Forget About ROI, Start Thinking About 'ROE'

DavidJohnson4
David Johnson VP, Partner, 3GEngagement

Posted on March 12th 2012

Forget About ROI, Start Thinking About 'ROE'

Word-of-mouth is gold and social media is the vessel we use to promote it, but how exactly is it accomplished?  As businesses we are always looking for ways to lower the cost of acquiring new customers.  It’s simple economics, the lower the acquisition cost the more sales (and money) we make…simple right?  Not exactly. As with most things it’s easier said than done, but if you make it part of your daily customer/employee interaction to give your customers something positive to talk about you go a long way to influencing a higher rate of word-of-mouth, let’s call it your ROE or "Return On Experience."

In this post I’m going to throw out some radical ideas. Radical ideas that, at first, you will discount as being just that, radical. Then these ideas will start to work on you as you mull them over in your mind, more than likely you will talk with your spouse about them or maybe a co-worker asking yourself and them what if? What if you did try what I’m about to suggest, what would happen? Would it produce rapid word-of-mouth, would it reduce your cost per customer, would it create you more sales? The answer to all of those questions, of course, is yes but I understand that there will be a certain amount of skepticism involved but as you will soon find out, the logic is iron clad.

Customer Experience

I’ve brought this up before but I thought it important enough to bring it up here again and that is: it’s the difference between what people expect and the actual level of customer service received that will dictate whether or not a person will talk about how their business with you went. Of course it goes without saying that if you fail to meet those expectations the word-of-mouth will be negative but if you exceed them, well …all sorts of magical things start to happen, such as repeat and referral business!

The idea is to go so above and beyond what the customer expects that you earn massive amounts of exposure on the level of Return on Experience (ROE) you receive from shocking your customers with your level of customer service. In fact, I don’t want you to think about it as “customer service” at all, instead think of it as:

Customer Enchantment

It might just be me but when I think of the term customer service I think about doing all the things that I’m supposed to do such as be helpful and friendly but when I think in terms of customer enchantment I think on a much, MUCH grander scale. In other words I don’t want you to think about how you can give good customer service, I want you to think in terms of “how can I enchant my customers?”

Enchantment: (en·chant·ment ) Captivation: a feeling of great liking for something wonderful and unusual.

Before I get into some ideas of what I mean I feel it’s important to remind you about the story of the boy and the starfish. You know the one, the one where there are thousands of starfish beached upon the sands where a little boy, one-by-one, is throwing the starfish back into the water. When asked why he’s even bothering when there are too many to make a difference, the little boy replied after throwing a starfish back in the water, “It mattered to that one.”

I bring up that story because I understand that what I’m about to propose would be impossible to do with every customer, of course you wouldn’t want to do what I’m about to propose with every customer anyway because then it would become expected and the whole idea is to go beyond what is expected. Another thing to keep in mind is that you are trying to work your way into your customers social graph (both online and off), or at least become a conversation within it. By influencing your customers to say positive things about you, you in effect create customer that create other customers, thus reducing your customer acquisition cost theoretically in half.

Scenario #1 Let’s say you have a customer come in to your dealership to purchase a vehicle for his daughters 16th birthday. He of course is excited but you decide to take things to the next level by getting the car wrapped for him, complete with a big bow on top. But you don’t stop there because you really want to enchant your customer so you then give to his daughter a year’s worth of free oil changes, 5 complete details and a $150 gas card.

Scenario #2 A customer drops off her car for an oil change and you learn that she is due to give birth to a baby boy in two weeks so you decide to go shopping for her. You buy her some baby related items, maybe a diaper bag and diapers, maybe some baby clothes or baby blankets. While talking with her you learn that she is in need of a car seat or maybe even a stroller so you picked one of those up for her as well and put them in her car for when she comes back to pick it up.

Scenario #3 You learn that one of your customers has had a death in the family so you send a big bunch of flowers to their house, along with a gift certificate for a free house cleaning and yard maintenance with a hand written card that says, “It’s always tough losing a loved one and we understand that there are always too many things to worry about during times like these. Attached you will find a gift certificate for free house cleaning and yard maintenance, two less things that you have to worry about. We truly are sorry for your loss.”

Do you get what I mean when I say customer enchantment? I sure hope so because by doing things such as the three scenarios above you go a long way to influencing word-of-mouth. Think about what will happen once the word gets out about the things you are doing for your customers and it will get out. In fact your customers will find a way to bring up the amazing things you did both in person and all over Facebook (and Twitter, MySpace, and others) any and every chance they get. They will happily do this because you made a difference in their lives and did something they would NEVER have expected. You now have a customer and a word-of-mouth generating machine for life.

Another Crazy idea

What if you empowered your employees to do this sort of thing. Maybe create an enchantment budget, think of it as advertisement if you have to but by allowing your employees to get creative with customer enchantment and then giving them the means by which to do so you are creating an environment that creates rampant word-of-mouth.

What ideas do you have when it comes to creating customer enchantment, how can you increase your ROE?

DavidJohnson4

David Johnson

VP, Partner, 3GEngagement

Next to my family and my faith, social marketing is my passion. I blog about how business and social purpose intersect in order to grow your bottom line.

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Comments

The concept on "Return On Experience" is very much connected to "Customer delight", I would rather say it is directly proportional to ROE. Customer enhancement is nothing but customer delight where in you create an upper hand in terms of your services provided to your customers as a result you get differentiated in the market which paves the way to create a competetive advantage thus supporting your marketing strategy.

 

I'm fond of saying, the worst customer experience you can give is the same experience your customers are getting down the street. It's time to stand up and care, it's time make a difference and stop giving the customer what they expect. Because, just by meeting those expectations you are doing nothing to stand out in their mind. If your aim is to create loyalty and word-of-mouth you must exceed those expectations.

David,

Loved this post because it's very specific. You practice what you preach which sets you apart. Any ideas on measuring ROE that are as direct as your comments? I'd love to hear your thinking on that. Thanks!

Mike

Word-of-mouth has always been hard to track but something that all businesses know is important. The best way to track something like this is to ask your customers how they heard about you. Of course, after implenting ideas such as these, you will notice an influx of positive reviews on all the different review sites. That's just one metric but one that goes a long way to show you if what you are doing is actually influencing word-of-mouth. As well know there is a difference between giving good customer service and giving the kind of service that makes people stand up, take notice and sing your praises.

This is good content and not in the least bit crazy. Perhaps a customer champion could lead this great article, and yes its radical but a logical movement in attaining a very loyal customer base.

 

I totally agree! The best way to get people talking and to influence customer loyalty is through enchantment!

The key to social media success is quite simply the three "Cs" . . . Conetent - Context - Contact (http://wp.me/pydAP-2Fs).

Lets add a fourth, customer service!

David - a good and informative article on ROE.

A customer having a good experience backed up by excellent customer service is certainly what differentiates a good company that thinks and cares about its customers to one which wants to sell a product or service and then move on to the next customer.

Of course from good word of mouth comes, generally, higher level expectations from not only current customers but also new customers - the issues then become ones of managing customers' expectations.  So whilst always wishing to have a strong Return on Experience this needs to be done with an understanding of creating expectations and managing those expectations.

Well said. With any kind of customer experience processes its important to manage the expectations of your customers. Just look at what Zappos has done, its amazing.

Guy Kawasaki has written an excellent book on the subject: Enchantment: The Art of Changing Hearts, Minds and Actions.

Honestly, I thought the book was okay. It reminded of Influence by Robert Cialdini, but the concept is spot on!

I love this concept, but what happens with customer A tells customers B-Z that they got a stroller when they went in for an oil change and all customer "S" gets in an oil change and a friendly face?

I think if you are giving poor performance and then enchanting some, then it would be a problem. But, if you are giving awesome customer service and use the methods I mention above I don't think anybody would mind. Zappos does the same thing all the time, and others as well. I get what you are saying and I agree it would be a concern but I wouldn't let that stop me from enchanting my customers. Just a thought. I do appreciate you sharing your concern, you're awesome for commenting!

How many dealers can afford to do option #1?  What you propose eats up a lot of the margin on the original car purchase.  Yes, the buyer will talk about your dealership in a positive way, but will the increase in positive press pay for the margin hit?  I'm wondering if most dealers might do better by not treating the customer as a total rube/enemy and getting more quickly to a real price.  THAT would be a shocking change to most car buying transactions I've been a party to over the last 15 years.

Having said that, as a lifelong direct reponse guy, wouldn't it be worth a test for a dealership group that has a few of the same brands? Brand X in one town could take that approach, while Brand X in the next state would use the tried and true as a control.  Run it for 3 months (just guessing) and do pre- and post-analysis and check not only sales but sentiment?

If you can prove that ROE works--and I do believe that experience does work--then it makes it easier for the company skeptical about it that it works.

I get what you're saying Mark, but the avergare car dealer spends $500 in adveritsing dollars for each car they sell. While I understand that this type of thing costs money I also picked extreme examples to prove my point. It doesn't take much for an auto dealer to stand out from the crowd, most people despise them.

As far as one price lots, they don't work that well, even though I like the idea. I do a lot of work with auto dealers and I think the way the system works now is broken. As far as the one price lots, just look at Saturn, it didn't work and now they are out of business. Auto dealers have taught people that negotiation will get them the best deal so that when a car lot offers one price selling people don't trust it and still want to negotiate. Believe me I've been in the business for 11 years.

Now, once again, I'm NOT saying I don't like the idea. The way it is now makes an enemy of the customer, which is why I brought up the idea of ROE. It's the same thing that Zappos does and a hotel chain, that I can't remember the name of. But Gary Vaynerchuck talks about it in his book, The Thankyou Economy.

I'd love to do the testing you're talking about. In fact I will be speaking at a conference soon and will propose it. Thank you for the comment Mark!

Thanks for the great read. 

We've found, with our [MindTouch] customers, that by focusing on customer success with their products, ie- making their customers kick ass with their products, they yield a great many benefits. In short, when your customers kick ass with your products you win. Go figure, right? So, it's not just about during the sale, but making sure you're delivering an awesome customer experience that focuses on making them experts with your products. 

Well said and i agree! I appreciate the comment!

David,

Great to see you separate Customer Service with a discussion of Customer Enchantment.  They are really what those of us in the experience field define as The Customer Experience.  I also love the three examples you give to stage a "Customer Surprise", one of the most important elements of experience staging.  Customer Surprise is not about exceeding customer expectations (a known element) but rather going off in new and completely different directions to WOW a Customer.  Great Ideas Dave.

ps. Read both ThankYou Economy & Enchantment.

Better books on Experience Economy by Joe Pine & Jim Gilmore.  Also Colin Shaw.  The discuss arguments and actual frameworks and models for Customer Experience Design.

 

I've read the Thank You Economy. It's the second time I've heard of the hotel using customer enchatment techniques such as these, very inspiring indeed! As far as Enchatment by Guy Kawasaki, I got about half way through it, I need to finish it up... too many books to read not enough time! LOL

Thank you for the comment Bill!

Thanks for the great post David. There's a great phrase that was taught to me by a Ritz Carlton Customer Service speaker who said, " Under promise and over deliver." It seems like a simple idea and initially it may seem something confusing to do to your customers, but it always makes your organization come out on top. When people are expecting a certain level of service, or duration of time, and you "over deliver" that is what creates that "WOW" factor. Also- not all "experience makers" will cost your organization money. Sometimes, simply having the "right fit" employee being gracious, considering and compassionate to your customer's needs will alleviate their anxiety and contribute to their overall positive experience.

I agree, not all experience costs money. I was at Sam's Club the other day and whenever we go in I always get the kids some ice cream. Well, this last time, while I were sitting there with the kids happily spooning heaping spoonfulls of ice cream in their mouths, the guy cleaning the tables stopped by our table and said, "I really appreciate you being a member here, It means a lot to me. Is there anything I can do for you?"

Wow, that really made an impact and was very nice of him to say. You don't hear thank you enough and it costs niothing to say but can have  ahuge impact. Thank you for the comment!

I really enjoyed this article and think that there are many pratical uses in the real world.  I've always been willing to pay a bit extra to have a great customer experience, such as at Nordstrom.  Their employees are always very knowledgable, polite, and willing to help...something that goes a long way in today's world of department stores.  Do you have any suggestions for how this could apply to a non-profit community center with very limited budgets? Thanks for the great article!

That's a very good question. Since money has its better uses in a non-profit there are some other things that you can do. For one, the word Thank You is very important and powerful. By letting people know that you appreciate them you go a long way to encouraging them to do it again,

In customer service, saying something like, "Thank you so much for your donation, we really appreciate everything you do. We couldn't do what we do without you."

If there is a big donation then making a big deal out of it with a plaque and a presentation ceremony is another good thing. It makes people feel appreciated. Can you go into more detail about your non-profit, maybe we can come up with something together.

Love this post David. I've worked for a few companies who really embodied this idea of enchanting the customer and they reaped the benefits on a financial and brand loyalty basis. I do have to say that enchanting customers should be used less as a tactic and more as a part of a larger, overall philosposhy that the company all buys into. I currently work for lululemon, and one of our biggest things is to give without expectation- we give to our guests, our ambassadors, our staff and ourselves and just be content in that act of giving. Following this philosophy, the enchanment inherently becomes more authentic and thus more rich in the experience. 

I totally agree! Something like this should be in the culture of the business. It should be all about who the business is, it's not a campaign or a one time thing but something that lives on in each employee. Thank you for commenting!

My compliments. Nice article, succinctly written. It's too bad though that being exceptional in what you do still has to be presented as a radical concept. 

I recommend you read "Firms of Endearment" by Sisodia, Wolfe and Sheth. The expanded title is "How World-Class Companies Profit from Passion and Purpose." The crux of the work is that companies that treat all stakeholders - whether they be employees, shareholders, customers, suppliers or anyone with a stake in the company's success - with love and respect equally, can and do outperform others. The reason I believe this book is so important is that it goes way beyond customer service, or even customer enchantment. They teach that the company, as an entity, should strive to enchant all stakeholders involved in their business. No one gets more priority than anyone else. And that's a key difference between a company with great service, and a company that really enchants.

This book goes to great lengths to measure performance of the companies they discuss in traditional ways so they can get "apples to apples" comparisons with none FOE's (Firms of Endearment). But a strong measure of whether or not your company is offering great service, or engagement or enchantment, is your customers' willingness to recommend, or overall Net Promoter Score. With so many companies putting large investments in social media programs, any Marketing team not measuring the overall effect of their new efforts with NPS or WTR is leaing themselves at risk.

Wow, thank you for commenting! I will check the book out, I've always been very interested in companies that enchant their customers and how successful they are because of it. Just look at Zappos. It's what they do, it's what they are, and look how quicly they have grown through the power of word-of-mouth. These ideas do work, and people crave them as loyality in out society takes a down turn.

Want more loyalty? Need more repeat business? Take care of your customer, it's as simple as that.

Great article and the proposed examples on going that extra mile for a customer. Although I think it needs to be pointed out, that one needs also identify the 'right' customer that will actually go on social media websites and spread the word, so in this sense the socially active ones should be targeted, otherwise it might also result in a waste of resources that might have lead to ROE but didn't.

Something to think about: why only worry the online social graph? People talk with people in real life as well. Don't get me wrong I get what are saying and agree, an avid social networker will be able to reach more people than somebody not on social networks. But, what about the woman who is active in the church and people come to for advice? Just something to think about.

Thank you for commenting Marina, it is very much appreciated!

Thanks David for your reply, by no means I am opposing this view, personally I've always tried to stick to this rule of 'stakeholder enchantment'. Especially in the world where any minor negative experience is spread with the speed of light, so although a positive experience would apriori be less influential and quick, in a long term if would definitely have more power. 

I'm just thinking one of the shallenges in here would be the border when that extra mile becomes a norm and the expectancies naturally get higher and higher, and a company has to work harder and be more creative, especially with limited resources.

True, I feel that's why you give unparalledled customer service and enchant here and there, using such techniques as I mentioned in the post. Principles such as these will most defintly raise the bar and is an interesting topic that you bring up.

Sounds like I need to write a follow up, thank you for inspiration Marina!

My pleasure to collaborate! And thank you for evolving this discussion, looking forward to the next article then:)

You are most welcome! I really enjoy this back and forth, I always learn so much. Thank you again Marina!

Well said David it is Great to hear from inspirational people like yourself. How could this pertain to a food product such as Maple Syrup? We would like to build a larger Retail Market.

I apologize for not responding to this sooner, for some reason I'm not getting email alerts and it must have gotten lost in the shuffle.

Who doesn't love maple syrup? The family and I bought a waffle maker about a month ago and it seams like we are eating waffles every day... with maple syrup of course!

Quick questions so that I can answer it better. Do you retail the maple syrup yourself or do you wholesale it to the retailer?

We do retail ourselves.

VT,

I'd think there would be several ways you could build a bigger retail market.

You could try giving away a fancy waffle maker to a certain portion of your customers who buy syrup from you. Not an announced program, just something you ship out along with the bottle you send, saying, "Thanks for being a customer. We wanted to give you this as a thank you for your business." Or instead of the waffle maker, you could package an extra bottle of syrup in every few orders. Syrup isn't cheap, and customers would be thrilled to get an extra, along with a note that thanks them for their business.

In the social sphere, if you just want to get the word out, search Twitter for people talking about waffles or pancakes. Find some influencers among that group and tweet them an offer for a free bottle of syrup to try. Do the same thing with blogs - find popular bloggers talking about syrup, or about waffles or pancakes, or even about healthier alternatives to sugar (my wife and I use grade B maple syrup instead of sugar because of the lower glycemic index and suitability to our paleo/primal diet) and offer them some product to try.

I would be thrilled to get a bottle of syrup to use. I've got kids, and we go through it fast. I guarantee I'd talk it up and link to the website if that happened. And if you have a good product, good prices and reasonable rates for shipping, I would definitely come back.

VT,

Steve brings up some very valuable insight into using customer ehchantment, I really like what he had to say (thank you Steve!).

Consider putting a hand written note in every package. Real handwriting, not a font that looks real, you can tell the difference! The note can say something along the lines of:

"It's really "sweet" of you to use VT Maple! Whether it's on pancakes or waffles, sweet potatoes or hamburgers (who knows, I'm sure somebody does) VT Maple has got you covered! Thank you for having a sweet tooth and for choosing VT, we appreciate you!"

Then sign it.

Yes, I like humor, remember: funny is money!

 

David

 

Marina ...Great point about identifying those who spread the word. "The Influencers".  

Some really great info on Influencers in a book called Wiki Brands - Reinventing Your Company In A Customer Driven MarketPlace.  You'll be surprised by some of the research. 

I'll have to check that out, thank you for the share Bill!

Really great posting, David.  Your ideas are inspirational. 

It brought to mind working on telecomm accounts and their urgent need to adopt & incorporate SOE as part of their retention strategy.  As we all know, everyone hates the cable guy and for good reason - his customer service support is largely MIA, ambivalent to customer needs or simply not helpful.  I'm preaching to the choir now as we all know that research and data readily available points to poor customer service ultimately equals millions in revenue loss - especially when existing customers jump ship which they do often in telecomm.  And social media amplifies bad feelings to turnoff potential acquisitions, and so on.  However, making the recommendation and corporate executives listening/approving is another story.  For example, in a previous life our team worked with client (one of the giants in the industry) to re-build the online support experience.  We had great intention, brilliant strategy & the beginnings of an awesome site (& global) experience that would have made customers feel enchanted.  However at the end of the day, the executives didn't see the value & pretty much wanted to default to BAU so we ended up just skimming the surface of what was really needed - pretty disappointing.  Bottomline - I'd love to see more corporate executives really "get" the concept of SOE as it seems such a no-brainer.

You would think so because a happy customer is a customer that keeps coming back and telling others. Taking it even further then, into the relms of enchantment, it stands to reason that an enchanted customer will tell even more people! Tahnk you for weighing in Cindy, you are appreciated!

So true.  Your business should have that mindset of adding value to their customers lives not just getting revenue from them.  These are great tips.  Can't wait to run this by my auto client!

Thank you Craig. I wrote a follow up to this post just yesterday, which you can also find here on SocialMediaToday.com. It's called, Why Relationships Matter and ROI Doesn't.

I wanted to explain what I meant by forget ROI. Thank you for taking the time to comment!

I like the Return on Engagement concepts, but doesn't your ROE lead to ROI?  For example you state "Of course it goes without saying that if you fail to meet those expectations the word-of-mouth will be negative but if you exceed them, well …all sorts of magical things start to happen, such as repeat and referral business!"  Doesn't referral business generate a return on social media investment for you?  You also state "By influencing your customers to say positive things about you, you in effect create customer that create other customers, thus reducing your customer acquisition cost theoretically in half."  Looks to me that reducing your customer acquisition cost by half is a great return on your social media or customer enchantment investment.  So I don't understand why ROI should be forgotten.

Absolutley ROI is important. And yes ROE leads to an ROI, it's just not always easily tracked. I wriote this because I was asked what the ROI is on customer service and I said when it comes to customer service, tracking an ROI isn't important because it's more or less a given. In fact I wrote a follow up post to explan what I mean about forget ROI. Its called Why Relationships Matter And ROI Doesn't.

While I do agree that providing a great customer experience is important to social media, heck to all marketing efforts, you can't just throw ROI out the window. Word-of-mouth is a very powerful tool that can generate a lot of business, but to start that word-of-mouth it takes a lot of planning and resources. I dare anyone to go to their CEO and tell them that the new marketing plan is to forget about ROI and focus on "enchantment." Probably not going to go over too well. The bottom line for all business comes down to money.

To start this program of improving your businesses' customer service efforts will require drafting new guidelines to share with your employees, possible training, and potentially a program budget. Positive word-of-mouth is definitely a desired outcome for these efforts, but it is not the end. The ultimate goal is to turn those word-of-mouth people into paying customers. Thus generating a ROI. That ROI can also be tracked through this customer service campaign so that you can show your CEO or COO why you put so much emphasis on social media marketing.

For example: say you convince your CEO to put $20,000 into a new social media customer service campaign to generate postive buzz about your business. You begin tracking sales, online mentions, positive and negative opinions, and customer feedback. Over the next 6 months you see that your sales increase 110%, your online reputation has increased, and the number of people talking about your business has increase dramatically. You factor in any PR stories that may have taken place, any additional advertising, and other key events that may have affect this increase, and in the end hopefully you are left with a definite coorelation between your customer service efforts and your sales increase. Your CEO is now very happy because you have lowered cost per customer, improved your reputation and generated a ROI. 

Word-of-mouth marketing is vital to a business, but it too is tied to ROI no matter how much you don't want it to be. It's a piece to the puzzle of running a business.

That being said, I think this is a great article discussing why outstanding customer service is important. It can make or break a business. It's just never a good idea in any marketing efforts to say "Forget about ROI."

 

I agree and very well said. I don't think that ROI should be forgotten at all. I said that because, and Albert Einstien said it best, not all things that count can be counted. Yes, it can be tracked to a certain degree, but rampant word-of-mouth affects so many things that it's not really straight forward. I wrote a follow up post explaining that to a much deeper level, take a look at it, it's called Why Relationships Matter And ROI Doesn't.

Thank you for taking the time to write all of that it really adds to the conversation!