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Differentiating on customer experience: New operational models needed

6th Jun 2013
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At a time when many organisations are moving to differentiate themselves on customer experience, those that create new operating models will be most successful.

That’s according to Forrester analyst Paul Hagen who explains in a new blog post that most companies were built on now-outdated models, when the primary vehicle for value was tied up in the product/service itself.

“Within these operating models, firms have worked to optimize processes like marketing, sales and distribution focused on getting to the transaction. Support has been a cost center, so limited as much as possible,” he says.

However, Hagen explains that this kind of operating model has critical problems, including:

Product lines obstruct customer needs that cross the company: Companies organized by product lines force customers to navigate different marketing messages, sales teams, billing systems, web sites and support organizations to get what they need, while internal staff waste effort and fail to create synergies that could deliver a bigger value proposition.

Channel strategies don’t account for information transparency:  Like product lines, firms regularly treat channels as separate P&Ls. This artifact results in disjointed pricing, confusing return policies, botched hand-offs, and assorted other mishaps that undermine the customer experience.

Marketing drowns in the roar of the more trustworthy crowd: To be heard, firms spend increasing energy on activity such as direct mail that customers don’t care about.

Pricing focuses on internal objectives, not customer reality: Gimmicks such as airline mileage programs, time-based subscription requirements and bait-and-switch first year introductory pricing offers trap customers rather than creating good will and a value proposition that leads to true loyalty.

Support contradicts engagement: Firms regularly consider customer service organizations as a cost center, throwing up barriers to customers who actually want to engage with the company about issues important to them. Meanwhile, on the marketing side of the house, staff struggle to engage customers around things they care much less about, namely looking at product pitches. Again, the operational structure not only fails to deliver value to customers when needed, it wastes resources on activities that customers largely ignore.

“Companies that will succeed in differentiating based on customer experience in the future will have to move beyond simply finding-and-fixing problems within their existing structure, and instead create a new operating mode,” he says.

To do this, Hagan advises customer experience leaders that they should partner with company strategists and business architects to:

Use customer outcomes as a guide, rather than products and transactions: Forget about existing product/service silos, functions, and capabilities for a moment. Use tools like customer journey mapping, ethnographic research that uncovers customer jobs or goals, or Business Model Foundry’s Value Proposition Canvas to ground the conversation in customer needs. Then begin to design ecosystems of capabilities, including products, services, processes, interactions, communications and technologies (including those from partners) that help customers achieve goals.

Build a new model based on capabilities to deliver customer outcomes: Use customer journeys or outcomes to rethink roles, responsibilities, and P&Ls that make more sense and account for the emergent capabilities. Be prepared to elevate new capabilities like design, content strategy, customer engagement, data strategy and visualization, and application development over existing roles as they help deliver outcomes that matter to customers.

Use customer perceptions as arbiter of success: Rather than internal perceptions of value (e.g. feature checklists), operational effectiveness (e.g. on-time delivery) or measures of success (e.g. wallet share), turn attention to customer perceptions of these things. Do customers perceive that they’re getting good value from the company? Do customers think you’re easy to do business with? Do customers trust/enjoy/love to do business with your firm (e.g. do customers feel an emotional component beyond the interactions/transactions)?

"Treat these perceptions as signals that tell you that you’re company is on track – and identify adjustments or changes in expectations," he says. 

Read Hagen's full blog post for brand examples and further insight on how businesses can change their operational architecture. 

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