This theme emerged in my recent online interview with Theresa Kushner, Director of Strategic Marketing Customer Intelligence at Cisco Systems. Theresa is co-author of the book, Managing Your Business Data: From Chaos to Confidence. Her team at Cisco received the National Council for Database Marketing Award for Analytics and Modeling, as well as The Data Warehouse Institute Best Practice Award, for Cisco’s new customer intelligence center initiative that integrates customer data for sales, marketing and financial applications. This initiative assisted in correlating over $500 million in customer bookings.

Theresa explained how to go after the gold in your customer data, avoid fool’s gold, and refine your customer data gold to make a difference in your business growth and profitability. Untapped opportunities exist in:
*Making use of unstructured data, such as customer inquiries
*Connecting data systems such as order-entry and sales
*Helping Sales, Service, Finance, and the whole company see the customer in totality
*Allowing customer-facing people easy access to combined customer/company data
*Enabling customers to define their profile and why they’re interested in the company
*Demonstrating to customers you can move with them as a partner
*Avoiding pitfalls of fools’ gold, such as a focus on internal data, measuring what you want to hear, incentivizing data collection rather than problem prevention, and pursuing internal agendas rather than aiding superior customer experiences.

“Customer knowledge is becoming the hottest thing companies can do”, continued Theresa, “particularly in weak economy. We want to hold on to the customers we have: what are customers telling us? The trick is to collect that data, refine it, and make it available to the right people. Most companies have tons of data, but don’t know what to do with it.”

Outside-In or Inside-Out
“We tend to think customer intelligence is very important when it’s translated into business intelligence reports or dashboards that tell us how we’re doing in the business. The problem with this is it’s a very internal view of how we’re doing with customers. It’s more of a response to how we want to see things in managing the business, how our processes are working and what we’re doing. It’s not always focused on the customer. Very few systems manage against one customer profile and put the customer at the heart of it; usually financial systems are at the heart of the business, not the customers’ individual information.”

Define the Customer
“To begin data integration, determine how to define the customer; this definition becomes your master data. Customer definition sounds easy but it’s not. Ask 5 people and get 50 different answers, particularly in a B2B environment. To Sales, a customer is the person I call on that makes the decision to sign the purchase order. To Finance, a customer is the person who pays the purchase order. To Service, it’s the person who is using the product or service. Defining the customer with common agreement is a tough thing, but it’s the key to successful data integration and data ROI.”

Avoid Fool’s Gold
“Since there’s so much data out there we get enamored with insights we can glean around what’s happening with manufacturing and the product — to identify the next big purchase from customers. What you’re really looking for is real gold that tells me how the customer is reacting to my product. Where’s the real gold that tells me whether they’re really liking what I’m selling them, or their stuck because there’s not another competitor or we’re not doing everything needed to keep them happy. One of the measures of customer loyalty is how often they refer others to you. Even CRM systems don’t always tell you which customers are referring.”

“Customer satisfaction data is not always related to what customers actually do. Very few companies use survey data to figure out what customers are really telling us. We tend to throw up dashboards that say a certain point on the scale means we all get paid, or not. That motivates people to go out and collect more information from customers. It doesn’t motivate people to fix the problem the customer had to begin with.”

Aid the Customer Experience
Companies that go after the real gold, that understand it the best, are the ones that are succeeding. Help executives and managers become more comfortable with what customers are actually saying and how they’re acting. Combine appropriate data sources, take the insights to heart, and act to aid the customer experience at every touch point.

This post highlights segments of my online discussion with Theresa. Listen to the interview: Untapped Gold Mines in Customer Experience Data (recorded internet talk radio discussion, 28:40)

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This theme emerged in my recent online interview with David Cliche, Vice President of Global Interactive Marketing at Aon, a leading provider of risk management and workforce productivity solutions. Dave’s role includes leadership of interactive marketing, customer experience management strategies, sales operations, corporate communications, marketing research and analysis, and knowledge management.

“Delivery on brand expectations is most important and customers will tell us how well we do that. There’s so much to learn from the Sales and Customer Service interactions with customers”, explained Dave. “Take all those lessons learned for improvement, and drive them into creation of Marketing programs and value propositions. Then take the customer experience full-circle back into the organization as part of the strategic discussion for the whole organization to accurately understand customer needs, and to impact strategy and structure, to better manage delivery of the value proposition.”

Two-Way Messaging
Dave suggested that Marketing should own the message flow both ways. Take the customer’s message to parts of the organization that may otherwise not hear it. Customers are generally treating company messaging like noise. They think:
*At end of day, did you actually do what you said you would do?
*If I told you something did you listen?
*And most importantly, did you let me know that you did something differently because of my inputs?

There is a world of opportunity to create new relationships with customers that are potentially much more valuable. Where most organizations seem to experience the greatest challenge is making sure appropriate field data and customer feedback are understood and used across the company. Marketing can enhance the organization’s ability to incorporate customer feedback into new product offerings, organizational structure, revenue models, strategic resourcing of talent, operations, and more. We are probably squandering numerous lost opportunities to do what customers tell us they want. How can we ignore this guidance from the customer?

Accountability
Customer-centricity is not just a buzz word, it’s a structural challenge to assign accountability
into an executive policy committee, smooth hand-offs between functional areas, and commit to using customer feedback data. Marketing should own and facilitate customer experience management by leveraging all of the functional pieces to deliver the value proposition to stakeholders efficiently and cleanly. Marketing can help everyone understand how what they’re doing plays a role in how the customer receives the brand. Give equal importance to satisfaction and advocacy metrics as to financial metrics. Compare revenue, share, profit, forecast, satisfaction, and retention data to gain a fuller picture of reality and to perk up the whole organization to maximizing the potential value available.

Elevate Marketing’s Role
Historically, various functions have managed CRM and related initiatives, but Marketing is the natural fit for managing customer experience, as an essential strategy to brand management and business growth. Marketing executives can elevate their role in the company by owning customer experience management.

Listen to the interview: Marketing Wins Strategic Clout by Driving Customer Experience Management (recorded internet talk radio discussion, 28:34)

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That may seem simple enough, yet reality proves the elusiveness of customer-centricity. In Accenture’s Delivering the Promise study, 75% of executives viewed their customer service as above-average, while 59% of their customers reported their experience with these companies’ service as somewhat to extremely dissatisfying. Likewise, in CMO Council’s Customer Affinity study, half the companies said they are extremely customer-centric, but only a tenth of their customers agreed.

The building blocks of customer-centric culture are communication, skills, accountability and systems.

1. Communication. The vision and values that top management communicates, both verbally and behaviorally, set the tone and direction. What top management focuses on guides the thinking and efforts of the entire organization. The key is consistency: at every opportunity, continually communicate the necessity of making it easier and nicer for customers to get and use solutions. Consistency occurs in formal and informal meetings, written correspondence, external messages, and in every business process and every management ritual such as performance reviews, annual operating plans, performance dashboards, etc. Consistency builds trust and passion, which are necessary ingredients for true customer-centricity.

At Amazon.com, founder Jeff Bezos once began a meeting by announcing that an empty chair at the table represented the customer. Throughout the meeting, the executives were compelled to include the customer in the discussion, as if present. This became a habit – the group’s way of thinking and doing.

2. Skills. Customer-centric values and vision must be supported by proficiency in related technical and soft skills. Examine competency requirements for everyone – not just customer-facing roles – relative to your customer-centric values and vision. This includes channel partners, suppliers, and other external entities. Proficiency is the vital link between strategy and execution.

At Nordstrom, employees are selected on their capabilities to anticipate and meet people’s needs. They’re encouraged to try new approaches to selling and customer service, with the mantra use good judgment in all situations giving them a tremendous sense that they’re trusted to always do right by the customer.

3. Accountability. What gets rewarded gets done – whether the rewards are tangible or intrinsic. Interestingly, intrinsic rewards have proven to be more powerful in adjusting a group’s ways of thinking and doing. Risk tolerance and penalties also determine the degree to which customer-centricity takes root. Above all, monitor cause-and-effect and also perceptions of fairness in terms of logic and equity; these elements are pivotal to success.

At Enterprise Rent-a-Car, customer sentiment is measured at the rental office level. Only employees in offices that score at or above the overall company average are eligible for promotion, raises or bonuses. At EMC, achieving the target for their leading indicator of customer sentiment, system availability, is a go/no-go determinant of the bonus for the entire company.

4. Systems. Systems-thinking means acknowledging the big picture and linkages between its components. Scrutinize your business policies and procedures and tools for their contribution or detraction from the goal of making it easier and nicer for customers to get and use solutions. Systems include formal and informal inter-department communication and interactions and handoffs, and connections outside the enterprise.

At Dell, SVP of customer service Dick Hunter asked employees to send him notes about the inconsistent and dumb things the company was doing. Combining this input with customer’s verbatim comments to their call center led to significant changes in the customer experience.

Motives are at the heart of true or false customer-centricity. Customer-centricity as priority number one must permeate the entire business, and be un-challenged by other concerns as the organization’s primary focus of attention and efforts. All other goals are more likely to fall into place with consistent customer-centricity.

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The answer to the second question exposes the company’s culture and customer experience management motives — whether they are striving to be customer centric (eager to know and act on what customers really think), or happy to be self centric (eager for positive publicity). Maybe the motive behind the satisfaction survey depends on the sponsoring organization; perhaps a Marketing-sponsored satisfaction survey will naturally lean toward PR objectives, while a Quality-sponsored satisfaction survey will naturally lean toward continual improvement. Regardless of the sponsor, here’s why it’s best to pursue a customer centric survey strategy:

1) Investment: Surveys are an investment of customer time and of company funds, manpower and time - aren’t there more straightforward (honest) and cost-effective ways to build positive publicity? From a statistical view, manipulated surveys are worthless. Even the positive publicity is not sustainable, if it is inaccurate. Telling customers how to respond to a survey makes the survey results invalid, and the whole effort a waste of everyone’s time and money.

2) Customer Management: Many companies are concerned with respondent fatigue issues, so it’s essential to design surveys wisely and use results wisely. And since customer expectations can rise after they participate in a survey, it’s wise to have a well-established process in place to act promptly and systemically on survey results.

3) Growth: Marketing is overlooking lucrative opportunities to heighten their value within the organization if they do not view their role as a voice of the customer conduit into all functional areas across the company.

The answer to the first question reveals weaknesses in the company’s performance management strategy — either imbalanced scorecards or poor training of employees. Customer experience management scorecards should balance lagging indicators and leading indicators, with greater weight placed on the latter. Leading indicators are metrics that are actionable at the manager and worker levels, with a strong (predictive) tie to the customer survey ratings, and which can be measured before customers experience their effects. Survey results are lagging indicators because they reflect what customers have already experienced. If sales and service employees know their performance is being measured primarily by leading indicators, and secondarily by lagging indicators, their compulsion to tell customers how to rate them will be lessened. With the proper setup of customer satisfaction incentive pay, employees should be trained to respect customer’s pure assessments of the business and its related services, and to welcome constructive customer feedback.

The practice of coaching customers on satisfaction surveys should end! Customers feel insulted to be told what to say, especially in our Web 2.0 world, where customers are now accustomed to thinking independently and voicing their true opinions. To end this manipulation, go to the root cause of it: the company’s motives and/or the employees’ bonus calculation. Customers will reward you well for doing the right thing the right way.

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What Are “Outcomes” in the Customer’s World?
The concept of customers’ desired outcomes throughout the customer experience originated in innovation literature when Clayton Christensen wrote his book, The Innovator’s Dilemma, explaining that customers “hire” a product or service to get something done for them. When we understand the circumstances motivating the customer to hire a product or service, then we gain insight into the customer’s jobs-to-be-done.

A great way to identify customers’ desired outcomes throughout the customer experience is to scan customer-generated inputs on your brand category. Good sources of customer-generated inputs include contact center and sales call logs and social media. Ethnography, or observation research, is also instrumental in understanding outcomes in the customer’s world. What value does your organization place on these customer outcomes sources relative to your formal research that is typically organized from a customer satisfaction enabler viewpoint? Why not consider revising formal research to focus on customer outcomes rather than enablers?

By really understanding customers’ jobs-to-be done, constraints, work-arounds, hassles, and other elements of their world, new insights emerge for superior alignment with customers. Adopt the customers’ jargon — don’t make them adopt yours. Cater to the customers’ world — don’t make them cater to yours. Your jargon and world are customer satisfaction enablers, or a means-to-an-end toward customers’ desired outcomes. The outcomes are the direct link to re-purchase behavior and propensity to recommend a brand. In the end, it’s only the outcomes that matter.

Outcomes-Viewpoint Builds Customer-Centricity
What’s the value of heightened sensitivity to jobs-to-be-done? Ironically, it’s segmentation by circumstance-based jobs-to-be-done (rather than by demographics and psychographics) that yields creative breakthroughs and more meaningful value to customers. Christensen cites numerous examples of companies that have plodded along without much momentum in innovation, revenue and customer loyalty — until they shifted their paradigm to concentrate on improving the customers’ outcomes. Customer-centric companies proactively seek to improve customers’ outcomes across all elements of the customer experience spectrum by innovating products, services, business models, policies, processes and behaviors. It’s a paradigm shift for companies to quit concentrating on product and service features (customer satisfaction enablers; secondary focus), and to instead concentrate on helping the customer get a job done faster, more conveniently, and less expensively than before (customers’ desired outcomes; primary focus).

The Milkshake Example
My favorite story about the value of customers’ desired outcomes is from Clayton Christensen’s subsequent book, The Innovator’s Solution. He describes a fast-food business with a great reputation for milkshakes. As a customer-focused business, they monitored customer opinions and acted on customer feedback for continual improvement. Customer panels guided the introduction of thicker, richer, and cheaper versions (customer satisfaction enablers) … but without significant up-tick in business results. New research was begun to focus on the customers’ jobs-to-be-done when they ‘hired’ a milkshake. The researchers chronicled everything about milkshake purchases during a full day at the restaurant: time of day, whether the customer was alone or with others, what else the customer bought with the milkshake, take-out or eat-in, etc. Surprisingly, about half the milkshakes were purchased as single-item take-out orders in the morning.

The researchers returned to ask morning customers what they were trying to get done when they bought the milkshakes, and what alternatives they used when they had to get the same job done. They discovered that most of the morning purchasers had a similar job-to-be-done: make a long commute more interesting! They weren’t yet hungry, but they knew they would be by the time they arrived at their destination, unless they ate something along the way. They faced similar constraints: they were in a hurry, dressed in business clothes, and had only one free hand. Alternatives they considered (the business’ true competitors — not just other milkshake businesses) were typically inferior relative to these constraints: bagels cause crumbs and sticky fingers, bananas get eaten too fast, breakfast sandwiches cause greasy fingers and get cold fast, and hunger pangs would quickly return with pastries. Considering the customer’s world, the milkshake was pretty good at getting the job done: it satisfied hunger for the right amount of time and could be eaten with one hand, with minimal mess, and more slowly, to make the long commute more interesting (customers’ desired outcomes).

The researchers also found that milkshake purchases at other times of the day were typically for children, along with purchase of a full meal. The parents were usually exhausted and wanted to feel like a loving parent by giving their child a treat. However, the milkshake was not a superior alternative for this job-to-be-done. Parents waited impatiently after they finished their own meal as the children struggled to consume the milkshake through the thin straw, often discarding the milkshake half-full.

Christensen says: “When researchers asked customers who have multiple jobs in their lives what attributes of the milkshake they should improve upon, and when the researchers then averaged consumer responses in the same demographic or psychographic segment, it led to a one-size-fits-none product” that wasn’t ideal for any of the jobs that customers were trying to get done. In this example, creative breakthroughs (product, service, business model, policies, processes) were achieved for each of these circumstance-based jobs-to-be-done, providing more meaningful value to customers.

Map Desired Outcomes to Enablers
Thorough mapping of customers’ desired outcomes to internal customer satisfaction enablers allows outside-in thinking and behaviors. Once the mapping is verified, ongoing customer sentiment monitoring can be focused on the customer’s world rather than the company’s world. The translation to customer satisfaction enablers can occur within the company, through drill-down to root causes. Once root causes are verified, progress in resolving them can be predictive of what will occur in the customer’s world. Foster true customer-centricity by setting up your customer satisfaction enablers to revolve around outcomes in the customer’s world.

Note: These concepts are further defined in my e-handbook, Innovating Superior Customer Experience.

Contact the author to find out how to customize these tips to your situation.

In managing customer experience, the challenge is not only to maximize the numerator, but also to minimize the denominator. Touch-point analysis can be very helpful, but make sure non-touch-points are also considered, as the customer experience contains several elements that do not touch the company or channel. By carefully identifying and improving the time, energy and psychic costs to customers, the customer experience value quotient can be boosted significantly. In fact, the intangible elements of the denominator may be the hardest things for your competitors to copy, and therefore, your surest strategy to sustainable value superiority.

A great exercise in exploring your value quotient is to quantify the value ratio for all choices available to your customer. To develop a holistic perspective, plot these quotients as they existed in the past, as they currently exist, and as you project them to evolve in the future.

While the exercise above is illuminating, it’s incomplete in its prescriptive value to your organization. You may realize that your solution is inferior or superior to other alternatives available to your target customer, but which superior elements should you prioritize for protection and strengthening, and which inferior elements should you prioritize for improvement? The answer lies is customer experience outcome research, which involves ethnography to observe customers in their natural surroundings, revealing a more accurate and realistic viewpoint of the dimensions in the numerator and denominator of the customer’s value equation.

To innovate superior value, plot all available solutions by customers’ desired outcomes. If you have conducted customer outcome research, rank-order desired outcomes by importance x frustration x frequency. Now you’re able to see things the way the customer does: for the most important outcomes, how do the choices compare? Root cause analysis may identify engineering issues, service skill gaps, business process complications, or outdated policies.

Involve your whole organization in outside-in thinking and continual improvement by teaching them about the customer experience value quotient. For similar ideas, see my newest handbook, Innovating Superior Customer Experience.

Contact the author to find out how to customize these tips to your situation.

This practice became a habit at Amazon, part of their corporate culture. CTO Werner Vogels explains: “It’s very important to have a culture where everybody understands what the core values of the company are. New starters are often surprised at how important focusing on the customer is to us and how good Amazon is at doing that. … We often have meetings where we start off with a ‘customer voice’ — a success story, even sometimes a negative story, of a customer’s experience of buying on Amazon — and use those stories to drive our services to become better. … We want to be the most customer-centric company on the planet.”

The elusiveness of true customer-focus is evident in several studies, such as Accenture’s Delivering the Promise study, where 75% of surveyed executives viewed their customer service as above-average, while 59% of their customers reported their experience with these companies’ service as somewhat to extremely dissatisfying. Another example is CMO Council’s Customer Affinity study where half of companies said they’re extremely customer-centric, but when customers of those companies were asked, only a tenth of them said those companies were extremely customer-centric, but when customers of those companies were asked, only a tenth of them said those companies were extremely customer-centric.

As Amazon exemplifies, building a customer-focused culture is an ongoing journey. This journey is called internal branding, where outside-in thinking is integrated into the job of everyone company-wide, managing their personal impact on customer experience. Top-performing companies in customer service, according to JD Power & Associates’ recent studies, are: Amazon, USAA, Jaguar, Ritz Carlton, Publix Super Markets, Zappos, Hewlett-Packard, T Rowe Price, and Ace Hardware. These companies are well-respected on several dimensions, demonstrating that it pays dividends to put customers’ well-being first.

Challenge your organization to follow their examples. Invite your “customer” to attend all your discussions company-wide, and see what a difference it makes in transitioning to outside-in thinking that results in actions your customers would agree are in their best interest. In the meantime you’ll be building customer affinity that translates to sustainable market leadership.

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“For any given job, customers collectively apply 50 to 150 metrics to measure how well the job is getting done”, says Anthony Ulwick in his book What Customers Want. “Only when all the metrics for a given job are well satisfied are customers able to execute the job perfectly. Figure out which of the 50 to 150 outcomes for a given job are important and unsatisfied and then systematically devise a few ideas that will better satisfy those underserved outcomes.”

Good customer-jobs-to-be-done research for innovation purposes reveals precise customer wording for measures of satisfaction and promoter behavior. What better way can there be to craft the most meaningful monitoring surveys? Start with the customers’ desired outcomes as the survey questions. You may not need to ask customers specific questions about product and service features if you have well-correlated data from your initial research on the linkages between the elements of your organization’s solution as a means-to-an-end and the customers’ desired outcomes.

Use of customer-jobs-to-be-done findings for all customer experience management activities could solve these widely reported challenges:

• Different views across the organization of what customers want.
• Disagreement between business units on customer metrics.
• Balancing low respondent fatigue and high response rates.
• Broken linkages between survey results and business results.
• Large gaps in customer and supplier viewpoints of delivering customer-centricity.

Monitoring customers’ desired outcomes is a lot safer than monitoring satisfaction with features. Astute managers know that over-focus on satisfaction can lead to blind spots unless it’s combined with diligent monitoring of the competitive landscape. However, “it is important to remember that the customers’ outcomes are stable over time,” says Ulwick. “What does change is the degree to which these outcomes are satisfied by new technologies and product and service features.”

Indeed, monitoring of customers’ desired outcomes may be more eye-opening than traditional satisfaction surveys, as focus on outcomes maintains management’s attention on competition as the customer sees it. Customer choice is not always among similar-feature-offerings, but rather, it is among similar-outcome-offerings.

In a 2009 CMO Council study, Turning Customer Pain Into Competitive Gain, two-thirds of companies self-report they don’t have a high commitment to customer listening, and the same number don’t look for ways to convert problems into opportunities. Clearly, a competitive advantage exists for organizations that monitor the right things right, and take action accordingly.

See the e-handbook Innovating Superior Customer Experience for step-by-step guidelines, diagrams and templates covering more than 30 best practices for in-depth customer knowledge and innovation applications, as well as creativity tools and internal innovation techniques: http://www.clearaction.biz/innovation.html; 30% discount code = Optimization.

Contact the author to find out how to customize these tips to your situation.

A thorough understanding of what customers want is based on desired outcomes rather than features and reactions to concepts and prototypes. From the customer’s viewpoint, the solution that your firm sells is a means-to-an-end. It’s simply a tool meant to enable the customer’s desired outcome.

Customers should be segmented by circumstances surrounding their desired outcomes, in place of demographics or psychographics. Metrics for innovation and operations can be obtained from customers themselves, capturing their inherent evaluations throughout their selection and usage processes. And innovation is expected to be a part of everyone’s job across the organization, instead of the engineer’s realm.

Consider the past decade at Procter & Gamble, as shared by chairman and CEO A.G. Laffey: “In 2000, for every six new product introductions, one would return our investment. Today, about half of our new products succeed. That’s as high as we want the success rate to be. If we try to make it any higher, we’ll be tempted to err on the side of caution, playing it safe by focusing on innovations with little game-changing potential.”

He continues: “In 2000, we hadn’t explicitly or inspirationally enrolled enough of our 100,000-plus people around the world in our mission; it was neither fully embraced by employees nor fully leveraged by the com­pany’s leadership. At least 85% of the people in our organization thought they weren’t working on innovation. They were somewhere else: in line management, marketing, operations, sales, or administration. We had to redefine our social system to get everybody into the innovation game. Today, all P&G employees are expected to understand the role they play in innovation. Even when you’re operating, you’re always innovating — you’re making the cycles shorter, or developing new commercial ideas, or working on new business models. And all innovation is connected to the business strategy. Last year, the business development group reviewed more than 1,000 external ideas. This year, they’ll see 1,500. We tend to act on about 5-7% of them.”²

Business models may spur growth more than product and service innovations. Affinities and convenience are powerful levers in the emotional as well as functional aspects of customer experience. These include social status, flexibility, form, time, policies, and environment for purchase and usage. Culture, policies, skills and processes also affect the solution purchased by customers.

To build common language and vision for innovating toward desired end-results, development of customer experience personas is essential. A persona describes the customer’s perspective of total value and total costs, representing the circumstances of their experience life cycle. “Personas foster empathy among the development team that empowers them to understand requirements with less detail and specification, make reasonable implementation decisions independently, raise valid concerns and opportunities, stay focused on the real requirements, and talk among themselves and with the rest of the company using a common language.”³

Here’s a partial list of best practices; contact lynn.hunsaker @ clearaction.biz for the 30-point checklist:

A. In-depth Knowledge of Customers
1. ___ Crystal-clear description of customers’ desired end-results
2. ___ Segmentation of customers by circumstances
3. ___ View of customers’ experience from need awareness through need extinction
4. ___ Preserved customers’ wording of their built-in value judgments (metrics)
5. ___ Emotional as well as functional characterization of experience and end-results

B. Innovation Applications
1. ___ Innovation targeted at business models, affinities, conveniences, policies, processes, skills and culture – as well as products and services
2. ___ Innovation adapts to customers’ priorities, without asking customers to adapt their priorities
3. ___ Innovation respects customers’ perspectives on what the brand does and does not represent
4. ___ Competition defined by customers’ circumstance-based desired end-results instead of similar solutions or target demographics
5. ___ Customer personas and solutions prioritized by cumulative lifetime profit

¹ Barry Jaruzelski & Kevin Dehoff, The Customer Connection: The Global Innovation 1000, Strategy+Business, October 16, 2007.
² A.G. Laffey, P&G’s Innovation Culture, Strategy+Business, August 28, 2008.
³ Bonnie Rind, The Power of Persona, The Pragmatic Marketer, Volume 5, Issue 4, 2007.

See the e-handbook Innovating Superior Customer Experience for step-by-step guidelines, diagrams and templates covering more than 30 best practices for in-depth customer knowledge and innovation applications, as well as creativity tools and internal innovation techniques: http://www.clearaction.biz/innovation.html; 30% discount code = Optimization.

Contact the author to find out how to customize these tips to your situation.

Over-focus on customer acquisition teaches customers to switch brands. For example, the brand switching rate, called customer churn, is 40% for the mobile phone industry, compared to a 7% customer churn rate for the insurance and financial services industries. As growth slows in acquiring new customers – either due to the economy or to shrinking technological gaps with competitors, more companies are pursuing customer retention as a vital corporate strategy.

Not Planning or Funding Retention
Most executives and marketers can quote the well-known universal statistics on customer retention – that a small improvement in the number of customers retained can have exponential improvements in profit – yet only 39% of companies say their marketing plans contain specific customer retention strategies, and only 28% of companies say they have funds set aside to specifically support their customer retention strategies. In fact, 89% of firms view customer experience management as very important or critical to their firm’s strategy in 2009, according to a study by Forrester Research. In creating a marketing plan for customer retention, be sure to include the entire customer experience spectrum, which begins at the point when prospects are aware they have a need for a solution, through the point at which they perceive they no longer have that need.

Really KNOW Your Customers
In addition to customer involvement methods, do your marketing tools support customer retention as well as they support customer acquisition? Your customer databases should tap into all phases of the customer experience spectrum. Three-fourths of companies admit they have fair or little knowledge of their customers; the same number say customer experience is not well defined and communicated within their company. Three-fourths of firms say their employees are not well-versed in how to delight customers. For database use, it’s best to segment your customers by lifetime value, create customer experience personas, and develop ways to predict behaviors. Best Buy is a great example of identifying customer personas and training their employees to cater their services to the specific needs and expectations of the customer personas.

Do What You Say
So we re-visit the question, why is it hard to retain customers? It goes back to the basics – doing what you say you’ll do – in product, service and value promises, and really knowing your customers. A recent quote I heard from Peppers and Rogers is that half of companies say they have fair or little knowledge of customers’ demographics, behaviors, psychographics and transactions. Two-thirds of companies say they have no processes in place for reactivating dormant or lost customers.

As the 2009 Edelman Trust Barometer emphasizes, customers view product and service quality by far as the most important components of trust. Way down on the list are state of the business, innovations, supporting the public good, and commitment to the environment. Since trust is the basis for long productive relationships, then your customer retention strategy must include oversight on product and service deliverables meeting or exceeding the brand promise featured in marketing communications.

A study by the London School of Economics examined the revenue gains by increasing positive word-of-mouth and by reducing negative word-of-mouth. They found that reducing negative buzz pays off 300% over improving positive buzz.

Customer retention may be best supported by operational integrity. After all, when you think about your personal relationships as well as your business relationships, you tend to stick with the folks that are really good at showing they sincerely care about you, and doing what they say they’re going to do. It boils down to trust. When you dig down to the reasons why people leave a brand for a competitor’s solution, it’s not so much about the competitors’ offers and brand affinity …. But the reasons people switch brands is much more about product, service and value disappointments. Companies make huge investments in communicating their value proposition. Logic says a corresponding investment – at least in energy and scrutiny – should be made in making sure their value proposition is lived up to. TRUST is the best way to retain customers.

Common Practices vs. Best Practices
To sum-up, you can retain customers by locking them into contracts … but a better way is to encourage customers to invest non-transferable equity in your brand – for example, customers might store
their photos or contacts on your site, or they may have social connection perks through your brand that can’t be readily transferred to your competitor. This is better, because it’s the customer chooses his or her level of involvement and tie-in with your brand.

You can retain customers through unique technologies that competitors don’t offer, either due to patents or lack of common standards. But a better way is to develop customers’ passion for your brand. This is being done by many companies, as seen in the examples of customer involvement shown earlier in this presentation.

You can retain customers by resolving problems as they arise, escalating issues for high-value customers, and rewarding heroes who save the day with at-risk customers. But a better way is to prevent customer hassles in the first place, by creating customer experience personas that help your entire workforce really know the customers, using personas to guide business policies and processes, and being proactive in predicting at-risk customers, promptly reaching out to them, sharing your customer feedback summaries and achievements in response to customer feedback, and embracing customer complaints with solid problem resolution that prevents recurrence of customer hassles.

Culture & Prevention are Under-Managed
The building blocks of customer retention are culture, tools, prevention and passion. The more customer-centric and trust-building your culture is, the more likely you will be to retain customers at a higher rate than your competitors. The more you include customer retention in every marketing plan and budget, the more likely you are to retain customers. Hand-in-hand with customer-centric culture is prevention of customer issues, making the customer’s reality match or exceed your value proposition. And finally, build passion through customer involvement.

Marketing tends to do pretty well in the tools and passion area, but the culture and prevention areas tend to be neglected, relatively speaking. For more ideas on how to improve effectiveness in culture and prevention areas to maximize customer retention, see these resources: customer.ology.com, clearaction.biz/blog, blogtalkradio.com/customerexperience, brighttalk.com/channels/2107/view, and the e-handbook Customer Experience Improvement Momentum at clearaction.biz/momentum.

Customer Retention is smart business! In a study done last year, best-in-class customer experience practitioners were compared to industry average and laggard customer experience practitioners. The year-over-year gain in customer retention was 15% for best-in-class customer experience practitioners, compared to 1% industry average. Customer satisfaction and profit were markedly higher for best-in-class customer experience practitioners.

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