The Customer Experience Manifesto

Transcription

1 The Customer Experience Manifesto Seven Questions Senior Executives Should Ask About How to Create Experiences that Drive Business Results Frank W. Capek Chief Customer Officer V2.1

2 Acknowledgments The material described in this document is the culmination of many years of learning, discussion and reflection based on a considerable amount of client work. I would like to acknowledge several colleagues I ve had the great pleasure to collaborate with, including: Tim Bevins, Lou Carbone, Laura Carillo, Tom Casey, Steve Chaissan, Ron Christman, Tom Davenport, Mike Dover, Tammy Erickson, George Fandos, Michael Glavich, Suzie Goan, Grant Helmendach, Sandra Leal, Geoff Marlow, Barbara McGill, Vaughan Merlyn, Bob Morison, Thomas Nickles, Chris O Leary, Walter Popper, Marsha Reese, Judi Israel Rosen, Peter Scott- Morgan, Colby Thames, B. Joe Pine, Gary Shaw, Jason Sherman, Andy Shimberg, Dave Sutton, Al Travis, Nick Vitalari, Sarah Weldon and Mike Wittenstein. Copyright 2005 by Frank W. Capek Revised edition copyright 2011 by Frank W. Capek All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system without the written permission of the author, except where permitted by law. Portions of these materials were previously published as part of a research report sponsored by The Concours Group and are reproduced here with permission.

3 SEVEN QUESTIONS SENIOR EXECUTIVES SHOULD ASK ABOUT HOW TO CREATE CUSTOMER EXPERIENCES THAT DRIVE BUSINESS RESULTS You are in the customer experience business. It doesn t matter if you re in retailing, consumer products, business services, high- tech, industrial products, or commodities. The quality of the experience your customers have with your business translates directly into profitable growth. This is typically in the form of attracting and retaining customers. However, it is also the ability to influence customers in a way that improves their profitability, such as diversifying what they buy on what occasions, choosing lower cost service channels and adopting new products, service offerings or technology. Despite these fundamental truths, most companies have not clearly described, deliberately designed or effectively managed the experience they expect customers to have. If this is true for your business, chances are the experience customers are having is fragmented, inconsistent and frustrating. You may be making life difficult for customers in ways you do not understand. In addition, you are almost certainly missing opportunities to improve customer profitability and the success of your business. Focused improvements in the customer experience will accelerate the profitable growth of your business. Over the past 25 years, we have worked with and studied companies that have made meaningful improvements in their customer experience. In most cases, these companies realized bottom line improvements of 10-25% as a result of increased retention, additional sales, reduced customer acquisition costs and improved realization of premium pricing. Companies with more complex business- to- business relationships often have the most to gain by making improvements in the customer experience. Getting the experience right leads to significant opportunities to retain, sell more to, and improve the profitability of highly valuable customers. Some companies are even discovering new ways to deliver a differentiated and influential experience surrounding the sale of increasingly commoditized products and services. In addition, we ve found the customer experience is often the best lens for making performance improvements in specific areas of the business. For example, the best way to improve sales performance is to design a sales process that matches the way target customers want to buy and simultaneously creates a differentiated experience for them. This is a much more effective way to accelerate growth than the traditional focus on what and how we want to sell or adopting best practices from other business situations. Page 1

4 Many corporations recognize and have started to pursue these benefits. Their success, however, is limited by several critical (and perhaps counterintuitive) realities: You can t create an influential experience by just listening to what customers ask for. You must also discover needs customers may be unaware of, observe the ways customers use and benefit from what you do, understand their frustration points and innovate with solutions to problems they don t even realize they have. You can t create an influential experience by just improving what you re already doing. Most businesses are constrained by strong yet untested beliefs about what is important to customers; by short- term performance objectives that hamper innovative action; and by entrenched processes, systems, structure and culture that reinforce the status quo. Creating a breakthrough customer experience requires you to think broadly about your business and challenge its implicit rules and assumptions. You must focus on influencing behavior, not just improving satisfaction. It s very easy to make uneconomic improvements in the experience by increasing service levels across your touch points with customers. Most companies measure satisfaction based on how customers feel about the service they ve received at these touch points. Ultimately, however, it doesn t matter how satisfied customers are. The only way customer experience investments pay off is if customers actually do something different. In order to generate a return, customer- facing investments must be focused on the specific behaviors that drive business success. You must explicitly and intentionally specify the desired experience for your target customers. This specification is a powerful method of aligning marketing communications, service processes, management practices and information systems to deliver the intended experience. An Experience Specification is like the requirements document for a system. Without a clear specification, investments and efforts tend to be all over the map. You can t make significant changes in the customer experience without intentionally designing a generative employee experience. In most service businesses, the customer experience is a direct reflection of the nature and quality of the employee experience. Very few companies really appreciate how a highly aligned and engaged workforce shapes the customer experience. In fact, in many companies, culture gets in the way. discusses seven key questions senior executives should be asking about creating a compelling experience for their customers. They include questions about the experience itself, what contributes to outstanding customer experience and what organizations can do to translate specific improvements into increased revenue and profitability. Page 2

5 1 WHY SHOULD CUSTOMER EXPERIENCE BE A PRIORITY TODAY? Beyond improving satisfaction, intentional and differentiated experiences positively and profitably influence behavior. Page 3

6 It s hard to imagine the customer experience, the primary driver of profitable organic growth, isn t a priority for some businesses today. It doesn t matter if you re in retailing, consumer products, business services, high- tech, industrial products or commodities the nature and quality of your customers experience are central to your ability to acquire, retain and improve customer profitability. We have seen businesses realize bottom line improvements between 10-25% after making meaningful improvements in their customers experience. These results typically come from some combination of: Increased customer retention. Customer retention and repeat business are among the most significant drivers of profitability. Improving retention by just a few percent can translate into millions of dollars in additional profit. Increased wallet share. There are almost always opportunities to sell additional products and services to the customers who have had a good experience with you, and who know and trust you. This is true for business- to- business and consumer relationships. Reduced new customer acquisition costs. Outstanding customer experiences are highly attractive. People tell compelling stories about the outstanding experiences they have had. This positive word of mouth advertising leads to lower customer acquisition costs. Improved customer profitability. Customers who have had an outstanding experience and who know and trust you are generally not as price sensitive. This is a benefit where a small difference can have a huge impact. For many businesses, a 1% increase in price realization can lead to a more than 10% improvement in the bottom line. Some companies understand these benefits and are already using the customer experience as a differentiator. They include many of the well known customer experience leaders like Disney, Lexus, REI, Whole Foods and Four Seasons, as well as emerging leaders such as Build a Bear Workshop and Hot Topic. They also include innovative business- to- business companies like Granite Rock, who rewrote the book on gravel and cement delivery; Solectron, an electronics component supplier and one of the few companies to win the Baldrige Award twice; and IBM, who has a long history of creating a differentiated client relationship experience. Most companies, however, come up with excuses to not focus on the customer experience: We are committed to improving the customer experience; we just don t know how to get started. This is probably the most common situation. Very often companies have identified the need to improve their customer experience or be more customer- centric. Their first hurdle is getting a clear, outside- looking- in perspective on the customer and what s right and wrong with the current experience. We understand the importance of the customer experience; however, we have more pressing tactical issues. This is also a common reaction a heads- down focus on short- term performance improvements. Ironically, these companies are foregoing perhaps the most powerful fulcrum for shifting the short- term performance of specific parts of the business. Focusing on the customer experience enables companies to: Page 4

7 o Design more successful products and services that create value for customers and enable the company to sell on value not on price. o Design better sales processes and tools that improve sales performance by delivering a differentiated experience that matches how customers want to buy. o Design better service and support processes that increase retention by addressing deep customer needs and creating unbreakable relationships. o Optimize strategic account relationships by engaging customers in a more collaborative experience and deploying a differentiated relationship development process. o Implement employee experience practices that build a strong and effective customer- oriented culture, increasing commitment and productivity in the process. This doesn t really apply to me. In our experience, companies that feel this way are often passing up the greatest opportunities. We find this attitude in companies with a traditional focus on product leadership and in industries where there are strong forces toward commoditization. But as Michael Porter observed, When everything is equal, people buy on price. The alternative to competing on price is providing a differentiating customer experience. The payoff of being the first in a commoditizing industry to focus clearly on changing customer needs and customer experience can be substantial. This last point was driven home during a recent workshop. An executive from an industry- leading technology manufacturer stood up and said, I understand what you re saying, but this doesn t really apply to us. We compete by continually leapfrogging the latest generation of technology. Coincidentally, an executive from one of the company s largest customers was in the audience and objected, Wait a second, we re one of your largest customers and, although we appreciate your focus on leading edge products, the experience we have working with you has a huge impact on your success in continuing to sell to us. Example: Granite Rock, a Baldrige Award- winning provider of gravel and aggregates, has consistently earned a price premium by using the customer experience to differentiate their pure commodity products. For example, recognizing customers concerns about rising trucking costs, Granite Rock developed GraniteXpress, which dramatically reduced the time it takes contractors to pick up product. It works like an automatic teller machine available 24 hours a day, seven days a week. Drivers pull in, flash their GraniteXpress card, select the product, advance to the lighted overhead bin and pull the chain to load the correct amount of product into their rigs. Page 5

8 2 WE INVEST A LOT IN CUSTOMER PROGRAMS ISN T THAT ENOUGH? Success will be bestowed upon those who are able to embrace and deliver a compelling and emotionally engaging customer experience. Mohan Kharbanda, VP Customer Experience, Dell Page 6

9 Many businesses invest large sums of money conducting market research, measuring customer satisfaction and collecting and mining mounds of customer data. Some businesses focus on improving customer service levels, or at least maintaining service levels while they cut costs. The most common areas for this sort of attention include call centers, customer support and order and fulfillment processes. Still other businesses invest heavily in customer relationship management (CRM) technology. While all these things may be incrementally valuable, they are often ineffective because they re not part of a coordinated effort to create a differentiated overall customer experience. As a result, these disconnected investments end up creating little more than better sameness. Some of the symptoms of this disconnect include: Implementing CRM technology but not using it to deliver the experience and relationship customers want to have with you. Making service level improvements that tell customers they are important but that, in the end, don t measurably improve sales, retention or customer profitability. Attempting to cross- sell to customers in a way that generates additional revenue but undermines the customer experience and decreases retention by annoying customers. Experiencing unacceptable levels of customer churn while still getting relatively high satisfaction scores. Using solid research to create new products that still don t sell well in the market. The sad fact is that customers are less satisfied with their experiences than they were 10 years ago. The American Customer Satisfaction Index (ACSI), a cross- industry indicator of customer satisfaction, is lower today than it was in Customers are less satisfied with their experiences with virtually every major industry, including retail, finance and insurance, hospitality, healthcare, airlines and utilities. Not only are people less satisfied, they now have easier ways to share their dissatisfaction with others. Message boards, blog sites and Web sites like Planet Feedback provide ways for customers to share their positive and negative experiences with millions of other current and potential customers. In today s world, customer news travels fast. Over this same period of time, the magnitude and growth of investments in customer- related programs have been staggering. According to industry analyst International Data Corporation, annual investment in the CRM technology required to understand and improve customer service will reach the $12 billion mark by 2010, up from $4.2 billion in This level of investment has continued despite the fact that most studies indicate the success rate for CRM projects to be only about 30%. Performance with new products and services is not much better. Nearly half of the resources companies invest in the design, development and launch of new products is spent on products that never make it to market or fail commercially. According to the Product Development Management Association, the failure rate for new products is approximately 40%. And even where products are commercially successful, many companies today try to distinguish their products by ever more complex features that create confusion, make life more difficult and Page 7

10 degrade the overall customer experience. How can you make all of your customer- oriented initiatives pay off? By centering their attention on the customer experience: First, you must recognize, it s the customer s experience, not yours. If you start by asking, How do we improve our customer experience? you re already on the wrong track. The customer experience is not a characteristic of your business; it s a characteristic of your customers. Only customers have customer experiences. This represents a fundamental shift from company- centric thinking to customer- centric thinking. Company- centric thinking leads to marginal improvements in what you do. You must start by clearly focusing on what your customers are trying to accomplish and what they have to do to accomplish their goals. Only then can you focus on ways to improve the experience they have. Second, you must establish ownership and accountability for the quality of the customer experience. In most corporations, no one really owns the processes of designing and orchestrating the overall customer experience. Instead, the experience is influenced sometimes at cross- purposes by the independent actions of market, sales, product/service development, customer service and other operational functions. It s also influenced by different business units and product lines that touch the same customers. To remedy this, some corporations have created the role of chief customer officer as an integrating mechanism. Unfortunately, these individuals often lack sufficient influence or adequate tools to orchestrate the customer experience effectively. Third, you must establish the business processes and management methods for designing and consistently delivering a satisfying, engaging and differentiating customer experience. Most businesses lack a well- defined framework and toolkit for doing so, and the purpose of this Manifesto is to provide guidance on filling the gap. Specifically, we recommend implementing business processes associated with the next four questions: creative customer intelligence, innovative experience design, consistent experience delivery and employee experience alignment. Example: After observing what vacationing families do from the time they get off the plane to the time they reach their destination, automobile rental company Alamo designed a differentiated experience to meet these customers latent needs at selected major family vacation destinations. Aside from streamlined check- in and checkout processes and simplified rental agreements, the facilities include an on- site mini mart where customers can pick up food, soft drinks, film, travel games, suntan lotion and other items they ve forgotten to bring. There are lockers where travelers can place bags while they pick up or return their car, eliminating the need to carry luggage. Private booths give customers traveling between climates a place to change clothes and repack. A multilingual travel center provides directions and information about events in the area, as well as access to a live concierge service. There s even a two- story play area for kids. Page 8

11 3 HOW DO WE DEVELOP CREATIVE CUSTOMER INTELLIGENCE? Customer preference and motivation are far less influenced by the tangible attributes of product and service than the subconscious sensory and emotional elements derived by the total experience. Gerald Zaltman, Harvard Business School Page 9

12 Designing and delivering an outstanding customer experience starts with a deep understanding of customers, including their changing needs, priorities, values and alternatives. The most important customers to understand are naturally those who are most valuable today and present the most profitable opportunities tomorrow. The most useful customer intelligence centers on the recognition that customers don t buy products they buy desired states. The goal of customer intelligence is deep insight into these desired states: What are your customers trying to accomplish? What end- to- end path do customers follow to get what they want? What are their latent or unmet needs across this path? Where are their frustration points and workarounds? How do they perceive your role in their process? What opportunities can address a deeper or broader set of customer needs? How can you influence expectations about your role and the value you deliver? Traditional approaches to understanding the customer market research and sales force feedback are severely limited by two barriers: Cognitive bias. Customers can t easily explain what they are looking for, particularly if it relates to needs and desires that are unmet or that they haven t thought about. They also don t remember details of their actual experiences, even though their cumulative impressions may be very strong. Limitation of human perception means that more than 95% of the details of a customer s experience cannot be recalled; they must therefore be observed or reconstructed. Motivational bias. Customers may not want to tell you. There are many needs customers feel uncomfortable sharing, particularly in business- to- business relationships where there are often complex inter- organizational dynamics. When the business relationship is negotiated and contractual, customers may be distrustful and feel the insights they share could be used to gain leverage. The most common primary market research techniques are based on customer interviews, focus groups and other approaches that require the customer to remember, try to articulate and voluntarily share their experiences and preferences. These approaches run into both forms of bias and thus are largely ineffective at capturing issues and opportunities in customers actual experiences. In addition, many businesses go to great effort and expense to collect and mine large quantities of historical customer data. Understanding customers experiences from this data is indirect and insufficient like tapping on the ceiling to determine how the furniture upstairs is arranged. All in all, we find actual customer behavior is not highly correlated with what customers tell you they want. Actual customer behavior is influenced by latent values, hidden motivations, limited awareness, information of varying accuracy, fuzzy decision processes, social influence and force of habit. Page 10

13 There are two types of techniques your organization can use to overcome these barriers: Observation. This is a branch of ethnography that studies the experiences and behaviors of individual customers in depth, rather than studying a customer population en masse. It focuses on actual end- to- end experiences, not just what the customer remembers or is capable of articulating. By observing customers in action in their own environments, you can develop an intimate understanding of how they think and act. Observation surfaces customers latent or unexpressed needs, actual behavior and usage patterns, frustration points and workarounds, and drivers and inhibitors of value. Observation should work hand- in- hand with quantitative market research. In addition to uncovering specific opportunities for a better customer experience, observation helps set direction and determine areas of broader research. Elicitation. This is a set of structured communication techniques designed to probe deeply. Most were originally developed for applications in covert intelligence gathering, expert systems knowledge acquisition, cultural anthropology and investigative reporting. Techniques include storytelling, one- on- one dialogue, case studies, role- playing, simulations and goal- directed exercises. Innovative customer intelligence also must consider the wide range of customer roles. In many situations, it s hard to identify who the customer really is. Is it the individual who makes the purchase? The individual who actually uses the product or service? Or the individual who benefits from the product or service use? These may be three different people or organizations. Typically, it s necessary to create a Constituency Map to delineate the different customer roles and understand the interactions that influence revenue generation for your business. It is important to direct intelligence gathering at customers who have the highest proximity to revenue generation. For businesses that have business customers, it is also very helpful to build an economic model of your customers businesses. Equipped with a rigorous understanding of your customers revenue and cost drivers, you can focus improvements to the customer experience on things that help your customers generate revenue and control cost. You can communicate clearly the tangible value your differentiated experience delivers and thus compete more on value, less on price. Finally, it is crucial to pay close attention to the customers you lose and why. Customers migrating to the competition serve as an early warning system that something is amiss with your offerings and customer experience. Also note when and why unprofitable or otherwise undesirable customers go away. When fine- tuning the customer experience, it helps to understand whom you re not trying to engage. Example: A leading moving company was interested in creating a better and more differentiated family move experience. By following a set of customers over the complete lifecycle of their moves, the company found many opportunities to innovate by addressing customer needs that go beyond their traditional focus on packing, loading and delivering belongings. These innovations included helping customers get organized for their moves, disposing of things they didn t want to move and helping them get oriented and established in their new communities. Page 11

14 4 HOW DO WE CREATE AN EXPERIENCE THAT ACCELERATES PROFITABLE GROWTH? Your brand is formed not by what your company says about itself, but by what the company does. We want to raise the worldwide bar for the customer experience. Jeff Bezos, Amazon.com Page 12

15 A successful customer experience does more than please and engage customers. It influences your best customers to do more and more profitable business with your company. What makes for such an outstanding and influential experience? We can describe its characteristics and results: Deliver innovative solutions to customers problems. Outstanding experiences leverage deep understanding of the customer to find solutions to their problems, including problems they may not realize they have or may not be able to describe. Earn and carefully protect the customers trust. Flawlessly shaping your customers experience requires an understanding of both their explicit and implicit expectations. For example, sales activities must be oriented around meeting the customers needs, not pressuring customers to buy more than or earlier than they are ready to. The end of quarter sales push can undermine customer trust. Go beyond what s called for. Outstanding experiences demonstrate the company s commitment to the customer and to going out of their way to under- promise and over- deliver. This can include things beyond the boundaries of what customers think you do, things that surprise the customer with value- added extras that demonstrate your commitment and recognition of the value of the relationship. Balance value delivered with value captured on both sides. It s easy to create a good experience if you give three scoops for a penny. But it s wasteful all around if you deliver more value than the customer can use, and if you don t capture the value of more profitable business in return. Outstanding experiences maximize recognizable value for customers, rather than over- serving on basic expectations. They also make tradeoffs to approach the optimal mix of value realized by the customer and value you capture in the form of price and loyalty. Outstanding experiences are win- win. Engage the whole person. Outstanding experiences address customers physical, intellectual, emotional and spiritual needs. They help customers clarify their goals and aspirations, visualize what s possible and understand and explore their options. Build authentic relationships with the customer. The key here is to treat customers as individuals. Getting to know and treat your customers as individuals engenders close personal connections. Customer experience leaders acknowledge their customers value and genuinely thank them for their business Tell a compelling story. Outstanding experiences tell a story that helps the customer understand where you come from, what you stand for and what makes you special. This is the real meaning of a brand a consistent story told every time you touch the customer. Every touch point is carefully orchestrated to reinforce your story, thus differentiating you from your competitors. Be flexible yet consistent. In this imperative, we simplify matters by talking in terms of the customer experience. But of course, there are many variations on how customers want to interact with your company, and vice versa. You need to design and deliver experiences for different customer segments, situations and needs. However, these variations must be consistent in two senses. First, they must reinforce your brand, positioning and value proposition. Second, similar customers in similar circumstances should have similar experiences interacting with you. Page 13

16 How does a company go about designing and developing an outstanding customer experience? The process begins with creative customer intelligence that enables you to live the customers experience, not guess at it. To illustrate other basic techniques, we ll use the example a highly innovative regional mortgage company (we ll call MortgageCo) that has leveraged a differentiated customer experience to achieve far faster growth than their competitors. Strive to address unreasonable customer expectations. One of the best ways to stimulate innovation is to start with what sound like unreasonable objectives. For example, MortgageCo started with the objective of going from application to closing in less than eight hours. This forced them to think very differently about opportunities to help customers realize their goals. Use the broadest business definition. Don t let the traditional definition of the business you re in constrain your thinking about the range of things you can do to improve the customer experience. There may be opportunities to partner with other businesses to enable a better customer experience. For example, MortgageCo provides a wide range of peripheral services such as a free security system and arrangements for discounted security monitoring for every house they finance. Actively surface and challenge the rules. Every product and service offering and every customer interaction happens within a hidden set of rules that can be surfaced and challenged. In order to go from application to close in less than eight hours, MortgageCo had to challenge and overturn the implicit rules about the balance of responsibilities between loan officers who sell and underwriters who make credit decisions. Involve divergent voices. To spur creativity, find ways to involve people and perspectives from outside the company and industry. MortgageCo has a policy against attending any mortgage banking events because they don t want to be influenced by standard industry practice. They are only interested in learning from the companies that represent the absolute leading practices. Adopt a rapid, low- risk experimentation approach. Collaborate and experiment with your customers. This makes it easy to evaluate opportunities and alternatives, and customers appreciate being part of the process of designing their interactions with you. Try a lot of things and keep and refine those that work. MortgageCo has continually experimented with approaches to collaborating with realtors, builders and financial services providers who are its primary referral sources. Example: When DuPont developed Alathon 25, a polyethylene resin 5% more durable than competitive products, it was initially unsuccessful in convincing customers of the additional product value. After turning their attention to the customer experience surrounding product use, they realized the marginal improvement in product performance could be used to create a differentiated experience. For example, when Alathon 25 is used for irrigation pipe, it provides marginal savings in pipe replacement cost. However, it provides 10 times those basic savings from reductions in labor costs and crop damage associated with digging up and replacing underground pipe. By focusing on selling a differentiating customer experience rather than a product feature, DuPont was able to realize a 38% price premium while doubling their product sales. Page 14

17 5 HOW DO WE ALIGN OUR BUSINESS TO DELIVER A CONSISTENTLY OUTSTANDING EXPERIENCE? Business is simple. Management s job is to take care of employees. The employees job is to take care of the customers. Happy customers take care of the shareholders. It s a virtuous circle. John Mackey, Whole Foods Page 15

18 Do you have an explicit specification of the customer experience you want customers to have? If yours is like most businesses, you don t. In fact, most businesses have only a fuzzy notion of what they would like customers to experience. Since the experience is not clearly specified, it s impossible to deliver consistently. This is one of the fundamental reasons why businesses with the best intentions end up with a customer experience that is all over the map. The experience customers have is typically highly variable, based on what part of the business and which employees they interact with. In most businesses, the actual experience doesn t match what customers are told in advertising or other communications. This dramatically undermines credibility and trust. There are two invaluable tools for aligning a business to deliver a consistently outstanding experience across all customer touch points. The first is an Experience Specification. It acts like a requirements document for each customer- facing element of the organization. A well- defined specification includes three things: Experience Positioning. This is a concise and explicit statement of the essence of the experience. How would we like the customer to think about their experience working with us that is meaningfully different from the experience they might have with our competitors? Generally this experience positioning is captured as a single phrase that is meaningful, relevant and compelling to the customer. For example, Whole Foods Market s positioning is Whole Foods, Whole People, Whole Planet. Southwest Airlines positioning might be stated as inexpensive, reliable and fun. The most powerful experience positioning statements are perceived by customers as a difference in kind rather than a difference in degree, saying, we do this and they don t rather than, we do the same things they do, only better. Krispy Kreme s experience positioning, including Donut Theater, where patrons watch the product being made, sets the stage for a difference in kind compared to Dunkin Donuts. Experience Profiles. These describe a set of differentiated customer outcomes and the intended experience the customer will have for each of the most important customer situations. These profiles expand on the story captured in experience positioning. For example, a major health insurance carrier is defining a clear set of differentiated customer outcomes and experiences around the annual renewal experience for agents (who secure the business) and employers (the major customers). Experience Scenarios. Experience profiles provide a static view of the experience, describing specific intended results in specific situations. Experience scenarios make it dynamic. They tell illustrative stories of particular customer experiences and interesting variations, and describe the evolution of particular types of customer relationships over time. These scenarios are an effective way of communicating with the organization and focusing it on the intended customer experience. Make sure your scenarios include specific customer situations or parts of the customer lifecycle most important to or stressful for the customers. Page 16

19 The second tool is an Experience Blueprint describing how the specified experience will be consistently and effectively implemented across each customer- facing element of the business. The blueprint tells how to shape processes and marshal resources to deliver. We recommend designing each of the following individually and then ensuring their alignment and mutual reinforcement: Customer communications. How do messaging, marketing communications and customer information access reinforce the specified experience? Processes. How do we align and integrate customer- facing processes to deliver the specified outcomes and experiences? People. How do employees need to relate to customers to reinforce the specified experience? How does this turn into skill requirements, role definitions, required behaviors and organizational models that reinforce effective and consistent delivery? Management systems. How do we align leadership and management practices, goals and rewards to reinforce business processes and organizational behaviors associated with the customer experience? How do we measure our effectiveness in delivering the specified experience, not just generic customer satisfaction? Information and technology. What tools and technology are needed to enable processes, provide information to customers and facilitate management reporting? How will we gather, manage and leverage information about the customer? Culture. What elements of our culture represent barriers that must be removed to deliver the specified experience? What elements of our culture are assets we can emphasize in delivering the experience? Everything communicates. Everything you do, or fail to do, communicates what your company stands for and what customers can expect in dealing with you. Use your own Experience Specification and Experience Blueprint to align the business to consistently deliver the differentiated experience you want customers to have and, in the process, drive profitable growth. Example: Coca- Cola Refreshments, the business division of The Coca- Cola Company responsible for relationships with restaurant chains and other customers with fountains, has continuously innovated with services that improve the customer experience of both their restaurant customers and the end consumer. For example, Coca- Cola developed the original value meal concept that helped fast food restaurants enhance the consumer experience by simplifying orders and accelerating turnaround time, while simultaneously improving the economics of restaurant operations. Coca- Cola s Good Answer TM call center service helps their restaurant customers manage consumer feedback, improve consumer service, resolve consumer issues and encourage consumers to return to the restaurant. Other innovative services include menu planning and concept development that help their customers track and meet changing consumer tastes. Page 17

20 6 HOW DO WE CREATE EMPLOYEE EXPERIENCES THAT REINFORCE THE INTENDED CUSTOMER EXPERIENCE? The most important component in our brand is the employee. The people have created the magic. The people have created the experience. Howard Schultz, Starbucks Page 18

21 No matter how creative you are in understanding customers and designing an innovative experience, it is impossible to have an outstanding customer experience without having an outstanding employee experience. In any service- oriented business, the quality and character of the customer experience are direct reflections of the quality and character of your employees. When they are ill- equipped, disempowered or frustrated, they won t be willing or able to deliver a compelling customer experience. In fact, the employee experience establishes a limit or cap on the customer experience. Your organization s ability to develop strong, trusting relationships with customers is limited by its ability to build strong, trusting relationships internally. And your ability to collaborate well with customers is limited by your ability to collaborate well within your business. The foundation for a successful and productive employee experience is uncovering the unwritten rules that affect how work gets done, recognizing when these implicit rules are inconsistent with great employee and customer experiences, and then purposefully rewriting the rules. The unfortunate fact is most cultures fight the customer. The unwritten rules that define what s important, what gets rewarded and how work gets done create significant impediments to delivering an outstanding experience. Unless they are decoded and actively addressed, they will sink any effort to create an outstanding experience for the customer and the employee. While these unwritten rules are unique to each organization, we ve found several that are common: Satisfying your boss is more important than satisfying the customer. You can get in a lot of trouble for ignoring policy to satisfy a customer. The stars in the organization are out getting new customers not satisfying and retaining existing ones. We compete with other divisions and departments for the customers attention. We talk about customer focus, but no one is measured on it. You get measured on the performance of your function, not the total enterprise. Do whatever you must to make your numbers, even if it s not always in the customers best interest. Do whatever you must to meet product milestones, even if you have to shortcut requirements validation and testing. Once an organization acknowledges unwritten rules like these, it can take deliberate steps to intervene, rewrite the rules, make them explicit and shift the culture to focus consistently and genuinely on customers. Just like a successful customer experience, a successful employee experience must be deliberately designed. Recognize employees may define success in somewhat different ways and management approaches and human resource programs must be flexible to allow for appropriate levels of customization. We recommend developing the employee equivalents of the Customer Experience Specification and Customer Experience Blueprint described in the previous Page 19

22 question for your key employee groups. Look at the fundamental preferences and characteristics of the employees you need to deliver an outstanding customer experience, and then design an end- to- end employee experience that attracts, incorporates, engages, reinforces and retains them. Attracting employees. This requires an attractive and differentiated employee brand and an empowering culture and recruiting individuals who demonstrate the character and competencies to deliver the customer experience. For example, Disney World deliberately attracts and hires genial conversationalists. Incorporating employees. Rapidly familiarize employees with the business how we succeed in the marketplace and make money and enlist their commitment to meeting the goals of the business and its customers. Provide specific training to enable employees to deliver customer experiences that uniquely fit your brand s promise. For example, at MorgageCo (the example we used earlier), each loan officer attends 550 hours of training before working independently with customers. The consistent and differentiated customer experience they want requires highly trained loan officers. MorgageCo s CEO has stated, I don t want our loan officers serving customers until they know how to tie their shoes the MortgageCo way. Engaging and retaining employees. Make sure people s work is energizing and fulfilling, makes best use of their talents and invests them with responsibility. Listen to employees about their experiences in the workplace and working with customers. Empower everyone to identify and help remove barriers to the intended employee and customer experiences. Create an environment where it s safe to surface and confront issues that affect these experiences. Reinforcing behavior. Measure and reward the right customer- centric behaviors and actions. Tell heroic stories that demonstrate what is expected from employees, especially in their interactions with customers. Make sure there are clear consequences for behavior inconsistent with the intended customer experience. Example: The Whole Foods Market employee experience focuses on attracting and bringing out the best in well- rounded, customer- oriented people who are passionate about food and enjoy working in teams. The company has created an employee experience where teams on the front lines are empowered to make their own decisions, people are treated fairly and are highly motivated to succeed, and everyone in the store plays a critical role in helping build the business into a profitable and beneficial part of its community. This includes: Self- directed teams that meet regularly to discuss issues, solve problems and appreciate each other s contributions. Increased communication through Team Member Forums and Advisory Groups, and open book, open door and open people practices. Labor gain sharing and other team member incentive programs. Team member stock options and stock purchase plan. Page 20

23 7 WHAT SHOULD SENIOR EXECUTIVES DO TO IMPROVE THE CUSTOMER EXPERIENCE? Leaders have to be the catalyst. It is not as though they are the dominant force they are only the spark. Herb Kelleher is a great example at Southwest Airlines: he is not creating every customer experience but he set the standard. - Robert Stephens, The Geek Squad Page 21

24 Executive leaders exert tremendous influence over the conditions for an outstanding customer experience, especially the organization s fundamental commitment to customers and behavioral norms when interacting with them. To make that influence as positive as possible, we recommend the following executive agenda: Ensure you and your people live the customer experience. Personally spend time with customers to experience firsthand what they do when acquiring and using your products and services. Spend time with business customers to understand their revenue and cost drivers and how you can work together to improve the profitability of their businesses. Get your entire organization tuned in and listening to what customers are trying to accomplish, what s frustrating them, what their unmet needs may be and where the opportunities are to create breakthrough value for them. Focus on customer behavior, not just satisfaction. Get to the bottom of why customers engage in and make choices around the behavior that drives the success of your business. Focus customer experience improvements on areas most likely to influence that behavior. Develop and follow an Experience Specification. You can t create an outstanding experience without being explicit about what that experience is. Use the specification as a rallying point to align the business to deliver. Make sure it covers those critical moments of truth that affect the course of the entire customer relationship. Measure and reward based on performance with customers. Pay close attention to customer opinions, retention rates, your share of their business and your positive referral rates. Track and integrate these measures into the reward system for both customer- facing employees and the organization at large. Find and fix the most obvious breakdowns and barriers in the current experience. Don t rely entirely on interviews and focus groups that provide limited information after the fact. Make sure your employees observe and work with customers directly, probe for what is working and not working in the current experience, make immediate improvements where possible and combine their information and insight to uncover big opportunities to improve the current experience. Start with improving the experience for a particularly valuable segment of customers. Not all customers are created equal in terms of their value to your business. Most companies find they can accelerate results from improvements in the experience by focusing on the needs and priorities of their most valued or most growable customers or market segments. Page 22

25 Promote collaboration, integration and holistic thinking. Turf wars and narrow thinking are deadly to the customer experience. Denial, blame and excuses intensify the problem. In successful organizations, people hold each other accountable and accept personal responsibility. When working to improve the customer experience, draw together the best ideas and practices, get the best people onto collaborative teams, integrate customer- touching business processes and multiply your organizational strength in the marketplace. Equip the front line with training, support and autonomy. Employees must have the training and skills to know how to win with the customer. They also need the freedom to take risks within appropriate limits. Don t punish honest mistakes. Do set direction and define boundaries within which employees have the flexibility to make sensible and sometimes innovative decisions on behalf of customers. Communicate and demonstrate your commitment to customers and employees. Outstanding employee and customer relationships thrive on clarity, transparency, honesty and reliable follow- through. As a leader, your job is to model the behaviors important to success and create a drumbeat for the organization to follow. Always start with the customer. No matter what the decision, always ask what impact, direct or indirect, it will have on customers and the customer experience. Insist that every business process, policy and practice be designed with an unblinking eye on customer value. Put customers first in management reports and leadership team discussions. Relentlessly remind the organization that an outstanding customer experience is everyone s job. Many corporations proclaim, "Our success starts with our customers' success." Unfortunately, most are better at saying the words than they are at operationalizing them. Executive leadership's ultimate responsibility is to make sure the corporation does, indeed, focus relentlessly on the customer experience and thereby turns customers' success into profitable growth for the enterprise. Example: The CEO of a major automotive services company recently expressed his concern about growing customer attrition: I think we ve got the best service in the industry. But for some reason, customers are leaving at an increasing rate and I don t think anyone here really knows why. After analyzing attrition by customer segment and by competitor, the company found attrition was five times higher in the segments considered early adopters of new services they were beginning to adopt more often from two emerging competitors. This analysis provided a leading indicator of a more general market shift in customer expectations, as well as a very effective way to prioritize specific improvements in the customer experience. This CEO realized even outstanding experiences are perishable because customers expectations are always changing. Thanks to early attention and action, customer retention rebounded. Page 23