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THE Customer Experience EDGE
Technology and Techniques for Delivering an Enduring, Profitable, and Positive Experience to Your Customers
By Reza Soudagar, Vinay Iyer, Volker G. Hildebrand
The McGraw-Hill Companies, Inc.Copyright © 2012Reza Soudagar, Vinay Iyer, and Dr. Volker G. Hildebrand
All rights reserved.
Customer Experience in the "New Normal"
80 percent of companies say getting closer to customers and providing them with a differentiated experience is a top strategic objective. Their average rating of the customer experience they provide, however, is just 3.6 on a scale of 1 to 5.
—Bloomberg Businessweek Research Services Survey, 2010
Everyone has a customer experience horror story. The cable company technician who never shows up. The parts supplier that you have to call repeatedly for an update on a spare part order. The support person who cannot help you with your billing question, even after you have waited on hold for an hour. The building materials supplier whose late delivery costs you thousands of dollars in lost labor and causes you project delays.
It's ironic but true: in an age in which a large majority of companies profess to rate a positive customer experience among their top strategic objectives—about 80 percent in two recent surveys by Bloomberg Businessweek Research Services (BBRS)—examples of bad customer experiences abound. Executives, it seems, are doing a lot of talking about the importance of customer experience, but they are failing to back that up with technologies, processes, and policies that can consistently and cost-effectively foster customer happiness. These same executives will even admit to this failing, with most of them rating the customer experience offered by their own firms only slightly higher than mediocre, according to BBRS data (see Figure 1.1). Walking the talk they are not.
The fact is, there are two sides to a successful and profitable customer experience: the employees are on one side, and the customers are on the other. In most cases, employees are motivated to satisfy customer needs and desires—but they are not empowered to do so.
Imagine, for example, a customer phoning the call center of a large bank. Say this customer has just discovered something disturbing in her online bank account: a check for $10,000 that she deposited a few days ago is marked "hold," and the funds are not available. After toying with the idea of trying online chat support, she decides instead to call the support center. Once she is in the interactive voice response system, she punches in her account number and listens to a list of options until she can finally press zero to speak to a customer service representative (CSR). The CSR asks for her account number—Why? She just entered it.—and then for the "verbal password" on her account.
Increasingly anxious, the customer replies that she does not recall ever choosing a verbal password, whatever that might be, so she could not possibly know what it is. The CSR then asks her a series of questions, from her social security number to her address to her phone number to her mother's maiden name to the amount of a recent deposit. Once she has supplied all of that (three minutes into the exchange), the customer can finally ask why the check was being held, only to be told that the bank does not have any specific information on that check. Her options at that point: get in the car, drive to her local branch, and wait in line for a supervisor, who might be able to make an exception; or wait until the date when the hold is lifted and accept whatever consequences that might have for her bills in the meantime. It is no wonder the customer's stomach is in knots when she hangs up the phone.
Meanwhile, the CSR is in no better shape. During the call, he has been well aware of the customer's anxiety, and he has had to seesaw between two computer screens, switch between two keyboards, and use several applications to track down all the pieces of information he needed in order to access the customer's various accounts and try to resolve her questions. He ends the call feeling frustrated that, once again, the best he has been able to do for yet another customer is simply apologize.
As everyone knows, banks have stringent processes and security practices in place—as they should. These measures are there to safeguard our money. But if the CSR in this example had had easier access to the right information, and if the bank had had business applications that enabled a 360-degree view of the customer, our customer would not have had to repeat her information. Also, the CSR could have quickly discovered the reason for the hold—this was an out-of-state check for a large amount. In addition, he could have looked up historical information on the customer's account and discovered that she is a high-value individual with a variety of different types of accounts at the bank. With this information at his fingertips, the CSR could have either lifted the hold himself or quickly gotten a supervisor on the phone with the necessary authority to do it. How far this action would have gone toward making the customer happy! How much lighter of heart—and stomach—this customer would have been, and how much more likely she would have been to become a customer for life.
Not to mention, think of how much more satisfied the customer service representative would have been with this increased level of empowerment. People who go into the field of customer service have a strong motivation to help other people and solve their problems. And just as customers get frustrated when CSRs cannot help them, the CSRs themselves also get frustrated when they do not have the right information to help customers.
Loyalty vs. Lock-In
The sad reality is that many customers of large banks stay only because the costs of switching to a new institution are too high. New fees, combined with the time investment of notifying the numerous entities that deposit into or withdraw from the existing account, are a daunting deterrent to switching banks. Being locked in, however, does not create loyalty. Once a better option presents itself, any customer who has endured a stressful or frustrating experience anything close to what we have just described will go for it—not to mention all of those customers who have simply had just "OK" service.
Like everyone else, large companies do not intentionally offer a poor customer experience; rather, it happens simply because a good customer experience is hard to provide. Traditional business processes, organizational structures, and cultural practices all tend to place the needs of the company above the needs of the customer, creating many obstacles to creating the customer experience edge.
And then there is the matter of cost. Superior customer experience tends to be viewed as being expensive customer experience, although that is certainly not always the case. Often, doing the right thing for the customer will result in lower costs (for example, higher product quality or better service delivery leads to fewer support calls). But executives are leery of funding initiatives that promote customer centricity because they are unsure of what the real impact of a particular investment will be. More than half of the executives responding to the North American BBRS survey cited inadequate funding as an obstacle to improving the customer experience.
The trick is not to throw money at an undefined customer experience initiative. Rather, companies should raise the overall customer experience bar and then concentrate their resources where the superior experience repays the investment—for example, with customers who have a high lifetime value.
Profitability is a necessary component of the customer experience equation, although early leaders have not always seen it that way. Zappos, for example, prides itself on free shipping and no-hassle returns for all customers for up to a year after purchase. The self-described customer-obsessed online shoe seller also maintains a blog that recounts stories of "wow" experiences that its employees have extended to individual customers.
Customers Really Are in Charge
From the dawn of commerce, companies have developed products and offered them on the market. Consumers either bought them or didn't. Except in extreme cases, communication flowed from the company outward. Internal experts did their best to gauge the drift of future demand and prepare products accordingly.
Today, globalization, mass customization technology, digitally engaged customers, the mobile Web, and the widespread use of social media, among other factors, have created a landscape in which the consumer or business buyer has more information and, therefore, more control than ever before. Customers increasingly feel empowered to tell companies exactly how they want to be treated, down to their preferred product delivery mechanism, while demanding ever more personalized solutions and real-time response times to suit their individual tastes and needs. Consumers talk to one another and hold their peers' product reviews in higher esteem than any information they can glean from a corporate website.
This shift is true not only in the world of business-to-consumer marketing (B2C), but also for business-to-business companies (B2B). Increasingly, there is little differentiation between the two business environments—employees expect the same level of customer experience from their business partners that they expect as customers in their private lives. Business employees also are apt to spend their free time on social media sites on work-related topics. Hence, B2B companies are developing Web portals where partners can order goods, remember preferences, obtain information on popular products, view other products or services they might want to consider, and see real-time order status. In addition, these companies are building online communities and monitoring social forums to ensure that they are aware of what is being said, and they even engage in conversations.
We would go so far as to say that the distinction between B2C and B2B is increasingly a meaningless one; both belong to a single category: P2P, or people to people. After all, that is the new framework dawning on businesses of all types. We are all people serving people, and we all spend time on both ends of the transaction. (We will talk more about the customer experience for B2B companies in Chapter 3.)
The upshot of all of this is that it is no longer good enough to "treat customers well." Now, companies must offer a superior "experience"—and a differentiated one, at that. And different experiences need to be created for different types of customers to ensure that the value they are seeking is provided.
Differentiation is also the path to a profitable customer experience. It makes sense to concentrate resources on those customers who promise to repay the investment—now or via an expanded lifetime value. The good news: foundational technologies [such as integrated CRM and enterprise resource planning (ERP) software] and disruptive technologies (such as the mobile Web and social media) can greatly reduce the cost of providing a successful customer experience, thereby enabling companies to provide all customers with a level of experience that would otherwise be cost-prohibitive.
It is a mistake, however, to view investments in customer experience as a direct path to increased revenue. "Most executives think, 'How can we use this technology to sell more stuff?'" says Don Peppers, founding partner of CRM consultancy Peppers & Rogers Group. "This attitude is doomed to failure. A better question is: how can we use this technology to deliver more value to our customers—better, faster, and cheaper?"
At a high level, improving the customer experience requires reorienting the whole organization—people, processes, and technology—to focus on the customer. This flips the dynamic that has been in place forever. Now, customers will tell you what they want, rather than passively receiving whatever you choose to offer. Such a major change is hard for any organization to assimilate. The bigger and older the company, the more entrenched its organization centricity is likely to be. It is difficult to align everyone around the same goal—giving customers what they want, on their terms. In this era, when all businesses are trying to balance the need to cut costs with seeking growth avenues and maintaining innovation, interacting with customers on an individual level and answering their needs provides a competitive advantage.
The Cost of Ignoring the Customer Experience
Realigning the company around the customer is indeed a major effort that affects every part of the organization. But sooner or later, the consequences of ignoring the customer experience can be dire. Even in a special case, where your company has a near-monopoly (think Microsoft a few years ago), you make yourself vulnerable to competition from new quarters (think Microsoft post-Google). As with all negatives, the cost of not improving the customer experience is hard to measure but cannot be underestimated. The stakes are as high as extinction.
Take Dell. In 2005, the company saw its customer satisfaction score slip by five points, according to the American Customer Satisfaction Score Index, which is conducted by the University of Michigan. The dip was largely attributed to the viral response to the blog postings of journalist Jeff Jarvis, along with Dell's slow response to the online events. Dell later hired a large team of people, led by a vice president of communities and conversations, to monitor and manage social media activities.
In 2011, that team monitors more than 22,000 online conversations a day, according to Adam Brown, Dell's executive director, social media, global marketing. He runs a Social Media Listening Command Center, launched in December 2010 at Dell's headquarters in Round Rock, Texas (a second center will be launched in China later in 2011), to coordinate and manage the company's response, around the clock, to those 22,000 conversations—70 percent of which are not in English. Dell can currently respond to conversations in nine languages, and it plans to add more.
The team includes assignment editors. These editors route critical conversations to one of the 7,000 social media–trained Dell employees, who have applicable, appropriate technical expertise and language skills, Brown explained at the Microsoft Global High Tech Summit in early 2011.
In the future, a radio icon on selected desktops around the company will let individuals "tune in" to online conversations that are relevant to them. For example, an engineer who is designing laptop hinges can see conversations about hinge-related issues, while a shop floor manager might monitor conversations about the build quality of the products produced in his shop. Other individuals will have the equivalent of a social telephone on their desktop, so that they can engage in and respond to conversations as needed, Brown explained.
Dell does not view the investments required to support its Social Media Listening Command Centers as an unrewarded cost, but, ultimately, as providing a return on the investment, Brown noted. Dell realized—and you should, too—that the costs of an unhappy customer are myriad. You also need to consider the costs of unhappy customers themselves—the cost of a complaint, a bad experience, and customer churn—and how much money you are leaving on the table by not providing a customer experience tailored to business objectives, says Lior Arussy, president of Strativity Group, a customer experience research, strategy design, and implementation firm, in our interview for this book. An example is a $300 million cost-reduction effort that could lead to a $1 billion loss of revenue because you have become irrelevant to customers, Arussy says.
Failing to invest in the customer experience also means risking not being differentiated and therefore having to compete substantially on price, according to David Gardner, author, consultant, and mass customization expert. In our conversation on the topic, Gardner points to the early days of the MP3 player as an example of how this lack of differentiation can play out. Sony, Nokia, and other companies each had its own version of a digital music player. Though initially—and widely—considered one of the weaker market entries, the Apple iPod succeeded in differentiating itself via a superior retail experience, product design, emotional appeal, and an easy-to-use solution to the vexing issue of downloading music. The other products were left to compete anemically on price.
In today's digitally engaged world, ignoring the customer experience also may have dire consequences for a company's reputation and, ultimately, its bottom line. On average, twice as many people will hear about someone's bad experience as will hear about his good experience, says John Goodman, founder of the customer experience agency TARP Worldwide. This outcome is even more dramatic on the Web, where four times as many people hear about a negative experience than hear about a positive one, he says.
Companies that have locked in customers—however temporarily—now understand that they need to join with their customers via love, not bondage. "In the past, companies invested hundreds of millions of dollars in [loyalty] programs that handcuff customers financially to their solution," says Paul D'Alessandro, partner at Diamond Advisory Services at professional services firm PricewaterhouseCoopers. "Today, they need to build up a bank of appreciation by addressing customer needs exactly how they want them addressed, and that's much more powerful than a loyalty program."
This "bank of appreciation" is built through the cumulative effect of three factors, according to D'Alessandro. The first is the stories people hear through word of mouth and the media, the second is direct interaction, and the third is the transcendent "moments of truth," which are profoundly positive or negative experiences that lead to long-lasting impressions, for better or for worse.
Clearly, for today's businesses, the focal point of doing business needs to shift to the customer and staying one step ahead of the curve in managing a consistently strong customer experience. The benefits of doing so are many. Delivering the customer experience edge can help you nurture engaged advocates who not only will stand by you into the future, but will help you grow your business through word of mouth and their own loyalty.
Excerpted from THE Customer Experience EDGE by Reza Soudagar. Copyright © 2012 by Reza Soudagar, Vinay Iyer, and Dr. Volker G. Hildebrand. Excerpted by permission of The McGraw-Hill Companies, Inc..
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