Monthly Archives: May 2009

Select, Not Fire Customers

Sprint made news lwhen it sent “you are fired” letters to about 1000 customers who, the company claimed, made excessive amount of calls to customer service. Apparently, these 1000 customers combined made more than 40,000 calls a month in total! See a termination letter sent to a customer. Notice Sprint’s attempt to make it “easy” for customers to end the relationship.

Sprint, not surprisingly, received a lot of flak for this move. Most of the blogs I’ve seen have been highly critical of Sprint’s actions. The 1000 problem customers represent a miniscule percent of Sprint’s 53 million customer base. When you have that many customers, there will be some that are not profitable. Was the negative publicity created by the termination of a small number of high maintenance customers worth it? It appears that some of Sprint’s competitors may benefit from the fallout. Did Sprint make a mistake?

Before I answer it, I’d like propose a three-step approach which can help avoid such problems.

  1. Customer Selection. Very few companies seem to pay careful attention to who they choose to serve. Businesses can and need to select their customers carefully. Segment your market and choose the segments you wish to target. This will ensure a better fit between the company’s offerings and the customers’ needs. In a category like wireless/mobile, usage patterns and needs are not homogeneous across customers. It is important to understand these segments and create offerings that are meaningful and offer value. By choosing not to serve certain segments or types of customers, a lot of subsequent pain can be avoided.
  2. Creating Expectations. Even if you target the “right” customers, it is still important to create the right expectations in terms of service features and service standards. Most of the time, in my experience, customer experience is rated poorly because the firm did not do a good job of setting appropriate and realistic expectations. Sprint said in the letter sent to the 1000 customers, “The number of inquiries you have made to us during this time has led us determine that we are unable to meet your current wireless.” When these customers were sold the Sprint service, was a proper assessment of their needs made? Or did the customer needs change over time? Where the customers over-promised?
  3. Delivering on Expectations. As I’ve said in other posts on this blog, delivery is critical to customer expectations. If a brand does not fulfill its promise, it loses its credibility. In this case, Sprint does not seem to be doing a good job here too. According to a Zogby poll commissioned by MSN, Sprint ranked at the top of the list on the Customer Service Hall of Shame. It is possible, that the 1000 customers who were terminated were the most vocal among a large number of dissatisfied customers. The Zogby poll was based on a national sample of over 5000 customers. So, there is mounting evidence against Sprint. I’d rather promise a little less and deliver more.

This is not rocket science. It is surprising to see so many companies not getting the basics right.

Was Sprint’s action prompted by bottom line concerns? According to an article in the Contact Center World the average cost per call to a contact center varies from $3.50 and $32.74. If assume $5 per call in Sprint’s case, 40,000 calls per month to serve 1000 customers translates to $200,000 cost or $200 per customer. The cost could have been higher. Clearly Sprint was losing money on these folks. Some CRM and customer profitability and customer lifetime value (CLV) proponents would argue that dropping these customers is the right thing to do.

Incidentally, I had the same discussion with a group of executives last week at a seminar I gave on Customer Experience and Loyalty Management. Most of them were uncomfortable with the idea of saying “you’re fired” to a customer and some even suggested that certain companies have a larger societal obligation that goes beyond generating profit from each customer. Their arguments were compelling.

Saving about $200-500K by getting rid of these customers will not make a big impact on the bottom line. Clearly these consumers were using an extraordinary amount of resources. In my view, the situation has been mishandled badly. The negative publicity could end up costing more.

There is a deeper malaise within Sprint, given the very low service rating in the Zogby poll. They have to address this service delivery issue first At the same time, set the customer expectations appropriately to match the service standards.

Under the right conditions, it may be appropriate for a business to choose not to continue the relationship with certain customers. There are cases where ethical and societal considerations would suggest otherwise. Most businesses would rather swallow the losses and carry a certain percentage of unprofitable customers. Sprint’s decision was bold. But if they had a great reputation for service excellence and customer satisfaction, they would’ve been on firmer ground.

I’ve noticed that this topic gets most people riled. Look forward to your comments.

(This post originally apppeared on July 15, 2007)

Filling a Vacuum

The words “customer experience” don’t often pop-up in the same sentence as the words “vacuum cleaner.” It’s not a sexy category and it is a category where customer experience is often not satisfactory. I’ve had my share of unsatisfactory experiences with different brands over the years.

Dyson, which retails in Canada starting at about $500, claims that it never clogs. In an interview with Fortune, James Dyson, the founder, talked about how he created more than 5000 prototypes before the product went to market. That’s pretty impressive. I don’t have firsthand experience with this brand. I’ve seen a few reviews online… it’s a mixed bag really. The price and weight of the upright models seem to be the major concerns. You’ll see both positive ratings at Epinions.com and some complaints here.

The customer experience in this category is going to depend on the performance (does it clean well without clogging and easily losing power), price, durability and ease of handling (weight, attachments and cleaning). Dyson may be among the best in the category. But it seems like when it comes to clean floors, there’s still a vacuum in the market. I am not sure there’s a brand with all the ideal attributes which fills this vacuum.

This brings me to a larger issue regarding customer experience. In situations where the company controls the environment in which the product or service is used or when consumer usage situation is similar, it is easier to deliver a consistent customer experience. When Dyson says “it never clogs”, there will always be customer who’s had the contrary experience simply because the situation in which the brand is used varies from user to user (Image someone with four dogs and six cats… the vacuum cleaner will get quite a workout:-).

When the consumer does not use the product as intended, the result may be a less than optimal experience. But as you can see in the consumer ratings online, the frustration (no matter the cause of it) can turn into negative word-of-mouth. Consumer product development has to take into account the varying conditions in which the product may be used. Very few products these days are so versatile and durable.

When the situation in which the consumption occurs cannot be controlled, as in the case of most consumer products, the firm has less control over the final user experience with the product. Services have their own challenges in delivering a consistent experience, but at least they tend to have greater control over the environment in which the service is consumed.

Product quality and ease of use are important when it comes to experience. Educating the consumer about appropriate usage is also important at times. Substandard, unfriendly and incomplete user/owner manuals don’t enhance the customer experience. I recently had some problems with my treadmill. The owner’s manual has scant information on troubleshooting. It took some online research and a call to the company and finally the help of a service technician to solve the problem.

It makes sense for companies to invest some resources (online and print materials) so that customers are (a) informed about appropriate product use and (b) able to help themselves when faced with minor problems.

Any thoughts on this?

(This post originally appeared on May 25, 2007)

A Framework for Customer Experience Management

Customer experience management (CEM) is not the domain of one functional area. Product developers, marketing, sales, operations and HR all have a role to play. In Part 2 of my introduction to customer experience, I’d like to present a framework which may be of use to those who plan to study, design, implement or manage customer experience (check out Part 1 if you missed it).

7-P Framework for CEM

Focusing on customer experience over brand advertising is a better way to build the brand in most cases. According to the Glen Senk, president of retail chain Anthropologie:

One of our core philosophies is that we spend the money that other companies spend on marketing to create a store experience that exceeds people’s expectations. We don’t spend money on messages — we invest in execution.

If you think of the great experience brands (Amazon, Starbucks etc.), they all “talk” (i.e., advertise) less and focus on the “walk” (i.e., execution) instead.

Anthropologie - Seattle

Anthropologie store in Seattle. Photo by Elena Spicer. Used with permission.

In the case of Anthropologie, each store is somewhat distinct. The architectural and design elements are based on the local heritage, regional climate, type of target consumer and other factors. While no two stores look alike, there is a great deal of consistency in quality and selection of the product offerings. Each store offers a different experience, while preserving the feeling of familiarity. The outcome is a great experience brand.Superior or optimal customer experience does not happen on its own. It starts with strategy. A customer experience strategy requires a firm to articulate the type of experience it will provide and how it will differentiate itself from its rivals. Needless to say the customer experience strategy has to be tied to specific business goals and outcomes. A customer experience strategy, as demonstrated by Anthropologie and other firms, requires a great deal of attention to execution. Here is my 7-P Framework for CEM (see figure below). It has three layers – strategy, infrastructure and delivery.7-P CEM Framework

  1. Positioning. Strategy is a lot more than positioning. But positioning, in my view, is a critical aspect of strategy, because it drives the marketing messages as well as the execution. If you position a restaurant as “inexpensive, clean and fast” versus “elegant, gourmet and upscale”, the execution of such positioning and consequently the resulting customer experience are likely to be vastly different. When I walk into a Tim Horton’s (which has a bit of blue collar image) my expectations regarding product quality, service and ambiance (the elements that make up my customer experience) are very different compared to when I visit a Starbucks store. The key is to consistently execute in a manner consistent with the brand values. How you choose to position affects what you do as a business and in turn affects the customer experience.Customer experience is not absolute, it is relative. It is relative to one’s expectations and past experience. If customers have a clear sense of “what to expect” from a brand, then half the job is done. It is when expectations are unclear or off target that the experience is often judged to be unsatisfactory. Unfortunately, brand positioning statements often tend to be vacuous or pure puffery. A good brand positioning statement should communicate concisely what the brand means and how it is differentiated. To the employees, a brand positioning statement should be a guide post.
  2. People. The quality of the customer experience is directly related to the quality of employees, especially in services. Do employees understand the brand values and do they follow the brand values? According to the recent Gallup Management Journal’s semi-annual Employee Engagement Index, only 29% of employees in the US are “engaged”, with 54% “not engaged” and an astonishing 17% “actively disengaged.” Customer experience cannot be great when employees are tuned off when they arrive at work. Through proper selection, training, empowerment and rewards, it is important to create a workforce that is customer-centric. It begins with employee selection. By selecting employees who fit with the brand values and are passionate about their work, the outcome for customers can be greatly influenced. The Container Store was rated No.4 on Fortune magazine’s list of top 100 companies to work for, and it is not a surprise that this company is also highly rated for its customer experience. They apparently provide each new employee 240 hours of training compared to industry average of 7 hours and reward their employees better than their competitors. Well-trained and well-treated employees do make a difference (see “The Service Profit Chain” by Heskett, Sasser and Schlesinger).
  3. Physical Environment. For service companies the physical environment as well as all the other tangibles (from stationery to napkins) can make an impact on the customer. The physical and tangible part of the business conveys and reinforces the brand image. Starbucks became the poster-child for experiential marketing by ensuring that the physical environment in the store matched its brand goals – i.e., to be the “third place” in people’s lives where they could relax. They have the reputation of being meticulous with their selection of furniture and fixtures. The comfy sofas encourage “lingering”.Anthropologie, known for its lifestyle merchandising, ensures that the architecture as well as the look and feel of each store is unique. Contrast this with the high degree of standardization that most chain retailers employ to lower costs. While stores differ architecturally and in design elements, Anthropologie ensures that there is a consistency in product selection and quality. Anthropologie takes into account the regional climate, local heritage, target consumer profile and architectural context in design each store.A design orientation to service and the customer-brand interaction environment (be it online or offline) can create an ideal mix of form and functionality. Design is emerging as a critical area in customer experience delivery.
  4. Process. A big part of creating superior customer experience is implementing customer-centric processes. Simply put, make it easy for customers to do business with the firm. Amazon.com’s “1-click ordering” is a process that is very much designed to enhance the customer experience. Same is true of the “virtual model” at Land’s End, which makes shopping online more intimate and personal.The reality is that in most organizations, processes are designed to squeeze costs out of the system. Designing customer-centric processes will involve change and, possibly, increased costs in the short-run. It will pay-off in the long-run through greater customer engagement and increased loyalty.Step into the shoes of the customer and go through every touch point and every stage in the purchase cycle. Such customer journey mapping can reveal the touch points that are pleasure points or pain points. Customer-facing processes often involve cross-functional coordination, which requires breaking down the silos. It is important to have a customer process management (CPM) system to ensure that customer-facing processes are designed to optimize the customer experience at critical touch points.
  5. Product. Some will have you believe that customer experience is all about customer service. I beg to disagree. Whether it is a computer or iced tea or a transaction at the bank, the product or service should deliver the functionality or benefits that the user is seeking. Of all the touch points that the customer comes across, one could argue that the product is the most important. It is likely to elicit the strongest cognitive and emotional responses. Companies have to get it right. There are two aspects to products or services that need attention in terms creating optimal experiences.
  6. Product Design and Usability. Design is important not just for form, but also to enhance the functionality of the product. The emergence of specialized design houses such as IDEO has brought design to the forefront. Consumers today are not just looking for products that provide a benefit, but also for products that are self-expressive in terms of style and aesthetics. In the services domain, however, the use of design seems to be a fairly new trend. Everything from the physical environment to the process of obtaining and using the service can be improved by using principles of good design. Good design can evoke positive emotional reaction toward the brand.

    Product Features and Benefits. Does the product contain the right feature-set and does it deliver the benefits the target customer seeks? The tendency these days, especially with technology products, is to bundle too many features, where many of the features are never used by the customer. Even my mortgage at the bank has all kinds of payment and prepayment features, which I likely will never use. But at the time of buying the product or service, it makes the customer feel they are getting more and the additional features act like an insurance for some customers (i.e., just in case I need it).

  7. Personalization. I use the term personalization synonymously with the term customization (some of you may not like or agree with this). If the customer experience can be personalized to some degree, if not completely, it is likely to create greater customer engagement. The process of buying and download songs on iTunes is a great example. You buy only the songs you want and buy it when you want, unlike the CD from which often contains songs that the consumer may not like.Land’s End offers a personalized approach to online shopping through features such as the “My Virtual Model” (which allows you to try clothes on a virtual model with your body shape), the “Specialty Shopper” who can provide personalized recommendations any day of the week and the ability to talk to a “live” person. Buying clothes through a catalogue or an online store is not for everyone. Land’s End has thought through the process and the experience from the customer’s point of view.Take a look at National Semiconductor’s WEBENCH, where it allows engineers to actually design and simulate products (from power systems to audio amplifiers) and then order the parts needed to make the products. They offer a complete solution to the problems that design engineers face, rather than simply focusing on selling parts. It took a lot of effort for National to understand the challenges its customers were facing. National’s conversion rates for those who use the WEBENCH is astounding.Personalization leads to a greater match between what the customer wants and what the firm delivers. It also allows consumers to feel special and that their product or experience is unique. A personalized experience creates a greater intimacy between the brand and the consumer. To be able to effectively execute this, the company needs intimate knowledge of its current and potential customers, which means turning to not just transaction data, but also creating active voice of customer programs.
  8. Performance. A product may have all the necessary features and may do the job it is supposed to, but there may yet be an expectation-performance gap in the consumer’s mind. Performance of a product or service cannot be measured in absolute terms, but it is always relative to the expectations that customers had prior to purchasing it. Creating the right expectations and delivering on the expectations are equally important. In other words, the product or service has to solve the problem the consumer has.Imagine an airline with the friendliest service, easiest check-in process, absolutely comfortable seats with great in-flight entertainment… all at very affordable prices. Before you get too excited, let me add that this fictional airline is not renowned for its safety record. Now, how do you feel about this airline? My point is that a product can have all the bells and whistles, but if it fails to do the required job on a consistent and reliable basis, the resulting customer experience will be negative.“Performance” is my catch-all term for some things that go beyond the core product or service. For instance, when a product or service failure does occur, how well does the firm recover from the failure? Does the firm provide a quick and fair resolution when there is complaint? There is some evidence that excellent service failure recovery can indeed make a favorable impression on the consumer and can turn a potentially disastrous situation into a profitable one.

Final Thoughts

To achieve excellence across these seven areas requires an unwavering commitment to providing outstanding customer experience. If a brand offers the same product or physical environment as another brand, it does not stand out. Therefore, innovation is important in each of these seven areas. Not innovation for the sake of innovation, but innovation that enhances the customer experience and eventually has a positive bottom line impact for the business.

Finally, there are other areas besides these seven that need attention. I see technology as something that enables “process” in my framework. But there are clearly other aspects to technology that I have not discussed, such as customer databases which can enable a greater understanding of the customer. Leadership, resources and even a long-term orientation (as opposed to the “quarterly earnings” mentality which focuses too much attention on costs) can affect the experience delivered.

Having said this, I hope the 7-P framework provides a comprehensive approach to understanding, designing and managing customer experience. Start with the strategy, put the infrastructure in place and focus on delivery/execution.

As always, I would love to hear your thoughts.

(This blog post originally appeared on October 7, 2007).

What is Customer Experience?

Every time one reads about service excellence and superior customer experience the oft-cited examples include Starbucks, Google, Virgin Airlines, Lexus and Ritz-Carlton. A recent search on Google for “customer experience” returned over 1.4 million results and a search for “customer experience management” returned over 890,000 results! Clearly there is a great deal of interest (and chatter) on this topic. From business writers to leading consultants and CEOs, all have anointed customer experience as the new competitive battle ground. As differentiation in product and service features diminish, the argument is that superior customer experience can separate winners from losers. But what the heck is customer experience? Many pundits have written on this subject. Here is my spin presented in a three-part series.

An experience is something that one undergoes or lives through and obtains direct firsthand knowledge. It involves not only accumulation of knowledge, but also feelings during and after the experience. To use academic language, an experience results in both cognitive and emotional outcomes. Think of the birth of a child or buying your first car or the loss of a loved one. These are experiences that leave a permanent impression.

Clearly, not every customer experience will result in memorable cognitive or emotional reaction. I often buy coffee at a nearby Tim Horton’s. I can’t remember anything about my last trip there a couple of days ago. It was a thoroughly routine experience that made no lasting impression, positive or negative, on me.

On the other hand, a recent flight on Air Canada left a positive impression… for a change. As we checked in, we were told that our connecting flight from Toronto was full. My disappointment lasted only a fleeting second as the agent told me that we were being put on direct flight to our final destination and that we have been upgraded. That was a pleasant surprise.

I’ve come to expect very little good news when I travel. From lost baggage to missed connections to unfriendly (service in the) skies, air travel providers have lowered the bar on service quality. Actually, a J.D. Power and Associates study reported that in 2005 the average satisfaction across all airlines in the US was 664 on a 1000-point scale, which translates to 66% or a “C” grade. Given the low expectations, even moderately good experiences tend to stand out these days.

To me an experience has to be strong enough to register on the customer’s radar – either as a positive or a negative experience. If the experience is right on target with your expectations, it is not going to evoke strong cognitive or emotional responses. When given a choice, consumers will turn away from experiences that produces negative cognitive or emotional responses.

A customer experience with a firm does not start with or end with the purchase. Customers come in contact with touch points such as sales reps or the Web site, often sources if pre-purchase information, before they make the purchase. And in many cases, even months or years after a purchase customers seek support or go back to upgrade. So customer experience is something that happens over the purchase cycle – from pre-purchase to post-purchase (see Figure).

CEM Touch Points

Moments of Truth and Touch Points

If not all experiences evoke memorable thoughts or feelings, then it makes sense to focus on experiences that do leave a mark on the consumer. It is only these memorable experiences that are likely to affect purchase intent and the consumer’s future engagement with the brand.

Jan Carlzon’s, the former CEO of SAS Airlines, described a ‘Moment of Truth’ as one where the consumer’s perceptions of the firm are influenced, positively or negatively. Let me try to define a touch point:

A touch point is a point where the customer directly or indirectly comes in contact with the organization’s people, processes or customer interfaces, which influences, positively or negatively, how the customer thinks and feels about the organization. The touch point may be directly under the control of the firm or it could be an indirect touch point controlled by partners.

It is readily apparent that there are numerous touch points when one considers a typical service setting such as travel, hotel, banking and telecom or even with products such as cars and computers. Not all touch points are critical. Some of them are really “moments of truth” and others are hardly noticed except when there is a failure.

The touch points that evoke these strong responses are the ones that are important to consumers. It makes sense to focus on these touch points (even attempt to “wow” the customer), while ensuring that all other touch points offer satisfactory experiences, thereby avoiding the possibility of small irritants building up over time.

The J.D. Power survey of airline satisfaction highlights the fact that on average it takes 7.2 minutes to receive their boarding pass via an electronic kiosk, compared to 14.2 minutes at the ticket counter and 9.4 minutes at curbside check-in. Clearly, the check-in is an important touch point, but if the extra 7 minutes of waiting for a human agent at the ticket counter does not matter to most consumers, does it make sense to invest more in reducing the wait time?

The point is businesses need to know what experiences adversely affect consumers and then create solutions that will take away the pain. Often firms stress things that are unimportant to consumers.

What Products Mean to Consumers

Customer experience is really the result of the customer viewing the product or service through his or her personal lens. There is a lot of symbolism infused into brands through advertising and portrayal on TV and movies. Consumers buy into this symbolism and mythology when they buy certain products. That is part of the experience they are seeking.

Products and increasingly services have come to define who we are. We surround ourselves with brands that represent our self-image. What we consumes defines our place in the society. Work by marketing academics such as Grant McCracken, Russ Belk and Elizabeth Hirschman, among others, has opened our eyes to the symbolism, mythology and cultural context embedded in the products we consume.

So, when we think of customer experience one has to keep in mind that consumers seek products that satisfy many symbolic needs. Consumers interpret their experience through this cultural and symbolic lens. Consuming Coke is a mundane activity in North America, but in the developing world it could be a way of expressing that one is modern and not traditional. Two consumers could interpret a similar experience very differently.

In closing, a deeper understanding of the anthropological and sociological foundations of consumption is necessary to fully appreciate what customer experience means. Experiences are nothing but our perception. Perception is coloured by one’s background and one’s culture (see Figure below)

Factors in Interpretation of Experiences

The study and management of customer experience cannot be reduced to gathering customer feedback at every touch point. Customer experience management has to do with understanding what customer value and why they value it and then delivering this value on a consistent basis. Consumers seek not just functional product benefits, but also emotional and symbolic ones. Uncovering the consumer’s psyche is key to designing great experiences.

Customer Experience vs. Customer Satisfaction

Before we go too far into this discussion of what constitutes customer experience and why we need to manage it, it is worth considering the difference between customer experience management and customer satisfaction measurement. Isn’t it enough to measure satisfaction? To me, the answer is no. Customer satisfaction measurement has traditionally focused on product performance or functional attributes. It is a measurement that occurs in the post-purchase stage. Whereas, customer experience is really an organizational philosophy, just as six sigma is. To deliver a consistent and superior experience across all touch points, requires a concerted organization-wide effort and the breaking of silos. Customer satisfaction is a useful metric, but it remains a metric that tells us what happened. If an organization embraces the customer experience concept, it then has to align various parts, train and reward employees to deliver optimal experiences at every touch point.

Take customer experience with air travel. Virgin Airlines promises a “stress-free, fun and entertaining flight experience.” That requires everyone from ticketing agents to baggage handlers, inflight crew and caterers working together to achieve a common goal. Customer experience management has the ability to transform the way an organization functions, making it completely customer-centric.

In Part 2 of this series, I will explore the fundamentals of creating and managing customer experiences.

(This post was previously posted on October 1, 2007).