How to start a Customer Experience Strategy: 3/5 Understand the potential and the limits

I was approached recently at a conference and asked, ‘if we are starting out on a customer experience strategy, what are the key pieces of advice you would give a business when embarking on a customer experience strategy? I answered:

  1. Ensure those responsible for the customer experience have the right experience too
  2. If it’s the company that wants to be more customer-centric start with them, not the customer
  3. Understand the potential and the limits of customer experience early on
  4. Once you are in, you are all in and you are in for the long haul if you intend to profit
  5. Short cuts exist, resist. Only short lived programmes use them

 

3. Understand the potential and the limits of customer experience early on

It’s important to understand the potential of CX and invest accordingly. Feedback programmes, rewards programmes, continuous improvement resourcing, customer charter communications can all add up very quickly – and typically are coming from new budget lines (or cut from existing ones) because customer experience is relatively new to many budget allocation models, if not the company. Looking at CRM or loyalty models for read across forecasts, which I’ve seen some well established consultancy practices do, may give you a proxy figure (not that I’d accept such a read if I were the CEO) but not an appreciation of the market appetite or the business impact required to achieve the result. It’s impressive that Disney achieves 4 times the lifetime value from Promoters, but if you saw the time and investment behind the scenes you’d agree they’ve earned that.

monorailIt’s essential to assess the return potential before making grand claims to the board. Often there is a ‘no-brainer’ assumption that it’s just what every business should do, isn’t it? And whilst putting customers first should never be out of fashion, just what dividend it pays the business needs to be understood as well.  As a long-time practitioner and long-term server of customer strategies I would probably start at this point. but I also see CX being rolled out as the new shiny marketing toy. It reminds me of the Simpson’s ‘monorail’ episode where the salesman sings, “a monorail, everyone has got to have a monorail”, beware the salesman I say.

Sizing the prize

A value estimate is relatively easy to ascertain in many sectors. For example with hotels, guest experience is now more important than location or price (two former industry stalwart drivers of customer decision making) according to Trip Advisor. In the energy sector switching decisions are twice as likely to be driven by a poor experience as they are price, despite the market being fixated by recruiting customers on price based deals!

In other markets where factors such as product functionality and brand reputation can carry more weight, experience is a driver  but other factors are more influencing. E.g. car batteries, where there’s not much opportunity for experience differentiation there  beyond it ‘works’ (please someone prove me wrong on this one).

And in some sectors customer experience doesn’t typically feature highly as a standard due to overwhelming alternate factors (think lotteries or personal GI lines) or because the experience is actually owned by too many different parties (think airport operators and shopping malls) it may drop down the consideration list as too problematic to unpick and understand.

Whilst the business may wish to commit to the customer, market conditioning may limit the potential. Understanding this first could save face with overambitious forecasts and wasted investment of resources later.

Missing your potential

cx article 3However, experience typically will feature and understanding the potential is important because missing it can be business fatal. This chart highlights a predicament for a low interest category (utilities), where new insight into what matters most for customers (bar on left) exposed the inefficiency of the existing deployment of resource (bar on the right). A seismic shift in culture and process over a period of time, careful redeployment of resources and sensitive discussions with city analysts will be needed if a transition to a customer-centric approach, achieved through service experience and brand experience, is to be successful.

Seeing this most CEO’s might think twice before turning their business upside down. What this chart also highlights is the value of a brand and comms strategy when customer engagement otherwise is low. This creates a positive association between brand (think about the power of positive association from The Olympics bestowed on Visa’s brand) and customer which acts as a positive experience reinforcement when there is limit significant experience (paying for something isn’t a memorable experience consumers overtly associate with the scheme provider). In some markets such as general insurance and utilities, unless something goes wrong, most customers wont experience the brand. Activities including advertising, direct communications, PR and sponsorship become a surrogate so have an inflated value for customers and are therefore a key part of the experience remit. Ensuring they are in scope  and aligned to what matters most to customers is important otherwise the potential for customer experience will be compromised.

Ascertaining the value of customer experience

cx article 3.1CX purists might argue that in order to ascertain the potential value, first you need to find the opportunities for improvement and demonstrate their incremental return against brand equity, market share and revenues. However, you need to travel a long way through a CX programme to get to this point (often an oversight with CX programmes led by researchers), whereas pragmatic CX professionals would suggest to secure investment, resources and sponsorship for all the tools needed a ‘read’ of the potential is required first.

This can be derived from three simple ‘customer-focused’ questions as highlighted in this chart.

Beware the process wolf in customer experience clothing

I recently heard of a company who had identified 700 IT platform defects it needed to fix to deliver a decent customer experience! They also used a process engineering consultancy at diagnostics stage to ascertain the value of customer experience to their business. Unsurprisingly the diagnostics phase identified millions of pounds of operational savings through lean processing techniques, but not one CSAT or NPS benefit from any of the business improvement recommendations. This has resulted in a business re-engineering approach to improvements which reduce business operating costs but is badged as ‘customer transformation’ where the customer is at best a secondary consideration.

So before a programme is undertaken a short period of assessment is needed for an effective audit to provide the insight to assess the potential of customer experience. For this, our advice is to invest in the right expertise to get a sound reading.

If the ambition of the business is, to create a sustainable competitive advantage through understanding customer experience expectation and desires, then the assessment of the potential must be conducted on the same basis too.

Finally, if there is a poor or non-existent sector experience, it may also mean there is a greater opportunity to differentiate that hasn’t been exploited. For example, returning to the hotel industry, Formula 1 in France (and to some extent Premier Inn in the UK) demonstrated how low cost accommodation could still mean a really good night’s sleep. In fact that’s all that was required so that stripped out costs on amenities such as pools and restaurants and invested in sound proofing and quality mattresses’.

I recall working on the brand & comms planning for the Health Lottery. At the time the CMO was fixated on product and pricing – and with good reason – it was what he knew. But the margin of improvement against the competitor on this factor was limited. However, the sector customer experience importance was way below the broader leisure sectors so it was dismissed. A small investment in this area could have forced players to reappraise their preferred lottery provider on new terms, rather than accepting the much smaller slice of player’s wallet the ME2 gaming angle finally achieved. I couldn’t convince them – you can’t win them all.

Posted by Christopher Brooks

Lexden is a Customer Strategy Agency | Putting your customers at the heart of the decision

We work with brands to attract and retain happy customers | We achieve this by helping them to understand what makes their customers tick, building memorable customer experience strategies and creating engaging customer value propositions.

If you like what you’ve read please sign-up to our monthly ‘Putting Customers First’ newsletter. Or for a discussion on how we may be able to help you, contact christopherbrooks@lexdengroup.com or call us on M:+ 44 (0) 7968 316548You can also follow us on LinkedIn Facebook and Twitter @consultingchris 

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