Customization Corporation Licensed to Right-on Technologies for Distribution Executive Summary Nearly 25 years ago, Jan Carlson engineered a turnaround at Scandinavian Alertness by improving “moments of truth” in passenger interactions with the airline. Since then, mostly concerned with how to market to customers and get value from them, often with IT-based strategies. But largely forgotten was the insight that Carlson understood intuitively: Customers perceive value based on the experiences they receive. These days, it seems the phrase “customer experience” is on the lips of every racketeer and business consultant.
And really, it’s not a moment too soon. All too often, we’ve seen executives pay lip service to the customer while gearing their business to short-term payoffs. But in this age of customers empowered with global shopping carts, that won’t cut it. Colic Shaw, founding partner of Beyond Philosophy, and John Evens argue that customer experiences are critically important. “We are witnessing the first ripples of a fast approaching new wave of change, breaking upon the shore of a new business differentiator,” they write in their 2002 book Building Great Customer Experiences (Palaver MacMillan).
Think about your own behavior. While using Struck as your remote office, you sip on a tall latte and catch up on email. When you travel, you rent your car from Enterprise Rent-A-Car and stay at Marriott hotels;brands that fulfill their promise to you. When you get a free weekend, you head for the open road on your Harley. You listen to music on your pod. You buy DVD’s, kids’ toys, clothes, electronics and, Oh yes, books at Amazon. Com. These firms know the secret to building loyalty and growing your business. Why?
Because they make a connection with customers that transcends the basic functional value they offer. Unfortunately, such stellar experiences are not the norm. In Guru’s survey, only 22 percent of customers agreed that companies “currently provide an excellent customer experience” in major industries like banking, air travel and electronics. The silver lining, though, is that companies that excel can build a more sustainable competitive edge based on an emotional bond. But what is the “customer experience” and how can you tap into it?
What is Customer Experience Management and how does it relate to Customer Relationship Management? And why are so few businesses focusing on the customer experience, let alone managing t well? In this paper, we’ll discuss the customer experience from the point of view of the customer, based on Guru research conducted in April 2006. In a second paper, we’ll analyze CHEM.. From the enterprise perspective, and highlight performance gaps and methodologies to improve customer experiences while driving loyal and profitable relationships. Consider what customers had to say in our recent survey.
Some key findings include the following: In earning their loyalty, customers rate their quality of interactions with an organization as equally important to the quality of the goods or services purchased. Off-shoring and IVR initiatives, popular methods to cut the cost of customer interactions, have not improved customer experiences for more than 90 percent of survey respondents. In contrast, investing in employee training and Internet-based sales and support has generally had a more positive effect, improving customer experiences more than a third of the time.
Post-sales service/ support activities are the most likely to generate a “memorable” experience, either positive or negative, because of the strong emotions that often result in problem situations. Memorable experiences build loyalty;31 percent of customers in the revue recommended the company to a friend or colleague, and 19 percent increased their purchases. “Well-trained and helpful employees” is the top attribute of 2006 Customer Think Corporation Licensed to Right-on Technologies for Distribution What Is Customer Experience Management?
To manage customer experiences, you must first understand what “customer experience” means. It’s almost as difficult to pin down as “customer relationship. ” “Customer Experience” and “Management” Defined Experts interviewed for this paper offered many different definitions, but virtually all agreed that customer experiences included interactions with an organization’s people, processes or systems. Some said experiences also included interactions with a product. And others said that experiences included the feelings or emotional responses generated by the interactions.
Customer perception seems at the heart of what a customer experience is about, so we asked Guru survey respondents for their perspective. When asked to pick from a list of expert definitions, nearly 50 percent chose: “The sum of all my interactions with a brand’s products, services and people. ” But one respondent highlighted the importance of human perception in this write-in definition of customer experience: “The feelings and thoughts resulting from all impressions, tangible and intangible, from anyone or anything representing, directly or indirectly, an organization, brand or product. Well said. Customer experiences include every point in which the customer interacts with your business, product or service. For the Struck customer, for example, it includes the anticipation of going to Struck, walking up to a shop, opening the door, ordering and paying for the coffee, getting the coffee, sitting down in the atmosphere of the shop to enjoy the coffee. Each interaction point is what ASS’ Carlson would call a “moment of truth. ” That’s the point at which your customer is engaging with your brand and at which you can make or break the relationship. Note: This paper was written with the help of a few event lattes and apple fritters served up at the local Struck! ) For the purposes of this white paper, our definition of customer experience is: The customer’s perception of interactions with a brand Let’s break that down to understand it more clearly: “Perception” is critical, because unless the customer thinks or feels that something happened, it hasn’t. And perception can include the emotional aspect of the interaction.
An “interaction” could mean literally anything from viewing a marketing message to the actual use of a product or service to a post-purchase service/support activity to solve a problem. Finally, “brand” means far more than a logo or marketing communication. In the customer’s mind, the brand is a symbol for the organization and a promise to be fulfilled. Customer Experience Management, therefore, is simply managing customer experiences. That was easy! But this begs the question: To accomplish what?
A more useful definition of CHEM.. Is: Managing customer interactions to build brand equity and improve long-term profitability perceive and value experiences. “It is important to note that customers intuitively judge the experiences they receive. That is, they often are not able to consciously point out why an experience resonates with them, but they know when it works or, conversely, when it doesn’t,” says Calf Dibbled, director of thought leadership and vice president for Beyond Philosophy, the London-based customer experience advisory and consulting firm.
Copyright 2006 Customer Think Corporation Licensed to Right-on Technologies for Those “soft” responses are what set Customer Experience Management (CHEM..) apart from most other business strategies. They can’t easily be quantified by numbers and technology. It’s also what some would say differentiates CHEM.. From CRM, Customer Relationship Management. When it comes to defining CHEM.., you can view it as an extension of CRM as a strategy, paying particular attention to the customer’s emotion and considering the product itself as an experience.
How CHEM.. Relates to CRM Customer Relationship Management (CRM) is a business strategy to acquire, grow and retain profitable customer relationships. In previous research on Guru. Com, we found that more than 80 percent of business managers seem to understand that CRM is a customer-centric way of doing business, not Just technology to automate front-office processes. Managing customer experiences is an integral part of what CRM should be;a win-win value exchange between a company and its customers.
Loyal customer relationships are built on what the customer perceives and feels about the product/service purchased and interactions with the organization. At a fair price, of course. Says CRM industry veteran and CSS Insights’ partner Barry Trailer, CRM and CHEM.. Are really synonymous, if you look at CRM as a business strategy, rather than Just technology. ” Yet, the reality is that some people do equate CRM with technology used for tactical automation projects, and many of those consider it technology that hasn’t always made a business successful. (Guru’s research has found that about two-thirds of IT-focused CRM projects are successful. So in some minds, the term Customer Relationship Management has become tainted and must be avoided, while Customer Experience Management is another name for a customer-centric strategy without any stigma attached. Others see Customer Experience Management as an extension of CRM to provide a true customer focus. “At its highest level, CRM defines what the company wants from the customer relationship and gathers the information and insight that is analyzed against products and service to find optimum opportunities to sell,” according to David Range, managing director of Round (U.
K. ) Limited. “CHEM.. Is the mechanism by which the customer is engaged to optimize the potential customer loyalty and long-term value that is defined by CRM. The customer experience is the emotional part of any and author of Passionate & Profitable (Wiley, 2005), agrees that CHEM.. Is about managing the value proposition as the customer perceives it,” while CRM is concerned with “maximizing the revenue and value to the company. ” Of course, loyalty research tells us that there is a linkage between the customer’s perceived value and loyalty and the company’s revenue and profits.
But in practice, too many companies focus more attention on the ends (revenue and profit) and ignore the means (the customer’s value proposition). “Organizations think CRM will create the customer experience for them, but it’s Just a tool,” author Shawn Smith, director of the London-based gunsmith+co, told us. Customer Process Improvement Many find CHEM.. To be an organizational strategy for managing customer interactions. HP, for instance has placed customer experience high on its organizational chart, with a department dedicated to Total Customer Experience.
Its research director, Katherine Armstrong, calls CHEM.. A “designed and structured approach to planning and managing the customer experience end to end. ” In such cases, the business takes an active role in managing customer interactions, including setting expectations to protect the brand value. If you define CRM, at least in part, as a method of customer process improvement (technology-based or otherwise), then you’ll see plenty of overlap between CRM and CHEM.. In our recent survey.
Copyright 2006 Customer Think Corporation Licensed to Right-on Technologies for Distribution 3 The quality of the actual product or service being purchased is still critical, to be sure. However, as you can see in the following chart, the quality of sales, purchasing and service/support activities received a significant percentage (ranging from 58 percent to 66 percent) of high importance ratings. Marketing communications were not rated highly, but keep in mind that marketing messages are one way in which companies make promises that they have to keep.
Factors in Earning Loyalty How important is the quality of each of these activities in earning your loyalty? Product or service 84% Sales interactions Purchasing process 62% Service and support 58% Marketing communications 0% 20% Percent High Importance (Top 2 Box) Emotions and Experiential Products Is there any real difference between CRM and CHEM..? Yes, in two areas. CRM is usually more clearly focused on customers’ value to the enterprise. There’s nothing wrong with that;businesses exist to make money, and customers are valuable assets that require varying levels of attention and investment.
But CHEM.. Brings in the new dimensions of customer emotions and experiential” products (a type of product innovation), both of which are value that customers receive from the enterprise. Classic CRM projects rarely consider such things. “Ata broad level, [CRM and CHEM..] are similar,” said Berne H. Schmitt, professor of international business at Columbia University and author of five books, including Experiential Marketing (Free Press, 1999) and Customer Experience Management (Wiley, 2003). To Schmitt, CRM is supposed to focus on customer loyalty and making sure customers are treated well.
To that end, businesses can turn to their CRM systems to find out whether the contact center treated customers well, annotated them when they wanted to be contacted and fixed a problem. But, Berne says, CRM falls short of the emotional connection that is at the heart of Customer Experience Management. “l would say CHEM.. Is a bit broader. I don’t think people will talk about the aesthetic aspects of the product or design [when talking about CRM], but that’s part of the experience. ” Beyond Philosophy Dibbled agrees. Where CRM had to be in large part inside-out in perspective (I. E. , viewing the company from the inside) to begin to set a foundation for customer-centric action within the business, CHEM.. Is outside-in (I. E. Viewing the company from the point of view of the customer) to make certain that the actions of the business resonates with customers in a positive way. ” 4 Step Back and Stop Managing Some people are so emphatic about the importance of looking at the business from the customer’s point of view that they cringe at the reference to “management. Paul Greenberg, author of CRM at the Speed of Light: Essential Customer Strategies for the 21st Century, (3rd Edition McGraw-Hill, 2004), and a big proponent of focusing on the customer experience, warns against approaching that experience as something you can “manage. ” “What the customer deeds is to manage their own experience; they don’t need to have it managed for them,” he says. Instead, you must examine the customer and his or her experience with your business carefully, mapping out every point at which the customer touches out.
As Range of customer-experience specialist Round says, “Customer Experience Management attempts to define how all the customer management capabilities within an organization, such as the brand, marketing, business rules, processes, decision-making authority, training, employee engagement customer data and metrics, etc. Combine to influence the customer experience. ” Yin and Yang Previous Guru-sponsored studies have found that customer-centric planning;taking an outside-in approach;is the No. 1 driver of CRM success.
The emergence of CHEM.. Brings new focus to the battlemented task of examining the customer value proposition. Customer strategy expert Jim Barnes believes that you shouldn’t neglect some basic principles of CRM when you turn to Customer Experience Management. “Maybe we should approach CHEM.., as we should CRM, from the customer’s viewpoint. What will customers consider a genuine positive experience? I believe it will have to appear genuine, not staged or synthetic. ” Put it all together, and it seems the CHEM.. ND CRM have more in common than differences. After all, relationships are developed through a series of experiences over time.
Perhaps we can sum up by saying that CHEM.. And CRM are the Yin and Yang of customer-to-business relationships. The Yin-Yang concept originates in ancient Chinese philosophy and describes two primal opposing, but complementary, forces found in all things in the universe. There’s no record about whether the Chinese found it necessary to turn every concept into a Three Letter Acronym (TLA). Whether you’re a fan of the latest TLA or not, what you should take away from CHEM.. Is the imperative to find out how experiences drive the customer to;or, heaven forbid, from;your business, service or product.
Then use that knowledge to build an emotional attachment between the customer and your brand. A relationship, even. 5 How Important Are Experiences to Your Customer? Customer Experience Management is a method of increasing customer loyalty, a daunting task as more products and services become commodities in today’s global economy. Loyalty can increase your bottom line, because loyal customers buy more, stick around longer and refer others. Not surprisingly, CHEM.. Proponents claim it will help turn customers into “raving fans” or advocates.
Like members of the Harley- Davidson Owners Group (who call themselves, appropriately, HOGS), people who are so passionate about your product or service that they get tattooed with your logos. In Guru’s April 2006 online survey, more than 600 respondents gave 2,000 industry ratings based on their own experiences. We asked respondents to rate the importance of three factors in earning their loyalty, using a seven-point scale. Across 12 industries, nearly 80 percent of respondents give “hightail interactions” and cost of ownership” received only 31 percent of high importance ratings.
Loyalty Drivers by Industry To earn your loyalty in this industry, how important are these factors? All Responses (n=2,OHO) Airline Automobile Banking Car Rental Department Store Electronics Fast-Food Restaurant Fixed Line Telecoms Full-Service Restaurant Grocery supermarket Hotel Wireless Telecoms 77% 78% 83% 82% 76% 74% 77% 77% 76% 63% 35% 24% 34% 25% 42% 100% 75% 85% superstore product or service High-quality interactions w tit people and systems Low est.. Price or cost of owe ownership 35% 24% 6 As you might expect, there were differences between industries.
Banking and fixed- line telecoms customers rated interactions higher than product or price. In banking, of course, the main product is money;the perfect commodity. As many telephone customers are locked into service and pricing, company interactions rise in importance. It’s not clear how one can be truly “loyal” to a monopoly, however. Not surprisingly, customers of full-service restaurants rated both the product (food) and interactions highly, and price was tied for the lowest importance. Automobile customers provided quite similar ratings.
Wireless customers rated price the most important of all industries, but product/service and interactions were also average or higher. One surprise: electronics. All three dimensions were scored lower than average. Possibly, this simply means that it’s harder to earn gizmo shoppers’ loyalty, no matter what the manufacturer does. Barnes says that, since the customers’ principal contact is with the product, they are “most likely to define experiences as involving some form of contact with people. ” High-Quality Interactions Drive Loyalty These findings suggest that companies should not lose focus on providing competitive products or services.
But winning the hearts and wallets of customers requires equal attention to the quality of interactions between a company and its customers. This may be obvious in service-intensive industries like airlines or financial services, but as noted earlier, even customers of product-focused industries like electronics place significant value on interactions. Customer Experience Industry Trends Globalization and the Internet have created an abundance of goods and services, and it has become increasingly difficult to differentiate based on the core offering (functional capabilities) or price.
An IBM study in 2005 revealed that, “to the customer experience. ” Is CHEM.. Worth the effort? Author Smith and Joe Wheeler, ho co-wrote Managing the Customer Experience (2002, FT Prentice Hall), think so. They cite a 2000 study by Accentuate and Montgomery, which found that “if a $1 billion enterprise increased its investment in customer interactions from average to high, it could anticipate a $42 million return on investment. They concluded that ‘superior relationship management is worth half your bottom line. Customer Experience Management is valuable in any industry;and in both business-to-business and business-to-consumer relationships. Shaw and Evens of Beyond Philosophy cite their own research, which found that “85 percent of senior equines leaders agree that differentiating solely on the traditional physical elements such as price, delivery and lead times is no longer a sustainable business strategy. ” That’s why tuning in to the customer experience is so important.
Unhappy customers can bolt to a competitor;or simply stop using a service. All it takes is a computer browser set to any of the complaints sites on the World Wide Web to see the true story of how easy it is to irritate and lose a customer. “Because of one rude person you have put in charge, you no longer get that weekly cut out of my check, but you also have lost a very loyal customer who did ALL of their shopping, fueling and video rentals” complained one person on www. Complaints. Mom about a grocery store she used to patronize. Now angry, she was willing to pay more money to pump gas from the more expensive station across the street and travel farther from home for her groceries and videos. 7 How are companies doing today? In Guru’s survey, only 22 percent of respondents agreed that companies “currently provide an excellent customer experience. ” As you can see, more than half of respondents had no strong opinion en way or the other, and 18 percent had a negative response.
Full-service restaurants got the highest positive ratings and one of the lowest negative ratings. At the other end of the spectrum, fixed-line telephone companies earned the highest negative rating at 32 percent, perhaps an indication of the lack of competition in this industry. Electronics companies had the lowest positive rating, and the long-suffering airline industry fared only slightly better. Currently Provide an Excellent Customer Experience? All Responses (n=2000) Full-Service Restaurant Department Store Fast-Food
Restaurant Hotel Car Rental Wireless Telecoms Grocery Supermarket Fixed Line Telecoms Banking Automobile Airline Electronics 0% 59% 55% 100% Neutral Disagree 8 Experience and Cost Conundrum Over the past decade, business executives have been cutting costs with automation, off-shoring and, of course, the Internet. In recent years, as the economy has improved, attention has turned back to revenue growth and building loyalty;hence, the current interest in customer experiences. The problem is that some of these strategies may be in conflict;at least, in terms of how they are executed and perceived by customers.
We asked Guru survey respondents to rate their agreement on whether, based on their own personal experiences, they believed that employee training, Internet sales/support, off-shoring and Interactive Voice Response (IVR) had improved customer experiences. Their reactions were dramatically different. As you can see in the chart below, customers believe that “well-trained people” and “Internet sales/support” have had a positive impact a bit more than one-third of the time. Only 15 percent had a negative outlook. Have Companies Improved Customer Experiences? With w ell-trained people 36% With Internet sales/support 34%
