How much do you really know about your customers? 5 areas to look into

How much do you really know about your customers?

If you are going to create superior value for your customers through the Value Proposition and the associated Customer Experience then you need to have sound insight into the lives of your customers.   Which is why in my model Customer Insight, Value Proposition and Customer Experience are interlinked.

How much do you really know about your customer?  Allow me to be more specific – how much time, effort and emotional investment have you made into stepping into and living the lives of your customers?  Have you even spent a day walking in their shoes seeing what they see, hearing what they hear, experiencing what they experience and possibly thinking and feeling what they feel?  What kind of insight would be available if you were to step into the customer’s shoes and live their life for a week?  Who in your organisation had done that even once?

Word are easy, deeds are harder.  My experience is that few organisations truly understand their customers because it is still rare for people within the organisation to walk in the shoes of their customers and experience the world through the minds and bodies of their customers.  Yet, this is exactly what is needed if you are to come up with both the insight and the emotion around that insight that inspires you to make the changes that will create value for your customers.

Shifting from an organisation-centric mindset to a customer-centric mindset

The more I dive into Customer Experience and Customer-Centricity the more convinced I become that what we are really taking about is business model innovation (including leadership, culture, mission & strategy) – the outer ring of my Create Superior Value framework (the first diagram in this post).  As such I wish to share with you a table that I adapted from Osterwalder & Pigneur’s book:

Conclusion

Shifting from a company-centric to a customer-centric mindset can be remarkably difficult – most people live and breathe the organisation so their natural, taken for granted, way of being, seeing and doing is company centric.

Only those people who have a strong enough reason (competitive forces) or a strong desire will step into the customer shoes and by doing so they will shift their perspective from company-centric to customer-centric.  Therein lies the opportunity: to come up with novel insights that are simply not available to those looking at customers from afar with industry/company coloured telescope.

What do you think?

Customer Experience: what is in unlimited demand yet in limited supply in the modern world?

The Customer Value Equation

My approach to the Customer is fundamentally one of creating superior value for the Customer.  In an earlier post I spelled out my formula for creating superior value:

Value = Benefit – Effort – Risk – Price +/- Treatment

If you want to create more value for the Customer then you can focus on any of these five levers.  In this post I want to focus upon the last one “Treatment”. Fundamentally “Treatment” is how you leave your Customer feeling.

The Values Proposition:Do Small Things With Love

In Why Is It So Hard to Be Kind? William C Taylor shares the story about how his father was treated as an economic object (“I-It” in  Buber’s terms) by his Cadillac dealer even though he had been a loyal Cadillac customer.  Then William contrasts this to the way that he was treated (“I-Thou”) by a Buick Dealer.  To cut a long story short the Buick dealer: honoured an expired loyalty certificate that the Cadillac dealer would not honour; allowed William’s father to take the car for the weekend – without being asked; and then built an amazing bond with William’s father.  How? In William’s words:

“Monday rolled around and my father found himself being rushed not to the dealer but to the hospital, with what turned out to be a medical problem that required surgery (He’s doing great now, thanks.) As he was lying in his hospital bed, thinking about whatever it is we think about in these moments, he realized that the Buick Lacrosse was sitting in his garage! So he called the dealer from the hospital and asked how he could get the car back. “Don’t worry about the car,” he said. “Just get better.” And the next morning, what should arrive at the hospital but a lovely bouquet of flowers and a nice note from the Buick dealer!

In a follow up post William shares his visit to a retinal specialist and this is what he says about his experience:

“This doctor did an utterly competent exam, explained my situation, and offered a sound course of action. So I’m fine. Yet I keep thinking back to the experience, not because of the quality of the medical care I received, which was superb, but because of how uncaring the experience felt.  As I sat in the waiting room, it seemed more like the offices of a payday lender or a bail bondsman than that of a highly credentialed surgeon. “If you arrive late, your appointment may be rescheduled,” one sign warned. “Copay is due upon arrival,” another signed explained.  My fellow patients and I were nervous, anxious, worried about our eyesight. Yet it felt like the doctor thought of us as a collection of truants, tightwads, and general layabouts.”

William goes on to write:

“There is a temptation, amidst the turmoil, for pundits to conclude that the only sensible response is to make bold bets — new business models that challenge the logic of an industry, products that aim to be “category killers” and obsolete the competition. But I’ve come to believe that a better way to respond to uncertainty is with small gestures that send big signals about what you care about and stand for. In a world defined by crisis, acts of generosity and reassurance take on outsized importance.”

“Nobody is opposed to a good bottom-line deal,” I concluded at the time. “But what we remember and what we prize are small gestures of connection and compassion that introduce a touch of humanity into the dollars-and-cents world in which we spend most of our time.

“As the value proposition gets rewritten in industry after industry, it’s organizations with an authentic VALUES PROPOSITION that rise above the chaos and connect with customers. Few of us will ever do “great things” that remake companies and reshape industries. But all of us can do small things with great feeling and an authentic sense of emotion.”

James G. Barnes said something very similar when he published his book Secrets of Customer Relationship Management.  What was the subtitle? “Its All About How You Make Them Feel

What does Frederick Richheld have to say?

In Profiting From the Golden Rule Frederick Richheld stresses the importance of the “I-Thou” orientation.  In his words:

Our system of financial accounting rewards quarterly profits, but struggles mightily to place a value on ethical behavior

“Reputation is earned through the simple, age-old concept of the Golden Rule: treat others as you yourself would want to be treated. Each time you live up to the Golden Rule, your reputation is enhanced; each time you fail, it is diminished. And the mathematics of long-term financial success — revenues, profits, cash flow — square perfectly with this scorecard.”

“We all want to be treated with honor and respect in ways, large and small, that enrich our lives. Such experiences not only make us happy, we want to share them with people we care about. By recommending an experience, we’re signaling our trust that our friends will be treated similarly. Recommendations also signal to businesses how customers view their relationship with the company. When customers feel so well treated that they enthusiastically recommend a company to friends, they are promoters. When treated so badly they recommend avoiding the company, they are detractors. Both have direct and measurable economic consequences.”

What is in unlimited demand yet is in limited supply in the modern world?

We strive to deliver something for which there is unlimited demand–being treated with honor and respect. There seems to be a very limited supply of that in today’s world.” CEO Dan Cathy, Chick-fil-A (an award winning US company)

The importance of the 3V’s to customer-based strategy

How do you go about developing a customer-based strategy?

If you are a strategist you will have come across all kinds of frameworks including: 5 Forces(Porter); Core Competencies (Hamel & Prahalad); Ansoff’s Matrix; BCG’s Growth-Share Matrix; 7S McKinsey Model; GE-McKinsey Matrix; 3Cs (Kenichi Ohmae); PEST(LE) model; SWOT analysis; IDIC (Peppers & Rogers)…..   Each was developed in a particular era, for a particular problem and represents a particular point of view about what matters in shaping success.

In addition to these frameworks, I’d like to suggest the 3V’s – Vision, Values and the Value Proposition.

Vision

Valeria Maltoni at the Conversation Agent has spelled out the value of having a Vision Statement.  I am going to take her lead and explore the Virgin Group especially as I had the good fortune to provide digital marketing services to the Virgin brand some years ago and walked away impressed at the culture, the customer orientation and how we (the supplier) were treated.  If you take a look at the Virgin website you find the following statements:

  • “We have always succeeded in business by offering consumers another way, a better way and being willing to fight their corner.”
  • “Our lifestyle is the way that we choose to live our lives – the things we buy, the things we believe – it is who we are. As global citizens we want to provide people with products and services that will help them to embrace a more sustainable lifestyle.”
  • “Our vision is to contribute to creating happy and fulfilling lives which are also sustainable – surely a vision worth aspiring to?”
  • “We believe that we have a part to play in making this a reality and so our vision for sustainability within the Virgin Group is: “to make a credible contribution towards sustainable lifestyles whilst meeting or exceeding the expectations of our staff, customers and other stakeholders”.”
  • “We want our Virgin companies to provide responsibly produced, sustainable, low carbon services and products that are desirable, easy to use and good value above all else so that our customers can enjoy their lifestyles safe in the knowledge that Virgin is acting responsibly on their behalf.”

What is the point of putting forth a Vision Statement?  Let me say that is no point in a Vision Statement if it is just a PR exercise or a desperate attempt to revive flagging fortunes.  The power of a Vision Statement lies in its ability to enroll a diversity of actors (Tops, Middles, Bottoms, Customers, Suppliers…) in an inspiring point of view on the future such that they co-operate in moving towards and creating that future.  This means that first and foremost the Vision Statement has to be authentic for the leader who crafts, speaks and lives it.  Notice the last point:  the Vision Statement lives to the extent that it is lived.  The more people that live it the more likely it is that the vision will become reality.

Values

You and I might craft the same Vision Statement and yet go about it very differently.  Why? Because our values (and beliefs) are very different.  For example, in the ‘struggle’ for independence from British rule in India several leading figures wanted the same thing – to bring an end to British rule and rule themselves as a people – yet some leaders valued taking up arms, others valued pleasing the British and Gandhi valued non-violent resistance.

Here is what Virgin says about values:

“The Virgin brand values have remained unchanged for 40 years. They aren’t just an image but a reflection of our very essence and the way we do business. Virgin has always stood for value for money, quality, innovation, fun and a sense of competitive challenge. But now our brand values have gone three dimensional; we no longer have a list of brand values but a brand cube to which we have added the Wellbeing & Happiness of People and Sustainability of the Planet. “

Made up values are cooked up to brainwash the intended audience and in that sense are simply the lipstick that hides the pig.  They are an either an attempt to hoodwink the gullible, a good sounding slogan or simply a desperate attempt to turn an also ran into a contender (think back to the highly successful Avis campaign “We try harder”).   Which makes me ponder about British Airways suddenly finding its core values: “To fly, to serve”.  Is it authentic?  I don’t know.  Will it lift its fortunes?  Possibly.

Real – authentic – values act both as guides and as constraints on what you will and will not do and how you will conduct yourself. One of the essential aspects of strategy is choosing what courses of action you will take and what courses of action you will not take.  Real values also have another advantage they allow you find / attract value chain partners – it is simply easier to do business with those that hold the same values as yourself and arguably it is more fun as well.

Value Proposition

In my way of thinking the Value Proposition is where you spell out your promise to your target customers.  It is where you take all of your insights about yourself, your target customers, your competitors and the world at large and spell out what your customers can count on you for. If you get the Value Proposition right then you will attract hordes of customers.  If you actually deliver on the Value Proposition – the customer experience delivers the value proposition – then you will keep customers and they will get more customers for you through word of mouth.

Let’s take a look at the Value Propositions for Richer Sounds (award-winning high street electronics retailer); TED (one of my favourite sites); and John Lewis (renowned for customer service):

Richer Sounds:  “Biggest Brands, Best Prices, Expert Advice…and take it home today!“;

TED: “Riveting talks by remarkable people, free to the world”; and

John Lewis:  “Free Standard UK Delivery on Orders Over £30”; “Click and Collect From Our Shops”; “International Delivery”; and “Never Knowingly Undersold.

Conclusion

It is worth thinking about what you stand for in the world (Vision, Values) and clearly articulating the promise that you are making / the bargain that you are striking with your target customers (Value Proposition).  Why? Because these are fundamental strands of a customer-based strategy.  What do you think?

 


Howard Schultz/Starbucks: 18 insights and lessons from a customer experience master

It is worth learning from the masters

You may have noticed that I am an avid student of all things customer.  Over the last few months I have been reading Onward by Howard Schultz and I have found it to be an insightful and inspiring read – I recommend you buy it and read it!

Perhaps, I love the book because it validates my point of view (bias) on customer-centricity and customer experience – as a philosophy rather than a strategy or simply tactics (I’ll get into that distinction in a follow up post).  For today I simply want to share with you some stuff in the book that resonated with me in the hope that you may find it useful too (any stuff in bold is my doing).

18 insights / lessons from Howard Schultz

“A well built brand is the culmination of intangibles that do not directly flow to the revenue or profitability of a company, but contribute to its texture. Forsaking them can take a subtle, collective toll.” (p23)

“I always say that Starbucks is at its best when we are creating enduring relationships and personal connections. It is the essence of our brand, but not simple to achieve. Many layers go into eliciting such an emotional response.  Starbucks is intensely personal.” (p23)

“Unlike other brands, Starbucks was not built through marketing and traditional advertising.  We succeed by creating and experience that comes to life, in large part, because of how we treat our people, how we treat our farmers, our customers, and how we give back to the communities.  Inside the company, there had always been an unspoken level of trust….” (p27)

“I suggested something to the group as the ideas began to percolate. “The only filters to our thinking should be: Will it make our people proud? Will it make the customer experience better? And will it enhance Starbucks in the minds and hearts of our customers?”” (p75)

In my head I knew that no silver bullet would transform Starbucks overnight, but in my heart I was on the lookout for a big idea – what would be the next Frappucino, the most successful new product in Starbucks’ history?” (p75)

“But there was an even more important reason that I chose to eliminate comps from our quarterly reporting. They were a dangerous enemy in the battle to transform the company…….The fruits of this comp effect could be seen in seemingly small details. Once I walked into a store and was appalled by the proliferation of stuffed animals for sale.  “What is this?”  I asked the store manager in frustration…..The manager didn’t blink. “They’re great for incremental sales and have a big gross margin.” This was the type of mentality that had become pervasive. And dangerous.” (p89)

“In any well run retail business, there is, by definition, a maniacal focus on details……..In 2008 I felt very strongly that many of us had lost our attention to the details of our business…..Like a doctor who measures a patient’s height and weight every year without checking blood pressure without checking blood pressure or heart rate, Starbucks was not diagnosing itself at a level of detail that would help ensure its long-term health….We thought in terms of millions of customers and thousands of stores instead of one customer, one partner and one coffee at a time. We forgot that “ones” add up.” (p97

Their instruction at this “seeing” exercise was to consider each retail experience not as a merchant or an operator, but from the point of view of the customer. What did they witness, smell and hear? What non-verbal cues enhanced the experience? ……That journey helped put our leaders back in customers’ shoes, providing an enlightening and for some emotional exercise that underscored how important it was to put the customer at the centre of every meeting and business decision.” (p107)

“Starbucks coffee is exceptional, yes, but emotional connection is our true value proposition.  This is a subtle concept, often too subtle for many businesspeople to replicate or cynics to appreciate. Where is emotion’s return on investment? they want to know. To me, the answer is clear: When partners like Sandie feel proud of our company – because of their trust in the company, because of our values, because of how they are treated, because of how they treat others, because of our ethical practices – they willingly elevate the experience of each other and customers, one cup at a time.” (p115)

I have always believed that innovation is about rethinking the nature of relationships, not just rethinking products and as Michael explained how Ideastorm was helping Dell listen to customers and improv its products and services…..Thee was definately something here for Starbucks.  A chance to reconnect with customers we had lost touch with.” (p120)

“..one of the most important pieces of advice I’d heard upon my return…….”Protect and preserve your core customers.”…..”The cost of losing your core customers and trying to get them back in a down economy will be much greater than the cost of investing in them and trying to keep them.“” (p129)

“Some corporations are built, or rebuilt, on data driven business plans and hired guns with formulaic strategies. They may succeed, but they lack soul.  Starbucks is, by its founding nature, different……..transformation was not only about tightening nuts and boltsIf we did not also feel, if we did not have conviction in our values and believe that we really were in the business of human connection – on our farms, in our offices, in our stores, in our communities – then we were doomed.  We had to preserve our humanity.” (p131)

“But what many or our people had in spirit they lacked in business acumen and tools…….We also observed too much waste…….Something subtler was being wasted: our people’s time and energy……The fault did not lie with our people in the stores.  They were doing the jobs they had been asked to do with the resources and training they’d been given.  For all the brand’s marketing success, Starbucks needed a more disciplined operations system…..” (p145)

Growth had been a carcinogen. When it became our primary operating principle, it diverted attention from revenue and cost saving opportunities, and we did not effectively manage expenses……..Then as consumers cut their spending, we faced a lethal combination – rising costs and sinking sales – which meant Starbucks economic model was no longer viable.” (p149)

“As I stared at the list of 600, a lesson resonated: Success is not sustainable if it’s defined by how big you become.  Large numbers that once captivated me – 40,000 stores – are not what matter. The only number that matters is “one”. One cup. One customer. One partner. One experience at a time. We had to get back to what mattered most.” (p152)

“Kristen summed up Lean’s benefit well: “We were spending too much of our time fixing moments , but not actually solving problems. But fixing moments, like mopping a dirty floor, only provides short-term satisfaction.  But take the time to understand the problem – like how to keep a floor from getting so dirty in the first place – solves, and maybe eliminates a problem for the long term.”” (p278)

“At it’s core, I believe leadership is about instilling confidence in others..” (p302)

“There are companies that operate huge global networks of retail stores, like us.  Others distribute their products on grocery shelves all over the world, like us.  And a few do an extraordinary job of building emotional connections with their customers, as we have learned to do.” (p311)

My recommendation

Buy the book – it is a great read and has lots of real world lessons and insights.  For most business people it is likely to be a challenge because Starbucks is Starbucks because it is not built on nor operates on conventional business wisdom and practices.

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?