Forrester Research's Harley Manning explains the most basic errors that organisations make when it comes to customer experience – and how they can be addressed.
While the idea that the customer experience is critical to financial performance is intuitive, hard facts and figures have tended to be thin on the ground. As such, some businesses have been happy to merely pay lip service to customer experience management.
But those brands may have to think again, as a new book- “Outside In: The Power of Putting Your Customers at the Center of Your Business” – provides strong evidence of the impact of customer service in dollars and cents terms.
In the book, Harley Manning, VP research director at Forrester Research, and his co-author Kerry Bodine, compare total returns from a portfolio of customer experience leaders identified from their Customer Experience Index study versus a portfolio of customer experience laggards over a five year period to demonstrate stunning findings.
“During the period 2007-2011 the S&P 500 was down a couple of percentage points, so if you hid your money in the S&P index you would have lost out. Meanwhile, the customer experience laggards portfolio returned negative 46.3%. However, the portfolio of customer experience leaders during that same period returned a 22.5%. And these numbers bear out,” says Manning.
Furthermore, other evidence in the book demonstrates the strong statistical correlations between customer experience factors and loyalty factors. Manning continues: “It makes intuitive sense that there is a connection, but now we have proof – we can show you Pearson correlations in the .6 to .7 range, so that somewhere between 30 and 40% of the reason why you’re going to get another sale or not, or get a recommendation, comes from underlying elements of customer experience.”
Manning says that the conclusion is simple: it is unlikely that anything else you do as a company has more of an impact on getting new business.
But this is far from good news for many businesses, because while the authors can demonstrate a connection between financial performance and customer experience, the book also concludes that customer experience is one of the most misunderstood elements of corporate strategy.
Harley Manning spoke with MyCustomer.com to explain three of the most fundamental errors that organisations make when it comes to customer experience – and how they can be addressed.
1. Businesses don’t define ‘customer experience’
“If I said to you ‘we need to improve the customer experience here’, what would you do?” says Manning. “We’ve done a lot of research into this, and for instance there was this one chain of retail stores here, and they decided to improve the customer experience, to make people want to come into their stores. And then when they looked at what the store managers had done in response to this, because the direction was very vague, some of them had focused on training their staff to greet customers, and one had decided to bring in fresh baked cookies every day! Now which of those is correct? If either?”
The problem is compounded by the fact that many executives think of something “very squishy and soft and vague” when they talk about customer experience, says Manning.
“People use the phrase ‘customer experience’ and they don’t stop to define it,” explains Manning. “They tend to just simply think ‘the customer is always right’ or ‘I have to be good to my customers’ and that falls far short of actionable insight. Just like any other business discipline, people need to be able to define what they mean when they say ‘customer experience’. And they don’t!”
In ‘Outside In’, Manning and Bodine build on academic research to carve out a definition that they believe businesses can build a model. According to the findings, there is strong statistical validity that a “good customer experience” is one that: meets customer needs, is easy (i.e. there are very few barriers to getting those needs met) and is enjoyable (i.e. is emotionally engaging). This model is appropriate to both B2C and B2B brands.
2. Businesses do not treat the customer experience as a business discipline
Many brands are happy to pay lip service to the customer experience, but often this is as far as it goes.
“If you take a look at companies’ mission statements, most of them include some statement of intent related to customers, whether it is ‘we exist for the benefit of our customers’ or ‘we intend to further our customers financial future’ or ‘we intend to bring humanity back to air travel’,” says Manning. “Many of these companies have statements relative to customer experience, what they don’t then do is take it to the next level. And it is mostly a case of not understanding what they should be doing and especially not being able to make the business case for it, so therefore it doesn’t seem worth doing even if they do have some vague idea of what they should be doing!”
As part of the research for his book, Manning researched a large number of businesses to discover a substantial part of what it means to practice customer experience as a business discipline – and it was found that those that succeeded were enjoying anywhere from good to unbelievable results from doing that.
“Practicing customer experience as a business discipline essentially means defining it, breaking it down into its component parts so that you can understand what drives a good experience and then measuring the results of your efforts so you can be able to quantify the business value of a good experience,” he explains. “When you do these things, it is suddenly not mysterious anymore – it seems like something you should have been doing all the time.
“I get asked ‘isn’t this just common sense’? It is a fair question because it should be common sense. To a certain extent any small shop owner understands customer experience - they may not have a clear mental model of it but they get that they have to treat their customer well and carry products that their customers want to buy or they will go out of business. But in big businesses it is clearly not common sense, as evidenced by the horrible customer experiences we have on a regular basis.”
3. Businesses assume customer experience is a frontline issue
Businesses often treat customer experience as a “superficial” thing and tend to associate it strictly with the frontline employees like the salesperson or contact centre agent. However, this is not the case. Manning explains: “What we found in our research is that customer experience excellence and customer experience problems occur as often as that because of things that are happening deep within your organisation - not in the front office but in the back office.”
One example of this is the case study of US cable company Charter Communications, as detailed in ‘Outside In’.
The cable firm’s senior VP of customer experience, John Birrer, was faced with a problem where his small business customers were buying router software for one of their products, but when the technicians would arrive they were unable to install the software, leaving the customers unhappy.
“John started diagraming the customer journey from the time they became aware of the product, the time they bought it and then he started looking at who sold it to them, what did they sell, and he dug back through the organisation,” continues Manning. “What he found was that the sales people were getting their commission based on a sale not on a successful installation. So as a result they weren’t motivated to find out what the technical requirements were. Therefore, when the service technician showed up they had no clue what they were walking into.
“Meanwhile, the service technicians could have actually solved the problem by touching the customer’s hardware but there was a policy that prohibited them from doing that, a policy created by Charter lawyers to protect the company from liability. But what it really did was protect customers from getting the product!”
Birrer solved the issue by changing the sales compensation policy so that salespeople didn’t get their commission unless the product was installed, and training the sales people about how they check the information in the first place regarding the technical requirements. This required going to the human resources department and going to the finance department to change the compensation policy.
They also changed the policy that prohibited the technicians from touching the routers, something that required going to the legal department and explaining to them how their actions had impacted the customer.
This example, says Manning, perfectly illustrates how customer experience is an issue from front office all the way to back office. “Unless you look at your processes, your policies, your finance department, your legal department, your human resources department, down to bare bones like your hiring practices, you will not find the root causes of your customer experience problems, and you will not find out what you need to do to create long lasting change,” says Manning. “And so that is why we say you should start with the customer journey and then diagram it back using simple root cause analysis – why does this happen, why does this happen, why does this happen - until finally you get to the root causes.”