A Fresh Look at the Top and Bottom Lines
For more than half of companies, cost and ROI are
the top concerns with customer experience initiatives.
Reza Soudagar, Vinay Iyer, and Dr. Volker G. Hildebrand
THERE IS A CENTRAL PARADOX of the customer experience edge: customer centricity needs to stem from a genuine desire—even a passion—to do right by the customer. At the same time, your customer experience efforts need to result in a positive impact on your company’s top and bottom lines. Otherwise, as Strativity Group’s Lior Arussy tells us, “We don’t recommend companies do this.” After all, if your company goes bust because it is giving away the store (those universal free shipping and free returns deals come to mind), that is not going to be a good experience for your customers in the long run.
So, how do you focus on these two seemingly competing imperatives at the same time: revenues and profits, on the one hand, and putting customers first, on the other?
Certainly, executives are wary of this very issue. According to the Bloomberg Businessweek Research Services (BBRS) survey, top concerns with customer experience initiatives are cost and ROI (see Figure 6.1).
FIGURE 6.1: ROI Among Top Concerns
Respondents were asked to name the top concerns they have regarding their company’s efforts to improve customer experience.
Percent of respondents rating the concern at a 4–5 level.
Base: 307 director-level and above executives at midsize and large companies.
Source: Bloomberg Businessweek Research Services, 2010.
So, is there room for both the accountant’s concerns with growing revenues and profits and the zealot’s approach to (using customary customer experience parlance) being “obsessive” and “passionate” about customers? We believe there is. Done right, the customer experience (CE) involves creating wins for the customer, but behind those customer-focused wins are business and financial success for your company. Financial drivers can range from reducing customer churn, to acquiring new customers, to reducing the cost of sales, to decreasing the sales cycle. “It has to be something you can point to and say, ‘We have moved the needle on either revenues or expenses,’” Arussy says.
For all the talk among CE advocates of passion, obsession, and devotion to customers, embarking on a CE program cannot be backed with the idea of “if you build it, they will come.” There needs to be a clear sense of what your return is going to be, and you need to calculate the ROI.
The Cost of Not Doing CE
One way to look at the ROI of the customer experience is to analyze the cost of not focusing on the customer experience. What is the cost, for example, of a single bad experience? If you include all the negative impacts that resonate from that experience, costs include the lost revenue opportunities from that customer and all the others who hear about it through word of mouth, as well as the resource costs to fix the problem and possibly your own reputation, should that bad experience blow up into an Internet cause célèbre. Remember, the rule of thumb is that twice as many people will hear about a negative experience as a positive one, and on the Web, that increases to four times as many people who will hear about a negative experience than a positive one.
Many companies jeopardize their customer relationships by making decisions that don’t take these types of costs into account. This is particularly true when companies look to cost cutting to improve their financial health instead of looking at the customer experience. “Say you’re planning to launch a cost-reduction effort,” Arussy tells us. “Your first question should be, how much will it affect customer loyalty and spending? What if your $300 million cost reduction costs $1 billion in revenue because customers find you’re irrelevant to them?” Rather than focusing on cost alone (too much a habit during the downturn years), your mindset needs to encompass the cost of losing your relevance to customers.
Arussy cites the example of Starbucks introducing its Via instant coffee product in 2008, at the height of the financial crisis. Typical cost-cutting measures would probably have hurt Starbucks’ customer experience (and therefore its bottom line), so instead it listened to its customers, discovered a new product to meet an unmet need, and now has new organic growth that would not otherwise have been possible. Because of the negative economic conditions, it took two years for this effort to pay off, but pay off it did. Had Starbucks focused solely on cutting costs, it would be much worse off now.
“You think [customer experience] is expensive?” says Arussy. “How much are you wasting by not doing it? That is the message companies don’t have.”
We can also approach this question mathematically. Let’s say you’re a company with 500,000 customers, and the average lifetime value of your customers is $1,000, just for simplicity’s sake. Then, let’s say you force customers to use a self-service capability as part of a cost-cutting move. And your customers hate it. What is the revenue impact if, as a result, your retention rate decreases by 1 percent? With 500,000 customers, that’s 5,000 lost customers, or $5,000,000 in lost business.
What if you had 10 million customers, with an average annual purchase rate of $50, and the retention rate slips by 1 percent? If you do nothing to fix the issues, you will lose $5 million in revenues that your salespeople will have to make up just to stay on par with the previous year’s revenues. Bear in mind that this does not include the lost revenue from future crossselling and upselling opportunities or the future wallet share of these customers. And in many cases [for business-to-business (B2B) companies, in particular], the results can be even worse than what these calculations show.
On the other hand, what if you took one small step to improve the customer experience that resulted in a boost in first-call resolution or positive word-of-mouth impact? Let’s say the result is a rise in retention rate from 85 percent to 87 percent. With 500,000 customers, that’s $10 million more in revenues and 10,000 fewer customers your salespeople have to find in new business the following year.
Lesson learned: the cost of doing nothing, when it comes to the customer experience, can be significant. The worst possible stance for a company (of any size, in any industry, or with any customer base) is to do nothing with the customer experience because of the fear that the return is uncertain. Traditionally, it is difficult to prove a negative, but when it comes to the customer experience, this is relatively easy to fathom.
Passion and Profits
The idea of financial gain from the customer experience can get murky when, clearly, there is an emotional component at play. As we mentioned in "Throwing Out the Old Playbook", there needs to be a certain level of passion for customer centricity that fuels the customer experience edge. However, mixed with the passion and the drama, there also needs to be a focus on the business outcome.
Smith+co’s Shaun Smith illustrates this in his recently published book, Bold: How to Be Brave in Business and Win. Smith uses words such as zealous, infectious, dramatic, obsessive, and even cult-like to describe the characteristics of companies that he considers to be customer experience leaders. From Virgin Galactic to Burberry, Smith sees these companies as being driven not by making money, but by making a difference—being distinctive by declaring their principles and then sticking to them. Even more important than focusing on profits, he says, is having a sense of purpose. He calls it “putting purpose before profit.”
“They succeed because they have the courage, confidence, or just sheer chutzpah to pursue a purpose that is beyond profit, to engage, entertain, and educate their audiences,” Smith says on his blog.2 “They are not just different but dramatically different and push to the extremes the consequences of their desired positioning and strategy.”
But even Smith acknowledges in his blog that “none of these practices are worthwhile unless they lead to successful business outcomes, such as increased revenues and sustainable profits. These companies believe that by focusing on customer value, they can become more profitable and sustain these profits longer than the competition,” he says.
In fact, one company that he profiles, U.K. luxury retailer Burberry, reported a 50 percent rise in profit in the 2010–2011 fiscal half year ending September 30, 2010, as well as 21 percent revenue growth in that time period, a time when many retailers were reporting declines. Those results were followed by 31 percent revenue growth for the second half of the fiscal year. Smith attributes this to Burberry’s focus on digital marketing, social media, and improving the in-store and online experience as opposed to cutting costs.
Among the many examples of Burberry’s multichannel digital prowess is its Artofthetrench.com social networking/fashion blog site, designed by a top fashion influencer. The site displays hundreds of images of models and regular citizens wearing its signature coat in seemingly endless ways. Visitors listen to hip, mood-inducing music and are invited to click on the images to read more about the person wearing it, indicate which they “like” the most, leave a comment, or even write about their own trench coat experiences. Images are also sorted by categories, such as “highest volume of comments” or “most ‘likes.’” People can upload their own photos of themselves or friends modeling a creatively worn Burberry trench coat. Burberry calls the site “a living celebration of the trench coat and the people who wear it.”
Burberry established a Facebook presence early in the game, which it frequently updates with photos and albums of upcoming seasons, as well as videos of up-and-coming British acoustic artists, to further extend and strengthen its brand. In addition to its three million “friends,” it also has more than 80,000 Twitter followers, to whom it provides updates of which celebrities were wearing which of its fashion pieces.
Burberry’s ad campaigns are also cutting-edge, with three-dimensional images on its website that can be clicked, rotated, paused, and dragged 180 degrees. The company has live-streamed fashion shows to various websites, into stores, and even onto a digital billboard in London’s Piccadilly Circus. It also launched a “runway to reality” initiative, enabling consumers to buy fashions that they see on the runway via their iPads or online, with delivery in seven weeks. Soon, Burberry will offer a made-to-order service, enabling customers to add details such as studs and initials to the iconic trench coat.
Clearly, this is a company that gets the idea that brands can no longer just “be”—they need to “do” something. It also understands the importance of delivering on the four CE essentials of reliability, convenience, responsiveness, and relevance.
Not All Customers Are Equal
In "The New Customer Experience Recipe", we mentioned segmenting your customers as an ingredient in the customer experience recipe. We want to discuss this again here, as customer segmentation plays a strong role in enabling the balance between purpose and profit. Essentially, companies need to focus their products and services on the best segment they can serve, and within that segment, they need to focus on delivering what matters most to attract and keep customers. This means consciously eliminating customers who cost too much to serve and who might be better served by other product lines.
“It’s about real passionate belief in making a difference for customers, but also creating a commercially minded business model that allows you to do that,” Arussy says.
An example is Southwest Airlines. The company has received accolades for its customer centricity, even while refusing to offer amenities such as reserved seating, baggage transfer, and a hot food service. Does that sound like customer centricity to you? Actually, it is—Southwest keeps its eye focused on what it has determined that its customers really need from an airline: low fares, no fees for regular checked baggage, and on-time service. Anything else is a distraction. The chairman and cofounder of Southwest once asked a dinner companion, “Would customers pay $100 more for inter-airline baggage transfers? No, they wouldn’t—they value on-time, low-cost flights.”
Customer segmentation also means concentrating your resources on high-worth customers who will repay the investment—now, or via an expanded lifetime value. “Customer lifetime value has come into all industries for the first time,” says Diamond Advisory Services/PricewaterhouseCoopers’s Paul D’Alessandro. “The more you understand the overall profitability of the customer, the more you [should be] willing to invest in those customers or cut off others.”
Sounds a bit harsh, right? But consider that failing to segment your customers means asking your best customers to subsidize your worst. Rather than continuing to enrich the experiences of your elite customers, you invest the premiums they pay in customers who probably don’t have an iota of loyalty to your company. Not only is that not good business, but it’s not fair, says Martha Rogers, one of the founding mothers of customer experience and one-to-one marketing and a cofounder of Peppers & Rogers Group. “Differentiating according to customer value [and potential value] doesn’t mean you treat anyone badly,” says Rogers. “It means you stop putting resources toward the people who are costing your best customers a lot of money.”
If you don’t distinguish between your most profitable and your least profitable customers, your return on investment (ROI) will be reduced. Customer segmentation is a driver of customer experience ROI.
TIP
Zappos takes an unusual approach to customer segmentation, choosing to eschew the practice. “All of our customers are the best customers,” says Aaron Magness, senior director of brand marketing and business development at the online retailer. “We have a level playing field where everyone enjoys this great experience.” Magness points out that Zappos’s most profitable customers are also the heaviest users of the store’s free-returns policy, as they are willing to test new categories and buy higher-end goods. “The free marketing for us is the referrals,” he says. “They may be sending things back and forth many times, but there is a high likelihood that they are telling friends how easy it is to be a Zappos customer.” In this way, Zappos is fulfilling the CE essential of convenience.
Tesco PLC is a good example of a company that segments its customers to ensure a profitable customer experience. With $86 billion in revenue, Tesco is the U.K.’s largest retailer, as well as the fourth largest in the world. It matches tightly segmented product lines with its six distinctly different customer groups, according to Coriolis Research Ltd., a market research firm that worked with Tesco. At the high end of the spectrum are the “Finer Foods” customers, who overlap somewhat with the “Healthy” consumers, representing about one-quarter of the total. These customers desire (and can pay for) the nicer things in life (not just organic strawberries and grass-fed beef, but high-end personal care products, wines, and housewares).
Solidly in the middle of the pack are the “Traditional,” “Mainstream,” and “Convenience” customers, who together make up about half of Tesco customers. These customers are aware of price and alert to product promotions, but are willing to spend on items that reflect their values (such as higher-priced foods for special occasions or prepared foods for weeknight dining). “Price Sensitive” customers are less affluent and make up nearly one-quarter of the total. Here, the focus is on everyday value.
A pioneer of supermarket loyalty programs in the late 1990s, through its Clubcard, Tesco offers benefits commensurate with customer spending levels (at a rate of one point per pound spent). Tesco’s genius: it mines and slices the data from its 16 million–member loyalty card program to segment and more fully understand both its customers and its products, providing an entirely different experience for each customer segment. “Customer data is in the fabric of every decision we make in the company,” says Mike McNamara, Tesco’s CIO. “We know an awful lot about our shoppers.”
For example, at a cost of 21 pence, Tesco Value bath soap is as unadorned as soap can get, whereas Tesco brand liquid handwash costs just under £1. At the other end of the spectrum, priced at £5, is Tesco Finest creamy body soufflé—a whopping 2,000 percent higher than the Value offering. As you can see, Tesco serves its less well-heeled customers with effective and well-priced options, while extracting copious profit from those who can afford and want to pay for a higher-end experience.
At their worst, supermarket loyalty cards are just a different way for customers to get a discount, says Clive Humby, chairman of dunnhumby, a consulting firm that worked with Tesco, in a published interview. But used effectively, “They open worlds of possibility when you mine the rich data they produce to add relevance to your customers’ lives.”
For instance, when Tesco mails out coupons, people in different customer segments receive personalized coupon variants, depending on their profile. And if Tesco cuts prices, it does so with the knowledge of which products, across which customer demographics, will have the most impact on its top and bottom lines. “You should only collect this information if it’s going to do you some good,” McNamara adds.
Before it introduced customer segmentation and analytics, Humby says, Tesco had been accustomed to monitoring top-line numbers to the exclusion of the bigger picture. “‘What are my sales this week?’ ‘What were my sales last week?’ and so on. That’s the way they measured things. If you look at that level, you can’t see the impact.”
Now, however, Tesco mines both structured and unstructured data with an eye toward increasing customer satisfaction and retention, as well as its own growth. For instance, it has implemented technology in thousands of stores that allows customers to provide in-store feedback on their shopping experience by filling out a card, using their mobile devices to leave a voice message, or sending a text or an e-mail. It then turns these unstructured data into structured formats that can be fed back into stores, creating continuous improvement. For example, a disgruntled customer’s voice mail is translated by language processing software, and the customer receives an instant response.
With all these efforts, Tesco is succeeding at the heart of “the new competitive battleground” of the retail industry—“shopper centricity,” according to Pierre Lever, managing director at Planet Retail, an analyst firm that covers the retail industry. This shopper centricity is paying off. In March 2011, in a European retail climate that is difficult at best, Tesco customers are buying up the more expensive goods in the retailer’s Finest line, as well as the Value products that one would expect to thrive in a downturn. According to Bloomberg Businessweek, sales growth at Tesco will outpace that of its global rivals, including Wal-Mart, through 2015.
Another good example of thoughtful customer segmentation is the New York Times. Until March 2011, anyone could read the newspaper’s articles completely free of charge on the Web. However, the venerable publisher rolled out a new approach that provided advantages to its print subscribers, while fully acknowledging the new world of its digital readership.
In an e-mail to its readers, the New York Times explained the new segmentation:
- Home delivery subscribers would continue to have full and free access to content on the website through their PCs, smartphones, and tablets.
- Others would get free access to up to 20 articles, videos, or slide shows per month. When they exceeded that, they would be asked to become digital subscribers, with a choice of three digital subscription options.
- The “Top News” section would continue to be free on the New York Times’s smartphone and tablet apps.
- Readers who find New York Times articles through links from search engines, blogs, and social media will be able to read those articles, even if they have reached their monthly reading limit.
We consider this to be a good example of a company that has considered the needs of a wide range of customers and potential customers and how to offer an experience that can be beneficial not only to different segments, but also to its own top and bottom lines.
The Payoff
As you eliminate experiences that frustrate and irritate customers (endless customer service loops on the telephone, for example) or are able to turn negative experiences around, you may well find that you are actually taking cost out of the organization. A good example is Progressive Insurance. The auto insurer continually changes its business processes and introduces innovations that are squarely aimed at customer needs, namely, taking the pain out of dealing with automobile insurance. It seems to recognize that customers not only do not enjoy paying for car insurance, but also don’t enjoy dealing with the long-drawn-out process of filing a claim and repairing their car after the terrible experience of being in a car accident.
To start, Progressive initiated a transparent pricing policy on its website, on which prospective customers can see not only a policy quote for Progressive automobile insurance, but also the prices for its nearest competitors, even if those competitors are offering lower prices. This was a customer-friendly move that was a major differentiator at the time. After all, the Web introduces price transparency, so why not make it quicker for customers to see what they will inevitably find, anyway?
The company also began offering a “concierge” service that allows customers who have had an accident to drop off their cars at a designated location and let Progressive handle the repairs. This reduces the time each driver has to spend on the claims and repair process from about four days to about 15 minutes, according to the company.
Another customer-centric move was to target what it determined was one of its customers’ biggest sources of frustration—its claims settlement area. The process was cumbersome and time-intensive, with customers having to fill out a complex form and then deal with follow-up questions. It was not a customer-friendly process for a person who had just endured an accident.
Instead of tinkering around the edges, Progressive revamped the entire process by creating “roadside settlements.” Now, customers can call a mobile claims assessor to come to the site within minutes. Assessors gather crucial details, check the customer’s policy details via their mobile PCs, and, in some cases, submit the claim on the spot. A check can be automatically dispatched, and the claim is settled on the spot. Not only did this approach cut claims processing costs, but customers feel that they are being taken care of.
Progressive’s innovations continue. Today, in 30 states, the insurer allows customers to “name the price” that they’re willing to pay for auto insurance, and the company will offer a package that comes closest to that price. The service is a Web-based offering in which prospective customers enter their personal information and how much they are willing to pay for insurance. After seeing what their named price will buy in terms of coverage and deductibles, they can also drag a “slider” bar to the right or left to see how their coverage and price can change.
The company also offers Snapshot, a device that plugs into a car’s onboard diagnostic port and tracks how and when you drive. The data are transmitted to Progressive and are also viewable by customers on the website. People who drive fewer miles and less aggressively can receive discounts of up to 30 percent.
By focusing on customer wins, the company has lowered its costs, enjoys higher profits, and has increased its market share. Progressive has risen from number 10 in market share in the early 2000s to number 4 today.
Financial Drivers
The impact that you want to see is, of course, financial. A better customer experience should have a positive effect on both your top line and your bottom line. In its report, “The Business Impact of Customer Experience, 2011,” Forrester Research, Inc., shows a high correlation between the quality of a customer experience. Forrester calls this CxPi or Customer Experience Index. Three key elements of loyal behavior are
- Willingness to buy more
- Reluctance to switch
- Likelihood to recommend
Sounds good, of course, but how do they affect a company’s bottom line? As analyst Megan Burns writes in the report, customer experience leaders in 11 industries have a financial advantage over customer experience laggards across all three areas of loyalty. According to Burns, the potential annual benefits of excellent CE top $1 billion each for wireless providers ($1.5 billion) and hotels ($1 billion). She notes that, known for below-average customer experience, airlines could reap almost $800 million apiece by boosting their CxPi score.
In the financial services industry, according to a 2011 Forrester report, loyal customers are willing to buy more, borrow more, invest more, and stay longer with the firms they already use. According to Forrester analyst Bill Doyle, one trait above all drives loyalty, and that is (emphasis his) the perception on the part of customers that the firm does what’s best for them, not just what’s best for the firm’s own bottom line.
In most cases, the financial drivers of CE will come down to the following areas.
Increased Revenue
The revenue benefits of customer service improvements are well documented, according to TARP Worldwide’s John Goodman, reaching 10 to 20 times the cost implications. When you can turn customers into extremely loyal customers, not only will they buy more from you, but they may also influence others to buy from you, as well. Additionally, trust and loyalty will drive them to buy your more value-added products at higher margins or become early adopters of your newest products and services.
This can be seen in a survey by the relationship management firm Convergys. The study identified 15 percent of surveyed customers as “super-loyalists” or “advocates.” This group was much more likely than other respondents to exhibit profit-inducing behaviors, such as recommending the company to friends (56 percent more likely), making more frequent purchases (185 percent more likely), not shopping at competitors (377 percent more likely), and responding to requests for feedback, special offers/discounts, and new products/upgrades (29 percent more likely).
These results are well illustrated at Akbank, one of the leading banks in Turkey. It launched a centralized customer relationship management (CRM) system to support its customer experience strategy, and within six months of the implementation, it had sold 500,000 new products, increased its customer base by 200,000, gained €2.2 million in gross profits, and cut €3.5 million in service costs.
Premium Pricing
To truly optimize relevant, highly valued experiences, companies need to understand which experiences customers are actually willing to pay for, Diamond Advisory Services/PricewaterhouseCoopers’s D’Alessandro says. This means knowing not only how highly customers value attributes such as accessibility, trust, and innovation, but also whether are they willing to pay for them. “Companies need to get to a point where they know the actionable things to tackle and the economic return,” he says. According to a recent Strativity Group survey, 29 percent of loyal customers who feel that they’re getting a superior experience are willing to pay premium prices of 10 percent or more, whereas 66 percent of dissatisfied customers expect discounts of 5 percent or more if they are to continue doing business with a company (see Figure 6.2).
Customer Retention
When a customer encounters a problem, there is an average 20 percent drop in loyalty, Goodman tells us, which varies depending on the type of problem. (For example, a torn package might be 2 percent, while infestation of a food item would be 70 percent.) In the average market, for every five customers with problems, you are likely to lose one of them—along with that customer’s revenue. On the flip side, if you can prevent or fix five problems, you will retain one customer (and his revenue) that otherwise would have been lost, he says.
FIGURE 6.2: Financial Rewards
In a recent survey, consumers clearly stated that superior customer experience delivers superior financial results.
* Base: 930 consumers in North America, 2010.
† Base: “Dissatisfied customers” are those who give a ranking of 1 to 3 for “likelihood to recommend the company to others.” The base in this case is 62 respondents.
Source: Strativity Group, in partnership with Customer Service Experts Inc.
D’Alessandro cites similar statistics. In the insurance industry, normal churn is about 9 percent, he says. But according to a study that Diamond Advisory Services conducted, that jumps to 17 percent if a customer has one bad customer experience or, more specifically, a “moment of truth.”
According to the Convergys study, there is a 57 percent attrition rate among customers who reported a bad experience and received no response vs. a 30 percent attrition rate among customers for whom the issue was resolved.
Improved Reputation
On average, twice as many people will hear about someone’s bad experience as will hear about her good experience. This outcome is even more dramatic on the Web, where four times as many people hear about a negative experience than about a positive experience, according to Goodman.
Reduced Costs
In some cases, a shift to customer-centric processes can create efficiencies that translate into reduced costs. At Comcast, Eliason helped the company create an online forum where customers could help one another with troubleshooting. The cost savings of this can be extended if you take that peer-to-peer support information and create a knowledge base for your phone agents, he says.
“Typically each month, the Comcast help forums have 14.5 million visitors, and if 80 percent are taken care of in the forum, how many calls does that avoid?” Eliason tells us. “Even conservatively, at $8 per phone call, there are huge savings in just one month.”
Twitter monitoring also pays off here: “We can predict what’s going to happen before the call center has a clue,” Eliason says. For instance, during a 2010 outage that affected several East Coast cities, people began tweeting about it immediately. Comcast was able to respond instantaneously with a tweet providing followers with an estimated time when the outage would be fixed, as well as follow-up tweets reporting on its progress, says Rick Germano, senior vice president of national customer operations at Comcast. This significantly cut back on calls to the call center and long waits in queues. All told, as we mentioned in Chapter 2, Comcast reduced its service calls by four million in the first four months of 2010 vs. 2009 because of its social media monitoring and follow-up response, which has translated into reduced operating expenses, according to Germano.
Smith+co’s Shaun Smith also points to Progressive’s mobile claims assessors. This program cut the administrative cost of claims processing and reduced the amount of an average settlement because people are willing to accept less when they do not have to wait longer.
Another example is CEMEX USA. When CEMEX determined that ontime delivery was its customers’ top priority, it revamped its processes and centralized its business applications to ensure that it could meet that expectation. This involved increasing the visibility of its delivery operations, streamlining its bill of lading process, installing cameras on its truck loading docks, and setting system alerts when delays were likely. The result: it has boosted order accuracy from 92 percent to 99.9 percent. Thanks to efficiency improvements and incremental sales as a result of the initiative, CEMEX has achieved an ROI of 30 percent. It has also lowered costs, as the customer care center now manages 29 percent more volume with the same headcount as before the implementation. (For more on CEMEX USA’s customer experience initiative, see the case study in "Adding Disruptive Technologies to Advance the Game".)
Meanwhile, Synopsys attributes many cost efficiencies to its focus on the customer experience, including a reduction in the amount of time its application consultants spend on reactive support from 33 percent to 20 percent. This enables the company to shift its support to more accessible channels and leverage a broader global talent pool. (For more on Synopsys’s customer experience initiative, see the case study in "B2B Customer Experience: Different Animal, Same Spots
".)
Building a business case for customer experience initiatives is something that many companies overlook, as it is all too easy to get caught up in thinking that the end goal is simply “delivering a better customer experience,” without the business goals baked in. In addition to establishing your financial drivers, developing a successful business case also requires taking a macro look at your business. Customer experience delivery affects every aspect of your business, from cost of sales and marketing, to returns and renewals, to upselling and cross-selling, to market share and the overall profitability of your company. So don’t aim for the trees and miss the forest. Mistaking customer experience for a sales force automation initiative or an interactive voice response (IVR) or Web self-service implementation can turn out to be a very costly error that can seriously impede if not torpedo your customer experience edge.
Notes
Quoted material that is not referenced is from personal interviews.
1. Bloomberg Businessweek Research Services survey, 2010.
2. Shaun Smith, “The Eight Brand Traits Separating the Best from the Rest,” mycustomer.com, March 7, 2011,
http://www.mycustomer.com/topic/customer-intelligence/shaun-smitheight- brand-traits-separating-best-rest/121029.
3. “Why Is 37Signals So Arrogant,” blog post, Don Norman’s jnd.org,
http://jnd.org/dn.mss/why_is_37signals_so_arrogant.html.
4. “Tesco: A Case Study in Supermarket Excellence,” Coriolis Research, July 2004,
http://www.coriolisresearch.com/pdfs/coriolis_tesco_study_in_excelle nce.pdf.
5. Bruno Aziza, “Learn How a Major Retailer Boosts Customer Satisfaction,” MSDN blogs, February 11, 2011, http://blogs.msdn.com/b/bi/archive/2011/02/07/learn-how-a-majorretailer- boosts-customer-satisfaction.aspx.
6. “Tesco Shines at Loyalty: An Interview with Clive Humby,” CustomerThink, January 28, 2004, http://www.customerthink.com/interview/clive_humby_tesco_shines_at_loyalty.
7. Bruno Aziza, op. cit.
8. Sarah Shannon and Clementine Fletcher, “UK Market is ‘Challenging’ This Year, Retail Chiefs Say,” Bloomberg Businessweek, March 25, 2011, http://www.businessweek.com/news/2011-03-16/u-k-market-ischallenging-this-year-retail-chiefs-say.html.
9. “Progressive Reaches Concierge Levels of Claims Service Milestone with Opening of 50th Service Center,” Progressive press release, November 15, 2006,
http://www.progressive.com/newsroom/2006/november/akron-servicecenter. aspx.
10. Michael De Kare-Silver, “Does Investment in Digital Pay Back?” conference speech,
http://dekaresilver.com/downloads/speeches/digital_investment.pdf.
11. “Progressive’s Name Your Price Tool Aims for Cost Transparency,” Hartford Business.com, June 29, 2009,
http://www.hartfordbusiness.com/news9372.html.
12. E. J. Schultz, “Progressive’s Flo Thumbs a Ride with Drivers,” Advertising Age, March 14, 2011,
http://adage.com/article/news/progressive-s-flo-thumbs-ride-snapshotdevice/149367/.
13. “Progressive Says February Income Rose 16 Percent,” CNBC, March
16, 2011, http://www.cnbc.com/id/42119304.
14. Megan Burns, “The Business Impact of Customer Experience, 2011” July 7, 2011.
15. Bill Doyle, “Customer Advocacy 2011: How Customers Rate U.S. Banks, Investment Firms, And Insurers,” Forrester Research Inc., March 8, 2011.
16. “Cultivating Super Loyalty,” Convergys survey, 2010, http://www.convergys.com/insights/research/downloads.php.
17. Lance Whitney, “Major Outage Hits Comcast Customers,” CNet, November 29, 2010, http://news.cnet.com/8301-1023_3-20023949-93.html.
18. Elizabeth Glagowski, “CEMEX USA Constructs a Concrete Competitive Advantage,” 2011 Gartner & 1to1 Media CRM Excellence Awards,
http://www.1to1media.com/downloads/2011_Gartner&1to1Awards.pdf.
Bibliography
1. Lior Arussy, Customer Experience Strategy: The Complete Guide from Innovation to Execution (Strativity Group, Inc., 2010).
Arussy provides a practical soup-to-nuts blueprint for understanding what the customer experience is, determining how to measure current experiences, and coming up with an action plan for developing greater customer experiences.
2. Shaun Smith and Joe Wheeler, Managing the Customer Experience: Turning Customers into Advocates (London: FT Press, 2002).
The authors offer practical advice on how companies can build the power of the brand, not through advertising, but by the experience and value that they offer their customers. The book provides analysis and concrete methods for increasing loyalty and advocacy in customer experience in a targeted way.
3. Shaun Smith and Andy Milligan, Bold: How to Be Brave in Business and Win (Philadelphia: Kogan Page, 2011).
This book highlights 14 businesses that illustrate what the authors say is necessary to stand out in business today: putting purpose before profit, going beyond what customers expect, and relentlessly differentiating.
4. John A. Goodman, Strategic Customer Service: Managing the Customer Experience to Increase Positive Word of Mouth, Build Loyalty and Maximize Profits (New York: AMACOM, 2009).
This book focuses on the strategic alignment of customer service with overall corporate strategy. It draws on research from the author’s work with the likes of Chik-Fil-A, USAA, Coca-Cola, FedEx, GE, Cisco, Nieman Marcus, Toyota, and Cisco Systems. It includes both case studies and formal research. Many aspects of conventional wisdom are challenged with hard data that show how any company can increase loyalty, win customers, and improve the bottom line.
5. Patricia Seybold, Outside Innovation: How Your Customers Will Co-Design Your Company’s Future (New York: HarperCollins, 2006). Seybold explores how businesses can unleash innovation by
inviting customers to co-design what they do and make.
6. Denis Pombriant, Hello Ladies: Dispatches from the Social CRM Frontier (lulu.com, 2010).
7. Paul Greenberg, CRM at the Speed of Light, 4th ed. (New York: McGraw-Hill, 2009).
Greenberg reveals best practices for a successful social CRM implementation and provides examples of the new strategies for customer engagement and collaboration being used by cutting-edge companies, along with expert guidance on how your organization can and should adopt these innovations.
8. Seth Godin, Purple Cow: Transform Your Business by Being Remarkable (New York: Portfolio, 2009).
Run-of-the-mill TV commercials and newspaper ads are no longer effective for reaching consumers because consumers are tuning them out. So you have to toss everything and do something remarkable, the way a purple cow in a field of Guernseys would be remarkable, according to Godin. He uses examples of companies including HBO, Starbucks, and JetBlue to illustrate new ways of doing standard business with measurable results.
9. Frederick Reichheld, The Ultimate Question: Driving Good Profits and True Growth (Boston: Harvard Business School Press, 2006).
Reichheld argues that customer satisfaction is more important than any other business criterion except profits and that the best measurement of customer satisfaction is whether you would recommend a business to a friend—the foundation of the widely used net promoter score.
10. Tony Hsieh, Delivering Happiness: A Path to Profits, Passion, and Purpose (New York: Business Plus, 2010).
The CEO of online shoe giant Zappos, Hsieh details his rise from Harvard student entrepreneur to the creator of a hugely successful brand. Customer service became the focus of the start-up retailer, even when funding dried up. The book recounts how Zappos survived, eventually being acquired by Amazon for more than $1.2 billion in 2009.
11. Jim Joseph, The Experience Effect (New York: AMACOM, 2010).
Joseph focuses on how to create “the experience effect,” which is a combination of marketing message, advertising, sales approach, website, interaction with company personnel, and more.
12. Brian Solis, Engage! The Complete Guide for Brands and Businesses to Build, Cultivate, and Measure Success in the New Web, rev. & updated (Hoboken, N.J.: Wiley, 2011).
Solis’s updated primer focuses on how to use social media to succeed in business. Learn about the psychology, behavior, and influence of the new social consumer, and define and measure the success of your social media campaigns. It features a foreword by actor Ashton Kutcher, who has more than five million followers on Twitter.
13. Bernd H. Schmitt, Customer Experience Management: A Revolutionary Approach to Connecting with Your Customers, (New York: Wiley, 2003).
Schmitt examines how customer experience management increases growth and revenues and remakes companies’ image and brands. The book offers a five-step approach to customer experience to connect with customers at every touch point, and offers case studies in various B2B and consumer industries.
14. Gerald Zaltman, How Customers Think: Essential Insights into the Mind of the Market (Boston: Harvard Business School Press, 2003).
Zaltman, a Harvard Business School professor, says that about 80 percent of all new products either fail within six months or fall short of their profit forecast. The reason? A disconnect between the customer experience and the way marketers collect information about how customers view their world. Analysis, success stories, and advice on rethinking marketing approaches are included.
15. Joseph Pine and James Gilmore, The Experience Economy: Work Is Theater and Every Business a Stage (Boston: Harvard Business School Press, 1999).
The authors make a case for focusing on the service economy and learning “to stage a rich, compelling experience” by adding service to differentiate products.
16. Chip Bell and John R. Patterson, Take Their Breath Away: How Imaginative Service Creates Devoted Customers (Hoboken, N.J.: Wiley, 2009).
A comprehensive look at what it takes to keep customers in today’s market as well as gain new customers. The book provides real-world examples of how 12 brands create customer practices leading to “irrational loyalty,” and explains how these techniques work and how to implement them.
17. John R. DiJulius, What’s the Secret? To Providing a World-Class Customer Experience (Hoboken, N.J.: Wiley, 2008).
An inside look at world-class customer service strategies at top companies, such as Disney, Nordstrom, and Ritz-Carlton. The book provides steps, best practices, and service standards needed to build a customer service machine that consistently delivers.
18. Jeanne Bliss, Chief Customer Officer: Getting Past Lip Service to Passionate Action (San Francisco: Jossey-Bass, 2006).
The author offers advice to companies that think they’ve committed to customer experience but haven’t.
Resources
1. Ashwin Nayan Rai, “From Brick to Click: E-Commerce Trends in Industrial Manufacturing.” Cognizant Technology Solutions, 2010, http://www.cognizant.com/InsightsWhitepapers/From-Brick-to- Click.pdf.
2. “Customer Experience Boosts Revenue,” Forrester Research, Inc., June 22, 2009.
3. “The State of Customer Experience, 2010,” Forrester Research, Inc., February 19, 2010.
4. “Three Secrets of Success for Customer Experience Organizations,” Forrester Research, Inc., April 29, 2010.
5. “What Is the Right Customer Experience Strategy?” Forrester Research, Inc., September 28, 2010.
6. “The Six Laws of Customer Experience: The Fundamental Truths That Define How Organizations Treat Customers,” Temkin Group, July 2010.
7. “Profiling Customer Experience Leaders,” Temkin Group, September 2010.
8. “The Evolution of Voice of the Customer Programs,” Temkin Group, September 2010.
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10. “2010 Customer Scorecard Series,” Convergys, 2010.
11. “Q1 2010 Customer Experience Tracker,” Beyond Philosophy, 2010.
12. “Social CRM: The New Rules of Relationship Management,” Altimeter Group, March 5, 2010.
13. “Empathica Consumer Insights Panel: 2010 Year in Review,” Empathica, 2010.
14. “2010 State of Marketing,” CMO Council and Deloitte, 2010.
15. “Global Consumer Research Executive Summary 2010,” Accenture, 2010.
16. “Worldwide CRM Applications 2010–2014 Forecast: First Look at a Market in Recovery,” International Data Corp., May 2010.