Net worth: capturing the customer - customer service

Chief Executive, The, Jan-Feb, 2003

Faced with intense competition and demanding consumers, companies are recognizing the value of delivering a positive customer experience from start to finish.

When it comes to building brand awareness, the AFLAC duck is a clear winner. People know it on sight and, even better, smile when they see it. Daniel Amos, chairman and CEO of the $9.6 billion insurance firm, smiles, too -- and for good reason. Since introducing the duck campaign two years ago, AFLAC's brand awareness has jumped from 44 percent to 87 percent. In fact, the only complaint about it is a half-joking reproach from a mom who reports that when she asks her 4-year-old what sound a pig makes, he says "oink," but when you ask him to mimic a duck, he says, "AFLAC!"

But while name recognition is a wonderful thing, Amos told the audience at the CEO2CEO Conference, it's just one piece of the company's integrated program to capture and keep customers. "The AFLAC duck creates positive name recognition, but it doesn't tell us what customers want in terms of products or services," he said.

"We still rely heavily on our frontline salespeople and research team for that information. And it's still up to our salespeople to actually make the sale."

As competition intensifies and customers grow more demanding, companies are recognizing that reaching out to consumers takes much more than a catchy slogan or flashy packaging. It means delivering a positive overall customer experience from start to finish, catering to wide-ranging customer segments in the process and, in many cases, combating commoditization by delivering added value.

Some companies are succeeding by using powerful data warehouses that collect and mine customer data and sophisticated sales support tools that bring the resulting enhanced products and services to customers. Capital One, for example, was founded on the notion of using technology to deliver both customized credit card product offerings and customer service.

"Credit cards are totally flexible and intangible -- you don't have inventory issues or physical distribution issues -- so there's the ability to customize on a massscale," said Richard Fairbank, chairman and CEO of Capital One Financial, who admitted that Capital One uses its customers as guinea pigs. "The credit card business is a massive scientific laboratory in disguise," he said. "If you have millions of customers and a very flexible product, you have the ability not only to customize but to try different things with different folks. And that can transform a business."

Capital One tested this theory by varying its response to customers who threatened to switch to another company with a better deal -- a common problem in the credit card industry. "The concept was to randomize the calls coming in and try giving a third of them whatever they asked for, meeting another third halfway, and taking the final third arid calling their bluff," Fairbank explained. "You can actually build from the results by seeing what the economics are of who stays and who leaves. Then you can build predictive models."

Call Capital One with such a threat today, and there's an "instantaneous calculation of the lifetime value of that account on a present-value basis, as well as the statistical likelihood that you're bluffing and your price sensitivity in terms of negotiation," said Fairbank. "The incentive plan of the rep on the phone with you is based on what he or she can negotiate based on that instantaneous calculation and the message that comes back in real time."

Sound complicated? Not for Capital One, which in 2002 did 65,000 such tests that covered at all aspects of its business, from marketing to collecting on delinquent accounts. But building the company from a concept into one of the nation's top 10 credit card issuers was a lengthy endeavor. "To me the fear along the way was that this nice-sounding idea would drown in the logistics and cost and complexity of doing this," Fairbank said. "It took four years to hire the people and build the technology and infrastructure to be able to do this:'

Leveraging the Customer's Mind

If the hurdles in pulling off large-scale customization are formidable for a startup like Capital One, how do companies hobbled by legacy systems -- and existing product lines and policies -- manage the task? Very carefully, said Lawrence Babbio Jr., vice chairman and president of Verizon Communications.

At Verizon, customer research has led not only to the development of myriad service packages, but also to new ways to communicate service requests. "People today expect integration of wireless and wire line products and are looking for more bundles, so we offer a whole variety of new combinations of things," said Babbio.

Yet while new offerings are essential to attract new customers, it's equally important to continue nurturing satisfied existing customers. "We create dozens, probably hundreds, of different packages," he said. "But at the same time we preserve the hundreds of thousands of service offerings we have for the entire customer base."