A few years ago in a report I wrote, "What's The Right Customer Experience Strategy?", I asked whether it looked more like Apple or more like Costco. The reality is that Costco outperforms Apple on Forrester's Customer Experience Index. While both companies actually perform well, they differentiate themselves in very different ways to exceed the expectations they've established for their target customers. I recently came across an article about Costco, which reaffirmed why the company continues to perform well through the massive digital change that challenges the business models in many industries. Here are a few takeaways for CX leaders:
Be very clear about your target customers. Instead of trying to be all things to all people, Costco goes deep in serving its target customers, leveraging its strengths (most important, business capabilities) to solve bigger problems for them.
Look beyond the boundaries of your own industry for opportunities to serve customers (Costco is selling cars, helping small businesses with inventory and payroll, etc.). This is where the real competitive scenarios will take place. Costco is competing with USAA (auto program), investment firms, and insurance companies . . . as well as other big-box retailers.
A customer experience ecosystem map is a visual technique that connects end-to-end customer processes to the ecosystem of employees, partners, capabilities, processes, technology, information, and interfaces involved in delivering the experiences. Without these maps, companies regularly perform blind-man-and-the elephant exercises in which different silos of an organization see only parts of the customer’s experience related to their own jobs. A customer experience ecosystem map breaks down this tunnel vision to help systematically improve or redesign experiences to deliver value.
Customer experience ecosystem maps are evolved from service blueprints, which experience designers have used since at least the mid-80s. They essentially start with a customer journey map that depicts the experience a customer has in a scenario that describes the context and the outcome the customer seeks to achieve. But it doesn’t stop there. It continues to map the value stream responsible for delivering the experience.
Why bother with this exercise? Here are eight reasons:
Firms must actively engage external vendors and third-party partners to deliver a unified customer experience (CX). Why? Because partners across the supply chain influence the quality of customer interactions. Sometimes these partners are the face of your company on the front lines in the form of agents, dealerships, value-added-resellers (VARS), distributors, and outsourced call center reps or technicians. Alternatively, they might act behind-the-scenes in the case of suppliers, outsourced credit or risk services, or billing and invoicing vendors. These 3rd parties are a critical component of what Forrester calls the customer experience ecosystem: the complex, interdependent set of relationships and interactions between customers, employees, and partners that determine the quality of every customer experience.
Failing to engage partners not only degrades customer experiences, it costs companies money. Here are a few examples:
Supply chain issues that plagued Google around its Nexus devices through this past holiday season left countless customers empty handed, undermining sales numbers. It also resulted in the UK managing director at Google to issue a personal apology to British customers and offer a refund for shipping to those who were able to purchase a device.
At some point after their companies find and fix the low-hanging fruit that creates problems for customers, customer experience leaders hit a wall. That wall is the outdated operational models upon which most companies were built. These models were conceived decades ago, based on the existing capabilities and constraints of the day, when the primary vehicle for value was tied up in the product/service itself. Within these operating models, firms have worked to optimize processes like marketing, sales, and distribution focused on getting to the transaction. Support has been a cost center so limited as much as possible. But this kind of operating model has critical problems. Here are a few that just scratch the surface:
Product lines obstruct customer needs that cross the company. Companies organized by product lines force customers to navigate different marketing messages, sales teams, billing systems, and websites and support organizations to get what they need, while internal staff waste effort and fail to create synergies that could deliver a bigger value proposition.
Channel strategies don’t account for information transparency. Like product lines, firms regularly treat channels as separate P&Ls. This artifact results in disjointed pricing, confusing return policies, botched hand-offs, and assorted other mishaps that undermine the customer experience. Moreover, it leaves little incentive for the fiefdoms to cooperate on behalf of the customer.
A chemical manufacturer with a solid customer listening program noticed an uptick in complaints about pricing. Unlike many firms, which would take the comments at face value and take action accordingly, this company first stepped back and reflected on its strategy: it sold premium chemical for advanced applications targeted at particular industries, so it surmised that the company shouldn’t see this kind of feedback. It did some root cause analysis, talking to those customers. It learned that some distributors were selling chemicals for applications in markets better served by off-the-shelf, commodity products. As a result, not only were these distributors driving detractors, which were creating a headwind for selling into their target market, but they were wasting time on low-value sales and more importantly, using valuable resources internally that made the company competitive in target markets (e.g. scientists to help innovative clients discover new applications for the chemicals). The company decided that the right course of action was to re-visit its distributor training and communications programs to better ensure sales teams understood the core value proposition and how to find the high value opportunities.
There are at least a few lessons to take away from this story.
Know your customer experience strategy. Firms often have blanket statements such as “we aim to delight our customers.” When these lack a connection to a company strategy, which should clearly articulate value propositions for specific target markets, firms can spend a lot of time and energy jumping through hoops trying to serve customers it never should have acquired in the first place. A situation that the chemical manufacturer avoided by reflecting on its strategy to direct its activities.
Even companies that make customer experience a strategic priority struggle to implement major long-lasting improvements. That's because they fail to connect behind-the-scenes activities to customer interactions. These firms need a new approach to customer experience management: one that considers the influence of every single employee and external partner on every single customer interaction. Forrester calls this complex set of relationships the customer experience ecosystem.
Healthy customer experience ecosystems create value for all of the actors in the system. To nurture a healthy ecosystem, firms must balance the needs of and engage all of the parties involved. Customer experience leaders need to:
Engage employees to meet business and personal objectives.
Engage partners to drive results for their organizations too.
Engage customers to create experiences that meet their needs, are easy, and are enjoyable.
The way that firms can deliver value to clients has massively changed. Firms can interact with customers in the context of using products (e.g., think Rosetta Stone and language coaches). In fact, customers interacting with each other within the product may deliver more value than the product itself. Companies can harness the data exhaust of product usage and turn it into powerfully useful information to help customers succeed at their goals (e.g., think Nike Plus and fitness).
Firms need to rethink how they operate to capitalize on these opportunities. This means rethinking marketing and support roles that make less sense in a world of such ubiquitous interactions and data. It means rethinking separations between front and back office, both of which have very powerful impacts on customer experience.
How do customer experience leaders reinvent how their firms operate? Two articles give customer experience leaders some excellent guidance. The first is John Kotter’s “Accelerate!” He argues that companies need to build a parallel second operating system for the organization that more nimbly adapts to rapid change and disruption. For customer experience leaders, what does this operating system look like? A second Harvard Business Review article, “Adaptability: The New Competitive Advantage,” provides a nice framework for thinking about this new operating system. Its three imperatives are to: manage complex multicompany systems, read and act on signals, and experiment often. I’ve adapted these into a customer experience context:
The only way your company will differentiate based on customer experience is if the culture of your organization aligns closely with the brand promise to customers. Zappos CEO Tony Hsieh puts it in his blog post entitled “Your Culture Is Your Brand”: “Advertising can only get your brand so far . . . So what’s a company to do if you can’t just buy your way into building the brand you want? In a word: culture. At Zappos, our belief is that if you get the culture right, most of the other stuff — like great customer service, or building a great long-term brand, or passionate employees and customers — will happen naturally on its own.”
When Forrester looks at building a customer-focused culture, we believe firms need some precursors in place, such as a clear strategy and vision, metrics that reflect customer perceptions, and governance mechanisms that set standards and hold people accountable for changes.
Once those are in place, rewards systems are one powerful lever to keep employees focused on what’s important. My colleague Belle Bocal and I identified nine ways that companies use reward systems to build a customer-centric culture.
Celebrate Target Behavior
Many companies make the mistake of trying to tie variable compensation (e.g., bonuses) to customer experience metrics too early. What many firms have learned is that the more informal recognition programs can be even more powerful at moving culture than the compensation metrics.
Many different types of firms have channel partners or others that control a significant part of the actual experience with customers. Automobile companies have dealers, insurance and real estate firms have independent agents, software companies have value-added resellers (VARs), restaurants and hotels have franchises, and heavy equipment manufacturers have resellers. Even the brokers or financial advisors within financial services organizations can act in many ways like these external partners.
While companies may not have direct control over these partners, firms are waking up to the fact that there are ways to influence these organizations to provide a better customer experience. To ensure that partners enhance the customer experience (CX):
Share VoC data with partners. Standard voice of the customer (VOC) programs make customer feedback data available to internal employees throughout the organization. Firms should use adapted versions of these dashboards to deliver relevant insights to partners. Deluxe, which sells services to small businesses and financial institutions, gathers customer research on the behalf of its smaller partners that cannot afford to pay for these insights on their own. Such insights gathered after the financial crisis helped many of its smaller financial services clients understand specific teller behavior that was hurting relationships more than helping.
In our continuing research on the emerging role of the chief customer officer (CCO), we recently looked at the kinds of authority their firms vest in them to drive change across the organization. This authority can affect the activities they do, the composition of the teams that report into them, and the budgets they control. For firms considering putting this kind of senior customer experience leader in place, Forrester has identified three archetypal models that characterize the most typical modes in which CCOs operate.
Advisory CCOs Play A Coaching Role
Companies that are early in their customer experience transformations are often reluctant to commit too many resources or cede control of core company processes to a CCO. These firms tend to place CCOs in an advisory or coaching role for peers with operational responsibilities, particularly if the company has had past success with centralized teams to drive change management efforts. CCOs running these teams have little control over decision-making and execution and instead derive authority through their expertise and personal reputation within their companies. A mandate from senior leadership in a business unit, the executive management team, or the CEO bolsters these CCOs' ability to change behaviors in other departments. These CCOs:
Build core capabilities and spread awareness. Because they don't directly control operations, advisory CCOs and their teams focus on building core foundational customer experience capabilities and standards as would a center of excellence.