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An experiment in measuring customer satisfaction
Arun Hariharan Published: 03/23/2012
First time right (FTR), or doing things right the first time, is an important concept in quality. Some experts even consider FTR the very definition of quality. This two-part article summarizes an experiment in which FTR was applied to sales. Is it possible to sell something right the first time? We decided to measure and see if FTR actually helps in sales, and if so, where and how much. We will look at two examples FTR in sales, and how they affect five different, and equally important, outcomes.
Much has been written about the obvious need for FTR, given its importance in improving efficiency and reducing waste and costs associated with rework. Many examples of FTR pertain to operations or customer service, e.g., resolving a customer’s query right the first time. However, I didn’t come across too many examples of selling right the first time—that is, FTR in sales. Also, I didn’t come across too many published examples where the business benefits of FTR have been measured.
Hence, I thought it might be useful to share the results of our experiments—if one may call them that—with promoting FTR in sales.
At a large group of services businesses, we’d always been convinced about the usefulness of FTR and have been promoting it wherever possible. However, when we started measuring the difference between selling right the first time and not selling right the first time, the numbers were astounding and proved to us that FTR is one of the most important business measures for a CEO to personally focus on.
FTR in sales is simply ensuring that during the sale, the company (this includes salespeople, distributors, and agents who sell on behalf of the company) ensures that 100-percent complete and accurate requirements are collected from the customer the first time, and that the customer is not pestered repeatedly because the company failed to collect or understand some requirement. These could include the application form, supporting documents, customer’s payment, and customer specifications. It also includes requiring that complete and accurate information be given to the customer correctly the first time so that there are no surprises later. Often, the company needs to go back to the customer a second or third time because it failed to provide or collect some information, document, or other requirement the first time.
The second and more obvious part of an FTR sale is making sure the company delivers the customer’s requirement accurately the first time, on time, and without any rework. Also, it goes without saying that any sale where false promises are made to the customer automatically qualifies as “non-FTR.”
Our experiments were mostly conducted in large service companies, such as insurance, investments, lending, other financial services, and telecom businesses. These are industries where the company typically must both provide information to, and collect information and specifications from, the customer before each sale (often in the form of a sales application and related documents). However, it seems logical that the concept of FTR in sales and its benefits would be equally relevant in almost any manufacturing or service business. After all, which customer in any industry would put up with a “not-right-the-first-time” experience? Even if some customers complete the purchase despite a non-FTR experience, what kind of first impression are they going to have, and will they come back to such a company for a repeat purchase?
First, let’s look at the more obvious links. It seemed quite obvious that FTR would contribute to lower cost of rework and higher customer satisfaction.
The savings through reduced cost of rework was the most obvious and straightforward to measure. Every time a salesperson brought a sales application that was not right the first time, it resulted in the salesperson (or worse, someone else from the company) traveling back to the customer for more information or corrections, documents flowing back and forth, communication expenses, and operations staff spending double or more company-paid time on processing the sale as compared to an FTR application. Obviously, all this is wasteful activity that no customer is willing to pay for. When this was measured, the company realized that non-FTR sales were adding 20 percent to the cost of processing due to rework, directly eating into the company’s profits.
Common sense also suggested that customers who have an FTR purchase experience would be happier than customers who are bothered several times by the company for the same purchase. The company decided to measure how much happier the FTR customers were. Fortunately, for the last four years, the company has commissioned a reputable research firm to conduct an annual, independent survey of customer satisfaction. This year, the company asked the research firm to measure the satisfaction score separately for customers who had experienced an FTR sale and those who hadn’t, other things being equal. Customers who had experienced an FTR sale rated their overall satisfaction—not merely on the purchase-experience, but overall satisfaction with the company—a full 10 points higher (on a scale of 100) than customers who didn’t experience an FTR sale. According to the research firm’s global norms, the score is in the “excellent” range for FTR customers, while it is in the “average” range for non-FTR customers. The research firm’s experts pointed out that the 10-point difference represents a statistically significant variation in overall satisfaction levels with the company for the two groups of customers.
In both the examples above, we had always suspected that FTR sales would have some impact on cost of rework and customer satisfaction. However, most people in the company admitted that the enormity of this impact came as a revelation to them.
Another serious impact, though not so easy to measure, was on the company’s image. Going by the oft-repeated fact that a dissatisfied customer is more likely to tell his friends about his bad experience than a happy customer will talk about her good experience, clearly, the company’s brand image was taking a beating with each non-FTR sales-application.
The impact of FTR sales on cost of rework, customer satisfaction, and company image is covered in this article. The effect on revenue, profits, and sales productivity, as well as some vital lessons learned, will be the subject of part 2.
Arun Hariharan is a quality, knowledge management, and performance management practitioner. He has worked with business leaders of several large companies and helped them achieve substantial and sustained results through quality and customer focus. His is currently president of quality and knowledge management at Reliance Capital, India. Hariharan is a frequent speaker at quality and knowledge management events around the world. E-mail him at arun_hariharan@rediffmail.com.
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