CIO SURVIVAL GUIDE PART 5: CREATING MEANINGFUL CUSTOMER EXPERIENCES
Creating Fans, Not Customers
MANAGING THE CUSTOMER EXPERIENCE IS QUICKLY BECOMING A FUNDAMENTAL SURVIVAL SKILL FOR COMPANIES IN EVERY INDUSTRY.
THE ENTIRE BOARD MUST BE ACTIVELY INVOLVED AS THIS SPANS THE ENTIRE ENTERPRISE. AS SO MUCH OF THE CUSTOMER’S EXPERIENCE IS BASED ON TECHNOLOGY, THE CIO PLAYS A KEY ROLE IN MAKING THIS HAPPEN.
By Chris Parker
Every company has limited resources, yet too few use their customer’s experience as a baseline from which to make investment decisions. Mike Wittenstein, one of the world’s most prominent customer experience strategists, has an elegantly simple equation to describe the benefit of improving your customer experience : take everything you do FOR your customer and subtract everything you do TO your customer and you are left with the value created for the customer. The reason why Customer Experience Management (CEM) is important for the CIO is through this thinking process you can determine what is most valuable for your customers. CEM lets you focus on what’s important to your customers and your brand while increasing profitability by avoiding unnecessary costs.
There is no scientific measure to indicate if the experience you are providing your customers is good or bad. The customer’s experience is a personal emotional reaction which does not always respond to direct intervention. The best way to determine if you are succeeding in delivering the experience you intend to is to talk to your customers. Alternatively, you can use indirect metrics such as customer satisfaction scores, complaints and compliments metrics and loyalty. Net Promoter Score (NPS) is a simple and widely used measure of loyalty and is considered a standard in many markets. It is simply a calculation based on the answers from customers when they are asked how likely they would recommend your company to a friend or colleague. Subtract the very low scores from the very high scores, ignoring the average scores, and you have the NPS. If your company values the loyalty and retention of its customers, then NPS is a good measure to manage, and managing the customer experience is a proven way of improving this score. In the UK banking sector, where some banks have begun charging customers for using other bank’s cash machines, it is not unusual to have a very low score. Barclays currently has a NPS of -35. On the other hand, there are banks which are focusing heavily on the customer experience and their NPS is reflecting this effort, such as Metro Bank which has a NPS of 85! Metro Bank is clearly creating a fan base for their bank, as opposed to a customer base.
In the banking and retail sectors, Forrester has observed there is a high correlation between improving the customer experience and the resulting higher Net Promoter Score (NPS)1. If your company is struggling with loyalty then customer experience improvement should be high on your list of personal priorities. Sadly, when companies are struggling with reducing loyalty and profits, they often resort to efficiency projects to reduce costs. Applying Lean Thinking after the fact to a poorly designed customer experience will risk the elimination of special and unique things which your customers might love. An efficient customer experience is not necessarily a good customer experience. Companies who provide consistently excellent experiences for their customers have defined up front what the fundamental purpose of the company is and everyone in the company is working towards that purpose. Based on that shared and agreed purpose, decisions can be made as to what should be provided to the customers and what shouldn’t be. You can’t fake a good customer experience.
No Stupid Rules
Metro Bank (www.metrobankonline.co.uk) opened its first location just over a year ago. They decided up front what their purpose is and what they won’t provide their customers. Their business model is based on serving the customer and they have decided to break from the style of traditional banks in a number of key areas. For example, as they are competing on service and not price, their interest rates for savings accounts are in the middle of the pack. They have also decided not to allow customers to sign up for new accounts online. While this might sound like an inconvenience, they have done this intentionally because a fundamental pillar of their experience is starting the relationship face-to-face.
Metro Bank has purposefully designed their business this way to deliver one of the most amazing customer experiences in the financial industry today. According to Anthony Thomson, the Chairman of Metro Bank, “We have to absolutely own the interaction with customers, so we use our own people, on the phone and in-store.” Notice that he said he owns the relationship in the ‘store’, as opposed to a ‘branch’ as most bankers might say. When they designed their store location concept, everything was done through the eyes of a retailer. Their locations are exclusively in high visibility locations in the centre of London, are almost three times the size of an average bank branch, and are unique in that they have an open floor plan and glass walls to create the feeling of space and openness. They don’t have thick security glass separating the staff from the customers, as this would take away from the retail experience.
They don’t only look like a retailer; they also act like a retailer. Their stores are open early to late seven days a week and are mystery shopped at least every other day. They didn’t stop at the conveniences you would expect from a good retailer, such as having toilets which their customers can use. They continued to provide additional services to live up to their experience ambitions by providing free coin counting machines for customers and non-customers alike and have made it a big deal that they are dog friendly! Dogs are welcome, and will even enjoy a biscuit and water bowl while their owner is opening an account or having their coins counted. The dog doesn’t have to wait long, as Metro Bank has designed its processes so a customer can open an account in 15 minutes and walk out with their permanent bank cards and cheque books.
In an age where established banks are arrogantly closing branches and pushing people online, the Metro Bank philosophy is quite daring – will customers trade lower interest rates for a better retail experience? So far they remain on their target business plan and over 25.000 retail and business accounts have been opened in their eight stores during the first 12 months and over 1.000 new accounts continue to be opened each week. To celebrate this success, they announced that all existing and new credit card customers will enjoy 0% interest for 12 months from their anniversary, however they choose to use the card. Whether it is used for purchases, cash withdrawals or balance transfers it is the same 0%. According to Craig Donaldson, their CEO, “We promised no stupid bank rules and this deal proves that one year after we first opened our doors, we are continuing to deliver on our promise.”
Delivering on this promise of the quick opening procedure and the instant issuing of permanent bank cards requires a complex landscape of applications and strong relationships with their support partners. According to Aisling Kane, the Metro Bank COO, “We can only be successful with customer service led IT, not if we have an IT led customer service.” Everything has been designed to make it easier for their employees to serve their customers.
Metro Bank operates principally on the Temenos banking system (www.temenos.com) and is integrated with a mixture of Oracle, SAP and IBM software. It was not easy to get this diverse landscape integrated to support their experience ambitions, but in the end they succeeded. Their systems are hosted in two data centres, one in London and one outside. The only equipment used by the staff are thin-client terminals, voice-over-IP handsets and Blackberries. Internal IT is responsible for security, local networks and they spend a lot of their time on vendor management as everything else has been outsourced.
In order to minimise upfront costs, Metro Bank entered into an innovative outsourcing agreement with niu Solutions (www.niu-solutions.com), which is a merger of four different IT and telecom providers and had little track record as a unified company. The agreement is based on the software-as-a-service model which allows them to only pay incremental costs per user as they continue to grow. The architecture and outsourcing arrangement have been designed to be scalable, so as they open more stores and support more customers they should not need to hire additional internal people.
Delivering an excellent experience is a strategic decision that needs to be made at the very top and implemented consistently throughout the entire organisation. This becomes more difficult when a company uses third-party suppliers to deliver portions of the customer’s processes. If your company is serious about strategically managing the customer experience, then the service level agreements with third-parties should include specifically the experience they need to deliver to your customers.
Improving the customer experience for business-to-business (B2B) customers may be even more important than for consumers. A B2B customer typically represents a larger percentage of sales than in consumer markets, and there is more to lose if the experience isn’t resulting in loyalty and retention. Although more complex, the opportunity to integrate systems and processes with business customers provides even more ways to connect the two organisations through a meaningful customer experience.
A B2B technology services company which is well known for their customer experience is Rackspace Hosting (www.rackspace.com). Rackspace serves over 152.000 customers around the world and promises them all ‘Fanatical Support’. This focus on the customer experience shows in their daily activities, but it shines when they have a chance to recover when things go wrong. A few years ago, Rackspace lost power and thousands of customers were affected. In this case, ‘Fanatical Support’ meant more than just getting back online as quickly as possible. Every customer affected was called by an employee and received an apology, an explanation and a promise for a refund. Rackspace turned this potentially disastrous crisis into an opportunity and used it to strengthen their fan base. ‘Customer Service’ begins when something in the process fails and ‘Customer Experience’ is the opportunity to do something unique and special during the interaction.
The term Customer Experience Management (CEM) has been around for over ten years and there are more and more consultancies specialising in this area. Technology companies are rushing to fill the gap as well, with the recent emergence of CEM software solutions. Most of these solutions are enhancements to existing solutions in other related domains, such as content management, commerce platforms, customer service and analytics solutions. An example is Medallia (www.medallia.com) which is an established leader in the hospitality sector and is expanding their solutions into B2B and enhancing their products into a CEM suite.
No technology on its own will manage or improve the experience you provide your customers. Brian Walker, a VP and Principle Analyst with Forrester Research, wisely writes, “…eBusiness leaders should proceed with a pragmatic view of the value of CXM solutions in the near future.”2 Making the decision to excel in the area of customer experience is much more important than the software to support the effort.
Are You A Dog?
Metro Bank set out to create fans, not customers. They designed their business model, processes and systems to achieve this goal and hired the right people to make it happen. They even took this beyond the expectations of their customers by providing retail store locations for them to visit and even allowed dogs to come along. It’s true that some dogs might bark in the store or poop on the marble floors, which is why other banks see dogs as an annoyance and cost centre. Do you ever feel like a dog?
Every company, and every CIO, is constantly struggling with improving service performance with ever constrained resources. Strategically designing the customer experience up front will allow you to remove some of your stupid rules and shift resources away from the things which really don’t matter. The customers will value the experience more and you will be able to save costs, or even charge a premium if you are ahead of the market. Customer Experience Management can help the CIO get out of the cost centre dog house and back into the profit centre game.
The next CIO Survival Guide will explore how the CIO can improve your company’s performance in engaging in the Experience Economy.
Chris Parker ([email protected]) is a customer experience expert and helps business leaders around the world improve customer experiences by embracing emerging technologies.
The CIO’s Customer Experience Survival Action List:
- Educate yourself and your team on Customer Experience Management with the resources listed below.
- Assess your current customer experience performance by talking to some customers.
- Hire or partner with a Customer Experience Consultant.
- Enhance your customer experience strategy and customer journey designs.
- Test the new experience with some customers to see what they think and feel.
- Make friends with the Chief Customer Officer, or support the idea of hiring one.
Resources on Customer Experience for the CIO
Authenticity – What Customers Really Want by James H. Gilmore and B. Joseph Pine II (2007)
The DNA of Customer Experience – How Emotions Drive Value by Colin Shaw (2007)
On Customer Experience (www.mikewittenstein.com/download/cio.pdf)
1Better Customer Experience Correlates to Higher NPS Scores for Banks and Retailers – Forrester Report by Megan Burns (2011)
2The Emergence of Customer Experience Management Solutions – Forrester Report by Brian Walker (2011)
Customer Experience Professionals Association (www.cxpa.org)
Customer Experience Certification Program (www.cemcertification.org)
European Customer Experience World 2012 conference (www.ecew.co.uk) Special CIO Survival Guide discount code: CIO