Is There Any Real Value In Customer Experience?

The genesis of this post lies in the following article: Is Customer Experience Manageable? An Industry Pundit Says No. In reading this article and listening to the embedded interview I was struck by the importance Esteban Kolsky attached to defining Customer Experience clearly. In fact Vala Afshar, the author of the post starts with the following statement:

“What is customer experience (CX)? To get customer experience right, companies need to first get the definition of customer experience right, according to an enlightening talk I had with Esteban Kolsky,…

How important is it to clearly define Customer Experience?

Think of a tree. Ask yourself if any definition of tree fully grasps and discloses tree? Can you come up with a definition that will clearly point out the entity tree to someone who has never seen-experienced tree – say a Martian?

Think of service. Ask yourself if any definition of service accurately captures, discloses and exhausts service?  Furthermore, ask yourself what use a definition of service is, to a being that has not experienced service?

Consider that the definition, any definition, discloses little about the phenomena and/or entity as it is in itself. Consider that the definition discloses he who is doing the defining. In particular, it discloses his/her worldview, understanding and interests.

Getting back to Customer Experience, consider that it is not possible to get the definition of Customer Experience right. Further, consider that even if it was theoretically possible to arrive at one  accurate-precise definition of Customer Experience, this definition would not yield any practical value.

What did the distinction CRM bring into being which was not already present?

I invite you to take a look at CRM as a distinction. What arrived on the scene with the arrival of CRM as a distinction. I say that the following arrived:

Customer lifetime value – looking beyond signing up a customer, or effecting a single transaction, and seeing, perhaps for the very first time, the economic value of the customer over his/her lifetime.

Treat different customers differently – using one’s understanding of each customer’s needs-wants-preferences and her lifetime value (£/$) to tailor one’s products, propositions, communications, conversations, and interactions so as to create superior value for the customer and the company.

The learning relationship – using each customer conversation and interaction to enrich the company’s understanding of the customer AND enriching the customer’s understanding of the company. Thus enabling the company to become better at ‘treating different customers differently’ and increasing the ‘customer lifetime value’.

Now here is the joke and it is not funny. Most organisations in the rush to embrace CRM technologies did not fully get present to and hold on to these powerful distinctions. Instead they rushed to automate to reduce costs or do what they were doing faster. Or they used CRM technologies to effect more control over their staff so enabling micro-management. Or they used CRM technology to bombard with personalised marketing messages that did not show up as personal to the customers. Or they started on the path of single customer view – many still have not arrived there.

Then there is Chris Zane of Zane’s Cycles. He attended a conference (according to him in his book Reinventing The Wheel) and heard a speaker share the concept of customer lifetime value. Chris, seized by the world opened up by this distinction, of taking the longer term orientation (maximising customer lifetime value), altered his way of doing business so as to maximise customer lifetime value. And as a result has built a great business.

What does the distinction Customer Experience open up which was not present before?

What arrived on the scene with the arrival of the distinction Customer Experience? It occurs to me that the following arrived on the scene either present for the first time or moved from the background (where it was hidden) to the foreground:

Customer Experience as ‘product’ and differentiator in itself – this was the central assertion of Gilmore and Pine in their book The Experience Economy. When I think of this I automatically think of Build A Bear and Apple with the launch of the iPod, iTunes, iPhone, iPad, iPad – the entire ecosystem.

Enter into the customer’s world and experience it as she experiences it – think of this as ‘walking in the customer’s shoes’ in the broadest sense not in the narrow sense of what it is like and how it feels interacting with your organisation. This broader sense of ‘walking in the customer’s shoes is the access to surfacing the customer’s unmet needs and thus the source of lucrative new revenue streams. This moving-enlightening-human video point towards that which I am pointing at here.  And at the same time it only gets us somewhat towards the destination that I am pointing at here. I read the other day that a huge industry – prepared and packaged salads – was created when someone figured out that folks in the USA wanted to eat salad and did not do so because they were not willing to do what needed to be done to put the salad together.

Experience your organisation as your customer experiences your organisation – this is what I call the narrow sense of ‘walking in your customer’s shoes’. How does the customer experience your organisation: your company, your brand, your products, your people, your processes? How does the customer experience your marketing, your selling, your service, your billing, your return policy, your charges…? United Breaks Guitars is the classic illustration of this. Undercover Boss at it’s best shows the Tops getting to the front lines and getting some access to how the customer experiences the organisation.

Emotions – pay attention to human emotions. Every conversation, every contact, every interaction will call forth human emotions. Emotions lie at the root of ALL decision making! To shape human decisions focus on and influence-shape human emotions.  The best way that I can explain this is by sharing what my wife said with such gusto “I love my iPad!”.  This is coming from a woman that hates computers and did not want the iPad to start with. Now she is using it throughout the day, every day. Through her enthusiasm she has influenced her father to buy an iPad and her mother to buy a Mac for the first time in her life.

My advice

Forget definitions of Customer Experience. Leave that to the people who make a living out of defining and arguing about definitions. Instead follow in the steps of Amazon (Jeff Bezos), Apple (Steve Jobs), Zane’s Cycles (Chris Zane), UCLA (Dr Feinberg), Zappos (Tony Hsieh): explore and live the distinctions that are unconcealed and opened up by Customer Experience. Or don’t. As always the choice to take the road less travelled will only be taken by a brave few. That is OK. The death of the old gives space for the new to flourish. And when the new flourishes the old dies. Think of Nokia, think of Apple.

I thank you for listening to my speaking. I continue to be drawn to share that which I share by those of you who continue to subscribe to this blog. I wish each and everyone of you the very best.

Why do only a handful of companies excel at cultivating customer loyalty?

The story state of Customer Experience

Dave Brocks latest post (selling disguised as relationship management) and Beyond Philosophy’s Global Customer Experience Management Survey (2011) which made the point that a lot of stuff that is not Customer Experience is being badged as Customer experience got me thinking about this sorry state: lots of talk, lots of people with the right titles, lots of spend on technology and yet the same old organisational behaviour.   Which begs the question: why it is that only a few companies truly excel at Customer Experience and customer-centricity?  Now I can list all the usual candidates: spaghetti like systems, silos, channel proliferation, organisational design, conflicting agendas & metrics and so forth.  That is exactly what I am not going to do because I believe that these are red herrings that are used to paper over what is so.  So let’s take a skeptical look at business and see if this sheds any light.

The smuggler, the border guard and the wheelbarrow

Every day a man turns up at the border with a wheelbarrow and some stuff in it.  Every day the border guard examines the stuff in the wheelbarrow convinced that the man is smuggling something.  Some days the stuff is clothes, other days footwear, sometime watches, sometime blankets yet none of the stuff in the wheelbarrow is contraband and so the border guard reluctantly allows the man across the border.  This goes on and on until the border guard retires.  Shortly after that the border guard and the man meet accidentally and the border guard asks him to say what he was smuggling.  The man replies “Wheelbarrows!”

Let’s stop for a moment and look at the whole customer stuff: customer satisfaction, customer focus, customer loyalty, customer relationship management, customer experience and customer-centricity. And ask the question: what is right in front of us that we are missing?  What is our ‘wheelbarrow’?

The name of the game is neither Customer Experience nor customer-centricity

Is it easy to do well in a truly competitive industry?  No, it is hard work.  What is the ideal scenario for every company in a competitive space?  To become the monopoly supplier.  Why is this appealing?  Because, you can dictate terms to the customers and they have to play ball.  When you are in that position you do not have to bother with all this nonsense about customer focus: customers are difficult, being customer focussed is hard work and besides it stops you from making monopolistic rents.  If you cannot have a pure monopoly then you can get something like it – and oligopoly.  This is where a small bunch of companies control the market: they sell similar products, at similar prices, in similar ways and have the same business models.  In effect, they ‘agree’ to carve up the market and the profits.  Often these industries have high barriers to entry and so there is no real competition: think banks, utilities, telecoms…….The last thing that any CEO, Board of Directors or shareholders want is a truly competitive market.  Why? Because you have to fight for customers and their wallet.  Which brings us to an important point.

What has changed is that the traditional means of attaining this outcome no longer work as well as they used to.   Originally there was control over valuable natural resources and distribution channels. Later, control of intellectual property and shaping the mind of the consumer through advertising, branding and PR. Since the rise of the internet the traditional means (resources, distribution, IP, advertising..) have not been working that well.  Just think of the disruptive power of the internet: you no longer need stores and all the capital that goes with that; your market is the whole world and you do not even have to setup a website – you can pitch your tent at ebay and sell to the whole world; and customers are awash with useful information that makes them better informed, smarter decision makers and more discriminating buyers.  This is why we have heard and read so much talk about targeted marketing, relationship marketing, permission marketing, personalisation, customer focus, customer service, customer experience, customer-centricity.

Does that mean that there has been a wholesale transformation of the heart (love of the customer) or of the head (change in worldview)?  I am think that there has been no such change.  The game is still the same: to orchestrate the levers of power to become monopolistic suppliers and thus extract monopolistic rents.   And if that is not possible then many businesses do the utmost to get the better of customers (too many option, complicated pricing, misleading advertising, dumbing down customer service etc) to maximise short term profits.  If it is the ‘age of the customer’ (IBM says it is) then we are talking about many businesses being dragged kicking and screaming into the ‘age of the customer’.  Many if not almost all would prefer the good old times when customers had no voice, no power and simply put up with what they were given.  Take a good look at the laggards (you know who they are) and you will notice that they still hold monopoly type positions, accrue monopolistic rents and continue to pay lip service to customer service and ‘the customer is king’.

If you see this then you can see the ‘wheelbarrow’ that is right in front of us and which we may have been missing: the vast majority of businesses want and strive to become monopolistic suppliers so that they can monopolistic rents without the hard work of being customer-centred.   If you accept this then you can understand that whilst the titles of changed from “Sales” to “Relationship Manager” the hidden objective is the same: sell more, increase “share of wallet”.   You can also understand why business process management, lean, cost-cutting via self-service technology, customer service, marketing etc  have all been rebadged as Customer Experience – changing labels is the easy part and Drayton Bird has an excellent/witty post on this.   Put differently, all the talk of customer focus, customer service, CRM, Social CRM, customer experience and customer-centricity is simply the bric-a-brac in the ‘wheelbarrow’ that prevents us from seeing the ‘wheelbarrow’ for what it is.   Any real form of customer-centricity (as opposed to the talk) is being brought on by new entrants to the battleground.  And by the power wielded by customers who now have the technologies and platforms to be better informed, make smarter decisions and make their voices heard

To excel at customer-centricity, Customer Experience and customer loyalty you have travel along the road less travelled

Which bring me back to my original question: why do only a handful of companies excel at cultivating customer loyalty?  Because by design or by accident the people who started these companies  operate from a customer centred paradigm and have built customer-centred business models, cultures and organisations.  And the leaders of these companies were willing to play the long term game.  How long did it take for Amazon to become profitable?  What about Zappos?   Is USAA simply a vehicle for churning out profits for shareholders or an organisation with a mission to service members of the armed forces?  Starbucks is a great example of a company that made it fortune by understanding customers human needs and delivering them (“the third place”)  and then got itself into trouble by forgetting this mission (and associated values, operating practices) and chasing growth and profitability targets set by the analysts.  Starbucks had to go back to the basics to connect with their customers and win them bac

Perhaps this handful of companies (Amazon, Starbucks, USAA, Zane Cycles, Zappos..) will provide the inspiration for authentic customer-centricity:  O2 (UK mobile telecoms operator who does not think of itself as that) is a company that has embraced customer-centricity with a fervour that is necessary to be an experience services brand and organisation.  In the process it has become the leader in the UK telecoms industry: brand, revenues, subscribers, profits. The recent Ofcom results show that “The least complained about mobile provider….was O2, with 0.02 complaints for every 1000 customers compared to 0.14 in the case of 3UK.”  This is remarkable when you consider that O2 was spun off from a former state monopoly BT in 2001.  And birth O2 was viewed as a second rate player in the telecoms market and some doubted its future prospects.  Maybe more executives will follow the lead of O2 and genuinely orient their companies around customer, customer experience and customer-centricity.

A final word

To excel at Customer Experience and customer-centricity you have to have an affinity for people as human beings.  I will go further and say that you have to connect with and care about your customers as human beings first and wallets second.  Going even further I’d say you have to love your customers and show them that you love them.  In my view this is and has always been the great (hidden) strength of Steve Jobs and Apple:  a deep affinity for the misfits, the rebels, the people out to create a more beautiful world.  If you can see merit in what I am saying then I recommend that you read the following insightful post by Pete Abilla: How to be human

What do you think?

Why culture is the ‘Achilles Heel’ of your customer experience efforts (Part II)

This post concludes the train of thought that I shared in an earlier post – Why culture is the Achilles Heel of your customer experience efforts (Part I). – I encourage you to read it to get the most out of this post.

Let’s forget morality and focus on ‘workability’.  By ‘workability’ I am addressing the pragmatic dimension.  For example if you want to fly a 747 from London to New York you simply need an airworthy aeroplane, the right fuel, experienced pilots, the right staff etc – these are the conditions of workability for the flight.  If you do not have these in place then your plane may get off the ground but it is highly likely to make it to New York.  So what are the conditions of workability for a customer-centric orientation that builds customer loyalty?

The foundation of customer loyalty is earning and cultivating trust

In a world full of suppliers who offer pretty much the same goods who would you choose to do business with?  If you are like most of humanity then you will instinctively do business with the one that you trust the most. Don Peppers & Martha Rogers have taken a good look at the whole trust thing in their book ‘Rules to Break & Laws to Follow’.  So allow me to share their wisdom with you.  Here are the laws that they recommend that you follow:

1. Earn and keep the trust of your customers

The key point I want to stress here is the word ‘earn’.  Yes, you need to earn it by doing the right thing (honest, fairness, integrity) as well as doing things right (competence, ease, access, efficiency…).  It means paying as much attention to the social and moral aspects as it does the economic aspect. Are you a fit and proper person/organisation?  Which is another way of asking: can you be trusted to act honorably/ethically?

2. Really taking your customer’s point of view means treating each customer with the fairness you would want if you were the customer.

At a philosophical level you can look at this either through John Rawls veil of ignorance or refer to some of the oldest philosophies used to guide human relations.  Using the lens of the ‘veil of ignorance’ ask yourself how would I design the system (roles, rules, interactions….) if I did not know if I would end up playing the role of the customer or the enterprise?  I used to use this with my two children when they would quarrel over cake: one of them got to cut the cake into two pieces and then the other one got to choose (first) which slice he wanted.  This system ensured fairness.

If we turn towards the world’s great religions then with Christianity you have the Golden Rule.  Rabbi Hillel when asked about the Torah replied “Do not do unto others that which is hateful to you, the rest is merely commentary.” Confucius stated “What you do not wish upon yourself, extend not  to others.”  Mohammed said “None of your truly believe until he loves for his brother what he loves for himself.” And in the holy book (Mahabharata) of the oldest religion (Hinduism) you have “This is the sum of duty: do naught unto others what you would not have them do unto you.”

At a practical level it means taking off your shoes and walking the shoes of your customers.  It means experiencing how it feels to pick a mobile phone plan when there are so many to choose from, so many conditions, so many variables?  It means experiencing what it is like to set-up and use the product with instructions that occurs as being useless?  It means experiencing what it is like not to be able to get hold of  helpful human being when you have an urgent need and having to navigate a ‘hard to make sense of’ IVR and so forth.  Not reading a report about it – actually experiencing it by doing it for real.

Don and Martha say it best when they write:

  • Honestly taking the customer’s perspective is really at the heart of understanding the customer’s experience with your brand or product.”
  • “…the very concept of being trustworthy that the company will not be acting solely in it’s own short-term interests.  On one level, this might involve simply giving a customer a fairer deal than she would otherwise have know about.  Or it could mean providing the information to allow her to compare competing offers directly – your competitors best offers included. It might mean being completely open with the customer when talking to her about the merits of buying a product or service….”

3. To earn your customers’ trust, first earn your employees trust.

Your employees can be the source of customer insight, competitor intelligence, ideas, creativity, innovation and judgement.  They are also the source of flexibility: they can judge the situation and respond appropriately.  And there is world of difference between giving the minimum and put our ‘heart and soul’ into your work.  The difference is called ‘discretionary effort’.  Tapping into it is like tapping into an inexhaustible gold mine.  Still not convinced?  Name one technology, one artifact, that has not been ultimately created by a person or persons working as a group.

If you want your employers to treat your customers well you have to model that behaviour: you have to treat your employees well.  In services heavy industries (such as retail, telecommunications, hotels & leisure…) your employees are absolutely critical to any form of service excellence.  To earn the trust of customers you absolutely have to earn the trust of your employees.  You do that by treating them well:  the ‘veil of ignorance’ and the Golden rule applies just as much to your employees as it does to your customers.

You would be wise if you were to apply this ethic to your suppliers and your partners.  I have been a supplier of professional services for most of my working life and my teams have given our all to those clients who have practiced the golden rule.  The rest – we stuck to the contract and did the minimum we had to do.  When disaster strikes your suppliers/partners can be your saviours or the source of your ultimate destruction: more than one company has experienced this.  When disaster struck Toyota survived because it’s suppliers did the right thing because Toyota had a history of doing the right thing by suppliers. In the UK I once heard the CEO of the best known Indian food company share (emotionally) how his suppliers pitched in to save his business when his only manufacturing facility burnt down overnight. Why?  Because he had treated them honorably.

4. If being fair to customers conflicts with your company’s financial goals, then fix your business model or get a new one.

To cultivate customer trust you must put in place a culture that calls everyone in the company – each and everyone – to genuinely consider your customers perspective and well being in each and every decision that your company makes.   Here is how Don and Martha put it: “Whenever your employees are solving a problem or undertaking an initiative, at some point they should ask themselves the question: What’s in the customer’s interest here?” And you have to act on that interest.

If we are truthful then it is highly unlikely that you have this culture today.  Your challenge is to create that culture; your biggest obstacle is likely to be the Tops, your business model and short-termism.  If you company does not create that kind of culture then you are leaving the field wide open for new entrants who build a business model around treating your customers fairly, cultivating their loyalty and reaping the benefits: think Netflix v Blockbuster (late fees) or Google v Yahoo! or Zane’s cycles v other bike sellers.

Final words

Archimedes said “Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.”

Culture is the lever and the CEO (as leader) is the fulcrum:  if you have do not have the right leader and the right culture then despite your best efforts you will not succeed in cultivating customer loyalty and harvesting the benefits. At best you will win minor battles like reducing customer service costs or improving the ROI of your marketing campaigns. And in the process of seeking ‘customer gold’ you will simply make the pick axe and shovel sellers rich.

Do you really want to get to grips with customer-centricity? Then read ‘Reinventing the Wheel’ by Chris Zane

Does your map correspond with ‘reality’?

We never live in the ‘real world’.  Each of us lives on our own personal map of the real world; groups live in their map of the real word; and cultures are deeply enmeshed in their cultural map of the real world.  To the extent that these maps are a good with the ‘real world’ then our actions produce intended results.   If you twist this around then you will find that if you are doing stuff and not getting the intended results then it is highly likely that you are using a map that does not have an adequate correspondence with the world. Let’s take a look at how this applies to the world of customer-centricity, customer experience and CRM.

Many established businesses have an inadequate map of ‘customer-centricity’

Imagine the following scenario.  My 11 man soccer team is on the pitch and it is divided into four groups: goalkeeper, defence, midfield, attack.  I come to the realisation that my team is not delivering the intended results or that there is a risk that it is not likely to do so.  So I have instructed the groups and the team to change and I may even have hired experts to help me bring this about.  You come along and see the goal keeper is busy moving the goalposts to make them goal smaller.  You see that the defence is busy being replaced with fewer and cheaper players who are on someone else’s payroll (‘outsourcing’).    You see that the midfielders are busy learning a new method of passing the ball.  You see that the attackers have been told to follow a new method and use new technology: high-tech boots that promise to help them run faster. And so forth.

Then you laugh out loud.  Why?  Because you see the absurdity of the situation.  At one level, what I am doing / what my team is doing / what my hired experts are advising makes perfect sense.  Yet, at another, more important level it is just absurd.  Why?  Because you get that the game has changed.  You get that we (me, my team) should be on the rugby pitch playing rugby – a completely different game!  You see something that I do not see.  You see that I think I am playing rugby and I am not!

That is exactly what is happening in the business world when it comes to customer-centricity and customer experience – the same old companies continue to be an exception.  Allow me to make this real by using just one example.

Lets take a look at ‘customer lifetime value’

Lets, consider customer lifetime value.  Companies that have jumped on the customer focused bandwagon have spent considerable sums in developing ‘accurate’ customer lifetime value models.  Those that have not are busy doing so or refusing to do so because it is not possible to come up with a lifetime value model.  Take a good hard look: you will see that this is a transactional model at work.  I will only invest in you, to treat you well, if I can figure out in advance that I will get more out of this then I have to put in.  Dive deeper and you will find that the hidden assumption is that each customer has a fixed customer lifetime value that is attached to her – like her name is attached to her.

Now go and read ‘Reinventing The Wheel’ by Chris Zane and you will find that he continues to run his business on the principle that each and every customer has a lifetime value of $12,500. And it is everyone’s job to deliver a unique experience and realise that lifetime value.  You see Chris Zane gets the philosophy (the game) of customer-centricity!  Chris (and his team) is creating value for his customers by treating each and everyone has a $12,500 customer.  He did not hire a customer insight team to do all the calculations.  He sat down and estimated it based on what a customer would purchase if Chris managed to keep that customer for a lifetime.   When you dig deeper you find that Chris chooses to trust and invest in his customers.   And customers are paying him back.  How many of these customers have become $12,500 customers because of the way that Chris and Zane’s Cycles treats them that way?  Chris gets that the mission of creating that $12,500 in cusotmer lifetime value falls to  Zane’s Cycles: yes it has to be created not just calculated!  It is created by selling and delivering unique experiences (again and again) that customers value:  trust, support and outstanding service is a core part of these unique experiences.

Conclusion and Recommendation

To sum up, established business have completely misunderstood the principle behind customer lifetime value because their mindset is old school: transactional – focussed on extracting value.  Chris Zane gets the deeper game from which arises the principle of customer lifetime value and that is why he has made it work.

If you really want to grips with the customer-centricity game then read Chris Zane’s book:  ‘Reinventing the Wheel’.  It is gem of a book and I wholeheartedly recommend it.