No Substitute for Experience
For the rest of the December 2009 issue of CRM magazine please click here.
As one of the many subsets of CRM, customer experience management (CEM) has been having an experience of its own lately: an upsurge of interest. And yet, according to recent research from Gartner and other analysis firms, CEM remains an acronym open to wide interpretation—and confusion—among vendors and users alike.
Bruce Temkin, a vice president and principal analyst at Forrester Research, believes CEM is at least beyond the definition phase, however, estimating that approximately two-thirds of companies are now investing in some form of an approach to CEM that incorporates “the perception that customers have of their interactions with an organization.”
According to Temkin’s research, customer experience maturity is best broken down into five stages: interested, invested, committed, engaged, and embedded. Right now, he says, of the two-thirds of companies focusing on customer experience, most are between the first and second stages. Only a few are in the committed stage. “Interested takes a mindset shift,” he says. “To get to the invested stage—in an environment where many have had a bad quarter and are cutting back on things—you really have to decide this is a much more important investment than other opportunities.”
And yet Temkin says that, among the services he offers his clients, demand on the customer experience topic is “growing dramatically”—a rise he attributes to “the recognition that, ‘Hey, there is an end to this.’ To me, there are so many people focusing on the customer experience now that those who aren’t are now recognizing that there are implications for not focusing on it that are even broader in the future. Smart people are looking at it in terms of how customer experience will help them now and in terms of the rebound.”
Those benefits are clear—and relate to the bottom line. In a study released earlier in the year, “Customer Experience Boosts Revenue,” Temkin modeled the potential impact of even modest improvements in customer experience. For a company with $10 billion in annual revenue, he determined benefits might total approximately $284 million—$65 million in additional sales, $116 million in reduction of customer churn, and a $103 million boost through word-of-mouth recommendations.
As companies continue to invest in their customers, many have already forged ahead on the journey. While the strategies and solutions may differ depending on company size, revenue, or industry, the goal is the same: improve the customer experience. (For Temkin’s seven tips on customer experience, see his The Tipping Point column, page 12.)
GIVE CEM CREDIT WHERE DUE
In 2005, despite multiple efforts to distance itself from competitors, Experian, a global credit information group, recognized that it just wasn’t breaking away from the pack. “We had been investing in operational excellence, lean six sigma, all kinds of efforts, but when we interviewed our customers…we were lumped in with the rest of our competitors,” recalls Laura DeSoto, the company’s senior vice president of strategic initiatives.
It took deep soul-searching among the management team to figure out what was going wrong. The stumbling block in fully utilizing the voice of Experian’s customers turned out to be not the number of approaches, but a lack of cohesion among so many: “We were coming at it from so many different angles that we were not delivering a consistent, intentional, valuable experience our customers could count on,” DeSoto says.
Experian decided on Satmetrix, a firm that helps management organize customer data, to help embed the voice of the customer into its everyday workflow. Deb Eastman, chief marketing officer at Satmetrix, stresses the value of uniting customer experience data with the CRM system. “The CRM system gives you information about your relationship with the customer and behavioral patterns, while customer feedback data can help companies like Experian collect attitudinal data,” she says. “Put them together, and you can help drive customer-centric decision making.”
Since launching its Customer Loyalty program in 2005, Experian’s Net Promoter score—a metric for gauging customers’ willingness to recommend—has increased every year. Despite the financial services industry’s particular vulnerability during the recession, the consumer-credit-reporting business saw its highest NPS ever at 33.2 this past year, and also snagged a Voice of the Customer award from Forrester Research. “We’ve seen our organization change to a very customer-centric one,” DeSoto says. “Virtually every decision we make today takes into account what it means for the experience that we want to deliver to customers.”
DOWN PAYMENT ON LOYALTY
Redfin wanted to bring openness and honesty back into the battered real estate industry. The online brokerage combines a customer-focused team of real estate agents with online tools for empowering consumers, with the aim of simplifying the process of buying or selling a home.
“We really wanted to be a voice for consumers, and other forums really preyed on them,” says Glenn Kelman, the company’s chief executive officer. “We wanted to have a strong community with agents who really believe in the mission of the company, and are addicted to real estate in general. We wanted to find a way to use it to enable people to help one another and increase confidence.”
To follow through on this aim, an online community was necessary. After considering a plan to build that community in-house, Kelman says Redfin decided to turn to Lithium Technologies, a purchase based on more than just the technology platform. “Lithium gave us insight about how to build a powerful community,” he says. “Many people talk about Lithium as a way to reduce support costs, but the primary benefit for us has actually been revenue generation.”
Since turning to Lithium, Redfin grew revenues 40 percent year-over-year while reducing marketing expenses by 82 percent. Also, customer satisfaction has risen by 5 percent, to 97 percent. “We’re trying to build a brand that needs customer service, not sales,” Kelman says. “This is a sales-dominated industry…
but our motto is ‘always be serving.’ No other brokerage has the guts to create a forum in which any customer can go up and say, ‘My real estate agent screwed me.’ That’s happened to us, and sometimes we do make a mistake but we deal with it openly, and that inspires more confidence—not less.”
DELIVERING FRESH EXPERIENCES DAILY
It’s no secret more people are turning to the Internet for everyday purchases, whether it’s that new sweater from the Gap or groceries for your home. Focusing on the latter, Richard Braddock, chief executive officer of FreshDirect, explains companies flocking to the Web to hawk their wares are a blessing and a curse. “People don’t realize that in the transition to the Internet, the customer has much greater control there,” he says. “Anyone who aspires to sell over the Internet needs to change their thinking.”
Braddock explains an “intense customer focus” is necessary—and managing with that focus takes two Internet values: knowing the customer in great depth and the real-time nature of the Web. He believes he has found the solution with his company’s database, which measures all details of each customer’s shopping experience on the site; all the products purchased; service interactions; whether she is a loyal, new, or lapsed customer; and information from 140 customer surveys conducted in weekly, monthly, and annual installments. “We must know the customer in great depth, greater than marketers have ever been able to know them in the past,” he insists. (See “FreshDirect’s Secret Ingredient: Customer Focus,” page 24, for a CRM exclusive: Braddock’s own in-depth description of the company’s approach.)
Braddock’s senior team looks at the data daily and each manager uses the customer-focused metrics to talk about what’s going well, what isn’t, and what must be done. “The biggest challenge we have as a business is that we will never give perfect service,” Braddock says. “All we can do is minimize service mistakes, and then try to offset the fact that we will make mistakes with great experiences otherwise.”
This is translating into better sales for FreshDirect. According to numbers disclosed by Braddock, the share of business conducted by loyal customers has increased year-over-year from 25 percent to 59 percent of total sales as of May 2009. The company finished the first quarter of its fiscal year with a year-to-year growth rate of 15 percent. But the job’s never done. “We have a lot of momentum now, yet we have approximately the same amount of customers as last year,” Braddock says. “But the ones we have are more loyal and we’re growing because they are buying more from us.”
SKY-HIGH CUSTOMER EXPERIENCE
US Airways has nearly a half million unique visitors per day to its Web site. Clearly, with so many people visiting the site, it is important to fix any technical glitches quickly so customers can find the information they need. According to Wes Graham, the airline’s director of Internet distribution, his team couldn’t see what customers could. “We had a set of tools that can get a lot of metrics on aggregate items and events, but they’re not really from the standpoint of what the consumer sees,” he says. “Really, it’s all about our customers.”
At the airline’s dedicated contact center, issues were cropping up when individuals called asking for Web-site help and agents couldn’t quickly resolve the situations. Graham says agents relied on the customers to describe their online problems—not only a lengthy process, but something hard to recreate in words. “We needed to get specific information from the customer and pull up [her] session while she was online, [so] she could walk the agent through exactly what [she] did, right there,” he says. “That improves customer service on the spot.”
To assess business impact and optimize US Airways’ online customer experience, the airline turned to Tealeaf, an online CEM company, in April 2008 to add customer visibility and a continuous feedback loop with business decision makers. Especially during a time of particular financial difficulty in the airline industry, being quick and easy-to-navigate for harried travelers is key. “Companies that aren’t doing that type of analytics and don’t have the tools that can allow them to see what customers do, in my opinion, are flying blind,” Graham says. “They cannot analyze, troubleshoot, and correct issues as they occur at the same velocity I can.”
TARGETING EPSONALITY IN ALL OF US
Epson, the worldwide electronics giant, is no stranger to innovative campaigns (see “Innovation Nation,” March 2009, for more). When it came to the company’s email and cross-channel marketing, the company was not taking into account its customers’ personal preferences—or past purchasing history. “We weren’t happy with our last provider,” says Chris Nickel, manager of CRM and direct response marketing for Epson. “All we were doing was the traditional batch-and-blast emails, and we wanted to take it to the next level so we could get more intimate with our customers. We needed to communicate on a one-on-one level with them in a relevant and timely way.”
Nickel says that his company has plenty of customer information already, but putting all of the metrics together to create lucid, actionable insights was the hardest part. Epson turned to Responsys for help. “It was a major data integration project, combining purchasing history, behavior with our emails, clickthroughs, combining all pathing information…and doing an extensive append project for matching…lifestyle data to the customer base to get a better understanding and profile of what the customer looks like,” he says. “Now, we can look directly into purchase history and other factors that are helping us know exactly what triggers we need to have. We needed to communicate with customers when it made sense and was the right time in their respective buying cycles.”
Since focusing on sending more-targeted, personalized email marketing campaigns, Epson has realized a 27 percent increase in revenue (at the time CRM spoke with Nickel) compared to the same point in 2008, and a 45 percent increase in July’s revenue when compared to July 2008. “We’re more efficient and basing it on the customers’ actual behavior…so we can hit them with dynamically created emails,” he says. “When the economy does turn around, we’ll be hitting all cylinders and everyone else is hoping to be there and catching up. We want to be the leader.”
SUPPORT TUNES RIGHT ON KEY
RealNetworks knows a thing or two about keeping a pulse on its user community. The creator of digital media services and software brands including Rhapsody, RealArcade, and RealPlayer had been a longtime customer of RightNow Technologies, but wasn’t taking full advantage of the quarterly releases for its support staff of 350 agents.
“Two years ago we revisited what our business objectives were and scanned the market to see who could best serve those requirements,” says Claudia Lowman, general manager of consumer customer support at RealNetworks. Top-of-mind was an effort to streamline the number of vendors the company was using for separate support channels—chat, knowledge base, email management, and survey—and consequently simplify the agent desktops. “We had information about why people were contacting us in different channels, but didn’t have the 360-degree view of the customer that we wanted,” she says. “We wanted to survey our customers in a real-time manner, and a better sense of how to offer self-service without it becoming a hurdle to live support.”
Deciding to rededicate itself entirely to RightNow’s service offering, RealNetworks agents have a single desktop that supports all three businesses—music, video, and gaming—and changes dynamically based on actions taken by an agent or information known about a customer.
Thanks to RealNetworks having the wherewithal to adapt according to the needs of its customers, 40 percent of those customers now resolve their issues online without escalating to an agent, email response time has dropped from 24–48 hours to a maximum of 12 hours, average handle times have dropped, and customer satisfaction has increased by 10 points.
“We’ve been able to grow our business without increasing our support costs by having a better, richer, more exhaustive knowledge base so customers can resolve issues on their own,” Lowman says. “We’ve also been able to reduce the number of contacts per incident because we can be more proactive. Our customers are much happier when we can keep them informed of any potential bugs or issues.”
TAKING THE PLUNGE
All of these CEM cases may have reached different solutions and results, but one thing is the same: They all took the risk and invested in people, process, and technology to retool their customer experience strategies either immediately before or during the latest economic recession.
“I believe there is a mandate for using more technology rather than less—even in a recession,” stresses Scott Morgan, president of Brunner, a top-75 U.S. digital agency. “Consumers are moving from conspicuous to conscientious consumption, and there is the impression of choice with so many different categories, product lines, and offers…customers are overwhelmed. Technology is essential in helping to preempt any kind of confusion, consideration, or lack of knowledge well before they get to the point of purchase.”
One example of what Morgan is talking about can be seen in Golf Pride, a company that makes grips for golf clubs. “This is a category where consumers wouldn’t expect to have a lot of discretionary spending or even be involved,” Morgan says. “But if there are consumers looking to change golf grips, there are a lot of choices and the consumer doesn’t know when they need to change them. We direct them to a tool on the Web site, a golf-grip selector and analyzer, which they can go through online well before going to any retail store.”
In other words, the consumer is being empowered with knowledge before going to the point of purchase. Freed from the confusion of myriad products, “the oppression of choice is taken away,” Morgan continues, adding that Golf Pride will now be able to boast of a point of differentiation: Customers know they won’t just be thrown a barrage of grips. They’ll have the option to ask questions and get specific grips that meet their requirements, enhancing the potential for a sale—and a foundation for loyalty.
As the economy continues to improve, Forrester’s Temkin says fostering this loyalty is important. While it’s hard to put a dollar amount on it now, as we haven’t escaped the recessionary woods yet, “If your customers aren’t loyal now, then when they step up and start buying more you will lose a larger portion of incremental purchases,” he says. “So as growth happens, you’re going to fall behind.”
SIDEBAR: Misconceptions of Customer Experience Management
Bruce Temkin, vice president and principal analyst at Forrester Research, focuses primarily on customer experience management (CEM) philosophies and strategies. While he believes we are beyond trying to figure out what CEM is, he also pointed out some misconceptions that must be cleared up in order to continue pressing forward.
Misconception #1: Customer experience is something you sort of do just because it’s good to do so.
“If you believe that, then you run into problems because a good experience is good, a better one is better, and more is always better,” Temkin says. “That’s not the way it is. You have to want to do it because it is an integral component of your strategy.”
Misconception #2: Customer experience is solely in the hands of front-line employees.
“People believe that somehow this is all the responsibility of call centers, customer service organizations, the Web development team, and your store manager…that is a complete misconception,” Temkin stresses. “The entire company must create an environment that fosters a quality experience in every interaction with its customers.”
Misconception #3: Focusing on CRM applications is the same thing as CEM.
“A lot of the things you may choose to do in order to improve require technology and applications, but focusing on those isn’t the way in which you improve the customer experience,” he says. “They’re working from the application to the customer instead of from the customer to the application.”
SIDEBAR: 6 Laws of Customer Experience
- Every interaction creates a personal reaction.
- People are instinctively self-centered.
- Customer familiarity breeds alignment.
- Unengaged employees don’t create engaged customers.
- Employees do what is measured, incented, and celebrated.
- You can’t fake it.
Source: Bruce Temkin, http://experiencematters.wordpress.com (unrelated to his Forrester Research work).
SIDEBAR: The 4 Ds of Customer Experience Management
- Discover…your current experience.
- Design…your strategy.
- Deliver…your message.
- Develop…your culture continuously.
Source: Customer Service Experts, Inc.
SIDEBAR: Mystery-Shop ’Til You Drop: Poor Experiences
Companies today use myriad forms of survey technology—mail, telephone, interactive voice response, email, and Web-based—to try and capture the essence of what consumers think about their product, brand, or service. There are many in the customer service industry who believe there is another form that often isn’t talked about nearly enough: mystery shopping.
“I’d make the case that you can get some information out of these types of surveys, some concrete points like how long did you wait…but it doesn’t measure the whole customer experience,” says Judi Hess, president of the Mystery Shopping Providers Association (MSPA). “To my knowledge, mystery shopping is the only tool that measures the entire experience.”
The MSPA has more than 260 member companies worldwide, including marketing research and merchandising companies, private investigation firms, training organizations, and companies that specialize in providing mystery shopping services. Hess explains that in-person visits can capture the “soft” issues that surveys often cannot: friendliness, courtesy, names, and knowledge.
Hess says after 25 years in the industry, we are beyond having to explain what mystery shopping is and how it is connected to customer experience. “It’s so widespread and understood that now I just have to differentiate myself,” she says. “I don’t have to explain what it is or why to use it. That’s a big change.”
Lise D’Andrea, president and chief executive officer of Customer Service Experts, explains that many still associate mystery shopping with finding out what employees are doing incorrectly, rather than looking for success and opportunities for advancement. “We need to use that information to help define the experience,” she insists. “People think they know what the customer wants, but don’t often really understand it fully.”
Mystery shopping can certainly help in this aim, D’Andrea says, but she says it is just one tool in an overall package (check out the sidebar “4 Ds of CEM,” page 27, for her take). She says that the ultimate goal for the customer experience is not to tell customers how to experience what they feel when they come to you. “It’s about managing all of the people, processes, and practices…doing that effectively so that experience just happens,” she says.
Especially in this economic valley, Hess says now is the time to retool your customer experience strategy with the help of mystery shopping to come out of the recession stronger. “Customer experience is more important now than ever, and that’s what will allow companies to survive and differentiate themselves,” she says. “What companies [that invest] will have that others will lack is customer loyalty. They won’t make the switch when the economy improves.”
SIDEBAR: Tips to Improve the Generational Experience in Healthcare
- Manage the customer experience—from the CEO down.
- Design operational elements of healthcare delivery around the patient, not the convenience of the provider.
- Invest in front-line customer service.
- Educate staff on service and communication expectations.
- Use formal and informal communication styles appropriately.
- Provide different communication tools for different generations.
- Expand access using online and other technological tools.
- Focus on Boomers and Generation X.
- Prepare your staff to deliver healthcare through education and engagement.
Source: “Customer Experience: A Generational Perspective,” The Beryl Institute
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