Last week I went with my family to an Apple store, mostly because my daughter needed a new computer for school. There was no question that we were going to buy a Mac; she wouldn’t consider anything else! (Even though we’ve been buying Dells in our house for about 15 years, I’ve become an Apple convert).

The experience was great. We got assigned an Apple Genius as we walked into the store and he very effectively walked us through all of our options. We ended up with a MacBook, an iPod Touch, a printer, Microsoft Office, and an extended warranty. He brought all of the products to us and we handled the transaction on his portable device. The entire process took about 15 minutes, we only needed to speak with one person, and we spent a bundle of money. Win for Apple, and win for us.

As I mentioned, we left with an iPod Touch. It turns out that Apple is running a program where you get a free iPod Touch if you buy a Mac. That was great for me. I’ve wanted an iPod Touch for watching movies while sitting in airports and planes. This promotion (along with Massachusetts’ tax free day) sealed the deal. My daughter got what she needed, and I ended up with something that I’ve wanted. Win for my daughter, and win for me.

As I reflected back on this experience, I realized the brilliance of Apple’s strategy. By bundling an iPod Touch into the deal, there was something in it for the Mac user (my daughter) and the decision maker/buyer (me). We all win.

This strategy isn’t new. The same general concept exists in the travel industry. Companies pay for flights and lodging, but business travelers get the loyalty points. I’m an American Airlines/JetBlue, Starwood/Marriott guy. There’s something for everyone.

Although people use this strategy, I’ve never seen it given a formal name. But I think it’s important enough to have one. So I’m calling the strategy Influential Bundling, and defining it as:

Packaging products and services that deliver value for key influencers

How about Zales giving free football tickets with the purchase of a diamond ring? Think about how many new engagements that would generate. Or maybe The Gap could run a deal where you get $50 and free shipping from Piperlime on any purchase of $250 from The Gap or Old Navy. Parents can get some stylish shoes after helping their kids pick out their back to school wardrobes.

The bottom line: What decisions makers can you reach with Influential Bundling?

We just got back from a family trip to New York City. As I did after last year’s trip, I decided to share some of my observations of “The City.” Here goes:

• Shea Stadium is well past its prime. My son and I went to our first Mets game, before Shea Stadium gets knocked down. While Shea wasn’t in great shape, it was better than Fenway Park. But right next door is the new stadium, Citi Field. When will the Red Sox get a new park?
• In The Heights is wonderful. While we really, really enjoyed the Tony award-winning show “In The Heights,” we did not leave the theater humming any of the songs. With one rewrite, it could become an even more memorable sound track. We’d love to see Eminem take a shot at the lead role when star/creator Lin-Manual Mirand takes a break.
• There’s always great food. New York has an endless supply of restaurants, but we still end up revisiting many of the ones we really like. Our favorite meals on the trip: breakfast at Norma’s, lunch at La Bonne Soupe, and dinner at Rosa Mexicano.
• Virgin Records is the real deal. Times Square is always a vibrant spot. One of our favorite things to do there is to browse through Virgin Records. It always has an unbelievable collection of CDs and DVDs on sale for $10.
• Street vendors make the walk interesting. There are makeshift stores on just about every other corner with handbags, sunglasses, and other apparel. While browsing through some $5 watches, some of the vendors whispered under their breath: Do you want to see some Rolexes? Where else can you get a Rolex for $25?
• Zabars is worth an excursion. As always, we stopped by Zabar’s on the Upper West Side on our way out of town. We love to stock up on what we believe are the world’s best knishes and strudel.
• Traffic can come out of nowhere. A Saturday in late August should be a good time to drive home from New York. But it wasn’t. It took us no time to get out of Manhattan, but over 2 hours to get to Connecticut. Interestingly, there did not seem to be any accidents or construction.

The bottom line: NYC is a great place to visit, but I couldn’t live there.

The American Customer Satisfaction Index (ACSI) just released its Q2 2008 report that covers the following sectors: Internet news & information, portals & search engines, automotive, electronics, major appliances, and personal computers. As I mentioned in a previous post about the ACSI, it’s a great research effort that doesn’t gets enough visibility.

Here are some highlights of the new data:

Ratings Of Firms

• Top rated: Toyota and BMW
• Top rated relative to industry average: Apple and Google
• Largest improvement (since last year): Google and Apple
• Lowest rated: AOL and HP
• Lowest rated relative to industry average: AOL, Chrysler Jeep, and Ask.com
• Largest decline (since last year): Whirlpool and HP

Ratings Of Industries

• Top rated: Electronics
• Largest improvement (since last year): Internet Portals & Search Engines
• Lowest rated: Personal Computers
• Largest decline (since last year): Major Appliances

While it’s interesting to look at the data, I also like to read the commentary by Professor Claes Fornell who puts the customer satisfaction results in context of the overall economy. Here’s an excerpt from his Q2 2008 comments:

Future consumption growth is impeded by many factors, chief among them house-price deflation (which has trimmed household wealth), tougher credit conditions, a worsening labor market, and continued high fuel and food prices… Under these circumstances, even if customer satisfaction were rising, it would be difficult to offset pocketbook limitations. But since ACSI shows no aggregate growth, the outlook for more aggregate spending growth continues to be bleak… The ACSI forecast suggests a third quarter spending growth of no more than 2.3% and the economy will continue to struggle… But all is not doom and gloom. E-business and technology lead the way. Customer satisfaction for e-business is up by almost 6%.

The bottom line: Satisfaction may be down, but Apple and Google are doing something right

The Spanish retail chain Zara has overtaken The Gap as the world’s largest clothing retailer. That’s amazing since many people outside of Europe probably don’t know much, if anything, about Zara. So what can we learn from Zara’s ascension to the top spot?

First of all, Zara is a division of Inditex, which is a vertically integrated apparel juggernaut. Unlike other large apparel corporations, the company owns all of its retailing, designing and manufacturing operations. This structural difference allows Zara to break some norms in the apparel industry.

Zara offers “instant fashions:” cheap, trendy clothing. In Zara shops, there are two new collections every week, and the company manages to design, produce, distribute and sell each of its collections in just four weeks. Here’s what Professor Isabel Díez Vial from the Complutense University of Madrid, who has studied Inditex, has said about the company:

The customer doesn’t go to the store at the beginning of summer or winter, and see what they want, and think about it and decide later what to buy. Instead, the customer has to go to the shop every 15 days because the collection is refreshed so frequently… This approach leads to a complete change in the production process. Instead of offering products that take a year to plan and sell, you now have a product that the customer demands.

In addition, Zara relies heavily on its front-line employees. Rather than squeezing costs out of its personnel costs, it sees them as a key to its advantage. By analyzing sales data, the retailer increases staff during the periods when there is heavy traffic in the store. Employees are also expected to provide feedback on any fashion trends they see or hear about — including what’s hot, what’s cold, or what’s missing from the current collection.

My take: Zara represents a great case study in how to change the paradigm by focusing on customers. Here are few lessons that others can learn from Zara’s approach:

• Break supplier-driven paradigms. In many industries you’ll find approaches that are based on some limitation of the companies. These supplier-driven paradigms, like very discrete seasons in apparel, aren’t optimizing customer experience. So there are opportunities to expand your business by challenging the status-quo.
• Disrupt with service amplification. Many firms view front-line employees as costs; which they try to minimize. That’s why there’s an opportunity for companies to differentiate themselves by investing in their people, like Zara. This approach, called service amplification, is one of the five disruptive customer experience strategies that I’ve mentioned before.
• Shorten cycle times. If it takes six months to define, design, and manufacture something, then you need to make decisions six months too early. Zara’s ability to cut the cycle times for getting products to market provides it with the ability to respond more effectively to changes in the market. So firms should find ways to cut down the time it takes to make changes in their offerings. 
• Look to customers for innovation. As I discussed in the post Customer Experience Innovation: As Simple As 1-2-3, companies need to focus their innovation efforts around the needs of customers. Zara’s growth shows that there’s a lot of opportunity to find new and better ways to meet their needs.

The bottom line: The path to the top is always fueled by customers.

Last November we introduced Forrester’s Customer Experience Index in the US, with Costco and Borders taking the top 2 spots. Using the same methodology to examine three key elements of customer experience (usefulness, ease of use, and enjoyability), we recently published the The UK Customer Experience Index, 2008.

Based on a survey of nearly 1,200 UK consumers, we ranked 25 firms. Here are some of the details:

• Top five in the rankings:
  • Play.com [#1]
  • Amazon UK [#2]
  • John Lewis [#3]
  • ASDA [#4]
  • Tesco [#5]
• Bottom five in the rankings:
  • British Gas [#25]
  • AOL [#24]
  • Virgin/NTL Telewest [#23]
  • BT Internet/Openworld [#22]
  • Vodafone [#21]
• Retailers took the top 8 spots, but here are the leaders in other sectors:
  • Banking: Lloyds TSB [#8]
  • Mobile: T-Mobile [#17]
  • ISP: BT Internet/Openworld [#22]

We’ll be fielding the survey again in the US in a few months, so keep your eyes out for Forrester’s second annual Customer Experience Index later this year.

The bottom line: There’s room for customer experience improvements everywhere.

Just read an excellent article on the Business Week site called The Era Of Inspiration which looked at the leaderships styles of Tom Coughlin (NY Giants Coach), Herb Kelleher (former chairman of Southwest Airlines), and Bill Marriott (CEO of Marriott). It discusses three different management styles: coercion, motivation, and inspiration.

Coughlin was considered an “autocratic tyrant,” but became more inclusive, creating a leadership council of 11 players. In effect, he shifted his style from coercion to inspiration. The changed paid off with a Superbowl championship. 

The article also quoted Kelleher who was Southwest Airlines’ beloved leader:

If you create an environment where the people truly participate, you don’t need control. They know what needs to be done and they do it. And the more that people will devote themselves to your cause on a voluntary basis, a willing basis, the fewer hierarchies and control mechanisms you need.

The article also makes the following key point:

Unlike coercion and motivation, the source of inspired conduct is intrinsic and internal. Inspired employees act on something they believe in; they are in the grip of ideas; they are compelled by a deeper purpose and propelled by values they hold fundamental.

My take: Inspiration is a fundamental part of good leadership; and it’s important that leaders instill a strong sense of purpose with their people.

The bottom line: Get your people do things because they want to, not because you want them to do it.

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.

I recently published a research report called What Consumers Want From Insurers that examined what consumers cared about the most when it came to their insurance providers. In our analysis of survey responses from nearly 5,000 US consumers, we found that consumers most want:

• a good reputation from life insurers
• low prices from auto/home insurers
• high quality coverage from health insurers

We took the analysis one step further and looked at how responses differed across five generations of consumers: Gen Y (18 to 27), Gen X (28 to 41), Younger Boomers (42 to 51), Older Boomers (52 to 62), and Seniors (63 and older). It turns out that Younger Boomers care the most about the actual coverage. Here are some other interesting factoids that we found:

• Life insurers: Gen X wants low prices, Younger Boomers want good coverage, and older consumers want a good reputation.
• Auto/home insurers: Young consumers want low prices, Younger Boomers want good coverage, and older consumers want good service.
• Health insurers: Gen Y and Seniors wants good service, Gen X wants low prices, and Boomers want good coverage.

The bottom line: Insurers need generational-specific strategies.

I just ran across a post in Fortune’s Postcards blog about a speech that Lou Gerstner gave at the Yale CEO Summit in New York in last month. Here’s a summary of his advice for how to transform a Fortune 500 company:

1. Distinguish between transformation and turnaround. A turnaround is about management execution, but a transformation is about a fundamental change to the business. Transformation is much harder.
2. You can’t transform a dodo.  Gerstner quoted Warren Buffet’s rule: “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact.”
3. It’s all about the culture. I love what he says on this topic: “You have to transform the culture, not just the strategy. Culture is what people do when no one is watching.”
4. Integrate as a team. He notes a major inconsistency within IBM: there were “Team” signs all around, but people were paid based on individual performance.
5. You have to understand what people do everyday – the processes, the values, the rewards. This requires a great deal of involvement by the CEO

My take: Gerstner is a great leader; his turnaround of IBM will be remembered as one of the greatest management accomplishments of our time. So I was thrilled to see that his advice matches a lot of the advice that I’ve written in my (mini) book ”The 6 Laws Of Customer Experience.”

The bottom line: Get the business model right and focus on the people.

Kudos to Amazon.com. My prediction: The Kindle will revolutionize how people read books, newspapers, and magazines. This new product represents a great example of online infusion (designing offerings that natively incorporate online capabilities as part of the core product definition) which is one of the five disruptive customer experience strategies that I’ve discussed in the past.

I recently had the opportunity to play around with a Kindle…

While it has a few usability miscues, the Kindle gets enough right to establish a new paradigm for reading. It’s a great combination of product design and online capabilities.

What makes the Kindle a great disruptive product?

• Appealing form factor (smaller than most books)
• Simple core interactive buttons
• Immediate access to media (books, magazines, etc.) through cellular network
• Good readability, including font enlargement

The bottom line: There are many opportunities for an online infusion strategy; what’s yours?