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What simple innovation brought billions in new investments to Fidelity? What basic misunderstanding was preventing Office Depot from achieving its growth potential? What surprising insights helped the Mayo Clinic better serve both doctors and patients?
The solution in each case was a focus on customer experience, the most powerful—and misunderstood—element of corporate strategy today.
Customer experience is, quite simply, how your customers perceive their every interaction with your company. It’s a fundamental business driver. Here’s proof: over a recent five-year period during which the S&P 500 was flat, a stock portfolio of customer experience leaders grew twenty-two percent.
In an age when customers have access to vast amounts of data about your company and its competitors, customer experience is the only sustainable source of competitive advantage. But how to excel at it?
Based on fourteen years of research by the customer experience leaders at Forrester Research, Outside In offers a complete roadmap to attaining the experience advantage. It starts with the concept of the Customer Experience Ecosystem—proof that the roots of customer experience problems lie not just with customer-facing employees like your sales staff, but with behind-the-scenes employees like accountants, lawyers, and programmers, as well as the policies, processes, and technologies that all your employees use every day. Identifying and solving these problems has the potential to dramatically increase sales and decrease costs.
|Publisher:||Houghton Mifflin Harcourt|
|Product dimensions:||6.00(w) x 9.10(h) x 1.10(d)|
About the Author
Harley Manning founded Forrester’s customer experience research practice when he joined the firm in 1998. Today he leads a team of analysts that cover enterprise-level customer experience topics ranging from strategy to metrics and business models.
Kerry Bodine leads Forrester’s research on experience design. Kerry’s research, analysis, and opinions appear frequently on sites like Harvard Business Review, Forbes, and Advertising Age, and she blogs for Forrester and 1to1 Media.
Read an Excerpt
You Need Your Customers More Than They Need You
Kevin Peters sat alone in his car in the rain, watching the entrance of an Office Depot store. He was wearing a baseball cap and a well-worn pair of jeans.
Over the course of the last half hour he’d watched one customer after another emerge from the store. None of them carried a shopping bag. On their way out, they walked past an Office Depot employee leaning against a wall under the awning, smoking a cigarette out of the rain.
Kevin was torn. On the one hand, he didn’t want anyone to know he was there. As the president of Office Depot’s North American retail division, he’d come to this parking lot in New Jersey on a gray, dreary day to get a firsthand look at how customers experienced one of his stores. His method, already followed at dozens of other locations, was to observe customers coming and going, then enter, walk the aisles, and talk to customers about whether they were finding what they needed and how they liked the store in general.
The success of each visit hinged on the store manager not knowing he was there. Kevin wanted to see the store as a customer on a shopping trip, not as an executive on an inspection tour. But this situation was too much. Frustrated customers were leaving without products while one of his employees not only ignored them but laid down a cloud of tobacco smoke for them to walk through on their way out the door. Should he blow his cover by telling the manager to get his slacking employee back in the store to help shoppers?
Kevin made a decision: This couldn’t stand. There was no way he was going to sit idly by and watch his business erode one customer at a time. He abandoned his undercover plans, got out of his car, and walked into the store on a new mission.
Because he’d planned to go incognito, Kevin hadn’t bothered to find out the name of the store manager. But he knew that every retail location has a stanchion near the front of the store with a picture of the manager and, right under it, this service promise: “If you are not satisfied with your shopping experience, please see me or another manager on duty.” Kevin walked over to the stanchion, looked up to see what the store manager looked like—and found a picture of the smoking employee outside.
When he tells this story you can see very real pain in Kevin’s face and hear it in his voice. “The darn store manager! The person with whom we trusted our customer relationship.” He pauses and
repeats, “The person with whom we trusted our customer relationship.”
What Went Wrong at Office Depot?
What underlying problem brought Kevin hundreds of miles away from his executive office in Boca Raton, Florida, and into one of his own stores—in disguise?
The story began months earlier when Kevin first got the job of president. It wasn’t a great time to take over the helm of a retail chain. The economic downturn that began in 2008 had not been kind to retailers in general, and Office Depot’s store sales had declined even more than those of its competitors.
What puzzled Kevin was that, even as sales declined, Office Depot’s “mystery shopping” scores—compiled by a third-party research firm—were going through the roof. How could this be? How could customers be having a great in-store experience while not actually buying anything? The answer clearly didn’t lie in Office Depot’s Boca Raton headquarters, so Kevin set out to find it in the
Kevin visited over seventy locations across the United States fully expecting to find a differentiated experience—one that set Office Depot apart from other office supply stores and big box retailers. He didn’t. Instead, the experiences he found ranged from, in his own words, “poor to fair and, on a few occasions, good.” But never good enough to truly differentiate Office Depot from its customers’ other options.
By the time Kevin finished talking to hundreds of customers and watching them while they shopped, he’d begun to solve the puzzle. The mystery-shopping scores were actually correct—they were just asking the wrong questions: “Are the floors clean?” and “Are the shelves fully stocked?” As Kevin put it, “Who cares?”
Not his customers, as it turned out. They’re mostly small-business owners who don’t make money when they’re not in front of a client or preparing work for a client. They want to find the office products they came for, quickly and easily. In other words, they want to get in, buy, and get out.
But Office Depot stores didn’t help them do that. They were large and their signage was cluttered and confusing, making the stores hard for customers to navigate. Employees, both associates and managers, were neither as empathetic nor as helpful as they should have been. They had been coached all along to focus on tasks, not on building relationships with customers by listening carefully and responding to their needs. Wham, bam, thank you customer, and—oh, wait—did you forget to buy something? Sorry, I was so busy stocking the shelves and fixing the planogram that I missed that part.
Ultimately, Kevin knew that if he wanted to reverse the downward slide in sales, he needed to transform virtually every aspect of his in-store experience. Quickly.1
You Are in the Customer Experience Business—Whether You Know It or Not
This book is about customer experience, something that is fundamental to the success of every business. For most companies, customer experience is the single greatest predictor of whether customers will return—or defect to a competitor. It’s so critical that even virtual monopolies like cable providers and health insurers suffer when they fail at it (which most do, as we’ll see in the next chapter).
Customer experience goes to the heart of everything you do—how you conduct your business, the way your people behave when they interact with customers and each other, the value you provide. You literally can’t afford to ignore it, because your customers take it personally each and every time they touch your products, your services, and your support.
So why are so many business leaders seemingly blind to the importance of customer experience? Primarily, it’s because they don’t know what they don’t know—starting with what “customer experience” actually means. Sure, most executives have at least heard the term “customer experience,” but they often believe it’s just another way of saying “customer satisfaction.”
That misunderstanding is a disaster in the making. Because if you don’t understand what customer experience is and why it’s important, you risk losing your customers to companies that do—think Apple, Amazon, Southwest Airlines, or USAA.
To appreciate what customer experience really means, let’s start by clearing up a few of the more enduring misconceptions about it.
We’ll do that by listing some of the things that customer experience is not.
It’s not soft and fluffy. Of course you love your customers—if not for them, you couldn’t pay your mortgage. But loving your customers won’t help you succeed unless you do something about it, like offering them products that meet their needs, and making it easy to find, buy, and use those products—all critical aspects of customer experience.
It’s not customer service. People call customer service when they have a problem. So equating customer service with customer experience is like saying that a safety net is a trapeze act. Yes, the net is important to the act. But if the performer needs to use the net then something has gone wrong with the show.
It’s not usability. Yes, people appreciate it when a product or service is easy to use. And ease of use has helped drive the success of products and services ranging from Apple’s iPod to YouTube video uploads. But usability is just one piece of the customer experience puzzle—and not even the most important piece. Take your car, for example. Even if the steering wheel is easy to turn and the brake pedal feels just right, your driving experience will still be miserable if the car fails to meet your basic needs, like running reliably and stopping
So if those are some of the things that customer experience is not—what, then, is it?
It’s what products and services your company offers, how you manage your business, and what your brand stands for. It’s what your customers think happened when they tried to learn about and evaluate your product, tried to buy it, tried to use it, and maybe tried to get help with a problem. What’s more, it’s how they felt about those interactions: excited, happy, and reassured, or nervous, disappointed, and frustrated.
Customer experience is how your customers perceive their interactions with your company.
Once you understand that, you can manage your business from the outside in, bringing the perspective of your customers to every decision you make.
Who are your customers? They’re both the people who have purchased your goods or services and those who intend to buy your goods or services. Even if they don’t actually buy anything, their active interest in buying puts them on our radar. That interest leads them to interact with you through your marketing efforts, your retail locations, your websites, and any other channels you support. And that leads them to form perceptions of their experience—perceptions that will determine what happens next.
What qualifies as an interaction? Here’s how we think about interactions: they’re reciprocal. Your customer takes an action such as visiting your store or website. Your company responds in some way. Maybe an associate walks up to your customer, or the website pops up an invitation to chat. Your customer then responds to your company’s response—asking the associate a question or accepting the chat invitation—and so it goes until your customer achieves her goal, or gives up. When you string a series of these interactions together you end up with the steps in the customer journey.
Which brings us back to where we started: Customer experience is how your customers perceive their interactions with your company.
As it turns out, those perceptions matter a lot—as FedEx discovered.
CASE STUDY: FEDEX EASES CUSTOMER WORRIES
Looking out from within the FedEx world headquarters in Memphis, Tennessee, it might seem that the customer experience starts with logistics.
The company ships about 3.5 million packages per day in a mind-boggling ballet of planes. If you were to hang around its “Super Hub” at the Memphis International Airport for a month, you’d see about five thousand FedEx aircraft pass through. There are parking slots there for up to 175 aircraft at any one time. Handling all the packages that come off those planes takes twelve thousand FedEx employees and more than three hundred miles of conveyor belts that move hundreds of thousands of packages per hour. It’s like magic.
But looking from the outside in, the customer experience begins when FedEx picks up a package or when the customer drops one off. For many customers, drop-off involves a trip to one of six-hundred-plus World Service Centers and FedEx Office locations. FedEx had always treated the FedEx World Service Center locations as convenient places for customers who want to fly in, drop off a package, and fly back out again as quickly as possible. They even had a name for this type of customer—the Frisbee. FedEx thought that
Frisbees accounted for the majority of walk-in traffic at these locations.
FedEx management believed they had been doing a pretty good job of serving these customers. But satisfaction surveys told them that not all customers were pleased with the experience. So in 2000, FedEx hired Ziba, a design and innovation consultancy, to help redesign the customer experience at the FedEx World Service Center locations. As part of that work, Ziba interviewed and observed FedEx customers to determine how they shipped packages and how they thought about shipping packages.
The results of the study were surprising. Only about 10 percent of the service-center customers were Frisbees. The rest fell evenly into three behavioral clusters based on how prepared they were when they walked in the door, and how much help they wanted from a FedEx employee. Of these groups, the most intriguing of all were the ones that FedEx dubbed Confirmers.
Confirmers are, in a word, uneasy. They walk in the door well prepared, with wrapped packages and a clear sense of how long it will take the packages to get where they’re supposed to go. But even so, they can’t help worrying that something bad might happen.
At the time, FedEx team members did something that made perfect sense to them but made Confirmers nervous. When a Confirmer handed over a package to a team member, the team member would process it and then place it on a pile (affectionately dubbed “the leaning tower of packages”).
These FedEx team members knew—with a high degree of confidence—that each and every package in the pile would get to its intended destination. For them, the shipping process was working. But just seeing that pile sent a signal to Confirmers that their packages were not going to make it to their intended destination. Based on that simple visual cue, they thought that the shipping process looked broken.
As a result, Confirmers were on the verge of a panic attack because they believed something with no basis in objective reality (“My package will get lost because it’s on that pile!”). And that made them highly at risk of taking their shipping business elsewhere.
The solution that transformed shipping into a great experience for Confirmers was elegantly simple. FedEx placed a wall with five presort windows behind the service counter. FedEx then trained their agents to take a package from a customer, say thanks, turn around, and slide the package through one of the windows. That sent a highly visible signal that the package was safe and sound and well on its way.
What was behind the agent wall? The leaning tower of packages.2
The Three Levels of Customer Experience
As we’ve already seen, customer experience is about customer perceptions. The research that Ziba conducted for FedEx reveals something fundamental about those perceptions. What was it about the shipping experience that disturbed Confirmers? After all, every time they used FedEx their packages got to the right destinations at the promised times—FedEx had optimized the shipping process with that goal in mind. Yet despite the fact that their needs were being met, quickly and easily, Confirmers were not having a good experience.
To fully understand why, you need to know that customers perceive their experiences at three different levels: meets needs, easy, and enjoyable. Every time they interact with a product, a service, a person, or an automated system, they judge how well the interaction helped them achieve their goals, how much effort they had to invest in the interaction, and how much they enjoyed the interaction. FedEx employees nailed the first two levels but blew it at the third when they failed to grasp how customers felt about the shipping
Kerry stumbled upon the original version of this model—the customer experience pyramid—in an academic paper by Dr. Elizabeth B. N. Sanders when she was getting her master’s degree in human-computer interaction from Carnegie Mellon.3 Like a lot of thinking that’s ahead of its time, Dr. Sanders’s 1992 paper hasn’t gotten the attention it deserves. We’ve applied it in our own research for a number of years and tuned the version you see here as a result of our findings. It
proves out beautifully in the real world—as we’ll demonstrate in chapter 2.
Indeed, this model is so helpful when it comes to understanding customer experience that it’s worth spending some time on. Let’s start with the first level, meeting needs. That’s at the base of the pyramid for a reason: It’s the bedrock.
What if Office Depot never had printer paper or toner in stock? What if FedEx couldn’t get packages to the right destinations? These would be company-killing failures beyond rescue by a sympathetic customer care representative. Game over, thanks for playing.
When “Easy” Offers Competitive Advantage
But when companies do meet basic needs—and all of them must if they want to keep their doors open—the next level of customer experience always comes into play. Well, almost always. As it turns out, being easy to work with is optional only for businesses where customers literally have no choice.
Let’s look at a fairly benign example that illustrates this point: the Ford Model T. It was not exactly “user friendly.” It took two people to start a Tin Lizzie: one sitting in the driver’s seat and one standing in front of the vehicle and turning a crank. The person turning the crank took a big risk. Sometimes the engine would “kick back” and start spinning the crank in the opposite direction, a design flaw that broke many a crank-turner’s wrist.
Yet in its day, the Model T was a huge commercial success because it was the only affordable car for the masses. It let Ford win out in the marketplace by owning the base of the customer experience pyramid.
Today Ford couldn’t give away a vehicle that started with a crank and might break your wrist in the process. With tons of competition for low-priced vehicles, the company pays tons more attention to ease of use. Now for well under twenty grand you can buy a new Fiesta with touch-screen controls, a voice-activated navigation system, and a hands-free dock for your phone.
Who can get away with being hard to do business with in this day and age? Ironically, the best example we could come up with also has to do with cars: the Department of Motor Vehicles. And the only reason they can get away with it is because customers can’t take their business elsewhere—yet.
In contrast, we’ve see many examples where ease of doing business created a competitive advantage—or an entire industry. It was possible to upload video to the web, but not much consumer-created video was actually on the web until YouTube came along and made uploading easy. Digital music players didn’t catch on because it was hard to get music onto them. Then Apple launched iTunes and iPods (which also led to iPhones and iPads and a market capitalization of $589 billion as of this writing). Netflix, eBay plus PayPal—there’s real money to be made by lowering the barriers to customers using your product or service.
Meeting needs. Making it easy to buy a product or use a service or get customer service. It’s not hard to believe that these are important aspects of a customer experience. But what about the idea that a company should make customer interactions enjoyable? Not everyone agrees that “enjoyable” is a key part of customer experience. Some people want to believe that only a few industries, like media or retail, need to worry about being enjoyable to work with, and not, say, manufacturing or shipping.
But remember our FedEx customer, the Confirmer. No offense meant to our friends in Memphis, but package shipping has got to be one of the least glamorous industries on the planet. Yet FedEx has an entire customer segment whose experience—and therefore continued business—hinges on positive emotional engagement. And FedEx does something about it. Because when it comes to customer experience, package shipping is also one of the most competitive industries on the planet.
Table of Contents
Introduction: Mastering the Outside In Challenge ix
PART I: THE VALUE OF CUSTOMER EXPERIENCE
You Need Your Customers More Than They Need You 3
Customer Experience Means Billions to Business 18
The Customer Experience Ecosystem 36
PART II: THE SIX DISCIPLINES OF CUSTOMER EXPERIENCE
From Bumper Sticker to Business Discipline 59
Customer Understanding 86
PART III: HOW CUSTOMER EXPERIENCE TRANSFORMS COMPANIES
The Natural Path to Customer Experience Maturity 169
The Rise of the Chief Customer Officer 183
The Customer Experience Race Is On 204
What Next? 223
Case Index 243
About the Authors 259
What People are Saying About This
"Why read Outside In? Because a focus on customer experience and an outside-in perspective are the cornerstones of business success. The strongest client relationships are built on trust, mutual respect, and really listening to each other. Those are the kinds of relationships that can last a lifetime."
— Vanguard Chairman and CEO Bill McNabb
"This eye-opener gives you a comprehensive, need-to-know look at how smart companies achieve sustainable success in dealing with customers. Hint: It involves the entire organization, not just those on the 'front lines.' The GPS-like guidance provided here is invaluable."
— Steve Forbes, Chairman and Editor-in-Chief, Forbes
"Enjoyable, Easy, Meets Needs. This is Manning and Bodine’s Customer experience pyramid, listed in order of importance for the customer. Yes, it’s hard to make the changes needed to deliver on these promises. But there is a simple first step: read this book.
— Don Norman, Nielsen Norman Group, author of Living with Complexity
"Manning and Bodine understand that a good customer experience is actually less expensive to provide than a poor one and customers will pay more for a good one than for a bad one. Nothing drives profitability like an excellent customer experience does."
— Dan Hesse, CEO, Sprint
"I define customer centricity as simply ‘the one who pays you money placed at the center of everything you do.’ If you buy that definition, then buy this book, for Manning and Bodine provide a blueprint for doing just that. Following its prescriptions will yield enjoyable experiences for your customers by understanding them — from the outside in."
— B. Joseph Pine II, co-author, The Experience Economy and Infinite Possibility: Creating Customer Value on the Digital Frontier
"Looking forward, healthcare organizations need to make patient experience part of their strategic plans. It’s as important as quality and safety. Manning and Bodine show why creating a great experience is important for any organization, and how to drive the change needed to make it a reality."
— Delos “Toby” Cosgrove, MD, CEO, Cleveland Clinic
"Here at Virgin, our brand is all about a great customer experience. Outside In provides the discipline to turn that thinking into successful business practices."
— Paul Sands, Head of Customer Experience Management, Virgin Atlantic Airways
“Here’s a simple recommendation: if you have customers, you should read this book.” —800-CEO-READ
“CIOs who want to travel down that path [of success] but need a bit of guidance should look at Outside In…By looking closely at the problems customers experienced that led them to call customer service, some of these companies either slashed costs by billions of dollars or generated billions in new revenue.” —The Wall Street Journal