The customer experience blog

Zappos encourage their employees to be ‘weird’ (image: © Zappos 2010)

More and more organisations are coming to the realisation that in order to deliver a great customer experience you must first create an engaging employee experience. There is no doubt that creating a powerful customer experience requires the full and continual commitment of the people responsible for making it happen. This article describes how brands like Zappos, innocent and The Geek Squad create ‘wow’ experiences for their employees and customers and, in so doing, outstanding results for their shareholders.

The importance of bonding emotionally with customers

The essence of a highly distinctive customer experience lies in the emotional connection made with the customer. As Tom Ford said when he was Chief Designer at Gucci, “a brand is a memory”. It is how it makes the customer feel about the experience. Indelible memories are more often created by the intangible attributes than the tangible. Research by Ogilvy for their annual BrandZ loyalty survey found that companies “….successful in creating both functional and emotional bonding had higher retention ratios (84% vs. 30%) and cross-sell ratios (82% vs. 16%) compared with those that did not”. This is a significant difference and one that is more than sufficient to negate the effects of the economic downturn. It is for this reason that brands like Burberry, First Direct and O2 have continued to grow their customer base and thrive while their competitors have lost market share and seen declining loyalty from both customers and employees.

How then, do you create customer experiences that create an emotional bond with your brand? The answer lies in having a great product for sure – Apple would not be the brand it is without leading edge design – but just as importantly, it is the ability to have customers interact with your products and brand at a deep level that creates true loyalty. Anyone who has visited an Apple store and received help at the ‘Genius Bar’ or spoken with one of the highly knowledgeable and enthusiastic store associates would know that the in-store experience is a stage for the brand and the store people the actors who bring it alive. Just as with any theatrical production, casting, direction and rehearsals are essential to top performance on the night.

We have just completed two years of research with leading brands for our forthcoming book ‘BOLD – how to be brave in business and win’. The book tells the story of 14 brands who are challenging the rules of business and delivering highly distinctive experiences. The stories are told through the words of the executives, employees and, in some cases, the customers themselves. What struck us in conducting our research was the unusual attention paid to the employee experience by the brands we studied: brands like Zappos, innocent and The Geek Squad.

Cult-like culture

The qualitative research was supported by a survey where we measured the perceptions of the BOLD brands with a control group of executives from other organisations. The BOLD companies outscored the control group on the 8 dimensions and 40 practices measured in our survey by a significant margin. You will have to wait for the book to be published for the full detail but what I can share with you is that one of the dimensions that showed greatest difference was what we labelled ‘a cult-like culture’. Now the term ‘cult’ tends to carry negative connotations. It conjures up images of fringe religious groups of some kind following the warped vision of a charismatic leader. But if we examine what makes a group ‘cult-like’ the attributes are neither good nor bad; it is the vision or purpose that drives them that is good or bad and which provides the context for their actions.

One brand that has attracted an enthusiastic following of customers is the US on-line retailer Zappos. Zappos sells shoes and other items of apparel but that is not its purpose. According to Tony Hseah, its Chief Executive, the purpose of the organisation is to deliver happiness through ‘wow’ experiences. He calls it their ‘secret sauce’. The organisation defines a ‘wow’ experience as one that goes way beyond what you expected. One example is when Wendy Fitch, a regular Zappos customer, posted an ‘out of office’ announcement in her Outlook saying that she was away on a charity run for breast cancer. When the Zappos e-mail letter she subscribed to, bounced back one of the agents in the call centre picked it up. During her lunch break the agent purchased a gift card and sent it to Wendy with this message:

“Hello, Wendy, while working through e‐mails from our amazing customers, I came across your auto‐reply. Normally we mark them as auto‐replies but yours caught my eye. I just wanted to let you know what an admirable thing you are doing. We at Zappos are proud to have you as a customer and as a part of our family. Thank you for being a wonderful person.”

So what was it that motivated that agent to take that action? From our research we would suggest there are a number of key factors…

‘Purpose beyond profit’

This may come as a shock but most employees do not leap out of bed in the morning excited by the prospect of making more profit for their organisation that day. This may serve to motivate the senior executives but it rarely does so for the front-line unless they also happen to be shareholders too as in the case of the John Lewis Partnership. What motivates employees is feeling connected to a cause. That cause can be ‘Delivering Happiness’ as in the case of Zappos or ‘saving the planet’ as in the case of the World Wildlife Fund. If you ask employees of Umpqua, the community bank based in Oregon, what their purpose is, they will tell you “making customers feel dealing with Umpqua was the best thing that happened today”. Quite a tall order for a bank! The financial services sector is one that generally has low levels of emotional engagement with its customers.

‘Hire for DNA not MBA’

We wrote about this in our first book, ‘Uncommon Practice’, but we found that it is still true for these brands. The fact is that there are many bright, well-qualified people out there that you can hire, but only a few of them will be the right fit for your brand. We tell our clients “hire for DNA not MBA”. In other words, find the people who share your values and teach them the skills they need. Umpqua advertises for employees in retail trade magazines, not the financial services press because it wants people who understand customer service rather than banking. Tony Hseah offers recruits $2,000 at the end of their first week of training to leave the company. Why? Because he only wants people who are passionate about the brand and committed to what it stands for.

‘Rites and rituals’

Sustaining a culture is very hard, particularly if you are growing. One of the things these brands do is to reinforce their uniqueness through the use of what we describe as ‘rites and rituals’. Umpqua has a daily ‘motivational moments’ session where everyone gathers to hear someone sing a song, tell a joke or conduct a short exercise in some way related to their purpose. Zappos encourages their employees to be ‘weird’ which means they organise parties and theme events where people dress up and have fun. They engage in ‘Zuddles’ which are short, motivational work-group meetings. Innocent, the UK smoothie maker holds its AGM (A Grown-up Meeting) where all the employees gather to hear the latest news and then have a barbeque. The Geek Squad, the computer support firm, uses language and titles to reinforce the zany culture whose sole purpose is to ‘save your ass’ if your computer should crash. Their employees are called ‘agents’ or ‘double-agents’ and encouraged to share their stories of daring-do in helping customers through the intranet site but also social media.

Making it work…

You may be reading this and saying to yourself “well, you might be able to do that kind of thing in the States but not here.” You would be wrong. We have seen examples of brands that focus on purpose beyond profit, hiring for DNA and encouraging rites and rituals in the UK, US, Brazil and Asia. Of course, if these practices are false or forced, they become trite and will not deliver value for your brand; but when they are driven by a common purpose and shared values, when they are sincere, when they create a great employee experience and when they result in a ‘wow’ experience for customers – they work.

Shaun Smith’s new book ‘BOLD’, co-authored with Andy Milligan, will be published in 2011.

© iStockphoto.com/Joselito Briones. Licence purchased.

Natwest – part of the RBS Group which is now largely owned by the UK taxpayer – have committed to a Customer Charter and launched an advertising campaign built around the promise of ‘helpful banking’. HSBC too have been active with the recent launch of two new ads that focus on responsibility and integrity, the implication being that in dealing with HSBC we can be confident that we are working with a bank that upholds the highest standards of ethical behaviour. It seems that the banking sector has finally started focusing on the customer.

Call me cynical but it seems premature to be trumpeting improvements that have not yet been delivered and shouting about integrity at a time when the banks in the UK are experiencing the lowest level of consumer confidence for many years. The perception is that bankers are still paying themselves inflated bonuses, over-charging customers, imposing unfair terms and conditions and continue to deliver generally poor levels of service despite their claims to the contrary.

The moments of truth for banking customers…

Banks of course need to deliver routine banking transactions in a convenient and efficient way and at a price that customers feel is fair. Large unexpected charges for going £10 overdrawn feels like profiteering and a long wait in branch or on the phone can become irritants which, if they continue, may cause customers to leave. However, fixing these things does not drive the trust and confidence that we are talking about.

There are some events in people’s lives where the banking relationship assumes a particularly important significance: opening a bank account, managing finances for the first time as a student away from home, accessing banking services whilst travelling abroad, taking out a mortgage, going overdrawn, making investments, handling a bereavement. These are the moments of truth that shape the level of trust and confidence we each develop in our bank.

Too often, sales trump service

So the question is: does your bank live up to the values and promise of its brand when it really matters; when you as a customer are facing these financial moments of truth? Well the fact is that as a customer you are likely to receive more attention at certain times than others, particularly when it involves additional revenue for the bank. For example, you may well find it is easier to get access to personal service when opening an account or making investments, whereas resolving a service issue or handling bereavement will see you shunted to an off-shore call centre. Why? Because few organisations manage to truly align the sales and service parts of their organisations. Over-promising and under-delivering are still the norm for many brands and sales will usually trump service.

The organisation invests in improving the customer experience, or at least advertising that they have improved it. Sales people are briefed: “here is what we are doing to improve service to make it easier for you to sell”. Meanwhile, sales efforts continue with all the previous practices, be they good or bad, intact. The pressure of meeting quarterly targets and expectations of the market are cited as reasons why the organisation cannot de-stabilise the sales effort.

© iStockphoto.com/Baldur Tryggvason. Licence purchased.

So what happens is that some of the short term, ‘manipulative’ sales practices continue. For example, not telling customers the full details of the contract they are about to enter into or how and when overdraft charges kick in, because the bank employee doesn’t want to risk losing a sale. The consequence of these failures is that the customer gets a surprise when they read the small print on their contract and when they receive their bank statement. The company has got its sale but trust in the brand is eroded.

Short-term thinking can destroy a brand

Dixons the retail consumer electronics brand has now disappeared from UK high streets. This was in part because the brand had become tired and trust had reached a low-ebb because of hard sell techniques the company employed to shift product warranties to customers whether they wanted them or not. DSG International (the parent company of Dixons, Currys and PC World) decided that there was more to be gained from transferring the Dixons product range across to Currys and PC World rather than continue with a brand that customers had little affection for. So, Dixons may have driven additional revenues in the short-term but the price, over time, was to destroy the brand.

Customer satisfaction generates sales

Let’s finish by looking at a bank that has got it right. Through an integrated strategy that brings together service, sales, marketing, operations, HR processes and technology; First Direct (the online and telephone bank) manages to generate the highest level of customer satisfaction in the UK banking sector and recruits one new customer every 8 seconds through word of mouth referral. Satisfied customers are your best sales people.

So the million dollar question is: are you creating a joined up strategy that rewards service as well as sales, and are your sales people adding to or destroying value for your brand in the way they behave with customers?

When Tony Hayward gave his final press briefing shortly before departing as Chief Executive of BP he said that BP had shown itself to be “a model of corporate social responsibility” but it was “not a great PR success”.

On the face of it BP has done most things right: they have managed to cap the worst of the spill, they managed to keep most of the oil from washing up on the beaches, have paid over $300 million in compensation to the US locals whose livelihoods have been affected; So why then the furore and criticism heaped on BP and its CEO?

A failure of authenticity

I believe that the failure was one of authenticity; a failure on the part of BP leaders, past and present, to be genuine in their support for the positioning of the brand.  BP, although embracing ‘green’ credentials and purporting to be the fuel brand most closely identified with sustainability, when put to the test drilling for oil off the Florida coast, seemed to act first and foremost as an energy company concerned with maximizing its profits rather than an experience brand concerned with delivering on its promise.

Unfortunately, Hayward has taken the rap for his previous boss, Lord Browne, who when Chief Executive drove the company to earn ever greater returns for shareholders.

We are just finishing the research for our new book ‘Bold’ and one of the characteristics  we have seen shared by the brands we have researched  is authenticity. You can’t succeed unless you are genuine, true to yourself and absolutely honest with your customers. This is challenging for those people in business who believe that as long as you promote 5 corporate values on your web site (usually the same ones your competitors promote as well), it’ll be enough to get by. And as long as you say the right things to shareholders and customers in your annual report, advertising or PR about CSR, then, short of committing a criminal act, it doesn’t much matter the extent to which you actually practice what you preach as long as the profits continue to roll in.

Authenticity comes from people’s own values

Authentic companies are run and largely staffed by people who care passionately about what they do because they see it as an extension of their own values. And that means when you make a promise for your brand you have to deliver it: you can’t force it, fake it or fudge it.

By forcing it, we mean that sense of trying too hard to be something you’re not.  The Geek Squad has its competitors who try to take a similar approach but it doesn’t require too much first-hand experience of those competitors to know that the values come from the advertising rather than the heart.

“Customers can smell a fake a mile off”

By faking it we mean when your marketing department see an opportunity to align your brand with something like sustainability, for example, but management continue to focus primarily on profitability and the behaviour of the organisation is aligned with this focus. Joe Pine and Jim Gilmore in their book ‘Authenticity’ make the point that customers can smell a fake a mile off. Consumers demand authenticity from their brands today and especially from the people who work for them.

By fudging it we mean those moments of ‘on the one hand but on the other’ that brands often fall into – promising you the earth in the headline copy only to caveat their offers in the small print.  Brands like O2 have opened up the telecommunications market by introducing transparency and ‘no strings’ products like its ‘Simplicity’ offer.

So what should BP have done? As well as taking the necessary engineering steps which it did well, it should also have seen this as an unfortunate, but wonderful, opportunity to dramatise its brand promise: to really make its green credentials apparent. As well as fixing the leak deep on the ocean bed, which was largely unseen by customers, it should have over-indexed its public response. It is hard to hate an organisation when it has a ‘face’ to it. Now BP would say, perhaps rightly, that is what they did; they got their people involved in the effort, but what I am talking about here is a massive effort from hundreds if not thousands of BP branded employees working in the community.

What Patagonia did

Patagonia founder Yvon Chouinard

Patagonia, the environmentally friendly clothing brand, had employees working on the beaches (wearing Patagonia clothing of course) because they care deeply about the environment .  Patagonia  also sponsors  the ‘Louisiana Bucket Brigade’ a voluntary organisation set up to support the environment and deal with oil spills.

Yvon Chouinard, the Patagonia founder, had this to say in an interview in 2004,

“I’m not in the business to make clothes. I’m not in the business to make more money for myself, for Christ’s sake. This is the reason Patagonia exists — to put into action the recommendations I read about in books to avoid environmental collapse. That’s the reason I’m in business — to try to clean up our own act, and try to influence other companies to do the right thing, and try to influence our customers to do the right thing. So we’re not going to change. They can go buy from somewhere else if they don’t like it”

Now that is an authentic leader.

If you are an executive of a medium to large organisation and would like to receive an executive summary of our new book ‘BOLD’ , all you need do is to go to the following website and complete the short survey that you will find there:

http://bold-industry-survey.questionpro.com/

At the Farnborough Air Show this weekend, Britain saw its first Boeing Dreamliner (above) – on which the company has bet its future. ‘Parked’ alongside it in the civil airliner area of the air show is Boeing’s European rival, the latest Airbus. But, amazing, high tech aircraft that they are, when it comes to creating a flying customer experience, these multi-million dollar aircraft will fast become mere commodities.

So, let’s take a look at how you would take your multi-million dollar commodity aircraft and build a unique customer experience around the flight itself. And to do so we have to look, of course, to the masters of creating an airline customer experience – Virgin. We’ve looked elsewhere in this blog at how Virgin crafts a unique experience for its passengers on the ground, before they even reach the plane. This post focuses on the bit that happens up in the air.

Create ‘difference’ in the experience

Like all other airlines, Virgin Atlantic used Boeing 747s for its long-haul flights. In a real sense, the multi-million dollar plane was a commodity – all the airlines had the same plane. The difference in the guest experience came from something Richard Branson dubbed ‘Virgin flair’. To ‘be different’ – because they knew that being surprising was what made the passengers remember their Virgin flight – Virgin started serving small ice creams during the in-flight movie. Because people often enjoy an ice cream in a cinema.

That’s your first learning point in this blog post: when you are crafting a customer experience, don’t invent everything anew; be creative in crafting the experience by borrowing little popular snapshots of experience from other sectors. This increases the chances of acceptance by customers of a service innovation – because they are already familiar with it in another context.

A Virgin cabin attendant called Sue Rawlings took the creation of a unique, memorable customer experience one stage further. In the galley, before serving the ice creams, she would smear some ice cream around her mouth. As she walked down the cabin with the ice cream tray, handing out the little gifts as the movie was about to start (big screens in those days) she would say loudly, so that people across the cabin looked up at her,

“People tell me these ice creams are delicious, but I’m on a diet and never touch them. Enjoy!”

As passengers looked up, they saw the ice cream around her mouth and the smile on her face and a ripple of laughter followed her down the plane. Other passengers looked up to see what people were laughing at and joined in the laughter.

Difference attracts customers

The passengers who experienced Sue Rawling’s ‘Virgin flair’ told all their friends and family and the story rippled around the world, becoming viral. Because it was MEMORABLE and FUN and SURPRISING (excuse the upper case – three important words in crafting a customer experience, of course, so I shouted them at you). People who had never flown Virgin heard about it. And when they had to book a trans-Atlantic flight and got to choose between Virgin and BA, they went for Virgin. Because they wanted the ice cream. And maybe they’d meet the zany flight attendant.

How much does an ice cream cost compared with a Boeing 747? How much did that free viral story-telling by the customers themselves – people trust referrals from other customers more than they trust a supplier message, remember – cost compared with a glossy advertising campaign? There are no little things in the customer experience. There are memorable things. And that will often come from your people.

A post-script to the story

That story, above, comes from our associate at smith+co Phil Dourado, who checked the detail with a senior manager at Virgin Atlantic. The manager confirmed it was true, named the flight attendant and said she was a ‘legend’ at the airline. Phil adds that he was on the way back from Shanghai to London earlier this month, after a one day visit – fly in one day, work at a conference the next, fly back the third day.

Obviously Virgin don’t do the ‘big screen and ice cream’ combo now, to mimic a cinema experience, as all the movies are on demand and viewed on the seatback screens. But, he did notice one innovation that we don’t think any other airline offers: on Virgin flights you can text other passengers, via their row and seat number, using the entertainment console handset. This innovation is intended to heighten the interactive experience of the flight – so you interact with the technology and your fellow passengers. More impressive than that, though, Phil reported, was the human touch.

Customer recognition – still a powerful thing

One of the Virgin cabin staff said to him on the way back: “You were on the flight out with us, weren’t you. Gosh you’ll be tired with two long-haul flights in three days.” A bit later her colleague appeared with a sleep suit (it was the morning and the flight had only just started) and said “We give these out later, but my colleague says you might want this earlier than everyone else. I’ll leave it here in case you do.” Then a third attendant, serving the meal, said “Oh, hello! (as if Phil was an old friend) I remember you from the flight out from London. Now, let’s see if I can remember what wine you like…”

She didn’t. But, Phil says he was amazed at the passenger recognition, and that she had even tried to remember what wine he liked. Virgin flair again, I guess. No, he doesn’t remember the multi-million dollar plane they were flying in – Maybe an Airbus he said. But, he did remember the attention. And yes, it made him want to fly with them again.

Shaun Smith
Smith+co

Show me the money

“A key obstacle cited by many (61 percent) for measuring the customer experience is the difficulty of monetizing the value of investments for improvement – despite the fact that it does make a significant difference” Source: Experience Maturity Monitor SAS Institute Inc and Peppers and Rogers Group 2009

We consult with many leading brands on the customer experience and find that one of the first things we have to do is to convince them that their investment will be returned. The question is how can you do this when customer behaviour lags the change in performance? This is not a new issue as the Peppers and Rogers Group quote, above, found.

In response to this need, we recently developed a tool that can help you convince your board of the value of customer experience management.

The CEM+ Calculator™

We call the new tool our CEM+ Calculator™. It takes real data from client organisations – number of customers, their purchase behaviour and current levels of advocacy – and then projects the impact on revenues of what will happen if you increase advocacy through changes to the customer experience. It also allows the costs of the improvement to be factored in, allowing the ROI to be calculated.

The benefit of this approach is that it allows organisations to estimate to a fairly accurate degree (given the many variables affecting organisational performance) the impact on their revenues and profits of investing in the customer experience – making the decision no different to any other form of capital investment. This allows the Customer Experience Officer to talk to the Chief Financial Officer in a language he or she understands!

Satisfaction is not enough

So, why is such a tool necessary? Why not just rely on customer satisfaction data to show a return on investment?

Traditional measures of customer satisfaction have little to do with customer experience, or financial performance, for that matter. According to research, 80 percent of customers who switch suppliers express satisfaction with their previous supplier. Rather than just satisfaction, revenue growth has everything to do with ‘advocacy’, the extent to which customers or clients prefer a supplier and then refer friends and colleagues to you. For example, First Direct, the UK retail bank, has the highest level of customer satisfaction in the market and is recommended by its customers every five seconds gaining over one third of all new business from referral. Advocacy translates into increased share of market and higher levels of retention, all of which mean good news for your bottom-line.

What is customer advocacy?

The dictionary definition of “advocate” is “plead for, defend, champion, recommend, support”. When Steve Jobs, the CEO of Apple introduced the iPad at the annual Apple convention (see blog post below), the reaction of the audience was more akin to a religious meeting than a product launch. Apple customers are passionate champions for the brand in a way few other technology users are. How does this translate into money? Satmetrix research in the computer hardware industry found that Apple advocates generate revenues of $4,500 each compared with their competitors who earn just $2,600 from their best customers. The difference is the emotional connection with the brand: Apple customers are willing to pay more, repurchase more frequently and refer other customers.

The Advocacy Index

For those organisations wishing to increase margins by driving down sales costs whilst driving up revenues, advocacy is the answer. Advocacy requires you to know who your most profitable customers are and to consistently deliver a customer experience so as to create a high degree of trust in your brand. Only then will these loyal and highly profitable customers be prepared to recommend your organisation to others.

In his classic HBR article ‘The one number you need to grow’, Frederick Reichheld argued that the only measure of performance that really matters is the ‘Net Promoter Index’. This is the result of subtracting those customers who are dissatisfied from those who are highly satisfied. Our term for this is the ‘Advocacy Index’ and our CEM+ Survey™ measures this to determine the extent to which your firm will grow organically through attracting and retaining profitable customers via positive word-of-mouth.

Focusing on your most profitable customers

We did research in the mobile phone market and found that the top 5% of customers represented a significant proportion of the profit and were worth several times more than the average customer to the mobile phone providers. Yet these customers were not treated any differently to reflect their high value and increase their likelihood to stay loyal and become advocates. In fact in most instances, new customers got better deals than the long standing customers.

It was this insight that led the mobile network operator O2 to focus on rewarding these valuable customers. O2 established a separate call centre and more highly trained employees for these high value customers. Their loyalty rose significantly as did the profits.

This is still true in financial services where new customers are routinely offered more attention, deeper discounts and better deals than long established customers. In loyalty terms this is madness. In his book The Loyalty Effect, Frederick Reichheld says that loyal customers are more profitable because the costs of sales are amortised over a longer period, they increase their purchases and percentage of spend with you, cost less to administer, refer others and are willing to pay a premium.

By focusing on delighting highly profitable customers, companies keep them loyal and eventually turn them into advocates who attract others who value the same things and thus in turn become advocates themselves.

Shaun presented some of these ideas with Simon Groves – Head of Strategy and Customer Experience for O2 – at the Satmetrix Net Promoter Score Summit in London on June 17th 2010. It has since been announced that O2 have topped a poll of European consumers asked to score their customer care experiences with mobile phone networks. O2 achieved a rating of 24% compared with the industry average of only 3% (MyCustomer.com has more details).