Customer Behavior and CRM Advocate
Gary Lemke over at CRM Advocate does some nice work. Every day he asks a thought provoking question related to CRM and asks readers for their “take” on the issue. Over the years he’s exposed me to a lot of good thinking and I encourage you to take a look at his blog.
A few days ago the subject was Daniel Kahneman, a psychologist who won a Nobel prize — in economics. Kahneman and his colleague Amos Tversky laid the foundation for behavioral economics and challenged us with the idea that, while economics studies the rational behavior of individuals in the marketplace, we are not always very rational. That means at least some of the time we are doing logical things for emotional reasons out there in the good old market. Without fingering any single behavior this idea nonetheless explains a lot.
So with Kahenman as the basis, Lemke asks how often we do things in the marketplace that are emotional vs. rational. He says,
“Now, let’s use to 80/20 rule and suggest that most customers in search of service (for example, calling the call center) lead with emotion. And let’s use the same 80/20 rule to suggest that business objectives and business processes drive primarily rational behaviors understanding that individual employees still possess emotional attributes.
The startling conclusion (and graphic) is that only about 16% of the time are both sides dealing in a rational/rational manner. The big winner at 64% is “rationally dealing with the emotional” i.e. rational vendor dealing with emotional customer.
Yikes! This doesn’t make any attempt to grade emotion from under control to crazy but it’s still valuable.
I don’t know if the 80/20 rule obtains here, but as I told Gary, it sure feels right. If that assumption is even close (and I bet it is) then it is the best explanation I’ve seen for a focus on the customer experience. Forget the rules, the metrics for call handling time and all the rest. More likely than not you are dealing with an emotionally driven customer who needs some TLC. Dispensing TLC all day is a hard job and perhaps this is one of the silent reasons driving people to social networks to solve problems. What better place to find someone who empathizes with you?
The Howard Moskowitz Factor
In a Ted Talk from 2004 that I watched a the other day, Malcolm Gladwell spoke about Howard Moskowitz. You might recall the New Yorker writer made a name for himself with the publication of The Tipping Point and several other works that focus on the unpredictable things that people do in the course of normal lives. Gladwell’s Ted Talk gave me an insight about CRM.
Howard Moskowitz is a Harvard educated psychophysicist — whatever that is — who has made his bones in market research. Moskowitz works in the food industry of all things and his great insight was that very often there is no single, perfect version of a product just as there is no single monolithic customer. There are several product types that are attuned to the needs of clusters of customers.
Moskowitz’s contribution was in discovering that there is not a single big bell curve of a market for most things but he also showed that the market is not infinite or even made up of innumerable markets of one. He showed that there is a multiple but finite number of clusters, of horizontal customer segments, in anything. His breakthrough was to show that there are sizeable markets for multiple kinds of spaghetti sauce and that sauce is not a monolithic idea.
To be a little technical, this means that one’s Platonic conception of sauce, in this case, might match many other people’s notions of what sauce should be but, if given a choice, many might discover that they like something different. In the case of spaghetti sauce Moskowitz’s research replaced a single kind of sauce with six types ranging from traditional to garlicky to chunky to spicy and more — just check your store shelves.
By evolving from a one-size fits all approach to one that embraces customer diversity Moskowitz was able to improve customer experiences with food products from coffee, to cola, to spaghetti sauce and beyond. Embracing diversity goes by the name of horizontal segmentation and it applies equally well to food products as it does to other customer experiences. For what is a food product but a customer experience in material form? Horizontal segmentation seeks to understand what customers want and then to deliver it.
In our own design of customer experiences we often ignore horizontal segmentation and simply try to deliver an experience that most people will find acceptable, which is to say our Platonic conception of the experience. In fact, smart companies are designing customer experiences leaving nothing to chance. But what’s acceptable to the big Bell curve is very different from wowing the customer.
In customer service, for instance, we’re at least on the right track because service suites offer a range of communication modes today. With these modes a customer can at least select the setting of an interaction. But what about the content of the interaction?
This issue highlights the importance of social media tools that capture customer input and render it in the moment. They can do what Moskowitz did for a fraction of the cost and time. If a vendor or service provider can be in the moment with the customer, a vendor is more likely to be able to respond to a need as it happens. This amounts to horizontal segmentation on the fly or just in time horizontal segmentation.
If you link together enough such interactions you can deliver a differentiated customer experience in the same way that you deliver a movie by rendering a lot of still frames in rapid succession. But note that the key is in the ability to rapidly respond, it has less to do with the medium you use and it’s about as far away from the metrics we love to track like time in queue or ensuring we use the customer’s name or anything else that is temporal but off the mark.
Horizontal segmentation on the fly solves part of a problem. It helps us get through a customer experience at hand but it doesn’t give much insight into better alternatives. If Moskowitz had stopped at the sauce at hand, today we’d have a very good conception of traditional spaghetti sauce but we’d be unaware that deep in the marketplace there were opportunities for more chunky or garlicky concoctions. The sauce companies made a lot of additional money catering to new tastes but only once they had done the research and began to offer multiple alternatives.
So while being in the moment is important it’s not enough. It’s still critical to use social tools to ask the marketplace open-ended questions in order to capture unique insights. You don’t know where these insights will lead but it’s a sure bet that they are literally the secret sauce for differentiated products and customer experiences in an era when commoditization is turning our perspective into shades of grey.
The meta customer experience
Last week I looked at an interesting downside of social media. Social media makes it possible for anyone with very little effort to start a blog or social group that thrashes a vendor. Generally speaking the people behind these sites have a gripe that has a fragment (or more) of truth in it and it would be harder for a corporation to fight these annoyances than to simply let them be. That strategy implies that the publicity acquired by fighting is greater than what’s gotten if the perpetrators simply do their thing. Twisted up in all this is the concept of the customer experience.
Customers who take the time to start a blog or other social site with the title “[your company’s name] sucks” are more than a little bent out of shape as evidenced by the effort they spend dragging your name through the mud. In part one of this series I showed how I discovered this trove of social CRM research just waiting for some analysis. This week it’s time for analysis.
As I mentioned in part one it is amazing that much if not many of the critiques of companies have less to do with actual product or service issues and more to do with what I call Level 2 customer experience but we could also call it the meta experience. The meta experience in on full display at the “BP Sucks” sites where people tear into the oil company for its runaway oil well in the Gulf of Mexico and other issues. People these days aren’t disposed to love oil companies and the disaster appears to have put them over the edge. Other oil companies have their detractors too but none except Exxon have a greater negative following. As the largest company in the world, Exxon is in a class by itself.
Even categories of entities you’d think were or should be immune from the phenomenon get rung up. My best example is the Ivy League colleges. Yep, the Ivies. You would have thought that people who get there would have nothing to complain about but in this free-swinging era you’d be disappointed. Some of the Ivies have suckometer readings that would make a corporation blush. Topping the list of Ivy League schools on the suckometer is Dartmouth with a very healthy About 1,080,000 results (0.38 seconds).
Why is this?
Well, to coin a phrase, I guess if you live by the customer experience you also die by it. The entities that have some of the greatest problems seem also to be the ones that have least control over their customer experiences. Many companies today actually try hard to design good customer experiences. In an interview with Greg Gianforte, founder and CEO of RightNow, recently I learned about how hard that company tries to design its own customer experiences and how they try to instill the importance of design in their customers. I think it’s working too.
But what few of us ever expected is the idea of the meta experience — the experience your customer has as a result of mere insinuations made my your company, usually in a different context. Starbucks is a good example.
Starbucks sells an experience much more than it sells either coffee drinks or edibles and that experience shapes how its customers perceive the company and — surprise — how they see themselves. Starbucks is not alone in this and when a company falls down over some issue that affects how people see themselves, fans become detractors.
Clearly, if you care about what your customers think and say about you then not only do you need to design the primary experience but you have to look out for unintended consequences or blowback from every action you take — a.k.a. the meta experience. That sounds hard and perhaps it is, but here are some ideas to help.
- Understand what you stand for and make it part of everyday life. Companies used to have (still have?) mission statements that often included words about ethical treatment of customers, employees and vendors as well as concrete descriptions of what they do. For instance, Google is famous for a somewhat tarnished and unofficial one-sentence summary, “Don’t be evil”. People are watching so it might be time to dig up the mission statement and make sure it influences your business decisions. You know, walk the walk.
- Test your customer experience design with real people. This is really just a quality control step and I’ll bet lots of companies engineering customer experiences only go so far as to test if anything breaks along the way and see if every sub-process ends properly. You need to ask real people who are not interested in your profit and loss statement to break the design before deploying it.
- Think outside the box. In this case the customer experience design itself. Use communities to gather data about your customers’ attitudes, needs and biases. If you run the community right (get help if you need it) and people freely reveal their thoughts, the process will reveal things you would never even think about in a million years.
This is important. In market after market today, the pecking order is already established — we know who is number one and who is supposed to be trying harder. In other words, there are fewer green fields to go after and few net new customers to get. The way to growth and profitability today is to keep the customers you have and now and then steal some from the other guy. Providing inadequate customer experiences — even unintentionally — is a sure way to lose in this zero sum game.
Experience is in the eye of the beholder
Last week in New York, I began some field research in social CRM that will result in a longer paper later this fall. One of the things that interested me was the level of frustration and, well, anger that some customers have for some of their vendors.
It’s a mixed bag, really — some people take great umbrage at Starbucks (Nasdaq: SBUX), others at a social networking site, and still others target their ire at oil companies, their colleges or even retailers.
In my research, there isn’t a single industry — or vendor, for that matter — that doesn’t have a group of antagonists.
This should surprise no one, but in the age of the Internet, some people might stew in their own juices over a problem or slight — either real or imagined — that happened just yesterday or one that goes back several years, but many others take action by airing their gripes online. If this is the age of transparency, it is not simply about vendor transparency — customers have a lot to say on the idea and they do.
Everyone Has Their Enemies
For part of my research, I relied on the highly subjective and unscientific international expression of annoyance and resistance to corporate affronts — I searched on the phrase “[insert name here, please] sucks.” Dear reader, I understand your delicate sensibilities, and I assure you that my interest in this research and the use of this mild form of profanity is not at all prurient — it is used in the furtherance of science. Think of me like a doctor or a photographer for National Geographic.
My reasons for beginning this quest are not germane to this piece but will be explained in the paper. Nonetheless, the more I searched, the more I realized that any company you can think of that serves the mass market has its detractors. These detractors have reached a personal level for frustration or loathing sufficient to cause them to invest many hours of their time to initiate Web sites and blogs to drive their points home and to invite others to likewise vent their frustrations.
In all but the smallest number of cases, searching on “___ sucks” brought to the screen not thousands or tens of thousands of hits but hundreds of thousands, and in many cases millions of them.
Dissatisfaction on 2 Levels
Here’s where it gets interesting. It is no surprise that some people have problems with corporations that supply them with life’s necessities. I can’t say that I have read or analyzed more than a small speck of the rants online, but after spending several hours with these for a, I feel safe in stating this preliminary conclusion: People are less dissatisfied over products or services than you might think. They are much more likely to have problems with their customer experiences.
But saying the customer experience is an issue really understates the point, which is that it appears there are at least two levels of customer experience to contend with. Moreover, it is the second level that gives many corporations agita, or at least it should.
The two levels? Thought you’d never ask.
Level One is the customer experience that the company knows about and in many cases designs around.
Level Two is the customer experience expectation that has developed in the customer’s head.
A company may not even be aware of Level Two — how could it be? It’s completely subjective. But level two is where companies falter, often badly, because of the impressions they have unwittingly encouraged to take form in their customers’ crania. More on Level Two shortly.
A simple example is all we have room for here, so it will have to suffice until the paper is ready. Note there are loads of variables in this data that are unaccounted for, and controlling for them will probably inform the work of thesis writers for the next generation. You are welcome.
Starbucks is the example. Searching on “Starbucks sucks” brought back 335,000 hits in 0.15 seconds — the number of hits seems large but broader research proves it to be middling at best. If you want some really scary numbers, try “BP Sucks” — about 2,510,000 results (0.38 seconds), according to Google (Nasdaq: GOOG), or “Facebook sucks,” clocking in at a whopping 24,300,000 results (0.19 seconds).
Case in Point: Starbucks
Reading the posts on these sites provides a clear understanding of Level Two. To be sure, there are Level One critiques of products and services — the absence of non-dairy creamer or the extra charge for soy in espresso drinks, for example. But extensive reading shows that many more of the complaints deal with Level Two and aspirations.
For instance, the reason many people patronize Starbucks’ shops is the vibe. People want to associate with Starbucks because it reflects the image they have of themselves in a Gatsby-esque way — it shows how they want to see themselves on their best hair days. They seem to see themselves as kind, ethical, caring and nurturing people.
So when Starbucks has a disagreement with African coffee growers over trademarks and the price of raw beans, people complain. They also complain about the wages and low level of tipping for the baristas and they are happy to supply reports from Oxfam on the African situation and information about a successful lawsuit over tips in Los Angeles by baristas against the chain. Two sides play this game — consider the Starbucks water brand “Ethos.”
These and many other examples of Level Two failures point out the downside of living by the customer experience. It seems to me that many large companies have taken the approach of doing their best on Level One customer experience and of working to ensure that Level Two never gets totally out of control, a la BP (NYSE: BP).
What can a company do about it? Plenty, as it turns out, but it requires a different kind of thinking and another column. Next week, part two of this piece on how to approach the Level Two customer experience.
The IP your customers can give you
I wasn’t sure what the reaction would be to last week’s column on customer experience. Maybe I hang around with vendors and other analysts too much because customer experience is a hot topic among us and it’s generally seen as a good thing. But judging by last week’s mail and some further digging at the Harvard Business Review’s website, it appears that there are at least two camps with decidedly different views on customer experience.
The mail from last week was very positive and many people wrote to tell stories about encounters with vendors that were very pleasant but unproductive. For instance, Cary Fulbright wrote about an experience with PacifiCare Health insurance that took nine months to resolve. And another writer, Mark Hochhauser, wrote about difficulty upgrading Comcast service that should have been free but wasn’t.
I decided to do more digging at Harvard Business Review and got more of the same. HBR’s blog has numerous articles by business gurus who describe similar situations. The common denominator I see in all these sources is that companies — wittingly or unwittingly — leave their support people hanging with nothing between them and irate customers but scripts and pleasantries or scripts about pleasantries.
Too often companies are using “customer experience” as a firewall between themselves and customers. Instead they should see that customer experience is only half of what they need to be doing. Customer service is often a repair mechanism for something that went wrong up the line. In manufacturing we learned a long time ago that building quality into a product has to be done at every step of the manufacturing process. If you wait until the end and perform a perfunctory quality inspection, you will only catch the most egregious problems and your service and repair business will boom, which is not a good thing if you are providing a warranty.
The other half of customer service and the thing that balances out “Have a nice day!” is overt and outbound customer engagement. If you want to build quality into your products and especially your services, you have to know what works and what doesn’t and if you wait for a customer satisfaction survey to do it you have missed the opportunity.
Instead, this is where social media should come in. We’ve done a good job of using social media to market and sell, to the dismay of some, but what we haven’t wrapped out brains around — at least not enough — is how to use social media to proactively reach out to customers. It’s too bad because the result of that outreach is intellectual property (IP) and by not gathering it a company is leaving money on the table.
Most often we think of IP as the stuff that the engineers, designers and others develop and patent in the back office or in operations. There’s no need to patent the IP of the front office because it is unique to the company and at any rate a patent would spill the beans to your competition. But think about it, if your customers open up (and they will) and tell you how to make your products, policies and services better isn’t that worth a lot? Companies that use customer experience to deflect haven’t figured out yet that they are deflecting IP and with it the ideas that can help make them great.
Getting back to last week, if Toyota had been more customer focused over the last couple of decades they might have seen the braking and acceleration problems as opportunities to gain valuable IP and help burnish their image as a company you should want to buy a car from. But multiple recalls suggest that the company’s attitude was that it would like to be customer focused if the effort wasn’t too costly.
So what was the cost? Set aside the dead people for a moment. According to the AP, in February 2010 car sales were up 13 percent over the same month in 2009. Ford was up a whopping 43 percent while Toyota was down 8.7 percent. Prior to the recalls Toyota had been challenging GM for leadership but as of last month Toyota’s share was 12.8 percent, GM was 18.1 percent and Ford had 18.2 percent. Ford sold more than 42,000 more cars than Toyota in February.
The tough thing about customer experience is that a company has to feel it in its bones. A software vendor can provide products that enable you to implement your vision for customer experience, but that’s it. If the vision doesn’t extend from fixing the problem in customer service to fixing root causes and sustaining a culture of customer focus fueled by harvesting the IP that customers can provide, you might be toast. If I was a CRM vendor I would be sensing an opportunity right now.
