Delivering a Preferred Customer Experience

Transcription

1 MARKETING LEADERSHIP COUNCIL Delivering a Preferred Customer Experience Annual Executive Retreat Sydney 18 August 2009

2 COPIES AND COPYRIGHT As always, members are welcome to an unlimited number of copies of the materials contained within this handout. Furthermore, members may copy any graphic herein for their own internal purpose. The Corporate Executive Board Company requests only that members retain the copyright mark on all pages produced. Please contact your Member Support Center at for any help we may provide. The pages herein are the property of The Corporate Executive Board Company. Beyond the membership, no copyrighted materials of The Corporate Executive Board Company may be reproduced without prior approval. LEGAL CAVEAT The Marketing Leadership Council has worked to ensure the accuracy of the information it provides to its members. This report relies upon data obtained from many sources, however, and the Marketing Leadership Council cannot guarantee the accuracy of the information or its analysis in all cases. Furthermore, the Marketing Leadership Council is not engaged in rendering legal, accounting, or other professional services. Its reports should not be construed as professional advice on any particular set of facts or circumstances. Members requiring such services are advised to consult an appropriate professional. Neither The Corporate Executive Board Company nor its programs are responsible for any claims or losses that may arise from a) any errors or omissions in their reports, whether caused by the Marketing Leadership Council or its sources, or b) reliance upon any recommendation made by the Marketing Leadership Council.

3 Deep recession has eroded the power of traditional commercial levers, leading marketers to focus on customer experience. New business pipelines have frozen as customers cut back on capital expenditures, ruling out reliance on new business as a commercial driver. Cost-conscious customers view product quality and reliability as table stakes and are unwilling to pay for nuanced product differences. LEFT WITH FEW DEVICES Potential Commercial Levers to Pull in Response to a Down Economy Acquiring New Customers Contribution to Profit, New Customers Product Improvements None of our customers are willing to pay for the product improvements they were asking us to fund three years ago.? SVP Marketing Medical Devices All Other Selling Strategies Personal Relationships Likelihood of Being a High Performer by Sales Rep Profile 23% 7% Relationship- Based Sales Source: Integrated Sales Executive Council research. Increased scrutiny into budgets and expenditures has put relationship-driven demand in jeopardy. B2B marketers are looking to customer experience to drive stronger commercial performance, especially with existing customers. Customer Experience In our industry no one makes a product that doesn t work we have to win on customer experience if we don t want to be the low-price player. 3

4 In recent years, B2B marketers have made notable advancements in customer experience management. DOWN THE EXPERIENCE PATH Advances in Customer Experience Management Voice of the Customer Audits Touchpoint Mapping Process Ordering Billing Services Remarketing Customer Services Customer Requirements (CTQs) Importance Level Customer #1 Meet Est. Delv. Date Timely Order Confirmation Timely Status Update Tag Before Exp. Date Timely Fuel Card Delivery Vehicle Maintenance Account Servicing Hold Time Knowledge and Consistent Answer Response Time Frequency of Mention Scores NA Segment A MarComm One-on-One Interactions Key Service Moments Relevant Research and Data Awareness $ Acquisition Service $ # # Best-in-Class # # Total # Priority Customer Experience Councils Net Promoter Score Metrics Sales Finance Ops Marketing Council Resources Voice of the Customer Audit Experience Storyboards Customer Experience Council Net Promoter Program Essentials 4

5 Customer experience efforts to date have provided questionable returns for many companies. UNREQUITED LOVE Assessments of Customer Experience Investments Investment Return Bain & Company Survey of 362 B2B Companies and Their Customers $? 80% of Marketers Believe They Offer a Superior Customer Experience 8% of Customers Agree Financial resources Staff time and effort Opportunity cost Political capital Source: Bain & Company. Where Do We Go Next? We know we ve made some progress to date, but I can t imagine that another 10% improvement to our Web site or a few seconds off of our call center response time will pay off we really don t know what to do next. SVP Marketing Banking Services 5

6 Marketers looking for the next opportunity to improve customer experience start from one of two perspectives: Touchpoints or Benefits. TWO EXPERIENCE LENSES Two Perspectives for Evaluating the Customer Experience Touchpoints How effective are we across the range of typical company-to-customer interactions? Benefits What benefits are we trying to deliver across the course of our customer experience? Example Touchpoints Example Benefits Customer service Technical support Online experience Day-to-day product use experience Sales interactions Product literature Marketing communications Is responsive to feedback Simplifies my supply chain Is easy to do business with Removes costs from my business Keeps my technicians productive Adapts to my unique needs Offers a great out-of-the-box getting started experience 6

7 The Council created a model to uncover successful approaches to customer experience management. WHERE DO WE REALLY NEED TO FOCUS? MLC Customer Experience Model The Council asked customers to evaluate the customer experience provided by member companies at two levels: Touchpoints Touchpoints Specific interactions between a customer and the company COMMERCIAL SUCCESS Customer Preference Do customers prefer us over our direct competitors? Benefits Customers were also asked a series of questions to measure: Benefits Perceptions we create across the customer experience Intent to Repurchase Do customers plan to continue buying from us in the coming year? Preference for a company relative to competitors Intent to continue buying from a company in the coming year Survey Population We surveyed customers of 15 B2B member companies regarding their experience with the member. Council analysis is based on more than 9,000 customer responses. The survey was administered to a broad cross-section of stakeholders within customer companies, including decision makers, end-customers, influencers, consultants, and procurement officers. Sample industries included: Business Software Financial Services Scientific Equipment Packaging Building Materials Chemicals 7

8 Benefits are much stronger drivers of preference and intent to repurchase than are Touchpoints. FINDING 1: BENEFITS OUTPERFORM TOUCHPOINTS Model Results: Relative Power of Touchpoints and Benefits Customer assessments of specific touchpoints are a marginal driver of their preference and intent to repurchase. Customer assessments of benefits are powerful predictors of both preference and intent to repurchase. Preference Strong Benefits Customer assessments of benefits have four times greater impact on preference and customer intent to repurchase than do touchpoint assessments. Benefits (e.g., responsive to my feedback ) Touchpoints Weak Touchpoints (e.g., customer service) Weak Customer assessments of specific interactions are a poor driver of both preference and customer intent to spend. Strong Intent to Repurchase 8

9 Both Common and Unique Benefits are important drivers of preference and intent to repurchase. DISTINGUISHING BETWEEN COMMON AND UNIQUE BENEFITS Model Results: Common and Unique Benefits Common Benefits Benefits that are relevant in almost any commercial relationship. Unique Benefits Benefits that are specific to an individual company s customer experience. Preference (e.g., responsive to my feedback ) Strong Both Common and Unique Benefits are powerful drivers of preference and customer intent to spend. Unique Benefits Common Benefits (e.g., simplifies my supply chain ) Weak Weak Touchpoints (e.g., customer service) Strong Intent to Repurchase 9

10 Focusing on highlypreferred companies allows us to understand how they approach customer experience differently. LEARNING FROM SUCCESS Distribution of Preference, 15 Member Companies Levels of customer preference differed dramatically across the 15 participating companies, with the top companies achieving levels of preference five times greater than that of trailing companies. Percentage of High-Preference Customers Lowest Observed Preference: 11% of Customer Base Highest Observed Preference: 62% of Customer Base Companies with Low Preference (Between 11% and 32% of existing customers prefer these companies to their competitors) Companies with High Preference (Between 35% and 62% of existing customers prefer these companies to their competitors) High Preference Companies Focusing on high-preference companies allows us to isolate how their approach to customer experience differs from the broader population. 10

11 High-preference companies rely on Unique Benefits to build customer preference and intent to repurchase. FINDING 2: HIGH-PREFERENCE COMPANIES WIN WITH UNIQUE BENEFITS Analysis of high-preference companies leads to three conclusions: Low Preference High Preference Looking Specifically at High-Preference Companies Unique Benefits emerge as the most significant source of both preference and future spend intentions. Model Results: High-Preference Companies Preference 1 Unique Benefits are twice as powerful as Common Benefits in driving preference and intent to repurchase. Common Benefits drive significant levels of preference but are outperformed by the importance of Unique Benefits. Touchpoints are the weakest driver for high-preference companies in keeping with the findings of the broader population. Strong 2 Common Benefits Play an important role in getting us into the consideration set. Common Benefits (e.g., responsive to my feedback ) 3 Unique Benefits Unique Benefits Allow high-preference companies to distinguish themselves from other viable competitors. (e.g., simplifies my supply chain ) Weak Weak Touchpoints (e.g., customer service) Strong Intent to Repurchase 11

12 High-preference companies have found opportunities to deliver Unique Benefits across a wide-spectrum of markets. UNIQUE BENEFIT EXAMPLES Unique Benefits, MLC Member Companies SCIENTIFIC INSTRUMENTS PETRO-CHEMICALS COMMERCIAL FOOD INGREDIENTS Sample Unique Benefit: Provides a great out-of-the-box getting started experience. Sample Unique Benefit: Provides the technical expertise needed to back our marketing claims. Sample Unique Benefit: Offers commercial ingredients vetted by demanding consumers. Source: National Instruments Corporation; Afton Chemical Corporation; McCormick & Company, Inc. 12

13 Proximity Bias leads marketers to overestimate the uniqueness of their company s experience. CLOSE TO HOME Marketers often suffer from a form of proximity bias assuming that the differences they see between their company and their competitors are also perceptible to customers. Proximity Bias The tendency to over-value information that is close or familiar. Lindsay and Michelle Identical Twins Source: Journal of Behavioral Finance, 13

14 Marketers often fall short of differentiation when setting a customer experience strategy. SEEING DOUBLE Lack of Differentiation in Typical Unique Benefits When asked what benefits separate their customer experience from that of competitors, marketers frequently cited a very familiar set of benefits. Most Frequently Reported Unique Benefits Surfaced in Council Interviews Trustworthy Innovative Personal Service Reliable Valued Partner Medical Supply Company A Provides genuine, personal service, above and beyond what you expect. Medical Supply Company B Delivers on promises while providing a personal touch. From the customer s perspective, it s six of one, half dozen of the other they default to buying based on price. SVP, Marketing Medical Supply Industry 14

15 While marketers are naturally compelled to showcase benefits with obvious value, these benefits are nearly impossible to own in the marketplace. INNOVATION HAS MANY NAMES Sample Unique Benefits Highlighted in B2B Marketing Claims STEEL CUTTING EQUIPMENT COMMERCIAL HOT WATER HEATERS HOOF TRIMMING TOOLS Sample Unique Benefit: Innovation has a name: ByStronic. Sample Unique Benefit: Innovation has a name: A. O. Smith. Sample Unique Benefit: Innovation has a name: Merlin. Source: Bystronic; A. O. Smith Corporation; King Arthur s Tools. 15

16 To drive commercial success, Unique Benefits must pass two tests: relevance and delivery. FEW AND FAR BETWEEN Two Typical Unique Benefit Failure Points Relevance Does the benefit drive Preference? Relevant Benefits Only 57% of the Unique Benefits tested across companies showed substantial correlation to preference. Delivery Do customers agree that the company consistently provides the benefit? Consistently Delivered Benefits 33% of benefits are delivered consistently enough to drive high levels of agreement. Relevance and Delivery Relevance High 43% 14% Only 14% of Unique Benefits achieve both relevance and consistent delivery. Low 24% 19% Low High Delivery 16

17 Even high performers are capable of making remarkable improvements. THE LOOK Source: (9 July 2009). 17

18 Improving our delivery of Unique Benefits drives several positive outcomes. FINDING 3: EVEN WINNING COMPANIES CAN PROFIT FROM IMPROVED DELIVERY ON UNIQUE BENEFITS Delivery: Customer Assessment of Company Performance on Unique Benefits Representative Distribution of a Unique Benefit, e.g., Simplifies My Supply Chain Attitudes and purchase intentions of customers who agree with Unique Benefits. Customer-Stated Preference +36% Moderate Agreement High Agreement Moderate Agreement Intent to Repurchase +41% High Agreement Moderate Agreement High Agreement Willingness to Recommend +30% Moderate Agreement High Agreement Low Preference High Preference Looking Specifically at High-Preference Companies Willingness to Try New Offers +24% Moderate Agreement High Agreement 18

19 SUMMARY FINDINGS Conclusions from Our Analysis Finding 1: Benefits outperform Touchpoints. Finding 2: High-preference companies win with Unique Benefits. Finding 3: Even winning companies can profit from improved delivery of Unique Benefits. Common Failure Points of Unique Benefits Failure Point 1: Proximity Most marketers overestimate the uniqueness of the benefits they deliver. Failure Point 2: Relevance Many Unique Benefits fail to drive customer preference. Failure Point 3: Delivery Few companies deliver on Unique Benefits consistently enough to drive widespread customer agreement. 19

20 A Unique Benefit-driven approach provides the focus necessary to achieve differentiation across the customer experience. SOLVING FOR CUSTOMER SUCCESS Council Assessment of Competing Customer Experience Strategies Touchpoint-Driven Approach A focus on optimizing each touchpoint individually in pursuit of the exceptional customer experience. Unique Benefit-Driven Approach A focus on selecting and improving touchpoints in a way that delivers a specific Unique Benefit for customers. Touchpoint 1 + Unique Benefit Touchpoint 2 + Touchpoint 3 + = Best-in-Class Customer Experience? Touchpoint 1 Touchpoint 3 Touchpoint 5 Touchpoint 4 Touchpoint 2 Touchpoint 4 + Touchpoint 5 KEY DECISION How do we need to invest to get to best-in-class at each touchpoint? KEY DECISION How do we optimize critical touchpoints to move our customers closer to realizing our Unique Benefit? Limitations of a Touchpoint-Driven Approach Unlimited number of touchpoints potentially need improvement Multiple competing options for investment at each touchpoint Limited interconnectivity across touchpoints Fails to drive preference and intent to repurchase Upside of a Unique Benefit-Driven Approach Narrows the set of potential investments Clarifies the direction of improvement for critical touchpoints Provides a common aligning principle for organizing the full experience Drives high preference and intent to repurchase 20

21 High-preference companies reflect Unique Benefits across the entire experience. WRITTEN IN OUR DNA National Instrument s Differentiated Customer Experience Effective Unique Benefits link directly to the outcomes target customers are trying to achieve. Unique Benefit Offers user-friendly technology Unique Benefit Provides a great out-of-the-box getting started experience Each touchpoint is viewed as an opportunity to reinforce a Unique Benefit USB-equipped products simplify day-to-day usage Three clicks to data installation process Online trialability allows customers to experience the userfriendly nature of NI software No-frills packaging is easy to remove and generates little waste Our Identity We help customers minimize time spent setting up equipment and maximize time spent working. Source: National Instruments Corporation. 21

22 DELIVERING A PREFERRED CUSTOMER EXPERIENCE I What Is Our Unique Identity? 2 Where Do We Invest to Bring Our Unique Benefits to Life? 3 How Do We Coordinate the Full Experience? Identity Refinement Workshop Customer Jobs Touchpoint Assessment Targeted Experience Improvement Guidelines Example Companies Loyalty Driver Analysis Outcomes-Based Touchpoint Planning Dealer of Tomorrow Scorecard Benefit-Focused Web Site Design Principles 22