2011: what is likely to stay the same?

Right now there are lots of people putting forward there views on what will be hot /new / different in 2011.  As I do not have a crystal ball and because I believe in the fundamentals, I am going to focus on the key themes that are not going to change in 2011.

Customer will continue using trusted resources to find information and make decisions

Customers live in a world that is full of suppliers, brands, products and services.  Choosing between them is difficult and there is always the concern around making the right choice.  So for low consideration products (the basics of food, drink, utilities, retail banking..) customers will simply continue using the brands that they use today. Some customers will continue to be tempted by ‘specials’ – to try other products, other brands, other suppliers.

For high consideration purchases, customers will turn to trusted sources: the internet, Google search, social network, other customers and independent sources.  Customers will particularly value trusted resources that take out or cut the hassle associated with doing all the research and coming to a decision.

Companies will continue to shoot themselves in the foot as the content and tools are often created by marketing.  And too many marketers are disconnected from the real lives of customers and their real needs.  Too often the need for spin outweighs the need to provide useful, informative, honest content.

Customers will continue to have the same needs around products

Most customers will continue to look for products that are easy to understand, easy to set-up, easy to use and which work as they expect them to work.  Some customers will pay a premium for products that are novel, beautiful and/or well designed.

Many products will fail to live up to customer expectations either because the marketing communications are misleading, or the product has not been well designed or because the customer has unrealistic expectations.  And this will result in calls into the contact centre and negative comments offline and online.

Customers will continue to look for, be attracted to, special offers

Direct marketers are the masters of special offers – they know that the right offers will drive purchases.  Human beings are drawn to all kinds of  special offers.  The offer can be around membership of an exclusive club, or a special edition product or simply one of a price discount.

Businesses will continue to offer attractive ‘specials’ to get new customers.  In the process they will continue to cut loyalty from existing customers and thus encourage them to move to competitors to get their special offers.

Customers will continue to look for and value good service

Customers live in a complex world where they have a lot more to juggle and less time to do it; a world where choosing the right products and solutions can be a tricky and time consuming task; a world where they need help in setting up and using products effectively.  For example, one time you could just go and buy a tv, try doing that now with the latest HD tvs.

As a result customers will continue to cry out for good service in the form of correct and informative marketing material, customer centred sales advice, convenient product delivery, ease of product set-up and use, accurate billing, easy access to the right people in the company to deal with problems and issue and responsive caring customer service.

Many companies will continue to give less than good service because of the internal, silo centred, efficiency oriented metrics, processes and culture.

Companies will continue to focus on the shiny new stuff and neglect the basics

Time and again companies are attracted to the shiny new stuff, the silver bullets, the miracle cures etc.  Social media, mobile, location-based services, group buying (Groupon), customer experience – are examples of the latest shiny objects

In the process, companies will neglect the basics such as making good easy to use products, easy to use websites, improving the delivery process so you don’t have to take a full day off work, sorting out issues that prevent sales and customer service staff delivering the kind of service that customers expect etc. Here is an example of neglecting the basics: Toyota Just Doesn’t Get It

Companies will continue to focus on the sell side of the business at the expense of the service side

The majority of companies will continue to focus their best people and the bulk of their money on the areas of the business that generate or promise to generate revenue. Revenue and market share growth are the top priorities of the C-suite in most companies.

These companies will also continue to spend money on products and services that promise to cut operating costs – thus boosting profits.  That means more investments in technology and less in people – especially those that actually interact with and serve customers.

It also means that companies will continue to focus on getting new customers than on keep existing customers through good service and fair treatment. This is partly because the it is easy to show the return on getting customer and difficult to show the return on retaining customers.

Companies will continue not to embrace and make effective use of social technologies

The philosophy – transparency, openness, interaction, connectivity, sharing, participation, co-creation etc – of social is fundamentally at odds with the command and control philosophy that is at the heart of almost all businesses.  The powerful love to exercise power – this applies to all kinds of institutions including corporations.  And it applies to the C-suite executives.

This clash of idealogies and operating practices will stop the majority of companies from harvesting the true promise of social technologies:  transforming the way that work is done – collaboratively between employees, customers, suppliers, partner etc – within the enterprise.

Instead companies  will continue to dabble in social media treating this as simply another marketing and customer research channel.  Does this remind you how digital marketing and ecommerce operations were treated?  And how some are still treated today?

Companies will continue to talk about innovation and customer experience tranformation and yet fail to deliver

Whilst every company wants to the fruits of innovation very few are willing to go through the birthing process and experience the pains of giving birth to these innovations.

It is no easy matter to make the silo’s work together.  It is no easy matter to change the technology infrastructure – most companies still do not have a single customer view despite the mountains of ink on that subject over the last ten years.  It is no easy matter to change the culture of the company.  It is no easy matter to give up the practices that are resulting in ‘bad profits’ and recapture these profits by creating products and services that customers value.  And there is absolutely no incentive when you are the category leader or the market is dominated by up to four big companies.

The task of category level innovation will continue to fall on companies that specialise in this (e.g. Apple, Virgin) or newcomers that have no investment in the existing way of doing things (e.g. Metro Bank, Groupon).

The core challenge facing the customer experience designer

From a customer point of view what matters is an ‘effective’ organisation – one that is good at anticipating and responding to the diversity of customers and their needs.  That means designing the organisation to be flexible, adaptable, versatile – this allows the organisation to absorb and effectively deal with the variety of demands that are placed on the organisation by customers.  This in turn requires the organisation to have ‘redundancy’ built into it.  That is a fancy way of saying that it needs extra resources (“fat”) to deal with and take advantages of unexpected difficulties and opportunities – to cater for the inherent unpredictability of the world.  Finally, making the parts work well together (integration) is a key requirement of effectiveness.  Think of a car it is only of value if all the components work well together.

Organisations are enmeshed in an ideology that values efficiency and structure that lends towards fragmentation.  The focus is on cutting out all the ‘fat’ so as to minimise operating costs and thus drive efficiency.   This way of thinking involves lots of efforts in up front forecasting and planning to predict and manage demand.  It also involves finding and standardising on the one best way of doing things and then striving to make customers, employees, suppliers and partners to use that one way.   This way of thinking encourages and insists that managers control the real world – at least their piece of it: to act on it so as to force it into the shape that was envisaged in the plan.

So customers want organisation to dance to their specific, individual, tunes.  Whereas organisations insist that customers fall into line – the line that reduces operating costs and thus maximises profitability.  That is how we come to the gaping hole between what customers want and what organisations deliver.

Sometimes the gaping hole gets smaller – at least for a while – when the organisation finds a way of being effective (customer perspective) by taking actions that improve efficiency.  Enter the category of self-service: ATMs, electronic banking, e-boarding card, well designed IVRs to do standard stuff like top up mobile phones come to mind.   At other times the gaping hole grows larger: sales assistants who know less about the products then the shopper, badly designed IVRs, waiting a long time to speak to a human being, call centre agents who are not in a position to help and so pass you on and then on again and so forth.

The fascinating thing about ‘social media’  is that it provides a great opportunity for organisations to be effective (from a customer perspective) whilst being firmly wedded to efficiency.  Yet, there is little movement in the direction of social media because there are a couple of things organisations are more wedded to than efficiency.  Secrecy, ownership and control – in every organisation lurks the dictator.  Again we have a divide: customers want organisations to be open, truthful, clear and collaborative.  Organisations are wedded to secrecy, spin, ambiguity, ownership and control.  And this divide explains why so few organisations have adopted social media to bring customers into the heart of the organisation.

So the challenge that falls to the customer experience designer is how to deliver the effectiveness, openness, transparency and participation that customers want whilst being embedded in an organisation that worships at the altar of efficiency, secrecy, ownership and control – sacrificing many customers in the process.  This is not an easy trick to pull off and it is why I have profound respect for all the people in organisations battling to improve the customer experience!

On customer lifetime value: I would laugh if I was not crying

I remember the incident as if it was yesterday.  It was the first term of the first year of my degree in Applied Physics.  One of my physics professors took the time to point out a huge mistake I had made in answering one of the questions.  It was a mathematical question and I had used a calculator and thus had written the answer to 6 or so decimal places(xxxx.xxxxxx). I wanted to show off my accuracy, my precision!

Being a benevolent fellow this physics professor asked me to estimate the accuracy of each variable that went into the calculation.  It turned out that the accuracy was typically x plus or minus 5%.  Given that there were four or so variables, my physics professor pointed out that I should have simply given an answer to the nearest thousand – leaving out the decimal places as they gave a misleading impression of certainty, of accuracy, that simple was not there.

This is my first issue with all the people who are fixated on calculating the customer LTV and spending a lot of time and money to do it.  If you were calculating that for me – your customer – what would you need to figure out?  Which products I am going to buy?  How many I am going to buy?  When I am going to buy?  How often I am going to buy?  How I am going to pay?  What the margin is on each of the purchases I make?  What it will cost to serve me?  What discount rate to use to discount future cash flows into todays money to arrive at a Net Present Value?

So here is the question my benevolent physics professor would ask?  How can you possibly work out these variables with any accuracy?  How can you possibly come up with an answer that you can count on, you can rely on?  You have to make so many assumptions that the answer depends radically on your sense of optimism or pessimism than it does on facts on the ground.  In fact you create any answer you want to support any case that you want.

Put differently customer LTV is not written in stone.  It depends on what you do.  It depends on what your competitors do – including some that are not even on your radar.  It depends on the customer and her circumstances and tastes – and these evolve.  If you take chaos theory seriously – and you should as social media is everywhere – then the next Tweet could completely change your customers willingness to purchase from you.

Whilst this is a serious flaw, it is not the most important one.  The legions that are busy calculating a precise customer LTV have totally missed the central point of customer LTV.  This point is simply this: if you view the customer as being a customer for life then you are more likely to behave in a way that creates a customer for life.  How?  You are more likely to do the right thing for the customer: the right product, the right service, the right pricing, the right communications and above all the right attitude.  An attitude of lets collaborate so that we can both come out winners.

Put simply you can either make the assumption that I am only going to buy this one computer from you and treat me accordingly. Or you can assume that you have it in your power to treat me so well that I will buy a new computer from you every three years for the rest of my life.  And the assumption you make has a large impact on the future you create.

Is LTV important? Yes.  Do you have to spend a lot of time, effort and money to get at a precise figure? No.  Does making this effort result in the right kind of attitude – the kind of attitude that creates customers for life? Highly unlikely.

If you disagree then please write and correct my misunderstanding.