A CustomerSat Case Study
`
`>> “
`
`CustomerSat’s feedback
`programs make our
`customer-facing staff
`much more effective. We
`feel that the ROI justifies
`our investment in service
`quality and feedback.”
`
`Lois Koch, VP, Customer Service
`Digital Insight
`
`B u i l d i n g C l i e n t L o y a l t y
`
`Yields Strong ROI for
`Major Financial Services Provider
`About Digital Insight
`
`Digital Insight® Corporation (Nasdaq:
`DGIN), one of the great financial services
`success stories, was founded in 1995. The
`company has become the leading provider
`of Internet-based banking services for
`commercial banks and credit unions, leading
`to its successful initial public offering in
`September 1999. Headquartered in Calabasas,
`CA, the company’s range of secure, hosted
`services include: retail and commercial
`Internet banking, electronic bill payment and
`presentment, eCommerce portal technology,
`advanced target marketing, and website
`development and maintenance.
`
`In the summer of 2000, John
`Dorman, Chairman & CEO of Digital
`Insight, gave Lois Koch, the new Vice President of
`Customer Service and Client Relations, an
`ambitious directive: raise the quality of Digital
`Insight’s customer service and client relations to a
`world-class level.
`
`By mid 2000, it became clear that Digital Insight’s
`rapid growth had strained the existing customer
`service and client relations infrastructure and was
`impacting the company’s otherwise stellar reputa-
`tion. At that time, fewer than 30% of Digital Insight’s
`financial institution clients were willing to serve as
`references to potential new clients, causing sales to
`be lost to competitors.
`
`Lois Koch, a financial services veteran, had spent
`more than 25 years in the industry. Her career
`included 16 years at Great Western Bank, where she
`had served as Vice President of Checking and Savings
`Services, managing a staff of 400 employees per-
`forming back office functions and customer service
`
`Qualtrics, LLC
`Exhibit 1016
`CBM of U.S. Patent No. 8,041,805
`Page 001
`
`

`
`A CustomerSat Case Study
`
`>>
`
`Koch and her staff
`recognized that raising
`Digital Insight’s service
`quality was the top priority
`to achieve the desired
`results.
`
`Digital Insight partnered
`with CustomerSat, Inc., due
`to their robust technology
`and customer satisfaction
`research expertise.
`
`for the bank’s 500 retail branches. She later spent six years at Fidelity Federal Bank as
`Senior Vice President of Retail Operations, where she was responsible for all back office
`operations, facilities, property management, and office services for the bank’s 40 retail
`branches.
`
`Koch was hired to implement a scalable customer service infrastructure with the
`processes to support the company’s continued growth and expansion. Koch and her
`staff knew that raising Digital Insight’s service quality was the top priority to achieve
`the desired results. They identified three initiatives:
`
`• Mobilizing the organization to provide superior customer service
`•
`Building an effective infrastructure to support the customer service activities
`• Measuring customer satisfaction and addressing key concerns
`
`To Koch, mobilizing to provide superior customer service meant reinforcing or building
`the right skills in the right people; executing to deliver first-rate service and support;
`continuously coaching, rewarding and recognizing staff for outstanding performance;
`and leading by example.
`Measuring Customer Satisfaction and Loyalty
`
`It was clear that client satisfaction and loyalty measures would serve three purposes:
`• Help guide and prioritize customer service investments
`•
`Provide a continuous stream of feedback for ongoing improvement
`•
`Facilitate coaching, rewarding, and recognition of customer-facing staff
`
`Multiple strategies and technologies to measure and report on client satisfaction and
`loyalty were evaluated. Because Digital Insight was itself an online service provider,
`online techniques appealed to the company as a means for gathering feedback. After
`evaluating several proposals, Digital Insight partnered with CustomerSat, Inc. due to
`their robust technology and customer satisfaction research expertise.
`First Steps
`
`CustomerSat worked with members of the client-facing team at Digital Insight and
`with a core group of Digital Insight clients to identify key satisfaction and loyalty
`measures and to define the feedback processes. This team deployed its first online
`customer relationship survey in October 2000 and added transaction-based surveys in
`2001. Together, the surveys provided both an initial baseline and on-going
`performance measures for Digital Insight’s sales, implementation, customer service,
`account management, products, systems and training.
`
`Qualtrics, LLC
`Exhibit 1016
`CBM of U.S. Patent No. 8,041,805
`Page 002
`
`

`
`A CustomerSat Case Study
`
`The online, hosted feedback solution that CustomerSat designed and implemented for
`Digital Insight contained multiple automated functions (Figure 1):
`
`•
`
`•
`
`Selection of customers and closed service incidents from Digital Insight’s Pivotal CRM
`system to be used for surveys. Business rules (“touch rules”) ensured that no customer
`was surveyed too frequently.
`
`Personalized email invitations containing secure links to individualized online
`questionnaires.
`
`• Overview rating score reports, verbatim suggestions, and trend lines were made avail-
`able to managers across Digital Insight through real-time dashboards, allowing users
`to analyze results any way desired to pinpoint customer problems and concerns. The
`same analytics and intelligence were further disseminated by scheduled email reports
`(“push” reports).
`
`• Action Alerts which notified the right managers at when customers required
`immediate attention.
`
`
`Figure 1: Digital Insight-CustomerSat customer feedback system.
`
`>>
`
`The online, hosted
`feedback solution that
`CustomerSat designed
`and implemented for
`Digital Insight contained
`multiple automated
`functions.
`
`As a result of the initial baseline measures, goals were established for improvements in
`performance by area. Digital Insight’s Management Incentive Plan for the entire
`management team, not just the customer-facing organizations, was tied to increases in
`overall satisfaction scores.
`Feedback Drives Action and Results
`
`At Digital Insight, client feedback drives action through a combination of processes,
`practices, and technology (Figure 2). Client feedback generates alerts to the right
`individuals in the Digital Insight organization, notifying them immediately if clients are
`dissatisfied. Interactive dashboards allow users to pinpoint problems and
`opportunities. Push reports email up-to-the-minute statistics — trend lines, charts, and
`
`Qualtrics, LLC
`Exhibit 1016
`CBM of U.S. Patent No. 8,041,805
`Page 003
`
`

`
`A CustomerSat Case Study
`
`other graphs of survey results — directly to Digital Insight managers. Together, these
`services allow Digital Insight managers to:
`
`•
`•
`•
`
`Recognize and address client concerns
`Reward and recognize customer service staff for outstanding performance
`Provide the right technical and customer service training and coaching, including
`issue-focused cross-departmental training.
`
`Figure 2. Real-time client feedback drives action alerts, interactive dashboards, and push reports,
` which allows Digital Insight management to open and address cases; coach, reward, and recognize
`staff; and provide the right training.
`
`>>
`
`Client feedback generates
`alerts to the right
`individuals in the Digital
`Insight organization,
`notifying them
`immediately if clients are
`dissatisfied.
`
`As a result of the first survey results, four key issues were identified as drivers of
`customer dissatisfaction with the current level of customer service:
`
`Lack of standards for answering and returning calls
`Poor product knowledge of the service staff
`Lack of customer service skills
`Poor follow up and resolution of issues.
`
`•
`•
`•
`•
`
`In response to the feedback, from late 2000 through 2002, Digital Insight took a wide
`range of actions. (Figure 3).
`
`As a result of these actions, Digital Insight enjoyed significantly improved results:
`
`Customer Service improved from 6.5 at Q4 2000 to 8.0 in Q2 2002
`•
`• Account Management improved from 6.4 in Q4 2000 to 7.7 in Q2 2002
`•
`Referenceable client percentage improved from less than 30% at
`
`YE 2000 to 75% by YE 2001 and to 85% by YE 2002.
`
`In addition to these overall results:
`•
`Service level for incoming calls improved from 84% to 97% handled
`• Abandon rate for calls dropped from 12% to 3%
`• Average queue time dropped from 2 minutes to 20 seconds
`• Average days to resolve an incident dropped by 50%
`• Average incidents outstanding dropped by 100%
`Scores and performance have continued to improve since 2002.
`
`Qualtrics, LLC
`Exhibit 1016
`CBM of U.S. Patent No. 8,041,805
`Page 004
`
`

`
`A CustomerSat Case Study
`
`>>
`
`Digital Insight’s service
`quality improvements
`gradually showed up in the
`company’s Quarterly Client
`Renewal Scorecords.
`
`As a driver of non-renewals,
`Digital Insight scored a
`“perfect zero” in the area of
`Service/Support.
`
`Figure 3. Actions Taken as a Result of Feedback
`
`Area
`
`Training &
`Coaching
`
`Standards &
`Processes
`
`Technology &
`Resources
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`
`•
`•
`
`•
`
`Completed service skills program for all Customer Service and Client
`
`Action
`
`Relations employees
`
`Implemented monitoring and coaching
`
`Developed and delivered extensive product and technical training
`
` Implemented service standards using Apropos automatic call
`
`distribution (ACD) system
`
`Added skills-based routing
`
`Implemented product specialization by teams
`
`Implemented additional transaction surveys to guide improvements
`Launched new client site for self service
`
`Expanded service capability through Apropos and Pivotal CRM sys-
`
`tem
`
`Impact on Client Loyalty
`
`Digital Insight’s service quality improvements gradually showed up in the company’s
`Quarterly Client Renewal Scorecards, tools used by account managers to project the
`likelihood of client renewals. The quarterly scorecards define risk levels for each client
`scheduled to renew their Digital Insight services that quarter, and identifies possible
`drivers of non-renewal:
`
`Change of DP Vendor
`•
`Pricing
`•
`• Merger or Acquisition
`•
`IT Interface
`
`Service/Support
`•
`Product
`•
`• Other
`
`In prior years, Service/Support had contributed to non-renewals of customer
`contracts. But for 2002 through 2003, Service/Support was not a factor contributing to
`non-renewal in any Quarterly Renewal Scorecard. As a driver of non-renewals, Digital
`Insight scored a “perfect zero” in the area of Service/Support.
`Measuring ROI of Customer Feedback
`
`Working with CustomerSat, Digital Insight’s Finance Department and members of
`Koch’s staff divided Digital Insight revenue into three categories:
`
`• New: Revenue from new contracts won during the year
`
`(i.e., revenue from new clients + new products to existing clients)
`Renewal: Revenue from existing contracts retained during the year
`•
`Lost: Revenue from existing contracts lost during that year.
`•
`
`Of these, the largest category was revenue from renewals; the smallest category was
`revenue from lost customers. The process used to measure ROI was as follows:
`
`Qualtrics, LLC
`Exhibit 1016
`CBM of U.S. Patent No. 8,041,805
`Page 005
`
`

`
`A CustomerSat Case Study
`
`>>
`
`Customer Service
`improved from 6.5
`(on a 10 point scale) in
`Q4 2000 to 8.0 in Q2 2002.
`
`Scores and performance
`have continued to improve
`since 2002.
`
`1. Estimate changes in revenue by category due to actions taken as a result of feedback
`2.
`Identify full costs of customer feedback programs, internal and external, initial and
`on-going
`3. Estimate total change in gross profit attributable to changes in revenue
`4. Subtract full program costs from change in gross profit for net profit changes
`5. Compute the return (change in net profit) on investment (full program costs).1
`
`Revenue Impact Assumptions
`
`In estimating the impacts of customer feedback processes on revenues, the team
`wanted to be conservative in their assumptions. From a percentage standpoint, the
`impact of customer feedback processes on contracts that would otherwise have been
`lost was greatest, for two reasons. First, the feedback processes enabled Digital Insight
`staff to promptly recognize, pinpoint, and address concerns causing client dissatisfac-
`tion, keeping those clients from discontinuing use of Digital Insight products or ser-
`vices. Second, the base of lost customers was relatively small to begin with.
`
`In contrast, the percentage impact on new customers was smallest, since these sales
`benefit less directly from improvements in customer service. Revenues from new
`customers benefit indirectly, through stronger and more favorable word of mouth
`about Digital Insight. Finally, the impact on existing clients was intermediate between
`the other two.
`
`The following assumptions were made concerning the impact of the customer feed-
`back program on revenue:
`
`•
`•
`•
`
`2% increase in revenues from new clients won per year
`3% increase in revenues from retained clients per year
`5% decrease in revenues from lost clients per year.
`
`These assumptions alone had significant implications for Digital Insight’s growth rate.
`Given these assumptions, over a five-year period, Digital Insight’s compound annual
`growth (CAGR) was five percentage points higher – 44% vs. 39% – as a result of feed-
`back processes and the resulting improvements in customer loyalty (Figure 4).
`
`Figure 4: Estimated Digital Insight Revenue Growth (Normalized with and without Customer Feedback Programs)
`
`1 Refinements to this process include consideration of depreciation, amortization, interest and taxes.
`
`Qualtrics, LLC
`Exhibit 1016
`CBM of U.S. Patent No. 8,041,805
`Page 006
`
`

`
`A CustomerSat Case Study
`
`Cost Assumptions
`
`The next step was to estimate costs of the client satisfaction programs. Costs included
`a percentage of management salaries as well as fees for online and professional
`services to Digital Insight’s online customer research partner, CustomerSat.
`
`Most costs of customer service staff and infrastructure would have been incurred with
`or without customer feedback programs, and so were excluded from the analysis.
`Real-time customer feedback allows customer service to take actions faster than if
`feedback was not available, allowing greater productivity and effectiveness with the
`same staff.
`
`Investment Assumptions
`
`To calculate ROI, two financial investment assumptions are required: the time horizon
`of an investment and the interest rate at which future cash flows are discounted (dis-
`count rate). A three-year time horizon was selected. This is shorter than the five-year
`time horizon widely used by accountants for depreciating physical assets, but appropri-
`ate for a fast-paced, technology-intensive business such as Digital Insight’s. A range of
`three discount rates with 15% as the mid-point – 10%, 15%, and 20% – were used to
`calculate ROI. The shorter the time horizon and higher the discount rate, the lower the
`ROI would be.
`
`>>
`
`Calculating Return on Investment
`ROI is the Net Present Value (NPV) of a series of cash flows – here, increases in gross
`profit – divided by the present value of the investment required to generate those cash
`flows. The NPV of a series of cash flows is the present value of those cash flows less the
`initial investment, where:
`
`Present Value =
`
`(Cashflow at end of year 1)/(1+interest rate) +
`
`(Cashflow at end of year 2)/(1+interest rate)2 +
`
`(Cashflow at end of year 3)/(1+interest rate)3 + ...
`
`Using a 15%/year discount rate and a three-year time horizon, the present value of the
`cash flows was approximately $1.2 million. The present value of the required invest-
`ment (which consisted of an initial investment plus incremental investments each year
`over three years) was approximately $840,000. At 15%, the ROI was approximately
`44%. Figure 5 measures Digital Insight’s ROI at three different discount rates. The fact
`that ROI far exceeds Digital Insight’s discount rate (cost of capital) indicates that the
`investment in customer feedback systems is well worth making.
`
`Referenceable client
`percentage improved from
`less than 30% at
`YE 2000 to 75% by
`YE 2001 and to 85% by
`YE 2002.
`
`Qualtrics, LLC
`Exhibit 1016
`CBM of U.S. Patent No. 8,041,805
`Page 007
`
`

`
`A CustomerSat Case Study
`
`>>
`
`About CustomerSat
`
`CustomerSat is the leading
`provider of enterprise solutions
`for measuring, analyzing,
`and managing enterprise-
`wide action responding to
`real-time customer feedback.
`With advanced technologies
`and proven market research
`techniques, CustomerSat
`solutions have helped
`companies such as AMD, Ariba,
`BellSouth, Canon, Honeywell
`and VeriSign, take timely
`action to address customer
`opportunities and concerns
`and build high customer
`retention and profitability.
`
`CustomerSat
`
`1049 Terra Bella Ave.
`Mountain View, CA 94043
`
`650-237-3300
`800-372-7772
`info@customersat.com
`www.CustomerSat.com
`
`Figure 5. Annual ROI of Digital Insight Customer Feedback Programs (3-Year Time Horizon)
`
`39.2%
`
`43.7%
`
`48.4%
`
`50%
`
`40%
`
`30%
`
`20%
`
`10%
`
`15%
`10%
`20%
`Corporate Hurdle Rate (Discount Rate)
`
`These measures do not take into account other benefits of real-time feedback that
`further contribute to ROI, including direct cost savings from more streamlined service
`and support operations, and product, market, and competitive intelligence.
`
`Strong ROI by any Measure
`
`By any reasonable measure, even as early as 2002, Digital Insight could confidently
`compare its customer service and client relations with those of any financial services
`organization worldwide.
`
`By any financial measure, Digital Insight’s ROI on its customer feedback programs was
`very strong. Summing up, Lois Koch said, “These feedback programs, with a relatively
`low investment on our part, make our customer facing staff much more effective.
`We feel more informed about what our customers want, and the real-time feedback
`allows us to take faster and better action to deliver on those wants. We feel that the
`ROI justifies our investment in service quality and feedback.”
`
`
`
`© CustomerSat, Inc. 2004
`
`Qualtrics, LLC
`Exhibit 1016
`CBM of U.S. Patent No. 8,041,805
`Page 008