What is a company’s true source of value? Is it the products they make or the customers who use them? Yeah, it’s the customers.
So why then do otherwise smart people consider Customer Experience as anything less than critical to their business?Consider the Wall Street-defying announcement Amazon recently made that caused Michael Hinshaw to declare on the MYCustomer blog,“When an incredibly successful, Fortune 100 company says customer relationships matter more than short-term profits, it should inspire us.”
This is a story about leveraging digital innovation to deliver customer delight.
In my experience, the senior executives who understand Customer Experience and are running with it tend to be visionaries. They see where business is headed and how very much it has changed in the last three years alone and they welcome that challenge. They see traditional mass marketing being replaced by active relationships with their customers that are very, very different from the way they were doing business yesterday and they embrace that change. And perhaps most importantly, they are making the correlation between the experiences customers have today and business performance and the line of sight to increased marketshare and share of wallet.
Here is why I say these people are visionary, one of the biggest challenges in implementing a Customer Experience strategy is that many of the benefits are long term and these are different days for businesses. Consumers? People don’t consume a brand, they join it and that means developing a relationship…and that takes time. But these changes are necessary if a company is going to succeed and thrive in the years to come and they can see that but many others do not, or are at least, resistant to change.
This means that these senior executives boldly state that their strategy is not going to yield business results this quarter and that is often a difficult message. (Think of Jeff Bezos’ stunning declaration that he is willing to forgo short term profits for a richer customer relationships). But the value of customer experience is not unlocked by simply looking at the number of widgets sold in any given month. Increasing marketshare and share of wallet through Customer Experience is a strategic initiative and it is important to understand that results will occur in the future, perhaps one or two years out, and build that expectation into the financial models.
So, is it all worth it? In a word, yes. In the recent report, “The ROI of Customer Experience” [PDF] by Peppers & Rogers and TeleTech, they report that the business impact of Customer Experience can be enormous. Fred Reichheld, a Fellow at Bain & Company who helped develop the Net Promoter Score (NPS), has found that a 5 percent improvement in customer retention can yield between a 20 percent and 100 percent increase in profits across a wide range of industries.
In the same report, Mark Grindeland, SVP and Chief Marketing Officer of TeleTech says, “Companies that are able to differentiate the customer experience and generate related business performance improvements are the ones that will win in the future.”
In the book, “Outside In: The Power of Putting Customers in the Center of Your Business”, proof is offered for the financial wisdom of pursuing a strong customer experience strategy, “Customer experience is, quite simply, how your customers perceive their every interaction with your company. It’s a fundamental business driver. Here’s proof: Over a recent five-year period during which the S&P 500 was flat, a stock portfolio of customer experience leaders grew twenty-two percent. In an age when customers have access to vast amounts of data about your company and its competitors, customer experience is the only sustainable source of competitive advantage.”
And, of course, there is this compelling evidence from Watermark Consulting’s 2013 research that shows that Customer Experience leaders outperform the market.
These are the business leaders who are creating Customer Journey Maps and Experience Maps to assess where the areas of improvement are. These are relatively inexpensive activities of looking at their own organizations from an outside-in perspective of a customer. This work is very strategic and provides a clear roadmap of where customer experiences need to be transformed and business processes optimized to increase market share and share of wallet.
“The ROI of Customer Experience” tells about how Federal Express has succeeded in linking improvements in customer experience to increases in financial outcomes. (Not surprising that a logistics company would be amongst the first to figure this out). As part of a multi-year transformational customer-centric journey, FedEx has devised its own methodology around the economics of customer behavior and has assigned managers to different customer segments where they are responsible for growing the value of those customers. It states that, “FedEx has ben able to draw upon a variety of customer, channel, and operational information, including customer feedback, to make improvements to its customer experience across the various channels it supports…FedEx used a customer value database and an integrated Web platform to deliver more relevant messaging to small business executives. While the average U.S. company has a NPS of 15, FedEx finds itself in elite company with customer experience leaders like Apple and Costco, whose NPS numbers are consistently higher than 50.”
In Bob Garfield and Doug Levy’s new book, Can’t Buy Me Like, the authors make a deft observation about marketing that revolves around the time honored “target audience”. They maintain that marketing is about relationships but a target is something that one shoots at and an audience listens passively. Not exactly representative of a relationship in the pervasively connected world of social media, is it?
Remember, people don’t consume a brand, they join it.
Getting back to those visionaries who see the value of customer experience in their business, how do they even get started course correcting their organization that is very often still operating like a mass marketer? Their role is that of a diplomat in many regards, speaking the language of a CMO but also the language of the CIO in order to deliver the ways and the means to deliver improved customer experience to increase marketshare and also share of wallet. Customer Journey Maps and Experience Maps are a good first step towards seeing their companies from a customer-centric, outside-in perspective. Often, they will find that there are efficiencies in customer experience between the silos, things that the business has heretofore been blind to but now possess new actionable insights.
Customer experience is very much an initiative that touches all levels of the organization and their customers and applies a careful blend of people, processes, and tools to gather and act on customer insights effectively. In doing so, they are positioning themselves to leapfrog their competitors by applying customer-centric business metrics and preparing their businesses for measurable success and that, in my book, is visionary.