How to Achieve a Great—           and Profitable—         Customer Experience          With companies shifting into the “e...
Table of Contents           Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...
Executive Summary  ▪▪ Among survey respondents, 80 percent claim that customer experience (CE) is a top priority. At the s...
25,000 business executives. A total of 307 director-, vice president- and C-level executives responded                    ...
IntroductionGlobalization. Consumerization of technology. Digitally engaged customers. Widespread use of social media.The ...
Moving Beyond Mediocre                      Despite general agreement among the majority of companies that customer experi...
experience program does not mean investing endless money without knowing what the return will be. “You can’tgo bankrupt tr...
some companies offer customers perks, whether that makes business sense or not. “When you fail to treat                   ...
Relevant Value                                                                                                            ...
When developing a business case, the financial drivers of CE will, in most cases, come down to the following areas:       ...
smith+co’s shaun smith also points to the process changes at Progressive Insurance, which created thepractice of mobile cl...
SPOnSOR’S STATEmEnT    The Key Elements of    Customer Experience    Demolish boundaries between functions to create    tr...
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  1. 1. How to Achieve a Great— and Profitable— Customer Experience With companies shifting into the “experience” business, they need to become adept at providing high-value, relevant offerings that will translate into profits. An exclusive survey and research report from Bloomberg Businessweek Research Servicesbloomberg bUsinessweek reseArch services 1 FebrUArY 2011
  2. 2. Table of Contents Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Moving Beyond Mediocre . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Financial Drivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Passionate Promoters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 narrowing the Delta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 relevant Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Building a Business Case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Conclusion: The Cost of Ignoring CE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 sponsor’s statement: The Key Elements of Customer Experience . . . . . . . . . . . . . . . . . . . . 12 Copyright and Disclaimer Notices Bloomberg Businessweek does not make any guarantees or warranties as to the accuracy or completeness of this report. Bloomberg Businessweek shall not be liable to the user or anyone else for any inaccuracy, error or omission, regardless of cause, or for any damages resulting therefrom. In no event will Bloomberg Businessweek nor other companies or third-party licensors be liable for any indirect, special or consequential damages, including but not limited to lost time, lost money, lost profits or lost good will, whether in contract, tort, strict liability or otherwise, and whether or not such damages are foreseen or unforeseen with respect to any use of this document. This document, or any portion thereof, may not be reproduced, transmitted, introduced into a retrieval system or distributed without the written consent of Bloomberg L.P. © Copyright 2011 Bloomberg L.P. All rights reserved. The names of actual companies and products mentioned herein may be the trademarks of their respective owners. ELECTronIC VErsIon AVAILABLE To see or use an electronic copy of this document in PDF format, please visit the following Web site: Bloomberg Businessweek research services 2011 2 bloomberg bUsinessweek reseArch services
  3. 3. Executive Summary ▪▪ Among survey respondents, 80 percent claim that customer experience (CE) is a top priority. At the same time, most acknowledge their existing CE is somewhat mediocre. ▪▪ Profitable CE strategies are holistic, sustainable and focused on creating competitive differentiation. ▪▪ CE is not a single function but a practical and emotional manifestation of how a company delivers on the promise it makes to its customers, through all encounters, on all channels. ▪▪ A strong customer experience is just as important for B2B companies as B2C. Employees expect the same level of CE from business partners that they expect as customers in their private lives. ▪▪ The reward for successful CE is the development of loyal lifetime advocates for your brand, which may lead to increased revenues, reduced costs, co-development and growth in new markets. ▪▪ CE initiatives pose many challenges because they are transformative undertakings that often require restructuring of the organization, business processes and policies, and underlying systems. ▪▪ Passionate leadership is a must for CE, but it needs to be combined with specific financial goals and a business case. ▪▪ Two best practices for profitable CE are customer segmentation and focusing on areas to provide relevant, recognizable added value to targeted customer groups. ▪▪ CE should be pegged to business strategy and market position. ▪▪ Great CE is not necessarily expensive CE. often, getting the customer experience right the first time (via fully functional processes) avoids costly customer service interactions down the road. ▪▪ To be cost effective and sustainable, CE needs to be built on a sound IT infrastructure that affords everyone a 360-degree view of the customer.MethodologyBloomberg Businessweek research services (BBrs) launched a survey and research program in late 2010to discover and analyze the views of C-level and line-of-business executives in north America on customerexperience (CE). The research sought to determine these executives’ perceptions of the importance of creatingcompetitive differentiation by providing powerful CE, thus growing the business. The research also sought toidentify the importance of technology as a tool to maintain or even improve CE.The goals of this program included: ▪▪ Determining the level of recognition of the importance of a positive customer experience. ▪▪ Defining the elements of a positive customer experience that contributes to the financial well being of the company offering that experience. ▪▪ Identifying the challenges of developing and maintaining a positive customer experience for the long term while increasing profits. ▪▪ Understanding the technological foundation for a positive and profitable customer experience. ▪▪ Determining the impact of new technologies on the customer experience, such as data analytics, social media and mobile computing.This research program included both quantitative and qualitative components: ▪▪ A survey of director-level or above executives at large and midsize B2B and B2C companies in north America who are members of the Bloomberg Businessweek Market Advisory Board, an online panel ofbloomberg bUsinessweek reseArch services 3 FebrUArY 2011
  4. 4. 25,000 business executives. A total of 307 director-, vice president- and C-level executives responded to the December 2010 survey. For more information about the demographics of this survey, refer to the “Methodology” charts below. ▪▪ In-depth telephone interviews with C-level and other senior executives at large and midsize companies. The companies involved include: ▪▪ Arizona Cardinals Football Club ▪ Coop ▪▪ Cardinal Health ▪ Disney Institute ▪▪ Colmobil Corp. ▪ The Lego Group ▪▪ Comcast ▪ Marriott International Inc. ▪▪ Interviews with leading independent consultants, industry analysts and academics, in addition to survey data from research firms, to provide context and additional insights. The experts include individuals from the following firms: ▪▪ Denis Pombriant, Beagle research Inc.Methodology ▪▪ Convergys ▪▪ Paul D’Alessandro, Diamond Advisory services atRespondents by Title PricewaterhouseCoopers Director/ ▪▪ Forrester research Inc.C-Level: 23% Vice President: 39% ▪▪ David Gardner, Mass-customization-expert ▪▪ Don Peppers and Martha rogers, Peppers & rogers Group ▪▪ PricewaterhouseCoopers ▪▪ shaun smith, smith+co ▪▪ Lior Arussy, strativity Groupsenior Vice ▪▪ John Goodman, TArP WorldwidePresident/Executive Vice President/ ▪▪ Bruce Temkin, Temkin GroupGeneral Manager: 37% ▪▪ Charles Patti, University of DenverRespondent Company Size by Revenue ▪ A poll of 1,004 senior managers and directors from companies$5 billionplus: 40% $200 million- with at least $500 million in annual revenues. Two-thirds of those $499.9 million: responding to the poll were at the vice president and executive levels. 17% Approximately 30 percent of the respondents were from the United states, 30 percent from Europe, 30 percent from Asia and 10 percent $500 million-$1 billion- $999.9 million: from the rest of the world.$4.9 billion: 14%29% Triangle Publishing services Co. Inc. supported BBrs in the development of the survey questionnaire, in addition to providing the in-depth telephoneRespondents by Industry interviews and the writing, editing and production of this report. BBrs and other: 25% the author of this report, Lauren Gibbons Paul, are grateful to all of theManufacturing retail/ executives who provided their time and insights for this 28% Wholesale: 5% nonprofits: 5% This research project was funded by a grant from sAP but was written independently of this sponsor. The editorial department of Bloomberg Healthcare/ Pharmaceuticals: Businessweek magazine was not involved in this project. 8% For more information about this project, please contact samuel Gager of Business Financial services:11% services: 18% Bloomberg Businessweek research services at Businessweek research services, 2010 FebrUArY 2011 4 bloomberg bUsinessweek reseArch services
  5. 5. IntroductionGlobalization. Consumerization of technology. Digitally engaged customers. Widespread use of social media.The proliferation of communication channels. Widespread commoditization. All of these factors—combined witha post-recession economy that offers few avenues for new growth—have shifted the familiar ground on whichcompanies worldwide have differentiated themselves from competitors and interacted with customers. Consider,for instance: ▪▪ Consumers and business buyers are in the driver’s seat, thanks Figure 1 to online forums, social communities and social media sites. ▪▪ The Web and mobile devices have increased expectations Customer Experience a Top Priority In a recent survey, 80% of respondents said that getting closer to for transparency, immediate response and intuitive business customers and providing them with a differentiated experience is processes. one of their top strategic objectives. Here is a breakout by industry: ▪▪ Differentiation is more difficult to maintain, with competitive offerings just a mouse click and a “free-shipping” offer away. Telecom 92% ▪▪ Whereas customer relations used to be considered a sales or High-Tech 90% service function, customer experience encompasses everything Healthcare/ 86% from the first impression of the brand all the way to sales, Pharmaceuticals fulfillment, invoicing, billing, collections and after-sales service. nonprofits 73%The result: Companies across all industries—B2C and B2B—are Travel 71%realizing it is no longer good enough to simply “treat customerswell” and aim for customer satisfaction. Today, businesses are Base: 1,004 respondents from midsize to large companies, worldwide.striving to develop loyal, engaged advocates who would not even source: Bloomberg Businessweek research services, 2010consider a competitor because they are emotionally connected to,absorbed in and—maybe—even helped create the offerings theyalready receive (see Figure 1, “Customer Experience a Top Priority,” above). The most loyal of customers are alsoapt to spend more, pay higher prices and recommend the company, says Lior Arussy, president of strativity Group,a customer experience research, strategy design and implementation firm.Companies are no longer in the business of selling products and services—they are selling a “customerexperience.” And a customer experience is not one thing but many: It is the practical and emotionalmanifestation of how a company delivers on the promise it makes to its customers through its call center,Web site, products, services, social media presence and even word-of-mouth anecdotes—in short, every directand indirect customer encounter a company has across all its customer or enterprise functions (see Figure 2,“Elements of Customer Experience,” on page 6).The business world is outgrowing the strategy of using financial “perks” such as loyalty programs to discouragecustomers from switching to a competitor, says Paul D’Alessandro, partner at Diamond Advisory services atPricewaterhouseCoopers (PwC). Instead, new strategies are based on creating “psychological” incentives to stay.“In the past, companies have invested hundreds of millions of dollars into programs that financially handcuffcustomers to their solution,” he says. “Today, they need to build up a bank of appreciation by addressing customerneeds exactly how they want them addressed, and that’s much more powerful than a loyalty program.”This “bank of appreciation” is built through the cumulative effect of three factors, according to D’Alessandro. First,the stories people hear through word-of-mouth and the media; second, through direct interaction; and finally, through“moments of truth,” which are profoundly positive or negative experiences that lead to long-lasting impressions. Hecites a recent PricewaterhouseCoopers survey, “The PwC Experience radar,” in which a respondent described JetBlueAirways flight attendants handing out pizza during a flight delay. “This happened four years ago, and it was still aformative notion of this person’s experience of JetBlue,” he bUsinessweek reseArch services 5 FebrUArY 2011
  6. 6. Moving Beyond Mediocre Despite general agreement among the majority of companies that customer experience is a high priority, most believe that, so far, they are not doing a very good job of providing CE (see Figure 3, “Differing Views,” on page 7). It is no wonder. CE initiatives involve a wide range of challenges that many companies are still working to meet (see Figure 4, “obstacles to a Powerful Experience,” on page 8). For over two-thirds of respondents, a main obstacle is siloed operations and disconnected tools and technologies. For the majority of respondents, creating a backbone of integrated processes and applications is a key component to delivering a stronger customer experience. Indeed, customer experience work requires a process of transformation, according to strativity Group’s Arussy. The transformation includes assessing the customer journey, identifying loyalty drivers, pinpointing the gaps between expectation and current performance, Figure 2 and then initiating innovative processes to address those gaps. “You need to develop a vision of what your CE should be, what you wantElements of Customer Experience to be known for, and then attach that to your brand promise andrespondents said their organizations considered the followingas the most important elements of a positive experience for their delivery and apply it across the whole organization,” he says.customers (rating them a 4 or 5, on a scale of 1 to 5). This transformation often requires reorienting the whole of your Attribute Percent of organization—people, processes and technology—to focus on the Respondents customer. In fact, it flips the dynamic that has been in place forever. The quality and reliability of your now, customers expect to tell you what they want, rather than company’s services 94% passively receiving whatever you choose to offer. The quality and reliability of your company’s products 92% such a major change is hard for any organization to assimilate. And yet this is just what some companies are doing. Take, for The perceived value of your company’s products and services—the importance of example, Colmobil, an automobile importer in Israel. As part of the customers’ perception that they feel 90% its transformation from to product-centric to customer-centric, they received value for their money Colmobil completely revamped not only its organizational structure The relevancy and timeliness of but also its legacy systems, both of which were designed to support interactions with your customers 85% more traditional business processes. The responsiveness of your company to customer feedback and acting on that 84% “After many years of working this way, we started realizing the feedback customer may touch the company in each and every division, The ease of doing business with your and even in different divisions at the same time,” says Gil Katz, company 82% CIo at Colmobil. The company wanted to provide a consistent, The consistency of your company’s personalized experience across all of these interactions. support and treatment of customers across 82% channels Colmobil replaced its legacy system with an integrated platform of ErP, CrM and industry solutions. It restructured its brand-focused divisionsBase: 307 director-level and above executives at midsize and largecompanies. to focus on how customers view the vehicles, in addition to doublingsource: Bloomberg Businessweek research services, 2010 the size of its service division. “now, we’re built to face the market and the customers rather than the brand we’re selling,” Katz says. Financial Goals These types of challenges make adopting a “customer first” philosophy impossible, “unless the leadership believes in the mission and has some fervor about it,” says Charles Patti, Professor of Customer Experience Management in the Daniels College of Business at the University of Denver. At the same time, embarking on a customer FebrUArY 2011 6 bloomberg bUsinessweek reseArch services
  7. 7. experience program does not mean investing endless money without knowing what the return will be. “You can’tgo bankrupt trying to deliver great CE,” he says. “You need to calculate the roI.” Figure 3Arussy from strativity Group agrees. “If there’s no financial driver, wedon’t recommend companies do this,” he says. “It has to be something Differing Viewsyou can point to and say, ‘We have moved the needle on either revenues The average rating that companies give the customeror expenses.’” experience they provide is 3.62 on a scale of 1 to 5, although there are variations by industry sector.However, it is also a mistake to view customer experience management andsimilar technology as a direct path to increased revenue. “Most executives High-Tech 4.07think, how can we use this technology to sell more stuff?” says Don Peppers, Professionalfounding partner of Peppers & rogers Group, a CrM consulting company. “A services 3.76better question is: How can we use this technology to deliver more value to Healthcare/ 3.47our customers—better, faster and cheaper?” Pharmaceuticals Manufacturing 3.47Companies that are known for customer experience “put purpose before Telecommprofit,” says shaun smith, president of CE consultancy smith+co. “They 2.94believe that by focusing on customer value, they can become more profitable Base: 1,004 respondents from midsize to large companies, worldwide.and sustain these profits longer than the competition.” source: Bloomberg Businessweek research services, 2010Passionate PromotersThe value that gets passed on to customers can come back to a company in a number of ways, including awillingness to recommend the company or product to a friend. This is a key customer experience metric (oftencalled the “net promoter” measure). For some companies, such as The Lego Group, loyalty and engagementgrows to the point where an elite group of super-users forms and co-develops your next generation of productswhile ensuring new offerings match real-world demand.Lego Ambassadors comprise 42 of the world’s top aficionados, representing 24 countries. The broader Legocommunity nominates the most influential individuals to attain this status, according to Conny Kalcher, Legovice president of consumer experiences. Lego hatched the idea as a productive way to harness the considerableexpertise of their most passionate customers.Lego brings its Ambassadors on-site to different locations globally to participate in special projects, be it Webinvolvement, game development or community development. “They can demonstrate the potential for the brandmuch more powerfully than we can,” Kalcher says.Lego’s CE initiative is profitable. It is based on the practice of customer segmentation, wherein every customerenjoys the Lego experience best suited to them while the highest value experience is reserved for the highestvalue customers.Narrowing the DeltaAlthough CE presents a total value proposition to all customers, experts still advise companies to combine thatmore populist approach with the use of customer segmentation, fueled by customer data analytics (see Figure5, “Target Customers,” on page 9). The idea is to ensure you are concentrating your resources on high-worthcustomers who will repay the investment—now or via an expanded lifetime bUsinessweek reseArch services 7 FebrUArY 2011
  8. 8. some companies offer customers perks, whether that makes business sense or not. “When you fail to treat different customers differently, you are going to spend too much money on customer service” while not focusing enough on high-value customers, says Martha rogers, co-founder of Peppers & rogers Group. Zappos, a company often cited for superior customer experience, gives all of its customers free shipping and free returns. However, this may not be a sustainable practice going forward. “If you give everyone the same benefits, you are asking your best customers to subsidize your worst customers,” rogers says. A recent study by relationship management firm Convergys bears this out. The company found that while 89 percent of surveyed customers said they are loyal, only 46 percent of this group makes more frequent purchases and about one-third do not recommend the company to others. However, about 15 percent of surveyed customers Figure 4 were identified as “super-loyalists” or “advocates,” exhibiting more profit- inducing behaviors such as recommending the company, making moreObstacles to a Powerful Experience frequent purchases, not shopping at competitors and responding to requestsrespondents named the following as “major” and “frequent” for feedback, special offers/discounts and new products/upgrades.obstacles to improving the customer experience. Marriott International Inc. has done customer segmentation for many Percent of Respondents years, via its 27-year-old rewards Program. Half of the hospitality giant’s revenue is from rewards members, and a smaller sub-segment of top- organizational and process silos in our company 73% value customers—Platinum members who stay in a Marriott brand hotel 75 Lack of coordination across nights or more per year—provide a significant revenue base, according to channels to ensure consistency 72% Mike Keppler, senior vice president, Marriott sales, marketing and revenue Large number of disconnected management systems. tools, technologies and applications 71% Lack of a complete view of the “We work to provide an excellent experience for all of our guests but customer to better understand their 66% also to provide more specialized services for our top-value guests, needs and make interactions more using information we gather about them,” says Ed French, senior vice relevant and customized president of Marriott rewards.Base: 307 director-level and above executives at midsize and largecompanies. What is different today is the growth in the variety of customersource: Bloomberg Businessweek research services, 2010 touchpoints, which are increasingly digital, in addition to the growing demands for access and control among all of Marriott’s guests. “our guests spend more than three million hours per year on our Web site, which is 15 times more than the calls our reservation office handles,” Keppler says. For its top-value guests, Marriott’s system capabilities allow all touchpoints to recognize these customers and tailor the service, including self-service, to the guest’s value, history and preferences. For instance, top-value guest calls are routed to a special team of agents based on the incoming phone number and other information. Agents are provided with a variety of options to ensure quick service, with pre-negotiated rates, room preferences and, in some cases, special requests for the hotel. In addition, if Marriott sees a decline in a top-value customer’s total revenue or number of reservations, an agent calls or e-mails that customer to see if there are issues to resolve. “It’s usually that their personal situation has changed,” French says, “but in 10 percent of the cases, there is an issue we can take action on. What has been surprising is how effective simply reaching out to the guest can be.” “We found that even in the tough economy, our rewards members continue to stay with us, and we saw their business stay strong worldwide,” Keppler says. FebrUArY 2011 8 bloomberg bUsinessweek reseArch services
  9. 9. Relevant Value Figure 5In addition to customer segmentation, a second key element Target Customersof profitable customer experience is identifying the make- While most companies with CE initiatives clearly define target customers andor-break customer interaction points and applying highly communicate the importance of serving them, fewer have practices in place to monitor interactions with those customers and apply decision-makingrelevant and valued experiences to those moments of processes with their needs in mind.interaction. Understanding what a relevant and valuableexperience is, once again, a matter of analyzing data on n▪Percent of Companies with a CE Executive n▪Percent of Companies Without a CE Executivecustomer behavior, needs and preferences. Clearly defined 62%To truly optimize relevant, highly valued experiences, set of targetcompanies need to understand which experiences customers customer segments 56%are actually willing to pay for, Diamond Advisory services’ Primary research used to fully 48%D’Alessandro says. This means knowing not only how understand the needs andhighly they value attributes such as accessibility, trust and behaviors of target customers 39%innovation but also whether are they willing to pay for them.“Companies need to get to a point where they know the Quality of interactions 38%actionable things to tackle and the economic return,” he says. with target customers is closely monitored 21%An example he cites is southwest Airlines’ “early-bird check- Decision-making processes 35%in” offering, where customers can pay extra to move to the systematically incorporatefront of the check-in line. The company framed this offering needs of target customers 23%in such a way that customers could understand its value,in addition to offering it at strategic moments, he says. so Base: 69 companies with a CE executive and 62 companies without a CE executive.while traditional ticket purchasers would automatically source: Forrester research, “The state of Customer Experience, 2010”go for the lowest price offering, the system now looks forcertain behaviors, demographics or situations—ticketspurchased close to departing time, complex routes, businesstravelers—and pops up the offering in the moment.Another good example is Coop, a grocer in switzerland that recently began offering customers an iPhone grocery-shopping application that is tightly integrated with its back-end ErP applications. Coop paid close attention todemographics and customer needs. With about 13 percent of the swiss population owning an iPhone, and storestypically closing at 6:00 PM on weekdays and all day on sundays, the iPhone application represents both relevanceand convenience. Coop’s back-end integration means the application shows real-time price changes and productavailability, which is a prime differentiator from the chain’s nearest competitor, which also recently began offering aniPhone application.Building a Business CaseTo be profitable, your customer experience strategy must match your corporate business objectives and market,and your business case should explicitly spell out this linkage. For example, a provider of low-end but reliablelodging will not have the same type of customer experience as a four-star resort.“Companies are not obligated to wow their customers every time,” says Bruce Temkin, managing director ofconsulting firm Temkin Group. “They should have an appropriate customer experience strategy to support theirbusiness strategy.”bloomberg bUsinessweek reseArch services 9 FebrUArY 2011
  10. 10. When developing a business case, the financial drivers of CE will, in most cases, come down to the following areas: ▪▪ Increased revenue. In addition to data that shows loyal customers spending more, the revenue benefits of improvements in customer service are also well documented, reaching 10 to 20 times the cost implications, according to John Goodman, founder of customer experience agency TArP Worldwide. ▪▪ Premium pricing. Closely related is the ability to charge loyal customers higher prices for experiences they value. According to a recent strativity Group survey, loyal customers who feel they are getting a superior experience are willing to pay premium prices of 10 percent or more vs. dissatisfied customers (see Figure 6, “Financial rewards,” below). ▪▪ Customer retention. When a customer encounters a problem, there is an average 20 percent drop in loyalty, Goodman says. This can vary from 2 percent to 70 percent, depending on problem type (for example, a torn package might be 2 percent while infestation of a food item would be 70 percent). In the average market, for every five customers with problems, you will likely lose one of them—along with their revenue. on the flip side, if you can prevent or fix five problems, you will retain one customer (and his revenue) who otherwise would have been lost, he says. D’Alessandro cites similar statistics. In the insurance industry, normal churn is about 9 percent, he says. But according to a study Diamond Advisory services conducted, that jumps to 17 percent if a customer has one bad customer experience or, more specifically, a “moment of truth.” ▪▪ Improved reputation. on average, double the number of people will hear about someone’s bad experience as will hear about a person’s good experience. This outcome is even more dramatic on the Web, where four times as many people hear about a negative experience vs. a positive one, according to Goodman. Figure 6 on the other hand, the mere existence of a sensational negative Web site or Facebook page is generally not enoughFinancial Rewards in itself to sway consumer opinion, at least not over the longIn a recent survey, consumers clearly stated that a superior customer haul, if other aspects of customer experience and customerexperience delivers superior financial results. service are solid. “What ultimately erodes customer loyaltyn▪Percent of Loyal Customers* is how you treat customers and interact with them, not thosen▪Percent of Dissatisfied Customers** outrageous social media sites,” such as “Comcast Must Die,” Expand purchases 73% Temkin says. by 10% or more 65% ▪ Reduced costs. In some cases, a shift to customer-centric recommend the 58% company to others n/A; this question is used to qualify dissatisfied customers processes may create efficiencies that translate into reduced costs. At Comcast, Frank Eliason (now senior vice president remain a customer 55% of social at Citi) famously helped the company manage for 10 years or more 12% an online forum for customers to help each other with Pay a premium price 29% troubleshooting. The cost savings of this approach can be of 10% or more 11% extended if you take that peer-to-peer support information and create a knowledgebase for your phone agents, he says. Expect discounts of 5% 19%or more to continue doing business with company 66% “At Comcast, we found that 80 percent of forum participants got the answer they needed through the forum,” Eliason says.* Base: 930 consumers in north America, 2010. “If we were traditionally getting 14.5 million calls per month** Base: “Dissatisfied customers” are those who gave a ranking of 1 to 3 for“likelihood to recommend the company to others.” The base in this case is and 80 percent are taken care of in the forums, how many62 respondents. calls does that avoid? Even conservatively, at $8 dollars per phone call, there are huge savings in just one month.”source: strativity Group, in partnership with Customer service Experts FebrUArY 2011 10 bloomberg bUsinessweek reseArch services
  11. 11. smith+co’s shaun smith also points to the process changes at Progressive Insurance, which created thepractice of mobile claims assessors for automobile accidents. This program cut the administrative cost of claimsprocessing and reduced the amount of an average settlement because people are willing to accept less whenthey do not have to wait longer.Conclusion: The Cost of Ignoring CEThe consequences of ignoring customer experience will be dire, sooner or later. As with all negatives, the cost ofnot doing CE is hard to measure but cannot be underestimated—the stakes are as high as extinction.A good example is Dell Inc., which in 2005 saw its customer satisfaction score slip five points, according toratings by the American Customer satisfaction score Index, which is conducted by the University of Michigan.The dip was largely attributed to the viral response to the blog postings of an unhappy customer, along withDell’s slow response to the beating it was taking online. The following year, Dell hired a vice president ofcommunities and conversations to monitor and manage social media activities.Even if you do not get caught in a viral episode of this magnitude, customer experience ultimately solvesthe business problem of how to differentiate your offering in a way not easily copied by a competitor. This isespecially important in an age of increasing commoditization, according to David Gardner, founder and principalof consultancy Mass-customization-expert. He points to the early days of the MP3 player as an example of howthis can play out. Though widely considered as one of the weaker market entries, the Apple iPod succeeded indifferentiating itself via design, the streamlining of music sales through iTunes, an innovative retail experienceand emotional appeal. The others were left to compete anemically on price.You also need to consider the costs of customers themselves—the cost of a complaint, a bad experience andcustomer churn—and how much money you are leaving on the table by not providing customer experiencetailored to business objectives, strativity Group’s Arussy says. “Companies are accustomed to treating thecustomer relationship more like an art than a science, so they’re making decisions without real information,” hesays. An example is a $300 million cost-reduction effort that could lead to a $1 billion loss of revenue becauseyou have become irrelevant to customers, Arussy says.Taken further, because of the emotional appeal of a powerful customer experience, even if all companies began tocompete on this basis, their differentiation and competitive advantage would not be sustainable in the long term.“The world is very competitive—our competitors see and emulate our success over time,” Marriott rewards’French says. However, the two elements that can keep companies perpetually ahead of the game are a laser-likefocus on taking care of customers and staying ahead of the curve in managing their experience, he says.If annihilation is the ultimate price of not doing customer experience, the potential benefits of successful CE arelegion. If you can deliver highly valuable experiences to your customers, in a sustainable way, the reward will beloyal, engaged advocates who help you grow your business. nbloomberg bUsinessweek reseArch services 11 FebrUArY 2011
  12. 12. SPOnSOR’S STATEmEnT The Key Elements of Customer Experience Demolish boundaries between functions to create transparent and efficient customer-facing processes. To better understand how companies can provide a superlative customer experience and still make a profit, Bloomberg Businessweek Research Services interviewed Reza Soudagar, Senior Director of CRM Solutions at SAP. He has two decades of experience developing and implementing CRM solutions. Soudagar is also a co-author of a new book on customer experience, to be published by McGraw-Hill in September 2011. An edited Q&A of that discussion follows. What are the key attributes of a customer results—usually enabling organizations to resolve experience solution? the issue in the first contact. We have the ability Customer experience is defined by every touchpoint to coordinate the dispatch of a repair person and in the enterprise, not just the traditional customer the spare part from a warehouse after checking on relationship management components—sales, availability; it’s all incorporated into the sAP CrM service and marketing. Today, organizations need service suite. to think about how all their customer-facing processes can be How important are mobile devices in customer transparent, from start to finish. In experience? the modern age, there should be no The reality out there is that a multi-channel approach boundary between ErP and CrM. is really important. Many times, customers choose To do that, integration is crucial. many channels for one transaction. A service request may start via What types of integration are a smartphone and important? then go to an onlineReza Soudagar For MoreSAP CRm Process and data integration. chat or e-mail. WeSolution management Customer-facing processes must see more transactions Information be flawlessly integrated, from being conducted via sAP’s Web site offers a beginning to end. The process integration we offer smartphone. wealth of information makes sure there are no breakdowns. Data integration about how to provide basically means there will be a single source of truth. The proliferation of a superb customer Accurate data delivered in real time to the customer channels adds to the experience at a profit. and the customer service reps provides positive complexity. We provide Go to moments of truth, when a customer wants to make a the capability to for more information. purchase or resolve a problem. incorporate a mobile platform, to enable Where are companies most vulnerable to damaging companies to create the customer experience if their systems and data applications for any device and integrate those aren’t integrated? applications with their sAP back-office system. The Customer service. After-sales support is one of those sybase mobility platform also enables organizations moments of truth. When a customer needs help, our to write the application once and then deploy it for service functionality takes the request and delivers multiple mobile devices. n bUsinessweek reseArch services FebrUArY 2011 12 FebrUArY 2011 bloomberg bUsinessweek reseArch services