What is customer participation in service what measures would you suggest to enhance customer participation?

1. Y. Liu, “Word-of-Mouth for Movies: Its Dynamics and Impact on Box Office Revenue,” Journal of Marketing 70, no. 3 (July 2006): 74-89; J. Villanueva, S. Yoo and D.M. Hanssens, “The Impact of Marketing-Induced Versus Word-of-Mouth Customer Acquisition on Customer Equity Growth,” Journal of Marketing Research 45, no. 1 (February 2008): 48-59.

2. L.A. Bettencourt, “Customer Voluntary Performance: Customers as Partners in Service Delivery,” Journal of Retailing 73, no. 3 (fall 1997): 383-406.

3. B. Schneider and D.E. Bowen, “Winning the Service Game” (Boston: Harvard Business School Press, 1995).

4. R.P. Bagozzi, “Reflections on Relationship Marketing in Consumer Markets,” Journal of the Academy of Marketing Science 23, no. 4 (fall 1995): 272-277; B. Berman, “How to Delight Your Customers,” California Management Review 48, no. 1 (fall 2005): 129-151; Bettencourt, “Customer Voluntary Performance”; C. B. Bhattacharya and S. Sen, “Consumer-Company Identification: A Framework for Understanding Consumers’ Relationships with Companies,” Journal of Marketing 67, no. 2 (April 2003): 76-88.

5. T.O. Jones and W.E. Sasser, Jr., “Why Satisfied Customers Defect,” Harvard Business Review 73, no. 6 (November-December 1995): 88-100.

6. H.S. Bansal and P.A. Voyer, “Word-of-Mouth Processes Within a Services Purchase Decision Context,” Journal of Service Research 3, no. 2 (November 2000): 166-177.

7. These dimensions were measured through a customer survey that employed well-established and widely used measures in marketing research.

8. In our model, we also calculated the total effect of customer satisfaction on customer spending via the word-of-mouth route and via the participation route. Results suggest that the total effect of satisfaction on spending via participation (.11) is 11 times greater than the total effect of satisfaction on spending via word of mouth (.01).

9. S. Fournier and J. Yao, “A Case for Brand Loyalty,” Harvard Business School case 9-598-023 (Boston: Harvard Business School Publishing, 1998).

10. G.L. Urban, F. Sultan and W.J. Qualls, “Placing Trust at the Center of Your Internet Strategy,” MIT Sloan Management Review 42, no. 1 (fall 2000): 39-48; G.L. Urban, “The Emerging Era of Customer Advocacy,” MIT Sloan Management Review 45, no. 2 (winter 2004): 77-82; A.B. Eisingerich and S.J. Bell, “Customer Education Increases Trust,” MIT Sloan Management Review 50, no. 1 (fall 2008): 10-11.

11. F. Reichheld and R. Markey, “The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven World,” revised and expanded edition (Boston: Harvard Business School Press, 2011).

Companies focus on encouraging customer word-of-mouth while ignoring the benefit of customer participation — encouraging customer feedback and suggestions to the company. Yet, research shows that participation can increase customer loyalty even more than word-of-mouth. 

IDEA SUMMARY

Customer word-of-mouth is a hot topic in marketing today. Positive customer-to-customer reviews, whether verbal or written, are powerful marketing tools because they have more credibility with customers than company-generated marketing. In addition, once customers help spread the word about a company’s products, they are more engaged and committed to that company.

Customer participation, on the other hand, is systematically overlooked by the same marketers pushing word-of-mouth. Customer participation involves customers who offer constructive feedback and suggestions on a company’s products and services. They share not only their concerns or appreciation, but also their ideas for new features or even new products. Word-of-mouth is all about customers talking to other customers; participation is about customers talking to the company.

The interest in word-of-mouth is driven by the impact of customer-generated marketing — statistics show a direct impact on sales from word-of-mouth — and the increased loyalty and purchase activity of customers who engage in word-of-mouth.

These same effects occur with customer participation… and to an even greater degree.

A quantitative study of a global retail bank’s customers revealed that customers who both recommended the bank to others and provided feedback or recommendations directly to the bank were the customers who purchased the most. The second most valuable group: customers who did not recommend the bank to others but did provide feedback or suggestions to the bank. The same results applied to loyalty and attachment to the brand. High participation/high word-of-mouth customers were the most loyal and attached to the brand; high participation/low word-of-mouth customers were the next most loyal and attached. The least loyal and attached were customers who did not participate, even if they had spread positive word-of-mouth.

The positive impact of customer participation is not limited to the banking sector. Numerous in-depth, structured interviews and roundtable discussions with CEOs around the globe by the same researchers revealed the power of participation in a wide variety of industries.

Focusing on customer participation does not mean abandoning word-of-mouth. However, customer participation is very profitable, and should be emphasized over word-of-mouth, not the reverse. Ideally, companies should encourage both as they are “two sides of the same coin” — one focused internally, one focused externally, both building financial value for companies.

BUSINESS APPLICATION

To encourage participation and truly benefit from customer suggestions and feedback, begin by trusting your customers. If you feel that they don’t understand the intricacies of the business model enough to offer viable suggestions, remember that the most groundbreaking ideas in business often come from those who are not afraid to ignore “the way things are done.” Some companies are also worried about intellectual property complications: what if customers start demanding compensation for the ideas that are used? This view of customers as potentially greedy and conniving is a poor basis for a customer-company relationship.

For some companies, the process of customer participation can seem daunting. The answer is to start simple, then ramp up participation processes and systems. Begin with a simple invitation for suggestions, for example, then follow up (eventually) with more sophisticated programs to gather, assimilate and analyse customer participations — such as the Apple Support Communities website that offers customers a forum to talk among themselves or with the company.

Customer participation must become a core part of a company’s strategy. Southwest Airlines, for example, involves frequent flyers in their flight attendants recruitment process. No frills airline EasyJet made a significant change to its business model — offering a selection of paid reserved seats as opposed to first-come, first-serve only — in direct response to customer feedback.

Use the power of social media. One of the best examples is My Starbucks Idea, a website through which customers can post ideas for improving Starbucks. An online game company lets its community of users assess customer ideas and choose their favourites.

It’s important not to be heavy-handed in forcing customer participation. Make sure customers feel that they have volunteered their feedback and suggestions. Bombarding customers with messages about feedback creates the wrong spirit for partnership.

Finally, keep customers informed about how customer ideas are used. If customers feel their efforts will lead to nothing, they are not going to bother.