March 10, 2010
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.
They have been discussing General Motor’s loss of market share in business schools for decades already and the added denouement of the company’s bankruptcy filing will doubtless drive many academic papers for decades to come.
The roots of GM’s fall from grace are numerous and it would be incorrect to attribute the fall to any single factor. Like Rome’s fall there were many root causes and it took so long that when the end came, life as people knew it simply continued. Far more traumatic and catastrophic was the instantaneous obliteration of the city of Pompeii.
At least part of the fall can be attributed to GM’s being out of touch with its customers which has been documented for many years, including in a wonderful 1984 book by David Halberstam, “The Reckoning.” Thought the book is mostly a comparison of the number two car companies in America and Japan (Ford and Nissan, at the time), there is ample discussion of GM as well.
In the book Halberstam tells an illuminating story of how company executives were all given company cars that were kept in heated garages and scrupulously maintained during the workday. These pampered cars never hiccupped and the executives who drove them never had the same experiences with the product as their customers.
For a long time, GM, Ford and Chrysler all dealt with the customer in ways appropriate that were appropriate to their times. They were manufacturers running large factories and in order to get the economies of scale needed to make their complex products affordable, they found ways to make customers want the relatively undifferentiated things they mass-produced. It was a twentieth century mind set and it worked brilliantly — so well in fact that GM actually made money every year during the Great Depression.
Everything changed with the Pepsi Generation. People like you and I decided we were individuals and wanted to be treated that way. Manufacturers tried to catch on and car makers were a prime example offering every conceivable option a la carte down to five or six engine choices. Lead times lengthened, quality was never high but it declined too, and production runs over shot and undershot demand. Car dealers nonetheless found ways — through discounting and sales — to fit round customers into square cars.
Japanese and other foreign manufacturers took a different approach to the American car market. With long shipping distances and no dealer network to speak of, they realized that they would either have to build to very high quality standards (Honda, Toyota and Nissan for example) or not play in the market. Remember Yugo and Sterling? Foreign car makers took a Zen approach to selling cars. Simplify the process, reduce the number of choices, make the most popular options standards. There would be less haggling and animosity as a result.
You already know this, but there is a point.
CRM entered the picture around this time, though even today both American and foreign dealerships are among the least well penetrated CRM markets. But CRM is more than the technology; it is a way of doing business. Car dealers need to move units, there’s no way round it. But look at how they do it.
A typical American car company ad on TV positions the product as secondary to the great deals now being offered. Discounts, reduced or eliminated interest rates and free options are what we hear about from Detroit. In marked contrast, foreign vendors talk about higher values like reliability and security. They have taken the lead in vouching for the reliability of their products and have taken the radical step of even guaranteeing the security of your job. If you lose your income, they say, bring the car back with no penalty. Some will even make your payments for a short time.
Detroit’s troubles and their mirror images in foreign fenders is emblematic of the failure to implement CRM concepts. A mature market like autos should not be a late adopter of the ideas if not the tools of CRM but that is exactly what has happened in Detroit. The bankruptcies of GM and Chrysler point to that failure but there is also reason for optimism.
It won’t be a sale that gets Detroit back to full strength. It will take many months and probably years of carefully listening to customers and ditching once and for all the 20th century mindset of mass production and huckstering. In my view I don’t see a lot of alternatives for Detroit than for the automakers to embrace CRM and social networking. There are proven things they can do that will result in better products and finer tuned messages to a public that still needs reliable transportation.
If they go more in a CRM direction I expect that the car companies will give CRM a new boost at a time when this market could use it. You might say that what’s good for GM is good for CRM and vise versa.
