The Mirroring Effect
By: Steve Terry, Navint Director, Subscription Revenue
The Mirroring Effect: How operational friction can guide the path to an improved customer experience
As we transition to Continuous Customers in the quest for recurring revenue and growth in customer lifetime value, internal operating friction across the organization is suddenly introduced and gets worse over time. The notion of “I sell, I ship, I bill and I’m done” is a legacy transactional view, and one for which our tools, systems and processes have been tuned. But now we are in a recurring business those processes and systems don’t quite fit.
Recurring revenue organizations need to meet customer demands and expectations in a continuous relationship. The core product or service provided to the customer is now just one element of what the customer buys. Customers are now buying a continuous experience with our internal functions – contracts, fulfillment, provisioning, billing, service delivery, and payment processes. Now the health of customer relationships hinges directly on the performance of functions previously viewed as back-office operations.
Internal operating conflict between customer-facing goals and the back-office way of thinking results in friction in the recurring relationship with the customer. If we experience bumpy and inefficient processes internally the chances are that customers will notice. We call this the mirroring effect. For every inconvenient process we support, the customer likely feels that pain too. Here are three examples of how disjointed business operations impact the Continuous Customer relationship.
1. Poor Packaging Creates Confusion, Prevents Self-Serve
Are you selling the product you make or are you selling the job it does? Are you selling your own view of what it is that you do, or are you selling what the customer is achieving, the outcome of using your service or product? This is where packaging comes in. Effective packaging defines your products from the customer viewpoint and enables them to evolve with you, buying more over time. Legacy thinking about products is the cause of SKU proliferation with direct impact on the customer experience.
For example, we add this product code because it’s the one that grants the customer the license. Another one gives it the recurring fee. Another one adds the set-up fee. Yet others drive seat entitlements or billing functions. What’s more, we’ve trained our sales and sales operations staff to make sure these things are part of the final order and may have even automated it for one-click operations. This path we’ve created has nothing to do with what the customer is truly buying.
If we have difficulty internally understanding what the customer’s status is today and what options they have to buy, then how are we going to make it clear to the customer? In this situation, how can we think ahead of the customer and serve their evolving needs? How can we provide self-service through portals built on systems and data that our employees struggle to comprehend? The customer is basically getting obscured by the same issues that disrupt internal operations.
For the Continuous Customer, it’s an iterative buying process. They’re not just buying once; they’re buying, using and experiencing our operations over and over again in the context of the relationship. Without direct insight through customer portals or direct sales platforms for the customer to self-select their own packages and manage their own subscription, the chances they will buy additional services is severely diminished. Internal issues managing SKUs and packaging are a direct reflection of awkward customer buying experiences.
2. Bumpy Enablement Creates Frustration, Prevents Upsells
Congratulations, we’ve sold it! Ring the bell, we’ve got a commitment, and then what happens? What’s the cycle time to get the service enabled and the customer up and running with the offering we’ve sold them?
Internally we are worried about how we are going to recognize revenue or when Frank is back in the office and can set up seats because he’s the only one that can do that. We make errors occur like setting up the wrong service, too few seats or some other mistake made in the enablement process – it happens all the time. The internal pains on service enablement such as manual set up, provisioning and leakage controls creates delays and reliability issues. Internal operations can easily become focused on their own hassles, forgetting that the customer suffers too.
What we are trying to do in the Continuous Customer paradigm is enable the customer to get what we promised to provide and to change it as we move through time. How do we respond to bumpy enablement and more importantly, how do we prevent it from happening again? It’s not the first time it’s bumpy, it’s when it’s bumpy the second time and the third time. That’s when our customers are going to stop buying from us. We may not even know when they make that decision.
When service provision is difficult for our operations you can bet the customer experience is also suffering.
3. Billing Errors Create Anger, Reduce Trust, Impact Revenues
Too many operations, particularly in B2B arrangements, get the billing right through the process of getting the first bill wrong. Let’s use tax exemption as an example. How do you find out a customer is tax exempt? You bill them with sales tax, and let them complain. In terms of the internal workload, that may seem efficient because it’s so much work to get the tax exemption sorted out as a right-first-time process. So, we send the wrong bill and if they call to complain, they complain, and then we figure it out. What a horrible customer experience. In our work, we consistently see billing as a major pain point for customers’ billing isn’t structured the way they need it, not timely for their internal accounting processes, or just plain wrong.
Internal pain is felt in the hidden costs of time spent on inbound email or phone calls directly related to billing questions, complaints, credits, and re-bills. It’s a constant distraction to what should be a very lineally threaded and process-based group.
And on the other side of every one of those phone calls, emails and re-bills is a customer that is unhappy with the bill they got. And every time you’re answering the phone for a customer billing inquiry you’re not only wasting your time, but you’re wasting the customer’s time too. In the Continuous Customer relationship where billing is at least one-third of the communications with customers, it’s essential to get it right or they will go elsewhere.
It’s not just billing, but collections at stake here too. Don’t expect to get paid with any more discipline than you exhibit in your own processes. That is true mirroring. If we focus on our internal discipline and get the bill right first time, our chances of getting paid correctly and on time the first time is so much higher. The customer gets the chance to follow our lead.
The internal cost of every inbound billing inquiry is at least equaled in customer pain. Which problem are we trying to solve?
Re-frame Internal Pain Points to Improve Customer Experience
So often we see improvement initiatives and projects driven by the need to resolve internal friction points, costs, and inefficiencies. In our effort to catch, keep and grow continuous customers, we must take the opportunity to find the reflection of those internal pain points on the customer experience. Our internal frustrations are key indicators of how the Continuous Customer experience can be resolved and made excellent – maybe if we focus on problems from the customer perspective then improved internal efficiency will be a happy by-product.
To learn more about Navint’s Subscription & Monetization service offerings, please visit our Subscription Services section.