1. This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden. Barriers to Service Innovation and How to Overcome Them John Goodman, Vice Chairman, TARP Bentley University June 18, 2009

2. 2 About TARP Founded in 1971—38 years delivering dramatic impact –White House sponsored studies of client service (instigated 800#s) –Malcolm Baldrige (influenced criteria) –Assisted 6 Baldrige winners and 43 Fortune 100 companies –Initiated concept of “word of mouth” (TARP/Coca-Cola 1978 Study) and “word of mouse” (eCare and Click & Mortar studies 1999) Credited with developing approach for quantification of impact of service and quality on revenue for companies like Neiman Marcus, Mayo HS, IBM, American Express, Qualcomm, Honda, Chick-Fil-A, Toyota/Lexus, USAA, Xerox, and Motorola New book, Strategic Customer Service, published by American Management Association, May 2009.

3. 3 Formula for Satisfaction & Brand Loyalty Customers will: Buy again Buy more Tell others to buy Buy your other products & services += DOING THE JOB RIGHT THE FIRST TIME MAXIMUM CUSTOMER SATISFACTION & LOYALTY EFFECTIVE CUSTOMER CONTACT MANAGEMENT Improved Product & Service Quality Respond to Individual Customers Identify Sources of Dissatisfaction Conduct Root Cause Analysis Feedback on Prevention This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

4. 4 Barriers to Service Innovation Misunderstanding of the causes of dissatisfaction Assumption that no news is good news Assumption that everyone is price driven Demand for interactions that are consistent and delightful Benchmarking that causes complacency Single source Voice of the Customer Financial and Marketing cynicism This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

5. 5 Causes of Customer Dissatisfaction - Products and services don’t meet expectations -Marketing miscommunication - System fails - Units fail to coordinate - Fails to follow policy The majority of dissatisfaction is not caused by employee errors or attitude. Customer 20%-30% Company 40%-60% Employee 20% - Wrong expectations - Customer error -Fails to follow policy -Attitude - Products and services don’t meet expectations - Marketing miscommunication - Broken processes This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

6. 6 No News Is Not Good News: Health Care Mollified 2 30% I Question/ Problem Experience II Contact Behavior III Contact Handling Health Care Clients Health Care Clients Complainers 5-25% Complainers 5-25% No problem experience 50% No problem experience 50% Problem experience 50% Problem experience 50% Experience suggests three strategies: Prevention, Solicitation of Complaints, and Response IV Market Impact % Definitely/Probably Recommend/repurchase from same organization Dissatisfied 3 20% Dissatisfied 3 20% Satisfied 1 50% 90% 93% 30% 60% 50% Non- Complainers 95-75% Non- Complainers 95-75% 6 This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

7. 7 Problems Raise Sensitivity to Price Problems vs. Dissatisfaction with Price % Dissatisfied with price or fees Percent of customer dissatisfied with fees rises with number of problems. This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

8. 8 Flexibility and Explanation Trump Consistency, Accessibility and Money No Unpleasant Surprises If Trouble Encountered –Accessibility –Taking Ownership –Apology –Tailored action – flexible response –Clear Explanation – so that I believe I have been treated fairly – often more important than money Handle on First Contact Results in 10% Higher Satisfaction and 50% Lower Cost This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

9. 9 Impact of Delightful Experience on Top-Box Loyalty by Type of Action This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

10. 10 Traditional Views of Benchmarking and Voice of the Customer Benchmarking of processes is good – benchmarking of performance is problematic –Performance is local –If tied to incentives – can be disheartening Voice of the customer tends to be only surveys or fragmented –Surveys, contacts, internal operations and employees –Marketing and sales are usually not the focus of feedback This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

11. 11 = = = = xxx = 35 153 306 1500 1994 Total customers at risk 10,000 Customers with problems Z% Dissatisfied Many not repurchasing Some not repurchasing X% Satisfied Almost all repurchasing 50% Do not complain 50% Complain Y% Mollified Some not repurchasing Revenue Impact Of Service Can Be 20 X The Cost Impact This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

12. 12 Word of Mouth Impact Can be Estimated 20% delighted 80% satisfied x Tell a few Tell one x = = 600 800 1,400 1,000 clients 1400 Referrals X 1 Actions 30 Referrals = 47 New clients Example Calculation of Potential Impact This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

13. 13 Ten Myths About Service 1. Always exceed customer expectations 2. Answering the phone really fast is the key to success 3. People always prefer talking to people 4. The customer is always right 5. Complaints are down, things are getting better 6. Employees are the cause of most dissatisfaction 7. Price and cost cutting is the key to success 8. We’re at 90% satisfaction – let’s declare victory! 9. Measure Net Promoter and we’re done 10. We have a 100% satisfaction guarantee – everyone is happy. This presentation is the intellectual property of TARP Worldwide and for use only to illustrate TARP’s methodology. Use of or distribution beyond that purpose is forbidden.

14. 14 Contact Information for Papers Mentioned John Goodman jgoodman@tarp.com (703) 284-9253