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 * Meet the Customer Innovations’ Team


CUSTOMER INNOVATIONS – CREATING INFLUENTIAL EXPERIENCES

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 * Contact us at info@customerinnovations.com
   
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   CEO: FRANK CAPEK
   
   
   
   
   Click here for information about having us conduct a workshop for your
   organization or speak at your private event.
   
   My name is Frank Capek and I am Chief Experience Officer of Customer
   Innovations, Inc. I've spent 25 years helping companies design and deliver
   the most compelling experiences for their customers. Over this time, I've had
   the chance to do customer experience work with more than 50 major
   corporations across industries. This has included helping them: understand
   how customers think, feel, and act; designing products, services, processes,
   and technology that enable more effective customer experiences; and aligning
   leadership, employee experiences, and organizational behavior to deliver.
   
   My research and intellectual energy has been focused on understanding the
   cognitive and neurological foundations of how people experience the world...
   independent of their roles as customers, employees, or members of any social
   network.
   
   I graduated with degrees in mechanical engineering from MIT; mathematics from
   the State University of New York; and have conducted research and advanced
   studies in artificial intelligence and applied mathematics.
   
   
   Subscribe to Customer Innovations Weblog by Email


 * BLOGROLL
   
   * Banking on Customers
   * Bruce Tempkin’s Blog
   * BSG Concours
   * Customer Experience Leaders
   * Guy Kawasaki’s Blog
   * Jonah Lehrer’s Frontal Cortex Blog
   * Kelly Mooney’s Blog
   * Maritz Website
   * Neuroeconomics Blog
   * Neuromarketing
   * Olson Zaltman
   * The Bank Channel
   * The Skeptic Society
   * Total Experience Blog


 * READING ROOM
   
   
 * 


WE’RE MOVING TO THE NEW CUSTOMER INNOVATIONS WEBSITE

Posted on March 21, 2012 by Frank Capek

We are very happy to announce that Customer Innovations is moving to a new and
updated home on the web.

You can find us at:  www.customerinnovations.com

The ideas and insights we’ve been sharing on this blog site have already been
relocated to this new location.

Onwards and upwards,

Frank Capek,  CEO, Customer Innovations, Inc.

Filed under: B-to-B Experience, Case Studies, Cognitive Ergonomics, Customer
Analytics, customer behavior, Customer Experience, Employee Experience,
Financial Services Experience, Neuroeconomics, Organizational Behavior, Personal
Experience, Uncategorized | Leave a comment »


EMPATHY IN ACTION: SUSTAINING SUCCESS WITH CUSTOMERS

Posted on January 9, 2012 by Frank Capek

“The purpose of business is to create and keep a customer.”

“The aim of marketing is to know and understand the customer so well the product
or service fits him and sells itself.”

Peter Drucker

Its not difficult to find support for what appears to be an ultimate truth;
customer-centricity is THE central element of business success.  Since virtually
every business leader espouses this truth, it must be great to be a customer!

Unfortunately, in practice, fragmented roles and accountabilities for the wide
range of activities associated with “being in business” tend to create issues.
 Surprisingly few organizations actually behave in a way that’s customer-centric
and, as you know, being a “customer” is often frustrating.    According the
national reporting body for the American Customer Satisfaction Index (ACSI),
customer satisfaction “continues on the path it has been for quite some time
now: in the aggregate, it is going nowhere.”

 

Issue:  Customer – Object versus Person

After having the chance to work with the leaders of many dozens of companies,
I’ve noticed a distinguishing feature of organizations that engage with
customers in a way that fuels continued innovation and economic success.   It
starts with how leaders and people throughout with organization think about and
talk about their customers.

According to dictionary.com, customer means…

 1. A person who purchases goods or services from another; buyer; patron.
 2. Informal.  A person one has to deal with: a tough customer; a cool customer.

The foundation of this definition is “person.”   A customer is a person or, in
the case of business-to-business, often a network of people.   A distinguishing
characteristic of organizations that sustain success with customers is their
ability to engage with customers as people.   This seems like it should be
easy.   However, even casual conversations with leaders in many businesses
reveal that the organization is focused on customers not as people but as
objects.

According to dictionary.com, “objectify” means…

 1. To present or regard as an object
 2. To make objective, external, or concrete.

Objectifying people generally involves intentionally or unintentionally treating
them as a means to an end, without any deep, visceral understanding of their
lives, feelings, priorities or preferences.    As a result, organizational
behavior tends to be at best – reactive, and at worst, self-serving and
manipulative.

There are several indicators of businesses that objectify customers.  People in
leadership positions don’t spend much time in open dialogue with customers about
what they need and what’s working and not working about their experience.  
Insights about customers tend to be surface-level descriptions.  Conversations
about customers tend to be abstract and removed rather than concrete and
personal.   People on the front line may be following the process but, at best,
“pretending to care.”  The company might measure customer satisfaction with the
company’s touch points but doesn’t really know what customers do end-to-end, how
they make choices, and how the overall experience makes them feel.

These characteristics stand in stark contrast to businesses that appear immersed
in their customers’ lives and, as a result, deliver a very personal, human
experience.   As consumers, we recognize these businesses.  They range from the
small and local (e.g., your favorite restaurant or local retail establishment)
to the larger scale businesses of which my favorites include Chick-fil-A,
Zappos, Nordstrom, Umpqua Bank, and Apple.

Personifying Customers:  Empathy in Action

In order to create real loyalty and sustain customer-focused innovation,
organizations need to adopt a discipline for personifying customers.   This is
even more critical as organizational transparency increases.  Personifying
customers includes structured ways to embed empathy in the core processes of
customer discovery, design and delivery.   Empathy is the identification with or
vicarious experiencing of the situations, feelings, thoughts, or attitudes of
another.   The core processes include:

 * Empathic Discovery.  Most of what companies know about their customers tends
   to be descriptive and data driven:  who they are, where they live, what
   they’ve purchased, how long they’ve been a customer, etc… There may be a
   segmentation analysis that groups customers by attitudes, etc… However, in
   most cases, there is no rigorous framework for personifying customers in a
   way that builds empathic understanding.  This includes structured ways to
   answer:  who are these people, what are the situations they’re in, what’s
   important to them and what are they trying to accomplish, how do they
   evaluate alternatives and make choices, what do they do outside of the
   limited set of contacts with our business, and what emotional states
   influence behavior?  
 * Empathic Design.  Empathic design leverages empathic discovery in order to
   create products that allow customers to more easily accomplish the goals that
   are important to them.  This includes designing products and services that
   customers love because they’re meaningful and make them feel good.  This
   often includes the design of products, services, or modes of interaction that
   customers don’t even know they desire or, in some cases, solutions that
   customers have difficulty envisioning due to lack of familiarity with the
   possibilities offered by new technologies or because locked in a old mindset.
 * Empathic Delivery.  Customer service is a monologue; it’s about technical
   delivery, standards, and execution.  The company decides what to do and how
   to do it.  Well-designed and executed customer service usually does a good
   job of meeting customers’ baseline needs and expectations.  On the other
   hand, empathic delivery is a dialogue.    It’s about watching a customer’s
   experience with every sense and following up with a thoughtful and
   appropriate response that demonstrates that you really care and are on their
   side.   It enables the organization to surround products and programmatic
   services with personal touch.

Unfortunately (and fortunately for competitors), empathic delivery is rare in
the business world.  Processes, policies, metrics, resource constraints, as well
as more deeply entrenched unwritten rules often get in the way.  Since empathic
delivery cannot be fully scripted, it leads to significant implications for the
employee experience.  Employees must have enough “elbow room” to do the right
thing for customers.  This requires a deliberately designed pattern of
interventions in the employee experience including recruiting, incorporating,
training, communicating, measurements, and rewards.  It also involves surfacing
the unwritten rules that may be driving employee behavior inconsistent with the
desired customer experience.

Integrating Customer and Employee Experience

Not surprisingly, putting empathy into action requires a tightly integrated
perspective on customers and employees.   You can’t treat customers with empathy
without doing the same for employees.   This is one of the reasons that many of
the companies that appear on Fortune’s list of best places to work are
businesses that deliver a very effective customer experience.   However, as
covered in several previous posts, a highly engaged workforce is necessary but
not sufficient.  (See:  A Break in the Service Profit Chain:  Why Increases in
Employee Engagement Don’t Improve the Customer Experience).  In addition, if
you’re interested, please feel free to check out the white paper titled:  
“Getting the Employee Experience Right:  Creating Employee Experiences that
Drive Business Growth.”

Customer Innovations works with leading brands to “embed empathy” into the
design and delivery of experiences that are both positive for customers and
profitable as well as strategically relevant for the business.

Filed under: Customer Experience, Employee Experience, Organizational Behavior,
Uncategorized | Tagged: acsi, Customer Experience, customer strategy,
customer-centric, empathic delivery, empathic design, empathic discovery,
empathy, empathy in action, Employee Experience, innovation, personify, peter
drucker | 1 Comment »


MOVING FROM SERVICE TO SIGNATURE EXPERIENCE

Posted on January 3, 2012 by Frank Capek


THE LIMITATIONS OF  SERVICE

Service has always been and probably will always be critically important.   
Every viable company must provide for an acceptable and effective level of
service in order to retain customers, avoid the cost associated with repeated
service interactions, and lost revenue associated with negative word of mouth.

While providing the finest levels of service may be a virtuous objective, we’ve
found that it is extraordinarily easy to make ineffective and uneconomic service
investments.   In situation after situation we’ve seen companies simultaneously
under-deliver on service elements that are important to customers and
over-deliver on service levels customers may not care about or even notice.  For
example, many companies attempt to optimize speed to answer or satisfaction with
service rep interactions rather than dealing effectively with issue avoidance or
measuring and minimizing overall customer effort.  Unless your organization is
unlike any other we’ve worked with, I can say with near certainty that you’re
currently making uneconomic investments in both service delivery and service
improvement.

There are several factors that contribute to the problem, including:

 * Service is an inherently introverted activity.   Service is something a
   company provides.    Since there are clearly costs associated with service
   delivery, most companies understand and carefully manage these costs.  
   However, in most cases, the real economic value of service is directly
   connected to customer behavior.   Does the service you provide actually
   influence customers and prospects in a way that builds and sustains
   profitable revenue streams?
 * Service often reinforces fragmentation.   In most organizations, providing
   service is assigned to specific front-line functions, including field
   representatives, call centers, etc…    In many cases, these front-line
   functions are stuck with the difficult job of making up for systemic issues
   created at the core of the enterprise.   As a result, the front-line can end
   up caught in the middle between a broken system and a frustrated customer
   with little ability to address any of the deeper systemic issues.
 * Service quality is usually a poor differentiator.  Every company provides
   some level of service.  Differences in service quality can be described as a
   difference in degree.   A difference in degree is something every one does
   but some do better than others.   The unfortunate fact is people on the
   receiving end have a very hard time perceiving differences in degree.  Not
   only that, but since differences in degree often correspond with literally
   hundreds of service levels, they tend to be very expensive to improve.
   Efforts to enhancing differences in degree are often investments in better
   sameness.  However, not all differences are created equal.   People have a
   very easy time perceiving a difference in kind.   A difference in kind is
   something I get from one that I don’t get from another; it’s fundamentally
   different and may even catch me by surprise.  Virtually every example of
   companies that have differentiated based on service (e.g., Amazon, Zappos,
   Container Store, Starbucks, Chick-fil-A etc…), do so with a relatively small
   number of differences in kind not just a large number of differences in
   degree.  The good news is that creating a small number of differences in kind
   doesn’t necessary cost as much as ramping up a large number of differences in
   degree.





FROM SERVICE TO SIGNATURE EXPERIENCE

So, what’s the solution?  We need a fundamental shift from focusing on
delivering service to focusing on and finding ways to improve experiences.  What
do we mean by experience?

 * Experiences are something that people have.  A company may influence that
   experience but, in the end, the experience only resides with the person.  
   Experiences exist within the context of the goals and desired states a person
   is trying to achieve, as well as the end-to-end set of activities they engage
   in to accomplish those objectives.  The only way to understand the experience
   is to understand how people are having the experience.
 * Experiences do not just happen at service touch-points.   Experiences can
   certainly be influenced by how an organization provides service, but it’s
   critical to pay attention to the broader context. Most opportunities to
   improve experiences do not just happen at the service touch points.  The
   greatest opportunities to create differentiated experiences come from
   understanding what happens at the non-touch-points.  How do we help them
   create new possibilities?  How do we minimize the effort associated with what
   customers are really trying to accomplish?  How do we eliminate points of
   confusion or frustration?
 * Experiences influence how people feel.  Not surprisingly, companies tend to
   focus a lot on how customers feel about their products and services.  
   However, experiences influence how people feel about themselves.  For
   example, does the experience make people feel smart, powerful, understood,
   cared for, or in control?   Of does the experience make people feel stupid,
   confused, marginalized, manipulated or frustrated?  If a company creates an
   experience helps people feel good about themselves, these customers will end
   up feeling great about the company and its products or services.
 * Experiences are social.  Most experiences involve things that people do
   together or engage in as a means of social expression.   The most powerful
   and influential experiences change the way people relate to each other.   For
   example, leading grocery retailer HEB’s experience design is orchestrated
   around the family experience of mealtime.   The most effective way to think
   about customer relationship management might be… what are the relationships
   are customer care most about and how can we create an experience that
   positively transforms those relationships.
 * Experiences create distinctions that influence behavior.   Experiences exist
   in what people remember, the stories they tell, the conclusions they draw,
   the decisions and resolutions they make, and the meaning they derive from it
   all.   The most powerful and influential experiences are designed around a
   differentiated commitment and a series of high-contrast “signature elements”
   that catch people by surprise and represent a difference in kind.

For example, the Starbucks experience represents a comfortable, inviting,
predictable and highly social “third place” to go (beyond home and office).  The
experience design incorporates a set of “signature differences” including the
products (unique drinks and serving sizes), baristas, ordering interactions,
service flow, store design, music and other peripheral products, and commitment
relevant causes.

As another example, ZipCar creates an experience that addresses the
non-touch-point opportunities in the traditional car rental experience.   ZipCar
enables people to easily access a shared interest they have in cars located
throughout their community.


WHAT DOES THIS MEAN FOR B2B?

Moving from service to experience is also critically important for
business-to-business providers.    First of all the stakes are often higher. 
For example, the quality and the nature of the experience a business has with
any product and/or service provider can influence significant revenue decisions
as well as influence the businesses focus on price versus differentiated
value.   Secondly, designing and managing the experience is more complex.  Most
business-to-business relationships involve a network of personal relationships
surrounded by a level of rational, economic decision-making.

Filed under: Uncategorized | Tagged: Customer Experience, customer service,
signature experience | 1 Comment »


GETTING THE EMPLOYEE EXPERIENCE RIGHT: CREATING EMPLOYEE EXPERIENCES THAT DRIVE
BUSINESS GROWTH

Posted on May 19, 2011 by Frank Capek

As many businesses are beginning to look towards economic recovery, we’ve seen a
growing recognition of the importance of the employee experience.   I suspect
this may be a recognition of the vast amount of stress in the workforce.   For
many companies, significant portions of the employee base are facing deep
economic hardships.  Employees have been working harder than ever in an effort
to keep their jobs and pick up the slack as their companies have cut positions
and reduced spending.   As the economy and the job market improves, these
employers may be facing latent turnover of some of their best people.

At the same time, companies interested in making more strategic investments to
accelerate growth will need to have a highly engaged and aligned workforce.  
Over the past several years, we’ve been working with a diverse set of of clients
on a rigorous integration of customer and employee experience design.

Here is a summary of what we’ve observed and what to do about it:

Observations:

 * The experience customers have with any organization is the product of
   behavior that emerges from a complex organizational system.
 * Every organization is strongly predisposed to deliver the current customer
   experience based on deeply entrenched legacy effects, beliefs, values and
   unwritten rules. These legacy effects are reinforced by employee experiences
   at every level of the organization.
 * Most customer experience efforts significantly underestimate the difficulty
   of shifting legacy effects. In some cases, organizations create a vision for
   the desired customer experience that is fundamentally at odds with the
   character and culture of the organization. As a result, their initiatives
   fail to produce a noticeable shift in the customers’ actual experience.
 * Any effort to fundamentally improve the customer experience must first decode
   how and why the organizational system produces the current experience. This
   understanding allows executives to identify what changes are feasible and
   what specific interventions are necessary. Without this understanding,
   efforts to change the behavior of the organizational system are likely to be
   naïve.
 * Delivering a substantially different customer experience requires a holistic,
   end-to-end perspective on the employee experience. Within that holistic
   perspective, targeted employee experience interventions must address and
   rewrite any “unwritten rules” that produce behavior inconsistent with the
   intended customer experience.
 * By creating a strong linkage between the customer experience required to
   drive profitable growth and the employee experience required to generate this
   customer experience, a company can justify and prioritize investments in the
   employee experience.

Recommendations

 * Describe the experience you intend to deliver to customers. Describe what
   customers are trying to accomplish and map the end-to-end activities
   customers follow to accomplish those things. Then detail the experience you
   want them to have. What do you want customers to feel after their
   interactions with you? What are the company’s ultimate goals for delivering a
   powerful customer experience beyond the transaction itself – for example,
   additional sales, word-of-mouth marketing?
 * Identify the organizational and individual behaviors required to generate
   that customer experience. What do people and the organization need to do
   consistently to create the intended customer experience? What specific
   changes in behavior are needed? What must front-line employees do
   differently, and what decisions should front-line employees be empowered to
   make to solve customers’ problems? How do the work and behaviors of
   behind-the-scenes employees, plus their interactions with the front line,
   affect customer experience?
 * Identify the business processes, practices and unwritten rules that have to
   change to produce the required behaviors. Diagnose how and why your company
   generates the current customer experience. This must be based on rigorous
   examination of the experience from your customers’ perspective. Identify
   where bottlenecks in service occur, where the smooth flow of customer
   interaction is interrupted. Measure alignment of customer-facing processes,
   roles, measurements and rewards, and surface the unwritten rules that drive
   individual and group behavior related to the customer experience. What
   exactly do the unwritten rules encourage people to do, and how do the
   resulting behaviors facilitate or interfere with the intended customer
   experience?
 * Design specific employee experience interventions that remove the barriers
   and rewrite the unwritten rules. Map the end-to-end employee lifecycle and
   identify what your employees experience along the way. Model and segment
   employee populations, measure their fit with “ideal employee profiles” for
   different roles and correlate with customer experience and business
   performance. The appropriate interventions may be in how you attract,
   incorporate, engage, retain or enrich employees’ work. Because useful
   interventions can be made anywhere in the employee lifecycle, you must be
   rigorous in determining where to intervene and where to invest in employee
   programs. The goal is not just to design a compelling customer experience,
   but to enable employees to understand their connections with the customer
   experience and feel empowered to deliver the designed experience.

These observations and recommendations are described in more detail in the
following white paper:   CI – Getting the Employee Experience Right 2011
You can also check out the following related blog posts:
 * How Employee Experiences Drive Organizational Behavior
 * Integrating Customer and Employee Experiences
 * A Break in the Service Profit Chain: Why Increases in Employee Engagement
   Don’t Improve the Customer Experience
 * No Matter What Business You’re In… You’re in the Hospitality Business

Filed under: Customer Experience, Employee Experience | Tagged: Customer
Experience, employee brand, employee engagement, Employee Experience,
organizational change, unwritten rules | 1 Comment »


OUTCOMES-BASED EXPERIENCE DESIGN

Posted on June 22, 2010 by ccoleary



Chris O'Leary


BRIDGING THE GAP BETWEEN CUSTOMER EXPERIENCE AND BUSINESS OUTCOMES

by Chris O’Leary, COO, Customer Innovations, Inc.

In the 25 years we’ve been helping companies design customer experiences, one of
the consistent challenges has been to estimate the business impact of specific
experiential improvements.  The fact is that many customer experience (CE)
programs simply fail to make a compelling argument about the business value that
will be generated by specific CE innovations. In the absence of a compelling
business justification, executive support and sponsorship may be weak or even
absent, orphaning the CE program and robbing it of the executive leadership it
needs.

In their efforts to generate a business justification, Customer Experience (CE)
managers frequently try two approaches.  Neither approach has been consistently
effective in earning senior management support and sponsorship.

First, they may choose to rely on generally held beliefs about the value of
customer satisfaction, engagement or Net Promoter Scores (NPS).  Often, this
reliance highlights a correlation between these indices and some business
outcome (e.g., revenue growth or market share), but treats it as though it was a
causal relationship. (see: Keiningham et al., “A Longitudinal Examination of Net
Promoter and Firm Revenue Growth,” J. Marketing, Vol. 71  July, 2007, pp. 39-51)

In addition to the confusion of correlation and causation, we’ve also seen many
cases in which high satisfaction or NPS scores actually co-exist with declining
revenues, market share, and profitability.  These measures reflect how customers
feel about the company and not how the company may make customers feel about
themselves.  As a result, they are poor predictors of how customers will
actually behave.

The second approach, of course, focuses on generating cost savings and
efficiencies, most often at the service touch points.  Unfortunately, service
efficiency is almost always more important to the company than to the customer,
and efforts to streamline or automate the touch points typically end up working
against the quality of the overall customer experience.  (See:  The Customers’
Experience Does Not Happen at Your Touchpoints).

What is needed is a fundamentally new approach to focusing and justifying
investments in customer experience innovation, one which directly addresses the
core challenge of connecting specific experiential innovations with measurable
business objectives.

For some time, we have been using a new approach to CE business justification
called Outcomes-Based Experience Design, which represents a 180-degree change
from common practices:

 * Rather than trying to justify potential CE innovations by predicting or
   projecting hoped-for business outcomes, this approach starts by clearly
   defining the desired measurable business outcomes and working backward to
   identify the innovations required to generate those outcomes.
 * Rather than relying on self-reported satisfaction, loyalty and NPS scores,
   this approach targets concrete business and customer behavior outcomes, both
   of which are measurable at the individual and the aggregate level. 
   Satisfaction, loyalty and NPS are interesting, but should NEVER be used to
   justify investment in experience innovation!

Rather than competing for attention, funding and time with other business
initiatives, this approach anchors CE to the existing strategic priorities,
which is where CE should have been all along.

Figure 1: Outcomes-Based Experience Design

As illustrated in Figure 1, the Outcomes-Based Experience Design approach
introduces a new measurable outcome, Behavioral Outcomes that connects
Experiential Outcomes and Business Outcomes.  Linking Experiential Outcomes and
Business Outcomes in this manner enables CE program leaders to define and
measure the specific business value that is being created, and this provide a
rigorous business justification.

The model works in two directions.  The first direction, going right to left,
illustrates the design relationship. When designing the experience innovation,
one starts with the business outcome of interest, then determines the specific
customer behavior that needs to be influenced, and then designs the specific
experiential interventions that are required.

Second, the model illustrates the causal relationship going left to right.  The
only way that CE innovation can create a business benefit is by influencing a
specific change in customer behavior and choice-making.  The difficulty in
business justification discussed earlier arises from the fact that it is so
difficult to predict how customers in general will respond to different CE
innovations, and even more so for specific groups of customers,

Outcomes-based Experience Design generates a host of critical benefits.  First
and foremost, it positions CE innovation as a tool for achieving the priorities
of executives and senior managers, NOT competing with those requirements. 
Second, it provides metrics and measurability at each stage of the causal
relationship.

Third, it allows companies to invest only in those innovations that will
influence the target customer behavior, and stop investing in potentially
expensive initiatives which may not matter to customers or for which they are
not willing to pay.  Identifying (and terminating) uneconomic CE investments
will often fund new investments that are far more impactful and that generate
meaningful business benefits.

One final note:  This model is effective only if we understand how and why
customers behave as they do.  Without the ability to link individual
characteristics to the decisions and choices a customer makes, there is no way
to design experiential interventions that will be effective in influencing the
target behavior.  More important, there is no way to assure that  an
experiential intervention targeting undesired customer behavior (e.g.,
attrition), will not adversely affect desirable customer behavior (e.g.,
retention, growth).

The necessary foundation of Outcomes-Based Innovation, therefore, is the ability
to understand how and why customers make the choices that they do, and to use
that information to influence those choices.  The scientific and methodological
basis for this understanding has been previously discussed here (Getting Beneath
the Voice of the Customer) and here (Customer Experience:  Beyond Better
Sameness); practical challenges and applications will be discussed in the
future.

Filed under: Customer Analytics, customer behavior, Customer Experience |
Tagged: consumer psychology, Customer Analytics, customer behavior, Customer
Experience, experience design, loyalty, net promoter score, nps, Outcomes Based
Design, touchpoint | 3 Comments »


BEHAVIORAL PORTRAITS AND THE DESIGN OF INFLUENTIAL EXPERIENCES

Posted on May 13, 2010 by Frank Capek

“Remember… you’re unique… just like everybody else.” Although, it may be a
little funny to say it that way, thank heavens for diversity!  For as much as we
all have in common, our lives are more interesting because we’re not all the
same. We’re interested in different things, we like different music, we’re
attracted to different kinds of experiences, and we have unique emotional
reactions to the situations we’re in.

Over the past 25 years, Customer Innovations has worked with a wide range of
leading companies on the design of products, services, and experiences that
influence customers.  In the course of that work, we’ve helped clients
understand how their customers’ think, what their customers’ feel, and how and
why customers behave the way they do.  That insight is used to design things
that really matter to customers; that make a difference in their lives; that are
intuitive easy to navigate; and that influence behaviors that make more money
for our clients.

In this post, I will describe one of the key tools we use to do this work,
called a Behavioral Portrait.   A Behavioral Portrait is rigorous approach to
understanding the important ways that different people are attracted to, engage
with, and respond to different kinds of experiences.  It also explains why
people have widely varying and highly individual emotional and behavioral
reactions to the same experiences.  The Behavioral Portrait tool is used to
identify key behavioral differences between different customer personae (for
more information see the following posts: Personae Driven Experience Design
and What is the Difference Between Personae and Segmentation?).

The Behavioral Portrait measures preferences in five major areas that have a
profound effect on the design strategy for influencing customers sensitive to
these preferences.  These areas are:

 * Novelty Seeking. Describes the degree to which a person is attracted to,
   comfortable with, and exhilarated by new and unfamiliar experiences.  Novelty
   Seeking includes individual measurements for curiosity, impulsiveness, and
   extravagance.
 * Harm Avoidance. Describes the ways a person engages with ambiguity, risk, and
   unpredictable interactions with people they don’t know.  Harm Avoidance
   includes individual measurements for anticipatory worry, fear of uncertainty,
   and shyness with strangers.
 * Social Orientation. Describes a person’s preferences for social interactions
   and connections that influence their experiences and their lives. Social
   Orientation includes individual measures of introversion/extroversion,
   sentimentality, attachment, and dependence.
 * Decision Style. Describes a person’s preferred mode of perceiving and
   interpreting information and then making decisions based on that information.
    Decision Style includes individual measurements of perceptual breadth,
   detailed versus conceptual interpretation, and analytic versus synthetic
   decision-making.
 * Behavioral Activation. Describes the unique ways a person initiates action,
   as well as, their degree of focus and persistence over time and in the face
   of obstacles. Behavioral Activation includes individual measures of energy,
   directedness, criticality, and single-mindedness.

Customers have different reactions to product, service, and experience design/
 execution based on their preferences.  For example:

 * Higher harm avoidant customers tend to get stressed about elements of the
   experience that are unpredictable, confusing, or seem risky.  Higher harm
   avoidant customers also tend to react more negatively to any embedded element
   in the experience that might be perceived as a “violation of justice.”  For
   example, in a restaurant, they will react more negatively if people seated
   after them are served before them.
 * More socially oriented customers will go along with the behavior of others
   and will respond more strongly to social influence.  For example, more
   socially oriented customers will respond more positively to conservation
   programs that illustrate how their behavior compares with others (e.g., your
   electricity usage is 57% higher than the average for your neighborhood… or…
   the blue recycle bins are at the curb for every house on my street except for
   mine).
 * Higher novelty seeking customers will tend to be the early adopters of the
   latest and greatest new technologies. They’ll tend to engage more readily
   with interesting information about products and services.  They’ll tend to
   experiment with alternative medicine.  Our research also indicates that they
   are more attracted to and more likely to return frequently to restaurants
   that offer a diverse experience or change up their menu.



We’ve found that by understanding the behavioral preferences for different
customer personae allows us to design products, services, and experiences that
engage a wider range of customers.   You do this by allowing for
personae-sensitive pathways.  For example, you provide a high-novelty seeking
pathway that customers can opt into if they desire that.  However, you don’t
force the low novelty-seeking customers through that pathway because it’s likely
to make them feel uncomfortable.

Customer Innovations has developed several tools for measuring these behavioral
preferences.  These tools include:

 * The full Behavioral Portrait tool – an 85-question instrument that takes
   about 12 minutes to complete and provides a reliable measure of an
   individual’s preferences across the 5 dimensions and 17 sub-dimensions
   described above.   This full Behavioral Portrait tool is used as part of
   in-depth personae development research.  It’s also used to provide rich
   feedback to individuals about their preferences.
 * A streamlined Behavioral Indicator tool – a 17-question set that can be
   embedded in a quantitative survey in order to correlate a respondent’s
   behavioral preferences to their response to other questions about their
   experience, their attitudes, or their preferences for new product or service
   concepts.

If you have an interest in learning more about the approach outlined above or
any of the associated tools, please let us know.

Filed under: Cognitive Ergonomics, customer behavior, Customer Experience,
Uncategorized | Tagged: behavioral indicator, consumer behavior, customer
behavior, experience design, harm avoidance, human centric design, influence,
novelty seeking, persona, personae | 3 Comments »


CUSTOMER EXPERIENCE: BEYOND BETTER SAMENESS

Posted on October 31, 2009 by Frank Capek

So… we’re ten years into the Experience Economy and, over that time, there’s
been an explosion of attention and investment in creating and improving customer
experiences.  Even in this midst of very challenging economic environment, it’s
hard to find a company that isn’t either actively involved in or planning
customer experience investments.   As the economy now starts to show signs of
turning around, we’ve observed an increasing level of interest in getting closer
to customers.

Despite the attention paid to customer experience, with a few exceptions, people
are no happier with their experiences as customers today then they were 10 years
ago.  It’s as if the majority of customer experience efforts have produced
little more than “better sameness.”   Better sameness is doing what you’ve
always done… and what pretty much all your competitors do… a little bit better
and faster; providing friendlier customer service, incrementally faster response
times,  a more appealing retail environment, a more streamlined web catalog and
ordering processes, etc…

The problem is, customers don’t perceive these incremental differences.  If
you’re looking for a competitively relevant improvement, you need to do
something that actually grabs the customer’s attention and positively influences
how they feel and what they do.  These are the only things that actually improve
your competitive differentiation.  Moving beyond better sameness demands doing
something that isn’t just a difference in degree; it demands doing something
that’s a difference in kind.

For examples:

Southwest and JetBlue represent a difference in kind experience compared to the
other major US-based airlines;



Umpqua Bank represents a difference in kind financial experience is a sea of
highly undifferentiated consumer banks;



Wegmans, and Nugget Market is a difference in kind experience compared to most
other major grocery retailers.




UNLESS WHAT YOU’RE AFTER IS BETTER SAMENESS…


…THE MOST COMMON TOOLS FOR IMPROVING CUSTOMERS’ EXPERIENCES ARE INSUFFICIENT ! !




This includes:

Customer Satisfaction Measurement: Most companies ask customers for subjective
evaluations of the company’s or product’s performance on the assumption that
these expressed attitudes drive behavior, such as repeat purchases or positive
word of mouth.  Unfortunately, decades of research into the correlation between
evaluations and subsequent behavior show, although the link exists, it tends to
be relatively weak.  Most customers who switch said they were satisfied.
 Satisfaction is not an emotional state that powerfully drives behavior.  In
order to get beyond better sameness, companies need to surface how the the
experience influences customers’ perceptions and feelings about themselves not
the company.

Voice of the Customer Insight: Listening to customers is critical for gaining
insight into their lives, their goals, their needs, as well as, their
frustrations, feelings, and behaviors.  However, as Henry Ford said, “If I asked
customers what they wanted, we’d just have ended up with faster horses.”  In
addition, what customers say they want is not often well-correlated with the
deeper goals and subconscious factors that influence their behavior.  In many
cases, what customers say they want is inconsistent with what ultimately drives
their behavior… leading companies to invest in the wrong things.   Getting
beyond better sameness involves engaging customers in fundamentally different
kinds of conversations and getting beneath the surface of what they say to
understand their deeper goals and the experiences they’re having.

Touchpoint Mapping and Service Level Improvements:  Touch point mapping is a
highly company-centric activity.  Customers’ experiences do not just happen at
your company’s touch points.  Customers follow an end-to-end set of activities
that make sense to them given the goals and needs they’re trying to address. 
You can’t understand and meaningfully improve the customers’ experience by just
looking at and incrementally improving service levels at your touch points.  As
customers go about their busy lives, they rarely pay attention to or act on any
of the incremental service improvements at the existing touch points.  Getting
beyond better sameness involves creating high contrast, signature experiences
that get customers’ attention, influence how they feel, and shape the story
about what you stand for.

Training and Motivating Front-line Service Employees:  Having engaged,
well-trained, and motivated service employees is important.  However, a lack of
training and motivation is rarely the real issue behind a poor experience.  The
experience customers’ have with any organization is the product of behavior that
emerges from a complex organizational system. The root of that behavior is a
leadership, management, measurement, and cultural environment that reinforce
“unwritten rules” inconsistent with employees doing the right thing for
customers.  Focusing on training and motivating employees without surfacing and
addressing the unwritten rules is like hacking at the leaves rather than
striking at the root of the problem.  Getting beyond better sameness involves
surfacing the unwritten rules and leadership and management beliefs and behavior
that constrain the experience.

Creating positively and profitably influential experiences, that go beyond
better sameness, requires a more fundamental shift in perspective.  You have to
focus first on how customers HAVE experiences… not on how your organization or
product DELIVERS experiences.  This includes being very clear on:   What are
customers really trying to accomplish?  What influences the pathway they follow
in pursuing those goals?  How do they actually construct preferences and make
choices along that pathway?  How does the process make them feel about
themselves?  How does the experience influence the relationships they care
about?  In most cases, understanding how customers HAVE experiences, leads to a
completely different set of strategies for creating experiences that really make
a difference for customers and the business.



Customer Innovations follows a unique Cognitive-Affective-Behavioral Engineering
approach that enables companies to design products, services, and experiences
from the mental model of the experiencer… not just the mental model of the
company.  Over the course of 25 years track we’ve helped leading organizations
realize bottom line results of 10-25% in the form of increased retention,
incremental sales, reduced acquisition costs, positive word of mouth, higher
price realization, and improved productivity of customer-facing operations.

The Customer Innovations approach is driven by three toolsets deliberately
structured to push companies beyond better sameness:

 * Behavioral Portraits – Generates deep insight that enables you to understand
   why customers behave as they do and identifies the most important behavioral
   drivers for specific groups of customers.
 * Trigger Analysis – Surfaces how people perceive, interpret and evaluate their
   experience and identifies the specific customer interactions that elicit
   positive or negative behavioral responses.
 * Influence Strategies – Designs the product, service, and experience
   interventions needed to influence customer behavior and creates the mechanism
   for consistent delivery of those changes.

Filed under: customer behavior, Customer Experience | Tagged: better sameness,
consumer behavior, customer behavior, Customer Experience, customer innovations,
customer satisfaction, experience design, experience designer, experience
economics, experience miner, unwritten rules, VOC, voice of the customer | 1
Comment »


GETTING BENEATH THE VOICE OF THE CUSTOMER

Posted on August 11, 2009 by Frank Capek

Doesn’t it make sense that:

 * If you want to know what customers want, just ask them.
 * If you want to see if they’re satisfied with the experience, just ask them.
 * If you want to know if they’re come back or will refer you, just ask them.
 * If you want to understand what you can do to improve, just ask them.

Listening to customers is critical for gaining insight into their lives, their
goals, their needs, as well as, their frustrations, feelings, and behaviors. 
Unfortunately, we’ve found that most structured “voice of the customer” research
is not only ineffective for designing influential customer experiences, but it
can seriously undermine innovation by directing investment at the wrong things.

It’s common for companies to conduct customer interviews, surveys, and focus
groups trying to understand what customers want.   The reality is that what
customers say they want is not often well-correlated with the subconscious
factors that influence their behavior.  In many cases, what customers say they
want is actually quite inconsistent with what ultimately drives their behavior. 
The key is to able to engage customers in fundamentally different kinds of
conversations and get beneath the surface of what they say to understand the
deeper experiences they’re having.

I first encountered this disconnect about 25 years ago.  At the time, I was
working with Dick Larson at MIT.  Dr. Larson is an expert in the psychology of
waiting.   The situation involved commercial real estate managers responsible
for several high-rise office buildings in New York.  These managers were trying
to figure out how to address customers’ dissatisfaction with the amount of time
spent waiting for elevators during peak periods.  Not surprisingly, if you ask
customers what they want, they’ll tell you that they want an increase in service
levels:  faster elevators and less waiting.  Obviously, the complexity and cost
of actually improving service levels are quite high; it would involve installing
faster elevators, dedicating more interior space to elevator banks, improving
the optimization of elevator queuing, etc…   It turned out that the most
effective improvement was to install mirrors in the elevator lobbies.  This
allowed people to entertain themselves by fixing their hair, straightening their
tie, and checking each other out in a much more socially acceptable way.  The
perceived experience improvement was greater with the relatively low cost
mirrors than with the relatively high cost technology required to improve actual
service levels.  Note:  Waiting is an important aspect of many experiences, for
more information about designing better waiting experiences see: Helping
Customers Lose Wait.




In general, the design of influential experiences involves a trade-off between
two strategies:  1) improve the reality of the events, service levels, etc…
and/or 2) influence the way customers experience and act on those realities.  
When you ask customers what they want or what they liked or didn’t like about
their experience, what do they tell you?  In most cases, they only talk about
the relatively obvious service levels associated with the first strategy.

Another example of this disconnect involves customers’ surface-level desires for
more choice… compared with their subconscious distaste for actually having to
make choices.  When conducting traditional voice of the customer research,
customers often ask for a set of choices that allow them to find the alternative
they prefer.  However, when presented with the range of choices uncovered in the
research, the same customers find that actually making the choice exceeds both
their level of motivation and capacity for processing information at the point
of purchase.  In essence, giving customers the choices they request often leads
to a “choice overload” that gets in the way of profitable customer behavior… in
many cases, influencing them to postpone making a decision.



In one illustrative experiment, conducted by Iyengar and Lepper, consumers
shopping at an upscale grocery store were presented with a tasting booth that
displayed either a limited selection (6) or an extensive (24) selection of
different flavors of jam.  The experimenters measured both customers’ initial
attraction to the tasting booth and their subsequent purchase behavior.  While
the extensive choice booth attracted more customer attention, customers
presented with the limited set of choices were 10 times more likely to make a
purchase.  Customers that sampled from the limited choice booth made a purchase
30% of the time versus only 3% of the time from the extensive choice booth.
Leading companies are really starting to internalize this finding.  P&G, for
example, reduced the number of versions of Head and Shoulders shampoo from 26 to
15, and, in turn, experienced a 10% increase in sales.

Voice of the customer research makes the underlying assumption that people have
a relatively stable, conscious, explainable, and at least somewhat consistent
set of preferences.  It also makes the assumption that when ask customers about
their preferences they can tell you or, in some cases, when you present them
with a set of forced choice trade-offs (e.g., would you prefer to buy A or B),
how they choose will reflect what they do in real life.  Unfortunately, this is
far from true.  People typically don’t know what they want until they see it;
they construct their preferences and work through decisions as they perceive
their alternatives in the actual purchase environment.  Subtle differences in
the design of that purchase environment can have a significant impact on the
decisions customers make.  In fact, research in the areas of cognitive
psychology and behavioral economics has shown that…

…small and seemingly insignificant contextual details have a major impact on
people’s behavior.

One of my favorite recent examples comes from MIT Professor Dan Ariely.  (See
Dan’s great book:  Predictably Irrational)  Dan came across the following
advertisement for The Economist:

The Economist Subscription Options

The ad offered three subscription options:

 * Electronic Only: $59
 * Print Only: $125
 * Electronic and Print: $125

Which of these options do you think people would choose?  Why would anyone
choose the “Print Only” option rather than opting for the additional “FREE!”
electronic subscription?  It seems very unlikely!  In fact, Ariely conducted a
test with 100 Sloan School students and only 16 chose “Electronic Only” while 84
chose the “Electronic and Print” option.  No one chose the “Print Only” option!
On the surface, this option seems totally irrelevant.  Why would you even offer
it?   It turns out that something very interesting happens when this seemingly
irrelevant option is eliminated.  When another 100 students were offered only
two choices: “Electronic Only” and “Electronic and Print”, 68 chose “Electronic
Only” while only 32 chose “Electronic and Print.”

The presence of an irrelevant option influenced a more than 250% increase in
customers choosing the more expensive alternative!!!

Ariely observed the following, “Thinking is difficult and sometimes unpleasant.”
Cues that allow us to establish the relative value of various offerings, then,
reduce the cognitive load or effort required to think about your options.  What
the Economist offered was a no-brainer; while we can’t be certain that the print
subscription is worth more than twice the electronic version, the combination of
the two was clearly worth more that the print version alone.

In another illustrative example of how subtle environmental details influence
customer behavior, Cornell University researchers Sybil S. Yang, Sheryl E.
Kimes, and Mauro M. Sessarego found that by dropping the “$”symbol on a
restaurant menu can have a significantly positive impact on the total ticket
value.  The researchers did a side by side comparison of three ways of
presenting menu prices: with a preceding dollar sign (e.g., $14.95), without a
dollar sign (e.g., 14.95), and as written out prices (fourteen dollars and 95
cents).  Aside from the subtle differences in price presentation, all other
aspects of the actual pricing and customer experience were held constant.  They
found that the average total ticket increased by $3.70 when prices were
presented without the dollar sign.  They also found that the average ticket
decreased by $1.85 when prices were written out.

All of these examples illustrate a level of insight into the way people have
experiences and act on their experiences that cannot be accessed by most 
traditional, structured voice of the customer research.


THE VAST MAJORITY OF HUMAN EXPERIENCE IS SUBCONSCIOUS

Every waking second of the day, each of us processes just over 4,000,000 bits of
sensory information.  At the same time, we get to pay conscious attention to
only 7+/- higher level and relatively abstract notions about what’s happening to
us, what we’re doing or planning to do, and how we’re feeling about all of
this.  Luckily our brain does an outstanding job of filtering, predicting, and
prioritizing all if this information in a way that makes it possible for us to
be reasonably effective in the world.  The challenge is every normally
functioning human being on the planet lives in a state of “naïve realism.”  This
naïve realism, gives us the sense that we’re experiencing our surroundings as
they actually are, rather than just as a high level abstraction of what we
believe them to be.

If we are asked by a researcher to describe an experience, particularly an
experience we had at some point of time in the past, the best we can do is
relate what we think we remember, about how we believe we felt, along with the
alibis we construct for the choices we made, in an experience that was almost
entirely subconscious.  However, due to the state of naïve realism we live in,
we’re convinced that our explanations have merit… despite the fact that we are
just reconstructing a plausible sounding story for what we think happened.  This
is the way it works for all of us.  It’s also the fatal flaw for most
structured, traditional voice of the customer research.

Understanding how to design highly meaningful, differentiated, influential, and
profitable experiences involves engaging people in fundamentally different sorts
of conversations and listening in ways that get beneath the surface of what they
say to understand the deeper, subconscious aspects of how  people actually have
experiences.



While there’s value to listening to customers’ recollections of the experiences
they’ve had and their suggestions for improving that experience, what you really
need to look for and understand are:

 1. Goals and Desired States
    * What set of desired states and goals are people really trying to
      accomplish?
    * What kinds of experiences are people attracted to and comfortable engaging
      with?
 2. Beliefs and Expectations
    * How do people make sense of and remember the experiences they have?
    * How do people construct situation-specific expectations and preferences?
 3. Emotional States and Triggers
    * What conscious and subconscious emotional states influence peoples’
      actions?
    * How do specific events trigger emotional reactions that influence
      behavior?
 4. Natural Behavioral and Decision Pathways
    * What behavioral pathways do they naturally follow to accomplish their
      goals?
    * How do people make choices in light of these expectations and preferences?

We’ve developed an innovative toolset for answering these questions. Experience
MinerTM provides a rigorous way of capturing and analyzing the most critical
aspects of the way people think, feel, and act  on their experiences.  It
involves a fundamentally different way of listening to what people say and
watching what they do in order to identify what’s going on beneath the surface. 
Built on 25 years of research into the cognitive, affective, and behavioral
basis of experience, it provides the specific insight required to focus design
and delivery efforts on the areas of greatest influence and financial return. 
 Experience MinerTM is used to identify the most influential experience elements
for each target customer personae.  This insight is used to 

…design evocative experiences from the mental model of the experiencer.



The Experience MinerTM toolset consists of the following seven elements, each
designed to fill in a critical piece of insight required to design experiences
that influence behavior.



 * Goal Space MappingTM – Describes the desired states and situation-specific
   goals that motivate and direct the experience for each key persona
 * Experiential TemperamentTM – Profiles how temperamental differences influence
   the way people are drawn to and engage with novelty seeking, harm avoidance,
   social orientation, and persistence
 * Framing Metaphors – Surfaces the underlying physical metaphors people use to
   interpret, evaluate and act on their experiences in the relevant domain(s).
 * Experiential ConstructsTM – Identifies the most common, learned distinctions
   that enable people to recognize, categorize, differentiate, and form
   expectations.
 * Emotional States and TriggersTM –  Surfaces the emotional states and specific
   triggers across the lifecycle of the experience highlighting areas of
   uncertainty, stress, frustration, etc…
 * Experiential PathwaysTM – Maps the end-to-end set of activities and choice
   points that people follow in pursuit of their goals… including the unwritten
   rules and automatic behavioral scripts people apply along this pathway.
 * Experiential Choice DynamicsTM – Describes the situation-specific choice
   processes that people follow, as well as, how they construct preferences and
   make decisions that influence their behavior.

If you’re interested, I’ve covered various topics related to the elements of
Experience Miner in a wide range of other posts, including:

 * Experience Miner: Creating Profitable, Evocative Experiences
 * Whatever You Do… Don’t Confuse Experience with Reality
 * Understanding Basic Drives and Experiential Temperament
 * Making Experiences Memorable
 * Customer Experience and Our Search for Meaning
 * Designing “Socially Influential” Experiences
 * Designing for Customers’ Reactive, Deliberative, and Reflective Experiences
 * Choice Architecture: Designing Experiences that Influence Customer Behavior
 * Optimizing the Most Critical Elements of the Customer Experience:
   Customer Choices
 * Framing and Priming the Customer Experience
 * Automatic Behavioral Scripts: Don’t Overestimate Your Customers’ Interest in
   Having an “Experience” with You

Filed under: Cognitive Ergonomics, Customer Analytics, customer behavior,
Customer Experience, Neuroeconomics | Tagged: ariely, choice architect, choice
architecture, cognitive ergonomics, cornell, dick larson, elicitation,
ethnography, experience miner, experiential constructs, experiential
temperament, framing, framing metaphors, goal-space mapping, Mauro Sessarego,
menu design, menu psychology, MIT, observation, priming, psychology of waiting,
Sheryl Kimes, Sybil Yang, voice of the customer, waiting experience | 5 Comments
»


CHANNEL 2.0: “COLLABORATIVE ECOSYSTEM MANAGEMENT”

Posted on August 10, 2009 by Frank Capek

We are in the midst of a dramatic shift in the way business is done.  In most
industries, a much more open and collaborative network model is replacing the
traditional closed and controlled firm-centric view of the world.   This shift
has been well documented by my colleague Don Tapscott in his bestselling book
Wikinomics.  Don is the head of nGenera Insights (a Customer Innovations
partner).

As this shift takes place, companies must reconsider many of the foundational
assumptions about their role in the complex ecosystem of customers, competitors,
intermediaries, and other influencers.   While many basic relationship
management capabilities are still important, there are two major problems with
the traditional approach to  “Channel Management”:

 1. The first problem is the “channel” part. In a network view of the world, a
    channel is an outdated, linear way of viewing the market.  In many ways, it
    reinforces the notion that you move your products and services forward
    through the channel to reach end-consumers.  This doesn’t work in the
    presence of media-savvy and networked consumers.  These next-generation
    consumers can easily find better deals with more agile providers and, in the
    process, are more likely to either by-pass intermediaries all together or
    deal with newer intermediaries (e.g. Amazon, etc…) that consolidate products
    and services in a way that makes it easier for them to get what they want.
 2. The second problem is the “management” part. In a more agile, networked view
    of the world, channel participants are more difficult to manage or control. 
    They tend to either have or believe they have more alternatives.  In most
    cases, they have the all-important relationship with the ulimate consumers
    who are paying the money.  In addition, they have to deal with a rapidly
    changing set of consumer demands that change what it takes for them to be
    successful.  If I’m an insurance agent, retailer, distributor, etc…
    struggling to keep up with changing consumer demands, preferences, and
    alternatives, I’ll challenge anything that product providers do that gets in
    the way of my responding to and serving my customers.

As we move beyond the linear, Channel 1.0 view of the world, companies must
begin to more effectively position themselves as part of a collaborative
ecosystem.  We call this Channel 2.o model, Collaborative Ecosystem Management.

Channel 1.0:  Traditional Channel Management


Channel 2.0:  Collaborative Ecosystem Management


Linear, feed-forward value delivery system

Complex, shifting network of participants

Static and known list of channel relationships

Evolving and emerging channel participants

Product and service fulfillment model

Demand creators and accelerators

Inflexible channel structures and systems

Adaptive collaboration processes and technology

The new channel model builds on many of the Channel 1.0 capabilities (covered
in:  Channel 1.0: Foundational Capabilities for Optimizing
B-to-B-to-C Performance) but must express these capabilities in a world that
includes a complex, shifting network of participants, an evolving and emerging
set of channel partners, and, as a result, must leverage more adaptive
collaboration processes and technology.



Example:  The SAP Developer Network (SDN) is an online community for SAP
developers. It is a resource and collaboration channel for SAP developers,
architects, consultants and integrators. The SDN hosts forums, expert blogs, a
technical library, downloads, a code gallery, e-learning catalog, a Wiki and
more.  All these support open communication between active members of the
community, which includes more than 1,455,000 members.  The SDN has
fundamentally transformed the scale and effectiveness of integrated and
supporting SAP’s products in a way that continued to fuel the growth of the
company.  This allows SAP to maintain a primary focus on evolving their product
while managing an enabling network of other participants that can apply the
product and fuel their growth.

In general, we’ve learned that moving to a Channel 2.0 model must integrate
three dimensions.  This builds on and extends the basic Channel 1.0
Capabilities, as well as, the Consumer-Back Approach that were introduced in
Channel 1.0: Foundational Capabilities for Optimizing B-to-B-to-C Performance. 
The three dimensions that must be integrated are:

 1. Consumer-Back Experience Design. Creating a platform for integrating
    complementary providers and partners in order to provide a seamless
    end-to-end consumer experience around goals that are important to consumers.
 2. Provider-Forward Experience Design. Creating an “experience chain” that
    helps makes traditional intermediaries, as well as, the wide range of other
    ecosystem participants successful in serving their downstream customers,
    whoever those customers are.
 3. Collaborative Ecosystem Platforms. Providing an open communication
    environment for connecting consumers, channel customers, complementary
    product/service partners, and other influencers.  This collaboration
    platform often creates the opportunity for channel customers and
    complementary product/service providers to collaborate with each other in
    ways that are currently impossible.

These are not three alternatives.  Effective Channel 2.0 strategies must
integrate all three.

Dimension 1:  Consumer-Back Experience Design. A more ecosystem-oriented
environment makes it possible to integrate capabilities across complementary
service providers in ways that were previously impossible.  Often that
integration was left to the customer.  For example, if your goal was to relocate
your family from New York to San Francisco, the experience you would have as a
customer would involve integrating the capabilities of real estate agents,
mortgage companies, movers, banks, schools, doctors, utilities, home furnishing
retailers, cleaning services, hotels, airlines, the post office, etc…    A
significant step beyond the Consumer-Back approach described earlier would be to
do what we call Consumer-Back Experience Design. This is what “The Right Move
Group” did when they created an integrated platform of services address all of
the elements listed above for families moving to the San Francisco area.

We are starting to see an increasing number of Consumer-Back Experience Design
examples in other areas.  For example, the range of integrated platforms for
launching small businesses (a.k.a. Business in a Box platforms).  This includes
platforms like:  Smart Online and Microsoft’s Start Up Zone.    Other examples
include travel integration services like TripIt, wedding experience integration
service like Wedding Channel, and personal concierge services like Fini.

We believe that building an effective Channel 2.0 strategy starts by thinking
Consumer-Back.  However, success is dependent on also considering the other two
perspectives.

Dimension 2:  Provider Forward Experience Design. Forward Experience Design
builds on and significantly extends the capabilities described in the Channel
1.0 Capability Model.  A more technology-enabled, ecosystem-oriented model makes
it possible for providers to collaborate with their channel customers in
fundamentally more effective ways.

Examples of technology that can enable Provider Forward Experience Design
include:

 * New Media Broker/Agent Portals. This includes the systems provided by
   FirstBest, iter8, or  The Broker’s Workstation.  These systems provide
   capabilities that help make intermediaries more effective in meeting the
   needs of their customers.  Systems like this can offer significant additional
   collaborative capabilities, dashboards, information, and what-if-oriented
   sales tools that go beyond the first generation portals many companies
   provide their intermediaries.
 * Salesforce.com. Salesforce.com provides a suite of tools that enable partner
   channel management on a collaborative community platform.  It’s worth
   checking out their whitepaper with ideas on next generation channel
   management.  Their suite includes it’s Partner Portal, Partner Marketing,
   Content Management, and the innovative Ideas Platform.  This Ideas Platform
   is currently being used for Dell’s IdeaStorm and Starbuck’s mystarbuck.com
   sites.
 * Other Partner Relationship Management Vendors. This includes companies like
   Channeltivity and Treehouse Interactive which provide sophisticated partner
   relationship management systems.

Dimension 3:  Collaborative Ecosystem Platforms.  As we move towards more of a
Channel 2.0 world, both of the previous two perspectives will increasingly be
enabled by an Collaborative Ecosystem Platform.  A Collaborative Ecosystem
Platform creates an environment within which participants from multiple
organizations can work together to create an integrated experience that improves
the performance of participants and, in the end, creates more value for
customers.  This can run the range from:

 * Relatively unstructured sites for sharing information, like Microsoft’s
   Technical Community Platform
 * Process specific platforms for collaborative service like Get Satisfaction
   (enables product companies, intermediaries, and end-consumers to all
   collaborate on generating answers to technical and service issues.
 * Domain specific platforms like Sermo which provides an environment for
   physicians to discuss courses of treatment, the application and effectiveness
   of pharmaceutical and medical device products, etc…
 * Social networking platforms like Facebook which is providing additional ways
   for companies to reach end-consumer and participate in the dialogues that
   consumers have about the experiences that are important to them.

The migration to a Channel 2.0 strategy is very much an emerging capability for
most companies.  It creates the ability to mobilize a much larger and more
diverse set of participants in a way that can accelerate growth.  At this point,
most of the companies we’ve seen and worked with are putting their toe in the
water.   In our experience, it’s still very important to address any gaps in the
foundational capabilities that are left over from Channel 1.0.  Very often
addressing those gaps can have a substantial and immediate impact on business
performance.  In most situations, we are recommending  a parallel set of
activities aimed at:  1) addressing Channel 1.0 capability and performance gaps
and 2) developing a Channel 2.0 strategy and roadmap that includes identifying
the business experiments required to start to learn about and get traction in a
Channel 2.0 world.

Filed under: B-to-B Experience, Customer Experience, Uncategorized | Tagged:
agent portal, B-to-B-to-C, broker portal, channel 1.0, channel 2.0, channel
management, channel strategy, collaborative ecosystem management, collaborative
ecosystem platform, consumer-back, customer back, dell, don tapscott, facebook,
get satisfaction, ideastorm, microsoft, ngenera, partner relationship
management, salesforce.com, SAP developer network, sermo, starbucks, wikinomics
| 8 Comments »


CHANNEL 1.0: FOUNDATIONAL CAPABILITIES FOR OPTIMIZING B-TO-B-TO-C PERFORMANCE

Posted on August 9, 2009 by Frank Capek

As I mentioned in my previous post (Optimizing B-to-B-to-C Performance: From
Channel 1.0 to Channel 2.0), the foundational, Channel 1.0, capabilities
required to optimize B-to-B-to-C performance include carefully selecting,
cultivating, collaborating with, and deliberately managing the lifecycle and
performance of channel relationships.   Unfortunately, many companies struggle
with issues or symptoms of issues that result from not having these foundational
capabilities in place.  These Channel 1.0 capability gaps often show up in the
form of the following issues and symptoms:


COMMON CHANNEL 1.0 ISSUES / SYMPTOMS


 * Not proactively identifying and selecting the right channel partners. This
   results from either inadequate attention to profiling the ideal partner (the
   “Ideal Partner Profile”) or a superficial search that doesn’t acquire the
   best partners (the ”Warm Body Syndrome”).  The business impact is that there
   are a significant number of under-performing channel partners and / or
   channel partners where the support costs outweigh the benefits derived from
   working with them.
 * Focus on “selling to” rather than “selling through” the channel. Often the
   channel is considered the “customer” rather than the ultimate consumer.  This
   limits the business’ ability to anticipate changing consumer needs and
   priorities.  As a result, the business misses opportunities to innovate
   services that help partners win by selling more of their products.
 * Listening to what the channel asks for rather than what the channel needs.
   Changes in consumer expectations and alternatives are having a significant
   impact on what it takes for channel partners to be successful.  Most of what
   channel partners ask for is a reflection of the past rather than a proactive
   view on how their needs are changing.  Responding to what the channel is
   asking for misses opportunities to “lead the channel” to a better solution.
 * Channel partners undermining the quality of the brand. Very often channel
   relationships are formed without putting the principles, education, support,
   and controls in place to manage the quality and the consistency of the
   experience that channel partners create for consumers.  In many cases, this
   problem occurs when the traditional agreement with channel partners is no
   longer relevant in the current business situation.
 * Being locked into a legacy experience model that can’t change. Because the
   B-to-B-to-C system has a lot of moving pieces, the system often becomes
   difficult to change as market conditions, consumer expectations, and
   competitive forces shift.  The experience that consumers have ends up being
   driven by a loosely coupled network of independent service providers that may
   not be able or willing to deliver the experience that keeps the system
   competitive.
 * Not effectively supporting channel partners across the lifecycle of the
   relationship. Most businesses do a good job of initiating channel
   relationships, but miss opportunities to actively measure and manage the
   evolution and productivity of these relationships.  As a result, there may be
   a large number of relatively unproductive channel partner relationships.

When we encounter companies with these issues, we start by assessing and
identifying specific gaps using our Channel 1.0 Capability Model.  Generally
issues with channel performance can be traced to a set of specific capabilities
that must be addressed.  The following Channel 1.0 Capability Model represents a
comprehensive best practices perspective.  Some of these capabilities are more
or less important based on the fundamental nature of the channel relationships. 
For example, these things show up very differently with tightly, coupled
franchise and captive agent models versus loosely coupled retail and distributor
relationships.


CHANNEL 1.0 CAPABILITY MODEL

Capability Elements Lifecycle Management
 * Ideal Channel Partner Personae
 * Channel Partner Attraction  / Brand Management
 * Identification and Targeting Channel Partners
 * Recruitment
 * Registration and Approval
 * Assignment of Entitlements
 * Agreements and Contracts
 * Partner Assessments
 * Partner Database
 * Partner Retirement and Continuity Planning

Training and Readiness
 * Orientation and On-boarding
 * First 90 day Training
 * Mentor Assignments and Coaching
 * Refresher and Reinforcement Training
 * New Product and Process Training
 * Partner Alerts and Newsletters

Collaborative Marketing
 * Supplier Brand Management
 * Marketing Communications to Partners
 * Integration of Partners into Multi-channel Campaigns
 * Collateral Catalog and Fulfillment
 * Auto Presentation Generator
 * Joint Marketing Planning and Execution
 * Joint Business Development Programs
 * Event Management

Collaborative Selling
 * Shared Visibility to Sales Process
 * Team Selling with Partners
 * Partner Sales Forecasting
 * Compensation and Commissions
 * Activity Management
 * Contact Management
 * Product, Pricing, Quote administration

Collaborative Servicing
 * Experience Specification and Management
 * Partner Portals
 * Contact and Case Management
 * Multi-channel Partner Services
 * Partner Self-Service Tools
 * Partner Value-added Business Services

Performance Management
 * Partner Performance Profiles
 * Partner Performance Tracking and Reporting
 * Early Warning Systems for Changes in Partner Behavior
 * Performance Improvement Interventions
 * Performance Issue Escalation
 * Partner Termination

In the course of addressing specific capability gaps, we’ve learned that most
effective approach to optimizing the performance of B-to-B-to-C relationships is
to work Consumer Back.  In other words, to look past what your business
customers are asking for to find innovative ways help them be more successful
with their customers. In fact, we’ve found that many organizations that consider
themselves pure business-to-business (B-to-B) providers would benefit from
adopting a B-to-B-to-C “Consumer-Back” Approach… such as the following:





THE B-TO-B-TO-C “CONSUMER-BACK” APPROACH

 1. Understand how expectations and alternatives are changing for the
    end-consumer. In most cases the end-consumer has a rapidly advancing set of
    expectations being driven by the best experiences they have with other
    providers. In addition, these consumers frequently have an expanding array
    of options for meeting the same set of needs.
 2. Understand how these changes affect the nature of the relationship that
    exists between your business customer and the end-consumer. Very often the
    changes identified in Step 1 create tension in the relationship your
    business customer has with the end consumer.
 3. Understand how these changes affect what it takes for your business customer
    to be successful. This includes changes in what it takes for your business
    customers to acquire consumers, serve and retain them, manage them
    profitably, etc… In a large portion of the situations we’ve seen, changes in
    end-consumer expectations lead to a fundamental shift in the dynamics of
    your channel customers’ operations. In some cases, these are shifts that
    your channel customers may have not fully recognized.
 4. Ensure that you have a solid “economic model” of your channel customers’
    business. This should include understanding the basic processes and costs
    associated with acquiring, serving, retaining, and managing their
    relationships with consumers. This provides a foundation for focusing on the
    elements of the experience that have the highest impact on your channel
    customers’ business (very often not the “table stakes” requests they make of
    you). It also provides the foundation for knowing how to communicate with
    your business customers about the innovation you develop in a way that
    reinforces the business value to them.
 5. Brainstorm any and all opportunities to help make your channel customers be
    more successful meeting the changing needs of the end-consumer. Generally
    these opportunities have a direct impact on your channel customers’
    effectiveness in acquiring, serving, retaining, and managing their
    relationships with consumers. We’ve found that it helps to surface the
    explicit or implicit “rules” that constrain your traditional relationship
    with the channel customer. Very often the greatest opportunities to innovate
    come from uncovering the opportunities and implications of breaking these
    rules.
 6. Analyze the impact that each of these potential innovations have on the
    economics of the channel customers’ business and prioritize them based on
    business value, complexity of implementation, and your credibility with
    customers on delivering that innovation.
 7. Present these innovation opportunities in terms of their economic value to
    the channel customer. In some cases, there may be a considerable sales cycle
    to helping your channel customers get their head around these innovations…
    particularly if they have not been directly involved in the above process
    with you.


B-TO-B-TO-C CONSUMER BACK EXAMPLES

One of our first experiences with this approach was about 15 years ago.  At the
time, we were working with a leading tire manufacturer that sells replacement
tires through independent dealers.  Our client had already spent a lot of time
listening and responding to what these business customers asked for… typically
improvements in ordering processes and turnaround times, payment terms, and
advertising support.  These requests really represented “table stakes”
improvements in the basic service levels that define the traditional
relationship the tire manufacturer had with these dealers.  Responding to these
requests generally involved investments that were difficult to justify; they
just added to the manufacturers’ cost to serve without driving additional
revenue growth.  They clearly needed to do something different.

Over the course of 2-3 months, we studied the factors that influenced consumers’
experiences associated with their tires and observed how consumers shopped for
and decided about replacement tires.  This was done in 5 different European
markets.  It turns out that there several innovative ways the tire manufacturer
could help their dealers be more successful with the consumer.  For example:

 * In the Scandinavian countries, consumers generally have two sets of tires for
   summer and winter. In addition, these consumers typically did not have room
   to store the tires in the off season. If the tire manufacturer helped the
   dealers set up and run a tire storage service, the dealer would be able to
   get the consumer back into the store on a semi-annual basis. This would
   generate stickiness for the dealer and also provide an opportunity to inspect
   the condition of the tires and make more optimal recommendations about when
   they needed to be replaced. This created a clear economic benefit for both
   the dealer and the manufacturer.
 * In the German market, time was more of an issue. In this situation, we
   determined that the opportunity for the tire manufacturer was to help their
   dealers provide mobile mounting services that would replace the tires while
   the car was parked at the customers’ home or workplace.

In each of the markets there were things the manufacturer could do to optimize
or improve the relationship between their customer and their customers’
customer.  (See Most Efforts to Improve Customer Experiences are Misdirected!). 
Like most of the situations we’ve seen since that time, these innovations are
the kinds of things that business customers would never ask for.

After that experience, we started to (semi-jokingly) tell our other clients that
they needed to stop listening to their “channel” customers so much.  We’ve
observed that these channel customers typically ask for things that drive up
your costs rather than increase your revenues.  Of course they need to pay
attention to what customers are asking for (or at least look in their general
direction when they’re talking)… but the trick is to look past what they’re
asking for to find more innovative ways to help them be more successful with the
end-consumer.

Since that time, we’ve worked with very many companies to create similar
opportunities, for example:

 * Several financial broker-dealers that now provide innovative services to help
   their independent financial adviser customers be more successful acquiring,
   serving, and managing relationships with individual investors.
 * A leading food processor that now provides innovative and collaborative
   concept development, meal design, kitchen layout, and education services to
   their restaurant customers… all aimed at helping their restaurant customers
   stay ahead of changes in consumer expectations for dining experiences.
 * An automotive financial services company that provides dealer financing,
   pre-paid maintenance, extended warrantee services, etc…  Beyond these basic
   products, this company’s entire positioning is now focused on collaborating
   with automotive dealers to improve the profitability and performance of their
   customers’ finance and insurance function. In addition, the company is now
   getting paid based on increases in their customers’ profitability not just
   the sale of their basic products.
 * A leading small group health insurance company that has significantly
   improved their performance by focusing on how they can help independent
   agents provide value-added services and advice to small businesses on the
   management of health benefits costs and employee wellness/productivity.

In this post, I’ve dealth with the foundational capabilities associated with the
Channel 1.0 model.  In an upcoming post, I’ll share some of what we’ve been
learning as we’ve helped companies build on these foundational capabilities in
order to move to an inherently more agile, collaborative, and open, “next
generation” Channel 2.0 model

Filed under: B-to-B Experience, Customer Experience | Tagged: B-to-B,
B-to-B-to-C, b2b, b2b2c, channel, channel 1.0, channel 2.0, channel management,
channel optimization, channel performance, channel strategy, consumer-back,
customer back, Customer Experience, distribution channels, sales channels | 1
Comment »


OPTIMIZING B-TO-B-TO-C PERFORMANCE: FROM CHANNEL 1.0 TO CHANNEL 2.0

Posted on August 6, 2009 by Frank Capek

How do we keep up with changing consumer expectations when we only have limited
direct contact with the ultimate consumers of our products?

How do we align agents, brokers, retailers, or franchisees in order to deliver a
consistent brand experience that drives growth?

How do we overcome complex, legacy distribution channels in order to reinvent
the customer experience in a way that allows us to stay competitive?

How do we balance attention or investment in channel “customers” versus
end-consumers?

How do we collaborate across an increasing array of diverse distribution network
participants in a way that helps us accelerate growth?




The majority of companies we’ve worked with operate in some form of
intermediated business model that fits a Business-to-Business-to-Consumer
(B-to-B-to-C) structure.  This includes:

 * Product companies that sell through retailers, distributors, or sales reps
 * Financial services companies that sell through agents, brokers, or financial
   planners
 * Technology companies that sell to and through integrators
 * Food products companies that sell to restaurants and food service companies
 * Franchise operations that maintain and manage a network of franchisees

It also includes many companies that haven’t traditionally thought of themselves
as operating in this model, but would benefit from doing so, including:

 * Pharmaceuticals or medical devices that focus on providers as well as
   patients
 * Placement agencies that manage employer, as well as candidate relationships

Although the B-to-B-to-C structure is an efficient way to go to market, there
are a common and predictable set of challenges that not only make it difficult
for the model to work effectively but to change as market and competitive
conditions shift.  As downstream consumer expectations change and competitive
alternatives arise, upstream product companies often find themselves locked in
to a set of channel relationships that are difficult to influence.   Most of the
B-to-B-to-C companies we’ve worked with experience a lot of angst and conflict
about how to integrate:  1) what they do for their channel, 2) what they try to
encourage the channel to do for the downstream consumer, and 3) what they do for
the downstream consumer themselves (often very uncomfortably by-passing their
channel.



This angst is now being amplified by a dramatic shift in the way business is
done.  In most industries, the emerging model for the market is a much more open
and collaborative network rather than a closed and controlled firm-centric
model.   This shift has been well documented by my colleague Don Tapscott in his
bestselling book Wikinomics.  Don is the head of nGenera Insights (a Customer
Innovations partner).

The traditional concept of channel management is a product of the older closed,
controlled, and firm-centric market model.  We call this “Channel 1.0.”    The
basic capabilities associated with Channel 1.0 include carefully selecting,
cultivating, collaborating with, and deliberately managing the lifecycle and
performance of channel relationships.

In the more open, collaborative network model for business, these capabilities
are still critical but they must be exercised in a fundamentally different
way.   In this new world, there are two problems with the traditional Channel
1.0 concept of “channel management:”

 1. The first problem is the “channel” part. In a network view of the world, a
    channel is an outdated, linear way of viewing the market.  It locks you into
    thinking that you move your products and services forward through the
    channel to reach end-consumers.  This doesn’t work in the presence of
    media-savvy and networked consumers.  These next-generation consumers can
    easily find better deals with more agile providers and, in the process, are
    more likely to either by-pass intermediaries all together or deal with newer
    intermediaries (e.g. Amazon, etc…) that consolidate products and services in
    a way that makes it easier for them to get what they want.
 2. The second problem is the “management” part. In a more agile, networked view
    of the world, channel participants are more difficult to manage or control. 
    They tend to either have or believe they have more alternatives.  They also
    have to deal with a rapidly changing set of consumer demands that change
    what it takes for them to be successful.  If I’m an insurance agent,
    retailer, distributor, etc… struggling to keep up with changing consumer
    demands, preferences, and alternatives, I’ll challenge anything that product
    providers do that gets in the way of my responding to and serving my
    customers.

This leads me to Channel 2.0, which for the lack of a better description can be
called Collaborative Ecosystem Management. In a more networked business
environment the fundamental shifts include moving…

From: To:

Linear, feed-forward value delivery system

Complex, shifting network of participants

Static and known list of channel relationships

Evolving and emerging channel participants

Product and service fulfillment model

Demand creators and accelerators

Inflexible channel structures and systems

Adaptive collaboration processes and technology

In my next two posts, I’ll share some of what we’ve learned in helping companies
improve performance by establishing the foundational performance capabilities
associated with Channel 1.0 and building on those foundational capabilities in
order to move to a more agile, next generation Channel 2.0 model.

Addendum… here are the next two posts:

 * Channel 1.0: Foundational Capabilities for Optimizing B-to-B-to-C Performance
 * Channel 2.0: “Collaborative Ecosystem Management”

Filed under: B-to-B Experience, Customer Experience | Tagged: agents, B-to-B,
b-to-b-to, B-to-B-to-C, b2b, b2b2c, brokers, channel 1.0, channel 2.0, channel
management, channel optimization, channel performance, channel strategy,
collaborative ecosystem management, Customer Experience, distribution channels,
don tapscott, franchise, ngenera, retailers, sales channels, wikinomics | Leave
a comment »


OVERCOMING CUSTOMER EXPERIENCE PROGRAM STRESS POINTS

Posted on August 4, 2009 by Frank Capek

Along with my colleagues at Customer Innovations, I’ve had the opportunity to
help structure and manage major customer experience initiatives for a wide range
of companies.    In the course of doing so, we’ve run into every imaginable
roadblock and gone down our fair share of unproductive “rat holes.”   About a
year ago, the Customer Innovations leadership team took a step back and
summarized the stress points that organizations face as they try to build and
maintain momentum with their customer experience programs.   Here’s what we came
up with:


CUSTOMER EXPERIENCE PROGRAM STRESS POINTS



These stress points create confusion, slow or stall progress, and often
partially, if not totally, derail the effort.   We’ve found that these stress
points occur predictably with certain roles (e.g., the project team, executive
stakeholders, support functions, etc…) and at certain points in the lifecycle of
the effort.   Although they occur predictably, they tend to catch most
organizations by surprise.   The key to building and maintaining progress is to
know how to anticipate these stress points and manage them in advance.

Here are just a couple of the predictable stress points and what we’ve found is
important to proactively address them:

 * Moving Beyond Platitudes (Executive Sponsors). Many executives have strong
   rhetoric around customer-focus and the need to deliver a compelling customer
   experience.  Very rarely do they understand how to move the organization
   beyond this rhetoric into action.  The experience that customers have with
   the business is typically the product of very deeply entrenched structural,
   cultural, and behavioral “legacy effects.”   Shifting the customer experience
   in any noticeable and profitable way involves knowing how to shift this
   deeply entrenched organizational behavior.  Addressing this stress point
   requires having a comprehensive, well-tested roadmap that allows Executive
   Sponsors to know how to create the conditions for success with a program that
   follows through on the rhetoric.  This roadmap must take into account
   surfacing and addressing the legacy effects that get in the way.  (see: 
   Centers of Gravity: Levers for Shifting the Customer Experience,  How
   Employee Experiences Drive Organizational Behavior, and Integrating Customer
   and Employee Experiences)

 * Knowing Where to Start (Project Leadership and Support Functions). Improving
   the experience customers have with the organization seems all encompassing. 
   There are usually a very wide range of processes, functions, technology, and
   people that touch the customer.  Most organizations have multiple lines of
   business, each with multiple types of customers, and often many different
   channels or intermediaries that play a role.  Where do you start?  Do you try
   to work top-down on the things that are common across all of these dimensions
   or do you try to work bottom-up by focusing on individual elements of what
   the organization does to influence the experience?   The answer is neither…
   and both.  We’ve found that an iterative top-down / bottom-up process works
   best.  Starting with top-down principles and a unifying customer experience
   specification (see:  Customer Experience Specification) and then refining the
   principles and specification in bottom-up detailed design and pilots with
   individual lines of business or experience components.

 * Productively Engaging the Organization and Partners (Line Management and
   Front Line Employees/Partners). How do you include and engage the
   organization in the project?  How do you involve outside intermediaries,
   agents, franchisees, brokers, integrators, etc… ?  Addressing this question
   involves understanding how the extended organizational system influences the
   experience customers have.  We’ve found that a deliberate combination of
   workshops, immersion events, participative research and design approaches,
   etc…  can make a huge difference in getting the broader set of participants
   in the delivery of the experience on board and owning the initiative. 
   (See:   Optimizing the Business-to-Business-to-Customer
   (B-to-B-to-C) Experience and Rapid Revenue Retention: A “Swarming” Approach
   to Keeping Customers During Recessionary Conditions)

 * The Experience Mapping Swamp (Project Team and Support Functions).
   Touch-point mapping… the analysis of how customers experience what the
   company does at each of the points of interaction… is the central approach
   used in most customer experience initiatives.    It’s very rational that the
   organization would want to know how it’s doing at those points of
   interaction.  The problem is that it’s close to useless for figuring what to
   do to significantly improve the experience.  In most cases, addressing the
   issues that get surfaced in touch point mapping exercises creates no more
   than “better sameness.”  (see:  Whose Experience is it Anyway? and The
   Customers’ Experience Does Not Happen At Your Touchpoints!)   The fact is,
   the customers experience doesn’t just happen at an organization’s touchpoints
   and, as a result, it’s really impossible to know how to meaningfully improve
   that experience unless you understand what’s happening at the
   non-touch-points.   The most effective tool for proactively addressing this
   stress point is making sure that the effort starts with an
   “experiencer-centric” definition of the experience.   (See Experience Miner:
   Creating Profitable, Evocative Experiences)

There are many other stress points:   Facing the ugly truth in “Coming to Terms
with the Truth About Today“, overcoming the tendency to define an “Ideal
Experience We Can’t Implement,”  having the guts to do drive towards
“Differentiation vs. Better Sameness,” while avoiding “Painting the Surface vs.
Changing the Core,”  and overcoming the “Surfacing Unwritten Rule Barriers” that
make it impossible for the organization and it’s intermediaries to behave in a
way that creates the desired experience, etc…  You get the picture.  We’ve
developed effective strategies for addressing each of these stress points.   I’m
happy to provide additional information…. just shoot me a message.

Cheers, Frank

Note:  Our stress point framework was inspired by the “Reengineering Stress
Point” framework originally created by brilliant consultant,  Glenn Mangurian,
while he was at CSC Index in the mid-90s’

Another note:  If you found this post interesting, you might also find the
following posts helpful:

 * Why Customer Experience Initiatives Fail?
 * A Break in the Service Profit Chain: Why Increases in Employee Engagement
   Don’t Improve the Customer Experience

Filed under: Customer Experience, Organizational Behavior | Tagged: Customer
Experience, experience design, experience mapping, failure, glenn mangurian,
Organizational Behavior, program management, roadblocks, service profit chain,
stress points, touchpoint mapping | Leave a comment »


EXPERIENCE MINER: CREATING PROFITABLE, EVOCATIVE EXPERIENCES

Posted on August 3, 2009 by Frank Capek

Most of the time and money organizations invest on customer experience is
wasted…

… because they focus on how the organization “delivers the experience”…

… rather than on how customers actually “HAVE the experience”…

… and how those experiences influence behavior!


Most customer experience efforts are based on touch-point oriented approaches
that define the experience in terms of a customers’ interactions with the
company.  These approaches are inherently company-centric and, at best, lead to
improvements that create “better sameness.”  The fact is:

Customers’ experiences do not just happen at your organizations’ touch-points.





EVOCATIVE EXPERIENCES… THE EXPERIENCES THAT MATTER

An experience is evocative when it positively and profitably influences:

 * What people think (cognitive outcomes)
   * What they remember about their experience
   * The story they tell themselves and others about their experience
   * The distinctions they draw that differentiate what you did for them
 * How people feel (affective outcomes)
   * How doing business with you makes them feel about themselves
   * How the way they feel about themselves drives how they feel about you
   * What specific emotional states and triggers motivate behavior
 * What people do (behavioral outcomes)
   * Making additional purchases
   * Diversifying what they buy from you
   * Telling stories about their experience with you
   * Recommending you to others
   * Behaving more cost effectively
   * Adopting new product, service, or process offerings


FOUR CHARACTERISTICS OF AN EVOCATIVE EXPERIENCE

 1. Are immediately simple to understand and easy to navigate. The vast majority
    of peoples’ experiences are accomplished using a combination of “gist
    processing” and “automatic behavioral scripts.” Well-designed experiences
    fit easily with the mindsets and natural behaviors people have for the
    problem they’re trying to solve. Note: As a result of being designed around
    automatic behavioral scripts, evocative experiences can have a surprising
    subconscious influence on behavior.
 2. Offer innovative solutions to peoples’ latent problems. Well-designed
    experiences start with a deep understanding of what people are trying to
    accomplish and provide solutions to problems, accomplish goals, and address
    needs that people may not even realize they have or be able to easily
    describe. These innovative solutions almost never occur at the existing
    company touch-points.
 3. Tell a compelling and memorable story. People perceive, interpret, and
    recall their experiences using stories. Well-designed experiences tell a
    story that has a clear and distinctive message that resolves conflict using
    a small number of high-contrast, signature experience elements. These
    signature experience elements get people’s attention and are perceived as a
    meaningful differences in kind… rather than incremental differences in
    degree.
 4. Trigger specific emotional states that influence behavior. The most
    influential experiences are designed to influence how people feel… not about
    the company… but about themselves. The specific emotional state(s)
    associated with the experience are chosen as the precursors to the behavior
    the experience is intended to generate.


CREATING EVOCATIVE EXPERIENCES

In order to create evocative experiences you must start with an
“experiencer-centric” rather than “company-centric” definition of experience.  
We define an experience to be:

Experience:  A person’s cognitive, affective, and behavioral reactions… across
the end-to-end process they follow… in order to realize a desired state, satisfy
needs, and accomplish goals that are important to them.

This is fundamentally different than the typical company-centric definition: 
Customer experience is the sum or all interactions a customer has with a
supplier of goods or services, over the duration of their relationship with that
supplier.


EXPERIENCE MINERTM AND THE DESIGN OF EVOCATIVE EXPERIENCES

The objective of any product, service, or experience design is to profitably and
powerfully influence how people think… how people feel… and, most importantly,
how people act.   Most organizations’ efforts fail to achieve this objective
because they focus on how their organization “delivers” an experience rather
than how people actually HAVE experiences.  As a result, organizations routinely
over-invest in incremental improvements that deliver “better sameness” at the
existing touch-points.  In the course of doing so, these organizations miss the
fact that customers’ experiences don’t just happen at their touch-points.  
Although these investments may have a marginal impact on reported satisfaction,
they often don’t lead to any measurable change in behavior in the face of
changing customer needs, priorities, expectations, and alternatives.  In order
to positively influence customer behavior, experiences must be designed and
delivered with a deep understanding of how people actually HAVE experiences. 
For more information on this, see:  Getting Beneath the Voice of the Customer

Experience MinerTM provides a rigorous way of capturing and analyzing the most
critical aspects of the way people think, feel, and act  on their experiences. 
Built on 25 years of research into the cognitive, affective, and behavioral
basis of experience, it provides the specific insight required to focus design
and delivery efforts on the areas of greatest influence and financial return. 
 Experience MinerTM is used to describe the key elements for each target
customer personae.  This insight is used to 

…design evocative experiences from the mental model of the experiencer.



> > The Experience MinerTM toolset consists of the following seven elements,
> > each designed to fill in a critical piece of insight required to design
> > experiences that influence behavior.
> > 
> > Goal Space MappingTM – Describes the desired states and situation-specific
> > goals that motivate and direct the experience for each key persona
> > 
> > 
> > Experiential TemperamentTM – Profiles how temperamental differences
> > influence the way people are drawn to and engage with novelty seeking, harm
> > avoidance, social orientation, and persistence
> > 
> > 
> > Framing Metaphors – Surfaces the underlying physical metaphors people use to
> > interpret, evaluate and act on their experiences in the relevant domain(s).
> > 
> > 
> > Experiential ConstructsTM – Identifies the most common, learned distinctions
> > that enable people to recognize, categorize, differentiate, and form
> > expectations.
> > 
> > Emotional States and TriggersTM –  Surfaces the emotional states and
> > specific triggers across the lifecycle of the experience highlighting areas
> > of uncertainty, stress, frustration, etc…
> > 
> > Experiential PathwaysTM – Maps the end-to-end set of activities and choice
> > points that people follow in pursuit of their goals… including the unwritten
> > rules and automatic behavioral scripts people apply along this pathway.
> > 
> > Experiential Choice DynamicsTM – Describes the situation-specific choice
> > processes that people follow, as well as, how they construct preferences and
> > make decisions that influence their behavior.

Most of the time and money organizations invest on customer experience is
wasted…

… because they focus on how the organization “delivers experiences”…

rather than on how customers actually “HAVE experiences” and how those
experiences influence their behavior!

Filed under: Cognitive Ergonomics, Customer Analytics, customer behavior,
Customer Experience, Neuroeconomics | Tagged: automatic be, automatic behavior,
better sameness, choice architecture, cognitive ergonomics, Customer Experience,
evocative experience, experience mapping, experience miner, experiential
constructs, experiential pathways, experiential temperament, goal-space mapping,
signature experience, touch point mapping, touchpoint | Leave a comment »


CUSTOMER INNOVATIONS: CREATING EXPERIENCES THAT DRIVE MEASURABLE
BUSINESS RESULTS

Posted on July 30, 2009 by Frank Capek

Are you losing too many customers or sales opportunities?    Are you
experiencing too much negative word of mouth?    Are customers’ expectations
changing faster than your company’s ability to stay ahead of the competition?   
Do you have trouble aligning the efforts of intermediaries in order to deliver
for the customer?    Are customers behaving in a way that constrains or
undermines your efficiency and profitability?    Are all your efforts just
leading to “better sameness”?

Over the past couple of years, I’ve covered an extensive array of topics focused
on how companies can address these issues.  In this post, I’d like to take the
liberty of  describing the type of work we do and the unique tools we use in the
process.

My colleagues and I at Customer Innovations have a 25 year track record helping
leading organizations create experiences that improve the acquisition,
retention, and profitability of customers.  In the course of our work, we’ve
demonstrated bottom line results of 10-25% in the form of increased retention,
incremental sales, reduced acquisition costs, positive word of mouth, higher
price realization, and improved productivity of customer-facing operations.  
Most of our work has been with organizations that create experiences across
complex networks of “customers” including consumers, agents, brokers, retailers,
and other influencers.

Our work generally takes the form of these types of efforts:

 * Rapid Revenue Retention. We quickly identify specific elements of the current
   experience that are leading to attrition, lost sales, negative word of mouth,
   and unproductive customer behavior.   Intensive 10-12 week efforts often lead
   to $10 – $100 million in benefits.
 * Accelerating Sales From the “Outside In”. Rather than starting with the
   internal structure, processes, tools, and training, we start with a deep
   understanding of how and why your customers buy and then focus improvements
   on shifting buying behavior.
 * Creative Customer Insight. Without breakthrough customer insight, design
   efforts can only produce “better sameness.”  We have a unique approach to
   surfacing customers’ latent motives, beliefs, needs, and priorities in a way
   that informs the creation of highly evocative and profitable products,
   services, and experiences.
 * Signature Experience Design. We design, deliver, and engage customers in
   experiences that capture their attention and influence the actions they
   take.  These evocative experiences are structured to tell a meaningful and
   influence customer behavior using a set of differentiated “signature
   experience” elements.
 * Aligning Effective Employee and Intermediary Experiences. We help create the
   specific employee and intermediary experiences required to ensure that those
   who work directly or indirectly with your customers reinforce the intended
   evocative experience.


WE HAVE A UNIQUE TECHNOLOGY FOR CREATING EXPERIENCES THAT INFLUENCE CUSTOMER
BEHAVIOR

Traditional touch-point oriented approaches rarely deliver more than “better
sameness” because they focus on how the organization delivers an experience
rather than on deeply understanding how people actually have experiences and how
those experiences influence behavior.   Customer Innovations has a unique
approach and toolset for designing evocative experiences that positively and
profitably influence behavior. 

 * Experience MinerTM – Traditional “voice of the customer” approaches are
   insufficient for understanding the largely subconscious processes that
   influence customers’ desires, preferences, emotional states, choices, and
   behavior. Based on 25 years of cognitive and behavioral research, the
   Experience MinerTM toolset helps surface, analyze, and measure the ways
   customers think about, feel about, and act on their experiences.
 * Experience DesignerTM – The output from Experience MinerTM feeds our
   structured Experience DesignerTM toolset that guides every step of the
   experience ideation, concept development, specification, and blueprinting
   processes.  Experience DesignerTM also incorporates an integrated
   experience-chain framework that helps specify and design the specific
   employee and intermediary experience interventions required to generate the
   intended customer experience.
 * Experience EconomicsTM – It’s exceptionally easy to deliver an uneconomic
   experience.  Most organizations simultaneously over-invest in elements of the
   experience that don’t matter to customers and under-invest in elements that
   have significant influence on customer behavior.  The Experience EconomicsTM
   toolset helps companies find the optimal investment point based on the
   influence that individual and collective experience design elements and
   service levels have on the financial performance of the business.

I’ll continue to expand on these tools in upcoming posts.   In the meantime, you
might want to check out the following links:

 * Rapid Revenue Retention: A “Swarming” Approach to Keeping Customers During
   Recessionary Conditions
 * When the Going Gets Tough… The Tough Get Closer to Their Customers
 * Choice Architecture: Designing Experiences that Influence Customer Behavior
 * Designing Experiences that Fit the Customers’ Mental Model
 * Integrating Customer and Employee Experiences
 * A Break in the Service Profit Chain: Why Increases in Employee Engagement
   Don’t Improve the Customer Experience

If you’d like any more information, just post a reply or send me a note at
fcapek (at) customerinnovations (dot) com.   Cheers, Frank

Filed under: Cognitive Ergonomics, Customer Analytics, Customer Experience,
Employee Experience | Tagged: behavioral economics, Customer Experience,
customer retention, experience designer, experience economics, experience miner,
Neuroeconomics, revenue retention | Leave a comment »


CUSTOMER EXPERIENCE AND AGILE MANEUVER: SUCCEEDING IN A HIGHLY
DYNAMIC ENVIRONMENT

Posted on December 18, 2008 by Frank Capek

There are four core processes you must execute effectively in order to succeed
in any uncertain and rapidly changing external environment.  These four core
processes are the foundation of agile maneuver:

 * OBSERVE changes in the environment in real time… while aggressively avoiding
   your own strong tendency to just see what you either expect or hope to see
 * ORIENT yourself quickly to what those changes mean… being careful to
   challenge and revise your outdated assumptions and beliefs about reality
 * DECIDE on a course of action… chosen from range of creative alternatives most
   relevant to the changing environment
 * ACT in a coordinated and committed manner… while being ready to OBSERVE,
   ORIENT, DECIDE and ACT in order to ensure progress and enable course
   corrections as necessary.

NOTE: These interrelated processes are called the Boyd Cycle; more on this later

The ability to effectively OBSERVE – ORIENT – DECIDE- ACT is critical for any
organization that must adapt to the rapidly changing customer needs, priorities,
and criteria.   The current economic environment is just part of the challenge. 
The uncertainty and fear we’re experiencing in the economy must be multiplied by
the high levels of technological, demographic, social, and global competitive
changes we’ve seen over the past few years.  Any organization that relies on an
outdated set of beliefs about customer is more likely to accelerate their
irrelevance than ensure their success.

Many organizations are already dangerously disconnected from their customers. 
One of the indicators that this disconnect is Bain’s research that found 80% of
companies believed they were delivering a superior experience while only 8% of
their customers thought they were receiving a superior experience.  This
disconnect will continue to grow as the rate of change in customers’ priorities
exceeds the rate of change of managements’ beliefs about customers.    Across
the industry situations we’ve seen, there are four urgent issues that most
organizations must OBSERVE – ORIENT- DECIDE – ACT on:

 * Customers’ Priorities are Shifting. During a recession, your customers do not
   just become more conservative… their needs and priorities change
   significantly.  As a result, it is very dangerous to rely on traditional or
   untested assumptions about customers’ needs, priorities, and behavioral
   drivers.   Prescription – OBSERVE: Get outside of the normal channels to
   observe, talk with customers, and get a clear picture of specific shifts in
   their needs, priorities, and behavioral drivers.
 * Experience Issues are Driving Attrition. Your organization is unnecessarily
   losing customer and prospects you worked hard to acquire.  Most organizations
   frustrate, annoy, and miss opportunities with customer in ways that are hard
   to see without looking at the experience clearly from the customers’
   perspective.  Prescription – ORIENT: Quickly diagnose and repair specific
   customer experience issues that are leading to unnecessary attrition and lost
   opportunities.
 * Customer Profitability is Shifting. A smaller number of your best customers
   will contribute an even larger share of your profits… while a growing number
   of margin or unprofitable customers will create even more of a drain on the
   system.  Prescription- DECIDE: Identify and aggressively prioritize
   investment in understanding, collaborating with, and improving the experience
   for the most valuable customers.
 * Employee Engagement is Deteriorating. As a recessionary mindset settles into
   the workforce, it drives increasing levels of distraction, indifference, and
   depression.  Unless the employee experience is addressed, these issues will
   have a profound impact on the level of hospitality employees provide
   customers.  Prescription – ACT: Shift communications and engagement efforts
   to mobilize employees and create a drumbeat behind the highest priority
   initiatives and performance objectives.

The question is… can you do this faster and more effectively than your
competitors?

The winner of any business competition is determined by THE CUSTOMER

In any competitive situation, it’s a race to see which of the competitors can
effectively re-orient themselves to the rapidly changing customer priorities
and, in doing so, outmaneuver their competitors.  An organization that can
OBSERVE – ORIENT – DECIDE – ACT faster and more effectively than their
competitors will be able to remain relevant, retain and grow their business, and
build the strongest customer relationships.

There are many great examples of this.   One classic is the Honda – Yamaha
“war.”  Honda learned that Yamaha was planning to build a large factory to ramp
up production of motorcycles.  However, rather than responding to this
competitive threat by building another factory of their own, they out maneuvered
Yamaha by concentrating on business processes that allowed them to quickly
release a flood of new models aimed at the rapidly changing concept of what
customers would find compelling.  Customers responded positively and Honda
emerged with the advantage and additional market share.

There are numerous other outstanding examples, including the way we’ve seen Dell
outmaneuver many of the other PC manufacturers in the late ’90s.  We’ve seen
WalMart outmaneuver just about every other mass market retailer over the past 20
years.  We’ve also seen Toyota outmaneuver GM and Ford, Southwest outmaneuver
Delta and American, Best Buy outmaneuver Circuit City, and we’re currently
seeing Google and Apple outmaneuver Microsoft today.  In each of these cases,
the prevailing organization has done a better job of OBSERVE – ORIENT – DECIDE –
ACT… and the winner has been determined by the customer.

We’ve applied the core principles of agile maneuver in our work with clients
over the last decade.  The high level roadmap we’ve followed is:



The overarching goal is to keep the value proposition and customer experience
relevant, compelling, and differentiated.   In order to sustain differentiation
and even move the market in a new direction, you must offer customers something
new; a product, a service, or an experience that both fits with… and influences…
the way they think, feel, or act.

However, we frequently come across organizations that have beliefs about
customers and their own capabilities that range from simply arrogant to
downright delusional.   This can include inaccurate beliefs regarding who the
company’s best customers are, what customers really want, and how differentiated
the company’s products, services, and capabilities really are in the customers’
eyes.  If this is true, it’s only a matter of time before the business becomes
irrelevant and its customers increasingly go elsewhere.

My post, titled “Rapid Revenue Retention: A “Swarming” Approach to Keeping
Customers During Recessionary Conditions,” provides a specific application of
agile maneuver focused on customer retention. The Rapid Revenue Retention
approach is structured like an OODA loop.  The approach quickly Observes and
Orients around the experience customers are having and uncovers the experience
elements that create frustration, confusion, annoyance that contribute to
attrition and missed additional opportunities.  The approach then focuses on
Deciding and Acting on the highest priority interventions required to reduce
attrition.  We’ve seen companies realize benefits from these efforts ranging
from $20-100 million in incremental revenue.

The Boyd Cycle and Agile Maneuver

The Boyd Cycle:  OBSERVE, ORIENT, DECIDE, and ACT was developed by and named
after Colonel John Boyd, an exceptional US Air Force fighter pilot engaged in
the tail end of the Korean conflict.  After the war was over, Boyd was intrigued
by the fact that the Americans achieved as high as a 10-to-1 kill ratio in
air-to-air combat, despite the technical superiority of the Russian MiG 15‘s
flown by the North Koreans compared to the American F-86 Sabres.  The MiGs had a
higher ceiling, superior climbing rate, faster acceleration, a tighter
high-altitude turning radius, as well as, more powerful weaponry.   When Boyd
studied this, he found that F-86s had two distinguishing features that allowed
the American pilots to better observe the situation unfolding around them and
respond more quickly than their adversaries.  Those two features were a canopy
design that allowed better 360o visibility and hydraulic controls along with an
all-moving tailplane that enabled pilots to respond more quickly.

Boyd concluded that these two capabilities contributed to the American pilots’
ability to OBSERVE, ORIENT, DECIDE, and ACT more quickly than their adversaries.
  The result was that the American pilots could outmaneuver the North Koreans
despite superior raw capabilities of their technology.  Boyd described an
ability called “fast transients” that allow one entity to operate “inside the
OODA loop” of their adversaries.  When this happens, adversaries’ actions become
increasing irrelevant because they are reacting to an environment that has
already changed.  Eventually the adversary gets so confused that they can no
longer stay on top of the changing situation.



Boyd went on to develop extensions to this theory that have become the central
tenets of modern maneuver warfare and is considered to be one of the most
influential military strategists of the late 20th century.   (See:  Robert
Coram’s Boyd: The Fighter Pilot Who Changed the Art of War).  In addition, Boyd
is credited with the design of the F-16 Viper light weight fighter that put the
principles of agile maneuver and fast transients into practice.

By the way, Boyd offered an elegant proof of why there is always on “orientation
gap” between an entity’s beliefs and the realities of that entity’s external
environment.  He showed that it’s impossible to fully understand the performance
of any complex system while operating inside that system.   His proof used a
combination of Gödel’s Incompleteness Theorem, Heisenberg’s Uncertainty
Principle, and the Second Law of Thermodynamics (see Boyd’ paper titled: 
“Destruction and Creation“).   The key learning is that, in order to maintain an
accurate or effective grasp of reality, one must undergo a continuous cycle of
interaction with the environment in an effort to continually close a gap that is
always growing.  This has profound implications for competitive business
situations.

OBSERVATION:   Getting Past an Arm’s Length Understanding of Customers

The first issue that must be addressed is the gap between the customer who is
“out there” and the decision makers who are “in here.”   Many companies have a
very arms length way of trying to understand their customers.  As Wharton
Marketing Professor, Peter Fader, observed, “Our understanding of customers is
about where it was 40 years ago.  We can store every customer transaction in our
database, but we need to find a way to use this to understand what makes them
tick.”

Most companies tend to hire market researchers to go “out there” and conduct
interviews, surveys, and focus groups in an attempt to find out what those
customers really want.  The researchers bring back what they’ve learned and, in
most cases, deliver a presentation or write a report.   In some cases, the group
of decision makers actually attempts to get their head around these findings and
try to guess what new products and services might work for those customers.

I’ve always felt that trying to understand customers based solely on arms length
quantitative analysis feels a lot like trying to determine how the furniture
upstairs is arranged…  by tapping on the ceiling! But the ceiling is a little
like the barrier between the company and its customers.  Obviously, you’d get a
much clearer picture if you just went and took a look… rather than trying to
infer what’s going on through indirect and limited data sources.  In addition,
inferences drawn from arms length approaches are prone to interpretation
errors.  Without an adequate visceral context for understanding the data, we’ve
seen many organizations draw conclusions akin to “Our customers in South Florida
are born Hispanic and die Jewish.”

In the more boundariless, Wikinomics view of the world, there are a growing
number of examples of organizations bringing the customer inside.  This Next
Generation Experience is “always on” listening to, observing, and interacting
with customers.  It includes organizations that are starting providing platforms
for collaborating with customers on the development and improvement of the
products, services, and experiences.  This includes great examples from Dell‘s
IdeaStorm and My Starbucks.com.  It also includes companies like Peugeot,
engaging customers in the design of its vehicles.  It also includes platforms
for connecting customers with other customers in order to have them share
experiences and provide each other support.

ORIENTATION:  The Destruction and Recreation of Beliefs

Of the four processes ORIENT may be the most pivotal.  The way we ORIENT filters
and biases the way we OBSERVE.  It also influences and constrains what we DECIDE
to do and how we ACT.  In essence, ORIENT is all about accurately understanding
how the environment you’re in is unfolding.  This is very difficult for people
to pull off.  The issues is that to some extent, we all hold onto beliefs about
the world that significantly bias the way we perceive and interpret what happens
to us.   Our beliefs also have a profound impact on the way we perceive,
interpret, and evaluate what we OBSERVE in our environment.

We don’t see the world the way it is… we see the world the way we are.

Although our beliefs are never fully accurate representations of the way things
actually are, they become a real problem if the environment around us is
changing rapidly.  Very often we just see what we expect to see. Dr. Leonard Orr
said this succinctly as, “What the thinker thinks, the prover proves.”

In addition, our beliefs limit and enable what’s possible by influencing the
alternatives we consider and the actions we take.   George Bernard Shaw once
said,

Our lives are shaped not as much by our experience as by our expectations.

Our beliefs limit and enable what’s possible for each of us in our lives. 
Regardless of what we’re willing to admit… our behavior is always fully aligned
with our core beliefs.  In fact, we cannot activate, maintain, decide about,
prefer, plan for, or pursue any goal which is not grounded (implicitly or
explicitly) on a set of underlying beliefs.

In any situation where the external environment is changing faster than our
beliefs, we run the risk of taking actions that are not only irrelevant but, in
many cases, accelerate our own demise.  In order to close that gap, the trick is
to uncover and master beliefs rather than belimited by them.  These can include
the beliefs about what’s important, as well as, the unwritten rules that drive
the real behavior of the organization.  This is both critically important and
easier said than done.  Your beliefs are so much a part of how you think that it
can be difficult to recognize them.  It’s like a fish being unaware of the water
it’s swimming in.

In a fascinating CIA paper titled “The Psychology of Intelligence Analysis”
Richard Hauer describes not only the issues surrounding the perception and
interpretation of information but also outlines an approach to overcoming this
bias.  The approach, called the “Analysis of Competing Hypotheses” forces
analysts to more deliberately evaluate evidence for alternative conclusions
rather than searching for evidence to confirm a pre-existing hypothesis.  I’ve
found that following a simplified version of this approach to be invaluable on a
personal level.  It avoids the tendency we all have to just look for and see the
evidence that supports our pre-existing beliefs.  The basic steps of this
approach are to:

 1. Identify a wide range of competing hypotheses
 2. Gather evidence for and against each of these hypothesis
 3. Prioritize each hypothesis based on the weight of evidence that disproves
    rather than proves it

Summary:

It’s important to recognize that customers’ needs, priorities, and choices are
different today than they were just 6 months ago.  Any organization that relies
on an outdated set of beliefs about customer is more likely to accelerate their
irrelevance than ensure their success.   In order to overcome this tendency it’s
critical to follow the Boyd Cycle:

 * OBSERVE changes in the environment in real time… while aggressively avoiding
   the strong tendency to just see what you expect or hope to see
 * ORIENT yourself quickly to what those changes mean… being careful to
   challenge and revise outdated assumptions and beliefs
 * DECIDE on a course of action… chosen from range of creative alternatives most
   relevant to the changing environment
 * ACT in a coordinated and unconstrained manner… while being ready to OBSERVE,
   ORIENT, DECIDE and ACT to ensure progress and enable course corrections as
   necessary.

I’d love to hear from you with comments and questions… Cheers, Frank

Filed under: Case Studies, Customer Experience | Tagged: agile maneuver, best
buy, boyd cycle, Customer Experience, customer retention, customer strategy,
dell, fast transients, honda yamaha war, john boyd, ooda, peter fader,
recession, starbucks | Leave a comment »


RAPID REVENUE RETENTION: A “SWARMING” APPROACH TO KEEPING CUSTOMERS DURING
RECESSIONARY CONDITIONS

Posted on December 4, 2008 by Frank Capek

Given all the business challenges you’re facing today, the last thing you want
to do is drive away customers, particularly your most valuable customers. 
However, I can say with total confidence that:

Some of your best customers will leave you based on negative experiences they’re
currently having!

How do I know this?  Because, after having worked on customer experience
initiatives with many dozens of different companies, I’ve learned that every
complex organization is, to some extent, disconnected from their customers’
changing priorities… and the harsh realities of the experience customers have as
they pursue those priorities.  (Note:  It turns out that this statement is more
than just an observation.  It’s a provable certainty that I’ll cover in another
post). As a result, it is highly likely your organization is unintentionally
frustrating, annoying, confusing, missing opportunities with, and on the verge
of losing some of its best customers.  And your organization is doing this in
ways that are impossible to fully see from where you are sitting inside the
organization.

I’m not trying to be antagonistic.  I’m just stating something that should be
intuitively obvious to anyone that’s ever experienced the joys of being a
customer.   Bain’s “Closing the Delivery Gap” clearly illustrated this
disconnect as follows, “When we recently surveyed 362 firms, we found that 80%
believed they delivered a “superior experience” to their customers. But when we
then asked customers about their own perceptions, we heard a very different
story. They said that only 8% of companies were really delivering.”



But wait!  It gets worse!   Not only does the gap exist, the gap is almost
always growing.  This is true in any situation where the EXTERNAL REALITIES
(customers’ circumstances, needs, expectations, and perceived alternatives) ARE
CHANGING FASTER THAN THE INTERNAL BELIEFS held by management about what’s most
important to customers.  If this is true in your situation, the rate this gap is
growing is proportional to the rate of change in your external environment.

As we’ve entered this recessionary economic period, the external environment is
changing quite dramatically and quite unpredictably.   As a result, any
organization that turns its attention inwards rather than getting even closer to
customers is only going to accelerate customer attrition and, ultimately, the
irrelevance of their business.

In previous posts, I’ve started to address the most important strategies for
dealing with these challenges.  (See:  When the Going Gets Tough… The Tough Get
Closer to Their Customers and Delivering Winning Experiences for the
Recessionary Customer Mindset ).   In this post, I’d like to extend these
perspectives to one of the most valuable things you can start doing today.


RAPID REVENUE RETENTION – A “SWARMING” APPROACH

Over the past decade, we’ve done a particular type of focused Rapid Revenue
Retention effort for clients.  We’ve affectionately call the approach we follow
“swarming” or “swarm sensing” because it involves sending a distributed team of
people into the field to observe (i.e., to swarm around) the experience
customers are having.  The approach we follow is based on Swarm Intelligence; a
highly parallelized approach to reconnaissance used by the military.



The objective is, over an 8-10 week period to:

Identify and prioritize the six most important things the company can
immediately start doing or stop doing that will lead to a substantial
improvement in customer retention or additional sales

In order to accomplish this objective, we send a team of “swarmers” into the
field to live with and talk with customers and prospects; to experience things
first hand, from the customers’ perspective; and to identify the specific
frustration and confusion points that are leading to attrition or lost sales
opportunities.   Generally these efforts have been able to quickly identify
improvements that lead to a 3 to 5 point increase in retention and, often, a
significant increase in the win rate on new business.  Depending on the size of
the business, the benefits of this focused effort have traditionally run into
the tens of millions of incremental retained revenue.

Here’s an example:

 * Situation: The company is a leading provider of financial products that get
   sold through intermediaries (dealers) around the country. The differentiated
   positioning for this organization was their ability to partner with those
   dealers in a way that created a measurable improvement in their performance.
   The President of the organization approached us and said, “I believe we
   provide a highly superior product but I can’t understand why dealers are
   leaving us at an increasing rate.”
 * Approach: In order to respond to his request, we had a team of swarmers hit
   the field and spend about 6 weeks with current dealers, lost dealers, as well
   as, the customers of those dealers. Like other situations we’ve been in, it’s
   surprising how immediately apparent the issues are when you’re able to step
   into the customers’ perspective.
 * Results: In the course of those six weeks, we were able to identify seven
   immediate interventions that improved both dealer retention and the
   profitability of the existing dealers. These interventions included
   improvements to the screening criteria for pursuing new dealers,
   modifications to the initial dealer training they provided along with the
   creation of a refresher training schedule, and an attrition early warning
   process that picked up on changes in dealer behavior and directed sales
   people to intervene proactively as soon as the dealer started to exhibit the
   behaviors associated with leaving. Over the course of the 6 months following
   this effort, the organization was able to increase their retention from 88%
   to 91% creating a revenue uplift of approximately 20 million dollars.


ORGANIZING THE SWARM

We’ve generally done this with a small number of trained swarmers (consultants
or researchers) supported by a team of more inexperienced swarmers (employees). 
While it’s generally easier for outsiders to approach the situation from a fresh
perspective, there are several conditions that can be managed to make it
possible to accomplish work economically with inside people.  The keys to
organizing the swarm include:

 * Ensure swarmers are capable of seeing things from an unbiased perspective.
   This can be an unnatural act for anyone that’s been involved in any way in
   delivering or managing the services being observed.  People who’ve had any
   involvement in delivering the services being observed are “burdened by
   knowledge.” This includes being steeped in the processes, constraints,
   assumptions, excuses, biases, and blind-spots associated with delivering the
   service.
 * Arm swarmers with the right tools and training. Over the past 10 years, we
   have developed and continuously improved a “Customer Experience Observation
   Field Book” and accompanying training that has been effective at helping
   swarmers better see the experience from the customers’ perspective.



 * Ensure swarmers are able to put themselves in the customers’ shoes. Swarmers
   must be able to step into and “live” the customers’ priorities.  It’s
   important that swarmers be able to viscerally “get” what the customer is
   trying to accomplish, feels their needs, and understands how the customer
   looks at the experience.  This can be easier to do with inexperienced
   swarmers when those people strongly resemble the customers in question and
   have themselves been in similar customer situations.  For example, we’ve
   found that inexperienced swarmers have done an outstanding job observing the
   experience at Disneyland, when they themselves fit the profile of the
   customers whose experience we’re interested in.  However, we’ve had much less
   success in situations where swarmers come from significantly different
   cultural, economic, or business backgrounds than the customers in question.
 * Ensure that swarmers have no relationship with the customers being observed
   or interviewed. The presence of any personal, professional, or organizational
   relationship with the customers being interviewed will bias: 1) what
   customers may feel comfortable sharing, 2) what the swarmer is comfortable
   asking about, and 3) the purity of observations that can be captured.  It is
   particularly important that neither party has a stake in the findings.  This
   is one of the reasons why…



One of the most biased and ineffective ways to listen to customers is through
your sales and account management executives.

The immediate reaction we typically get is, “We’ll just have our people on the
frontlines… the one’s that spend all day with our customers… do this.”  While we
understand the advantages, we’ve learned this is generally a bad idea.  There
are three multiplicative barriers that get in the way of having salespeople and
account executives be a good source of insight.  First, when salespeople talk to
customers, they have an agenda and customers know it.  There are often
negotiation-oriented and face-saving dimensions to the relationship between the
salesperson and the customer.  As a result, customers do not tell salespeople
everything.  Second, since sales people show up with their agenda and existing
relationship, they generally filter everything they hear through that agenda and
relationship.  So, salespeople don’t hear many of the most important things
customers have to say.   Third, salespeople don’t accurately report everything
they’ve heard back to management.  This is particularly true if, by any stretch
of the imagination, what the salesperson heard might reflect negatively on them.

 * Build a capable, well balanced team. There is a profile for the good
   swarmers.  In our experience, the best swarmers tend to be extroverted,
   empathetic, open-minded, detail-oriented people who are capable of
   withholding judgment rather than quickly jumping to conclusions quickly. 
   Although we generally have a diverse team, you need to have enough of these
   types of people in the mix.

There are several things that make the Swarm Sensing process different from
“mystery shopping.”  Most importantly, the intention is different.  The
objective is to aggressively identify the highest impact improvements that can
be made immediately.  This requires executive sponsorship and visibility for the
effort, as well as, for implementing subsequent improvements.  In addition, the
level of depth is different.  Most mystery shopping exercises are more about
measuring compliance with expected service standards rather than getting deeply
under the covers of what’s working and not working about the experience
customers are having.  In a way this makes the swarming effort more like a
highly directed ethnographic study.  The most challenging elements of this are
equipping, training, and coordinating a distributed team of swarmers to do the
work over a short period of time with a very well-defined and highly valuable
business objective.

I’d be happy to share more perspective on this approach than I have room to
address here.  Shoot me a message or add a comment if you’d like more
information.

Filed under: Customer Experience | Tagged: bain, closing the delivery gap,
Customer Experience, customer experience delivery gap, customer retention,
ethnography, keeping customers, recessionary mindset, recessionary strategy,
revenue retention, swarm intelligence, swarm sensing, swarmers, urgent customer
retention | 6 Comments »


DELIVERING WINNING EXPERIENCES FOR THE RECESSIONARY CUSTOMER MINDSET

Posted on December 2, 2008 by Frank Capek

I just received an interesting advertisement from Mimi’s Café.  Mimi’s is a
115-store chain of upscale casual dining establishments known for generous
portions of predictably high quality entrees.  In an unusual twist, Mimi’s is
promoting a “Just Enough Menu” focused on smaller portions at prices that range
from $7-9 for lunch and $8-12 for dinner.  While most advertisements you see
promote “more for less,” this advertisement promotes “less for less.”   Although
this may be surprising, I believe it’s an astute move.  Not only does it provide
a low price incentive but the “less for less” approach strikes a chord with a
recessionary mindset that has been taking hold.

The National Bureau of Economic Research (NBER) announced yesterday that the
United States has officially been in a recession since December 2007.  I don’t
think many people were surprised.  “I think that we’ve got a ways to go, that
this is going to be probably a deep and long recession,” said Jeffrey Frankel, a
Harvard University economist who sits on the NBER.

Over the past year or so, the focus of our work on customer experience design
has transitioned from the strategic to the urgent.  We’ve spent more time
helping clients focus attention and investment on collaborating with and
retaining their best customers, surfacing and quickly addressing the reasons for
customer attrition, and on continually reinforcing that, although everyone seems
to have become more conservative,…

Customers are NOT NOT spending!  They are just changing how and why they spend.

Customers are continuing to opt for and engage in experiences that are designed
to meet their needs.  It’s just that their needs and priorities are changing
significantly.  Organizations that understand and quickly adapt to these changes
can not only preserve but enhance revenue in the short term.  Organizations that
hang onto outdated beliefs regarding their customers’ priorities will not only
lose revenue but will ultimately be seen as out of touch and irrelevant.

While every industry and situation has its own unique behavioral shift to
understand, we’re seeing a few overarching patterns that represent a solid
starting place.  Increasingly, customers are:

1. Rejecting Conspicuous Consumption

The recession may just provide a cure for a wicked case of Affluenza!  In light
of the current conditions, our past consumer behavior looks a little
embarrassing; like our evolutionary predisposition to acquire has been running
amuck.  The Times of London columnist, India Knight wrote, “I am happy to
observe that the decades of vulgar excess are finally over… There is a strong
collective sense of us all coming back down to earth. It’s like a huge national
reality check and, unwelcome as it may be, there is a possibility that it will
result in us straightening out our priorities.”   (See:  Dear Prudence:
Recession May Bring Return of Traditional Values).

We’re seeing early indications that there may be an aggressive backlash against
indulgent and conspicuous consumption.  Think about it.  How many families need
a 5,000+ square foot house other than to store all the stuff they buy to fill it
to the rafters?  Is it really necessary to spend between $40… and even $400… for
a case of 12 liter bottles of water?  Have I got a deal for you?  A case of
Bling H20 (water corked in frosted glass bottles adorned with Swarovski
crystals) is currently on special for less than $400/case.  Even at this
discounted price, it still makes the Evian “Palace” water seem cheap at $15-$20
a bottle.  Similarly, is it necessary to spend three times as much on Renova’s
designer toilet paper, $200 jeans, or a $690 on a Porsche baby stroller?

We’re starting to see a return to the more reasonable basics.  In the fashion
industry, “the dress, which has enjoyed a lengthy reign over the market, is
losing ground to more conservative, versatile, basic pieces that can blend and
carry their owners through several seasons. Retailers report excellent sales in
practical items such as blazers, denim, basic separates, and trousers.” 
(http://www.slate.com/id/2191398/)

It’s starting to look more and more socially unacceptable to buy upscale goods. 
A recent investment blog post provides an indicator of some of the sentiment
we’re seeing.   “One company that will be hurt by the eating retrenchment is
Whole Foods (NASDAQ: WFMI), a favorite of the upper middle class who wants to
look down their noses at people who go to regular grocery stores.”  (My emphasis
added).  The point isn’t whether Whole Foods shoppers believe in the health and
environmental benefits of organic and natural foods; the point is that non-Whole
Foods shoppers perceive the Whole Foods shoppers as “looking down their noses at
them.”

As I mentioned in a previous post (When the Going Gets Tough… The Tough Get
Closer to Their Customers), as customers that are struggling will buy up in
order to keep up appearances, the ones that aren’t will tone it down.  I expect
we’ll see an echo of the “grunge” music, fashion, and lifestyle movement that
arose out of the recession of the early ’90s.  This will create opportunity for
new products, entertainment, fashion, and retain outlets.

As we head into the holiday season, we’re starting to see an increased tendency
to give “practical” gifts rather than the more luxurious and exotic gifts.  Look
for high end companies to jump on opportunities to introduce more discreet chic
alternatives.

2. Making Value-Focused Tradeoffs

As the recession has taken hold, most customers are more willing to postpone
purchases, trade down, or buy less.  For many customers, yesterday’s “must
haves” are becoming today’s “can do with outs.

In the course of making these tradeoffs, customers are buying more quality
non-branded or store-branded alternatives.  Michael Barbaro and Eric Dash wrote
in the New York Times “Recession Diet Just One Way to Tighten Belt” that, “Over
the last year, purchases of brand name cookies and crackers have fallen,
according to Information Resources, which tracks retail sales.  Sales of Nabisco
graham crackers have dropped 7.5 percent, and Keebler Fudge Shoppe cookies have
slipped by 12.3 percent.  Not even beer is immune.  Sales of inexpensive
domestic beers, like Keystone Light, are up; sales of higher-price imports, like
Corona Extra, are down, the firm said.”

Customers are also making tradeoffs in convenience for price.  This includes
shifting from the Marriott to the Fairfield Inn and looking for cheaper flights
at off peak times, such as mid afternoon and late evening rather than early
morning.  As Barbaro and Dash write, “Spending data and interviews around the
country show that middle- and working-class consumers are starting to switch
from name brands to cheaper alternatives, to eat in instead of dining out and to
fly at unusual hours to shave dollars off airfares.”

In a great article, “Dollar’s fall forces new standard of frugality,” San
Francisco Chronicle writer Sam Zuckerman writes, “Now, that shop-till-you-drop,
I-want-it-all-and-I-want-it-now era may be coming to an end. It couldn’t last
because it was built on a mountain of money borrowed from overseas.”  Zuckerman
goes on to summarize some of the ways that customers are throttling back:

IN OUT Saving Borrowing Cooking at home Eating out Fixing the old car New car
Staying at home Foreign vacations 20 percent down No down payment Debit cards
Credit cards Working past 65 Early retirement Library Bookstore Tap water
Bottled water BART Bay Bridge Patching Remodeling Public park Theme park
Eyeglasses Lasik surgery Poker night Weekend in Vegas

We’re also finding that business customers want to see products and services
unbundled and priced separately.  Customers want and need to evaluate the
individual contribution of each component and are placing a premium on
reliability, predictability, and performance.  New products and services that
address new customer priorities and put pressure on competitors can be effective
but advertising and sales efforts must stress differentiated value and superior
price performance.

3. Smaller Scale, Do it Yourself Alternatives

During more optimistic economic times, customers often find I easier to justify
making investments in major projects.  For example, homeowners might invest in
renovating their home with the expectation that it’ll have a positive impact on
their home’s value.   However, as home values are shrinking, homeowners are
opting for smaller scale and more focused and necessary improvements driven by
livability and value preservation rather than economic gain.  For example, at
Home Depot, sinks, faucets, and bath accessories are selling briskly as
consumers switch from full makeovers to more focused refreshes.

Barbaro and Dash go on to cite an NPD study that provides another example: 
“Carl Hall, a retired construction worker in Detroit, wants to buy a fence for
his backyard. But he decided not to buy a finished product at Lowe’s, the home
improvement chain where he was shopping recently. With money tight, “I am
looking to put it together myself,” he said, adding that he hoped to save $200.”

We’re also seeing anecdotal evidence of a similar pattern with business
buyers.   It seems like more companies are breaking consulting and business
services projects into smaller pieces and looking for parts that they can do
themselves.

Agile companies will create offerings and experiences that provide customers
both smaller scale and “do it yourself” alternatives… in addition to offering
fully integrated options for those who may continue to prefer that.

4. Regaining Control

People experience an emotional loss of control during unpredictable times.  As a
result, we typically see people acting in idiosyncratic ways driven by a deep
psychological need to regain control.  For example, people often engage more in
collecting hobbies when they feel out of control in their lives.  Depending on
their individual interests, they’ll collect figurines, CD, DVDS, coins… just
about anything.  Conway’s Vintage Treasures blog, stated, ” “Collecting is a
passion and a distraction to a better place, a better quality of life then we
can get from say for example, following stock prices everyday…”   Our research
points to a deeper reason that has to do with control.  The more people feel
their situation is out of control, the more they compensate by engaging in
behavior that helps them regain their sense of control.  Collecting is one of
those things.   What’s the benefit of collecting another figurine when you
already have 200 of them?  Well, it makes them feel like they’re on top of their
collection and making progress in small steps towards improving it.

Aside from these deeper control issues, we also see more obvious ways of
regaining control.  For example, programmable thermostats and insulation which
help gain control over fuel bills are another top seller at home improvement
stores.

Another way that customers regain control is by taking advantage of packaged
offerings that reduce the actual or perceived costs or level of uncertainty. 
These bundled offerings can provide the comfort of “no surprises at a set
price.”   For example, while travel agencies report that although overall demand
for travel is down, there has been a shift to U.S. and even local destinations,
with a rise in popularity of “all-inclusive” stays.  (See:  Americans Flee
Looming Recession).  The opportunity for a local bed-and-breakfast might be: 
they could offer a package that included dinner at a local restaurant; bicycle
rental, horse carriage tour or the like; and tickets to a local attraction or
museum.  Those establishments could provide the goods and services at a discount
to the B&B (as a “cost” of marketing for the increased business), and the B&B
could offer the full package below the retail cost of the individual items while
guaranteeing the usage of their rooms.  A win-win situation for all of the
businesses!

5. Cocooning, Insperiences, and Staycations

As hard times loom, we tend to retreat to the comfort of our friends and family.
 We connect with cozy hearth-and-home scenes in advertisements rather than
images of extreme sports, adventure, and rugged individualism.   As we cocoon,
insperiences tend to boom.  According to trendwatching.com, Insperiences
represent “consumers’ desire to bring top-level experiences into their domestic
domain.” This can include high-end entertainment systems, in-home spas, exercise
facilities, etc…

As a result, telephone use and discretionary spending on home furnishings and
home entertainment should continue to hold up well, as uncertainty leads us to
stay at home but also stay connected with family and friends.   Sales of
big-ticket electronics, like $1,000 flat-panel televisions and $300 video game
systems, are on the rise, according to retailers and research firms. Falling
prices for such devices and a looming government deadline to convert to digital
television have helped. So has the view, sensible or not, that the technology is
a good investment.

Staycations often replace vacations.  Vacations at or around home rather than
traveling can be significantly less costly since there are no lodging costs and
minimal travel expenses.  Costs may be limited to gasoline for local trips,
dining, and local attractions.   In addition, Staycations do not have the stress
associated with travel, such as packing, long drives, or waits at airports. 
They may also appeal to people who are stressed about being away from work. 
(However, it also leads to the downside of working on your vacation.)

6. Small Understated Indulgences

In parallel with reverting to the practical, customers will look for small
understated indulgences.  They seek diversionary yet affordable experiences that
can make them temporarily forget their worries.   This includes things like
going to the movies.  During the height of the great depression, when 25% of
families had no income and unemployed labor reached 40%, movie receipts still
increased by 22%.

Big indulgences like higher-end restaurant chains, including Ruth’s Chris and
Morton’s, will be off since they are either actually too expensive or appear to
be extravagant.  In addition, frequently small indulgences that have become
habits, like Starbucks, will also take a hit since the total expenditures on
those items tends to add up.

There are also a range of interesting anti-recessionary small indulgences. 
Chocolates and alcohol generally sell well during a recession.  Another
interesting affordable luxury that generally performs well during a recession is
lipstick.  The “Lipstick Index” is the result of a time-series analysis that
suggests that lipstick sales are inversely related to the strength of the
economy.

7. Looking for Empathy

Customers are looking for companies that understand what they’re going through
and are ready to help.  In the outstanding New York Times article, “Thriftiness
on Special in Aisle 5,” authors  Stephanie Rosenbloom and Andrew Martin write:

“While it might seem counterintuitive for stores to teach shoppers to cut their
spending, several chains have concluded that providing such knowledge can spur
loyalty and keep customers from trading down to cheaper competitors.

So the Stop & Shop grocery chain is offering “affordable food summits” where
consumers are taught how to lower their grocery bills. Home Depot offers classes
on how to cut energy bills. And Wal-Mart Stores hired a “family financial
expert” who has used online chats to teach several thousand shoppers how to save
money for college, whittle away debt and sell a house.”

Whole Foods has redesigned their customer experience around the “Whole Deal”
theme targeted at customers who remain committed to natural and organic foods
but are feeling a heightened attention to cost.  This experience includes
several creative elements that match customers’ shifting priorities : an
expanded selection of lower-priced alternatives marketed under their “365″ store
brand,  “Money Saving Meal Plans” and “Budget Friendly Recipes” that provide
advice for containing costs while maintaining a focus healthy natural and
organic foods.   They are even offering “Value Tours” through the store in order
to help customers find the most cost-effective solutions.

Another way customers are looking for understanding is pricing.  Astute
providers do not necessarily have to cut list prices but they may need to offer
more temporary price promotions, reduce the thresholds for discounts, extend
credit to long-standing customers and price smaller sizes more aggressively.

Rosenbloom and Martin very eloquently summarize that…

“The golden trend tip for brands in a downturn? Care about your customers.
Deliver. Sympathize. Surprise them. Talk to them.”

These seven patterns provide a solid starting place for identifying the specific
shifts in customer needs, priorities, and behaviors that may be relevant to your
industry and situation.  In the end, companies that focus attention and
investment on collaborating with and retaining their best customers, surface and
quickly address the reasons for customer attrition, and remember that…

Customers are NOT NOT spending!  They are just changing how and why they spend.

Those companies will be in the best position to deliver winning experiences that
resonate with their customers’ changing needs and priorities… and, maybe even,
turn a downturn into an upturn.

Filed under: Customer Experience | Tagged: affluenza, belt tightening, Bling
H20, cocooning, customer behavior, Customer Experience, economic downturn,
frugal, insperience, just enough menu, menu design, mimi's cafe, recession,
recessionary behavior, recessionary mindset, recessionary strategy, staycation,
thriftiness, whole foods | 6 Comments »


WHEN THE GOING GETS TOUGH… THE TOUGH GET CLOSER TO THEIR CUSTOMERS

Posted on November 27, 2008 by Frank Capek

Whether we like it or not, the current recession will separate the weak from the
strong.  For many organizations, I believe the deciding factor will be how well
they recognize…

The linchpin of an effective recessionary strategy is aggressive customer focus!

In a downturn, customers’ assumptions about the future are driven by fear and
uncertainty more than objective financial realities.  Any recession generates
the obvious and predictable belt-tightening; customers delay necessary
purchases, choose more inexpensive options, and avoid discretionary spending. 
However, it’s critically important to recognize that, beyond these generalities,
each recession produces it’s own unique pattern of changes in customers’ needs,
priorities, and behaviors.  As a result, a recession can create opportunities
for organizations that can understand these changes, think creatively, and use
the situation as an opportunity to strengthen relationships with their most
valuable customers.

One of the worst things an organization can do during a recession is to take its
eyes off of their customers.  However, when threatened, most organizations have
a tendency to adopt an inwardly-focused, “survival mode,” mentality.   They
focus on operational and financial controls and stop investing in what appears
like discretionary initiatives aimed at strengthening relationships with
customers.  By taking their eye off of the customer, they end up accelerating
customer and revenue attrition while undermining their longer-term competitive
strength.  There are three things we’d recommend based on the work we’re doing
to help our clients deal with this challenge:

1.      The first priority is aggressive focus on and investment in your best
customers and prospects.  During a recession, a relatively small number of your
best customers will provide an even larger share of your profits, while the
often larger ranks of marginal or unprofitable customers will create even more
of drain on the system.   The first thing to do in a recession is to clearly
identify who your most valuable customers are and invest in strengthening
relationships with those customers.   This includes collaborating with those
customers to understand and address their changing priorities, restructuring
your offerings around their unique needs and, as necessary, restructuring
financial terms.  It also includes focusing sales efforts on the most valuable,
winnable customers and making sure that you’re not wasting resources on
customers that are not going to buy and that are unlikely to be profitable.

There are many classic examples of the benefits resulting from aggressive,
customer-focused investment during times when competitors are retrenching.  For
example, Dell invested in their customer-centric telephone ordering and pull
production systems during the 1990-1991 downturn.  As a result, Dell was able to
capture the strongest competitive position when the economy sprang back. 
Singapore Airlines invested $300 million in new seats, entertainment, meals,
flight attendant training all aimed at their most profitable first-and
business-class customers.  As a result, they were able to not only survive, but
remain profitable in the aftermath of the 1997 Asian currency crisis and emerged
in stronger competitive position.

A lot of the work we’ve been doing is focused on helping clients collaborate
effectively with their best customers.  This starts with the analysis required
to clearly determine who their best customers are and continues with the
implementation of joint planning processes, closed-loop satisfaction management
practices, as well as, more agile, open, and collaborative product development
and service processes.  In addition, we’ve been helping clients optimize their
selling activities by starting with a clearer understanding of how their
customers’ buying priorities are changing.

2.      The second priority is watching, talking with, and listening to
customers more closely in order to identify creative ways to address subtle
changes in their needs, priorities, and behavior.  It’s critically important to
NOT rely on your traditional assumptions about what’s important to customers. 
Instead you need an informed view of how your customers’ needs and behaviors are
changing as dark clouds appear on the horizon.  You need to think creatively
about ways to meet those changing needs and address those changing behaviors in
order to strengthen the relationship, generate more value, make their lives
easier, or make their businesses easier to run.  Not surprisingly, customer
behavior will increasingly be driven by emotion rather than rational
consideration.  By getting closer to customers you can identify ways to
proactively address customers’ emotional needs and reactions.  Here are a few of
the overarching behavioral shifts we’ve been observing as the recession
continues to take hold:

 * Sympathetic Frugality and Inconspicuous Consumption. Most people who are
   struggling don’t want it to show; they’ll make compromises in order to keep
   up appearances.  However, even the customers that are doing well are becoming
   more cautious as they see friends and colleagues cutting back or losing their
   jobs.  Appearances matter.  Inconspicuous consumption refers to purchasing
   goods or services that convey a lower socioeconomic status. People who have,
   so far, been unaffected directly by the recession don’t want to rub it in. 
   As a result, we are starting to see a regression towards a more
   socially-neutral mean.  While the customers that are struggling will buy up
   in order to keep up appearances, the ones that aren’t will tone it down.  I
   expect we’ll see an echo of the “grunge” music, fashion, and lifestyle
   movement that arose out of the recession of the early ’90s.  This creates
   opportunities for clever, customer-centric marketers.
 * Exercising Control. People are starting to cut corners in ways that give them
   the feeling of being in control and of acting responsibly. All inclusive and
   bundled pricing that creates more predictable and budgetable expense streams
   will have an advantage.  Companies need to look for ways to help their
   customers regain a feeling of control. This might include measuring the
   benefits and savings associated with programs, locking in discounts for the
   future, etc…
 * Inexpensive Luxuries. During the height of the great depression, when 25% of
   families had no income and unemployed labor reached 40%, movie receipts still
   increased by 22%.   As stress and uncertainty levels rise, people naturally
   look for more inexpensive ways to meet their personal and social needs. This
   includes affordable entertainment alternatives. Beer, liquor, movies and home
   entertainment tend to do well during a recession. Product and service
   organizations that provide affordable alternatives to premium pleasures can
   benefit from promoting these options.  This includes everything from buying
   your latte at McDonalds or Duncan Donuts rather than Starbucks… to more
   economically-oriented entertainment, restaurants, hotels, and vacations.



I walked into Whole Foods yesterday and noticed how effectively they’ve
redesigned the experience.    They’ve launched “Whole Deal,” a more
value-focused experience targeted at customers who remain committed to natural
and organic foods but are feeling a heightened attention to cost.  This
experience includes several creative elements that match customers’ shifting
priorities : an expanded selection of lower-priced alternatives marketed under
their “365” store brand,  “Money Saving Meal Plans” and “Budget Friendly
Recipes” that provide advice for containing costs while maintaining a focus
healthy natural and organic foods.   They are even offering “Value Tours”
through the store in order to help customers find the most cost-effective
solutions.  In addition, they are promoting a “Local Producer Loan Program” that
highlights the support they provide to suppliers.   Overall, they are meeting a
challenging situation by finding ways to add more value for customers, rather
than just cutting costs.

3.      The third priority is identifying and eliminating the negative
experience elements that drive attrition. Most organizations unintentionally
frustrate and annoy customers in ways that they can’t even begin to understand.
 Recent studies have shown that, while the economy has been weakening, their
tolerance for bad service has been diminishing.  For example, a recent Customer
Experience Study (conducted by RightNow and Harris Interactive) found that:

 * 87 percent of consumers have stopped doing business with an organization
   after a bad customer experience, up from 80 percent in 2007 and 68 percent in
   2006.
 * 84 percent of consumers indicated they would tell others about a bad
   experience – up from 74 percent in 2007 and 67 percent in 2006, In fact,
   blogging about a negative customer experiences is on the rise: 22 percent of
   consumers this year have posted negative feedback about a company, vs. only
   13 percent in 2007.
 * 58 percent of U.S. consumers said that in a down economy, they will always or
   often pay more for a better customer experience

In many cases, the negative experience elements that contribute to attrition may
be relatively easy to fix without major investment.    The trick is to be able
to clearly identify these things with an unbiased and unfiltered,
outside-looking in perspective.  Over the past decade, we’ve worked with several
organizations to conduct an Urgent, Short-Term Customer Retention Program. 
Typically, over the course of 6-8 weeks, we can quickly diagnose the specific
breakdowns in the experience that are leading to defection or lost new business
opportunities.  For example, we worked with a business-to-business financial
services provider to uncover the root causes for why customer attrition was
increasing.  Over the course of an 8-week effort, we were able to identify 7
things they could immediately to 3 point increase in retention.  This translated
into a 12% improvement in the business’ bottom line.   These improvements
included a new template for on-boarding and initiating new customers, an early
warning system for changes in customer behavior that preceded attrition, and
expanding the schedule of follow up training for customers.

The way through many tough times is finding ways to intelligently create more
value for others.  One of the surest ways there is for making sure that you end
up being the strong rather than the weak is avoiding the tendency to become
self-absorbed and maintain a clear focus on the customers that are, ultimately,
the source of your success.

Filed under: Customer Experience | Tagged: Customer Experience, customer focus,
customer performance, customer profitability, customer retention, dell,
downturn, economy, harris interactive, inconspicusous consumption, recession,
singapore airlines, sympathetic frugality, whole deal, whole foods | 1 Comment »


EFFECTIVE EXPERIENTIAL STORYTELLING

Posted on November 23, 2008 by Frank Capek

What are the stories your customers tell about their experience with you and
your business?  What do they think you really stand for?  What are the most
memorable aspects of their experience?  What surprises them?  What frustrates
them?  How do you make them feel?  The nature and quality of these stories has a
profound impact on the success of your business.

We make sense of the world around us through the stories we tell… the stories we
tell ourselves and the stories we hear from and tell to others.  If you think
about the defining moments in your life, you’ll see that the stories you tell
yourself about those moments have a powerful influence on your identity and the
way you see the world.  Aside from these personal stories, across human history,
we’ve shared meaning and knowledge with each other in the form of stories.  This
includes the legends and parables shared within and across generations, as well
as, the stories we share about more immediate events.

Stories are our Primary Means of Sharing Knowledge and Transmitting Culture

Humans have evolved as storytelling animals.  The story form is one of the core
knowledge structures we use to encode and recall our experiences.   As I covered
in a previous post (see:  Making Experiences Memorable), when we recall past
experiences we actually reconstruct the experience from a limited amount of
information encoded in memory.  Understanding how this happens provides powerful
insight into how to design experiences that are both more memorable and more
influential.

In business, the nature and quality of your relationships with customers is
reflected in the nature and the quality of the stories your customers tell. 
Your ability to retain customers is directly related to the nature and quality
of the stories they tell themselves about their experience.  Your ability to
cost-effectively acquire new customers is increasingly dependent on the nature
and the quality of the stories your customers tell to other prospective
customers.

The Experience Must Tell Customers the Story You Want Them to Retell

If you don’t effectively tell the story… how can ever expect that your customers
will either get the message… or have the material to be able to pass the story
effectively on to others.   In a previous post, I drew a parallel between
experience and music.  (See:  Great Experiences are Music to My Ears).  The
experience that customers have with most organizations is a lot like the Billy
Preston song that goes, “I’ve got a song that ain’t got no melody.”  The
experience doesn’t communicate anything effectively… it just defaults from the
bunch of the things that organization does… and that bunch of things is
generally all over the map.  Similarly, most organizations have a story that’s
“got no message… and got no script.”

Earlier this week, I led several dozen executives from a wide range of companies
through a full-day customer experience immersion event at Disneyland in Anaheim,
CA.    Disney is an organization built on powerful storytelling.  There are
stories of Walt; stories surrounding some of the worlds’ best loved fictional
characters; the stories that unfold in movies, rides, and many of our personal
memories of visits to one of the Disney theme parks.

As part of that event, we took a close look at one particularly well-crafted
story; the “Pirates of the Caribbean” ride.  If you’re one of the more than half
a billion people that have had the pleasure of experiencing this ride… take a
moment… close your eyes and recall the experience.  What stands out as most
memorable?  How do you remember feeling?  Over the course of about 13 minutes, a
complete and highly immersive story unfolds.

Although it might seem like a stretch, there’s a lot that most businesses can
learn about customer experience by considering how they can make the experience
more like “Pirates of the Caribbean.”  For example, if you work for a bank, how
can you make the experience customers have opening an account, applying for a
loan, developing a financial plan, etc… a “Pirates of the Caribbean”
experience?  If you’re a professional or business services provider, how can you
make the experience that your clients have as engaging and meaningful as
“Pirates of the Caribbean?”  In order to answer that question, we must start
with three common characteristics of the most engaging, memorable, and
retellable stories:

1. A Simple, Purposeful Message

A simple, purposeful message is at the core of many of the experiences that
people find intuitively understandable and compelling.

By “simple” I mean a message that people can understand immediately; because
it’s concrete rather than abstract and doesn’t require a lot of additional
explanation. In their book, Made to Stick , Chip and Dan Heath do a great job of
describing how the “Curse of Knowledge” often gets in the way of communicating
in ways that people can easily understand.  The more knowledge you have of the
strategy and inner workings of your industry and business, the more difficult it
becomes to put yourself in the shoes of customers who don’t have that
knowledge.  What seems intuitively obvious, concrete, and simple to you… may be
confusing, abstract, and complex for your customers.

The Heaths illustrate the “Curse of Knowledge” using an experiment conducted in
1990 by Elizabeth Newton.  In that experiment, people were assigned to be either
“tappers” or “listeners.”  Tappers were asked to select from a list of 25
well-known melodies and to tap out the selection’s rhythm on the table.   The
listeners would then have to guess the song the tapper was tapping.  Tappers
predicted that the listeners would guess correctly one out of two times (50%). 
It turns out that the listeners were only able to guess one out of about forty
times (2.5%).   The tappers thought it would be easy to communicate their
“message” to the listener because, as they were tapping, they were hearing the
song in their head.  However, the listener wasn’t hearing that song; they were
just trying to decipher the message from what sounded like Morse code.  I don’t
know how many times I’ve seen people try desperately to get their customers to
understand when the underlying issue is that the customer just doesn’t have the
same background music playing in their heads.

Beyond being simple, the message must also be “purposeful.” It must not only
clearly articulate what you stand for BUT ALSO contrast that to what you stand
against.   People will find it easier to understand who you are, when it’s clear
who you’re not.  Heroes are boring without villains.  Triumphs don’t make sense
without understanding the challenges that made those triumphs meaningful. 
Stories without tension, uncertainty, or risk aren’t worth listening to.  The
conflict built into the message clarifies the things that make the experience
differentiated and worth engaging in.

It’s important to choose your enemies wisely.  For example, just about every
insurance company out there portrays the enemy in their story to be the
uncertain outcomes they protect you against.  As a result, the message from
those companies pretty much boils down to the same thing… with only minor
variations on how effectively they communicate that same old story.  Compare
that to Progressive that has gotten a lot of mileage out of telling a different
story; a story with a message that they provide competitive quotes that enable
customers to feel they’ve made a more educated decision.  Allstate is also
getting traction by telling a story around the message that they recognize and
reward people for safe driving.  In both of these cases, the enemies are
prevailing industry practices.

One of the best examples of a simple and purposeful message is Salesforce.com’s
“Success, Not Software.”  Salesforce.com’s “software as a service (Saas)”
platform allows you to focus on your sales processes rather than having to
implement complex and risky CRM software.  We’ve also worked with many companies
that provide further examples of strong messages:

 * Jewelry Store Message: “The Perfect Gift Guaranteed.” It’s not about selling
   you jewelry. It’s about helping you give the perfect gift, in the perfect way
   that contributes to your relationship with the recipient.
 * Mortgage Bank Message: “A Better Way Home.” It’s not about just giving you a
   mortgage. It’s about a well designed and flawlessly executed home buying
   experience.
 * Automotive Financial Products Firm Message: “Driving Dealer Performance.”
   Rather than just providing financing and pre-paid maintenance (to their
   automotive dealer customers), we work with you to measurably improve the
   performance of your finance and insurance operation.

In each of these cases, the message is crisp and clearly articulated.  As you
may guess, this is actually quite rare.  Most organizations become enamored with
a message that doesn’t really communicate anything specific or concrete.

If we take a step back and look at “Pirates,” beneath the relatively light
entertainment value, the story ends up hanging together brilliantly around the
message:  “Despite the adventure, there is a price to be paid for a greedy and
vile life.”

2. Characters that Make Sense

The most effective stories have characters that are authentic and intuitively
understandable.  These characters make the experience more concrete.  This is
particularly important if the product or service you provide is complex and
abstract.  For example, if you’re in the insurance business, what you sell is
abstract; a policy that represents the transfer of risk in exchange for a
premium.  This raises the stakes on identifying both the characters in your
story, as well as, the role they play.  If you’re in the banking business, who
are the characters?

The strongest brand stories have great characters.  The book “Storytelling:
Branding in Practice” by Klaus Fog, Christian Budtz, and Baris Yakaboylu
describe the typical characters as follows:

 * The Hero. Who is fighting for the goal described in the central premise?
 * The Adversary. Who or what must the hero overcome to achieve that goal?
 * The Supporter(s). Who (or what) assists the hero in their quest?
 * The Benefactor(s). What superior character or force(s) provides aid in the
   quest?
 * The Beneficiaries. Who benefits in the end?

In many situations, the company and/or its representatives are the heroes; the
customers’ situation or the alternatives provided by competitors are the
adversary; and customers are the beneficiaries.  This is true in the case of
Salesforce.com.  Many great services businesses, like the Four Seasons, really
cast their frontline employees as the heroes that overcome the ordinary and
predictable in order to provide the guest the most comforting and personalized
experience.  In this case, the Four Seasons plays a supporting role rather than
a heroic role.  (See:  A World-Class Hospitality Experience:  Four Seasons
Aviara).

In  many marginally successful services businesses, like the major US airlines
or many call center operations, frontline employees wind up playing the role of
victims… caught between the demands of the customer and the constraints and
frustrations imposed on them by their company.  In fact, there are many
situations I’ve observed where the frontline associates not only play the victim
but do untold damage to the brand my making their employer the adversary (e.g.,
“I’d like to help you but it’s against our policy”).

We’ve also seen many examples of companies that do a great job of telling the
story in a way that makes the customer the hero.  One of the best examples is
the wonderful grocery retailer, H.E.B., that’s core message is “Come Home a
Hero.”    In the case of the jewelry store example above, the core message of
“The Perfect Gift Guaranteed” is framed in a way that the male gift giver (70%
of their customer base) is the hero… and the gift recipient is the beneficiary…
but with a subtle message that, when the gift experience is a WOW, the gift
giver becomes the ultimate beneficiary (figure it out).

3. An Engaging Plotline with “Signature Scenes”

There are common, relatively predictable patterns to the way stories are
structured.  It doesn’t matter if these are verbal, or told in books and
movies.  Think about your favorite movie.  With very few exceptions, the story
typically opens with an Initiating Event that gets the audience hooked and
encourages them care what will happen next.  That Initiating Event introduces
the tension described in the message (described above).  Then, over the course
of the story, there are a sequence of memorable, Signature Scenes that gradually
increase the tension.  Typically each of those scenes introduces a question
about what will happen next.  By doing so, it keeps the audience engaged and
increases their investment in finding out how the story will eventually be
resolved.  Finally, the story reaches a climax that answers most but not all of
the questions that were posed over the course of the story.   The best writers
and story tellers purposely don’t answer all the questions at the end.  The
presence of unanswered questions is one of the reasons why people still talk
about the movie the next day and, very often, the thing that leaves them wanting
to see the movie again next week.

Experience Director, Adam St. John Lawrence, in his blog Work-Play-Experience
has a very insightful way of putting this.  He says great experiences, like
great stories go “BOOM Wow-Wow-Wow BOOM.”

One of the reasons that “Pirates” is so engaging is that it follows a very
well-designed plotline and includes highly memorable “Signature Scenes.”  Here
is the plotline:

 * BOOM: The Initiating Event: After lazily floating through the bayou for just
   long enough to feel immersed in the environment, guests encounter Jolly Roger
   who issues the warning that sets up the  conflict, “Psst! Avast there! It be
   too late to alter course, mateys… and there be plundering pirates lurking in
   every cove, waitin’ to board…. there be squalls ahead, and Davey Jones
   waiting for them what don’t obey…” Guests then plummet through two rapids
   drops that represent a Point of No Return.



 * Wow1: Guests enter the “Grotto of Lost Souls” where they see the skeletons of
   three unfortunate pirates, two of whom have been run through with swords. As
   guests progress through this scene, the skeletons progress from realistic to
   much more surreal states of animation… steering the ship, drinking at the
   bar, and finally the captain’s remains lying in bed still studying the
   treasure map with a magnifying glass.



 * Wow2: The Attack of the Wicked Wench. After leaving the Grotto, guests are
   thrown into the middle of a battle as the ship, The Wicked Wench, is
   attacking the walls of the city while cannon balls splash all around.









 * Wow3: Sacking the Town. As the guest round the corner, they find that the
   pirates have captured the town and are now dunking the mayor in the well
   asking him about where to find “Jack Sparrow” (Disney added the references to
   the movie characters in 2006) as the town’s leaders are tied up and led away.



 * Wow4: In the Town… The Wench Auction and the Chase Scenes. In a series of
   memorable comedic scenes, guests are offered the opportunity to “buy a bride”
   and entertained as they see the brides and grooms chasing after each other.
   The characters are animated on turntables that circle the balconies of the
   buildings. As we progress through this scene, the characters are shown at
   progressive levels of drunkenness as the town sinks into chaos.





 * BOOM: The Town in Flames and the Escape. Eventually, the town is in engulfed
   in flames with spectacular effects and burning beams threatening to crash
   down on the guest’s boat. Meanwhile, the pirates are either too drunk to care
   or they’re in jail desperately pleading with the dog to let them out. As the
   guests escape up the waterfall, they are entreated to a final warning from
   Jack Sparrow (again, added in 2006).







So… how does all this apply to you?  Let’s look at one of the cases I mentioned
earlier; the case of a leading specialty jewelry retailer that designed their
experience around the message, “The Perfect Gift Guaranteed.”  After agreeing on
that message, the customer experience was then designed to deliver that message
using a set of Signature Scenes organized into a coherent plotline.  The
Initiating Event was a specific greeting that welcomed the guest into the
store.  That welcome introduced the message of helping the customer give the
perfect gift… not just selling them a piece of jewelry.  This was then followed
by a set of supporting, highly differentiated, Signature Experience Elements (or
scenes).   These Signature Experience Elements included:  collaborative gift
planning (differentiated from traditional selling), preparing the male gift
giver to “romance the gift,” ensuring customers know what will happen if the
gift doesn’t work out (the “guaranteed” part of the experience), creating a wow
on exchanges or returns, and a clienteling process designed to maintain the
relationship with the customer for future gift giving occasions.

Similarly, the mortgage company mentioned earlier designed a set of five
Signature Experience Elements that happen over the life of the customer
relationship, all designed to tell the story, “A Better Way Home.”

Building on the above points, The Disney Institute’s book, “Be Our Guest”
summarizes their set of principles for delivering a compelling story, as
follows:

 1.  Know your audience. Clearly define who are you creating the experience
     for?  How do they think and what do they desire?
 2.  Wear your guest’s shoes.  Design and evaluate the experience from the
     customer’s perspective by experiencing it as a customer.
 3.  Organize the flow of people and ideas.  Think of a setting as a story and
     tell that story in a sequenced, organized way.  Build the same order and
     logic into the design of customer movement.
 4.  Create a visual magnet.  It’s a visual landmark used to orient and attract
     people.
 5.  Communicate with visual literacy.  Language is not always composed of
     words. Use common languages of color, shape and form to communicate through
     a setting.
 6.  Avoid overload–create turn-ons.  Do not bombard customers with data.  Let
     them choose the information they want when they want it.
 7.  Tell one story at a time.  Mixing multiple stories in a single setting is
     confusing.  Create one setting for each big idea.
 8.  Avoid contradictions; maintain identity.  Every detail and every setting
     should support and further your identity and mission.
 9.  For every ounce of treatment provide a ton of treat.  Give your customers
     the highest value by building an interactive setting that gives them the
     opportunity to exercise all of their senses.
 10. Keep it up. Never get complacent and always maintain your setting.

Over the past 25 years, we’ve worked with organizations that run the range from
business-to-consumer to the most complex business-to-business relationships.  In
the course of this work, we’ve found that Experiential Storytelling applies
equally well everywhere along this range.  In practice, the business-to-consumer
companies have the easiest time understanding it… while the business-to-business
companies have the most to gain.

Filed under: customer behavior, Customer Experience, Neuroeconomics, Personal
Experience | Tagged: Be Our Guest, behavioral economics, brand storytelling,
Chip Heath, cognitive ergonomics, Customer Experience, Dan Heath, disney, Disney
Institute, Disneyland, experience, experience design, four seasons, long term
memory, Made to Stick, memory encoding, Pirates of the Caribbean, plotline,
purposeful message, salesforce.com, signature experience, signature experience
design, storytelling | 6 Comments »


MAKING EXPERIENCES MEMORABLE

Posted on November 12, 2008 by Frank Capek

I went to a Jackson Browne concert with a group of friends a week ago.  Yes,
he’s still going strong at 60.  It was a great show.  He played a sufficient
number of his hits, like Doctor My Eyes and Running on Empty.   For me, the
highlight of the night was a very cool version of one of my personal favorites,
“Lives in the Balance.”  Like many week-old experiences, I can sit back and
still visualize a few of the key moments.  At the same time, like many week-old
experiences, I can feel the memories fading.  It’s not that I’m getting old
(even though I am); it’s just how memory works.

There is no experience without memory

Aside from whatever you happen to be doing at this precise moment in time, all
of your experiences exist only as memories.  It is, therefore, impossible to
really understand the nature of experience without understanding how we remember
those experiences.  In this post, I’d like to cover some of the ways that memory
affects how we experience the world.  This is very important for two reasons:

 1. One of the least effective ways to understand what someone has experienced
    is to ask them to tell you about it after the fact.  People’s memories of
    their experiences are notoriously unreliable.  The implications of this are
    significant.  For instance, it creates a substantial limitation on how
    effective simple voice of the customer approaches are for understanding
    customers’ experiences.
 2. If you want to design memorable experiences for your customers, you need to
    understand three things about how memory works:  how and why people pay
    attention to certain features of their experience, how those features and
    the overall gist of the experience are encoded in memory, and how those
    memories are recalled.  As you will see, understanding these three things is
    critically important to designing experiences that are much more memorable
    and, ultimately, much more influential.

Before jumping into this, I’d like to borrow an interesting illustration that
Harvard Psychologist, Daniel Gilbert included in his wonderful book, “Stumbling
on Happiness.”   Look at the six royal cards below and pick one.  No, no… don’t
tell me which card you picked!  Just make sure you remember it.  You might want
to repeat it to yourself a couple of times or even write it down to make sure
you don’t forget.



Okay good!  Now that you have your card memorized, I’d like to jump into how
memory influences experiences.  We’ll see how well you did at remembering the
card towards the end of this post.

“Memory is an internal rumor.” George Santayana

Our memories of past experiences are notoriously unreliable.  There are three
factors that contribute to the problem:  1) limitations in how much we can pay
attention to at any moment in time, 2) issues with the way information in
short-term memory are encoded into long-term memory, and 3) issues with how
memories that we do encode are eventually recalled.  Understanding each of these
factors provides insight into how to design much more memorable experiences. 
Let’s take a look at all three.



ATTENTION

Every second, every day, every year, our senses take in millions of bits of rich
detail about our experiences… all of the sights, sounds, textures, smells,
tastes, etc…  However, we only have a limited capacity to attend to all that
information.  Our conscious stream of the thought relies on short-term memory. 
This short-term memory provides capacity for holding a small amount of this rich
information in an active, readily available state for a short period of time. 
The duration of short-term memory is about 20 seconds and experiments
demonstrate that its capacity ranges from about 3 or 4 elements (i.e., words,
digits, or letters) to about 9 elements.

Experiences like a concert, a fine meal, a glass of wine, a movie, browsing
through a store, or walking along the street are very complex, rich, and
multidimensional.  While it’s possible to hold some of that rich detail in
short-term memory, it’s not easily translated to long-term memory.   We use
language or a sort of mentalese in order to extract what seems like the most
salient features of our experiences in order to be able to think about them or
communicate them later.  As a result, the morning after a concert, you only
really remember which songs were played, a few features of the way they were
played, and the sense about what you liked or disliked about them.

The transfer from short-term to long-term memory involves fast forgetting. 
There are numerous example of this.  For the sake of illustration, suppose I had
you memorize a sequence of three letters and then count backwards in groups of
three numbers.  In experiments to this effect, after counting backwards for 6
seconds, most people only remember about 50% of the letters.  After 12 seconds,
most people only remember about 15% of the letters.

The way we experience the world starts with a combination of selective attention
supported by subconscious “gist processing.” We generally pay attention to those
elements of our experience that seem most important; the elements that capture
our attention because they we were looking forward to them or they stood out
because they were particularly high-contrast or they caught us by surprise in
some way.  Beyond the relatively small amount of information that we’re able to
pay conscious attention to; we do something called “gist processing.”  Gist
processing enables us to get a sense for what is unfolding around us without
having to focus attention on all the details.  It operates through subconscious
pattern matching.  We get the gist of what’s happening because it roughly
matches experiences we’ve had in the past.

Gorillas, Doors, and Selective Attention

Research provides many interesting examples of selective attention and
inattentional blindness.   In one of the most striking and well- known
demonstrations of selective attention, participants watch a video of people
passing a basketball between each other, and they are asked to count the number
of passes.   As the participants are busy counting the passes, less than 50% of
those participants notice that a person dressed in a gorilla suit walks right
through the middle of the action, stops, turns, looks at the camera, and does a
little dance before turning and walking off the scene.   You can see an example
of this experiment in one of Michael Shermer’s lectures posted here.

Another well-known example is the ‘door study’.   In this experiment,
pedestrians are stopped by a researcher who asks them for directions.  While the
pedestrian is talking to the experimenter, two men carrying a door walk between
the two.   Hiding behind the door is another experimenter who changes places
with the first experimenter.  The second experimenter then continues the
conversation with the pedestrian.  The two experimenters are purposely different
in height, weight, coloring, dress, etc…  Shockingly, only about half of the
pedestrians realized that they were now talking to someone completely different
than the person they were talking to at the beginning of the conversation with. 
I’m sure you’ve had similar experiences?  How many of times have you placed an
order in a restaurant and not been able to remember who your waitress was five
minutes later?   These are illustrations of a specific type of inattentional
blindness called change blindness.  (Click here for some further examples).

So much for our powers of observation!  In both examples, the subjects were
paying attention to the central aspect of the experience:  counting the passes
or giving directions.  In both examples, subjects were also surprisingly unaware
of very significant elements of their experience.  If you look at this from the
standpoint of evolutionary psychology, it makes total sense.  Over history, our
survival has been based on recognizing and paying keen attention to those
elements of our environment that seem most important while filtering out and not
getting distracted by large amounts extraneous detail.

There are serious implications for anyone trying to improve the experience their
customers have with their business.  It’s very easy to waste a lot of time and
money designing experience elements that customers just filter out because those
elements are neither central to the goals they are trying to accomplish nor
occur on the attentional pathway customers are following in order to accomplish
those goals.  We’ve found that the subtle elements of experience need to be
designed in a way that specifically takes into account how people do gist
processing.  That is, just give people the cues that will enable them to
identify the experience.  The worst thing you can do is design a set of
experience elements that get the customers’ attention but don’t fit with the way
they think… elements that ultimately cause the experience to be both distracting
and confusing for the customer.



ENCODING

The second issue has to do with how what we experience gets encoded in long-term
memory.   We obviously don’t ultimately remember everything that was available
to us in short-term memory as we were having the experience.  If we did, we’d
need a brain many times larger than our current brain.   So, essentially, our
experiences are compressed for storage.  As these experiences are coded in
long-term memory, we store a summary of the gist of what happened, tagged with
information about how the experience made us feel, along with a small set of
specific representations of key features.  This is what I have left in my
week-old memory of the Jackson Browne concert.

How information is moved into long term memory depends on the depth with which
we process information.   A classic experiment by Craik and Tulving (1975),
tested the strength of memory traces created using three different levels of
processing:

 1. Shallow processing: Participants were shown a word and asked to think about
    the font it was written in.  In other words, they paid attention to
    peripheral cues rather than the core element of their experience.
 2. Intermediate processing: Participants were shown a word and asked to think
    about what it rhymes with.  In other words, participants were asked to make
    an association between their current experience and other experience.
 3. Deep processing: Participants were shown a word and asked to think about how
    it would fit into a sentence, or which category of ‘thing’ it was.  In this
    case, participants were asked to directly interact with the core element of
    the experience… rather than just paying attention to associations or
    peripheral cues.

Not surprisingly, participants who had encoded the information most deeply
remembered the most words when given a surprise test later.   But it also took
them longer to encode the information in the first place.

Encoding Favors High Contrast, Discrete Features

The most important factor with memory encoding is that our brain does a
relatively poor job of encoding rich continuous features (e.g., the way the
store looked, the way the music sounded, how the food tasted, how long we
waited, etc…) and are somewhat better at remembering high-contrast discrete
features (e.g., whether something happened or not, what we ordered at the
restaurant, the description we provided after we had the experience, etc…).

The implications of this for experience design are profound and
counter-intuitive.  Many companies think about the quality of the experience
their customers have in terms of a relatively large number of service levels
(e.g., how long the customer had to wait for service) or subtle improvements in
rich peripheral cues (e.g., store or web design).  In most cases, these
improvements represent differences in degree that, even if the customer paid
attention to them, would only get perceived as “better sameness.”  As important
as these things seem to be to the company, the typical customer doesn’t encode
their experience in a way that makes these things memorable.  As discussed
earlier, these continuous variables are only important to the extent that they
influence the way customers do gist processing.

We’ve found that the most memorable experiences are designed around a small
number of high contrast “signature elements.”   These signature elements are the
things that get the customers’ attention because they “differences in kind”
rather than “differences in degree.”  Customer service is generally a difference
in degree; everyone provides some level of customer service.  A specific service
that is provided differently than a competitor or differently than the customer
expected is a “difference in kind.”  For example, experiences at both Starbucks
and Caribou coffee shops are built around differences in kind compared to other
coffee shops.  There are also many specific examples, like the Renaissance Inn
in Tulsa which has a totally different design for their front desk area.  This
hotel has individual reception desks rather than placing a long counter between
customers and the front desk clerks… like virtually every other hotel does.   As
a result, out of all the hotels I’ve stayed at in the past year, this experience
was memorable because it included this high contrast “signature element.”

Focusing on designing high-contrast signature elements rather than better
sameness peripheral cues is a good start.  However, our memories of even the
highest contrast elements of our experiences are suspect.

Encoding False Memories

“Most people, probably, are in doubt about certain matters ascribed to their
past. They may have seen them, may have said them, done them, or they may only
have dreamed or imagined they did so.” William James

As this quote illustrates, another very significant issue related to encoding is
misattribution, bias, and the formation of false memories.  These encoding
issues can have dramatic consequences.  For example, Gary Wells and his
colleagues at Iowa State University did a study of 40 different miscarriages of
justice that relied on inaccurate eye-witness testimony.  Many of these falsely
convicted people served years in prison; some facing the death penalty.

While memory encoding errors can have disastrous consequences like this, it
happens to all of us in less dramatic situations every day.  Encoding errors are
a regular occurrence for most people.  These include:

 * Misattributing sources. This includes things such as thinking that you read
   something in the newspaper when, in reality, a friend told you. It also
   includes unintentionally thinking you came up with an idea that, in fact, a
   colleague suggested to you several days earlier. (By the way, I apologize to
   my very forgiving colleagues for all the times this happens.)
 * Mixing memories. There are a very wide range of ways that this happens. For
   example, you might think you knew something about a product you bought when,
   in fact, you learned about it after you made the purchase. It’s very common
   to add new information to memories after the fact.
 * Confusing imagined elements of an experience with reality. There are numerous
   experiments that point to the fact that people often imagine elements of
   their experiences and create memories of those elements when, in reality,
   those elements didn’t actually happen. For example, I was talking with
   someone about how much I enjoyed Jackson Browne’s rendition of the song Load
   Out. I had been really looking forward to hearing him do it. The issue was,
   when I checked the set list that was posted online, he didn’t actually
   performance that song that night. (See also Goff and Roediger, 1998 for other
   interesting examples of “illusory recollections.)
 * Consistency bias. Our memory process is “cognitively conservative.” Our lives
   are so much simpler if we don’t have to continually re-evaluate what we
   believe to be true. As a result, we tend to pay attention to and remember the
   information that conforms to our expectations or justifies our beliefs… while
   disregarding any information that contradicts those expectations or beliefs.
   This is an enormous factor in areas of our lives like our personal
   relationships or our political beliefs. Consistency bias is just one of the
   many biases that affect our memories.

All of these relatively simple misattributions at least have some basis in
reality.  They just involve getting a little mixed up on the details.  However,
we also create entirely false memories.  As William James pointed out, memories
can be constructed from our realities, our imaginations, and our dreams.  For
more information on this, I’d suggest checking out C. J. Brainerd and V. F.
Reyna‘s  book “The Science of False Memory.”

Why All These Idiosyncrasies of Memory are Actually Helpful

Given all of the challenges illustrated above, you might think it’s amazing we
can function effectively at all.  While these limitations can have a disastrous
effect in certain situations, we seem to function pretty well most of the time.
  It turns out that selective attention, gist processing, and limited memory
encoding is a blessing.  It spares us from cluttering our minds with a massive
amount of meaningless detail.   There is a positive correlation between our
ability to extract and remember features of our experiences while forgetting the
details and our ability to engage in abstract thought and learn from our
experiences.

Consider the case of Russian journalist Solomon Shereshevskii, whose memory was
so perfect he could remember everything that was ever said to him. 
Shereshevskii became famous after being criticized for not taking notes while
attending a speech in the mid-’20s. To the astonishment of everyone there (and
to his own also, due to his belief that everybody could remember that level of
detail­), he demonstrated his ability to recall the speech perfectly, word by
word.  There seemed to be no limited to his detailed memory.  However,
Shereskevkii’s gift had a very significant downside.  It was difficult to ignore
even the most insignificant events.  He remembered every scene, word, cough,
scratch, sneeze, meal, etc… In addition, all of these memories were so detailed
that it was difficult for him to generalize across experiences or think in the
abstract.  Shereshevskii was so tortured with the accumulation of memories over
time that he had to work out ways to try to intentionally forget.



RECALL

As much as it seems like we retrieve memories from storage, this is actually a
very elegant illusion.  When we remember past experiences, what we actually do
is quickly reconstruct and re-imagine the events by filling in around the
relatively small number of features we stored.  This whole approach is efficient
because it allows us to store a large number of memories.  However, it makes the
memories we do have highly suspect.  It happens so quickly and easily that we
get the illusion we are actually remembering what happened while our accounts of
those past experiences can be pretty inaccurate.

But our memories seem so real!  Memories of past experiences seem real because
many of the same portions of the brain are activated when we remember as when we
perceived the event in the first place.  For example, listening to a song on the
radio involve an area of the portion of the brain called the auditory cortex. 
When you sit and remember what a song sounds like, it also activates the
auditory cortex.  This use of the same area of the brain is a reason why it’s so
difficult to remember how one song goes while you’re listening to another song. 
It’s also why you can remember the song better if you plug your ears in order to
eliminate the confusion associated with the same part of the brain trying to
process two different experiences at the same time.

When we remember past experiences, it has an influence on what we will remember
about that event the next time around… the story gets sharpened and leveled. 
Information that is inconsistent with the overall storyline or gist we remember
is forgotten (leveled) and features that reinforce our beliefs about the
experience are emphasized (sharpened).  Often new information is introduced
after the fact.   Aside from the issues with selective attention and limited
encoding of memories, this is yet another reason why relying on eye witnesses
creates problems in the criminal justice system.  The way a person is questioned
about their experience can subtly influence what they remember about that
experience.

Daniel Gilbert also shared the following example.  Volunteers in an experiment
were asked to look at a series of slides that showed a red car approaching a
yield sign, turning right, and then knocking over a pedestrian.  After seeing
the slides, some volunteers (the no-question group) were not asked any
questions, and the remaining volunteers (the question group) were.  The question
that the second group of volunteers was asked was:  “Did another car pass the
red car while it was stopped at the stop sign?”  Next, all the volunteers were
shown two pictures:  one with the red car approaching a yield sign and one with
the red car approaching a stop sign.  They were asked to point to the picture
they had actually seen.   More than 90 percent of the volunteers in the no
question group correctly pointed to the yield sign.  However, 80 percent of the
volunteers in the question group incorrectly pointed to the picture of the car
approaching the stop sign.   Clearly, the question that was asked influenced the
volunteers’ memories of their experience.

There are several interesting implications of how memories are changed as they
are recalled and reconstructed.  Since I got divorced 10 years ago, I have my
two wonderful children with me for just the weekends.   Since I wanted to make
sure that they always remembered the time we had together in the most positive
light, we’ve consistently followed a Sunday evening ritual.  In the car on their
way home, we have a discussion about the weekend and we each share what we
thought were our best experiences.  It’s difficult to measure the impact that
this has, but I know that it’s had an effect on the positive way they remember
the special things we’ve done.

In a business application of a similar approach, I had the chance to work with
the late Christine Boskoff, who was one of the most successful high-altitude
mountain climbers in the world and the owner of a leading outdoor adventure
travel company named Mountain Madness.  Her question was how to improve word of
mouth about Mountain Madness in order to attract new clients.  The
recommendation I developed with her was that, on the last day of each trip,
there should be a final celebration involving a ceremonial round of
“storytelling.”  In this storytelling ceremony, each participant would have a
chance to share the personal story of their adventure, what it meant to them,
and what their most positive takeaways were.  The act of telling their own
story, in addition to listening to the stories of others, has a powerful effect
to prime and prepare clients with the “personal legends” they’ll share with
others when they get home.  In the course of telling and retelling these
legendary stories the most compelling aspects are typically “sharpened” while
any of the less positive or inconsistent aspects are “leveled” in order to fit
with a more compact storyline.

There are a wide range of approaches we’ve used with our clients.  For example,
is there a way to provide a personalized summary of the experience the customer
had as a memento but do it in a way that positively reinforces the
differentiated, signature elements of the experience.

Summary of Implications for Experience Design

Over the course of this post, I’ve covered the ways that memory affects our
experiences. I’ve also highlighted several of the many ways that you can design
and deliver more memorable experiences by understanding how people pay
attention, encode memories, and reconstruct those experiences after the fact. 
  Those strategies include:  1) designing for gist processing and not
overinvesting in service improvements or subtle cues that customers tend to
filter out, 2) focusing on a small number of high-contrast signature elements
that capture the customers’ attention, are easy to encode, and all contribute to
a storyline that reinforces the brand, and 3) finding ways to enable customers
to recall the experiences they’ve had in the most positive light.   As always,
there is much more to say about all of these topics.  Feel free to submit a
comment if you have questions or points to add.

OH… I ALMOST FORGOT… BACK TO THE CARDS

I hope you still remember the card you chose.  As you’ve been reading this post,
I’ve been running a little web-based subroutine that was able to read your
mind.  Based on the results of that little program, I’ve removed the card that
you chose from the lineup.  I’ll leave it up to you to figure out how I did this
fairly simple trick.



Filed under: Cognitive Ergonomics, customer behavior, Customer Experience,
Neuroeconomics | Tagged: change blindness, Customer Experience, daniel gilbert,
experience, experience design, eye witness testimony, false memory, gist
processing, inattentional blindness, jackson browne, long term memory, memory,
memory encoding, mentalese, misattribution, selective attention, short term
memory, signature experience, stumbling on happiness, voice of the customer,
william james | 1 Comment »

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