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      Why B2B Capital Equipment Companies Should Not Automatically Link Performance Pay To Satisfaction Metrics

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      Many business leaders link their employee’s variable compensation to satisfaction or loyalty survey results with a view to improving the customer experience provided by their company or just to game the survey results.

      In this article I assume the business leaders actually want to improve their customer’s experiences.

      Why you should not automatically link survey results with variable compensation?

      The fundamental reason is that metrics and compensation should only be linked to influence behavior that will result in the business achieving its desired business outcomes.  Some of these outcomes are increase profitability, grow customer lifetime value, and mitigate business risks.

      With many capital equipment products the cost of changing brands is so high as to make the likelihood of change non-existent and therefore the impact on the desired business outcomes also non-existent.  

      B2B capital equipment products generally have very high switching costs.  For example, airlines that fly the Boeing Max 8 or 9,  or have them on order, cannot easily stop purchasing new ones as their needs grow.  Crew training, maintenance and logistics, and long deliveries from Airbus mean that existing users and customers who await delivery will be flying the Boeing planes from many years.

      When a company has selected brand X products for one manufacturing site and decides to increase capacity by duplicating the production line at another location, they will usually buy the same equipment; it will reduce startup time and costs and make it easy to benchmark each facility against the other.  Intel has used a practice it calls Copy Exactly! for many years to deploy each new generation of manufacturing equipment.  They not only duplicate equipment but also use the same exact paint (color, manufacturer, and type) and flooring so they can troubleshoot production problems by eliminating everything that is the same across their factories. Standardization overrides experiences.

      Another useful data point.  In their article “CX Metrics Aren’t Customer-Centric, But Should Be. Learn How”, Peter Fader and Sarah E. Toms describe how companies with high switching costs break their customers into three segments based on any CX metric.  The three segments are:

      Segment Name Hostile Hostages Neutral Hostages Caged Loyalists
      CX Metric Bad Neutral Good

      Either your customers are hostages or are at least caged.  In either case, they have to be extremely upset to even consider switching, if it is at all possible.

      You might be wondering “what about referrals?”  In my survey work, I find many people who rate a company 9 or 10 on the NPS question but never actually refer.  There are many reasons why but their behavior doesn’t match their intent.  I have also found people who rate a company with a 0 or 1 NPS score who referred the company to associates.  When I asked about the difference, I heard things like “They were not good for us but would be perfect for my friend.”  The takeaway – intent does not always match behavior.

      Why improve the customer’s experiences with your company?

      Even though your B2B capital equipment customers are likely locked-in to your products, you should still work to improve all the experiences you create. There are still the referrals (some people actually do what they say) and when the current product reaches end-of-life, they will make a new purchasing decision. They will still purchase the product they believe is the best for their intended use but, if the final choice between you and a competitor is close, service experience may be the deciding factor.

      Where to invest your CX money?

      You should invest your time and money motivating your teams to improve on the actions that will help your customers extract the most value from your products because this is why they originally purchased from you. Their business outcomes are much more important than how they feel about the intangible interactions with the service engineers. Areas to invest in include:

      • Improve product ease of use and reliability
      • Minimize call center handling time so invest in a knowledge base and chat
      • Add more value to your contracts and/or reduce the price
      • Help the customers improve how your product fits into their overall operation
      • Status tracking and notifications
      • Become proactive with predictive maintenance
      • Increase spare parts holdings to improve first call fix rates
      • Employee training – both hard and soft skills

      In other words, with B2B customers using products with high switching costs, fixing down equipment is much more important then employee empathy for their situation.


      Sam Klaidman