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Design Thinking-Deeply immerse yourself in your customers' world

Tuesday, March 22, 2016

 

"Our customers are leaving in droves. Those that stay are killing us in price negotiations. We need your help to fix it." A major pharmaceutical company asked me to understand how, despite spending millions in marketing, advertising, and sales, low-cost generic competitors were eating their lunch in a particular segment. They had slick brochures that promised great benefits including higher inventory turnover, lower COGS, enhanced cash flow, highest returns on investments, high-tech inventory management programs, and more. Yet revenue was sliding. Customers seemed to only care about low price. Salespeople were negotiating away margin, and over-servicing customers to make up for what seemed like inflated prices. The dots weren't connecting.
 
I sat down with an elderly Mr. Wong in the cramped backroom only barely separated from the noise and hustle in the front of his small NYC pharmacy. When I asked about his experience in working with my client, he told me that he hadn't seen his sales rep in four years. He had never seen the brochures detailing the bevy of programs that my client offered. He admitted, in fact, that he didn't didn't know what COGS was (cost of goods sold). I came up empty as I tested all of my client's assumptions.
 
Flummoxed, I asked Mr. Wong, "What is really important to you in running your business?" His answers were surprising:
  1. I want to spend more time with my customers
  2. I have to grow volume. 
  3. But I can't do either because the insurance companies are squeezing everything.
  4. I'm looking ahead at retirement and I need help in getting my son ready to take over the business. 
I repeated these interviews in many, many different pharmacies across the US. The answer was shockingly consistent: customers were clamoring for help. They were willing to pay more for greater value. But they didn't understand what my client was telling them. My client was providing glossy brochures designed for the CVS and Walgreens of the world. But the small pharmacists didn't understand COGS, inventory turn, ROI. They were pharmacists. Who were forced into running a business.
 
In the absence of real value, they turned to price-the only thing they had left. I suggested four key hot-button issues that marketing and sales could use that actually met customer needs. And sales increased by $20M. Each year. 
 
One of the foundational tenets of design thinking is deep immersion in your customer's world. Like my client, without this deep immersion, you are stuck with supposition and belief-which may be completely wrong and may have damaging financial ramifications.
 
What if you were to deeply immerse yourself in your customer's world? What if you were to simply ask your customers, "What are you trying to accomplish? What is important? Why?" There are any number of methods to formalize this process from simple phone interviews to "follow-me-home" visits to full ethnographic research.
 
But what if you started with a direct conversation with a couple of your best customers and asked, What? And Why? Whom can you call tomorrow?
 
Take the first step in applying design thinking by deeply immersing yourself and your team in your customers' world. 

We're focusing exclusively on design thinking in our upcoming CCO Council meeting on April 12. Brilliant conversations with brilliant CCOs. If you think you should be there, call me @ 978-226-8675. 

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Categories: CCO Council | Customer Insight | Customer Retention | Design Thinking

Design Thinking vs. Customer Experience

Sunday, March 13, 2016

Last week I called my bank, entered my account number into their automated system, then my pin, then my zip-code, then the last four numbers of my social security number.  Having properly identified myself as the real Curtis Bingham (or at least a sufficient facsimile), I proceeded to check my balance and then transfer a balance to another account. I realized that my car payment was being deducted twice. So I pressed “0” to speak with an agent.  The agent then asked me to provide all the same information, again. 

This is my biggest pet peeve in dealing with banks and their IVR systems:  despite having proven my identity enough to make payments on a loan or even completely zero out my account, every agent makes me provide the exact same information. Some want additional verification, some say they didn’t receive it from the IVR. Making customers provide the same information all over again creates friction. And how many times have you gone to a doctor’s office and been asked to fill out three forms, only to find that you have to enter in all the same information on all three. Or been stuck listening to an agent read, verbatim, a three-minute long legal disclaimer before confirming a change you’ve made to your life insurance plan?

Someone created these processes to meet a business need—to verify identity, get information, or fulfill regulatory requirements. But like many processes, they neglect the customer. You’re predisposing someone to be irritated with you before you even begin the human interaction. Too much friction creates dissatisfiers which, if left unchecked, can lead to churn.

Despite significant efforts to improve the customer experience, many NPS programs have plateaued and customers complain even louder on social media. Chief Customer Officers (CCOs) are stuck in groundhog day: dealing every day with an endless stream of apologies, billing statement credits, and service recovery efforts. The focus is on remedial efforts to reduce detractors. And they are often “lipsticking” bad processes—making inherently business-centric technology and processes more palatable to customers. But this only takes you so far.

The goal of many customer experience (CX) initiatives is to make many of these business processes more palatable to customers. The goal of design thinking is to determine how to do away with some of these processes altogether and recreate the rest on balance between customer tasks and business needs. The value and application of design thinking in the enterprise was described in the September 2015 issue of the Harvard Business Review. This issue included a very good summary of how Pepsi applied design thinking not only to product design but also to culture and customer experience. Design thinking brings disparate stakeholders, disciplines, and expertise together to first listen and intimately understand the customer’s tasks to be completed. Instead of immediately converging on a solution from a narrow set of options, design thinking allows us to create new choices, explore new alternatives, create new options that didn’t exist before.

There are a couple of core principles of design thinking: 

  1. Begin with people, culture, and context: understand human needs deeply enough to know where to begin design—the biggest challenge is ensuring that you’re asking the right questions
  2. Rapid prototyping: learn rapidly by building, testing, failing, and honing 
  3. Engage: enable participation of disparate stakeholders including customers, process owners, and even those outside the domain to build upon ideas and remove artificial domain constraints
  4. Execute: change is hard—especially the type of transformative change realized with such a wholescale reimagining of the customer/company interface

What would your product/service/process look like if it were wholesale reimagined, not from an operational-efficiency perspective but from the perspective of the customer task to be performed? How much customer-company friction could be reduced? How might this decrease call volume? Or service recovery? How much more “easy to do business with” might you become? What would be the impact on churn? On revenue?

Design Thinking helps us go beyond the incremental to the transformative. Using design thinking we can examine products, processes, and experiences holistically from the outside in, starting from the customer’s work to be done/tasks to be performed and work backwards with few constraints to create fresh and transformative processes that actually solve real customer problems. In the near term, we want to minimize the friction in the customer interface. In the longer term we want to align the brand promise, business objectives, job functions, processes, around facilitating the customer tasks to be performed—balanced with critical business needs. 

Come join us at our April 12th Chief Customer Officer Council meeting, where we’re going to be discussing how the discipline of design thinking can help us go beyond the remedial, incremental improvements that many CX initiatives may provide and help us align the business to solve real customer problems. Jill Herriott, former CCO of CIGNA and current CMO/CXO of the American Marketing Association (AMA) will be sharing her remarkable journey applying design thinking to create powerful end-to-end customer experiences that customers loved—and that promise huge ROI. And you won’t want to miss her discussion of customer archetypes that create emotional attachment and far greater customer engagement.

Steve Mescon, CCO of Riot Games (90 million customers!) is sharing how he used design thinking to create a powerfully customer-focused culture that enables them to bring in 83% of new business from word of mouth.

I typically reserve a couple of seats for guests. If you’ve missed your invitation, please contact info@ccocouncil.org to request an invite. 

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Categories: CCO Council | Chief Customer Officer | Customer Retention | Design Thinking

The Impact of the Chief Customer Officer, Part II

Tuesday, June 24, 2014

Last week, I described recent research conducted by the CCO Council into the impact of the chief customer officer on company financials. This week, I discuss the findings in detail and provide recommendations for managing them.

1. Customer Centricity is a two-year investment

Developing and improving customer strategy is a profitable but longer-term investment. It takes at least two years for the CCO's activities to flow through the company and make a significant impact on top- and bottom-line results. Once these results materialize, however, they appear to continue to grow commensurate with the investment. B2C industries tend to see results more rapidly than B2B. Industries with intense competition show heightened impact from the CCO.  

Recommendation: CEOs and Boards must commit from the outset to support and invest in the CCO and his/her initiatives for a minimum of two years to ensure the highest ROI. In turn, CCOs must manage the expectations of the CEO and Board to allow for this two-year probationary period. 

2. The CCO must show contribution to long-term revenue and profitability improvements 

Companies have demonstrated measurable improvements in revenues and profits while employing a CCO. In some cases, overall revenue drops after the CCO's departure. This research shows that the CCO can and should be accountable for improving top-and bottom-line results, although the impact may not be measurable on a quarterly basis.

Recommendation: CEOs should expect the CCO to provide, in addition to intermediate metrics, quantifiable impact on revenue and profits, and ensure the systems are in place to properly track the CCO's contribution. The CCO should begin by providing a clear line of sight from his or her actions to revenue and profitability. In some cases, the CEO and CCO may need to begin by agreeing upon an intermediate goal of driving loyalty and accept academic research proving that loyalty drives revenue and profit. However, this can only be temporary. 

3. In absence of growth, the CCO may help prevent a slide 

In some industries that experienced negative growth, the presence of the CCO helped stem the decline suffered through competitors and maintain revenues/profits through stronger customer relationships and trust.

Recommendation: The CCO must "bank" customer trust and loyalty to protect customers against hard times. CEOs need to take a less transactional view of activities that may pay dividends at a later date. 

4. Everyone says they are customer centric... 

Every company claims to be customer centric, but fewer actually are. Many publicly-stated company policies remain company centric rather than customer centric, and in the end, those whose actions are aligned with their customer needs are more successful.

Recommendation: The CCO should, with the support of the CEO, examine the policies, actions, and restrictions to ensure that customer needs are met on balance with business needs.

This study clearly shows one thing: CCO's are adding value to the bottom line. While growing steadily from fewer than 30 in 2003, CCOs are the newest, and by far the smallest, component of the C-suite. Many companies look at the CCO position and question if they can afford to add it to their C-Suite team, but the numbers turn that question on its head and ask how they can afford NOT to do so.  

Whether you are a company looking to create a CCO position or currently a CCO looking for resources, we invite to you to explore the CCO Council (www.ccocouncil.org) to give you and your company a true competitive advantage.

*This article is the second in a two-part series excerpted from The Impact of the CCO, available for free download from the CCO Council website here.

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Categories: Chief Customer Officer | Customer Centricity | Customer Engagement | Customer Loyalty | Customer Retention

The Six Components to Customer Engagement Strategy

Tuesday, June 03, 2014

Customer engagement needs to be a disciplined strategy with ownership, accountability, broad reach, goals, accountability, measures, and a marketing plan of its own to communicate with employees, customers, and other stakeholders. Here are six essential components to a successful customer engagement strategy:

Purpose
In order to devise an effective strategy, you must first identify what you want engaged customers to do for you. Do you want them to help resolve problems, inspire innovation, co-develop new products or services, generate market insights, improve operational efficiency, enable greater sales velocity, or something else? You need a purpose to give your strategy focus.

Engagement Opportunities
What are the most important collaboration activities that support the engagement strategy? What are the most important advocacy activities that support the engagement strategy? How do you determine each activity’s importance and priority? Once identified, what resources do you have to support these activities?

Customer selection and enticement
How do you identify the ideal customers to participate in an activity that achieves your business goals? What opportunities are best suited to the customers and the pursuit of your goals? How do you entice customers to participate? For some, it’s simply a matter of asking. But others may need incentives or a clearly articulated mutual benefit that makes participation worth their discretionary time.

Measurement and impact on business metrics
You need to find a correlation between the measure of engagement by activity and its impact on the business. How do you measure engagement and how do you demonstrate that correlation? Without it, investment in your strategy is not defensible or sustainable.

Organizational alignment to customer direction
While it’s great if you have customers collaborating and advocating, if the organization is not aligned around delivering improvements or outcomes from these activities, engagement will be short lived. Customers will realize, “Oh, they’re asking me for help but they’re not really doing anything about it, therefore, it’s not worth the investment of my time and energy.” 

Employee engagement
Similar to the process of selecting customers, how do you identify the ideal employees to participate in an activity that achieves your business goals? What opportunities are best suited to the employees and the pursuit of your goals? How do you entice employees to participate? Rewards and incentives, both intrinsic and extrinsic, may be appropriate and necessary to successfully engage employees in the business of engaging customers.

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Categories: Chief Customer Officer | Customer Engagement | Customer Insight | Customer Loyalty | Customer Retention

Three Steps to Manage Customer Crises

Wednesday, May 28, 2014

Customer crises strike without warning, and the chief customer officer must act swiftly and decisively to address root causes and begin rebuilding damaged customer relationships. Over my years of experience working with scores of chief customer officers, I've found three steps that are crucial in successfully managing any crisis:

Build Strong Customer Insight Before Crisis Strikes
As owner of the customer you know the value of thorough customer research, but having detailed data is particularly vital when crisis strikes: your unique customer insight must form the basis of a successful response strategy. Relying on that insight you will be able to specifically target touch points that will resonate with your customers, identify areas of the organization's plan that may exacerbate negative opinion, and determine the best strategies for mitigating that negativity. Have a comprehensive customer research program in place before you're faced with crisis to ensure that the information is there when you need it most.

Focus the Organization on Customer Impact
It's all too common for the wider organization to focus on damage control-acting in self-defense, laying blame, or stonewalling. But this will only worsen already injured customer relationships. Instead, it's imperative for you to lead the organization to focus on customer impact at every step along the road to recovery. This is not to say that every action must have a positive impression; we know there are times the organization must act despite negative impact. Your job is to ensure that at every step someone is asking the question: how will this affect customers? If it's positive, highlight it in a way that strengthens customer relationships, and if it's negative, use your customer insight to mitigate the damage.

Rebuild Damaged Trust
Incorporating high customer touch into routine operations allows you to rebuild trust while creating sustainable customer centric change. Seek opportunities for reassuring customers not only within the recovery, but throughout the organization. Look for functions that can be updated or repackaged to highlight positive customer impacts. Share information with customers by updating call center scripts, or devise high touch outreach programs to provide understanding about particular actions or operations of the organization. Customer trust will return only when customers feel they are receiving honest and forthcoming communication about the problems affecting them and the steps you are taking toward resolution. 

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Categories: Chief Customer Officer | Customer Insight | Customer Loyalty | Customer Retention

Measuring ROI of Customer Centricity-Changes in Customer Value

Tuesday, May 13, 2014

Customer executives are regularly challenged to prove the value of their initiatives. To demonstrate value, executives must speak the language of business so as to allow business leaders to make comparisons and tradeoffs. Executives are primarily interested in increasing revenue, decreasing costs, and mitigating risk. To effectively demonstrate value, customer executives need to show how their customer initiatives impact one or more of these key factors. In my previous post I described the historical retrospective approach whereby incremental per-customer or per–segment revenue gains are correlated with increasing loyalty and engagement. Expected change in customer value is another valuable means of demonstrating ROI.

Many companies use lifetime customer value to justify marketing and customer acquisition efforts. Similarly, positive changes in lifetime value are a result of increased preference, decreased price sensitivity, increased consumption, and greater advocacy. Conversely, lifetime value plummets in response to negative experiences as consumption drops and referrals cease.

A number of years ago, JetBlue analyzed NPS results correlated with passenger behavior and found that each detractor converted to promoter is worth $40 additional profit and each 1-point overall NPS gain yields a $5-8M increase in annual revenue. Highly satisfied customers increase their use of ancillary services such as seat upgrades, box food purchases, etc. Converting a detractor to a promoter yields an additional $100-140 per customer annually, or the equivalent of another flight traveled each year plus ancillary service purchases. Conversely, negative word of mouth costs the company $104 per detractor per year in missed revenue: $72 in lost referrals and $32 in unpurchased ancillary services. 

Put another way, every 25 customers actively promoting JetBlue to friends, family, associates, and on social media equates to one new customer flying JetBlue, whereas only 16 detractors would dissuade an existing customer from flying.  By the same math, it might take 36,000 promoters to increase revenue by $1M, but only 14,000 detractors to realize a revenue loss of $1M.  Every customer value quantification effort must begin with a tangible understanding for each key segment of the length of average customer relationships, costs of new customer acquisition, average customer value, and retention rates. 

Enrich these data by examining how your most loyal and engaged customers within critical segments behave differently than your least engaged. Examine factors such as overall profitability, repeat purchase frequency and volume, longevity, share of wallet, breadth of product portfolio purchased (i.e. the ancillary services mentioned above), the number and value of new customers acquired through references and referrals provided each year. For many companies the annual value of these computations are significant and become even more so when extrapolated over the average lifetime of a customer. 

Similarly, the cost of dissatisfied customers can be computed to measure the cost of status quo.  What is the cost of each call into the call center? How many callbacks are required to address the same issue as a result of an inappropriate focus on average call handle time? What are the most common customer dissatisfiers and what does it cost to address them?  How many credits are being offered to correct billing mistakes?

Armed with tangible proof of the ROI of investments in customer centricity, customer executives can have meaningful conversations with top leadership, enabling them to compare such investments against other priorities and make the best decisions for the company. Without these measures, “doing the right thing” will only happen in the best of times and most certainly not in the worst of times when it is most needed.

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Categories: Chief Customer Officer | Consumer Spending | Customer Centricity | Customer Engagement | Customer Loyalty | Customer Retention