Overview
This is going to be quite a brief, high level overview of customer experience. I wanted to keep it aimed pretty much at CEO’s and business leaders. But, what we’re going to do is at the end of the webinar, I’m actually going to do a little bit of a deep dive because I spoke to a few folks before this presentation, and a number of people expressed interest in learning about how to tie customer experience to ROI.
What we’re going to do is do an introduction, then I’m going to talk about customer experience and we’re going to go through a definition. Then, we’re going to look at the role that emotion and biases play in customer experience. And then we’re going to talk about why it matters and we’re going to give some key statistics, which you might find very useful in terms of making business cases.
There are two big questions that a lot of people ask about customer experience. So, we’ll talk about those and how to answer them. And then we’ll look at the six core competencies. There are a number of different people that have different approaches to customer experience.
The Customer Experience Professionals Association break customer experience down into six core competencies for us to research. Those six align with each other. So, that seems to be the standard way that people are approaching. And so that’s why I wanted to talk about those six and give you guys an insight into how each of those makes up the complete picture of customer experience.
Then at the end, we’re going to look at the case for customer experience ROI.
What is Customer Experience?
So, let’s begin with customer experience and let’s start off with a definition. A good definition is, how your customers perceive their interactions with your brand.
What this is saying is, perceptions are greater than reality. It doesn’t matter if you’ve provided what you think is an excellent customer experience, if the customer feels they’ve had a bad experience, it is their perception that matters.
It’s all about expectations. It’s all about making sure the expectations are set correctly. There are two different types of expectation:
1. Implicit expectation
So, that’s for example, when you go to a restaurant, there’s a certain amount of time that will pass before you feel that the experience isn’t very good. No one sets that time limit. You just have an instinctual feel because it’s implicit within our culture.
2. Explicit expectations.
For example, when a customer says 50% discount and then of course you get to the store and there’s not a 50% discount.
People sometimes confuse customer experience with customer service. So, I always like to make it clear that customer service isn’t the same thing.
If you imagine checking in into a hotel, the customer service would be your interactions with the staff.
Your customer experience would be everything from how you feel when you walk into the hotel, actually finding the hotel in the first place, maybe frustration with parking, what the room fragrance is like, all those little details that can create interesting memories for you that you will then be able to go and tell others about.
That’s where emotions come in. Perceptions are obviously influenced by both emotions and memory.
Your emotions will shape the perceptions and then they’ll go into your memory, and then that really becomes the customer experience. Even if someone has a rocky customer experience, if you can make sure they walk away with a happy memory, then they’re more likely to see that as the customer experience rather than the rocky patches that they experienced.
Recognize that customers decide emotionally and then justify rationally.
A great example of this quote would be voting. Most people vote based on emotion rather than going through and looking everything rationally. Most people buy emotionally rather than rationally as well. But, if you’re asked to defend your decisions, you always go back to the rational side of your brain.
Brands are a bundle of associations, a bundle of memories. And when those memories are good, we feel affection for the brand
This quote is by Shawn Smith, the author of ‘Managing The Customer Experience’, which in my humble opinion, is the best book ever written on the subject, even though it was written many years ago. This quote says a lot about the essence of why customer experiences are important.
If we feel an affection for a brand, we’re more likely to recommend them to others and we’re more likely to go back ourselves.
And likewise, if we feel animosity for a brand, then we’re more likely to write negative reviews. The sad part of life is that it only takes one negative review to cancel out five positive ones.
Because of this, making sure that our customers’ emotions are in check and they’re feeling the way we want them to feel when they go through the experience is equally important as actually all of the functional aspects.
Bias is a very important as well because they affect the customer expectations and perceptions. What I always say is, when you’re designing experiences, it’s better to design experiences that compliment how the human brain works rather than work against it.
Humans basically have two types of brains. There’s a lot of material coming out on behavioral economics now, but we have a primal part of our brain that makes decisions instantaneously and then we have the logical part that’s less emotional. The logical part is the one that has to think hard and it causes cognitive depletion every time we have to use it.
There’s a very good book on user experience design simply called, ‘Don’t Make Me Think’. And I think that’s pretty much the best rule if you’re going to be designing any kind of software interface or any interface regardless of whether it’s software or not.
Heuristics
The more people have to think the more frustrated they get. People want something that’s intuitive. So, what we do is we rely on our primal brain and we also rely on things called heuristics.
Heuristics are shortcuts that we create.
If I say to you, “What’s two plus two,” you immediately know the answer you don’t have to think about it. That something that you created in your mind is a heuristic.
When you’re driving your car, that’s another heuristic. You can do these things on autopilot.
Humans like to use the least amount of energy possible to make decisions, and so when designing these customer experiences, we try not to engage the logical brain because cognitive depletion will take effect.
The early stage satisfaction is a good predictor of how satisfied a customer will be later in the customer experience life cycle.
This quote is an example of the primacy effect. You’re more likely to remember the first and last things that happened during an experience. That’s the primacy effect and the recency effect.
The idea that we mentioned earlier, one negative review cancels out five positive reviews, that relates to something called the loss aversion bias. We’re more compelled to avoid loss than we are to gather gain.
So why does this matter?
Improving the customer experience has been shown to correlate with increased customer retention, acquisition and revenue. Now, a lot of research has been done on this and the conclusion is that adequate customer experience actually can make you stand out.
There are huge gaps between the leaders in customer experience and the laggards in each of the individual industries. What this means is customer experience has become a powerful differentiator for businesses that can do it well.
When we talk about is it even worth doing customer experience, one very interesting way of looking at it is saying, “Well, if your current customers begin embracing CX and just think of the ROI of doing nothing,” and that brings us to some interesting statistics.
Brands that improve customer experience increase their revenue by about 10 to 15% and they lower costs on average 15 to 20%.
Those having an excellent customer experience are six times more likely to repurchase than those who have a poor customer experience. 64% of people confirm CX is more important than price. There’s a book called ‘Descartes’ Error’ that shows that the majority of buying decisions are emotional and price really factors into it. CX leaders grow revenue 12% faster than CX laggards.
So, we’ve made the case that this is something that businesses should be very interested in, but now we need to go and look at it a little bit more in depth and answer two big questions.
Most people will be saying, “How can I improve the customer experience for my customers and how can I prove the ROI of any CX efforts?”
Customer experience is sometimes seen as being a bit fluffy, so as a result, people then don’t tend to take it seriously and they are very cynical about, does this really translate to extra revenue or is this just something that’s going to make people feel good and there’s going to be a waste of money?
6 Core Competencies
1. Creating a CX strategy
The way to look at this is customer needs tend to translate very clearly into markets. And then from markets you should be able to clearly extract your mission statement. And then from your mission statement, you should then be able to devise your brand promise. And this really all factors into customer experience because at the end of the day, your brand promise is your expectations and you need to make sure that those expectations are either met or exceeded at every touchpoint that you have.
Good strategy flows from the strong mission statement and it should be focused around the needs of the market. It should never be focused around a product. You need to know why your business exists and how it changes the world. And I don’t mean on some grand scale, I just mean if your business was to not exist tomorrow, where would your customers go and why would they go there? And so that helps you understand the needs that you’re filling in the world.
Mission statements are very important as well because they really guide decision making during rough times.
Back when Amazon was looking at introducing the third party sellers and there was a lot of debate within Amazon as to whether that was the right thing to do or not. And in the end, because of their mission statement about being the most customer centric business in the world, they said, “Well, if this is ultimately gonna make things better for our customers and it’s gonna be all about them, then it is the right decision.”
I’m not saying they just use their mission statement, but it’s a very good guide, especially when making strategic decisions.
The strategy needs to be very deliberate about who the business serves and how it will provide a differentiated experience. As we all know, from the work of Michael Porter, you’re either competing on price or cutting costs or you’re differentiating. Most people are differentiating in this day and age.
How is your business gonna be different? How’s the experience gonna be different?
The brand promises are the promised benefit. The need must always be met or exceeded when the customer interacts with your brand. The CX strategy is what specific CX steps you will take to compliment your overall business strategy.
2. Embedding a customer centric culture
The key things are to know your core values and then hire for cultural fit. It’s much easier to do something at the beginning of a lifecycle than it is halfway through it.
If you can get the right employees in at the beginning, that’s going to be much more beneficial than trying to take existing employees who maybe don’t have the right attitude and try and train them. One thing we always recommend is, try to understand the core values that you’re building your company around and your culture around, and then hire for cultural fit.
When you do this, you should be prepared to lose employees who are not a good fit.
There’s a system called, the Enterprise Operating System (EOS). Businesses use this to try and find the right fit for the organization based on what it does. And even they say, “Be prepared to lose a few employees here or there,” because the end of the day you’re trying to shape the business around delivering the best service for the customer.
Employee experience is basically the sum of all of the perceptions that your employees have as they interact with the business. And the rule of congruent experience says that, the way that our business treats its employees typically translates into the customer experience.
So, if you’re in a very toxic company and there’s a blame culture and people won’t be accountable, then you can expect to see those effects start to spill into the customer experience. This is something that I always ask people to pay attention to and to be very deliberate about how they design their employee experiences.
Find ways to connect to your employees with the differences that they are making to the lives of customers. Storytelling’s a great tool obviously, but basically if you can’t take your employees out to the customer, then storytelling is a good way of bringing the customer in. It’s always good, especially if you have conferences or user groups, to try and get your employees and customers to meet so your employees can know that the customers are real people with real problems and they’re making a difference by helping them.
Incentives should be tied to the customer experience and other internal motivators, not operational goals such as average call time.
We don’t want to incentivize our employees to get rid of customers. We want to incentivize them to do the right thing.
Lastly, businesses should build slack into teams to avoid burnout. The other advantage of building slack is, if the team isn’t running at 100% full throttle all the time, it gives other team members a chance to be able to contribute in ways that help the team.
For example, a few years ago I worked at a business and the team was at risk, and we were doing work that, if you made one little mistake, it could result in a very bad situation for a client and that could actually also result in the firing of an employee. So I took it upon myself to use a little bit of flex time to go and build a tool that would basically stop that small chance of human error.
The reason I did that was obviously to protect my team, but it was innovation as well because ultimately I’m not only protecting my team, but I’m protecting the client as well.
3. Aligning your organization around your strategy
Really what this means is establishing a governance system. What that means is, this is an organization’s deliberate structured approach to CX.
You will decide how your customer experience projects are prioritized, how they are approved and how they’re managed, what types of CX data will be gathered and how it will be used, what KPI’s and metrics will be used, etc.
KPIs
A lot of the times a business won’t necessarily know it’s KPI’s, but it will be able to create these metrics from the mission statement.
If you say, “We want to be the top selling business, does ‘X’ in this town or this region,” then you’ve already got a few metrics there that you can start using.
If you’re talking about providing high quality, that could be another one. And then the KPI’s really are the metrics that matter and that’s why they are the Key Performance Indicators.
Code of Conduct
You need to establish your roles, accountability, standards and processes, and create what we call a code of conduct.
A code of conduct can be used in different ways. Basically, the idea is that you don’t give people big binders of information explaining how you behave when you’re with clients or when you’re communicating internally.
You give them a guide and it discusses the things that you ideally should do and the things you ideally should not.
Killing stupid rules is a certain term that was coined by Jeanne Bliss who wrote ‘Chief Customer Officer 2.0’, and all that really means is, listen to your employees and if they’re telling you that there’s unnecessary red tape. Just get rid of it.
You don’t want people to have to keep jumping through unnecessary hurdles. Processes are involved, but processes can get bloated.
That’s why I say adopt a rigorous approach to change management.
You can use Cotter’s framework, you can use AdCar. There’s a number of different options out there, but adopt a structured approach, because not having a structured approach is one of the main reasons a lot of change management efforts fail.
Customer experience is all about change management. You want to adopt a rigorous approach to both project and process management as well.
When we do customer journey mapping, we want to make sure that we’re mapping out our processes so that we completely understand what is affecting the client.
Hoshin planning, also known as Hoshin Kanri is basically a term that means that you cascade your objectives down through the organization. This ensures that everybody, strategically, is pulling in the same direction.
4. Introducing what we call a voice of customer program
The key is to determine your customer types. I always say, “Beliefs are the essence of customer types, not demographics.”
How customers behave has very little to do with their gender or pigmentation of their skin or how old they are. Don’t get me wrong. Those things are important. Especially, given the way that in the digital world we can see the breakdown between different age groups, shows different behaviors in terms of how they’re using systems, or how they are using channels.
Essentially if you really want to understand your customer types, you need to go a bit deeper than that.
One of the really good questions you can ask is, what do you like about what we’re doing and what do you not like about what we’re doing?
There’s a really interesting book called, ‘What Customers Crave’, and he gives a great example in the book. The author talking about car washes and he said, “Okay, so everybody that goes to the car wash, they want to get the car washed fine, but what are the other needs? What are the other ones?”
Well, some people want to go through really quickly, they don’t want to wait in the line. Other people want a real quality service, attention to detail, people all over doing all the work. And so when you look at all these different ways of approaching the experience, you can suddenly see that there are individual customer types.
Once you know your customer types, you can then ask yourself, are these the customer types that we want to cater to? Because you have to make those hard decisions.
Who are our customers and who are the people that we’re actually going to let go to competitors because they can do it better, and we’d much rather focus on what we’re good at.
Understanding the drivers of each customer. What are they trying to achieve? What do they want? A lot of people always talk about customer needs, and one thing I’ve heard recently is, “Don’t worry about needs because most needs are actually met.” What do they want? What do the customers actually want? That’s one good way to understand and break down the different drivers that are underneath each customer type.
Understanding the identity that each customer shields is a powerful insight. The reason I say this is, we have our own individual identities and a lot of the time when we buy things, there’re things that match the way that we see ourselves. And we always try our best to maintain a consistency with the identity. But on the flip side of that, there’s also group identity as well. And so sometimes people will like product purchases based on the group identity they’re in as well.
There’s a nice healthy tension between group and individual identity, and it’s important to understand those dynamics. The only way to do that is with detailed research.
What I recommend is you map your key customer journeys for each customer type, pay special attention to cues. Those are things that essentially tell customers how to behave. But, when you go to a website and you see a log on screen, instinctively you know what to do. And sometimes if you use the wrong cues in the wrong places, they can confuse customers, cause them to engage the logical part of their brain, cause cognitive depletion. That’s why we recommend actually doing these deep dives with customers.
The best way to do it is to begin with the broader phases of each journey and then work your way down to the key touch points, and conduct research to learn about the customer’s key pain points.
What you want to do is look at qualitative research, which is focus groups, interviews, open ended question, anything that basically comes through in the written word. And then quantitative research, which comes through as numerical or financial information. How long was this user on the website for when you did the results come back in seconds. At what point in the funnel did they abandon the purchase, that kind of thing.
The combination of these two types of information would be very useful. And then you then simply fix the problems that are of the highest values to customers and the business, and then close the loop with them. You then get back in touch with them and you let them know, thank you for your feedback, and then you show them the changes that you’ve made.
5. Designing your branded experiences
When it comes to designing brand and experiences, my advice is always this, be a control freak.
The more control you have over what customers think and feel, the more control you will have over the experienced outcome. Emotions are such an important part.
You can only really be a control freak when you actually understand the customer. You need to get that voice of customer system in place and you really need to start spending time with your customers, understanding what they want.
Another good way of designing a branded experience, is customer co-creation. This is when you actually involve them in the different stages. And this is where design thinking became popular because it’s a tool that you can use to tease out those hidden needs and find out of the box solutions. This is definitely very good when you can bring customers and a business together and have a design thinking workshop.
Some studies came out in 2012 from the London School of Economics that showed that reliability actually contributes more to the customer experience and the resulting revenue, then moments of the light. You can put all these wow moments in, but the most important thing is just to make the experience very consistent, very reliable.
When I go to Amazon, there’s never any bad surprises. I always know exactly what to expect and the primal part of my brain is able to just do what it does and I don’t need to worry about cognitive depletion or getting stressed.
There’s a really good book called, ‘The Brain At Work’, by David Rock, and introduces something called, the staff model. In this, there are five things, shown by his studies in neuroscience, that can upset the emotional part of our brain, the primal part of our brain.
These are things that you ideally want to avoid, but if you can actually play to them and make them better, then you would actually enhance the emotional side of the customer experience. And of course the more emotional bond that somebody feels with your brand then there’s going to be more affection. They’re more likely to recommend you’ll come back.
A really good example of status is when you see someone buy a $200,000 car when really a car just takes you from A to B. What are they really doing?
They’re showing the status and people are willing to pay more for status.
Sometimes there are different customer types, sometimes there are not. I’m someone who’s happy with a compact car, but like I said, other people might want to spend the money.
Autonomy is giving the user a feeling of control. It might seem that that contradicts the earlier statement, but that’s where the finesse is. You need to design these experiences in such a way that your users feel they have a feeling of control. When I’m on Amazon, I feel fully in control, but that experience is completely controlled by Amazon.
Relatedness means the bond between people. That’s where with customer service reps, with the way that the salespeople treat customers, trying to make sure that that bond is increased.
People also have a very strong sense of fairness. People want to make sure that if they talk to other customers that they feel that they’re getting a good deal, they didn’t miss out on something and they’re being treated appropriately. Anything that you can do to make people feel they’ve been treated very, very, fairly will enhance the experience. Anything that goes in the opposite direction, of course will do the opposite.
My wife called a medical line recently, during an emergency over a holiday, and she was treated so badly and disrespected so much that she just refuses to call them up. And I’ve seen other people with businesses as well where they don’t want to call into the help line because they feel that they’re treated in just unreasonable manner and they’re disrespected and they’re made to feel, again, their status and their fairness is affected.
You want to make sure that everything from the design of the storefront, the marketing materials, everything makes people feel safe. Then when they engage, the next step is to make sure they feel informed.
Making sure that the customer can get the information they need is very important. This is where the cues come in. You want to make as minimal effort on the customer’s part to be able to achieve these goals.
This is where you actually go through a completely new experience.
So, you say, “Okay. Yeah. Everything worked out the way it was, my expectations were met. There were no bad surprises and I had a nice feeling of control the whole way through.” Good. That’s great. But, there’s a stage above that and that’s where the user feels experiences emotionally positive and enjoyable and they feel a bond of trust.
For example, I had AT&T come out to my house recently, and they were supposed to be putting in a line underneath the house.
The tech comes to me and he says, “Mike, I can’t do anything because your crawlspace is flooding,” and it was like a torrential rain outside. I had no idea this was even happening. It turned out that the house that I purchased recently had a water run off that was flooding the crawlspace.
I basically said, “Look, you’ve done everything you can. We’ll just figure it out. Come back another day.”
“Oh no,” this gentleman said, “I’m here to get the job done and I’m going to do what I can.” He picks up a bucket and he starts scooping out the water. Of course I joined in and the two of us are scooping out as well.
He actually then reinforces my crawlspace well with gravel that he gets from the neighbor’s house, and I just couldn’t believe it. He was going above and beyond. He was doing everything he could to make me feel like a valued customer.
6. Measuring your customer’s experience
Then we come to measuring customer experiences, which is the final competency.
Good metrics always flow from very strong objectives, which comes from the mission statement. Metrics are where you measure, KPI’s are why you measure.
There are three types of broad metrics in customer experience.
1. Descriptive
This would be like your operational data. This is what happens. Customer clicked here, they did this, they spent this amount of time and then they purchase this amount, that kind of thing.
2. Perception
This is what the customer thought happened. They normally will provide that in a survey or maybe it’s a complaint or something like that.
3. Outcome
What was the end result? Did things carry on as normal? Did they suddenly buy more, did they decide that they no longer wanted to be a customer? And tying those metrics together is how you can start to use this data to create business cases.
There’s something called the Net Promoter Scor (NPS), which measures advocacy.
A lot of people try to say it measures loyalty, but it’s more of a proxy for loyalty than anything. Because the only way to truly measure loyalty is to see if people are actually coming back.
Would you recommend, how likely are you to recommend, is the classic NPS question. This is really a measure of advocacy and it has been tied to growth. There’s a whole book on it that we’ll talk about later on. It is commonly used for relationship surveys.
It groups your customers into three groups; promoters, passives and detractors. There’s also customer satisfaction which ranges from very dissatisfied to very satisfied, on a five point scale. And that’s used to measure satisfaction.
That’s commonly done on a transactional basis. Here at JMARK, every time one of our techs works with a client and they’ve completed the work, a survey will go out and there’s normally a customer satisfaction survey for that specific transaction.
Now we’re going to talk about the case for customer experience ROI.
First of all, a business must know, or it must at least have a hypothesis about what actions drive value in the business. McKinsey recommends three to five key drivers. Some of these can be really obvious, especially depending on the line of work you’re in. So, if you’re a bank and you have certain accounts that make a lot more money than others, people opening those accounts, those actions are adding a lot of value to the business.
Likewise, there are certain values that don’t add a lot of value to the business. The key is to pick out the ones that really make a difference. Then what you do is you can link your perception metrics, what the customer thought about what happened to the outcome metrics for each NPS group. Then you can go ahead and you can then make statements such as, my detractors chair over rate of 40%, my promoters chair 5%, my detractors accept cross sell a rate of 10%, my promoters at 50
