A Leadership Perspectives White Paper

Transcription

1 A Leadership Perspectives White Paper Building Best-in-class Customer Experience Recommended next steps for business leaders Executive Summary If good customer experience makes for good business sense, then business programmes that strive to deliver really memorable positive customer experiences promise to take organisations into high-performing and/or high-profit market niches. What can business leaders do to drive their organisations into these winning positions?

2 Business case overview Customer retention rates are one of the most important key performance indicators of business success. So often the level of customer loyalty (and repeat business) is shaped by the quality and consistency of the customer experience. Yet fewer than 20% of executives currently believe their companies are best-in-sector in customer experience. As many as 60% of them hope to take their organisations to positions where they are considered best in their industry within 3 years, however. The reason is that the quality of the customer experience is a huge driver of retention and financial success. Behind it, is everything that relates to a customer s perception of an organisation or business, its products or services, its staff, its brand and its commercial or market proposition. Every customer touch-point is an opportunity for the organisation to improve customer perception, to improve the customer relationship, and to improve retention by securing customer loyalty. In business, 20% of the customer base generates 80% of the profits and loyal customers also offer the CFO the best prospect for growth as they are soft candidates for up-selling or cross-selling opportunities for new products and services. Customers of businesses considered to deliver better than the industry norm in customer experience (and in the top quartile) have been found to be 6% more likely to make additional purchases than their industry sector average. Understanding the value of focus: Customer Experience measures With market globalisation levelling the playing field of commerce, customer experience will increasingly shape an organisation s competitive position. While important, being able to compete on product functionality or price is no longer enough. It is a trend that was discernible back in 2003, when consultancy Beyond Philosophy found that 71% of business leaders viewed customer experience as the next competitive battleground. Today 95% of business leaders believe that it is in the arena of customer experience where commercial organisations will increasingly compete in the future, and where they have to look for market advantage. Currently, companies are generally poor at understanding and measuring the state of customer experience within their organisation. Those that do measure it understand that while they can work to improve customer interactions in isolated areas, they will not develop positions that give competitive advantage until their focus on customer experience has become embedded into their operating fabric. To gain a greater understanding of the challenges organisations face, one global services group commissioned 12 focus groups, and conducted as many as 2,400 detailed interviews with its customers in search of clues. These issues are worth exploring at the start of a customer experience performance improvement initiative: Consider the speed of the customer interaction. Consider the context of the customer interaction, and the motivations behind the engagement. Consider aspects of trust, confidentiality and security of the information that is provided by the customer, especially when an engagement involves the exchange of any data that is personal or sensitive in nature. Consider the price of value : setting a low price for a product or service should not equate with setting low expectations in the context of the customer experience. Consider the ease or simplicity with which a customer can engage with the organisation. This can often be the most important quality of a customer interaction.

3 Planning top-line growth through best-in-class customer experience Before starting out with any customer experience performance improvement plan, there are three guiding principles that will help the leadership team shape an effective change programme road map. 1. Directive number one define and communicate the goal. Agree on and communicate internally a clearly defined set of target customers. Agree on the strategic plan and communicate all the way across the organisation in clear and easily understandable terms exactly what is the nature of the customer experience the organisation is striving to deliver. So often, customer interactions with different parts of an organisation lead to a different customer experience. It is vital that everyone is on-message. It is imperative that front-line sales to employees in customer service, product development and marketing, to the CFO s back-office finance group, HR and IT groups all have the same understanding of what customer experience they are delivering. 2. Do not expect overnight success. These programmes can call for anything from major cultural and organisational change, to some minor refinement or modification of a specific business process. Either way, the perfect customer experience is not created in an instant. Like any business change programme, it will involve changes to people, processes and technology and this will clearly take time. Experts in the field advise scrutiny of operations from many dimensions, to consider the customer expectations around brand, channels to market, pre-sales and support, business processes, recruitment policy, quality of communication, etc. 3. Measure the right metric. Customer service levels, or customer satisfaction measures are not always the best indicators of customer experience. Experts in this arena urge that net promoter scores be adopted as the minimum preferred measure of customer experience and incorporated by the executive as a business KPI. There is a need to understand what drives the customer experience, and look at ways of developing views of the customer signature to measure the level of emotional engagement that a customer has with the organisation. As well as these, some progressive organisations will actively look for other sets of valuable customer inputs and operate Voice of The Customer or Customer Advisory Board programmes, which help link customer insights and customer experience measures into the operational process. These are strategic continuous improvement programmes which allow the executive team drive high-impact change initiatives. These incrementally enhance the customer experience, by helping fine-tune operations or new product/ service development plans, to take advantage of feedback and other customer insights. Du is one company in the region that is pioneering such initiatives. It has launched a series of leadership and customer programmes, with the aim of driving end-to-end customer experience enhancements which would be valued by its target customer segments. Its programme draws on some of the customer experience principles developed by

4 Beyond Philosophy, and which emphasises the need for: A clear set of customer service values. Well aligned operations, business processes and employees. Compelling brand values. End-to-end customer connections. One outcome of such a focus is a better understanding of what really makes customers tick. By evoking certain customer experiences and eliminating others, value can be created. More than 50% of what makes up a customer experience comprises aspects about how a customer feels. Does the experience leave them feeling fulfilled or frustrated? Inspired or hopeless? Satisfied or underwhelmed? Valued or exploited? Experts have found there are as many as 20 different customer emotions which can play out during customer interactions. Customers carry a so-called emotional signature, depending on how these play out. Each is linked to a positive or negative outcome and which connects directly or indirectly to revenue or cost. So it is vital business understands just what emotions it is trying to evoke with its customers, and whether those emotions are deliberate or whether they are consequential. There are said to be four separate states a company must pass through in its approaches to customer experience, taking it from naïve to natural. From being reactive to customer demands, to focusing primarily on the physical aspects of the customer experience, to where it orchestrates emotionally engaging customer experiences, and finally when the organisational focus on the customer is total and it uses specific senses to evoke planned emotions. Customer experience: greater than the sum of all of the parts When dealing with something as complex as customer experience and emotionally-driven consumer behaviours, it is next to impossible to understand the components behind those behaviours in isolation. Moreover, the whole experience needs to be considered against customer need. In the retail, hospitality and travel industries, the use of the mystery shopper is considered a highly valuable tool. It is a means of appraising the customer experience holistically, and within a framework that provides useful metrics against which the experience can be judged. These and many other sectors have also adopted the use of customer satisfaction scores, although this method is deemed poor at measuring experience against customer need. A major survey by a leading business performance improvement consultancy of 350 retail outlets across automotive, banking, mobile phone stores, and fast food and coffee shops in five Gulf states, revealed that retailers make a good first impression. Customers are happy with their clean stores, quick and polite service and short queues. However, customer expectations were found to be low. Mediocre service was scored as more than satisfactory simply because consumers had become resigned to low service levels and poorly trained staff. A preferred metric, increasingly recommended by expert practitioners and analysts, is the customer advocacy or net promoter score (NPS). NPS can predict whether overall customer loyalty will encourage a business to grow or not. The idea is alluringly simple. Take the percentage of customers who are highly likely to recommend others to become a customer (promoters), subtract those who are disinclined, indifferent, or only somewhat likely to make a recommendation to others (detractors): P (%) D (%) = Net Performance Score (%) A higher score leads to better top-line growth. Since the research behind NPS was first presented by Fred Reichheld in a 2003 Harvard Business Review article, it has been adopted as the platinum standard in customer satisfaction metrics. NPS involves much more than simply measuring scores, however. It is really much more about what an organization does in order to act on its customer feedback, making workflow and systems refinements to drive business performance. ebay, which has as many as 100 million buyer and seller customers and more than 16 million average daily listings, uses NPS to understand how to better handle the significant number of customer support requests it receives each day. The online auction house combines contact-volume and transactional-nps information to target areas for improvement. The areas are then addressed by cross-functional agile teams, charged with improving the handling of issues in the customer support organisation. More importantly, the teams work to prevent issues from occurring upstream, following-up with members to foolproof processes and bridge any gaps between customer service and the product, policy, and process sides of its business.

5 Technology support for customer experience Many businesses have by now already deployed customer relationship management systems. However, these record customer interactions as transactions, rather than tracking the complex relationships that exist between an enterprise and its customers. The increasing role and importance of online and social media-based customer interactions only further complicates this issue. These more nuanced customer interactions are not suitable for the transactional model. Newer technologies have emerged that do help organisations capture customer experience data at critical touch points such as point-of-purchase, during service delivery, and into aftersales support. These collection techniques are also flexible enough to optimise customer interactions over the web, by , IVR, SMS and telephone. Other software types integrate this customer experience data into a data warehouse of customer experience intelligence that can mined by business analysts. The applications are useful in the sales office, as they allow reporting by customer segments, region, by call centre, product line, sale agent, account, and so on. Use of this type of analytics and business intelligence software not only helps reduce customer churn and retention, but supports core business activities within customer management such as customer acquisition, customer upsell and cross-sell, customer lifetime value measurement and campaign management analysis. Going forward, analysts say that it will be the mobile experience that is likely to be the next customer experience frontier, with high-performers successfully engaging with the customer in the first few seconds of an interaction, and optimising the experience to ensure a consistent experience across this untapped channel. The coffee house chain of Starbucks is being held up as an example of an early adopter, having piloted social-media marketing and sales promotions, and introduced a scheme that allows loyalty card holders to pay in-store by their mobile phone. Its approach to mobile is one of the elements believed to have helped drive its recent quarter-on-quarter same-store revenue increases. Customer experience-oriented, business as usual Market watchers and economists maintain that experienceoriented businesses which focus on choreographing memorable events and interactions for their customers represent the next stage in economic evolution, following earlier periods of agrarian, industrial and service-oriented economies. The notion of the Experience Economy has been proposed and an era of mass customisation, as popularised by the Long Tail of the Internet Economy, where companies offer a customer experience which can become increasingly personalised. Again, Starbucks is said to be a prime example of this new generation of consumer-focused, experience-oriented business. The different prices the market is able to support for a handful of coffee beans compared with a jar of instant coffee versus a Starbuck s coffee, is evidence of the value customers place on increasingly refined customer experiences. Active participation EDUCATIONAL ESCAPIST Absorption Immersion ENTERTAINMENT ESTHETIC Passive participation

6 Charting the landscape of the Experience Economy In proposing the Experience Economy, Joseph Pine and James Gilmore outlined that four types of experiences will drive this new economy. The advice when designing and delivering a customer experience improvement programme, is that there is a need to consider how to theme the experience; how to harmonise the experience with positive cues and eliminate negative cues; how to mix in memorable events; and how to engage all of the five senses. It is important to accept that different customers will be looking for different experiences -even when the base product or service they are receiving is the same. Getting it right for each customer segment leads to excellent customer experience and business success. A poor customer experience - or offering a customer the wrong experience - will mean lost revenue. u Conclusions: A mandate for customer experience excellence Consider what customer experience best suits each target customer segment. Deliver the experience consistently, but appreciate the nuances of place and speed of the customer engagement, their chosen channel of interaction, the strength of the business relationship with the customer, and the customer s emotional signature. Agenda item 1 Embed customer loyalty and net promoter metrics into executive KPIs. Agenda item 2 Explore customer touch-point analysis and customer experience business flows. Agenda item 3 Look for specialist service provider expertise to smooth and/or enrich the customer experience journey across the quad-play business channels of web, call centre, mobile and interactive TV. This is the first in a regular series of Leadership Perspectives White Papers, produced by du marketing in association with Ovum, a preferred knowledge partner For more information, please leadershipseries@du.ae or visit We d like to thank Colin Shaw of Beyond Philosphy, who contributed to some of the themes explored in this Leadership PerspectivesWhite Paper.