Ariba pins turnaround hopes on keeping in touch with customers

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Ariba Inc., based in Sunnyvale, Calif., the heart of the Silicon Valley, is a leader in spend management, providing consultancy and software solutions for its clients' purchasing departments. But it's also a company in transition. There's stiff competition from the likes of Oracle Corp. and SAP, and a relentless shift in customer preferences, from the old software model of permanent licenses to today's more favored "software as service," where online applications are paid for on a subscription basis.

One result has been a drop in revenue and earnings; 2006 sales were $296.0 million, down 8% from 2005, a third consecutive annual net loss, most recently a loss of $46.1 million.

Given those trends, it's no wonder that customer satisfaction has been made a top priority at the company. Roger Blumberg was named senior director, customer advocacy, 18 months ago to reinforce this key part of the Ariba turnaround.

"With the new software model, customers can be more fickle," said Blumberg. "They don't have the significant investment they used to have, with the exception of training, and our job is to reach out to them and find out how they're doing."

Adding to the challenge was the company's rapid growth. Five acquisitions in three years meant the company was using at least six different customer survey vendors, with different tools, styles, questions and even scales (1 to 5, 1 to 7 and 1 to 10).

The company centralized its customer satisfaction program with outside vendor CustomerSat Inc. and settled on a 1 to 10 customer satisfaction scale for its surveys. Driving the new program is a high-touch approach, with newly established advisory councils and quality management review meetings augmenting feedback from user groups and training programs.

Online dashboards—graphical representations of performance—display satisfaction ratings on virtually every company interaction, including training, tech support and product performance. The dashboards also offer snapshots by department, region, vertical industry and client size, as well as other metrics.

Even the surveys are monitored for customer satisfaction. "If we don't hear from somebody pronto, we have a dashboard that gives C-level executives notice to get on the phone," Blumberg said.

Finally, a year ago the company's bonus structure was changed to incorporate customer satisfaction. CustomerSat created benchmarks by analyzing Ariba's industry, and the company set a minimum acceptable rating of 7.5 out of 10.

While it is too soon to gauge the program's impact on revenue and profit—Ariba's sales cycles can be as long as a year—Blumberg said the company's 10 largest deals in 2006 all experienced a customer rating 10% higher than the average score. Over the past year, the company's overall satisfaction score has risen 15%, with 33 key customers recording improvements of 2 points or more on the 1 to 10 scale.

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