There is a difference between a customer experience and a service product and it is worth noting the distinction. We seem to obsess about the former and almost ignore the latter and that’s too bad because I think there is money to be made in the difference.
The distinction reminds me of the big discussion that went on a few decades ago over quality. At the time imports from around the world, but principally Japan and Europe, were cleaning our clocks because they were perceived to be of higher quality than domestic brands.
In typical American fashion we mounted a comeback strategy to bring our quality up to world standards and for a while smart business discussions were all about quality. It reminds me of the last few years and the relentless emphasis we have placed on the customer experience. Let me say that emphasizing anything as fundamental as this can’t be bad, in moderation, but there’s more to consider.
My interest in the customer experience was provoked by a long series of calls between my wife and our mortgage company, a typical big bank. The problem was that the bank had failed to pay our property taxes though it was clearly their responsibility because they collect the money each month and hold it in escrow. The problem got worse as we waded into it. Not only did the bank not pay our tax bill but also they had inadvertently paid someone else’s with our money.
My wife had a series of calls with bank representatives who work in the call center. Each bank agent promised to fix the problem, each tried to reassure us and each was pleasant and professional told my wife to have a nice day at the end of the call. My wife ended each call thinking that the agents were “nice” and that the problem had been solved. Unfortunately, there was no follow up and here I will let you imagine the rest. After four “nice” conversations the problem is still there.
Now if this was a manufacturing problem I would say that the product is broken and that the bank has a quality problem. The typical response when quality became an important value in manufacturing was to improve final inspections and it worked. Certainly a lot of inferior product was kept from the customer but the manufacturer also ended up with a lot of products that needed fixing. Clearly something else had to be done and that led to the idea of designing quality in rather than inspecting for it.
I think our focus on customer experience is a lot like focusing on quality. Just as you can’t separate quality from the whole manufacturing process you can’t separate the customer experience from offering a high quality service product. My wife is more tolerant than I am and left each encounter (so far) encouraged that the situation would be rectified.
Intense focus on the customer experience has left us with a hollowed out service product, at least in this case but I will extrapolate here. It appears to me that the bank might be incenting people to be nice but also to pass the ball and not care too much if the ball falls on the ground and dribbles away.
This experience vividly shows me and I hope others that there are two parts to customer service — the customer experience for sure, but also delivering a quality service that goes well beyond being nice or professional or any other qualifier that to attribute to the people involved except one. You still have to get the job done, and CRM needs to ensure that aspect as much as it addresses the experience.
I saw this on the Huffington Post and thought it said a lot about CRM. A California woman has refused to pay her bill for a credit card she has with Bank of America. According to Huffington Post, Ann Minch “has carried a balance of several thousand dollars on her Bank of America credit card, making minimum monthly payments of about $130, sometimes paying and extra $50 or $100. She says she’s never missed a payment.”
Minch’s beef is that for all her good behavior and customer loyalty the bank repeatedly raised her interest rate this year, reaching 30 percent in July.
It gets better.
Minch decided to make her fight with the bank public and posted a four-minute video on YouTube to explain her actions and to demand the bank negotiate and reduce her rate. You can see the story here.
Minch is not alone, especially in these hard economic times. Many people carry balances on their cards and pay monthly interest. Banks are only too happy to carry the balance and collect the interest because at 15, 20 or even thirty percent interest it doesn’t take long for the borrower to pay the bank more than the original card balance. For banks, card balances are the gift that keeps on giving.
According to creditcards.com as of June 30, 2009 Bank of America was the number two general purpose card issuer ranked by outstanding debt ($150.82 billion). In 2008 BofA was number three for cards in circulation with 80.2 million and based on outstanding debt in 2008 it was number two with 19.25% of the market. It was also number two in profitability in 2008 earning $520 million in profit. Interestingly according to J.D. Power and Associates 2009 Credit Card Satisfaction rankings Bank of America was tenth with a score of 687 out of one thousand.
Credit cards are a form of unsecured loan with the key differentiator being the loan originator. It’s you and me, not some loan officer. The banks can’t walk down the hall to tell you to stop making silly loans to yourself all they have is the interest rate lever to do that with. So to influence behavior, they jack up the rates they charge in the hope that you’ll stop charging until you get your income and expenses in line.
The difficulty comes when money borrowed at one interest rate is suddenly assessed a higher rate. It’s like moving the goal posts and paradoxically, if you had trouble making a payment at 15 percent, 30 percent will not be an easier climb.
Lest you think that the bank has all the leverage here consider this. Minch says in her video that she owns no property and was laid off. There’s nothing that the bank can do to compel payment — they can’t seize her home or car and the bank can’t garnish her pay.
The bank can and probably will take her to court but as she correctly points out in the video, the civil courts are backlogged and it could take years to get the case heard. Meanwhile she rails against Bank of America and all banks that have received federal bailout funds from the people of the United States and then turn around and treat their customers the way she has been treated.
It looks like a Mexican standoff but it could turn into a circular firing squad because Minch’s goal now is not simply to get the bank to reduce her interest rate — she wants to spark a revolt against big financial institutions and in the video refers to them as “evil, thieving bastards”. So far her video has been seen about a hundred thousand times. It’s going viral thanks to social media and it points to the importance of every vendor having good policies and procedures in its CRM strategy (not just tools, strategy) to avoid this kind of nightmare scenario.
Last week I made the suggestion that we have over done our reliance on customer experience as a customer intimacy tool — something that I stand by. The idea of customer experience looms large and there is no denying its power as a theme in CRM. But if our interpretation of customer experience is off the mark, as I think it is, then what is the right approach?
First, by way of review, customer experience has come to mean a literal experience had by a customer with a vendor, product or service rather than a product or service cultivated — through value add — to be an experience. The customer experience as we know it today is a method of establishing customer intimacy and it is only one of several intimacy strategies that we should consider using — along with product line extension, product enhancement and marketing. All of the other intimacy strategies require some greater knowledge of the customer, especially understanding customer attitudes, which can be gained through communities and other social media whose focus is information gathering rather than message or idea elaboration.
What separates customer experience, in my mind, from other intimacy strategies is that all the other strategies deal with “the thing itself”, either a product or a service. Customer experience is a meta-intimacy strategy because it operates at a level of abstraction above the thing itself.
It strikes me that when we talk about the customer experience, what we really mean is our service-product. That might seem like a distinction without a difference but it is not. The hyphen between service and product is deliberate. In conjoining the words it emphasizes an idea that might not be strange to us but it is often subliminal.
Customer experience, is generic, a thing to be achieved through prescribed processes within an organization, an outcome with few inputs. A service-product on the other hand, is more open-ended. It takes whatever shape a customer gives it and it is different from brand to brand, person to person. A service-product also has this key difference from an experience — it captures or ought to capture customer input well beyond the hoped for conclusion of satisfaction. A well-executed service-product looks for root causes, captures data and influences future company decisions about product and brand.
Replacing a customer experience orientation with a service-product idea will do several things for any company. As I have tried to say elsewhere, the current description of customer experience amounts to little more than the “ordinary care” that hotels owe guests. But no one competes on ordinary care because it is so easy to supersede.
We try to develop customer experience as a way to differentiate and while that may be a good thing, some products and services simply cannot be cultivated into customer experiences. Consider root canal. It is a service that will never be cultivated into an experience — except for the pain killers as one experienced patient told me recently. If we attempt to convert a service like this into a customer experience we run headlong into a wall. Far better to look for ways to improve the service product than attempt to make it something it is not. Also, since only some services can be cultivated into true experiences, it can relieve managers and line of business people from the contortions necessary to attempt to achieve a customer experience.
A true service-product orientation is an instant differentiator. Like any other product, a service-product can be differentiated based on customer input. In contrast, a pre-determined customer experience is a playbook to be executed and the customer is almost a by-stander.
The good news is that many companies already approach the customer experience as a service product and they are highly successful at knowing their customers as well as ensuring their satisfaction. Notwithstanding this success, I believe it is critical to get our terms right, to focus on the service aspect rather than sticking to the literal meaning of experience. If we fail to get our terms coordinated we risk ignoring real opportunities for innovation in our businesses. And at some point an ossified customer experience idea will fail to meet the needs of those whose need is for service-products. When that happens we will wring our hands and ask how and why CRM failed us. Of course it won’t be CRM that failed but our vision.
The recession is ahead of our thinking about how to sell around it. Our first response is a tried and true strategy that is not right for all occasions. People will disagree with me but so far we’ve seen a steady stream of one idea — staying close to the customer and attending to the customer experience.
There is nothing wrong with this customer-centricity and a lot to be admired. Attending to the customer experience is part of a customer intimacy strategy and we should always stay close to our customers. But customer intimacy is not the only tool in the box. It should be one of many that we use like a symphony conductor bringing in the strings and fading the percussion when the score demands it.
Customer intimacy is a great tool especially when customers have cash and need to choose between alternatives. People buy from people and they buy from the people they know. Today, customers don’t have much cash; the credit markets have been shredded and even worthy borrowers have a hard time getting the capital they need to do business.
The credit crunch affects us all because the economy is really one big cascade mechanism. My profits become your revenue in an unbroken chain that keeps people employed and products flying off the shelves. Absent credit and cash the mechanism seizes up and all the customer intimacy in the world isn’t worth the proverbial bucket of warm spit.
What to do?
I think of a spectrum with customer intimacy on one end and operational excellence on the other and CRM has a role to play all the way down the line. Right now we are stuck in the middle of the spectrum still favoring the intimacy end but it’s time to think different.
Selling is always about innovation; not just your innovative product but innovative approaches that help us stand out against the competition. Change the rules of the game is how one sales manager once put it to me. Don’t settle into the same niche as every other sales person or you will end up column fodder in some evaluation spreadsheet and there’s no reward for second place.
It is time to think about innovating around operations, if you haven’t already. We have a thirteen trillion dollar economy and the experts say the GDP will shrink by a trillion bucks this year. But that still means roughly twelve trillion dollars worth of good and services will be bought and sold. In other words people and companies are still buying, just not as much. They will buy from you if you have the offers, packaging and processes that fit their current needs and that all relies on operations.
An operational excellence strategy is available to almost every business and although it represents a kind of innovation, it requires no major investments and it involves no long lead times. Want to improve operations? Great, it’s all about mental innovation. Operational improvements can come from such over looked sources as employee input to enhance internal processes and outside vendors who can provide automation to streamline labor-intensive activities.
Good operational ideas can especially come from customers, admittedly an idea rooted in intimacy. If you listen hard they might tell you that, yes, they have need but no they don’t have money—we’re used to hearing that. But if you listen even harder you might discover that customers have enough to buy in different configurations with different price points and different payment terms—things they might not think are possible so they might not ask. These nuggets provide the information you need to adjust operations.
So maybe you change packaging, deliver more product but less frequently, put more or less in the package depending on the need. Pay by the drink rather than by the bottle. Or maybe you reduce the contracts process to bare essentials with a contracts management system delivered on-demand.
Things change in recessions and sometimes the changes are permanent. On-demand technology was a big winner in the last recession. In 2003, a bad year, I recall surveying the market and being surprised at the willingness of CRM buyers to evaluate on-demand CRM on an equal footing with on-premise solutions. It had not always been that way. In six months the numbers went from 52% in favor of evaluating to 85% in favor. The tide turned and it never went back.
On-demand has many advantages but the key in this case was the operational benefit of delivering software services on a pay as you go basis. Think about this. In 2003 on-premise CRM vendors stayed close to their customers, despite the fact that the customers had no money to spend on CRM. On-demand vendors sold to relative strangers over the Internet and phone—not terribly intimate. But while on-premise vendors were holding their customers hands, on-demand vendors were taking the business. On-demand vendors sold an operationally superior product in an operationally superior way.
So don’t shy away from customer-centricity in these times—you are the only one who knows if your business needs this approach. At the same time, be aware of your other weapons and remember that this is a great time to upset the established order. If you don’t upset the apple cart, who will?