Trading up

When arts organisations face acute financial pressure, customer service improvement is an early casualty, because cause and effect are hard to measure and because morale is probably sinking. However, even when you can’t immediately find a return on investment ratio to apply, it doesn’t mean that the team can’t get a good, measurable result. One of our favourite approaches is expounded by Kinesis, an American service company, and whilst we use a very similar approach they should be given the credit for what follows.
A step-by-step guide to increasing trading income
Step 1 – The venue makes a list of customer behaviours that directly affect revenues or costs. Ask the team what, specifically, the organisation wants customers to do more of or less of? Attitudes and feelings don’t count in this exercise – only measurable, observable behaviours do, such as “buy more tickets” or “spend more on an average visit to the venue”.
Step 2 – Eliminate any items that cannot plausibly be influenced through service interactions. (Service interactions do not necessarily involve employees; your websites, online presence, contracted-out services and information centres are all service providers.) Make a second list of specific, measurable service activities that are likely to affect the desired customer behaviours. This list should only include items for which a realistic, cause-and-effect scenario between service behaviour and customer behaviour can be articulated.
Step 3 – List what employees (or machines or websites) can do more of or less of, or do differently, to influence how customers act. If it can’t be measured, if it can’t be trained (or programmed), or if it has no likely effect on measurable customer behaviours that effect profit, delete it. It will still be a long list.
Step 4 – List what specific knowledge and skills are needed to provide the service that will affect the desired customer behaviours. Be clear about what you want people to do afterwards that they don’t do now. You will be surprised by the number of variables that are based on interpersonal behaviours rather than equipment. Establish the incentives, positive reinforcement and measurement you are going to apply as part of a training plan. Usually the vital component is management and supervisory behaviours, rather than substantial expense
Step 5 – Edit each list to ensure that it applies only to the items on the previous list. In this way, the picture does not become cluttered with irrelevant or ambiguous elements. Because every item on every list is concrete and measurable, the people who are accountable for delivering service and making it pay will know precisely what is expected of them.
Step 6 – Link the first list (desirable customer behaviours) to costs and revenues. Calculate the financial effect of an incremental change in each item. For example, what would be the effect on revenue of increasing the average customer purchase by one pound? What would be the one-year effect on costs if the volume of complaints to house management were reduced by 20%? What would be the effect if a customer visited one more time each year? Even a small change can have a substantial financial impact. It also becomes clear which service changes will have the biggest effect.
Step 7 – The venue has now identified the customer behaviours it wants to change, the general effect of each behaviour on revenue or cost, and the financial value of an incremental change in each behaviour. In addition, it has identified the service activities that are likely to influence changes in customer behaviours, and a strategy for promoting those activities. All of these steps can be accomplished in two days with the management team and plenty of flip charts.
Step 8 – Implement this early plan vigorously and you will have a significant improvement in performance.
 

However, if you really want to see the money, you will need to take a hard look at two more factors: magnitude and interaction. How much change can the venue expect to create? Can complaints be reduced by 10% or 30%? Also missing is the interaction among different variables. For example, aggressive up-selling may lead to a 10% increase in the average transaction amount, but it could also lead to a 2% increase in customer turnover, which might counteract the benefit. The only way to answer these last two questions is to experiment. The venue must identify the most promising service investments and test them on a small scale.
The experimentation does not stop with one test. Successive repeats of the process allows you to fine-tune your tactics and find the optimal mix of service activities that result in the highest return on investment. With patience, a reliable formula will emerge and the company can decide which service improvements it should invest in – or whether it should invest in service improvements at all. It will be your unique service fingerprint. Finally, Kinesis makes a very good point: behaviour analysis takes the view that service isn’t profitable because it’s good, it’s good because it’s profitable. This doesn’t mean there is no benefit to customers. On the contrary, the types of behaviours desired of customers will only come about if they are satisfied, loyal and occasionally delighted. Companies cannot make the world a better place for customers unless they are sustainable. By defining good service in terms of its effect on the bottom line, everybody wins.