Why is it so difficult to get funding for Customer Experience change?

CX initiative fundedIf you are reading this post you are likely well aware of customer experience’s capacity to improve your company’s performance. You are also likely very frustrated with a lack of actual commitment from your boss. Oh, he is probably saying all the right words at the company meetings, but when it comes to bankrolling the action, the time is never right.

The reality is that while 90% of executives say that customer experience is central to their strategies, and 80% want to use it as a form of differentiation, 86% of these executives do not expect to see a significant uplift in business resulting from it.

The reasons it is so difficult to get funding for customer experience initiatives are:

1. Your boss’s mental framework is focused on cutting costs and/or raising revenue – it is very difficult to find very specific examples (i.e. best practices) that directly connect improvement of customer experience to achieving these goals.

 

2. Fear is a stronger motivation than desire. The desire to provide better customer experience may not be strong enough to inspire the change. Fear of falling behind the competition in how customers perceive their experience of doing business with your company, may facilitate sufficient stimuli. Particularly if that fear is confirmed by trends in customer churn rate or increased product returns, while your competition enjoys healthy market share growth.

 

3. We all like to think of ourselves as the rational decision makers. Behavioral economics research exposes how predictably irrational are our decisions. Your boss, assuming s/he is human, is no exception and likely makes very important business decisions based on beliefs rather than evidence. Challenging these beliefs with “solid” data is a fool’s errand. A much better strategy is to understand which of these beliefs inspired him to hire you into his organization in the first place.

 

It is the time for the disclaimer – I believe that Customer Centricity can only be architected by the top leadership of a company as it requires alliance of corporate culture, customer experience metrics and operational KPIs. It is a long term corporate strategy and not a project or initiative.

However, most of us are not fortunate enough to work for leaders who share our commitment to viewing our company’s business processes and practices through the eyes of its customers. Most of us know how difficult it is to earn credibility and trust while evangelizing the importance of customer experience. Since this is the road less travelled, you are not likely to find a blueprint or a list of waypoints to guide you. However, an understanding of your environment and seasoned advice may help to navigate these uncharted “waters”. The scope for every milestone/waypoint has to be crafted to be uniquely relevant to the specifics of your situation and the landscape of your company. There is not space in this blog post for specific examples, I am happy to offer them, if contacted directly.

Nothing works better for evangelists than miracles delivered on time and within the budget.

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The Strategic Value of Customer Feedback

Strategic Value of VOCMost companies solicit customer feedback on their products or services in various forms, even though it is hard to find evidence of any strategic benefits derived from its use. Most commonly used methods, surveys and focus groups, are tightly controlled by companies through the selection of the subjects of inquiry and carefully formulated questions that require a quantitative response. These efforts are focused on validation of hypotheses about a product or service’s adoption by target market segments. However, they do little to help the discovery of unmet customer needs or to support construction of alternative hypotheses.

Unsolicited customer feedback, found “in the wild” at online customer reviews sites and forums, is an excellent source of insights comparable to the ones discovered by ethnographic research (by observation).  Both methods share the focus on the customer’s outside-in perspective, but “in the wild” feedback provides more statistically representative samples at a much lower cost.

“The only truly unbiased voice-of-customer feedback, I believe, is the feedback you find “in the wild,” that is, by simply observing the comments made by your customers in social media.” Don Pepper

It is a common practice today for many companies to collect and/or monitor both types of customer feedback. The problem is what they do with it. Ultimately, the quality of business outcome trumps what types of customer feedback or methodologies were used to produce it. There is a growing body of evidence that puts a very high value on the use of “in the wild” customer feedback for strategic innovation efforts. Yet, most companies use social media comments to focus on the resolution of public complaints by responding to them at a micro level.

“An ounce of prevention is worth a pound of cure.” Ben Franklin

The goal should be discovery and elimination of systemic process/product failures that impact customer experience. However, companies are often skeptical to consider unsolicited customer feedback as a reliable and fertile ore for mining strategic insights. Their management seemingly prefers the comfort of familiar, if not effective, evaluations by the “house” customers at the expense of their brand’s degradation by “in the wild” social consumers. The use of Band-Aids is not effective to stop heavy bleeding.

Since most “tamed” customer feedback is used for validation, and most “in the wild” customer feedback is used for firefighting, the relative ROI should be examined closely. Perhaps a better model would be to start using unsolicited Voice of Customer for selection of subjects for validation.

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Where are Customer Experience Success Stories?

Where are CX success stories.Companies cannot control how their customers perceive their experiences with their products and services. However, they can and they must optimize their processes to deliver the best experiences from their customers perspective, profitably. Some would argue that doing this is critical to a company’s longevity.

In developed markets the quality of customer experience quickly becomes the primary competitive differentiator. Recent studies found that 90% of executives say that customer experience is central to their strategies, and 80% want to use it as a form of differentiation. The problem is that 86% of these executives do not expect to see a significant uplift in business resulting from it. As long as this is the case, nothing will change, and the customer experience mantra will remain just empty words, while their companies continue to compete on price on the race to the bottom.

This will linger on as long as business leaders put the interests of short term share traders ahead of the interests of customers, employees and investors. The focus on quarterly growth of earnings per share benefits only day traders and corporate raiders. All the while the company’s longevity is being compromised. Companies exist to serve customers profitably. The executives, that cannot see “a significant uplift in business results” from customer experience investment, should closely examine what business results they pursue and a time frame they expect the results to occur.

The business results to be expected as a return on customer experience investment made skillfully include, but not limited to:

  • increase in revenue per customer
  • growth of customer lifetime value
  • increase in their market share
  • decline in marketing costs
  • decline in customer support/service costs

However, these gains typically start to make impact on the earnings per share (EPS) two or three years after the first round of the customer experience investment was executed successfully.

Customer Experience Management (CEM or CXM) is a relatively new discipline. A Google search of the term finds the first relevant reference on the second page as the very vague Gartner definition:

” the practice of designing and reacting to customer interactions to meet or exceed customer expectations and, thus, increase customer satisfaction, loyalty and advocacy.”

Given the association of Gartner with the software industry, and the most of subsequent search results point to technology companies, it is easy to assume that customer experience management investment means buying and implementing technology. Nothing can be further from the truth. In fact, technology is never the solution to your customer experience management challenge. The solution is an investment of effort and money into the rethinking of your business processes and practices from your customer perspective. Only after this is accomplished, modeled and tested, may you want to use a technology to speed the proliferation of the results throughout the company.

Specific methodologies and best practices for successful customer experience strategy implementations are very hard to find. Each success came after multiple failed attempts and is unique to the market in which the company operates. When a company considers customer experience to be a competitive differentiator, the last thing it wants to do is to share their hard earned customer competency with their competitors. Over 90% of our clients insist on strict non-disclose conditions before we start any work with them. This experience is not unique.

That is why successful implementations of marginal technology solutions will be publicized and imitated ad nauseum. The successful implementation of customer centricity strategy may see a lot of publicity, but its specifics would always be left for public guesswork and folklore.

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Customer Experience – From Data to Action

Customer Experience-From Data to ActionToo many analytical efforts focus on a single stream/source of data and that makes them unproductive. The purpose of analysis is the development of actionable intelligence:

  • to lower the uncertainty of management action
  • and/or to help form ideas to bridge the gap between the existing and desired state of affairs.

Confining these efforts to the analysis of a single source of data does not provide enough intelligence to produce confident outcomes.

Google Analytics is a good example of an excellent tool that provides a great deal of transactional data that requires interpretation to suggest an action. When the interpreters have no data about the customers’ experience with the website, they would have to make assumptions about the motivations behind the transactional data. Every time an assumption substitutes for  data,  the confidence in a suggested action is diminished. I am not arguing for “paralysis thru analysis”, but there is a reason why GPS requires the minimum of three satellite signals, before it gives your position’s coordinates.

I used to look over Yelp reviews before selecting a new restaurant to check out, but 9 out of ten times my experience fell well below the expectations created by other customers’ perceptions. Since I have no access to data about the reviewers age, culinary experience, cultural background and priorities, the analysis of their perceptions cannot produce confident/meaningful recommendations to act. Hence, Yelp restaurant reviews are no longer a reference source for me.

Analysis of customer reviews of products published on Amazon and other sites like that can be very valuable to product and brand managers. They can find great insights for optimization of a product’s lifecycle, a brand’s product mix or advertising efficacy. However, the correlation between customer experience data and sales and returns’ data, will always produce much more confident calls to action.Customer Experience-From Data to Action 1 dashboard

The myth of “The One” has been propagated in our culture for a long time. That explains the popularity of books and movies that try to make us believe in a single source of wisdom, love and happiness, or whatever else they sell. Similarly, technology providers market their analytical tools for a single source of data as a “strategic” solution, but market intelligence is highly contextual and requires a multiplicity of sources to be meaningful.

Flashy dashboards, without blended data sources, cannot produce confident calls to action.  Blending different models to analyze the same data will likely increase the confidence even more. It is important to remember that the effectiveness of your efforts depends much more on the data sets you choose to analyze in concert, than on the tools you choose for analysis and visualization.

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Customer Satisfaction Is Not Enough to Forge Loyalty

CSAT and LoyaltyMost companies, large and small, monitor satisfaction scores given by their customers. Regardless of the methodology or scale they employ, the utility of these measurements is somewhat questionable. Aggregate metrics like these offer very little actionable intelligence, but trending them over time may provide alarms, acting as the proverbial canary in the mine.

Presumably, companies that compete in the market have to satisfy their customers to stay in business.  Therefore, relatively high customer satisfaction scores signal the likelihood of the company’s longevity. Many hypothesize that high customer satisfaction leads to the creation of loyal customers, low customer churn, and subsequently high profit margins with increase in market share. While the correlations between increases in customer experience scores and wealth creation are relatively well documented, the cause and effect between the two are very hard to establish. There are many gaps in the logic of such inferences:

  1. Relativity of the score – most companies measure customer satisfaction of their customers without benchmarking these scores against the competition. Such an approach provides no more than a data point without reference to the realities of the marketplace.
  2. Satisfied customers do not automatically become loyal customers. Customer satisfaction is an absolutely necessary condition for forging customer loyalty, but it is not a sufficient one. Loyal is the customer who will continue to buy from your company regardless of the market pressures:

– even if the product or service can be purchased cheaper from someone else

– even if your competitor comes with a “better” product

– even if the delivery comes a day later than competition.

Rudy Vidal of Vidal Consulting Group shared with me the results of his research on the correlation between customer satisfaction and loyalty – only 13% of “extremely satisfied” customers identify themselves as being “loyal” as described in the definition above.

Make no mistake, raising your customer satisfaction scores above the scores of your competitors will likely have a positive impact on reducing your customer churn rates. The challenge is to produce “real” quantified evidence of such impact. It may be substantially easier to produce evidence of how loyalty (not declared intent, but observed behavior) impacts profitability and/or revenue growth. The methods for doing this have to be discussed in the context of specific product or company. The more relevant question for this post is – what turns satisfied customers into the loyal ones?

Many subject matter experts seem to think that loyalty is created by an emotional response of customers to certain elements or attributes of their experience with a product, brand or company. Moreover, the loyalty is only forged when the customer exposed to such experience on multiple occasions.

Most “loyalty” programs on the market today completely miss this point and act as “golden handcuffs” to incite repeat business rather than creating loyal customers. All the talk about “awing” or “delighting” customers is unlikely to produce any specific, measurable and lasting effect in creating customer loyalty. Without understanding what customers value on emotional level these programs will likely fail.

The ultimate challenge for a practitioner is to recognize which elements/attributes of their customers’ experience inspire emotional responses and optimize the processes to deliver them consistently.

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