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Voice of the CustomerValue Added – What Does It Mean?

2008 CASRO Client Conference

Michael MatzaWaMu Service Excellence GroupJune 3, 2008

WaMu - Michael Matza 2008 CASRO Client Conference 2

Agenda

• Washington Mutual

– History and corporate evolution

• Voice of the Customer and Loyalty System (VOC)

– Framework to analyze data and identify operational improvements that drive customer loyalty

• VOC in Action

– Case studies and examples


WaMu Overview – A Powerful Distribution Franchise

Presence in 18 of 30 Largest Metropolitan Areas

Retail Banking and Mortgage Lending

2,261 Retail store in 15 states

4,965 owned and branded ATMs

160 Home Loan Centers* in 15 States

Wholesale* and Consumer Direct Lending in 49 States

Multi-Family Lending through 44 offices in 18 markets

As of 3/31/08

*Recently announced plans to close all Home Loan Centers and discontinue Wholesale operations.


WaMu Recognized for Service Quality…

• Business Week “Customer Service Elite”

– 2007 Top 25 customer service leaders in US

• JD Power and Associates

– Ranked #1 in West and Midwest: 2007 Retail Banking Customer Satisfaction Study

• Reputation Institute

– Top 50 Corporate Reputations in US

…and continually working to improve


Voice of the Customer and Loyalty System (VOC)


WaMu – Voice of the CustomerThe Opportunity

• High customer expectations necessitated top-notch delivery of service at peak efficiency

– Actual customer experience, both product features and service interactions, must meet or exceed brand positioning

– Managers must have data on „Critical-to-Customer‟ (CTC) service criteria to drive operational improvement

• Business Process Excellence Solution

– Actionable feedback based on customer or employee experiences across the enterprise

– A framework to prioritize critical changes that drive customer loyalty

– Voice of the Customer (VOC)


Voice of the Customer (VOC)The Solution

The VOC system utilizes customer insights to identify and drive improved processes:

– Deliver and utilize VOC data and information to discover, analyze, trend, and recommend service improvements to increase ability to execute superior service processes and experiences as one company

– Consult with and educate business lines and enablers on VOC implications to service delivery and profitability

– Design and deliver VOC-based Service Excellence initiatives (e.g., best practices, problem resolution/service recovery strategies, and feedback/performance programs)

Provide framework to understand & use data to create meaningful customer experiences that build

strong customer relationships and loyalty.


Integrated set of tools provide insights to measure, manage, and effectively improve WaMu’s customer experience.

Measures all WaMu business lines

Measures people, process, product, price, and presentation

Measures contact and steady state (non-contact) touch points

Provides a

Comprehensive Viewof the customer’s experience

Provides system to compare and evaluate performance across business lines and business units

Provides system to benchmark WaMu performance with competitors

Allows for

Internal and External Benchmarks

for management insight

Provides actionable information by highlighting service thresholds that support desired customer satisfaction and loyalty levels. These thresholds can be used to drive improvement targets specific to operations

Includes

Operations or Service-Level Diagnosticsreported by the customer

Enables WaMu to prioritize performance improvement actions based on what will have the greatest impact on customer satisfaction and loyalty

Provides

Priorities for Actionbased on what is important to

the customer

Provides an understanding of who, what, when, and how the transaction/contact was conducted

Captures feedback close to the transaction/contact to ensure fresh recollection by the customer

Focuses on

Specific Eventsof the experience

WaMu - Michael Matza 2008 CASRO Client Conference

VOC Online Reporting

• Key Features

– Drill-down by business

– Index scores

– Benchmark

– Weighted attributes

– Breakpoint analysis


Voice of the Customer and Loyalty System In Action

Linkage Analysis

Key Business Drivers

Customer Impact Assessment

Project Prioritization


VOC in ActionWhat We Wanted to Find Out

STRATEGIC

• Which customer behaviors do we currently influence through service experiences?

– Direction

– Magnitude

– Financial implications

• How can we demonstrate a return on service that is competitive with other investments?

TACTICAL

• At a project level, how do “ripple effects” to customers and employees change the expected project outcome?

– Attitudes and intentions

– Behaviors

– Financial implications

Linkage Analysis Customer Impact Assessment


Path to Profitable Service (In Theory)

• Branch

• Phone

• Web

• Mail

• Satisfaction

• Willingness to recommend

• Intention to remain/repurchase

• Intention to switch from competitor

• Retention

• Referrals

• More products purchased

• Higher balances

• Lower cost channel usage

• Fewer complaints/ escalations

• More positive/ less negative word-of-mouth

Service Experience

Attitudes/Intentions

Behaviors $


Does Satisfaction = Attrition?

Delighted Neutral Dissatisfied

Attrit

ion

Le

ve

l

Satisfaction Level vs. Household Attrition 3 Months After Survey

1.5 times higher

2.7 times higher

Yes

• Look at categories instead of averages

• The effect “wears off” quickly


Does Satisfaction = Purchasing?

Surveyed Month 1 Month 2 Month 3 Month 4

Ch

an

ge i

n n

um

ber

of

acc

ou

nts


Satisfaction Level vs. Number of Accounts 3 Months Following Survey

No

• Delighted customers do not “reward” with more business or higher balances

• Dissatisfied customers may “punish” by dropping accounts


Does Satisfaction = Acquisition?


Satisfaction Level vs. # Referrals Made Within the Last Year

3.2 times more

1.75 times more

Estimated conversion rate of referrals to new households = 2.5% - 3%

Yes


Does Service Climate = Employee Retention?

A working climate that supports service quality also creates measurable financial benefits.

6-month Teller and Rep Attrition by Overall Service

Climate Rating

Teller Sales Rep

6-m

on

th a

ttri

tio

n r

ate

1-6 Rating

7-10 Rating

1.6 times higher1.8 times higher

Yes


Customer Impact Assessment (CIA)

• CIA helps answer these questions– Which customers/employees are likely to be affected?

– How will their experience be different from today?

– What specific customer/employee behaviors and attitudes might change?

– How are those changes to be measured?

– What effect on revenue or cost will result?

• CIA program consists of– On-line orientation course for executives and project sponsors

– Full-day training course for project managers

– Tools for hypothesis-development and impact calculation

– Company data source directory

– Project prioritization guidelines

– CIA categories included in cost-benefit calculation

A systematic approach for estimating and measuring project “ripple effects”


Some CIA case studies . . .

1. Emergency Card Replacement – Cost-saving project

• CIA reveals unexpected revenues

2. Back-office Consolidation – Efficiency project

• CIA mitigates expected negative impacts to customer and employee satisfaction

3. Teller Training – Service Climate

• CIA reverses cost savings initiative


Case Study 1: Emergency Card Replacement

• Summary

– As part of a service-level agreement with a new vendor, WaMu introduced a new process for emergency replacement of debit cards

• Primary objectives

– Reduce cycle time to meet vendor requirements

– Reduce cost of replacement through process efficiency improvements

• Hypothesized “ripple effects”

– Lower cost to serve through fewer calls and escalations

– Greater fee revenue by providing card more quickly

– Less negative and more positive word-of-mouth

– Increased customer satisfaction


What CIA Uncovered

• Decreased cost to serve

– Savings of ~$12 per instance was achieved through reducing average number of customer contacts required to get card

– Savings of ~$1 per instance from fewer teller (rather than ATM) transactions

• Increased revenue

– ~$10 of lost fee income/instance was regained as a result of faster debit card replacement

• Attitudes and intentions

– Increased customer satisfaction

– Increased likelihood to recommend

– Improved reputation relative to competitors

– Improved word of mouth


Impact to Attitudes/Intentions

Distribution of Customer Satisfaction Ratings

Una

ccep

tabl

e 2 3 4 5 6 7 8 9

Out

stan

ding

% o

f C

usto

mers

Before After

Critical incident results in bi-modal satisfaction curve: they love us or hate us

0

2

4

6

8

10

12

14

Unacc

eptable 2 3 4 5 6 7 8 9

Outs

tandin

g

Satisfaction with Emergency Card Replacement Experience

Nu

mb

er

of

Pe

op

le Y

ou

To

ld A

bo

ut

Yo

ur

Ex

pe

rie

nce

Positive

Neutral/Mixed

Negative

Dissatisfied customers told 3 times more people about the experience than delighted customers

Impact of ECR Satisfaction on Word-of-Mouth


Case Study 2:Back-office Consolidation

• Summary

– Several loan fulfillment centers were closed; one new center was opened; existing loan business was migrated to remaining centers.

• Primary objectives

– Increase operational efficiency

– Decrease labor costs

• CIA objective

– Monitor changes in customer and loan officer satisfaction

– Mitigate possible negative satisfaction impacts


Mitigating Customer Impact

• Existing front-line satisfaction survey was ramped up from monthly to weekly monitoring

• Satisfaction threshold levels agreed on for triggering action

• Operational task force monitored satisfaction levels over 4-month period until transition reached steady-state C11

Ind

ivid

ua

l V

alu

e

Oct W

eek 4

Oct W

eek 2

Sept W

eek 4

Sept W

eek 2

Aug W

eek 5

Aug Wee

k 3

Aug W

eek 1

July

Wee

k 3

July

Wee

k 1

June

Wee

k 3

June

Wee

k 1

May

Wee

k 3

May

Wee

k 1

8.50

8.25

8.00

7.75

7.50

_X=8.154

UCL=8.508

LCL=7.799

Before After

1

All Fulfillment Centers Weekly OSAT

Satisfaction levels improved during transition period


Case Study 3:Teller Training – Service Climate

• Summary

– Overall Service Climate ratings among one department‟s employees dropped significantly over 6-month period, from 6.56 to 5.98 (10-pt scale)

- Out of 35 questions on the survey, the largest decrease was “Management encourages me to take training” (7.0 to 6.12)

• Reason

- Management had cancelled training as a cost reduction effort

• Result

– Statistical analysis shows that employee satisfaction ratings are strongly correlated to employee attrition

• Attrition among exempt employees is nearly twice as high if Service Climate rating is lower than 7 out of 10

Short term cost reduction outweighed by the cost to replace/retrain/motivate staff


Cost of Low Satisfaction

• Low Service Climate Rating = Higher Teller and PFR turnover

• Direct correlation of multi-million dollar save to the business line in replacement costs for tellers and PFRs

6-month Teller and PFR Turnover by

Overall Service Climate Rating

Teller PFR

6-m

on

th t

urn

over

rate

1 - 6 Rating 7 - 10 Rating

.


ConclusionWaMu “Voice of the Customer” System in Action

• Initiating cross-functional collaboration

• Facilitating the use of VOC to align initiatives

• Assessing organizational support for providing effective service

• Providing on-going analysis of Critical-to-Customer (CTC) priorities to anticipate and monitor the effects of changes in service

VOC analytics aligned with business lines enables us to quantify opportunities and risks in efficiency efforts by:


Questions?

Thank You


Michael Matza, SVPService Excellence

[email protected]

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