Editor's note: David Conway is chief strategy officer at Nunwood, a Leeds, U.K., research company. He can be reached at davidconway@nunwood.com. This article appeared in the September 10, 2012, edition of Quirk's e-newsletter.
Given the vast investment in research, customer experiences have been slow to improve. Seduced by silver-bullet, "ultimate" measures, firms overlook the input, process and output measures that drive quality and excellence. However the firms that lead the field in delivering competitively superior customer experiences provide a compelling measurement blueprint for achieving cohesiveness on the journey toward excellence.
Drawing on the Nunwood U.S. Customer Experience Rankings 2012 study, I would argue that this is due to organizations failing to see customer experience as an ongoing process and, as such, failing to apply the same rigorous process metrics as any other mission-critical business process.
The last battleground
"The general who wins the battle makes many calculations in his temple before the battle is fought. The general who loses makes but few calculations beforehand." - Sun Tzu, The Art of War
In a world where a competitive edge is here today and gone tomorrow, customer experience management (CEM) is billed by many CEOs as the last battleground. It is where the relative quality of product and service delivery meets consumer decision-making. Based on their experience, consumers will be more loyal; more amenable to upselling and cross-selling; less price sensitive; and more likely to spread positive word of mouth. When you get these factors right, various studies have shown that the resulting positive impact on cash flow can dramatically increase shareholder value. So rest assured, the prize is a large one. This is one of the reasons why U.S. companies invest so heavily in research to understand how they are performing relative to their competitors.
According to ESOMAR, U.S. firms invested some $9.2 billion in customer research in 2010 and are predicted to spend similar amounts in 2011 and 2012 - much of it in the field of experience and service delivery. Yet according to Nunwood's comparison of 2011 and 2012, there has been little discernible increase in the quality of the experiences created for U.S. consumers. Further, a report published in 2010 by the Boston Consulting Group showed that only one-in-10 voice-of-the-customer programs come anywhere close to meeting their original objectives.
It raises the question as to why, given the huge investment, this should be the case.
A central organizing idea
An examination of the leading companies (e.g., Disney Parks, USAA, Amazon, Wegmans, Publix and Trader Joe's) that top the Nunwood rankings helps provide an answer. Customer experience for these organizations has many moving parts operating across multiple dimensions of delivery. All of these parts are interconnected to create what is essentially a system of systems.
At the heart of their ability to manage this complexity lies a central organizing idea - a concept so powerful it acts as an invisible hand, shaping and forming the multiple subsystems so that they come together to create a cohesive whole. At Disney it is all about storytelling. At USAA, it's "We know what it means to serve. Let us serve you." At Amazon, it's customer centricity. At Wegmans, it's creating of a theater of food. At Publix, it's making shopping a pleasure. At Trader Joe's, it's taking a 30-minute chore and turning it into a 30-minute tropical vacation.
For each of these companies, the compelling nature of the idea drives integration. To understand this concept, consider Hollister Co. A retail phenomenon, it has grown to a $4 billion business in just 10 years. Central to its success has been its brand narrative - a pseudo-history developed by its CEO to act as a touchstone for every aspect of the customer experience. It's a story of "passion, youth and love of the sea," involving a fictional character called John M. Hollister. This narrative is delivered with a sense of theater that engages every sense in stores, which are designed specifically to appeal to the aspirational dreams of their target audience (14-to-18-year-olds).
The concept of a central organizing idea isn't just restricted to the consumer market. Rolls-Royce Civil Aerospace has seen its order book rise from $3 billion to $60 billion thanks to what it calls a "central organizing thought" - a commitment to engendering trust from both employees and customers.
Multiple process measures
Contrast this integrated approach with those organizations that search for silver-bullet measurement to solve their problems (e.g., NPS, customer effort, etc.). They look for a single narrow solution when a holistic one is required. The result of focusing on an output (or consequence) measure to improve performance has unintended consequences, usually delivering reduced, instead of increased, performance.
The top companies show us that managing complexity requires multiple process measures.
Input measures
For each of the top 10 companies, hiring is a core competence. The quality of their people determines the quality of the experience they deliver. Top-10 companies recruit better people and on average pay 28 percent more than the industry average for the same role. Amazon, following its belief that the best service is no service - when things just work - focuses on customer contacts as an input measure. All of these companies carefully monitor culture and employee engagement in the context of the experience they are seeking to deliver.
Process measures
Because it encompasses every aspect of how a business functions, CEM has many moving parts. It is for this reason that companies find it so challenging. In addition to product, price and brand, there are six factors that influence loyalty and repurchase. The commercial contribution of each of these six factors varies across business and industry. However the excellent organizations consistently deliver outstanding performance against all six.
-
Personalization: The degree to which an experience meets an individual's specific needs.
-
Time and effort: Valuing customer time and reducing effort to make the interaction easy.
-
Resolution: Turning a poor experience into a great one.
-
Expectations: The setting and delivery against implicit and explicit promises.
-
Integrity: The degree to which the customer trusts the company to do the right thing - not just the thing that maximizes its returns.
-
Empathy: Understanding the customer's unique circumstances and responding accordingly.
A statistical analysis from the study shows that a composite 11-point measure of these factors has 10 percent more predictive power of future customer behavior than NPS.
However, this is not the point. Each of the six factors plays a role at essential points of the customer journey. On a number of occasions, more than one factor is necessary for the satisfactory completion of a customer journey step.
The message from the study is clear: The top companies excel by solving all of these areas. They do not solve these problems individually - each is interconnected. So if an organization fails to solve any one of them, it ceases to be excellent. It's the management of the interconnectedness that sets it apart.
Output measures
Every company is different. The choice of output measures (e.g., NPS, customer effort, customer happiness, forgiveness, CSAT, etc.) depends on the degree to which the measure drives corporate commercial objectives. The objective is usually profit but others include market share, customer value, core product penetration or customer base growth - whichever measure has the greatest explanatory power for the growth in shareholder value.
There is no silver bullet
It is human nature that we look to single-order, single-factor explanations of success. However, Nunwood's research shows that for customer experience, there is no silver bullet.
Albert Einstein cautions us to make things as "simple as possible, but not simpler." Satisfying customers isn't rocket science but firms would be foolish to underestimate its complexity. Ashby's Law of Requisite Variety suggests that the complexity of an organization internally must match the complexity of its external environment. Customer experience programs are only effective if they succeed in many areas, requiring a holistic measurement program that looks at the interconnectivity between measures as well as the absolute measures themselves.