Tuesday, November 20, 2018

The Customer Experience Difference: Are Customers Loyal to Your Brand or Your Loyalty Program?

Photo by rawpixel on Unsplash
Brands do not (and should not) improve customer experience (CX) simply because it feels right to have happier customers. The reason to invest in CX is to deliver more loyal customers—customers who spend more, churn less, are less costly to serve, inclined to recommend or refer others, and more likely to consider and purchase a broader selection of your products. Strong CX delivers more customer satisfaction, and that results in greater customer loyalty, drives up the lifetime value of your customers, and makes your bosses and shareholders happy.

Brands that struggle to meaningfully differentiate their CX often turn to other tactics to produce something akin to loyalty. So-called loyalty programs reward repeat customers with points, rewards or discounts—and they’ve gotten very popular (at least among marketers). Today, the US’s 300 million consumers represent 3.8 billion loyalty program memberships, and more than half are inactive.

The problem with many loyalty programs is that they don’t actually deliver loyalty. They deliver repeat purchases, and repeat purchases may look a lot like loyalty, but you cannot know what is driving preference and purchases unless you listen to and understand customer perception. A good loyalty program can produce ROI by delivering incremental revenue in excess of program costs, but brands must never mistake loyalty to their points and incentives with genuine loyalty to their brand.

A truly loyal customer is willing to pay more for your brand, while a points-loyal customer needs an inducement to purchase. A brand-loyal customer is less interested in competitive products, while a points-loyal customer is willing to make a switch for the right mix of price, discounts, and rewards. And an authentic brand loyalist will seek your brand out, engage more, and tell others, while a points loyal customer is more interested in the value they can extract than in having a relationship with your brand.

In short, points loyalty is transactional while true loyalty is emotional. Your airline has a loyalty program, and chances are you feel so little loyalty to that brand that if it was gone tomorrow and replaced with another carrier flying your favorite routes, you might not care if it weren’t for lost points and status. Meanwhile, Apple doesn’t have a rewards program, and it engenders some of the greatest loyalty of any brand in the world. As a result, Apple generates enormous margins—in one recent quarter, Apple captured 87% of smartphone industry profits despite accounting for only about 18% of the total units sold in the period.

To learn more about true loyalty from brands that earn the most customer loyalty, please continue reading my blog post on the Gartner blog. 

Friday, October 5, 2018

Digital Transformation: No Pain, No Gain

Is there any business catchphrase more ubiquitous nowadays than "digital transformation"? Everyone craves the agility, innovation, relevance, engagement, reputation, loyalty, and brand advocacy that digital transformation promises. But how many are willing to do what it takes to achieve the sort of digital transformation that matters? If your organization wants a meaningful digital transformation, then it must be willing to do enough to make it worthwhile; otherwise, you are just putting band-aids on a gaping wound.

What does "doing enough" mean? That depends on many factors, such as your category, legacy systems, culture, the frequency of acquisitions, disparate systems, centralization, global footprint, and other attributes, but the most important factors are your openness to risk and your willingness to invest what it takes. In short: No pain, no gain.

Today, many traditional organizations cast a desiring eye upon their upstart competition having "benefits" such as agility, private equity, and newer technology unburdened by legacy systems. (Few, however, would take the corresponding drawbacks of cashflow urgency, bootstrap mentality, and--ironically enough--the lack of legacy reputation, customer base, and institutional knowledge.) The difference is that startups are permitted (in fact, encouraged ) to take business risks, invest heavily in building the right tech stack, and take losses against future gains. Meanwhile, traditional public companies are beholden to Wall Street expectations for consistent quarterly results.

This is why the key to digital transformation isn't going to be found in your IT department but in the C-suite. What risks are you willing to take? Can you put a portion of today's business model at risk to create tomorrow's? How much are you willing to invest? Can you tell your shareholders that transforming your company for success tomorrow will involve increased costs today?

I regularly speak with business leaders who tell me they want to emulate Amazon, but Amazon lost almost $3 billion before turning its first profit. And well after Amazon established itself, it continued to prioritize innovation and market share over margin. And Amazon took risks—significant risks. It launched Amazon Prime and AWS and won; and it lost on the Amazon Fire Phone, which Amazon pulled little more than a year after it debuted. Of course, few want to emulate Amazon's losses, its purposeful reduced margin, its considerable R&D costs, and its risks. They want to be Amazon without doing Amazon.

Wednesday, September 12, 2018

Customer Experience and the "Next Best Action" Dilemma

Understand your next best action before you leap!
Photo by Shane Rounce on Unsplash
As an analyst covering customer experience, I am often briefed by multichannel, personalization, and marketing automation platforms. Many promise to help brands improve their customer experience by identifying and executing the "next best action" for each of their individual customers. The idea, in theory, is that your brand can improve its customer experiences and relationships by performing the one next best action at the best time in the best channel, providing one-to-one, personalized brand experiences at scale. But the reality is often quite a bit different.

The challenge with the concept of "next best action" lies in a simple dilemma: Who is that action designed to help most--the customer or the brand? This challenge is easy to see from the outside looking in but difficult to recognize when your performance appraisal, raise, bonus or job depends on you producing rapid business or economic outcomes. To uncover and resolve the dilemma of "next best action," ask three simple questions:
  • The next best action to what end?
  • The next best action to produce what measurable outcome?
  • And, finally, the next best action for whom?
By using these three questions, you may find that the goal of these platforms and their "next best action" functionality is not to improve customer experience but to lift brands' short-term sales and marketing results. The two are not mutually exclusive, but as we explore these three questions, it becomes easy to see how prioritizing the former before the latter can do more to undermine than enhance your brand's customer experience.

Why do it: To what end?  

Rarely in life is there a single "next best action" that fits every possible end. Consider your Monday morning as the alarm goes off. Sleeping in may leave you feeling fresher and more rested throughout your day; getting up early to exercise will improve both your mood and your health; and taking your early hours to rehearse your big presentation may reduce your stress and enhance job performance. So, which is the proper "next best action"? That depends on which of your priorities is most important.

So, when your brand invests six or seven figures in a platform and program to produce "next best actions," why do you do it? What is your priority? Is it to provide immediate business outcomes? To convince customers your brand cares? To enhance and improve your customers' lives? Your next best action will be quite a bit different depending on which of these you elect to emphasize.

To explore the next two questions (What do you want: To produce what measurable outcome? and Who benefits: For whom?) and to recognize how to flip the perspective of "next best action," please continue reading the post on my blog at Gartner.com. 

Wednesday, August 1, 2018

Effortless Experience Is A Tool In Your Customer Experience (CX) Toolkit, Not A Goal

Photo by jesse orrico on Unsplash
The business world loves easy answers, but the secret to success is often shrouded in nuance. Take the current trend in customer experience (CX): Effortless and frictionless experiences. In a world of “unexpectedly high call volumes,” complicated return policies, and mobile apps that make us want to hurl our phones, it’s pretty clear that most brands tend to make it unnecessarily difficult for customers. It is also evident that brands that remove unnecessary friction improve their ability to foster strong customer relationships. But take note of those qualifiers in those last two sentences—“unnecessarily difficult” and “unnecessary friction”—because the proper CX for your brand demands you make smart decisions about where and when customer effort is not only necessary but even a good thing for the customer and your brand.

Being effortless is not a simple goal for you to strive for in every touchpoint of your customer journey. There are times effort is good. Effort sometimes produces feelings of pride and accomplishment. Effort can imbue a product or brand with emotion. Effort can reduce risk and costs. And one customer's effort can add value for other customers. There are times when the customer and brand both benefit by having the customers get their hands (metaphorically) a little dirty.

For example, which is more effortless: Buying a teddy bear off the shelf or spending an hour crafting your own at a Build-A-Bear Workshop? The reason children (and parents) love their Happy Hugs Teddies Bears and Kabu Catlynns is that they take the time to personalize the product, adding clothes, shoes, sounds, and scents. Each bear is special, like no one else’s, and that is thanks to the customer's effort. A completely tricked-out Build-A-Bear plush will cost you time, effort, and a 300% or more premium on the teddy bears sitting waiting on the shelf, but your kids will treasure it forever.

Which is more effortless: Having a TV stand delivered to your home or spending two hours making an IKEA BESTÃ…? The “IKEA effect” is so well known, it even has its own Wikipedia entry. It is described as “a cognitive bias in which consumers place a disproportionately high value on products they partially created.” IKEA has said that having customers build their own furniture is a reason for their attractive pricing, but it is also true that your effort constructing IKEA furniture provides a sense of “stolthet” (which is Swedish for pride), and it’s a big part of IKEA’s success. In one study of the Ikea effect, researchers found people who built their own products were willing to pay 63% more for the product than would non-builders. (Of course, not everyone wants to put in that effort, so IKEA has partnered with TaskRabbit to provide assembly services—an important reminder of the need to understand your personas and craft different journeys for different needs.)

Which is more effortless: Being done with your transaction once you get out of a cab or taking time to rate and review your rideshare driver’s friendliness, cleanliness, and skill? While transportation network companies like Uber and Lyft have been effective at removing friction from the on-demand transit experience, there are key moments when they add, rather than subtract, effort. Rating your driver gives you a sense of control, makes you feel valued, and encourages a sense of community where every rider helps out everyone else to weed out bad drivers. The Lyft experience would be less without the customer effort required to rate each driver.

The problem with effort isn’t that effort is inherently bad; it is that brands add effort for the wrong, often careless reasons. To learn more about the science of effort, why brands often get effort wrong, and how CEB's pioneering research helps brands understand why and where to be effortless, please read the complete blog post on Gartner.com. 

Wednesday, June 6, 2018

What I Learned About Influencers and Advocates By Being One

Step back in time with me: It’s December 1994, Boyz II Men is crooning “I'll Make Love to You” on the radio, Prodigy opens up the Internet to users of its online service, and a guy with a giant love for Disney decides it would be fun to create a web page. I launched a single-page called Lampwick’s Guide to Disney on the Web, never expecting doing so would turn into a five-year life-changing journey leading to a voluminous Disney fan site, a free trip to Disney World, and a new career in the nascent field of Internet marketing. I'd like to share three lessons that I learned from my experience as a Disney influencer and advocate.

My old Lampwick website

Lesson 1: Brands (Not Influencers) Must Prove Influencer Authenticity

When I launched my Disney fan site, I didn’t do it to become an “influencer” (a term no one used yet), but I did wish to become an “advocate” (in the original sense of the word—helping others—not in the way we think of it today in a world of billions of interconnected people who, some seem to think, exist to help brands raise awareness.) I wanted to share my love of Disney and help others to have their own great Disney experience. And therein was my first lesson about influencers and advocates—the best ones do it to help others, not to become famous or get free stuff.

Today, the “influencer” concept is such a part of our Internet-saturated culture that teens with a few dozen followers declare themselves influencers on Instagram, and it can seem there are more influencers on LinkedIn than there are influencees. While it might have been easy in the late 90s to spot early-adopting influencers on the embryonic World Wide Web or in Usenet groups, it is far more difficult in the era of purchased followers and #fakenews. That means the burden is on brands to use the tools at their disposal to find not just the loudest voices but the most authentic ones. Marketers have come to understand the largest followership does not necessarily mean the greatest influence, but recognizing the intent of influencer candidates requires more than just counting followers and looking for keywords.

Lesson 2: Commit to Building and Nurturing Influencer Relationships

As my Disney site grew, so did my visibility and influence. My site was included in Luckman’s World Wide Web Yellow Pages, an actual printed book of websites. (There was a time before search engines, you know!) And as my visibility grew, so did my interactions with the Disney Company.

Some of those experiences were quite exciting—like getting an early sneak peek at the plans for the Animal Kingdom park. But other exchanges with the company were frankly alarming. A Disney lawyer contacted me to accuse me of stealing IP (and was bemused to learn I was on his company’s PR mailing list). And one Disney “webmaster” (remember those?) reached out to inform me that the Walt Disney Company exerted copyright on any photos taken inside their resorts and, by the way, my site had hundreds of photos I’d snapped inside Disney World. He didn’t want me to take down my site—he just wanted me to understand my place. As a Disney fan and very active advocate, I found the discussion distressing, and it caused me to question my effort to maintain and grow my fan site.

To learn my second and third lessons, along with the long-term benefits of treating your advocates and influencers right, please continue reading this post on my Gartner blog.

Monday, May 21, 2018

Beware the Customer Experience Case Study

Photo by Lacie Slezak on Unsplash
Case studies. Everyone craves them. But are they success guideposts to follow, or might they have the power to mislead us?

The lure of case studies is that they offer us peeks at others' success, providing useful models or best practices to follow. But I've always feared that case studies can give something a veneer of believability, sparking within us a modicum of false conviction while leaving us no closer to action and success.

In my years covering and leading social media, I have seen the Oreo "Dunk in the Dark" tweet used as a case study dozens of times, and yet no brand has ever repeated that success. That brand victory was a lightning strike--an unrepeatable occurrence that transpired thanks to the exact right mix of event, audience, context, maturity level of social media, creativity, brand, and rapid action. A thousand brands and a million tweets later, few if any have managed to recreate the alchemy of Oreo's tweet heard round the world.

We may view case studies as patterns to follow, but how many case studies are like the Oreo example? If someone walked into a casino, put chips down on double zero and walked away a thousand dollars richer, his or her case study would not help you. You can step the same way to the same table with the same bet, and your outcome will not be the same. (Well, it would be the same one out of every 35 spins on average, but you could still go broke trying.)

Case studies are created for a reason--most are designed to sell you something or to help a professional promote their career. That should not make them immediately suspect, but it should cause you to ask questions.

To learn the questions you should ask and to ponder what you can (and cannot) learn from Amazon and Zappos, please continue reading on my Gartner blog.

Tuesday, March 27, 2018

Leadership's Essential Role in Customer Experience

Photo by Tim Graf on Unsplash
Many companies are striving to launch customer experience (CX) programs that will improve their growth, margin, and customer retention. In working with our clients, one of the challenges we see is a tendency to view CX as a tactical effort--something designed to seek out and resolve customer annoyances, particularly in customer service interactions. As a result, company's CX focus can be narrowed to activities like enhancing customer care processes, front-line employee performance, customer care hiring, and call center training. While these are all good and necessary efforts, this sort of myopia misses the point of what CX really is and what it can do for your company.

One financial services client had become frustrated with the lack of CX success. Years of investing in improvements to customer care had yielded little impact to the organization's overall customer satisfaction scores. Although post-call transactional surveys validated that the customer care group had improved service interactions, the relationship surveys across the entire customer base demonstrated little to no improvement. We worked through the numbers: Only 20% of customers contacted the company for service each year, and 80% of those interactions were routine (such as checking account balances), offering little opportunity for the company and its employees to make a strong and differentiating impression.

This meant that just 4% of the company's customers had an annual opportunity to be exposed to those sensitive moments that allowed the brand the greatest opportunity to provide a significant and memorable experience--an average customer would experience such an interaction once every 25 years. That did not mean the company had wasted its time--after all, the improvement in the transactional surveys demonstrated that the customer care group was achieving its goals of improving their interactions. Moreover, the brand recognized the value of minimizing negative customer care experiences since each one increases the risk of diminishing or severing a customer relationship. Nonetheless, the brand could not expect to foster a significant and measurable improvement in customer perception across its entire customer base by focusing only on a small set of relatively rare customer touchpoints.

Mature and robust CX programs not only identify and solve points of friction and dissatisfaction for customers, but they also help to foster a more customer-centric culture. This means not just helping front-line employees to provide better experiences on a case-by-case basis but also encouraging and assisting senior leaders to keep the customer in mind as they make decisions that affect the experiences of vast swathes of customers. Changing the structure of a loyalty program can instantly affect far more customers than training hundreds of customer-facing employees. And a change in return policy can anger a much broader set of customers in a shorter period than can an entire call center full of disengaged call center reps.

Changes to loyalty or return policies are just obvious examples of outward-facing executive decisions that impact the CX of large numbers of customers, but leaders also shape the culture and operation of the organization in a plethora of more important and subtle ways. The goals they set, the performance they reward, the way they balance short- and long-term objectives, the spending priorities they create, the customer-centric behaviors they model, and the products they approve all influence how employees act and thus how customers feel and what they say about the brand.

Consider Uber, the company that came seemingly out of nowhere to swamp the established and protected taxi market in a matter of years, just by providing a significantly better customer experience. Uber didn't win with advertising strategy or content--they won with CX, turning users into advocates. Customers flocked to Uber's on-demand service thanks to an app that called cars to their location, provided a highly-rated driver, permitted cashless transactions, and did so at a better price. But in 2016, Uber hit a significant roadblock that caused a number of its customers to abandon the service.

Nothing changed with the product--the app worked exactly as it always had and the rider experience remained positive--and yet customers quit the company when its long history of dubious leadership behaviors reached a tipping point that many found too much to stomach. Uber saw reduced customer satisfaction, degraded loyalty, and poor word of mouth, the three core measures of brand CX. Uber's leaders had built a better mousetrap but failed to account for how their decisions and behaviors could impact customer perception, retention, and advocacy. Uber's business faltered not because of tactical issues such as rude drivers or poor UI in its app but because leaders made poor decisions--the same advocacy that built Uber began to work against it. (Leaders often forget that advocacy is a two-way street and that brands are as likely to suffer from poor WOM that drags on trust and consideration as they are positive WOM that drives inbound traffic and sales.)

To read more, including six ways CX leaders can "manage up" and help to influence and support better executive decisions and a more customer-centric culture, please continue reading my blog post on Gartner.com.