A couple of books ago I wrote about customer loyalty and how to get and keep it. The book was slightly ahead of its time, mostly because it’s easier to write books than code but also because a fair amount of research needs to happen before you write the right code.
My research convincingly showed that a customer’s experience drives engagement which in turn drives loyalty. There were examples of companies and their executives who tried to shortcut the process but found they couldn’t do that and get the desired results. Their idea was to ask customers to prove their loyalty by endorsing a product or brand prematurely via the net promoter score (NPS). The obvious problem was that no one in their right mind would do that. Nevertheless, some people performed as asked but in such small numbers it didn’t matter. In the process they managed to trash the reputation of the NPS which helped exactly no one.
One of the findings that I am most fond of is that customers highly value good execution on the bread and butter, run-of-the-mill, quotidian tasks. The data blows away the myth that customer experience must be something that wows customers. In truth, they don’t often get wowed; your ability to hang on to them stems from not wasting their time.
A great takeaway from this finding is that if we can systematize and regularize our interactions with customers making them efficient and reliable that’s often all it takes. And loyalty? That’s demonstrated when customers say nice things about you in your community or elsewhere or help others with questions, not necessarily when they buy more stuff because of the points they get.
Remember I mentioned writing the right software? Armed with this knowledge we can make software that handles the efficiency and reliability and sure enough, customer interaction software is becoming the next battleground among CRM vendors.
Spoiler alert, customer interaction software won’t get you to nirvana because there are other niches opening like customer identity. I’m working on a white paper to address this but for now let’s take a look at interaction.
Regularizing the customer experience is a good place to start for without that nothing else makes sense. You couldn’t collect and analyze data on wildly different experiences hoping to glean anything predictive from it. Jobs number 2 and 3 involve bringing disparate things together. First you need to provide omni channel communication, being able to address customers on the channels they on which they approach and then you need to bring together data that might be siloed in different systems.
In many ways these are three things we’ve been striving for in CRM for about a decade the difference now is that each now connects for a higher purpose. With all of this it’s possible to track customers across channels and lifecycles and make on-target offers by relying on a better understanding of customer journeys.
I was briefed recently on Salesforce’s Interaction Studio which combines these capabilities and came away impressed with the centrality of Journey Builder in coordinating all of this. Defining customer journeys, whether for sales or service, is elemental to standardizing and regularizing customer experiences but it’s not enough. You still need to connect what you know about the customer (your data and information produced by analytics) with your communications channels so that you can address customers (saving wear and tear on the customer) in the channels they decide are best.
That’s what the product is designed for. Standardizing journeys across channels and delivering useful information. All of this combines to enable a business to make good on its bread and butter promises. In the process customers feel well served, not spammed. There’s also much greater likelihood that the positive experience engages customers as they wish to be and that completes the engagement cycle. If engagement drives loyalty, then the heavy lifting is over for now at least.
My two bits
It’s nice to see experience and engagement realized through CRM. A lot of credit goes to the analytics engine in the background that acts on customer data as well as the machine learning algorithms that enable correct next best recommendations. All of that wouldn’t be possible without journey mapping to standardize processes.
It has taken a while to get all these moving parts in synch, but we’re not done. Time to start looking into how to protect identity so that suggestions and offers only go to customers when they’re wanted. This will build on the not wasting time issue. For this we might need a third party to manage personal data. Historically we haven’t done much in identity but it’s time to reconsider.
We can’t really expect the individual social network vendors to do that because they’re closed systems and it would result in either massive redundancy or chaos from competing systems and possibly both. There are also bigger issues involved like who pays to maintain data and how do we keep it safe? That’s why interaction and identity are some of the leading issues of our time.
The software industry has changed materially since the introduction of cloud computing at the turn of the century in ways that we might too easily forget. Fundamentally, for all its promise, software was once an impediment to business and that began to change after Y2K. You need only recall the great difficulty the business world went through to enable systems to capture four-digit years at the turn of the century. The changeover imperiled more than one large corporation and made many skeptical of big software projects.
Nearly 20 years ago when you bought software, it was far less flexible than today. I once knew a CRM company that had three products for various stages of the company lifecycle and none of the products was interchangeable. A small company with visions of becoming large had to make a Hobson’s choice. It could buy a lower capacity product because that it could afford with an inevitable upgrade later. Or it could buy more software than needed and hope to into it. The upgrade almost always involved ripping and replacing software, converting data, and retraining users.
Today, because software is available by the seat-month, it’s no trouble to start small and grow organically even adding functionality as the need arises, a big difference that saves time and effort as well as costs.
Salesforce revealed The latest example of this enhanced scalability today. First announced at Dreamforce, the new Salesforce Essentials is a scalable set of sales and service solutions aimed at the SMB market. But it’s not a stripped-down version or a unique solution that you’ll someday have to throw away when your needs change. The Essentials solutions are built on the Salesforce Lightning Platform just like the rest of the Salesforce offering. So as needs change, users can simply add functionality and here’s also no need to convert data.
Designed for high usability with key features like Einstein AI built in, Essentials is both a complete and an expandable one. With Einstein users can get insights from their data in the same way as users of the rest of the Salesforce suite. The AppExchange, with its thousands of platform native applications, is also accessible making it possible to fine tune even a small instance of Essentials.
This approach is a good bet for two kinds of businesses, small businesses and boutiques, each has different software needs that essentials can help with. True small businesses may need few functions and record keeping is a big deal. Giving employees a way to understand the sales team’s relationship with the customer is critical to enabling the support group to do its job professionally and efficiently.
Many boutique businesses may have small headcount but they still have sophisticated business processes involving many millions of dollars’ worth of activity. For example, independent financial advisors might only need a few seats, but they still have sophisticated processes to administer and they sometimes need integration with a variety of applications from other providers in the industry. They may also wish to augment their Salesforce instances with applications from the Small Business Hub, part of the AppExchange to fully support their customers. Salesforce Essentials gives them a path for doing all of this without costing a fortune or spending many months knitting systems together. Finally, Trailhead, the Salesforce’s interactive learning environment helps guide users through setup and first use.
My two bits
Today’s Salesforce announcement is certainly interesting from a product perspective. But it’s also a clear demonstration that over time, software technology has become more automated, less costly, and more attuned to business. I haven’t seen any economic analyses, but it seems logical that the maturation of software over the last two decades plays some role in our global ability to innovate and bring new businesses to market in a fraction of the time and at a fraction of the cost of the older paradigm. It takes less capital to spin up a business today than ever before and software efficiencies are a major cause.
Of course, many businesses will fail for a variety of reasons; that happens all the time. But the cost and complexity of technology is no longer a gating factor in business development and that’s a profound improvement.
Famous investor and entrepreneur Peter Thiel says he’s leaving Silicon Valley and taking his investment company with him. He’s decamping for LA and told the New York Times that Silicon Valley is over, which the Times points out is a popular trope among those who’ve had enough—enough wealth creation, invention and creativity, and fun. Stuff like that.
We must award Thiel points for honesty though his logic seems to be more of what works for a broken clock, occasionally right but more often off the mark. San Francisco is exhibit one. It is expensive, crowded, sometimes supercilious and unequal. If such characteristics presage a fall then, sure, the entire Bay Area might be in for a comeuppance.
But this isn’t the Bible or even a classical epic. It’s real life and while there are signs of change all around—Moore’s Law is tipping over—the signs also point to challenges that make people rich. I was struck by this Thiel line in the Times piece describing a generation’s work inventing new technologies:
“These technologies enabled globalization. They were about destroying the tyranny of place,” he said. “It was a bit paradoxical that the overwhelming majority of them emerged in this very small place.”
How quickly we forget. It is precisely the concentration of people, capital, and ideas in a small place that drives not only single inventions but a whole culture that goes with them. Having just written a book concerning all this (The Age of Sustainability) it is surprising and concerning that Thiel apparently doesn’t recall that textile manufacturing as well as its machinery development started and excelled in the British Midlands, a small place. So, did iron and steel making to support machinery development.
Detroit became Motor City for similar reasons. Henry Ford and the Dodge brothers were real people and so was Alfred P. Sloan. The point is that talent converges on a place where the brightest of the bright can interact, share ideas, and flourish. That’s what San Francisco and the Valley are all about.
For most of the last year I have been pitching the argument for K-waves, long economic cycles lasting 50-60 years in which industries are born and go through most of their lifecycles. The Information and Telecommunications Age is certainly getting long in the tooth and I believe a new K-wave is starting that will focus on renewable energy and producing ecosystem services like making fresh water and removing carbon from the air for profit. But this doesn’t mean the Valley is kaput.
Look at the long history of K-waves since the Industrial Revolution and you will notice that each succeeding wave gets support from industries in earlier waves. Sustainability won’t be possible without a healthy dose of modern IT including AI and IoT. And without sustainability, well, I don’t want to think about it.
So, Peter Thiel might be right about the Valley being over but it’s more about the end of an era, not the end of the world. If he wants to move to LA, he certainly should. But no one is clairvoyant or infallible. Thiel doubled-down on Donald Trump during the last election. How’s that one working out?
Disruptive innovations change our lives for the better. They expose long-standing needs and signal that there’s a solution at hand. Moreover, the solution involved is usually less expensive than the status quo. The lower cost aspect makes adoption inevitable and therefore disruptive.
Document management is like that. Decades ago for many enterprises the cost of capturing documents as electronic images vastly improved on the costs of managing file cabinets. Labor and printing costs still make up a significant cost for some organizations but generally, as document management becomes ubiquitous, a business saves a lot of money.
But disruptions don’t remain disruptive, they commoditize and become mainstream and on the way they become less costly and even more ubiquitous than their inventors had expected. Really successful disruptions follow this path to ubiquity without skipping a beat but other times vendors try too hard to extract value from their old disruptions. This still works when customers are deeply invested or it’s hard to convert to the competition. The term “walled garden” was coined to describe such situations.
In a walled garden you might expect a vendor to tightly monitor license use and to oppose commodity licensing options like site or corporate licenses. Some vendors have gone so far as to audit use within a client enterprise and to charge back for uses assumed but not necessarily verified.
These policies might work when a disruption is fresh and a vendor wants to penetrate an organization. But later both the customer and the vendor have an interest in making the solution ubiquitous because all or nearly all people in an organization can benefit from the solution. Those who can’t benefit won’t use the solution and for them a full license doesn’t make a lot of sense.
Walled gardens can fail, especially when conversion isn’t as hard as the disruptive vendor might think. Further, as time goes on the principal attribute that a vendor displays has much less to do with wiz-bang technology because the competition has caught up. The reason dominant vendors remain so is because they’ve managed to engage with customers and engagement drives loyalty.
In my experience, which includes writing books on the subject, keeping customers for the long term begins with engaging them on all levels with your whole product, a term from a few decades ago that’s still valuable. Whole product includes the core product but also all of the policies, procedures, service interactions and more that tell customers you care about their success.
In “Stop Trying to Delight Your Customers” a 2010 article from the Harvard Business Review the authors say, “…loyalty has a lot more to do with how well companies deliver on their basic, even plain-vanilla promises than on how dazzling the service experience might be.”
The essence of that delivery is simplicity, which includes the user experience as well as the experience with the vendor’s policies and procedures. But in multiple situations we see the opposite of simplicity today, which some customers view as hostility. The best example of this is the software audit.
Whether it’s database companies or document management companies, auditing customer use of a product, along with hefty chargebacks is becoming a bone of contention between customers and vendors. No doubt vendors think audits are necessary but as a customer engagement strategy it lacks a lot.
My two cents
At some point in the commoditization process the driving force of the vendor-customer relationship transitions from the awesomeness of a product to how easy a vendor is to work with and that’s the whole product wrapped up with a bow. The user experience, the buyer’s experience, technical features and pricing all have a role to play in the whole product description. Vendors who forget this may find that after many years customer attrition becomes a problem and at that point it might be too late.
They did it again. Salesforce exceeded its year over year quarterly earnings by a tidy amount. The numbers are 24 percent YOY growth on revenues of $2.85 billion. Full year revenue was $10.48 billion. Next year their guidance to financial analysts is revenues of $12.60 to $12.65 billion.
Stop for a minute. Do you know how hard this is to pull off? It’s not just that Salesforce exceeded $10 billion for the year, which was an important goal. It’s that they’ve been a growth company for almost two decades. Every year more corporations buy into Salesforce’s version of cloud computing for CRM, for ancillary applications from the AppExchange, and for building their own apps from scratch for a variety of platforms (all at once) ranging from the handheld device to the (dare we say legacy?) desktop.
Forgive me for going on, there will be no free steak knives at the end of this, but Salesforce has for many years been on of the very best companies on the planet to work for. And, again no parting gifts here either, they have built a business model that has philanthropy, a.k.a. doing good while doing well, built in.
To paraphrase Paul and Robert in “Butch Cassidy” “Who are these guys?!”
Okay, okay, they aren’t perfect. They change their marketing strategy as fast as most people change their socks. They’ve been a hosted CRM company, a SaaS company, a social company, a cloud company, they’ve embraced analytics and IoT as if they were the second coming. They’re also into teaching, training, making it possible for ever more people to use their stuff. They’re hard to keep up with.
But Salesforce, more than any company I know about seems to luxuriate in the idea of destruction as a means of creation. If something doesn’t work out exactly right, they have no problem scrapping it and finding something better. They grow because they embrace the new and the difficult.
But back to the degree of difficulty. It is hard, hard to put up better numbers year after year and do the other things but lately that’s become part of their appeal. Other, larger companies now go to Salesforce to discover their secrets and because their secret sauce is embedded in their software and how they use it, selling Salesforce is no longer about product. Actually, it’s still that but now it’s also about knowledge and culture transfer. That, combined with a subscription model that gets customers to commit to multi-year deals, suggests that this growth curve can extend well into the future. We’re seeing something special happening.