Associate Partner Optima Partners
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How to tailor your CX priorities to fit your firm's strategic focus

Strategic focus varies from business to business, and CX priorities should therefore differ according to business strategy. Here's how to identify what your CX priorities should be. 

13th Aug 2020
Associate Partner Optima Partners
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My previous article outlined how a one-size-fits-all approach to customer experience (CX) reduces differentiation. This article describes how CX priorities vary as the strategic focus changes, again using Treacy and Wiersema’s three value drivers – operational excellence, product leadership and customer intimacy.

CX priorities if strategic focus is operational excellence

The objective of CX design is to compound the inherent benefits in a strategic approach while limiting damage caused by its weaknesses.

Operational excellence delivers high levels of efficiency and high service quality enabling low prices augmented by speed and reliability – Amazon being a great example. But the risk from a customer experience perspective is that non-standard situations are handled poorly.

If the focus is on operational excellence, there are four primary CX priorities.

1. Deliver productivity gains

Driving productivity gains ensures prices remain competitive and service standards high. Doing so requires continuous improvement, with data enabling high quality decision-making (important for increasing effectiveness and optimising returns) and process automation (key for driving efficiency).   

2. Keep it simple

Complexity makes operational excellence harder to achieve. Hence keeping the service simple – limiting add-ons which increase both costs and the scope for problems – reinforces the proposition of delivering the core service at a low price.

Price-based disruptors focus on eliminating elements that others offer as standard - IKEA outsourcing the job of assembling furniture to its customers being a great example. The natural desire of CX professionals is to increase the number of customers’ jobs-to-be-done being served. But the opposite approach is likely to be more profitable when the strategic focus is on operational excellence, as is being a service innovation follower rather than leader.  

3. Manage expectations carefully

Most importantly, if you are going to provide less than others, managing customers’ expectations is critical. Our happiness with a service depends on its level relative to our expectations - not its absolute level. Communicating what is excluded and linking exclusions to the primary benefit (low price) so that customers still decide to buy but their expectations are managed is one that the ultra-low cost carriers like Ryanair have mastered.   

Conversely delighting customers – as advocated by many CX advisers – risks raising expectations to unsustainable levels. Imagine a scenario where on your first meeting with your bank manager you are offered champagne but the next time only coffee – delight will be followed by disappointment.

If for operational or other reasons you over-deliver in a particular instance, the one-off nature of the experience needs to be highlighted. (On a recent easyJet flight, I was upgraded to a seat with more legroom because two people are needed in emergency exit rows but at the end of the flight I was politely told not to expect such largesse in the future.)

4. Incorporate flexibility to handle Moments of Truth 

Moments of truth arise when a customer has a lot of emotion invested in the outcome of an interaction. Many of these happen when either the company (or the customer) has messed up to the detriment of the customer.  A highly standardised system does not typically handle such situations well (computer says no). But the benefits of recognising and escalating any such issues to a team with the remit to go beyond the procedures manual to achieve resolution merits the additional cost.

Mishandling moments of truth may result in social media-driven reputational damage while dealing with them empathetically can turn a complainant into an advocate. And given the exceptional nature of such events – by definition they are unusual – exceeding normal practices doesn’t create a risk of raising expectations to levels which can’t be sustainably met.

CX priorities if strategic focus is product leadership

Companies following product leadership strategies include the likes of Apple, Nike and BMW.

Product leadership stems from a combination of performance and aesthetics. By satisfying emotional as well as functional needs, product leaders are able to achieve premium pricing. As a result their share of the profit pool is higher than their market share – for example Apple has a 32% market share in smartphones but captures a 66% share of profits made on smartphone sales.

But with products often being sold through retail intermediaries, product providers have limited control over the end customer’s buying experience, at best influencing it through merchandising. The experience for the intermediary customer also needs to be considered with the key drivers being financial – saving time, saving cost, reducing capital requirements, reducing risk and increasing sales.

These inherent strengths and weaknesses create a different set of priorities.

1. Map all customer journeys, including usage ones

From the customer’s perspective, all interactions constitute the experience they have, whether they be with the product or with the company. Product design needs to be considered as much part of the customer experience as service design. But product interactions – particular with regard to physical products – are often regarded as being outside the scope of journey mapping.

Redressing this requires the integration of organisational silos if physical products are owned by the design and engineering team, digital services by the service design team and customer interactions by the customer support team.

Product design teams have their own tried and tested processes and won’t take kindly to CX professionals telling them what to do. But seeking to understand those processes and bringing product designers into digital service and interaction journey mapping workshops will help forge an integrated process that delivers a more consistent brand promise.

2. Expand the range of customer jobs being served

Journey mapping starts with the customer’s desired outcome and details all the jobs-to-be-done that must be completed for them to achieve that outcome. Whereas those focusing on operational excellence should limit the customer jobs they serve, product leaders should look to increase them.

Customer jobs come into two main categories – information-related and service-related. The latter are well understood but many of the least well served jobs relate to the former – when the customer needs information to make a decision. Satisfying these needs can significantly improve the experience. In the early stages of the buying process, product leaders can help customers formulate and specify their needs. For example, Pilkington has developed a set of tools and calculators to help building contractors specify and price their exact glass requirements, with Armitage Shanks doing the same for bathroom appliances. In both cases these tools deliver an additional benefit of collecting data for the company to use to better understand its customers’ requirements.

The Internet of Things (IoT) also provides significant scope for improving the customer experience. In addition to selling farmers seeds, Monsanto has created a service which uses weather, crop and soil data to help farmers know the optimal times for planting, watering and harvesting crops – massively expanding the jobs they are supporting.

In the early stages of the buying process, product leaders can help customers formulate and specify their needs. For example, Pilkington has developed a set of tools and calculators to help building contractors specify and price their exact glass requirements.

Similarly, Philips CareSage enables clinicians to monitor patients remotely via wearables so they can intervene before an adverse event arises. And insurance companies are incorporating smart devices (e.g. flood sensors) in homes and cars (behaviour monitoring) to help customers reduce their risk of loss and hence their premiums.

IoT Sensors also help with product maintenance in the later stages of the lifecycle. Using sensor data, vehicle manufacturers are able to warn car owners about an impending fault so the part can be replaced before the car breaks down. This significantly improves the experience as downtime can be very costly or inconvenient.

3. Servitise product offering

Turning products into services, known as servitisation, reduces the up-front financial outlay and risk customers face when making a purchase. The most famous example of servitisation is Rolls Royce’s Power by the Hour - rather than buy jet engines outright, airlines rent them and only pay for the time they are being used. As Rolls Royce bears the risk of downtime (due to penalties in contract), predictive maintenance is again critical to ensuring the service is profitable.

Other examples of servitisation include payment-per-copy printing services provided by companies like Xerox. In B2C markets, the biggest examples are Netflix and Spotify for film and music streaming. But pay-as-you-go insurance services from companies such as Cuvva are also becoming increasingly popular.   

4. Enable product customisation

Designing modular products, allowing consumers to customise a product to their specific taste, is another means of improving the experience. Vehicle manufacturers such as BMW provide buyers with multiple different options – everything from colour and engine type, through transmission and wheel style to the design of the interior and inclusion or not of accessories such as parking assist. Similarly, HP and Lenovo enable buyers to customise laptops before they order, Nike by You offers customisation of trainers and the vast majority of storage furniture providers (e.g. Neville Johnson) allow customers to create solutions that are tailored to their specific needs.

The challenge with all these services is to provide flexibility without providing so much choice that a decision is too hard to make. Also preferences vary by country - whereas vehicle customisation is standard in Europe, in the US vehicle manufacturers tend to offer a range of specific packages rather than customisation options to reduce cognitive load as that has proved most effective.

5. Create a direct-to-consumer model

When sold through retailers, control of the buying experience is limited. Consequently a number of product leaders such as Apple and Nike have created direct-to-consumer (D2C) models.

There are a number of benefits to D2C. Firstly cutting out the retailer enables lower prices to be charged. This is behind the success of dedicated D2C start-ups such as Warby Parker (eyewear), Caspar (mattresses) and Harry’s (shaving accessories). Secondly it provides more control over the buying experience. Thirdly it enables the business to build a stronger relationship with customers.

The ability to build a stronger relationship stems from direct access to customer data – notably what the customer has purchased, what they have looked at, etc. – all of which is not available when sales are via an intermediary.  

CX priorities if strategic focus is customer intimacy

Customer intimacy enables businesses to deliver a service that is proactive and personalised. Examples of personalised services range from consultancy in B2B sectors to medical care, bespoke tailoring and concierge services for consumers.

Proactivity requires a lot of insight into customers. In B2B markets this can be achieved with relatively low tech means when there is a relatively small number of customers. In mass B2C markets, a much higher tech approach is required so proactivity is generally the preserve of industries with lots of data – digital search and social media services, banking, mobile telephony and home entertainment, for example.

The risk is that the desire for intimacy is often one-sided – companies desire more intimacy with customers than vice versa. And unwanted intimacy is known is otherwise known as stalking.

1. Create services that generate customer data

Executing a strategy of customer intimacy effectively may require more customer data than you currently have, in which case the starting point is to generate more. Data generation occurs automatically with digital interaction and the incorporation of smart services into an offering achieves the same effect.

Zoopla is a digital service which helps people decide where they want to live and provides a tool for identifying areas within a given travel time of a specific location. It also provides tools to help homeowners value their property, the benefit to Zoopla being the valuable insights into their intentions these tools reveal.

Executing a strategy of customer intimacy effectively may require more customer data than you currently have, in which case the starting point is to generate more.

Similarly, Credit Karma has created a range of calculators to help consumers better manage their finances. These calculators capture information on outstanding loans, income and expenditures that would otherwise be the preserve of each individual’s bank or credit card company. Data collected in this way can then be used to provide a more proactive and customised service than would otherwise be possible.

A great example of using smart devices to achieve the same effect is Disney’s MagicBand. MagicBand gives visitors access to parks and hotel rooms, provides FastPass access at specific times, facilitates in-park purchases and enables Disney characters to have personalised interactions with children. In return, Disney automatically integrates location data, character interactions, ride choices and purchase histories providing valuable insights that enable capacity management to be optimised with customers discouraged from visiting competitor parks.   

2. Personalise digital services and interactions

Generating data on customers supports effective personalisation. Effective personalisation helps consumers achieve their specific job-to-be-done – whether that be information related, such as suggesting further articles or videos based on the one just viewed (something which YouTube does very well – potentially too well) or it could be service related – suggesting complementary products to an item that has just been purchased.

UK retailer The Very Group, has long aspired to deliver the world’s most personalised shopping experience, including personalised gallery pages (e.g. when searching for jeans, provide a listing that is tailored to the customer’s past brand, price and style choices), even extending to delivering a personalised home page for each customer.

But effective personalisation is hard. When it is too accurate, it can be creepy. The sense that companies have a deep understanding of us is highly disconcerting. And when it is inaccurate or clearly designed with the company’s rather than customer’s interest in mind, it irritates rather than pleases.

Supermarkets can do a good job as our weekly shop reveals a lot about us. But elsewhere the depth of understanding required for personalisation is more limited. For a fashion retailer it is even harder as they may only be privy to less than 20% of my clothes purchases, so won’t accurately know what I have already purchased. To counter this problem, services such as Dressipi are emerging to help consumers share purchase data across retailers to improve the quality of recommendations they receive. 

3. Use insights to protect customers

A third area where customer intimacy can improve the customer experience – and in the process build trust – is using the understanding that intimacy yields to protect people from damaging service usage.

The potential for the service to be harmful is obvious in industries such as tobacco, alcohol and gambling. Responsible companies in these sectors have to balance duty to shareholders with a duty of care to their customers. The casino operator Caesars Entertainment uses its loyalty system to track customer activity. And if a customer loses too much money too fast, Caesars sends the customer a message offering a $20 coupon for the buffet to be used in next hour – a diversion to help them break a downward spiral.

In a slightly different context, Facebook has created an algorithm that tracks peoples’ posts and assesses the likelihood of imminent self-harm, with those at high risk flagged to local authorities for more detailed assessment. And to help people improve their health, the insurance company Vitality undertakes a health risk assessment of new customers, creates an individualised action plan to help them make healthier choices, monitors progress using wearables and other data and rewards progress with points that can be redeemed against a variety of benefit.

All of these are examples of using a data-driven understanding of the customer to help them make better choices. When this is clearly in the interests of both sides, as is the case with Vitality, it is a commercially sensible thing to do. And when it is not in the company’s interest, as is the case with Caesars, the effect is to build trust that the company will not take advantage of customers when they are vulnerable.

Summary

The purpose of this has been to highlight how the dimensions on which you choose to focus should change with the strategy that your business is following. But if there is one thing that is common to designing a compelling customer experience for all three of the different types of strategy it is the critical importance of data – not just to help businesses make better decisions but so that they can help their customers do so as well.

Over the next five years, the creation of data services and tools that augment the customer’s experience will be a critical source of differentiation. Understanding how data and analytics creates value will be a key skill for creating superior value propositions.

The next article will continue with this theme by focusing on the data and insights needed to craft a compelling CX strategy. A quick heads up – it’s a lot more than Voice of the Customer research!

 

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