Executive Summary
Lets start with a statement:
Boards are tasked with delivering shareholder value, by driving the bottom line
In the search for what is going to deliver this benefit, an area that is being looked at with growing interest is Customer Experience. We see Blue Chip companies announcing the creation of specific main board Customer Experience (or Customer Director) roles, and a growth of Chief Customer Officers.
But what is Customer Experience (CE)? And how can it deliver the transformational impact on the bottom line that many believe it is capable of?
Our hypothesis is simple: Those seeking to gain the most from CE need to approach it as a total company game. CE picks up the baton from Marketing and Customer Services to create and embed a strategic approach to maximising Customer Value at every level in an organisation.
Few companies are doing this now, and those that are, often do so implicitly because they are/were run by strong personalities, Apple inc, or are formed in such a way that they inherently have a CE centric culture, as does the John Lewis Partnership.
But some have taken a lead in this emergent discipline. We will give our insight into how the likes of Shop Direct Group (SDG) has seen the benefits of putting CE to the top of the strategic agenda.
Our recommendation for those looking to benefit from CE is simple. Recognise that if you want transformational results, you need to drive it from the top down. If the CEO is not a believer, and the CE role is not on the main board, you may not be taking it seriously enough to get the level of return it is capable of.
Still not convinced you should read on?
Sir Terry Leahy gives his view on the most fundamental driver for success in a business. Talking to Manchester Business School
Starting with the Customer Everything should flow from the customer “ sadly many businesses end with the customer, CE is a customer centric view of your strategy “ delivered through your staff.
What Is Customer Experience?
One of the first conundrums that needs to be addressed before it becomes an elephant lurking in the corner of the room, is that a lot of the principles of CE are to be found in Marketings job description:
To develop an emotionally compelling expression of the companies commercial strategy, to create initial and future sales.
The focus on customer value as they interact across the various channels the business operates in.
The desire to be less reliant on recruiting new customers, in favour of retaining more (because they are worth 6-9 times more in terms of Ebitda).
 Recruit or Retain a 2% increase in customer retention has the same effect as cutting cost by 10% Source Academics Emnet Murphy & Mark Murphy
Our view on that is that this is in fact true, but Marketing have not stepped up to the mark because:
They have been focused on driving sales from outside the organisation into it.
The historic role of price deflation and now the recession have caused many businesses to aggressively remove internal expense, which has stopped Marketing from working closer with Customer Services to grow value.
Within Retail specifically the natural leaders for this type of thinking reside in the Home Shopping & Direct Marketing sectors, which, until the recent explosive multi-channel growth – were seen as poor relatives of High Street Retail and Advertising.
Holistic Marketing:This definition comes the closest to matching the opportunity now presented by Customer Experience. Its basic premise is that everything matters in marketing, but more significantly it recognises the role of internal and social (to which we would add social media) as well as traditional relationship marketingSee Marketing Management 14e Pearson Education 2012 Kotler, Philip & Keller, L. Kevin (2012)
Customer Experience Marketing?
So we think of CE as the natural development of Marketing. We have already articulated some of the reasons why Marketers are not doing CE now.
So why not give it to Marketing? Well because business is fundamentally about getting things done, and if your Marketing team were up to the task, they would already be banging on the door demanding it.
So what is it, in more detail, that CE needs to take from marketing?
Recruit or Retain
A 2% increase in customer retention has the same effect as cutting cost by 10%
Source Academics Emnet Murphy & Mark Murphy
Holistic Marketing
This definition comes the closest to matching the opportunity now presented by Customer Experience.
People Buy From People Like Themselves
The main lever Marketing pulls, is to engage the customer emotionally.
Fig 1. Why People Buy
Fig 1. Why People Buy, provides a simple model for a process that done well, ensures when the time to buy arrives, it is your product or service that is chosen over that of a competitor.
People like to feel better about themselves. A way of doing this is to buy something that demonstrates something (to themselves and to others) good about them.
Marketing plays to this need and at the heart of this approach is the discipline of Branding, which is a process of creating and promoting a Brand Personality, which starts the feel good purchase cycle by establishing your relevance to the customer.
The Brand Personality is made up of values, which are designed to match and appeal to that of a target consumer audience. This is the creation of the Unique Selling Proposition (USP).
So CE needs a strategic understanding of what the Brand Personality & USP are. If necessary, it needs to have the skills to create them as in our experience many significant UK companies either do not have them, or they only exist in the Brand Guidelines.
The Role Of Customer Services In CE
So our belief is that one leg of CE draws from Marketing. As you may expect the other leg is placed firmly in the Customer Service discipline.
Service expectations have changed at a dramatic rate. The pace of change is analogous to a service Big Bang.
Growing exponentially, driven by:
The growth of multiple channels Access
Mass distribution of information Knowledge
Consumer empowerment through social & peer networks Awareness
Simplification of technology through App proliferation Ability
It is this outside in drive for service, where consumers are often as, if not more, informed than the company, that has been one of the keys to the development of Customer Experience as a way of making sense of things, and exploiting the opportunity the change is creating.
Fig 2. Customer Service Expectations
Put simply whilst the recent history for Customer Services was to be seen as a cost base to be managed down to the lowest unit level, it is now being tasked (often by the consumer) with delivering the company’s Brand USP seamlessly across multiple and growing channels.
Social media is acting as a further catalyst to this, increasing the rate of change. It is interesting to note that Social Media Teams sit in the Customer Service, not Marketing function. Tesco has trebled the size of its team in the last 6 months.
The New Service Reality
With this growth comes competition. And competition drives change.
Fig 2. Customer Service Expectations gives our view on how the true leaders of service see the demand created by customers for a service that moves from a simple transaction, to an engaged experience.
Whilst there will always be a requirement for a reactive cost based service, rightly these are now being seen as areas that should be tackled (Voice of the customer initiatives being an example of how this can be done) through a process of root cause identification and removal.
The real goal in today’s market is the provision of a channel agnostic service that creates additional value to the customers dealings with the business.
At the heart of this New Service Reality is a mutually empathetic feeling that the dealing has left both the customer and the business with a greater level of understanding of each others needs, and the trust that when the time comes to buy again, it will be with your business.
The Systems Gap
A compounding issue to developing a better Customer Experience is technology with only 13% of Companies having developed the required systems to collect, analyse and distribute customer feedback. Source Forrester Research
Customer Experience, A Strategic Solution
Whilst it might seem provocative to make a statement such as Customer Experience is the combination of the best practices of Marketing & Customer Services, we do not want to cloud a more important point.
Our contention is that market forces are driving a fundamental opportunity to re-scope and shape the way in which business goes about delivering the bottom line.
The shift to a Service Economy, coupled with the rise of the internet driven virtual world has created an environment where traditional approaches to creating sales through brand advertising have to fight harder, and risk being undone with a few badly chosen words tweeted to tens of thousands.
Yet everyday tens of thousands of contacts are being made between a retailer and its customers through its Service Teams. This is a resource that is not being leveraged.
If Its New, How Do We Know It Will Work?
Customer Experience is a new discipline, but that does not mean it has no evidence for its potential to succeed. This is built on two factors that are common to many true innovations:
They are new ways of applying old experience (In this case a best practice model for Marketing & Customer Service)
It is adopted by the CEO and driven from the board down in a consistent and relentless manner (the basic tenants of all successful change)
New Ways Of Applying Old Experience ‘Colleagues Are Customers’
John Lewis Partnership could be argued to have had the customer at the heart of its business since its inception. Based on a mutual partnership model this business has ingrained in its DNA a clear view of what it means to be part of JLP.
Photo courtesy of AndyK
This relentless focus on being fair to the partners who work in, and own, the business has translated into a Brand Personality that is consistently felt across virtually all the areas of the business you come into contact with.
In the heart of a recession, this inbuilt Brand USP has enabled JLP to add 16% to their revenue stream and grow their online business by 40% in the last year. This result enabled them to pay a 17% staff bonus for 2013.
Compare this to Marks & Spencer. The long and continued difficult times they have had (lets remember they are still very profitable) have been punctuated with significant managerial changes, new strategic directions and shifts in product focus.
The only common denominator being the internal focus on revising product & layout, against a consistent message from its customers that M&S was changing, but not in ways that appeals to them.
Waking Up To The Opportunity “Old Dog, New Tricks”
Shop Direct Group was borne out of the merger of two of the UKs largest Home Shopping Businesses, Great Universal Stores & Littlewoods. 5 years ago they decided to have a fresh look at how they were serving customers. It was obvious to them that their desire to drive the business online would precipitate a change anyway (SDG has moved from under 20% to over 80% online sales in this period).
Key to this review were:
It was to be a drains up approach with nothing left untouched
It was to deliver a significant cost saving (more than 40%)
It was to service higher volumes across a broader channel mix (whilst still reducing cost by the target amount)
It was to increase revenue at point of order (by more than 10%)
It was to increase customer satisfaction
It was to increase staff satisfaction
Photo courtesy of Tim Reckmann
SDG delivered all these objectives, and they did so by embarking on a process that had at its heart the matching of its customers needs, to the companies strategic goals, through its colleagues.
The solution included the introduction of a Homeworker concept (brought in from America) and the introduction of outsourcing partners. This was done to create a blended resource capable of flexing with the changing demands of the new business strategy.
Central to the approach was the mapping of the customers value journey through the business. The creation of new metrics (presented in the form of a Balanced Dashboard) to enable the monitoring and control of this journey, and the success (measured in terms the customer stated as important) of the company’s colleagues in meeting these expectations.
This Balanced Dashboard approach was pinned into the financial plan, supported the colleague objectives, and formed a significant part of the company incentive. In short it became possible so see the financial effect of improving the things in the business the customer felt were important to them.
This approach grew to become one of the only fully (and almost certainly the largest) developed Customer Experience deployments undertaken in the UK to date.
Control Of The Message
Central to selling anything is the creation of Trust To Buy (see fig 2. Why People Buy).
Trust is not stated, it is earned and that is done by the rigorous creation and delivery of a core emotional message. Throughout this paper we have been heading to a point of convergence, out of which the idea Marketing is Service, Service is Marketing (to paraphrase) was borne and it is in the creation of the emotional message that this convergence happens.
Fig 3. Who Creates & Controls The Message
Interestingly we do not mean that either Customer Services or Marketing should take ownership of Customer Experience.
In fact, as we outlined in the Environmental factors section, doing so is likely to lead, at best, to an expensive waste of time due to the historical erosion of Marketings role and the cost driven nature of Customer Services.
These disciplines are unlikely to have the skills required, albeit individuals within them might by exception, be up to the job. So how do you take advantage of the Customer Experience opportunity?
This thought is explored further in the following Conclusion.
Conclusion
We asked at the start if Customer Experience created the opportunity for transformational change, or would become a fad.
Well of course, it could be both. The key to this is to recognise that to get at the transformational change it is capable of delivering (ergo avoid becoming an expensive fad) you would do well to remember that it needs to be an expression of the best parts of Customer Service & Marketing.
Fig 4. Customer Experience – A Convergence
It is highly likely that giving the responsibility for it to either one of these disciplines currently will result in failure. Instead as outlined in Fig 4 Customer Experience, A Convergence, it should be considered a new discipline.
Yet ultimately the ability of everyone in a business to deliver an emotionally empathetic experience to a customer, that creates a level of engagement in your brand that leads to a preference to buy from you, now and in the future, is what every employee should be doing.
Implementation
We could stop at the solution but given one of our statements is business is about getting on and doing things, we thought it best to give a starter on how to implement Customer Experience.
1.0 Give It To Someone New As A Sole Responsibility
This really needs to be at main board level. Whilst bottom up change is something some feel can be achieved in business, we feel it best suited to social revolutions! It needs to be at a board level so that it has the authority, both implicit and explicit to get cut through. This role can be an interim one as ultimately it sends the right message about CE being everyones responsibility.
2.0 Pick Someone With A Track Record of Change
CE calls for strategic change across a business at all levels. The fundamental skill set here is creating a strategic vision, then delivering it tactically. It calls for energy, diplomacy, tenacity and empathy especially for the colleagues who will feel the brunt of the change.
3.0 Make Marketing/Sales & Customer Service Accountable
We don’t mean reporting them into CE, we mean make it clear (linked to Personal & Departmental Objectives) that they need to do what is agreed in the CE strategy.
4.0 Develop & Agree Clear Business Objectives Based On Your Customers Needs
It is vital that you have a balanced dashboard that has clear numeric targets that are implicitly linked to things that matter to your customers, that your colleagues can take responsibility for, and affect. The start of this is to map the Customer Value Journey.
5.0 Find New Ways Of Saying The Same Thing
The core of any strategic change is the will to see it through. Management teams in the UK today are brought up on a mantra of Different & New. Once your customers have told you what they want in turn for delivering your bottom line, it is vital you execute relentlessly (whilst quietly looking for details that might need amending).
So focus on the metrics and find new ways of delivering the same messages your customers need to feel they are emotionally bonded to delivering your bottom line.
