The Customer Experience Scenario: The Magnificent Sevenkpc-group.cz/wp-content/prezentace/Customer_Experience_Management.pdfThe Customer Experience Scenario: The Magnificent Seven

The Customer Experience Scenario: The Magnificent Seven

Jim DaviesApril 28, 2015 Bratislava, Slovakia

Jim Davies

28/04/2015, Bratislava, Slovakia

The Customer Experience Scenario: The Magnificent S even

Jim Davies



In addition to attracting and retaining customers, satisfying CXs lead to revenue growth. Gartner researchshows a strong positive correlation between enterprise success and excellent CXs (as measured by the NetPromoter Score, or NPS, a useful proxy for measuring the CX — seewww.satmetrix.com/net-promoter/net-promoter-benchmarking-2/) as shown in this figure, which measures and compares the 5 yearrevenue growth for 'NPS Leaders' (as indicated by Satmetrix) with the average revenue growth for theindustry.

Adopted by many Fortune Global enterprise companies, NPS is the percentage of customers who wouldrecommend a company (promoters) minus the percentage that would urge friends to stay away (detractors).On a scale of 0 to 10, customers rate how likely they would be to recommend a particular product orservice to a friend, family member or colleague (see figure opposite).NPS originated with Frederick F.Reichheld's work at Harvard Business School and Bain & Co. (see "The OneNumber You Need to Grow"in Further Reading).

Dr. Laura Brooks and Satmetrix did the primary research to develop themethodology and pick the rightquestion: How likely are you to recommend to a colleague or friend?

Jim Davies



Jim Davies



Customer experience management (CEM) depends on the definition of customer experience, which, inturn, depends on the definition of experience. Those striving to improve thecustomer experience need to beclear about these definitions to avoid a lack of focus and oversight and to preventduplication of effort.Most organizations already have multiple initiatives to help improve thecustomer experience. Thechallenge is that each team, department or group has its own interpretation of what is meant by "customerexperience" and "customer experience management." Creating a consistent definition is important forgetting teams to work together, focus efforts and define metrics.

Gartner's definitions of CRM and CEM — see "Define Customer RelationshipManagement Your Way"(G00169126) and "The Definition of Customer Experience Management" (G00169354) — make itclearthey are not the same thing, but the terms are often confused, and even used interchangeably, by project andprogram managers. The five main differences are in the goals of the initiative; the roles of those impactedinternally; the degree of customer-centricity; the emphasis on the useof technology; and the importance ofa rational approach, as opposed to an emotional one.

Action Items: If you don't have a definition, or cannot agree on one, then use Gartner's definition of"customer experience." Use Gartner's definition of CEM to help your organization agree on what it is, andto outline the goals and scope of your CEM project or program.

Jim Davies



Delivering a satisfying CX requires more than usability studies and multichannel interactions. To beeffective in this arena, enterprises need to adopt an outside-in approach where all aspects of the valuechain, from initial needs identification to delivery and measurement, focuson the customer. This is afive-step process:1. Know your customer. Discover and understand customers' latent needs through a variety ofprimary research mechanisms.2. Match solutions to customer expectations. Realize that designing with the intent of satisfyingcustomers is as much about taking things out as putting them in.3. Design for the experience. Though the experience hinges on a moment of delight, it is farmorethan one point of interaction — it requires an entire experience ecosystem, including businessprocesses, back-end systems, and delivery channels, all seamlessly aligned.4. Deliver the experience. Today's IT skills and technologies are only part of what youneed to delivera satisfying CX. This must be an integrated enterprise effort encompassing an ensemble of diverseorganizational elements.5. Measure the emotional reaction. Leading enterprises use a mix of operational, behavioral,businessand customer reaction metrics to understand how well they met customer expectations and toiteratively improve their design.

Source: Only required for non-Gartner research

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Jim Davies



The overall customer life cycle can be quite generic as shown above.

There has been a movement in recent years to illustrate the life cycle as an infinite loop as the cyclerequires continuous focus and work by the supplier and the relationship only really ends with the death ofthe customer

Some organizations are heavily service-oriented so the "Own" part of the life cycle is much larger than thebuy (such as automitve), others have exactly the opposite focus with the "Buy" part of the cycle beingmuch more important (such as grocery retailers)

Jim Davies



Jim Davies



High-level customer experience metrics, such as those for improving customer satisfaction, loyalty, advocacy, brand awareness and reputation, are useful as eventual objectives, but they are not what employees focus on day to day. Individuals need metrics that they can affect through their daily activities. Listed above are some examples of what can be measured at this more granular level.

To gain understanding and buy-in from employees, a CEM initiative needs to create a hierarchy of metrics that encompass: (1) one or two highest-level metrics that the board can identify with; (2) a set of three to six top-line CEM metrics, such as those above on the left; (3) a series of (initially) between five and 15 process metrics, such as complaint-handling response times, complements capture and even first-time resolution of customer service requests that tie in to the most important processes for the customer; (4) a much wider array of operational metrics that may impact the customer experience, such as late delivery numbers, employee satisfaction levels, billing error frequency and website downtime. The key to using the hierarchy of metrics lies in creating linkages from the bottom to the top of the stack and in ensuring ownership of the process metrics by an individual.

Action Item: Create a hierarchy of CEM metrics, and systematically prove the linkages between different levels of the hierarchy.

Jim Davies



Tactical Guideline: Measure your organization's over all level of customer experience maturity and lay out the steps to move t o the next level of maturity over a two- to three-year period.

Level 1 (Initial): The focus on improving the customer experience is fragmented. Processes are ad hoc, disconnected and disorganized. There may be multiple individual advocates, but they have little awareness of each other, no formal strategy is in place, and there is limited acceptance of the importance of customer experience maturity across the organization.

Level 2 (Developing): A voice of the customer function has been established, and a vice president of customer experience may have been appointed. An audit of existing activities has taken place. Gaps have been identified, requirements for improvements have been assessed, responsibilities have been assigned, and an implementation plan is in place.

Level 3 (Defined): A vision has been outlined and management buy-in secured. Goals, practices and performance metrics are fully defined. Processes are standardized, integrated, documented and implemented. Formal governance and a compliance model are in place.

Level 4 (Managed): A customer experience metric has reached parity with profitability in terms of importance for executives, and all employees are focused on its improvement as much as on profit. Customer experience improvement has been systematized.

Level 5 (Optimizing): The culture of the organization has changed, so that employees do the right thing without being asked, given incentives or pressurized. Employees are empowered to take action and innovate. A culture of alert defense of an excellent customer experience has taken hold.

Jim Davies



Jim Davies



Key Issue: Which projects will deliver the most-pos itive customer experiences?

Tactical Guideline: Maximize the use of all the diff erent skills across the organization to improve the customer experience. Eve ryone can make a difference.

Projects to improve the customer experience come in many forms. Traditional categorizations have tended to focus on a small subset of projects, such as website design or voice-of-the-customer research. The categorization above summarizes the customer experience projects Gartner frequently comes in contact with, and divides them into seven types. From left to right ("listen, think, do" to "design better"), they move from more analytical activities to more artistic activities. No single activity is more important than the others.

The skills needed for these project types are wide-ranging, from those of analysts ("listen, think, do"), process improvers ("from out to in") and change managers ("alter attitudes" and "open up"), to designers, branders and strategists ("design better" and "get personal"). Therefore, almost everyone in an organization can make a difference to the customer experience. Customer experience projects are rarely as neat as the categorization above suggests. In most cases, they will concentrate on one of the types, but affect several. Nonetheless, one type is likely to be a rallying cry for activity at any given time.

Action Item: There is no panacea for improving the customer experience; it requires 1,000 minor improvements to get the desired result. Focus on one project at a time, but keep the big picture in perspective.

Jim Davies



Jim Davies



Tactical Guideline: Investment in customer service and support technologies needs to balance potential productivity gains against the impact on customer experiences, to effectively address senior management's cost con cerns and capitalize on rapidly evolving consumer expectations.

In the current economic environment, focusing on the customer experience seems a luxury that cannot be afforded. Cost cutting has risen to become the most important business goal for the first time in five years. However, a focus on operational performance does not have to be to the detriment of the customer experience. There is much that can be done through targeted technology investment that can improve the experience given to customers, while also improving operational efficiency or effectiveness. For example, self-service tools, community marketing and e-commerce can all enhance the customer experience, but provide significant operational benefits.

Action Item: Map out recent and planned CRM technology investments, and prioritize future initiatives that achieve a "win-win" for customers and the organization.

Jim Davies



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This is an extract from "Center For Quality Management Journal" Volume 2, Number 4, 1993, discussed Prof. Noriaki Kano of Tokyo Rika University and several of his colleagues' methods for understanding customer-defined quality, which were introduced during the mid-1980s. Kano's ideas can be summarized as: • Invisible ideas about quality can be made visible. As the customer's ideas of quality are made clear, many requirements emerge, and they can fall into several groups. • For some customer requirements, customer satisfaction is proportional to how fully functional the product is. • The horizontal axis in the Kano diagram indicates how fully functional some aspect of a product is, and the vertical axis indicates how satisfied the customer is. Traditional ideas about quality have sometimes assumed that customer satisfaction was simply proportional to how functional the product was — that is, the less functional the product, the less satisfied the customer, and the more functional the product, the more satisfied the customer. In the figure, the line going through the origin at 45 degrees graphs the situation. Such customer requirements Kano designates as "one-dimensional." For example, in automobiles, better gas mileage provides more satisfaction, and worse gas mileage provides more customer dissatisfaction. • Some customer requirements are not one-dimensional — there are also "must be" and "attractive" elements.The must-be curve example: Having poor brakes in an automobile causes a customer to be dissatisfied; having good brakes, however, does not raise the level of the customer's satisfaction. Good brakes are expected — they are a must-be requirement.The attractive curve example: An automobile customer may not be dissatisfied if the radio antenna does not automatically lower itself into the car body when the radio is turned off, but the customer may be more satisfied when the car has this feature.

Jim Davies



Tactical Guideline: "Word of mouth" and past experi ence will often have a greater weighting in the purchase decision than communicati ons from your organization. Measure the five types of expectations gaps in your organization, and act to close the gaps —starting with those within your organization.

The model above was developed to understand service quality in a service environment. The model was developed by V.A. Zeithaml, A. Parasuraman and L.L. Berry in 1990. It argues that service quality is a multidimensional construct. It has been the basis for multiple academic research projects in different industries since 1990. The starting point for the model is that customer expectations are set by word-of-mouth, personal needs, past experience, and the communications and actions of the organization. Customer satisfaction is determined by the difference between the expectations and the service provided. Five gaps were identified in the model as areas where organizations fail. Gap 1 is where customer expectations don't meet management's perception of customer expectations, so the organization does not know what customers expect. Gap 2 is where management's perceptions do not match the service specifications, so the wrong level of quality standard is put in place. The third gap is where the service specifications do not match the service delivery, so the organization is not able to deliver to the service specifications. The fourth gap is where the service delivery does not match the external communications back to the customers, so the promises made to customers do not match delivery. The fifth gap is the difference between customer expectations and the customer's perception of the service he or she is being provided, which results in poor customer satisfaction.Action Item: Use this service quality model to discover and help improve the customer experience of your organization by measuring the five different gaps and taking steps to close them.

Jim Davies



Jim Davies



VPs of customer experience are becoming less rare. Gartner has compiled a list of more than 200 firms that have executives with this job title, and believes there were more than 400 worldwide in 2010. A handful started appearing in 2001, with the majority appointed in 2007 or later. The most common industries they appear in are travel and hospitality, banking, communications and media, and high technology.

The most common location for them in 2001 was the west coast of the U.S., and the majority are still based in the U.S. However, they are becoming more common in Europe and Asia. The three finalists for Gartner's CRM Excellence Award in Europe in March 2008 all had the job title "VP of customer experience." The term "vice president" is less common outside North America, where "head (or director) of customer experience" is more common.

Jim Davies



A small minority of organizations have a large central Customer Experience organization

Over 80% have some form of hub and spoke structure with a small central customer experience organization at the center.

The central CX organization sets out the strategy, audits projects, coordinates best practices and provides assistance and help to the spokes.

The spokes continue to be responsible for their projects, outcomes and metrics.

Jim Davies



Jim Davies



Decision Framework: Because no enterprise in pursui t of market leadership can excel simultaneously in product superiority, operat ional efficiency and customer intimacy (unless it has unlimited resources), there are trade-offs to be made.

Jim Davies



There are many current examples of business model innovations in each of the six parts of the business model. Some examples:

Ideation: crowd-based design (like the T-shirt company Threadless), and the precompetitive sharing of processes and information that make the R&D processes easier in an industry (like the pharma industry's Pistoia alliance).

Creation: using large numbers of people to create parts of a solution using prizes (bounty-based), platformization/ecosystem effects in various industries (e.g., iTunes), the customer as nanofactory (a longer-term vision based on 3D printers in homes)

Customer engagement: Customer self-service, where customers "reach back" into the business model to serve-themselves more, and the inventory-information phenomenon discussed earlier.

Customer experience: exposing information from your internal supply chain to enhance the customer experience. Early examples of this came in the logistics and postal industry. And more generally, information extensions, monetizing informational assets that your business owns.

Monetization — examples include new fractional/temporal ownership models (e.g., Zipcar), freemium models (I charge most customers nothing because creation/distribution is so inexpensive, but make my money through a few premium customers, and 2-sided markets (e.g., Google — one class of consumers of my services (advertisers) pay for others (searchers).

Learning and change: e.g., hackdays — where staff and possibly others get to come in and hack/play around with information/products/services, and see what they can come up with (e.g., Guardian Media Group).

Jim Davies



Jim Davies



July 2013 saw the opening of YrStore , a U.K.-based pop-up shop allowing customers to create their own t-shirt designs in-store. Using touch-pads, shoppers design clothing from either stock images or their own artwork, and add text and filters to suit their taste. The final design is then printed in-store, ready for the customer walk out with, and cost from GBP 20.

LINK:http://www.yrsto.re/

Jim Davies



Social communities and Web environments in which subscribers with similar interests connect to harness the collective expertise of all the members are having an impact on corporate thinking. At the heart of these online communities are the members, who share knowledge through continued contribution of ideas and information. The participants collaborate and manage their communities, constantly providing feedback that is used to shape and extend the features of those communities, while building out the social knowledge. Businesses must review this rich source of information as part of their corporate wide self-service strategies

Jim Davies



Or that a ski resort would be one of the first to introduce RFID technology as a way to enhance their guest experience on theslopes and way beyond? We had the honor of helping Vail Resorts innovate a way to connect skiers to RFID tagging to social media so that they can track and share their Vail stories across their personal networks. The result was more than 100,000 social photos shared, yielding approximately 12 million social impressions for photos alone, and that's in just the first season. Vail Resorts empowered 150,000 people living the Vail Resorts story to tell the Vail Resorts story to an audience of 12 million. Whatonce might have begun as an ad for a ski vacation has become a panorama of experience that lives in perpetuity.

Vail Resorts: Digitizing the mountains. The experience at the luxury ski destination Vail Resorts is even more exciting through the use of RF-enabled technology to track runs, reward points and produce league tables. On-mountain photographers capture special moments, and add them to visitors' digital profiles, so they can relive their day through photos and stats, and share them with friends. This is as much a part of the service as building a new ski lift.

"In addition, we recently announced the launch of EpicMix Photo, a groundbreaking addition to the award-winning application we launched last season and we announced the conversion of the majority of our paper tickets to RFID enabled "hard" cards. Photos are an incredibly important part of the vacation experience and EpicMix Photo completely redesigns both the guest experience and the business model. Our on-mountain photographers will easily scan a guest's RFID-enabled pass and be able to automatically deliver their photo to their EpicMix account and the same can be done for group shots and for kids. Guests willthen get secure, free access to these photos for sharing on Facebook and Twitter and can purchase a high-resolution image onlinefor printing. Last season there were just less than 300,000 Facebook posts from EpicMix and we expect that to grow exponentially with these new enhancements. We believe EpicMix Photo will be a significant enhancement to the guest experience, create a deeper connection for us with our guests, and drive positive word of mouth" impressions across the Web."

Jim Davies



Case Example: Guess

Jim Davies



Barclaycard U.S. is calling its new Ring card "the first social credit card to be designed and built through the power of community crowdsourcing." That means you. The secret of the card, physically similar to any other, is the financial system behind it: The crowdsourced design has low interest rates, low fees, simple terms and "the opportunity for cardholders to shape and share in the product's financial success." That sounds unlike any other credit card we've ever heard of.

Using a typical credit card is like owning a modern car that conceals nearly every engine part beneath a thick plastic cover under the hood. You drive your car around and fill it up — it's a very useful, go-anywhere tool — but you absolutely don't get to see any of the working parts. They're almost exclusively controlled by Mercedes or whomever designed the car and engine. Cards are the same, as you can carry around the plastic, use it to buy things, pay off the monthly bill and even — after a few customer helpline calls — tweak how it suits you, but basically the entire process of how the card works and how much it costs you and how it makes profits for the company is a mystery.

And that's what Ring is all about changing, probably as an experiment for Barclaycard itself. The company notes that "for thefirst time, through a virtual card member community, cardholders will have visibility into the card's financial profit and loss statements. An online framework will provide cardholders with the ability to influence decisions that impact how the card is managed and serviced," and this all by itself is a radical re-think of the normally impenetrable process.

All the crowdsourcing happens in a special forum, which Barclaycard itself is actively participating in, so that user questions,problems and suggestions may have more immediate exposure to decision makers in Barclaycard. It seems a little like a community bank, or a collective credit agency, but in this case those using the product actually influence how the product works.

Jim Davies



October 2013 saw German airline Lufthansa launch the 'Are You Klaus-Heidi? ' competition in Sweden. On offer was the prize of a new life in Berlin, including a one-way ticket, a furnished apartment, bike and language lessons. Participants were required to legally change their surname to Klaus-Heidi: a combination of two of the most popular names in Germany. The first person to complete the name change and upload their new ID won the prize.

LINK:http://klaus-heidi.se/en/

Jim Davies



In May 2013, Swiss telecommunications provider Swisscom ran an outdoor campaign in four Swiss towns, in which passersby could win a Samsung Galaxy S4 by staring at the ad for 60 minutes. An interactive billboard challenged pedestrians to keep their eyes fixed on the phone for long enough to win it, utilizing the S4's technology which lets it know when a user averts their eyes from the display. To make the challenge harder for participants, a series of stunts (including police dogs and an outraged couple), were employed to distract them.

LINK:http://www.all-eyes-on-s4.ch

Jim Davies



Drawn from case studies, survey respondents and Gartner analysis, here are the five"CIO golden rules" for getting involved in a customer experience initiative

Jim Davies



Recommended Reading "Moments of Truth," Jan Carlzon (1989)

"The Experience Economy," B. Joseph Pine II and James Gilmore (1999)

"Building Great Customer Experiences," Colin Shaw and John Ivens (2002)

"The Future of Competition: Co-Creating Unique Value With Customers," C.K Prahalad (2004)

"BRAND sense: Build Powerful Brands through Touch, Taste, Smell, Sight, and Sound," Martin Lindstrom (2005)

"The Ultimate Question," Fred Reichheld (2006)

"Chief Customer Officer," Jeanne Bliss (2006)

"The Game Changer," A.G. Lafley (2008)

"Outside-In," Harley Manning and Kerry Bodine (2012)

"Effortless Experience," Matthew Dixon, Nick Toman and Rick Delisi (2013)

Jim Davies



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The Customer Experience Scenario: The Magnificent Sevenkpc-group.cz/wp-content/prezentace/Customer_Experience_Management.pdfThe Customer Experience Scenario: The Magnificent Seven