A framework to help you to think about and make sense of Customer Experience Management

A high end retailer and a discount retailer offer the same value for money

I was reading Marketing Week and the following piece caught my attention:

Consumers perceive that John Lewis and Primark offer the same value for money, despite their widely different brand positionings, according to a new retail study.

The “Re-imagining the retail store” report, by Arc Worldwide – part of the Leo Burnett Group, found that both John Lewis and Primark scored 112 on its quantitative scale for value for money, as rated by consumers.

The scores demonstrate that both deliver good value for money, but in different ways. Consumers’ perceptions of Primark’s value stems from its low price, while John Lewis’ value perception comes from its range of choice and quality.”

How do you make sense of Customer Experience?

How do you decide when you have got the customer experience right?  How does the customer experience fit / contrast with customer service?  How does customer experience fit into the bigger picture? Put differently if customer experience is the foreground then what it the background (the context) into which it fits?  I have been grappling with these questions and want to share my thoughts with you and get your feedback.

Here is how I make sense of Customer Experience:

In my way of thinking the focus of enterprise effort should be to create (and communicate) superior value to the customer segments that the Tops have decided to focus upon – to serve.   So that is why “Superior value” sits at the centre of my thinking and this diagram.

Which begs the question: how do you create superior value?  My answer is made up of two parts. First, you have to come up with (and communicate) value propositions that meet customer needs/wants – whether these needs and wants are expressed or not by the customers themselves.  Second, you need to deliver a customer experience that matches the promises implied within the proposition.  And the brand plays a role because there are a set of promised associated with the brand by customers and these are inherent in any value proposition.   For example, you will expect different stuff when you think of Mercedes and say GM.

The key point I want to stress is that in this framework we can think of the value proposition as the promise – the bargain that is being struck between the customer and the enterprise.  And the customer experience is the delivery of that bargain as experienced (lived) by the customer.

If you think about value, value proposition and customer experience then the fact that a high end retailer and a discount retailer as perceived as being par on value makes perfect sense.  They both excel because they have crafted value propositions that speak to their chosen customer segments and deliver the customer experience that goes with the value proposition.

How do you craft the right value proposition and associated customer experience?  This is where insight comes into play.  In my model I distinguish four different types of insight: customer insight – your customers needs, wants, behaviours; competitive intelligence – what your competitors are up to; technology insight – what technology enables and how it disrupts what is taken for granted today; and other insight for example regulation around how you treat customers, privacy etc.

The final point I want to make is that I strive to think like a ‘systems thinker’ and I see all of these pieces as being interdependent.  Each affects everything else.  So customer insight informs the value proposition and the customer experience.  Yet the customer experience will inform/feed customer insight and the value proposition cannot be developed solely based on customer insight: competitive intelligence has to be factored in because we, humans, make sense of things through comparison and contrast.  You may have a great value proposition and customer experience yet if your customer comes up with a better value proposition then you are likely to find yourself in trouble: think Nokia, think RIM.

Customer Experience Management – a tentative definition

I take the view that all knowledge is provisional and as such I offer you my ‘faulty’ yet ‘rigorous’ definition of Customer Experience Management:

Customer Experience Management is the practice of designing, orchestrating and overseeing the efficacy of customer interaction (direct and indirect) such that the phenomena (experience) and outcomes of these interactions as a whole deliver on the promises implied by the value proposition and meet-exceed the expectations (implicit and explicit) of the customer, the customer facing agent and the management of the enterprise.

If you want a much simpler definition then here it is:

all the stuff that you need to do to create happy customers, have them stick with you, incentivise them to ‘recruit’ new customers for you (free of charge) AND to do this in a way which delivers a fair reward for the investment/sacrifice that you make in time, money, effort and risk.

What do you think?

I’d love to get your feedback on what I have written here.  So what do you think?

What you are failing to do is much more important than what you are doing?

There are two kinds of errors that you can make: errors of commission and errors of omission.  An error of commission involves doing something that you should not have done.  A good example of this is the money that large companies invested in implementing complex CRM systems on the assumption that these would engender customer loyalty and drive revenues and profitability.  Closing down Napster and thus allowing the likes of BitTorrent to rise was an error of commission made by the music labels.  If you take a look at mergers & acquisitions you find that the research shows that these almost always destroy value and are not a good idea: the AOL and Time Warner merger is the one that sticks out for me.  If you look at this at a global level then the deregulation of the financial services industry was the big mistake that has brought the western economies to their knees.  Errors of commission are easy to spot in hindsight.

Errors of omission are the more important ones.  These errors occur when you fail to do something that you should have done.  Did Nokia indulge in an error of omission in sitting on smartphone technology (insiders tell me Nokia had this technology) and not introducing it and thus letting Apple steal the show?  Did the music industry make an error of omission in not setting up online music stores allowing customers to download individual songs? Did the offline book stores make an error of omission in not embracing the internet aggressively and thus allowing Amazon the premier seat at the table?

So where is this leading?  In the Customer field there is a whole bunch of stuff that companies should be doing right now and yet they are not doing it.  As such these companies are making errors of omission.  Allow me to give you some examples.

The words have changed yet the mindset is the same.  The mindset continues to be about finding clever ways of getting customers to do what we want and reducing costs.  The mindset has not shifted to a relentless focus on creating superior value for customers and figuring out how we get a fair reward for doing; time after time I hear something to the effect “How do we make more money out of our customer base or reduce the cost of servicing our customers?”  I rarely hear “How do we create more value for your customers?”.  Yes, it really does matter which comes first because what comes first determines the whole context for what happens.  It requires one kind of mind, one kind of organisation, to ‘extract’ value and grow this years financials.  It requires a fundamentally different mind and organisation to create value for customers, cultivate relationships and secure a lifetime income stream.

Effectiveness is doing the right things.  Efficiency is doing things right.  To cultivate long term relationships organisations have to focus on effectiveness: doing the right things as viewed from the customer perspective.  Yet the organisational focus continues to be on efficiency.  The relentless focus on efficiency means that I had to spend ten minutes or so hunting around for a telephone number to contact Sky.  It is also the reason that after four phone calls to BMI I was not able to pay my bill because my call was important to them yet they could not answer it even after five minutes.  It also means that human-human encounters are being replaced by human-technology interactions and so the opportunity to build emotional bonds is being sacrificed.  As a famous systems practitioner pointed out “The righter you do the wrong things the wronger you become!”

The organisational design is the same.  The functional organisational design and the associated management system was and is designed for a manufacturing centred organisation operating within a command and control operating system.  To be a customer centred organisation requires a fundamental change to the way that the organisation is designed.  It requires recognising that the front line people (those interacting with customers) are the most important actors in the organisation and the role of managers is to support these ‘actors’ in putting on the best performance they possibly can.  If you take segmentation seriously then it requires operational changes and not just sending some communications via email, others through SMS and the rest via direct mail.

I could go on and on and I am sure that if you put your thinking hats on then you can complete the list yourself.

Is your organisational focus on errors of commission?  Then who is looking out for errors of omission?  Please remember that the errors of commission rarely kill you.  Yet, errors of omission do exactly that even if it takes a little while for the results to show up.