CCO Council Blog

By Christopher Benoit

Curtis and I were in the office discussing our approach to strategy planning for 2012. Like everyone else, we often feel overwhelmed by the “Whirlwind” and a regular exercise for us is evaluating what we’re doing, what we think we should be doing, and what we probably should stop doing. I’d like to think it’s a continuous improvement process; certainly it’s continuous!

When Curtis touched, once again, upon the question of future activities, he made the observation that it’s so often difficult to tell what’s working; i.e., which activities are yielding acceptable – let alone optimum – ROI. I expressed my agreement, citing findings from HBR’s September 2011 article, Learning to Live with Complexity. To quote authors Gökçe Sargut and Rita Gunther McGrath, “In a complex system, the same starting conditions can produce different outcomes, depending on the interactions of the elements in the system”, which interactions, by the way, “are acting continuously and unpredictably”.

Sound familiar? Business, technology, the interrelationships between people and systems today are nothing if not complex.

I made my final point to Curtis, by asking the (I thought, rhetorical) question, “What do we know? How, within the complexity of variables and parameters we are (all) operating under, can we gain any comfort from thinking, let alone acting as if, we know what we’re doing?”

Curtis’s response caught me by surprise.

“That’s a great question! What do we know?”

He immediately hopped up, went to the whiteboard, and wrote the heading, What Do We Know at the top center. For “ideas” people like Curtis and me, the next two hours of brainstorming were gratifying in and of themselves. But beyond that, we ultimately were able to distill a list of “facts”; i.e., knowledge that Curtis and the business had gained from their experiences over time, many of which could be and had been repeated to yield specific outcomes. We started out looking for “buttons we could push” to achieve desired results and ended up with a set of clear guidelines to determine, and filters to evaluate, our future activities. It gave our strategy planning a shot in the arm.

Turns out, we “know” a lot. At least, we know enough to move forward with the confidence that even if some of our activities don’t produce the results we’re after, we’re undertaking the “most likely to succeed” of the seemingly limitless options we face every day. A bonus is the satisfaction of believing we’re capitalizing on the value of our time by applying it as productively as we know how.

You and your organization probably know more than you think you do. When was the last time you examined what you know, as a means of clarifying your future direction and focusing your future activity? None of us lacks for experiences, especially in today’s business environment where we’re all doing so much more with so much less. But unless we set aside the time to distill and organize from those experiences “what we know” – for ourselves and our organizations – we could be, at best, blindly applying the knowledge of others that we hope will prove beneficial but without a sense of confidence that our direction is grounded in experience, and at worst, wasting our valuable time.

By Curtis Bingham

Once upon a time, Netflix was an innovator and a giant slayer.  They offered a great product, enormous selection and a unique delivery system for DVDs.  By allowing customers to rent DVDs online and have them mailed to them, they put Blockbuster and video stores in general, out of business.  Next, Netflix wowed customers by offering a selection of movies to stream online via the same account.  No hidden fees, problems were addressed early and customers were loyal and excited about the product. 

They were once a company that “got it right” with their customers, but in the last three months, they have managed to squash 7 years of good will with some bad decisions that were poorly executed by the company.

I do a great deal of writing about companies and Chief Customer Officers that get it right, creating superb customer experiences that drive loyalty which in turn drives revenue and profits. While this can be instructive on how to be successful, sometimes it’s better to know what NOT to do to avoid complete and utter catastrophe.  Netflix is a study in both extremes, and whether or not it survives its own blunders time may only tell.

Early last summer Netflix announced a price increase…not just any price increase, but one that raised rates as much as 60% depending on the plan a customer was subscribed to.  The reaction was immediate and pervasive.  Angry customers blogged, tweeted, Facebooked and used every communication vehicle they could find to voice their disgust.  Netflix was silent.  After a short period of being ignored, the customers did what dissatisfied customers always do: they voted with their feet and left Netflix in droves. Still Netflix did nothing. 

Customers are never fans of unjustified price increases.  Netflix showed a complete disregard for their customer base when increasing the price of the service without a justifiable increase in value.  Price increases of this magnitude force customers to reevaluate decisions that used to be automatic.  They used to happily pay their bill every month and now they were determining if it was worth the price.  Many decided it was not.

Months later, CEO Reed Hastings came out with an apology, but it was several months overdue and it included a new bombshell: instead of the traditional online and DVD service found in the same convenient site, he was splitting the company into two entities.  Netflix would only stream video and Qwikster would continue in the spirit of Netflix’s original intent of DVD rentals.  Neither site will communicate with each other, so you will have to have separate queues for your movies and your credit card will be charged twice by two different companies.  Wait…what?  So, he is sorry for the price hike, but the price hike remains AND he is taking the most convenient part of his service and making it considerably more complicated?  How does this make things right for the customer? Does this sound like a company that cares about customers?

Companies are in business to create value for customers.  The price they charge is derived from the value provided.  When the value erodes, the price can’t be expected to remain the same or even increase without a backlash.  In 3 months, Netflix managed to destroy their service value and instituted a price increase.  Netflix is paying for these blunders both in a dropping stock price and in reduced Wall Street guidance as they lower customer acquisition expectations for Q4.   

Where is the customer in all of this?  Leaving, but it doesn’t have to be that way. 

Netflix could institute some changes to quickly bring departed customers back and save face with current disgruntled customers.  How?  By taking it all back.  Clearly, they have a strategic direction to split the company into two entities so they can pursue different customer segments.  Not all people who stream videos also watch DVDs and vice versa.  However, they can make the two services talk to each other to maintain consistent history, ratings, and recommendations. They could also go back to a single charge for those who use both services.  Small changes, but they reflect the biggest issues customers have with splitting the services up.

The largest gesture Netflix can make is to own their pricing miscalculation.  Reed Hastings belatedly apologized for the mistake and admitted it was quite a gaff, but he didn’t make it right.  Take action and correct the pricing scheme.  Grandfather current customers and make it an offer to those that left that they can return for their pre-June pricing plans.  It would energize the customer base, regain a percentage of lost customers and it would be a positive PR boost to a company that desperately needs one. 

Will Netflix do this?  Sadly, no.  They have stated publicly that they won’t recover the customers they lost.  Instead, they are rolling out announcements regarding new content agreements to justify their price hike.  This just increases the customer disconnect and will make them only too happy to jump on a number of very promising competing services such as Amazon and Apple that have gladly stepped into the breech. 

John Woods said “The purpose of a business is to create a mutually beneficial relationship between itself and those that it serves.  When it does that well, it will be around tomorrow to do it some more.”  Will Netflix be around tomorrow?  It is too early to tell.  However the prognosis is not good. 

By Curtis Bingham

Authority is the currency of the C-Suite. I’m not talking about the chest-beating, testosterone-laden, “hear me roar” type of authority. Instead I’m speaking of the “Our customer has a problem, let’s everyone work together to resolve it and make more money in doing so” type of authority. Most chief customer officers or similarly titled loyalty executives do not own all customer-facing personnel and therefore must lead by influence to effectively resolve customer issues or enhance the end-to-end customer experience and ultimately, increase revenue and profits.

Even as a direct CEO report, the chief customer officer or other loyalty executive may be challenged to obtain the authority needed to get the job done. There are three types of authority for the CCO: borrowed authority, positional authority and earned authority.

Every CCO or loyalty executive has some Positional authority derived from the position and title they hold within the organizational hierarchy. CCOs relying upon positional authority may own many if not all customer-facing personnel such as service, support, consulting, and sometimes marketing and sales. Using positional authority the CCO can point to his or her direct reports and say, “make it so” in order to address customer issues. Beyond the initial bump in influence when the CCO catches people’s attention as something new and unexpected in the organization, this form of authority tends to be static and may not carry the weight of either borrowed or earned authority. Borrowed authority is gained through the strong, vocal, and very visible support of the CEO. The more prominently the CEO advocates for the CCO and reinforces customer-centric imperatives, the stronger the halo-effect and the greater the influence the CCO has over the organization. Borrowed authority is strong in the early days of a CCO’s appointment but tends to wane as the attention of the CEO turns to other initiatives. Earned authority occurs when CCO led initiatives are seen to be successful both internally and externally. Authority is earned as the CCO leads peers, executives, and employees to recognize how customer insight and centricity can be valuable aids in achieving their own business, department, and personal goals.

Many CCOs begin with positional authority and borrow heavily additional authority from the CEO. The most effective CCOs with the longest tenure are those who quickly earn their own authority. Ultimately, such earned authority can eclipse both positional and borrowed authority in power and value. Earned authority is the strongest and most sustainable type of authority, enhancing both positional and borrowed authority as it increases.

How can a CCO effectively earn greater authority within the organization? There are three ways to do so:

1. Own actionable customer insight
2. Develop strong relationships with management, peers, employees, and customers
3. Demonstrate quantifiable results tied to revenue and profitability

The 2011 CCO Council Summit to be held on October 18-19 in NYC is entirely focused on accelerating the development of this earned authority. Regardless of whether you are new to the role or very experienced, you owe it to yourself to attend! It isn’t too late—click here to register.

Note: This article is excerpted from the Bingham Advisory, a ground breaking publication designed to define and clarify the role of the chief customer officer in today's global business fabric. Authored by Curtis Bingham, the worldwide expert on CCOs, The Bingham Advisory is scheduled to launch at the 2011 CCO Annual Summit and will enlighten, instruct and drive important conversations for the valuable role of the CCO.

By Curtis Bingham

Do you remember the old “Whac-a-Mole” game?  During my childhood we’d go to the arcade, pick up the oversized, soft, rubber mallet and whack plastic moles that would pop up at random from five holes in a waist-level cabinet.  Every mole successfully whacked was worth 10 points, and we’d work ourselves into frenzy, whacking moles as fast as we could before time ran out.  The app is available for the iPhone and Android devices, and there is even a $28,000 executive Whac-a-Mole cabinet complete with moles made in the likeness of friends, family, or co-workers and liquor and glass storage.

How many moles have you whacked today? As executives, we want to keep our organizations humming along smoothly and efficiently, correcting and preventing mistakes wherever they pop up.  We pride ourselves on being able to identify and resolve problems or quickly root out inefficiencies. We sometimes are frustrated at employees that don’t take initiative, for whom it seems we have to spell out everything.  Bass & Avolio wrote about these employees, characterizing them as a “workforce of risk avoiders and individuals who work merely to standards using ‘traditional methods.’”  Got a few of those? 

Here’s something that may surprise you.   These followers “avoid attempts to innovate because they risk making mistakes and receiving negative reactions from their leader[s].”  Could it be that the problem is not the employees….but you?

Bass & Avolio describe the leaders as having a “Management by Exception” transactional leadership style characterized as monitors who detect mistakes and are on the lookout for variances from standards.  They are extremely reactive and take corrective action when errors occur.  While at times this style may be necessary, it creates a “zero-defects mentality at all costs [that] can handicap willingness to take calculated risks to do what is needed.” 

Some time ago I used a quote in my signature: “If you aren’t part of the solution, you are part of the precipitate.”  See what I did there?  Are you part of the solution? Or are you part of the sludge that is holding your organization back, stifling creativity and preventing innovation? Maybe that executive Whac-a-Mole cabinet should be taken out of the office.

At the 3^rd Annual Chief Customer Officer Summit [INSERT LINK TO AGENDA HERE] we’re going to be talking about accelerating leadership, and specifically about how you can go about becoming the leader that everyone respects and is excited to follow.  If you are the senior-most customer-facing executive in your company, can you afford not to miss this event?

I’m going to be talking a lot about leadership and authority in the coming months.  I look forward to having you join in the conversation.

By Curtis Bingham

In my mailbox today I found a fantastic personal story from my good friend, Jeff, about how treating a customer complaint as a gift ended up winning back a customer, and saving the company money.  I’ll let Jeff tell the story in his words:

“I drink Coca-Cola each day and I have my favorite Sunoco gas station where I go to get a fountain drink. The Sunoco station was out of the soda I like so I went to the nearby Mobile station, which is the only other nearby source for fountain drinks.   I don't like the soda here because the syrup mixture is way to strong for me.  As I entered, I mentioned to the manager that the mixture of syrup at his store is awfully strong.  He said he would look into it.

This morning he told me that he’d mentioned to the vendor that a customer had brought an issue to his attention and asked them to take a look at it.  I was surprised as in my experience most people forget about the customer issue or blow off the customer and go about their daily business.  The service rep discovered that the syrup mixture was double what it should be! In the back of the room, the machine pumps a specific amount of water & syrup into the tubes connected to the dispenser.   The mixture had been very wrong for quite some time, costing the company double what it should have in syrup consumed. What’s more, the nozzle had to be replaced because it was getting all "gunked up", also costing the vendor in repair and replacement costs.  When asked by the service rep, the manager of the Mobil station said, "the customer 'gets it'.  He knows what the product is supposed to taste like."  

I thought to myself, "how often to we ask our customers what they want or what the product "tastes" like?  Or how often do they listen to a customer’s complaint or recommendation?  How many customers went elsewhere because of this problem? This manager listened and reported back to me on my initial comment.  I felt great that I had been heard.  I felt I had a better relationship with the store manager, and with the store that I had shunned in the past.  I’ll be going back.”

A simple, but powerful lesson:  customer feedback is a gift.  Listening to customers not only helps us better serve them, but can often save us money.  How well are you listening to customers?  How easy do you make it for customers to contact you to voice their concerns?  How do you close the loop with customers, letting them know they’ve been heard?  How do you thank them for their feedback?  The next customer complaint you field might just mean a customer saved.

By Curtis Bingham

“Why aren’t families dying to get into my schools?” asked the superintendent of public schools in one Rhode Island school district. According to a recent article in the Providence Journal, enrollment in public schools has dropped by 26.4% over the last decade, a precipitous drop.  This gap equates to a $3M funding cut this year.  The biggest cause?  An exodus from public schools to charter schools.  Charter schools are free from some of the bureaucracy of traditional public schools and by involving parents in the education of their children are better serving their customers. Parents are voting with their feet.

The public school system is a classic example of an organization in need of a chief customer officer (CCO). While the stated goal of providing children with a solid education is certainly appealing, the practical reality is that the organization is fundamentally flawed: the school systems are not interested in their real customers-the children and their parents.  If you examine every initiative proposed by teacher’s unions, they are all about the teachers, and never about the customers.  Unions, with rare exception, never work concordantly with the education administration and with the customer.  Instead, they are constantly fighting for shorter hours, fewer extracurricular activities, increased pay and benefits. Picture an organization like this where you have miserably unhappy employees.  How can you possibly have happy customers? The kids always suffer.  

Just like the superintendent passionately defended her schools and teachers, companies can claim they are customer-centric in every board meeting, press release, or marketing campaign. But what happens on the outside is merely a reflection of what is going on inside.  Miserable employees and happy customers simply cannot coexist! Unless you have a monopoly in a market or on a product, if customers are dissatisfied you run the risk of losing your customers to the business equivalent of charter schools: more nimble competition that is gleefully stealing away your customers. 

Task someone with championing the customer cause, maintaining your customer focus and managing the well-being and progress of customers. Learn why customers are defecting, and what it takes to get them to buy or pay more. Or better yet, hire a CCO so this important job doesn’t get lost in the whirlwind of an overburdened day job.  Whatever you do, don’t let your business fall prey to charter schools.

By Curtis Bingham

A number of years ago I was creating customer strategy for a credit card processing company and as a result of some intensive customer analytics, I found a rather large customer segment that would gladly by two, three, even five times their current rates because they valued the company’s product and service so highly. I recommended they charge one- to two times more to compensate for the extra value received, which translated into $20MM annual incremental revenue. 

However, the CEO focused on one other finding from my research: the selection of merchant services vendors was a once-and-done decision. Companies would select, conduct competitive analyses, perform due diligence, and choose a provider and having done so would almost never again review the rates, fees, or other statement items. The CEO decided to raise all fees AND charge an annual “Membership Fee” of $70. 

There are three things wrong with this. First is that it is just plain wrong and unethical. Second, it penalizes everyone rather than capturing the value in play. Everyone is forced to carry an additional burden rather than just those who truly value the service. Third and worst of all, this decision emphasizes short-term revenue at the expense of long-term customer relationships. 

As we all learned as children growing up, the foundation of a lie is that it works only as long as you don’t get caught. If your strategy is dependent on not getting caught, Murphy’s Law will inevitably prevail. If your customers don’t notice, your competitors will point it out with great glee! Consequences have a nasty tendency to catch up with us when we can least afford them.

There is a huge amount of research and tremendous anecdotal evidence proving that loyal customers generate anywhere from 5%-33% greater revenue than non-loyal customers. Trust is the foundation for this loyalty. If you destroy trust, customers feel they’ve been abused and taken advantage of. In the end, you sacrifice loyalty, revenue, and customers—it is just that simple.

The question for you is, “What are you doing to customers that you’re hoping nobody notices?” Just because you can do something to your customers, doesn’t mean you should.

By Curtis Bingham

In Q4 of 2010, 42.7% of consumers indicated their financial situation would be better in six months, compared with 33.8% in Q1 2010. This according to a study conducted in Q4 2010 by Empathica of 11,000 North American consumers. Another 15% of consumers are spending more now than a year ago.

Empathica Chief Customer Officer Gary Edwards said, “While showing signs of increased optimism, consumers are still relatively skeptical about the economic outlook and their own spending intentions. Coupons, special promotions and incentives continue to be helpful in fueling consumer spending moving forward. Just because more consumers intend to spend, doesn’t mean that frugality is over.” 

It appears that men are spending more than women, with 10.4% of men indicating they are spending “significantly” more vs. women at 3.9%.

Tangentially interesting is another finding from the study that 72% of consumers indicating that they use the web to comparison shop online and then buy an item in-store.

Implications for Chief Customer Officers?

The market is improving, customers are beginning to open their wallets.  Customer segmentation is more important then ever to ensure you prioritize efforts to win back damaged loyalty with those most important customers.

Additionally, this research supports many others in recent years that indicate that the online channel is every bit as important as the retail or direct-sales/distributor channel in terms of the overall customer experience. If the online experience is clumsy, you’ll not draw prospects into the stores.

By Curtis Bingham

I was reading a blog today about a company’s efforts to gather customer insight using a well-known research institution and it occurred to me that while gathering customer satisfaction scores is a good thing to do, many companies that I’ve worked with start their customer insight collection with massive surveys and end up wasting opportunities for strategic input to their overall customer strategy. In my experience at companies large and small as well as in interviews with scores of Chief Customer Officers (CCOs) for my upcoming book entitled, The Key to Customer Strategy:  The Rise of the Chief Customer Officer, I’ve found that there must needs be a sequence of customer insight collection methods from coarse to granular, and expensive to economical.  This approach may at first seem counterintuitive, but actually yields the most valuable results that drive profitable customer loyalty.

If you simply begin with satisfaction surveys as your primary view of the customer, you may well capture “dissatisfiers” or those things that are currently damaging customer relationships and must be fixed immediately. However, you miss the most valuable information, namely the real reason why your customers buy, what they value the most, whether they may be willing to pay more, and even more importantly, where your customers are going next and how you can lead them there.

To achieve this type of insight and more fully inform their customer strategy, the best companies have a hierarchy of customer insight collection methods:

1. Executive advisory council to understand strategic imperatives:  This mechanism gets senior-most executives (the economic buyers) from critical customers together to understand their highest-level business challenges and directions.  This input is critical in determining future directions your company must begin to consider because if your customers are heading in a direction that you aren’t, you’ll be left behind.

2. More tactical customer advisory boards:  Companies may have customer advisory boards for each major product line or customer segment they are in.  They are primarily comprised of product/service users and influencers.  Broadly speaking, these groups provide a wonderful focus group in which customers can speak their mind, share their issues and problems and get help from their colleagues and the company, as well as  react to forthcoming products/services and activities.

3. Direct interviews of key customers:  Direct interviews are incredibly important to truly understand customer value drivers:  ie. the critical reasons why your customers buy from you (see this blog post and this article published in CEO Refresher for more information on value drivers). Direct interviews are critical to uncover all the hidden issues, learn the context of problems, and even more importantly, discover new opportunities only exposed through direct, contextual interviews.  These direct interviews will refine questions and inform the large-scale customer surveys.

4. Large-scale customer surveys:  The surveys, by their very nature, need to be confirmatory–they need to validate the insights you’ve gained to date and confirm or otherwise assess the scope of the issues you are seeking insight into.   It is extremely hard to get strategic insight if you simply start with surveys unless you follow up with interviews, which simply indicates the need to have started with interviews beforehand.

5. Focused working interviews:  The large-scale surveys will invariable confirm issues that need to be addressed, and you’ll need to gather your cross-functional teams together to get to the root cause of the issue confirmed through the previous steps, propose solutions, and upon implementation, evaluate their success.

It may be tempting to simply send out a survey and call it good.  In my experience, surveys  can can be subject to many pitfalls that I’ve previously written about on my Customer Strategy Blog.  Squash this temptation.  Just like you don’t allow your sales people to go into a customer visit without preparing, you can’t allow your company to just send out a survey without fully informing the survey.

You only have so many silver bullets in your gun when it comes to your customers.  Do your homework first and make sure that when you spend your silver bullet and ask your customers to help you out, that you get only the insight you really need to drive your business forward.