Feeds:
Posts
Comments

Introducing Golfops.com

I would like to thank the readers of my old blog – Driving Growth through Customer Satisfaction, which I’ve been posting for the past two years.

Today, I am introducing my new blog: Drive Revenues and Reduce Expenses through Better Golf Operations.

Since I last posted a message, I have been hard at work on multiple new initiatives that fit within the title of my new blog. As a result, in the future, I’ll be sharing insights and strategies that can help you be a better operator through NGF research. I will continue to share with you research and strategies to improve golfer satisfaction, but I will expand the scope of my blog to discuss other ways you can drive revenues and reduce expenses.

One way that you can drive revenues and reduce expenses is through knowledge of how peer properties are performing on key financial and operational benchmarks.

I look forward to sharing with you in the near future some best practices on how to define peer properties, what are the important metrics to benchmark on and how to put the data to use to improve your operations.

Thank you for your support of the NGF.

A few months ago, I discussed the customer corridor of a public golf course.  A customer corridor map can be a helpful tool that can help companies understand the needs of the customer. In this posting, I hope to help golf resort operators rethink the needs of their customers by mapping out the touchpoints of a guest visiting a golf resort. The goal of this map is to help resorts shift their focus on customer needs from an inside-out approach to an outside-in approach.

Bottom Line: There are many touchpoints at golf resorts that impact guest satisfaction. Although you may perform well at some of these touchpoints, if you fall short on others, guest satisfaction may suffer.

NGF’s golf engagement services help clients measure the customer experience, engagement of employees and perceptions of golfers in the local market. NGF’s systems deliver “Voice of Golfer” (VOG), “Voice of Employee” (VOE) and Voice of Market (VOM) intelligence. These systems identify individual factors that are most influential in creating satisfied customers, engaged employees and an interested marketplace. NGF is experienced building and executing these systems for golf course operators, management companies, resorts, retailers, equipment manufacturers and golf travel organizations.

 

To learn more about how NGF’s VOG, VOE & VOM systems can help your company succeed, click here.

In my last post, I discussed the difference between satisfaction and loyalty. I alluded to a method that would allow operators to predict the future behavior of their customers by understanding satisfaction factors and their influence on causing customers to behave loyally.

At NGF, we have developed this method. Introducing the…

NGF Customer Satisfaction Index (NGFCSI)

The NGFCSI is a proprietary formula that links satisfaction with the economic value of a customer. Customer value is determined through a unique customer score for every golfer ranging from 0 to 100 (0 the worst, 100 the best). The customer value is determined through the amount of course rounds that the customer plays, the word of mouth referral value of a customer (both good and bad) and the likelihood that the customer will be retained a year from now.

Simply put, the NGFCSI tells golf operators not only how the course has treated the customer in the past, but how the customer will treat the course in the future. As the NGFCSI increases, the customer asset value of the course will grow. Through preliminary benchmarks, we have determined that for every 5 point increase in NGFCSI, a course will grow their customer value by an average of an additional $60 (assuming a $50 spend per round) per customer, through increased play and better word of mouth referrals. For a facility with 3,000 customers this translates to a growth of the customer asset of $180,000!

Through the NGFCSI, we have grouped golfers into one of five categories.

  • Super Advocates
  • Satisfieds
  • Apathetics
  • Hostiles
  • Assassins

The NGFCSI precisely predicts profitability through science. An operator that increases their NGFCSI score will financially benefit through increased rounds, improved word of mouth and reduced churn of existing customers.

The Beatles were onto something with the song “Can’t Buy Me Love.” What they missed in the song was that you also can’t buy loyalty. True customer loyalty can’t be bought or bribed.

Customer loyalty is the purchase behavior of a customer. It’s the frequency with which they repurchase, it’s the new business that they deliver through word of mouth referrals and it’s the total that they spend over their lifetime as a consumer.

When it comes to the behavior of loyal customers, there are no short cuts. Having a “loyalty program” or a discount card won’t in itself cause customers to behave loyally. The only way of impacting purchase behavior is by improving total customer satisfaction.

There is a strong link between purchase behavior and customer satisfaction. Satisfied customers deliver a higher wallet share, make more positive referrals, and are more likely to be retained.

To truly influence the behavior of consumers, businesses must first understand how satisfied their customers are. Satisfaction depends on the customer’s perspective and the context of the business. As a result it will vary from customer to customer and cannot be directly measured. There are a set of factors that influence customer satisfaction such as:

  • Overall satisfaction
  • Satisfaction relative to expectations – expectations will be very different at Pebble Beach versus a 9 hole executive 
  • Satisfaction relative to your ideal golf course – golfers may have a different perception of what an ideal course is to them, maybe it’s Pebble Beach, or maybe it’s a course that they can play 18 holes in 3 hours

After understanding how customers perceive your course on these subjective satisfaction factors, the next step is understanding which of these factors have a greater influence on causing customers to behave loyally.

I have recently became interested in a hedge fund that invests in satisfied customers. The CSat Fund (http://www.csatfund.com/home.html) invests in the top-performing companies by industry in terms of customer satisfaction. The investment strategy is simple; the fund managers invest in companies that are in the top 20% by industry, provided that the satisfaction of that company is at least better than the national average customer satisfaction score. 

Within the last month, Barron’s wrote an article noting the incredible performance of the fund. Barron’s – Happy Stocks: March 22nd, 2010 

Growth of $100 in the CSat Fund vs. S&P 500

 

The CSat Fund delivered an astounding cumulative return of 235% over the past 10 years. This is compared to the Standard & Poor’s Index return of negative 23% over the same timeframe. 

My Take: This fund clearly puts its money where its mouth is, and the results are compelling. It’s clear that companies with the most satisfied customers are the most profitable in the stock market. Also this fund has demonstrated that satisfied customers are an asset to companies in that they deliver high returns in up-markets but also reduce the risk in down-markets. The reason that risk is reduced is that satisfied customers are the most reluctant to defect and the most likely to buy more. These favorable traits were borne out in the performance of the CSat fund in both up and down markets. The CSat fund tracked proportionally less than the S&P 500 in down-markets, but tracked upwards proportionally more than the S&P 500 in up-markets. In down-markets the correlation of the CSat fund to the market was 74%; in up-markets it was 115%.1 

Source Notes
1Fornell, C. (2007). The Satisfied Customer: Winners and Losers in the Battle For Buyer Preference. New York: Palgrave Macmillan. 

This weekend’s launch of the Apple iPad has made me think a great deal about Apple’s most important asset, their customers.  Apple has developed their customer asset to the point that they can introduce a new product, such as the iPad and virtually guarantee huge sales, regardless of the quality of the product that they would deliver. Of course, if a product like the iPad were to deliver inferior quality this would adversely affect how their customers will behave towards future product launches.

The customer asset that Apple has developed is in stark contrast to that of the American motor manufacturers. Detroit’s inferior product quality for years burned many consumers. Today, Detroit’s product quality is on par with that of its Japanese counterparts, yet the American manufacturers still must offer higher incentives and lower pricing to get sales. Why? The reason again is the customer asset and although Detroit is now producing high quality products, their customer asset value is very low. As you can see through these two examples, the customer asset is a leading indicator of profitability and can be a powerful influencer on buying decisions, to the point that it can be a more compelling influencer than the product itself.

Today, consumer service consumption is twice the size of manufacturing. Sixty years ago, it was the opposite. This transformation has caused the accounting system that we currently use to be obsolete. There’s an example in a book1 that easily illustrates how accounting systems don’t properly account for the customer asset.  The simplified example talks about a company that acquires 5,000 new customers at a marketing/selling cost of $1,000 per customer. The average customer is retained for three years and the company nets $300 in income per customer, per year. Clearly this is not a profitable situation. The acquisition cost per customer exceeds that of the income delivered per customer.

Yet, accounting systems don’t accurately show this. In the first year the results show 5,000 customers acquired at a cost of $1,000 per customer equating to $5 million in acquisition costs. These customers deliver $300 in income per customer equating to total income of $1.5 million which would result in a loss of $3.5 million. The next year another 1,000 customers are acquired at an acquisition cost of another million resulting in a total of 6,000 customers generating net income of $300 each for a total of $1.8 million. Therefore in year two, the profit is $800,000 as the acquisition costs were only 1 million. It would appear that if the company adds another 1,000 customers, it would make even more profit.

But that’s not correct. We know that the average customers lifespan is only three years with an average net income of $300 per customer per year totaling an average lifetime income of $900 per customer. Yet the acquisition cost per customer is $1,000. Therefore, with each new customer added the more unprofitable the company becomes and the more economic value is destroyed. Since customer assets are considered a cost and not an investment, they are not amortized over time. This is what causes the confusion and can deceive companies.

If this company could extend the lifespan of these customers to four years, the company would be more and more profitable with each customer added, not less and less as shown in the example above. A missing piece of the puzzle in the example above was missing information related to customer retention. If the company had this intelligence, they would understand that they only are going to get $900 in net income over the lifespan of each customer, yet spend $1,000 in acquisition/marketing costs. The problem would become very clear.

“Retention Economics” can help golf courses and businesses understand what their customers will do to them in the future. By better understanding the customer asset, companies will not only have a better picture of their current financial health, but they will also more accurately be able to predict the future. Linking customer satisfaction to the customer asset empowers companies with the intelligence necessary to optimize customer satisfaction to yield maximum profitability.

 Source Notes
1Fornell, C. (2007). The Satisfied Customer: Winners and Losers in the Battle For Buyer Preference. New York: Palgrave Macmillan.

My last blog post discussed the failures of Sony and McCulloch in assuming that they understood the needs of their customers instead of actually knowing. You know what the old saying is when you assume. The penalty for assuming the needs of their customers for McCulloch and Sony was steep, to the tune of billions in lost profits. In the case of McCulloch, this mistake ultimately led to the undoing of the company, as they went into bankruptcy in 1999.

Sony executives made what they believed to be a correct assumption that picture quality was the crucial need that a customer would consider when purchasing a personal video recorder. Yet, the Beta Max became extinct. Why?  Sony didn’t fully understand the needs of the customer and which needs would be greater drivers in the final decision-making process of the recorder that the customer would buy.

Many operators may make the assumption that good greens is all they need at their course. While good greens are important, I have identified 38 separate touch points that can affect the experience of a customer at a public course. Not all customer touch points are equal. Based on research published by Professor Noriaki Kano, I have classified touch points into the following groups; penalty, reward or a combo of penalty & reward factors. For example, one of the touch points that I mapped out is the sand bottle on a golf car. The customer expects it to be full, and when a course meets this expectation by providing a golf car with full sand bottles the course won’t realize any additional reward in terms of customer loyalty, it’s expected! But if the customer reaches for the sand bottle and they are empty, customer loyalty likely will take a hit. Put another way, in my book an empty sand bottle on a golf car equals strike one. That’s not to say that this mistake can’t be overcome. If my experience is great at every other touch point, I’ll probably forget about the sand bottle. But if I am left unfulfilled at the other touch points, that empty sand bottle will be just one piece of ammunition in my rifle when I take aim and fire at the course through my negative referrals to friends. Failed touch points like these, make up the fertile breeding ground of irate assassins. When the course provides the customer with the ammunition of unfulfilled expectations on key touch points, assassins will be determined to complete their hit by launching an all out assault on the business that failed them.

A key tool that can help companies understand the needs of the customer is a “Customer Corridor Map.” I hope to help public golf course operators rethink the needs of their customers by mapping out the customer corridor for a round of golf. The goal of this map is to help courses shift their focus on customer needs from an inside-out approach to an outside-in approach.

The lifecycle of the customer experience from beginning to end at a public course

Bottom Line: An outside-in approach to the needs of your customer will allow you to better understand your customer touch points and maximize the customer experience!

Follow

Get every new post delivered to your Inbox.

Join 49 other followers