Experience-Based Differentiation « Customer Experience Matters

What The Heck Is Customer Experience? August 6, 2008

Posted by Bruce Temkin in Customer experience, Experience-Based Differentiation, Voice of the customer.
4 comments

One of the key problems with customer experience is that it’s not an “official” discipline like engineering and accounting. So it lacks a lot of rigor around processes and definitions. That’s why I still get a lot of people asking me questions like: “what exactly is customer experience?“

So, here’s my definition of customer experience:

The perception that customers have of their interactions with an organization

I’ve previously posted a definition for the perfect customer experience:

A set of interactions that consistently exceeds the needs and expectations of a customer

And I’d define customer experience management (CEM) as:

The discipline of increasing loyalty by exceeding customers’ needs and expectations

There are three key elements to the CEM definition:

Discipline. CEM is not about creating slogans like “this is the year of the customer.” It needs to be a set of ongoing activities like a well-established voice of the customer program.
Increasing loyalty. CEM is not about an altruistic belief that customers should be treated better. It needs to be linked to more profitable (or strategically improved) long-term behaviors of customers.
Customers’ needs and expectations. CEM is not about technology deployments or internal milestones. It needs to be calibrated from the perspective of target customers.

Now that we have some common definitions, it’s time to concentrate on the hard stuff: improving customer experience. And if you’ve been reading my blog, then you know what my recommendation is for that: Chart a path towards Experience-Based Differentiation (the blueprint for customer experience excellence) that conforms with the six laws of customer experience.

The bottom line: CEM is easier to define than to do.

Best Buy’s Growth Plans Neglect Customers July 24, 2008

Posted by Bruce Temkin in Customer experience, EBD #1: Obsess About Customer Needs, Experience-Based Differentiation.
Tags: Best Buy
3 comments

Mike Vitelli, executive VP of the Best Buy’s customer operating group, outlined this five point plan for the retailer’s growth:

Continue to benefit from the CE industry’s steady growth of 6 percent over time.
Open new stores and develop categories where it presently has limited share. These include Apple computers, a relatively recent brand addition; major appliances, which are benefiting from a differentiated assortment and a dedicated sales force with increased training; and mobile phones, which have been reinvigorated by a new business model developed with Carphone Warehouse.
Introduce new categories, such as musical instruments. While all Best Buy stores carry a smattering of keyboards and guitars, the company is experimenting with extensive, “top-shelf” collections in several locations around the country.
Develop completely new business models, such as the planned national rollout of Pacific Sales, the company’s West Coast chain of premium appliance stores.
International growth. Best Buy has already established itself in Canada, China and Europe, and soon plans to open its first stores in Mexico and Turkey.

My take: None of these 5 points focus on customer experience. So I am very concerned about a degradation of Best Buy’s customer experience.

Later in the article it says: “Separately, Vitelli said the company is working hard to engender more personalized service on the store level in order to combine the scale benefits of a national chain with the hands-on attention of an independent dealer.” But if Best Buy does not see customer experience as one of the core components of its growth, then it will under-invest in this critical area. As it says in the 6th law of customer experience: You Can’t Fake It.

In Forrester’s Customer Experience Index, 2007, Best Buy was ranked #34 out of 112 firms — and 23rd out of 27 retailers on the list. So the retailer needs to adopt the 1st principle of Experience-Based Differentiation: Obsess About Customer Needs, Not Product Features.

I’d like to see Best Buy invest in several areas as a core part of its growth strategy: (1) Product training for employees (similar to The Container Store’s commitment to training); (2) Voice Of Employee systems (to capture and attack problems and issues at the front line); (3) Product selection tools (to help customers make product decisions in major categories); and (4) Improved Web-Store cross channel experiences.

The bottom line: Customer experience needs to be a core objective.

Forrester’s Finance Forum; Customer Experience Remains Critical June 23, 2008

Posted by Bruce Temkin in Customer experience, Experience-Based Differentiation, Financial services.
Tags: Forrester Research Finance Forum
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Today was the first day of Forrester’s Finance Forum 2008 (titled “How To Deliver Great Customer Experiences”) which is focused on Experience-Based Differentiation (EBD). After giving the keynote speech at this event for the past several years, I decided to take this year off (even though the topic is EBD). While my crazy schedule is keeping me from attending the event, I’m sure that Bill Doyle and Harley Manning will be awesome hosts and it will be a dynamite event, as always!

Since I’m not attending this year’s Finance Forum, I decided to take a look back at my speeches from the previous 2 years. I believe that the content is still extremely relevant…

Forrester’s 2007 Finance Forum

In last year’s Finance Forum 2007, my speech was called “Turning Customer Experience Into A Competitive Weapon.” The theme of that speech was “Customer experience is a production’” Just like with the movies, creating successful experience takes a lot of dedication from and coordination between the people on stage (front line employees) and those behind the scenes (everyone else).

The largest portion of the speech was dedicated to the three principles of Experience-Based Differentiation:

I also highlighted data from a survey that we did with the American Banker which led to a piece of research called Banks Prepare For Customer Experience Wars. The survey showed that bank executives believe that customer experience is very important, but they don’t think they’re doing a particularly good job delivering it.

(more…)

Customer Experience Is The New Quality June 20, 2008

Posted by Bruce Temkin in Customer experience, Customer-centric DNA, EBD #3: Treat Customer Experience As A Competence.
Tags: Quality
3 comments

As I discussed in “My Manifesto: Customer Experience Is Free,” today’s push for customer experience is very similar to the quality push in the 1980s. The similarities include:

Nobody “owns” it
It requires culture change
It requires process change
It requires discipline
Upstream issues cause downstream problems
Employees are a key asset in the battle
Executive involvement is essential

Interestingly, several people who I interviewed for my current research on customer-centric DNA mentioned quality techniques (e.g., Six Sigma, Lean Sigma, TQM) in our discussions. I even interviewed someone who had the very cool title of “EVP, Customer Experience and Kaizen.” (For those of you who aren’t familiar with Kaizen, it’s a Japanese word for continuous improvement. This quality concept was popularized in the 1986 book called Kaizen: The Key to Japan’s Competitive Success).

It’s no surprise that this is coming up in my research on culture given what Philip Crosby, the author of “Quality Is Free,” once said:

Quality is the result of a carefully constructed cultural environment. It has to be the fabric of the organization, not part of the fabric.

The bottom line: Make customer experience the fabric of your organization.

The CEO’s (Key) Role In Customer Experience June 18, 2008

Posted by Bruce Temkin in Customer experience, EBD #3: Treat Customer Experience As A Competence, Executive leadership.
Tags: Ken Thompson, Wachovia
1 comment so far

I recently discussed Ken Thompson’s impact on the customer experience at Wachovia. That post highlighted this excerpt from his “letter to shareholders” in Wachovia’s 2004 annual report as a blueprint for CEO’s who want to transform their company’s customer experience:

Our longtime shareholders will recall, however, that it was not that long ago - 1999 - when our customer service had slipped, and we learned a hard lesson in customer attrition. One of my first actions when I became CEO in mid-2000 was to tackle service quality. We increased staffing levels in our financial centers, call centers, and operations area. We revised our incentive compensation plans to emphasize not only sales performance, but service as well. We instituted a clear measurement system to track customer satisfaction through our Gallup surveys of 60,000 to 70,000 customers quarterly. And I chair the monthly meeting of senior managers that ensures we quickly address any operational or system issues that create obstacles to providing good customer service.

The power of these words may have been dampened by the length of the excerpt, so I dissected it into components that are critical for CEOs…

“Our longtime shareholders will recall, however, that it was not that long ago - 1999 - when our customer service had slipped, and we learned a hard lesson in customer attrition. One of my first actions when I became CEO in mid-2000 was to tackle service quality.”

=>Insight for CEOs: The focus on customer experience (or, as it is called here, service quality) must come from the CEO’s clear belief that it impacts business results (in this case, retention). It is a core business imperative, not a “nice to have” initiative.

“We increased staffing levels in our financial centers, call centers, and operations area.”

=>Insight for CEOs: Since customer experience provides real financial benefits, it’s worthy of investment. And the CEO’s willingness to invest in these areas is a clear signal to the organization that customer experience excellence is critical; not just an empty slogan.

“We revised our incentive compensation plans to emphasize not only sales performance, but service as well.”

=>Insight for CEOs: People focus on what’s measured, incented, and celebrated. To embed customer experience within the core operating fabric of a company, therefore, firms need to refine what it measures, incents, and celebrates. So make sure that your HR exec is involved in the customer experience effort.

“We instituted a clear measurement system to track customer satisfaction through our Gallup surveys of 60,000 to 70,000 customers quarterly.”

=>Insight for CEOs: Any customer experience transformation needs to be driven by the voice of the customer; so CEOs should look for a customer experience dashboard with a handful of customer metrics (like satisfaction or Net Promoter). And hold your entire executive team accountable for improving those metrics; don’t offload the responsibility to a chief customer officer.

“And I chair the monthly meeting of senior managers that ensures we quickly address any operational or system issues that create obstacles to providing good customer service.”

=>Insight for CEOs: This effort requires the active involvement and commitment by the CEO. Why? Because transformation efforts can easily get bogged down in politics and silos. So reviewing progress of the firm’s customer experience efforts needs to become a regular part of the executive agenda.

The bottom line: Customer experience success requires CEO nurturing.

A Look Back At My First Year Of Blogging June 13, 2008

Posted by Bruce Temkin in Customer experience, Executive leadership, Experience-Based Differentiation.
Tags: Alan Mulally, American Express, Barnes & Nobles, Bob Iger, Borders, Cablevision, Charter Communications, Circuit City, Costco, Ford, Indra Nooyi, Jason Varitek, JetBlue, John Hancock, JP Morgan Chase, Ken Thompson, Kenneth Chenault, Mackey McDonald, Mark Hurd, Medicaid, Tony Hsieh, VF Corp, Wachovia, Zappos
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1st Year Aniversary For Customer Experience Matters

Today is a big day. It’s exactly one year after my first post “Lessons Learned From 1,001 Web Site Reviews.”

It’s hard for me to believe that I’ve been doing this for a whole year. Or as the song from Rent goes, for five hundred twenty five thousand six hundred minutes. But my measurement is not in daylight, sunsets, midnights, or cups of coffee. It’s in blog posts, 184 of them!

While blogging takes a ton of time (I’m constantly looking for interesting topics and drafting posts), it’s been a great experience. Why? Because of you! Readership continues to grow and this blog now has more than 10,000 visitors per month. So I want to say thank you to everyone who has been reading, linking to, writing about, and passing along my blog.

In honor of the 12 months of blogging, I’ve picked out 12 of my favorite posts (in no particular order):

Experience-Based Differentiation. This is the core idea which drives my research; it also won the best research award at Forrester. Experience-Based Differentiation, or EBD as I fondly call it, is based on three principles: Obsess about customer needs, reinforce the brand with every interaction, and treat customer experience as a competency. This remains a powerful blueprint for customer experience excellence. If you’re interested in customer experience (who isn’t?!?), then you may want to use the EBD self-test as a starting point. You can also find many other posts about EBD on this blog.
My Manifesto: Great Customer Experience Is Free. This post summarizes my perspective on customer experience; it’s a lot like the quality problems of the 1980s. While customer experience is not an easy situation to deal with, it can DEFINITELY be improved with a systematic effort; it just takes discipline (see EBD above). There was also a follow-on to this post called Great Customer Experience Is Free, Part II.
Don’t Let Profits Replace Purpose. Companies need to make profits, but here’s the dilemma: if they just focus on making profits, then they lose sight of what makes them special. Firms that lack a strong raison d’être have a hard time aligning the efforts of their employees. In a related post, I discussed how Firms Need Some Soul Searching.
The Holy Grail: A Link Between Customer Experience And Loyalty. I’ve been hoping to do this for a while: use data to provide the connection between customer experience and loyalty. And I finally did it. My analysis shows a high degree of correlation across the 9 industries that I examined, with the the strongest linkage for banks. That finding fits nicely with an earlier post which said that banks need to prepare for customer experience wars.
Trend Watch 2008 Wrap-Up. I really enjoyed writing a series of posts over the New Years break that examined trends published in The Economist, The McKinsey Quarterly, Advertising Age, Business Week, and Trendswatch.com. While I discussed 52 trends across all of the posts, this wrap-up looked at 14 that covered 4 areas: Consumer needs, online opportunities, required skills, and strategy & culture.
Learning From The Good Fortune Advice Of Others. Fortune Magazine published advice from 25 famous people, and I commented on 8 of them that I really liked. There was great advice from big names like HP’s CEO Mark Hurd, Disney’s CEO Bob Iger, and Ford’s CEO Alan Mulally. But my favorite person on the list is Indra Nooyi, Chairman and CEO of Pepsico (who I found out about in a Time Magazine article). Her advice: “Whatever anybody says or does, assume positive intent.”
Discussing Zappos’ Culture With Tony Hsieh. As a researcher, I get to interview a lot of people. But my discussion with Tony Hsieh, the CEO of Zappos was really memorable. It started a few minutes before our call when Tony twittered that he was waking up early (7:00 AM on Memorial Day) and needed a Red Bull before he spoke with me. Tony was great and I’ve become an even bigger fan of Zappos after the call. I also wrotr about another CEO that really understands customer experience, Wachovia’s Ken Thompson.
JetBlue’s “Happy Jetting” Is More Than Empty Promises. After a series of posts that looked at companies trying to change their customer experience through advertising efforts (JP Morgan Chase, Circuit City, and John Hancock) it was great to see that JetBlue was engaging its employees in its Happy Jetting efforts. I also wrote about how Ford is starting to view employees as potential brand ambassadors.
Forrester’s 2007 Customer Experience Rankings. We used responses from nearly 5,000 consumers to rate the customer experience of 112 US firms. Our customer experience index (CxPi) examined three areas:meeting customer needs, being easy to work with, and being enjoyable. The three organizations with the highest CxPi were Costco, Borders, and Barnes & Nobles. The bottom three: Charter Communications, Medicaid, and Cablevision.
Amex CEO Gains Insights From Napoleon. Kenneth Chenault, Amex CEO, used a quote from Napoleon that I really liked: “The role of the leader is to define reality and give hope.” This gave me an opportunity to discuss key leadership attributes: Deal with the reality of the world, engage your employees, provide a clear vision, and maintain a sense of purpose. While I’m discussing quotes, I really liked this one from Mackey McDonald, Chairman of VF Corp: “We realized we didn’t have to come up with brilliant ideas - we needed brilliant ways of executing good ideas.”
Mashup: Halloween + Red Sox + CxP. This was a unique opportunity for me to combine three of my favorite things: my family, Red Sox, and customer experience. We had a great interaction with Jason Varitek on Halloween that ended up with my kids getting his autograph. You can see where he signed my son’s World Series ticket in this post. In another mashup of my interests, I my posted about how The Colorado Rockies Embraces Its Guests.
The Best Of CxP Matters: Volume #1, Volume #2, and Volume #3. It’s amazing how quickly time (and many blog posts) just flies by. That’s why I’ve been writing ”The Best Of Customer Experience Matters” to summarize every 50 posts; they also give me a reason to reflect on what I’ve written. So I decided to bundle all three of these as one of my favorites.

In case you’re interested, here are the 10 posts that have been read the most:

The bottom line: If you’d like to celebrate this anniversary, send a link to this blog to five of your friends.

Will Thompson’s Departure Hurt Wachovia’s Customer Experience? June 12, 2008

Posted by Bruce Temkin in Customer experience, Customer-centric DNA, EBD #3: Treat Customer Experience As A Competence, Executive leadership, Financial services.
Tags: Ken Thompson, Wachovia
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Last week, Ken Thompson (Wachovia’s CEO) was asked to retire by the bank’s board of directors. What will that mean to the bank’s culture that has grown increasingly customer centric under his leadership? Here are a few factoids:

According to American Customer Satisfaction Index (ACSI), Wachovia has the highest customer satisfaction of any bank it tracks, and has led the way since 2001.
Forrester’s Customer Experience Index (CxPi) ranked Wachovia 4thout of 14 banks, only falling behind smaller banks: credit unions, BB&T Corp., and Citizens.
Of the 14 banks in the Forrester’s CxPi, Wachovia placed 2nd in phone satisfaction, 5th in store/branch satisfaction, and 4th in Web satisfaction.

To get a sense of Thompson’s imprint on the bank’s customer-centric culture, I examined his letter to shareholders in Wachovia’s last 7 annual reports. They show a clear and consistent focus on customer experience as a strategic mission. Here are excerpts from each of those annual reports:

2001: “The merger of First Union and Wachovia produced an improved market position, exciting growth potential and an operating strategy designed to generate enhanced shareholder value. We are focusing the resources of two fine companies on building a level of service, quality of product and degree of caring for customers that we believe will set Wachovia apart.”
2002: “Delivering the Promise In 2003, we intend to demonstrate Wachovia can grow organically as well as anybody in our industry. To do so, our goals are to deliver: Best-in-class sales and service excellence; Best-in-class risk management and financial disclosure; and Top quartile earnings growth.”
2003: “In every meeting of the merger integration team, the first comment when considering integration activity was “how will this affect our customers?”… We believe that having fully engaged employees who find real meaning in their work is crucial to our success. It is crucial to attracting and retaining the most talented people; it is crucial to providing consistently superior customer service; and ultimately it is crucial to enhancing shareholder value over the long term.”
2004: “Our revenue and earnings performance in 2004 is no accident, but the result of several years of hard work during which all of our employees, from the top levels to the front line, focused their full attention on providing the best possible service experience for our customers.”
2005: “With all of these advantages, we have no intention of taking our eyes off the ball. We’ll continue to focus on being the best at providing excellent service to our customers, at being the employer of choice, and in making a real and lasting contribution to the communities we serve.”
2006: “Wachovia’s success in leading the industry in customer service for the last six years has attracted attention, and competitors are trying very hard to replicate our success… So in response we remain obsessive about our attention to service… While we earn high marks for the quality and breadth of our product offerings, we are challenging ourselves to be better at seamless coordination between delivery channels, alignment of incentive plans, and ensuring that competing priorities do not hurt our results.”
2007: “While most of 2008 will likely continue to be a tough financial environment, we are focused foremost on two things: 1) Vigilantly and conservatively managing risk, and 2) Continuing to take good care of our customers. We believe that the actions we took in 2007 have already taken a lot of risk out of our company, and when the external environment once again improves, we’ll benefit from our steadfast focus on our core businesses and on our customers.”

Other execs can learn a lot from Thompson. He understands a key formula in retail banking: employee engagement leads to good customer experience which leads to higher loyalty which leads to growth. This excerpt from the 2004 annual report represents a blueprint for all CEOs who want to transform their firm’s customer experience:

Our longtime shareholders will recall, however, that it was not that long ago - 1999 - when our customer service had slipped, and we learned a hard lesson in customer attrition. One of my first actions when I became CEO in mid-2000 was to tackle service quality. We increased staffing levels in our financial centers, call centers, and operations area. We revised our incentive compensation plans to emphasize not only sales performance, but service as well. We instituted a clear measurement system to track customer satisfaction through our Gallup surveys of 60,000 to 70,000 customers quarterly. And I chair the monthly meeting of senior managers that ensures we quickly address any operational or system issues that create obstacles to providing good customer service.

The bottom line: Great customer experience takes Thompson-like leadership.

Authenticity Is (Unfortunately) A Novel Idea June 3, 2008

Posted by Bruce Temkin in Customer experience, Experience-Based Differentiation.
Tags: Sohrab Vossoughi, Ziba Design
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I don’t think that anyone would promote being fake as a good strategy. Yet, many firms end up trying to convince customers that they’re something that they just aren’t (see JetBlue’s “Happy Jetting” Is More Than Empty Promises). So I really enjoyed an article in Business Week by Sohrab Vossoughi (Founder of Ziba Design) called How to Stand Out? Try Authenticity.

Vossoughi hit the nail on the head with this statement:

A single, beautifully designed product is nothing more than a beautiful object without the focused intent of a company that has taken the time to understand three things: the deep-seated desires of its customers, its own DNA, and the sweet spot where the two overlap.

The article looks at the unique culture of Umpqua Bank (who I recently interviewed for my research on customer-centric DNA), the transparency in Starbucks’ comeback attempt, and the consumer relationships forged by Anthropologie.

My take: The article is completely aligned with my concept of Experience-Based Differentiation, so my only real comment is: read it.

The bottom line: You can’t fake customers into believeing that you’re authentic.

Great Scene: Al Pacino On Cultural Change May 30, 2008

Posted by Bruce Temkin in Customer experience, Customer-centric DNA, EBD #3: Treat Customer Experience As A Competence.
Tags: Al Pacino
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My discussion with Tony Hsieh about the Zappos culture made me think about a scene from “Any Given Sunday” where Al Pacino addresses the football team that he’s coaching. Pacino’s speech is about how winning takes every player to focus on every element of every play; as a team.

My take: Pacino captures the essence of culture’s role in delivering great customer experience. Any CEO trying to fix her/his firm’s customer experience problem should think about Pacino’s words:

Either we heal as a team or we’re going to crumble; inch by inch, play by play, until we’re finished.

The bottom line: Customer experience is made up of millions of inches, delivered one inch at a time.

Discussing Zappos’ Culture With Tony Hsieh May 28, 2008

Posted by Bruce Temkin in Customer experience, Customer-centric DNA, EBD #3: Treat Customer Experience As A Competence, Executive leadership, Experience-Based Differentiation.
Tags: Tony Hsieh, Zappos
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As I mentioned in my post about popular customer experience topics, I’m currently researching best practices for the 3rd principle of Experience-Based Differentiation: Treat customer experience as a competence, not a function. It’s a topic that I sometimes call customer-centric DNA.

As part of that research, I’m interviewing a number of executives. So I reached out to Tony Hsieh, the CEO of Zappos, a company that’s renown for its great customer service.

Given our schedules, Tony and I ended up speaking on Monday (Memorial Day) morning at 10:30 AM EDT (7:30 AM his time). I checked out Tony’s twitter right before we spoke and found this tweet:

About to do a conference call. Way too early to be awake, couldn’t find another time to do it. Getting out of bed was not easy. Red Bull!

So let me start by thanking Tony for getting on the phone so early on a holiday. That shows his commitment to getting the Zappos word out!

How good is Zappos’ customer experience? Well, my wife loves Zappos. And my mother-in-law, after finding out about my discussion with Tony, excitedly told me that she loved Zappos because “it is so easy it use.” She once ordered a pair of shoes at 10:00 PM and was amazed to receive them before noon the next day.

Those are not isolated impressions about Zappos; the retailer has a lot of adoring customers. As a matter of fact, Tony shared an interesting fact with me: the company’s Net Promoter Scores (NPS) are so high that they do not provide any guidance on areas for improvement.

Well, the interview was great. Tony was open, informative, and inspiring. Here are some of the interesting factoids from our discussion:

The company’s culture is defined in its ten core values that include items like “deliver WOW through service” and “be humble.”
Tony felt funny when the company codified those core values, because it felt a bit too corporate. But he realized that it needed to happen given the company’s growth.
Tony doesn’t want to prescribe actions for employees that show how much Zappos cares about customers; he wants employees to do things because they genuinely care about customers.
Zappos uses its culture as a reason to hire and fire people. All new hire candidates have a separate interview with the HR department that focuses just on cultural fit.
New employees go though 4-5 weeks of training that includes education about the culture and spending time on the phone with customers.
To ensure that employees have a strong fit with the culture, new employees are offered $1,000 to quit after their first week of training. That way they weed out the people who aren’t committed to working at Zappos. Hsieh didn’t feel like enough people were taking the company up on its offer, so he discussed raising the bonus to $1,500.
Every year Zappos publishes its “Culture Book” in which all employees are encouraged to write about what the culture means to them.
Tony recognizes that cultures often go downhill when companies scale. He wants Zappos’ culture to get stronger as it grows.
Tony offers this advice to Zappos employees: It’s completely up to you guys. I can’t force the culture to happen; so part of your job description is to display and inspire the culture.

I asked Tony if I could share some of our discussion in my blog. He said yes. Why? It met his basic principle for deciding what he’s willing to share:

Would sharing it make the world a better place?

The bottom line: Most firms would be a better place if they were more like Zappos.

86 Year-Old Chairman Still Talks To Customers May 27, 2008

Posted by Bruce Temkin in Customer experience, EBD #3: Treat Customer Experience As A Competence, Voice of the customer.
Tags: Mercury Insurance
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There was an interesting article in the LA Times about Mercury Insurance chairman George Joseph’s view of service. It turns out that the 86 year-old Joseph (who’s net worth is more than $1 billion) receives eight or nine letters from customers each month and, in most cases, he calls the customer. Here’s what Joseph says about his actions:

You used to be able to pick up a phone and talk to people. That doesn’t happen anymore. Now there’s e-mail and automated switchboards. People want to talk to people. They want to talk to people who are knowledgeable and who can answer questions.

My take: There’s almost nothing more powerful than senior executives systematically talking with customers. I call this activity ”continuous listening,” which is one of the key levels in a voice of a customer program. When execs regularly speak with customers, three great things happen: 1) The execs keep grounded in what customers need and want; 2) those customers feel special and appreciated; and 3) other employees get a clear message that customers are important.

The bottom line: There’s nothing better than some good old-fashioned customer experience.

Which Customer Experience Topics Are Hot? May 18, 2008

Posted by Bruce Temkin in Customer Experience Index, Customer experience, Customer-centric DNA, Experience-Based Differentiation, Marketing to Gen Y.
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I like to look at how many people (Forrester clients) are reading my research reports. It helps me figure out the topics that people care about. So I decided to share some of that info in this post. These are my 15 most-read documents over the last 6 months [along with their publications dates]:

The Customer Experience Index, 2007 [Nov. 07]
The Gen Y Design Guide [Dec. 07]
Young Gen Yers: Fun-Loving, Social, And Wired [Jan. 08]
The Experiences That Satisfy Consumers [Feb. 08]
The Business Impact Of Customer Experience [Mar. 08]
Gen Y Is Truly Different; Design Accordingly [Nov. 07]
Experience-Based Differentiation [Jan. 07]
Obstacles To Customer Experience Success, 2008 [Feb. 08]
Customer Experience Innovation In Three Steps [Feb. 08]
The Strength Of Customer Relationships [Feb. 08]
Customer Experience Index Snapshot: Banking [Nov. 07]
The Chief Customer/Experience Officer Playbook [Oct. 07]
Customer Experience Index Snapshot: Insurance Carriers [Nov. 07]
Lessons Learned From 1,001 Web Site Reviews [May 07]
Customer Experience Index Snapshot: Retail [Nov. 07]

(Here are links to my complete list of research and my 2008 research agenda).

My take: Some observations about this readership…

Experience-Based Differentiation (EBD), the oldest piece of research on this list, remains a vibrant blueprint for customer experience excellence. I continue to get a lot of demand on this topic for speeches, workshops, and advisory sessions. I am very excited about my current research on “Customer Centric DNA” which will illuminate the third principle of EBD: “Treat customer experience as a competence, not a function.” Look for that to get published in late June.
Clearly the Forrester’s Customer Experience Index is hot, especially with three of our key industries: banking, insurance, and retail. We plan to repeat that research again this year, with even more industries.
Many companies are beginning to actively look at how to reach Gen Y. Our data shows that these consumers are quite different and relatively underserved across many industries.
One of my newer reports, The Business Impact Of Customer Experience, is getting a ton of readership because people are looking for quantitative proof (to reinforce their intuition) that customer experience is tied to loyalty. Well, this research shows that it is. So now it’s time for companies to get moving and make some improvements.
Customer experience remains a hot topic overall. I continue to have the highest level of readership at Forrester; the number of clients that read my research during the past 6 months was nearly 70% higher than the second analyst on the list.

The bottom line: If people keep reading, then I’ll keep writing.

JetBlue’s “Happy Jetting” Is More Than Empty Promises May 8, 2008

Posted by Bruce Temkin in Customer experience, EBD #2: Reinforce The Brand With Every Interaction, Experience-Based Differentiation.
Tags: JetBlue
1 comment so far

I’ve written posts that have chided marketing campaigns from JP Morgan Chase, Circuit City, and John Hancock because they appear to be disconnected from the reality of how the firms treat their customers. Those myopic marketing efforts fail to meet a fundamental tenet of Experience-Based Differentiation: Reinforce the brand with every interaction, not just communications.

I even developed this diagram to show how these marketing campaigns can lead to empty promises:

Probability Of Success For Branding Efforts

Given my recent negativity towards marketing campaigns, I was thrilled to read about JetBlue’s “Happy Jetting” initiative. I call it an “initiative” because it’s more than just an external marketing campaign. Here’s some of what Andrea Spiegel, JetBlue’s VP-Marketing, had to say about “Happy Jetting” in an Advertising Age article:

This is much more than just an ad campaign, it’s a brand campaign because it speaks to what the core of JetBlue is. It’s executable across every touch point for crew members and customers. [It's also] the most integrated internally and externally. We’ve brought to life this new world of jetting internally for crew members through training programs, screensavers and posters all over the company.

Now that’s what Experience-Based Differentiation is all about!

The bottom line: Don’t push ad campaigns, embrace brand initiatives.

Senior Execs Are Not Fully Customer-Centric May 6, 2008

Posted by Bruce Temkin in Customer experience, EBD #3: Treat Customer Experience As A Competence, Executive leadership, Experience-Based Differentiation.
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As any regular reader of this blog knows, my research focuses on a concept called Experience-Based Differentiation (EBD). A key principle of EBD is to Treat customer experience as a competence, not a function. To achieve this principle, companies need to infuse customer-centric DNA into their culture. But this level of change requires a high degree of commitment from the senior executive team. I think this quote from Mario Andretti explains why:

Desire is the key to motivation, but it’s determination and commitment to an unrelenting pursuit of your goal - a commitment to excellence - that will enable you to attain the success you seek.

In a previous post I discussed how companies with customer experience leaders are progressing faster than other firms. The creation of that type of role can be a sign of commitment, but the president or CEO and all of her/his direct reports must demonstrates an ongoing commitment in order to change the culture.

My sense is that senior executives are intrigued with customer experience, but most are not yet fully committed to it.

8 Signs Of Executive Commitment

If a senior executive team is fully committed to customer-centricity, then it can answer yes to all of the following questions:

Do senior executive staff meetings have a recurring agenda item on customer experience? (this does not include dealing with customer emergencies)
Do internal communications from the CEO/President regularly include discussions of customer experience?
Do external communications from the CEO/President regularly include discussions of customer experience?
Is customer experience explicitly discussed (in some form) within the company’s strategic plan(s)?
Does the executive team have a clear set of customer experience objectives?
Do most of the executive team members have goals based on customer experience objectives?
Is the compensation of executive team members tied to customer experience objectives?
Does the organization believe that the CEO/President would trade-off some short-term financial results for longer-term customer experience gains?

The bottom line: Senior execs with less than full commitment need to be committed.

Customer Experience Thrives With Executive Leadership April 29, 2008

Posted by Bruce Temkin in Chief customer officer, Customer experience, Executive leadership, Experience-Based Differentiation.
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In a recent research report called Customer Experience Thrives With Executive Leadership, I examined data from 287 large US firms in our customer experience panel. Almost half (45%) had an executive in charge of customer experience across products and channels; a role that I refer to as a chief customer/experience officer (CC/EO). Here’s a summary of what I found when comparing responses from the firms with a CC/EO to those without one:

Firms with these leaders view customer experience as more important, have more enterprisewide customer experience efforts, report having fewer obstacles, do more primary customer research, and score better in all three areas of Experience-Based Differentiation.

When it came to the Experience-Based Differentiation (EBD) self-test, here’s how many firms ended up with a rating of either “excellent” or “good” for each of the three principles of EBD:

Obsess about customer needs, not product features
With CC/EO: 39%
Without CC/EO: 24%
Reinforce brands with every interaction, not just communications
With CC/EO: 46%
Without CC/EO: 30%
Treat customer experience as a competence, not a function
With CC/EO: 42%
Without CC/EO: 24%

The bottom line: A CC/EO can help turn customer experience into a competency.

Ford (Finally) Turns Employees Into Brand Ambassadors April 26, 2008

Posted by Bruce Temkin in Branding, Customer experience, EBD #2: Reinforce The Brand With Every Interaction, EBD #3: Treat Customer Experience As A Competence.
Tags: Ford
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I just read a BrandWeek article called Ford Asks Employees, Dealers to Spread Ad Message that talks about Ford’s new campaign called “Drive one” which includes a push for employees and dealers to spread the word. Jim Farley group vp-marketing and communications for Ford explains it this way:

The whole idea behind this campaign is not fancy ads. It’s talking to the customer, who talks to a friend. It’s the only chance we have to break the apathy.

My take: As I talked about in my previous post about John Hancock, advertising alone can’t dramatically change a company’s positioning. It takes a shift in how you interact with customers. That means you need to get employees involved (and for car makers, it means dealers as well). So this approach makes absolute sense. Yet, something is wrong.

The fact that Ford is making such a big deal out of this approach means that it’s an unusual occurance. So the car maker does NOT regularly engage employees and dealers in its advertising efforts. That’s a problem. Employees and the entire front line need to be developed into ambassadors for any campaign. And if they can’t promote it, then that’s probably a good sign that the campaign is not a good one.

When I interviewed the CMO for JetBlue several years ago, she told me that she spent half of her time communicating the brand message internally. Sounds like a good benchmark.

The bottom line: CMOs need to become CMMOs, Chief Marketing And Motivational Officers.

John Hancock Repositioning Provides Lesson About Empty Promises April 24, 2008

Posted by Bruce Temkin in Branding, Customer experience, EBD #2: Reinforce The Brand With Every Interaction, Experience-Based Differentiation, Financial services.
Tags: John Hancock
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John Hancock announced a new ad campaign called “Cursor” that showcases two areas: the rise of digital communications and the opportunity for financial success. It is trying to reintroduce the company to the public as a relevant and inspirational brand. Here’s how Jim Bacharach, vp-advertising at John Hancock described the campaign:

The thinking behind the campaign was to recognize where consumer sentiment is today. The unstable economy is a source of anxiety for a lot of folks. One of the key differences from what we’ve done in the past is that today, more than ever, these conversations take place through electronic media.

My take: Right below is the John Hancock homepage (from earlier this week). Other than the discussion of the new “Cursor” ad campaign in the lower right, is there anything about this page that reinforces the notion of relevance, inspiration, or digital conversations?

I didn’t bring this up to pick on John Hancock’s Website or even to discuss its repositioning efforts. Instead, I wanted to (re)make a point that advertising alone can not reposition a company.

While ad campaigns can certainly introduce new brand promises, repositioning can only occur of the company actually keeps those promises during all of its interactions. That’s why the second principle of Experience-Based Differentiation is: Reinforce the brand in every interaction, not just communications.

Without designing all touchpoints to fulfill the new brand promises, the hope for repositioning is likely to just lead to empty promises:

Probability Of Success For Branding Efforts

The bottom line: Don’t waste your marketing dollars on empty promises.

Can Health Plans Provide Better Member Experiences? Yes! April 18, 2008

Posted by Bruce Temkin in Customer experience, Experience-Based Differentiation.
Tags: Health plans, Healthcare, Microsoft
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I was a speaker at Microsoft’s Health Plan Executive Forum in Jacksonville, Florida last week. As you might expect, I talked about customer experience.

Dennis Schmuland, MD, Microsoft’s Health Plan Industry Director kicked off the morning with a video that showed how current and planned Microsoft technologies would revolutionize the healthcare experience — for both patients and providers. It was pretty cool; like something from a Sci-Fi movie. You can see the video posted on Microsoft’s HealthBlog.

Next up was Anthony Nowlan, Chief Medical Officer, CentriHealth, Inc., and former Director of the NHS Information Authority. He gave a great speech called “Organizing Health Care in the Information Age.” He started by walking through the history of healthcare starting in the 1800s. It turns out that one of the key problems that we have today is that our current institutions (hospitals, labs, etc) were created in a period where the primary issue was acute care. As Dr Nolan said, “patients came in, got treated, and then they either got better or died.” But in today’s environment, the majority of costs come from chronic care. And you can’t solve the current problem with the old institutions; consumers need to be more involved. So his speech focused on how to use electronic health records to reorganize the healthcare system.

My speech was titled “Health Plan Member Experience: From Enraged To Engaged.” I borrowed some material from Liz Boehm (one of Forrester’s healthcare analysts) to show that member experience was becoming more important for health plans. One of the reasons is that cost containment for chronic care requires some behaviorial changes. But consumers don’t trust health plans for basic interactions, never mind listen to their wellness and disease management recommendations.

I then showed some of my research on customer experience, loyalty, and satisfaction. Here’s a small snapshot of that information:

Health plans came in last place out of 9 industries in our Customer Experience Rankings; and were also lowest in each of the individual areas: useful, usable, and enjoyable.
The highest rated plan in the rankings, Kaiser, only ended up 75th out of the 112 firms we examined.
40 year-olds give health plans the lowest customer experience ratings.
Seniors give health plans the highest customer experience ratings.
Health plans have the lowest rating for satisfaction with online interactions and virtually tied for last place in satisfaction with phone interactions.

Of course, I couldn’t leave the attendees without a path to follow. So I explained how they could use Experience-Based Differentiation as their blueprint for improving customer experience.

After the presentation, one of the participants asked a good question: “Can we (health plans) ever have satisfied members, since we need to reject many of their claims?” My answer was “You can absolutely raise satisfaction levels. While you may never be as enjoyable as Borders, there’s no reason for interactions with health plans to be any less useful or usable than with any other industry.”

The bottom line: Health plan member experience is a chronic problem, but it’s curable.

(P.S. I don’t generally write about my work with specific clients, but Microsoft approved this blog post)

Chrysler Avows New Customer Experience Religion April 15, 2008

Posted by Bruce Temkin in Customer experience, Executive leadership, Experience-Based Differentiation.
Tags: Chrysler
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Yesterday’s USA Today provided a double-header for my blogging. In addition to the ad from AA pilots, there was also a full-page ad from Chrysler that started as follows:

Quality is one of those fluffy words. After you see it or hear it enough times, it doesn’t mean anything anymore

The ad announced that the auto maker had created a Chief Customer Officer position and that it aims to put the customer first, which it described as a “basic rule of corporate etiquette.”

My take: The beginning of the Chrysler ad reminded me of My Manifesto: Great Customer Experience Is Free. In that post, I discussed how customer experience is a lot like quality. So, hopefully, Chrysler execs are reading my blog and/or research.

If they are reading this blog, then I suggest that they also follow my advice about how to successfully implement the role of Chief Customer Officer. That research outlined five broad areas of focus: 1) Make sure that you’ve got the right environment; 2) Prepare to take on a broad change agenda; 3) Establish a strong operating structure; 4) Kick off high-priority activities; 5) Look ahead to the future.

But the presence of a Chief Customer Officer does not immediately convert Chrysler to the customer experience sect. The entire executive team needs to learn, internalize, and dedicate themselves to a new set of sacred rituals. What text can they use for guidance and inspiration? You guessed it: Experience-Based Differentiation (EBD). EBD is a blueprint to customer loyalty that builds upon three principles:

Obsess about customer needs, not product features
Reinforce the brand with every interaction, not just communications
Treat customer experience as a competency, not a function.

As a start to the conversion process, the executive team should take the EBD self-test and use the results as a basis for discussing where to invest their time and energy.

The bottom line: You can’t convert to the customer experience religion by proclamation; you need to dedicate your professional life to it.

The Holy Grail: A Link Between Customer Experience And Loyalty March 25, 2008

Posted by Bruce Temkin in Customer Experience Index, Customer experience, Experience-Based Differentiation.
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I just published a report called The Business Impact Of Customer Experience that I think will have a significant impact on how companies think about customer experience. Here’s an excerpt from the executive summary:

Executives know that customer experience is important, but they can’t always tie it directly to business results. So we examined the correlation between the customer experiences delivered by 112 US firms (as defined by Forrester’s Customer Experience Index) and the loyalty of their customers. Our analysis shows that good customer experience correlates highly to loyalty.

Most of us already intuitively knew that good customer experience is good for business; that’s the basis for My Manifesto: Great Customer Experience Is Free. But there’s no longer a need to debate the issue. This research objectively shows a strong tie between customer experience and consumer loyalty. Here are some more of the specific findings in the research:

For all 9 industries that we examined, there was a strong correlation between customer experience and loyalty.
Bank customer experience was the most correlated with loyalty, followed by wireless carriers.
Health plan customer experience was the least correlated with loyalty, followed by investment firms and retailers.
Companies in the top quartile of customer experience have a much higher level of customer loyalty than do those in the bottom quartile: 15% increase in customers that are willing to make another purchase and a 18% decrease in customers that are likely to switch providers.
Customer experience quality was most highly connected to the purchase plans of Fifth Third’s customers and the intentions to switch of Cablevision and Nextel customers.
When we examined how this might affect the annual revenue of individual companies, we found that customer experience quality could cause a swing of $242 million for a large bank and $184 million for a large retailer.

In case you’re interested, here’s how we did the analysis:

Determined the customer experience levels of 112 firms across 9 industries based on Forrester’s Customer Experience Index (CxPi) which examined responses from nearly 5,000 US consumers.
Calculated the correlation between each firm’s CxPi and two measures of loyalty: 1) the willingness of customers to purchase another product from the firm; and 2) the likelihood that customers would switch business away from the firm.

What should you do now? Chart a path to Experience-Based Differentiation.

The bottom line: As my blog says, Customer Experience Matters. Really!

The Most Useful Firms: Costco And Sam’s Club March 14, 2008

Posted by Bruce Temkin in Customer experience, Experience-Based Differentiation.
Tags: Costco, Sam's Club
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In the previous post, I looked at the most enjoyable firms from Forrester’s customer experience rankings of 112 firms across 9 industries: Banks, Credit Card Providers, Health Plans, Insurance Firms, Internet Service Providers, Investment Firms, Retailers, TV Service Providers, Wireless Phone Carriers. In that research, we asked nearly 5,000 consumers how they felt about the companies they work with.

Now let’s look at the organizations that consumers felt were best at meeting their needs:

Not all of the 9 industries were represented in the top 15. Here are the firms that came out on top of other industries (along with their overall ranking):

Wireless carriers: Virgin Mobile (16th overall)
Investment firms: Vanguard (24th overall)
Internet service providers: Bell South (40th overall)
Medical insurers: Kaiser (43rd overall)
TV service providers: DirecTV (58th overall)

The bottom line: “I have found that all ugly things are made by those who strive to make something beautiful, and that all beautiful things are made by those who strive to make something useful.” (Oscar Wilde)

Customer Experience Maturity — Not! March 13, 2008

Posted by Bruce Temkin in Customer experience, Experience-Based Differentiation.
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I recently published a report called The State Of Experience-Based Differentiation that analyzed a survey of 287 customer experience decision makers from large US firms. Respondents answered 12 questions which represented our Experience-Based Differentiation self-test. When we analyzed their responses, here’s some of what we found:

Firms scored particularly low when it came to these traits:
- “Employees across the company share a consistent and vivid image of target customers”
- “The quality of interactions with target customers is closely monitored”
- “Senior executives regularly interact with target customers”
- “Our company’s brand drives how we design customer experiences”
- “Decision-making processes systematically incorporate the needs of target customers”
Our assessment showed that most firms have problems in achieving the three principles of Experience-Based Differentiation:
1. Obsess about customer needs, not product features
  (68% of firms had problems in this area)
2. Reinforce brands with every interaction, not just communications
  (60% of firms had problems in this area)
3. Treat customer experience as a competence, not a function
  (67% of firms had problems in this area)

The bottom line: Firms are in the early stages of their customer experience journeys.

Note To Circuit City’s Board Of Directors March 9, 2008

Posted by Bruce Temkin in Customer experience, EBD #2: Reinforce The Brand With Every Interaction, Executive leadership, Experience-Based Differentiation.
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Since my previous post talks about customer service and my next post will talk about customer loyalty, I felt compelled to squeeze in something about Circuit City. The retailer just announced that both its CMO and president of small stores are leaving — just a few months after the retailer’s exec VP of multi-channel sales also left the company. In the midst of this turnover, I have a few thoughts for the Circuit City board of directors as they retool their efforts.

To being with, let’s look at how customers rate Circuit City. Here are some findings from my research which shows Circuit City’s rankings:

Overall customer experience: 26th out of 27 retailers
Usefulness rating: Last out of 27 retailers
Ease of use rating: 26th out of 27 retailers
Enjoyability rating: 26th out of 27 retailers
Phone interaction satisfaction: 47th out of 78 firms
Web site interaction satisfaction: 46th out of 83 firms
In-store interaction satisfaction: 44th out of 70 firms
Customer intentions to switch: 110th out of 112 firms
Customer plans for repurchasing: 106th out of 112 firms

It’s clear that Circuit City has it’s work cut out for itself when it comes to Customer Experience. I think it makes sense to repeat advice that I gave to JP Morgan Chase in ”Chase Can’t Advertise Its Way To Customer Friendliness:” You can’t advertise yourself out of this problem.

So here’s a suggestion for the Circuit City leadership team: Transform your latest marketing slogan, ”Simplicity guaranteed,” from a tag-line into an operational blueprint. How? By following the second principle of Experience-Based Differentiation:

Reinforce brands with every interaction, not just communications. Traditional brand messaging is losing its power to influence consumers — that’s why branding efforts need to expand beyond marketing communications to help define how customers should be treated. To master EBD, firms must articulate their brand attributes to both customers and employees, clearly describing how the firm wants to be viewed. That’s just the first step, because companies must go on to translate brand attributes into requirements for how they’ll interact with customers.

The bottom line: Circuit City should stop guaranteeing simplicity and