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Chapter2The Four Essentialsof a ProfitableCustomer ExperienceAccording to 90 percent of companies, the mostimportant elements of a positive experience are:reliable products and services, relevance ofinteractions, responsiveness of the company, andease of doing business.—Bloomberg BusinessweekResearch Services survey, 2010If money were no object, just about any company could providean amazing customer experience. Given unlimited resources, thereis no end to the perks and extras you could provide your customers. And in industries such as luxury retail, where getting noticed isthe name of the game, some companies have taken that approach.When you step through the doors of Neiman Marcus, for example,you know that you are in for a deluxe shopping experience. This issomething that high-end retailers can afford to do, because customers are prepared for the price of the merchandise to reflect the chichiexperience.15Soudagar 02.indd 159/6/11 1:00 PM

16The Customer Experience E d g eSpotlight On: Commerce BankCommerce Bank in St. Louis sees itself as a retailer (as opposed toa financial institution), which has helped the bank create an experience that aligns with the customer experience essential of convenience. It uses its motto of “Ask. Listen. Solve.” to rid itself ofanything that unnecessarily robs customers of an enjoyable experience. For instance, it offers Convenience Seven-day branch banking Extended hours Free penny arcade coin-counting machines Hassle-free products Treats for children and dogsNo wonder the bank has had the highest customer satisfactionrating in retail banking in the Midwest region for three years in arow, according to J.D. Power & Associates.But throwing all your money into dazzling the customer is notsustainable for most businesses, especially not in today’s world, wherecustomer expectations are constantly increasing. Companies can nolonger compete on price and product alone; they need to spend intelligently to develop and offer services and experiences that truly matter to customers and that are difficult for competitors to replicate.“Treat the customer the way you would like to be treated if you werethe customer,” advises Peppers & Rogers Group’s Don Peppers.“Use the Golden Rule. Imagine your best customer is sitting next toyou when you’re making decisions.”After all, the customer experience must—in the end—differentiate you from your competitors. And you need to achieve this differentiation in a way that is consistent and, ultimately, profitable. The“bank of appreciation” that we discussed in Chapter 1 needs to bevaluable enough that customers become loyal advocates who trustSoudagar 02.indd 169/6/11 1:00 PM

Essentials of a Profitable Customer Experience17you and want to engage with you. The value you offer needs to bedelivered in a cost-effective way that leads to competitive differentiation and growth. Otherwise, simply put, there is no reason to do it.“If there’s no financial driver, we don’t recommend companiesdo this,” says Lior Arussy, president of Strativity Group and authorof many books on the customer experience, including his mostrecent, Customer Experience Strategy. “It has to be something you canpoint to and say, ‘We have moved the needle on either revenues orexpenses.’”Financial goals need to be front and center in the customer experience initiative as part of the business case. Companies can realistically aim for several financial drivers, in addition to new ways tomeasure business outcomes. (We will discuss these topics in moredetail in Chapters 6 and 10.) Briefly, realistic business drivers caninclude higher revenues, the ability to institute premium pricing,improved customer retention rates, more word-of-mouth marketing,and reduced costs as a result of streamlined and innovative processes.The Building Blocks of TrustSo how do you get there? How do you build that bank of appreciation without breaking the bank? How do you do it in a way that leadsto profits and growth? We believe it is all about trust—a seeminglyamorphous concept, but one that we strongly believe is the cementof a business relationship. Only when you have established trustbetween the business and the customer can you begin to form anemotional bond—“stickiness,” if you will—that cannot be replicatedby anyone else and will keep customers loyal to you.We also have found that, on closer inspection, trust is not a blurryconcept at all. In our customer experience work, we have determinedthat there are four building blocks of trust. We call these the essentialsof the customer experience edge. These four customer experienceessentials are reliability, convenience, responsiveness, and relevance(see Table 2.1 and Figure 2.1).Soudagar 02.indd 179/6/11 1:00 PM

18The Customer Experience E d g eFIGURE 2.1: The Four Essentials of Customer enessTABLE 2.1: Four Customer Experience EssentialsCustomer ExperienceEssentialWhat It Looks LikeReliabilityLiving up to your promises. Example: Consistent on-timedelivery, each and every time.ConvenienceOffering choice, consistency, and timeliness. Example:Using multiple channels to engage with customers.ResponsivenessListening and responding quickly. Example: Changing aprocess or policy when feedback reveals that it causesproblems for customers.RelevanceEnsuring that offerings are personalized and meaningful.Example: Gaining insight into, and delivering, what reallymatters to individual customers at a particular point intime.Of these four essentials, reliability is the most fundamental andis really a prerequisite to the other three. After all, if you cannot consistently deliver on your promises, no one will care about your convenience, responsiveness, or relevance. Once you can deliver onreliability, you can look to the other essentials to develop your differentiation. Furthermore, you can use any one of these four customerexperience essentials as a litmus test for assessing the ultimate worthSoudagar 02.indd 189/6/11 1:00 PM

Essentials of a Profitable Customer Experience19of any action you take in the name of achieving a strong and profitable customer experience.The importance of these customer experience essentials wasvalidated in the North American survey by Bloomberg Businessweek Research Services (BBRS), in which respondents named themost important elements of a positive experience: reliable productsand services, relevance of interactions, responsiveness of the company, and ease (or convenience) of doing business with the company(see Figure 2.2). Throughout this book, we will continue to show,through real company examples, how these four customer experienceessentials—these building blocks of trust—form the basis of the customer experience edge.Business strategy, executive ownership, and organizational alignment are the starting points in driving cross-functional processes toachieve a true 360-degree customer experience. The execution ofcustomer engagement processes must be complete from start to finish, or else the nascent tendrils of trust can be trampled in an instant.To see why, let’s look at the example of a pet owner who is shop-FIGURE 2.2: Elements of Customer ExperienceRespondents said their organizations considered the following as the most importantelements of a positive experience for their customers (percent of respondents ratingeach attribute a 4 or 5, on a scale of 1 to 5).The quality and reliability of your company’s services94%The quality and reliability of your company’s products92%The perceived value of your company’s products and services—the importance ofthe customers’ perception that they feel they received value for their money90%Relevancy and timeliness of interactions with your customers85%Responsiveness of your company to customer feedback and acting on it84%Ease of doing business with your company82%Base: 307 director-level and above executives at midsize and large companies.Source: Bloomberg Businessweek Research Services, 2010.Soudagar 02.indd 199/6/11 1:00 PM

20The Customer Experience E d g eping for medication for her yellow Lab at a Web-based pet supplycompany. Wondering about the difference between two competingbrands, she clicks on the “chat” button and quickly gets a responseto her question. Impressed, she places the order, specifying standardshipping, and over dinner that night with her family, she recounts thepositive experience.A week and a half passes, and the order has not arrived withinthe time frame promised. Having had good luck with chat, she triesthis approach again. This time, however, the service rep is unableto help her, as he has no visibility into the order-tracking system.To make matters worse, he tells her that she needs to e-mail or callcustomer service. She sends an e-mail and then has to wait a full 24hours before getting a response informing her that, indeed, her orderhad been shipped three days previously and that it “should” be arriving in the next few days. Eventually it does arrive. However, the customer is likely to examine other options and competitor sites beforeputting an order through this site again. The opportunity to retainthis formerly satisfied customer—let alone turn her into an engaged,loyal advocate—has eroded (not to mention the increased likelihoodthat she will send a negative tweet or post her disgruntlement on herFacebook page).This example illustrates several things: One-time experiences—no matter how terrific—do not buildtrust. You need to be consistently good across all phases of customer interaction, regardless of channel. In the BBRS survey,82 percent of respondents named multichannel consistency asan essential element of a positive customer experience. The first experience is very important. You have only onechance to make a first impression with a prospect. Get the basics right. You can develop gratifying experiences,such as online chat, but these need to be layered on a strongfoundation of working business processes and cross-functional data visibility.Soudagar 02.indd 209/6/11 1:00 PM

Essentials of a Profitable Customer Experience21 Once established, trust leads to stronger bonds between customers and the business. Without this bond, customers maybe satisfied, but they will never become passionate, loyal advocates of the brand.Without trust, you cannot hope for loyalty, advocacy, engagement, or participation—all of which are the cornerstones of the customer experience edge. It is only when trust develops that customerswill be inclined to, say, provide feedback on how they would like tosee a product evolve. Even then, you need to be able to act on thatfeedback (a customer experience element named by 84 percent ofBBRS survey respondents). If your customers give you good ideasand you execute them well, differentiation is within reach.“Too many companies are treating [the customer experience initiative] as the deliverable and whiffing on the practical delivery ofservice,” says Denis Pombriant, founder of the consulting companyBeagle Research Group.The Cost of Broken ProcessesIn addition to building trust, getting the customer experience rightthe first time is also less costly than doing it wrong and having tobacktrack. Imagine, for instance, the experience provided by thecompany everyone loves to hate: the cable services provider. The scenario is all too familiar. You are having problems with your TV, soyou book an appointment and are given a three-hour time slot withinwhich your technician is expected to show up. That window is irritating enough to begin with, and it’s even more irritating when the technician does not arrive within it. Much as you hate to, you pick up thephone to find out what happened. The call center person usually doesnot have much information in this situation, but she promises to sendan alert out to the field.By the time the technician finally appears, your plans for the dayare shot, and with them, your mood. The technician pokes around,Soudagar 02.indd 219/6/11 1:00 PM

22The Customer Experience E d g erummages in his toolkit, and eventually pronounces the problemfixed. But when your kids try to watch the SpongeBob movie ondemand that evening, it is apparent that the problem is very muchalive and well. Another hour spent on the phone that evening bringsanother service “window” and a new promise to have the situationremedied. The result: an unhappy customer (you) and a lot of costlysupport for the company.Any improvement in this scenario would produce both a bettercustomer experience and lower costs to the company. What if thecable company had its quality control and business processes operating at a high level? What if the customer support, customer relationship management (CRM), scheduling, and dispatch processes andSpotlight On: ComcastIn the recent past, Comcast took a lot of heat for offering a poorcustomer experience. But the company has since taken many stepsthat are aligned with the essentials of the customer experience torespond to these complaints. For instance: Reliability. Comcast’s seven-point Customer Service Guarantee promises that, among other things, it will issue a 20 creditif the technician fails to arrive for a scheduled visit during theappointment window—a testament to its desire for increasedreliability. Convenience. The company is experimenting with whittling itstwo- to three-hour windows down to just one hour, to enhancecustomer convenience. Responsiveness. Comcast claims to have reduced its servicecalls by four million in the first four months of 2010 vs. 2009, because it monitors and responds to customer problems via socialmedia. “That’s a good thing, because that’s four million feweroutstanding customer issues,” says Rick Germano, senior vicepresident of national customer operations at Comcast.Soudagar 02.indd 229/6/11 1:00 PM

Essentials of a Profitable Customer Experience23systems all functioned together in a way that enabled automatic alertsto be sent—to your smartphone, e-mail, or landline, whichever youchose. That would eliminate the dreaded “window” and give you realvisibility as to when the technician would arrive. Customers do notexpect a product or service to be perfect, but they do expect the companies they patronize not to be riddled with broken processes. Andif we are kept informed while problems are being fixed, we will seethat as positive. And, chances are, we will tell our friends how well wewere treated.“There are numerous situations where investing in getting theexperience right from the start is a good thing to do from a businessstandpoint,” says Bruce Temkin, a principal with the customer experience consultancy Temkin Group. “And it has the benefit of beinggood for the customer, as well.”So, what are you doing as a company that would inspire peopleto spend their valuable money, time, and energy with you? For manybusinesses, the very first answer to that question is ensuring that thefundamental processes are in place and operating at an optimal level.If you promise a 24-hour turnaround on responding to a customerproblem, you need to have the processes and people in place to dothat. If you promise a discount on a particular product, your pricingacross channels should consistently reflect that. If you say that something will arrive in three days, it had better arrive in that time frame.And you had better be able to do this in every channel in which youoperate, whether the customer approaches you through an online ora brick-and-mortar channel.The Customer-Centric EnterpriseThe four essentials of a profitable customer experience need to bebuilt into the culture of the company. The desire—and the ability—to offer convenience, responsiveness, relevance, and reliability has tobe pervasive across every department in the company, not just something that only marketing and sales cares about. Product developers,Soudagar 02.indd 239/6/11 1:00 PM

24The Customer Experience E d g eengineering, finance, legal, the shipping department, and even storeassociates have to care about creating trust, too. We have determinedthat a cultural change is required to change the attitudes of everyonewithin the organization when it comes to how the customer is viewed.Changing the culture and the attitude comes from the very top ofan organization. Senior executives must reconfigure the enterprise,placing the customer—rather than the company’s products and services—at the center. This means reengineering processes startingwith the customer, from the outside looking in, rather than the converse. (We will discuss this topic in more detail in Chapter 4.) Withthat critical recasting of the corporate mindset, other decisions—including the choice of technology architecture to support the strategy—flow naturally.It is one thing to work on the customer experience on the edgesor at the margins. It is another to approach it as a transformative,profit-driven initiative that encompasses the entire company. A truecustomer experience is holistic, placing the customer at the centerof the corporate universe. It demands integration of business processes, in which customer service, the call center, marketing, branding, product or service development, technology, manufacturing, andthe other functions all work together to serve customers. The customer experience must be orchestrated across channels and touchpoints throughout the customer life cycle. Such a dramatic changecan never be made without the dedicated commitment and vocal support of the company’s top leaders. Indeed, the CEO is in the bestposition to articulate, on a regular basis, why the enterprise needs tofocus on its customers, and what that means.From inside the company, this means that the company is no longer focused on itself—its sales, product offerings, and future plans—but, instead, is focused on its customers and their desires. Such aholistic approach means that customers will never again suffer theproblem of having to explain their problem over and over to different employees, with different outcomes. It means that customers whospend heavily through the website, for example, are recognized fortheir worth across all channels.Soudagar 02.indd 249/6/11 1:00 PM

Essentials of a Profitable Customer Experience25It is all too common for the customer experience to be a marginalrather than a whole-company undertaking. Consider an office goodssuperstore—one whose motto promises an easy shopping experience.A customer spends an hour in the store, analyzing the laptops on display. He decides on a particular unit, one that bears the sign, “Available in-store only.” No big deal; he will buy it right now. So he flagsdown a service representative, who disappears into the back of theSpotlight On: CoopWhen the Swiss grocer Coop began offering customers an iPhonegrocery-shopping app, it ensured that the offering was not justa whimsical “come-on” that made it look hip to the 13 percent ofSwiss citizens who carry iPhones. By connecting the app with itsown integrated enterprise systems, the offering builds a whole newlevel of customer trust by aligning with the four customer experience essentials: Convenience. In Switzerland, stores close in the early eveningsand are closed all day on Sundays. With a mobile app, customers can shop while they are commuting to or from work. Responsiveness. Coop continues to upgrade the mobile app,with improved navigation and search functionality. Relevance. Switzerland has one of the highest adoption ratesof the iPhone in the world, making this a well-targeted platform for a mobile shopping app. Reliability. Customers can reserve one-hour windows to havegroceries delivered before they place their order, so that theydo not get locked out of available time frames. Real-time product availability means that customers receive exactly whatthey order.(For more on Coop’s customer experience edge, see the case studyon page 26.)Soudagar 02.indd 259/6/11 1:00 PM

26The Customer Experience E d g estore to retrieve the model. The rep returns with bad news: that laptopis out of stock. Ever helpful, the service rep checks the inventory inseveral nearby locations and tracks one down in a store about 20 milesaway. Great, the customer says, asking when that store will be able totransfer it to this location so that he can pick it up. “I’m so sorry; wedon’t do that anymore,” the rep admits. “It messes up our inventory.”Frustrated at having wasted his time—and mystified as to whythe office supply store would not make this model available online—the customer leaves, with no intention of investing additional time(and gas money) traveling 20 miles out of his way. Two days later, hefinds an even better deal on a similar model on eBay.How close the office supply store had come, and how manythings it had done right—a marketing message geared toward whatcustomers want (easy shopping); a knowledgeable, helpful servicerep; even the right product mix. But something important was missing: a multilocation, cross-channel, integrated inventory system, andorder management system that was flexible enough to meet manycustomer desires. It is not enough for marketing to be customerfocused; the entire organization needs to be, and its applications needto enable that focus.This type of customer-centric corporate alignment across everydepartment and function is something that companies are just nowrealizing that they need to achieve. If the customer experience imperative resides in just one or two departments, it is not transformative;it is just marginal. And that will not be enough to build trust, withoutwhich a profitable customer experience is impossible.Case Stu dy: C o o pGrocer Moves Shopping to thePalm of Customers’ HandsLeveraging both customers’ attachment to their iPhones and their longcommutes and time-compressed schedules, Switzerland-based Coopis boosting both loyalty and sales with an iPhone shopping app.Soudagar 02.indd 269/6/11 1:00 PM

Essentials of a Profitable Customer Experience27With about 13 percent of the population owning an iPhone,Switzerland has one of the highest adoption rates in the world forApple’s flagship mobile device. On any given day in any large city,Swiss citizens are compulsively surfing the Web on their iPhones,especially as they commute to and from work on public transportation. These two demographic tidbits—high iPhone penetrationand long hours on the train—created fertile ground for Switzerland’slargest retailer, Coop, to plant not just its new handheld groceryshopping application but also its customer-driven strategy for boosting revenues and growth.CE Essentials Reliability. Customers can reserve one-hour windows to havetheir groceries delivered before they place their order, so that theydo not get locked out of available time frames. Real-time productavailability means that customers receive exactly what they order. Convenience. In Switzerland, customers have limited groceryshopping time, as grocers close in the early evenings on weekdays and are closed all day on Sundays. With a mobile app,customers can shop while they are commuting to or from work. Relevance. Switzerland has one of the highest adoption rates ofthe iPhone in the world, making this a well-targeted platform fora mobile shopping app.Like all retailers, 27 billion Coop fights fiercely for its shareof the grocery marketplace. Basel-based Coop’s 1,800 stores offer awide variety of organic foods and wine, with a focus on sustainability.And like many companies around the world, in nearly all industries,the battle lines for Coop are now focused on engaging customers sointimately with its brand that they simply have no reason to turn tothe competition.The grocery business is, after all, highly traditional. As a result,profit margins are razor-thin, and spending on everything from tech-Soudagar 02.indd 279/6/11 1:00 PM

28The Customer Experience E d g enology to advertising to marketing campaigns is limited. However, aloyal customer’s lifetime value can be great. The trick is to provide alow-cost but comprehensive experience that seals the deal.To warm the weary hearts of time-pressed Swiss citizens, in May2009 Coop created an iPhone grocery-shopping application as anadjunct to its already existing online store, [email protected] Coop wasmaking a bold play to endear itself to customers by pioneering a valued capability before its competitors did, thus making it less desirableto use the other grocery brands and more likely that customers wouldstay with Coop.CE Pillars Operational excellence. Coop’s iPhone application interacts withthe retailer’s integrated enterprise resource planning (ERP) andCRM systems, enabling real-time product availability, the abilityto reserve one-hour delivery windows, and price synchronizationacross channels. Interaction excellence. Coop is continually refining its mobileinteraction capabilities. It recently improved its navigation andsearch functionality with a practical filtering function. Customerscan also add any item that is currently on their shelf at home totheir order by scanning it in via the iPhone camera. Decision-making excellence. Coop had already created onlineshopping with home grocery delivery via post or truck. But by researching actual customer behavior, the team realized that putting grocery shopping literally in customers’ hands for maximumconvenience and relevance would be more compelling.For a full discussion of the CE Pillars, see Chapter 7.Already, customers are voting with their keypads. [email protected] now account for 80 million Swiss francs (CHF) per year. OrdersSoudagar 02.indd 289/6/11 1:00 PM

Essentials of a Profitable Customer Experience29through the iPhone account for 4 million CHF of that total, withhigher growth expected. For a modest investment and two months oftime, Coop’s iPhone initiative has paid off handsomely for companyand customers alike.Such innovations are key to consumer satisfaction with retailers,which must continuously find ways to reinvent value for their customers, according to Dunnhumby, a U.K.-based customer behavioranalytics firm. And, it seems, supermarket retailers are catching on.According to a recent Dunnhumby report, which surveyed 1,300 consumers on 59 major companies in eight sectors, U.K.-based supermarket retailers received the highest ratings and were regarded as nearlytwice as customer-centric as airlines, which placed second. Accordingto the firm, there is a direct correlation between the commitment thatgrocers make to their customers and the length of the relationship.This correlation is particularly true when the company delivers highlyrelevant customer propositions, the Dunnhumby report says.Making Customers Feel @homeLacking brimming coffers to draw from, [email protected] focused ondeconstructing its customer experience, zeroing in on areas thatcould be improved without requiring exorbitant investment. “Weasked, what will it take to entice someone to shop with us—and thencome back again?” says Ellen Brasse, head of marketing and sales [email protected] in Spreitenbach, Switzerland. “We needed to defineservices that would make customers depend on us more.”When commuters travel on the train, it might take them an hourgoing and an hour coming home. “Commuters tend to surf the Web,and we knew they had iPhones,” Brasse says. Online grocery shopping had always been a natural for this demographic, as commutershave limited time to shop, and no one wants to lug grocery bags onthe train.You often hear that the customer experience is about creating“wow” experiences every day. For Brasse, though, the customer expe-Soudagar 02.indd 299/6/11 1:00 PM

30The Customer Experience E d g erience is first about meeting their needs in an elegant, efficient way.“As with any grocery retailer, our top priority is to meet our customers’ requirements, then give them a beautiful experience along theway,” she says. Coop gives its customers convenience, reliability, andrelevant value—all essentials of customer experience.Coop had already created online shopping with home grocerydelivery via post or truck. But by researching actual customer behavior, the team realized that putting grocery shopping literally in customers’ hands for maximum convenience and relevance would bemore compelling. The Swiss love their iPhones—would iPhone grocery shopping make them love their grocery store?Leveraging a Fully Integrated IT EnvironmentCoop began talking about the i-shopping application with its development partner, Movento Schweiz AG, in 2008. Designing the architecture was straightforward: like the e-shop, the iPhone applicationwould interact with Coop’s core SAP ERP and CRM systems.The integrated CRM and ERP systems are an important linchpin for several key capabilities, including real-time product availability, says Christian Heim, managing director at St. Gallen,Switzerland–based Movento. “The integrated backbone is veryvaluable for Coop,” he says. “We were able to use the latest technology for the Web and the iPhone, and we just extended the [backend] environment.” Because of the integrated back end, there wasalready synchronization between products and prices, Heim says.“When they change a price in the back end, it automatically getspushed through to the CRM system,” he says. That integration alsocut development time. In all, it took about two months to [email protected]“Because Coop had this integrated system in place, we just hadto build around the existing infrastructure,” Heim explains. Themoving parts were already connected, so creating an interface to thehandheld was not overly difficult.Soudagar 02.indd 309/6/11 1:00 PM

Essentials of a Profitable Customer Experience31Coop at a Glance Business description: Largest retailer in Switzerland, focusing ongroceries Annual revenues: 27 billion Number of employees: 75,000 Number of Coop member households: 2 million Number of subscribers to the [email protected] weekly e-mail: 130,000 Number of monthly unique visitors to the coo

The Four Essentials of a Profitable Customer Experience According to 90 percent of companies, the most . because custom-ers are prepared for the price of the merchandise to reflect the chichi .