of the Service Profit Chain a set of insights that we have been examining for 20 years about developing a working environment carefully selected highly capable engaged employee interaction with customers to create customer value far superior to that offered by the competition Results of careful application of service profit chain thinking Customers remain loyal exhibiting high rates of retention They buy more related sales They tell others about their positive experience providing referrals They suggest ways of enhancing the customer experience by complaining constructively suggesting new products or services and process improvements research and development Firms that are examples USAA MBNA intuit southwest airlines DEVELOPMENT 1 RETENTION 2 RELATED SALES 3 REFERRALS 4 RESEARCH Service profit chain The 4 R s SEVEN FUNDAMENTAL PROPOSITIONS THAT FORM THE LINKS OF THE SERVICE PROFIT CHAIN CHAINS 1 CUSTOMER LOYALTY DRIVES PROFITABILITY GROWTH a 5 increase in loyalty can cause a 25 85 increase in profits 2 CUSTOMER SATISFACTION DRIVES CUSTOMER LOYALTY driving improvements in TOP BOX CUSTOMERS satisfaction scores the highest ratings given by those surveyed 3 VALUE DRIVEN CUSTOMERS SATISFACTION value results plus process quality in relation to total cost to the customer critical all equals satisfaction 4 EMPLOYEE CAPABILITY latitude with in limits having places in a business to emp to expand to the side not just up so that it doesn t get boring and don t run out of spots to deliver value to targeted customers PRODUCTIVITY DRIVEN VALUE 5 EMPLOYEE LOYALTY DRIVES PRODUCTIVITY loyal emp less money on recruiting training new emps 6 QUALITY OF WORK LIFE DRIVES EMPLOYEE SATISFACTION LOYALTY fairness of ones boss chance to work with winners opportunity for personal development reasonable compensation capability to succeed latitude with limits 7 VALUE DELIVERED AS PERCEIVED BY CUSTOMERS IN RELATION TO COST YEILDS LONG TERM PROFIT 7 Advancing the Concept of the Service Profit Chain Service profit chain leaders Have worked to align key components into a single force key components of business marketing operations information human resources Are dedicated to consistently exceeding their customers expectations Created strategies policies and practices that integrate logic and technology to support the people who deliver value for customers Have set out to create a core of employees and customers known as owners Beyond Satisfaction and Loyalty The Ownership Quotient Preconditions for ownership High rates of satisfaction Loyalty Ownership Hierarchy Figure 1 1 i made a graph on the next slide just in case hierarchy for employees and customers pyramid Owners are satisfied loyal and engaged or committed Employee ownership offering ideas about how to improve processes recruiting potential new employees testing recommending new products services Customer ownership offering constructive complaints recruiting new customers testing recommending new products and services OWNERSHIP CUSTOMER EMPLOYEE APOSTLE LIKE VIRAL BEHAVIORS RECRUITING NEW CUSTOMERS EMP FREQUENT CONTACT WITH COMP MAYBE ANNOYING AT TIMES TRIES OUT NEW PRODUCT SERVICES USEFUL COMMITMENT LOYALTY SATISFACTION TRIAL AWARENESS CURIOSITY 10 Beyond Satisfaction and Loyalty The Ownership Quotient measuring OQ Measurable indicators of a high customer ownership quotient go beyond high customer curiosity satisfaction loyalty and commitment to high light such things a high proportion of new customers resulting from referrals a significant proportion of new or improved products resulting from customer suggestions and constructive criticism a high degree of customer willingness to test new products processes Measurable indicators of a high employee ownership quotient The primary driver of customer