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At the end of this chapter you'll be able to:Identify and utilise the most effective metric to measure customer service within your industry Utilise the RATER model as a method of customer experience management Develop strategies to enhance the customer lifetime value Understand and implement customer loyalty programs
Chapter #4 | Managing the experience
Once upon a time, there was a little girl named Goldilocks. She went for a walk in the forest. Pretty soon, she came upon a house. She knocked and, when no one answered, she walked right in. At the table in the kitchen, there were three bowls of porridge. Goldilocks was hungry. She tasted the porridge from the first bowl. "This porridge is too hot!" she exclaimed. So, she tasted the porridge from the second bowl. "This porridge is too cold," she said. So, she tasted the last bowl of porridge. "Ahhh, this porridge is just right," she said happily and she ate it all up. Do you give your customers the ‘perfect porridge’? And how would you know? The correlations between customer loyalty and experience is strong, and it all starts with how we measure our success. The right metrics will allow you to check the temperature of their experiences and adjust, so you know you’re getting it just right.
Amazon has made itself a success story because of its constant focus on customers. This can be seen in its infamous ‘empty chair’ whereby a seat is regularly left in the boardroom for the customer’s voice. This focus is clearly carried through into what CEO Jeff Bezos calls it’s ‘culture of metrics’. Within the organisation, Amazon tracks their performance using about 500 measurable goals, 80% of which are related to customer objectives. This allows Amazon to be right there for the customer, in ways the customer didn’t even realise they needed. They’re so onto it, they even have metrics showing that a 0.1 second delay in page rendering can translate into a 1% drop in customer activity. Take a look at the full article about how Amazon makes a real difference for their customer with a focus on metrics:
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Use RATER to analyse your gaps!
What is Customer Experience Management? Customer experience management is a way of looking at every single aspect and touch point of the company-customer relationship. Doing this well develops a customer experience that is intentional, consistent, differentiated from the competition and, most importantly, valued by the customer. The RATER Model was created by professors Valarie Zeithaml, A. Parasuraman, and Leonard Berry, and published in their book, "Delivering Quality Service”. The RATER tool works well because it highlights all the areas and touch points that you need to focus on to provide great customer experience. You can assess each element of your customer journey against five dimensions. By focusing on these five areas, you can analyse and improve service.
Developing meaningful metrics to measure your customer experience requires you to look at high level quantitative methods. When you get this right, it will allow you to consistently track how you’re performing in both the short-term and the long-term. Most organisations already track engagement and conversion with their customers, so tracking customer focused metrics adds context and depth that the analytics or survey numbers lack. Forrester is a company that works with business and technology leaders to develop customer-obsessed strategies that drive growth. They have looked at a customer measurement framework based on the following three categories: Descriptive metrics that identify what happened Perception metrics that focus on how customers perceived what happened Outcome metrics that describe what customers did or were expected to do based on their perceptions So, how do you pick your combination? Well, here are some options to help in your considerations:
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Industry: Certain metrics are more applicable to some industries than others. These can be determined by how responses will be collected, as well as how your customer interacts with your services or products. Brand promise: Meeting your brand promise positively links with a positive customer experience. Find a metric that validates your statement. Survey methodology: Look at your degree of access to your customer contact information to dictate the methods you use. Channel determination: What channels are you evaluating? Does each have the same kind of experience and therefore goals? This will determine whether you need different metrics for each area. Organisational Visibility: What do you want to see? For example, if you wanted to improve service at the frontline, tracking each individual service interaction would be valuable. If, however, you wanted to look at how customers viewed the brand, a more sophisticated analysis may be required and a different metric used. Consistency: While using only one metric may not provide enough information, using too many metrics can dilute the impact of the results.
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The Pros • Provides actionable data that can be used to help predict behaviour and design customer experiences • Simple and easy to communicate • Quick and easy for the customer to evaluate • Easy to implement across different service and survey channels The Cons • Inconsistent interpretation of scores e.g. 1=good, 5=bad from customers completing survey • Uneven global applicability where things translate differently. Various cultural norms may lead to different interpretations of what ‘effort’ is • Cross-company comparisons can be difficult
Customer effort score (CES) Seeks to evaluate the entire service experience, and reduce the number of interaction points required for a customer across all channels. Asks: ‘How much work does it take for a customer to solve their problem?’ and ‘How easy is the experience?’
The Pros • Quick • Cheap • Easily provides digestible quantitative data • Presents useful trends • Gives customers the opportunity to have a voice The Cons • Only provides a superficial measure of behaviours that   drive profit and growth • If the sample of customers used is too small, results will not be a true reflection of the total population • Samples may not be a true representation of all your customer segments
Customer satisfaction (CSAT) The classic measure on how happy your customer is and the likelihood and frequency of them purchasing from you.
Net promoter score (NPS) The percentage of customers who would put their own reputation on the line and recommend the organisation to others, showing loyalty Identifies the customers who will bring in more business and ways to improve their experience, as opposed to those that are less satisfied.
The Pros • Focuses on the outcome of a simple statement: “would you recommend this service – yes or no?” • Can be linked to social customer service strategies, as promoters and detractors are easily visible via social media avenues The Cons • The question can cause confusion. People may feel it is not their business to recommend a service to their friends or family, and therefore answer the question negatively, even if they have had a good experience • There is no proven link to revenue change • As it is an outcome rather than process-focused metric, it can be hard to derive actions from the data
Take a look at Tony Heish, CEO of of Zappos, explaining how Net Promoter Score for zappos.com is not just a metric, but an outcome of management action.
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Reliability Your ability to provide the service you have promised consistently, accurately, and on time. Ask questions like: How well do you provide the experience that you've promised to your customers? Are your systems and processes robust and reliable? Is service delivery consistent and timely, across all channels (including online)?
Assurance The knowledge, skills, and credibility of staff; and their ability to use this expertise to inspire trust and confidence. Ask questions like: Do your people have the skills and knowledge needed to deliver an exceptional experience, across all channels? Do your people need any further training or development? Do people inspire trust in your customers?
Tangibles The physical evidence of the service you provide. This could be offices, equipment, employees, and the communication and marketing materials that you use. Ask questions like: Is the evidence of your service (products, packaging, marketing materials, website, offices, staff appearance, and so on) sending the ‘right ‘message to your customers? Can your customer talk to a human being through other channels if their questions haven't been answered, or if your website is down?
Empathy The relationship between your people and your customers. Ask questions like: Do your people build strong relationships with your customers? Is all communication with customers clear and meaningful? Do they understand why empathy is essential for providing a great experience? Do your people genuinely care about customer needs?
Responsiveness Your ability to provide a quick, high quality service to your customers. Ask questions like: Do you provide a prompt service, which is easy to access? Do you resolve customer issues and problems satisfactorily, and in good time, across all service channels?
We often hear about retailers that just get it wrong. But what about when they get it wrong, and then turn it around? PMA Australia-New Zealand (Facebook 2014) posted this example of how Woolworths turned a negative situation into a positive. Woolworths had received what could have been a damaging complaint, when Ryan Goodall posted this on the retailer’s Facebook page, attached to the following image.
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What the heck – just be about something. Think about your closest friend and why you became close. More than likely, you share some common interests and passions. Doing this with your customers, whether it’s the love of your product, your desire to see them succeed in a goal, or just a connection with what interests them personally, find out what you can share and watch them become lifelong advocates of your brand.
Make it memorable
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Grow together
Good friendships are nurtured over time. By growing and becoming stronger through shared experiences and new experiences. Create the same bond with your customers by becoming a part of their lives. How can you add value? How can you write your brand into their story?
Stand for ( or against ) something
I’m sure you’ve left unique impressions with all the great friends in your life. Do the same with your customers in the early stages to nurture long term relationships.
STRATEGIES TO RETAIN CUSTOMERS You might not be managing your organisation's Facebook account (if you even have one), but just like meeting and making new friends, there are some other strategies that can be used to help you retain your customers.
Change their lives
When you think about your best attributes, they will have been influenced and enriched by the good friends in your life. How can your brand influence and enrich the lives of your customers?
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‘THE’ CUSTOMER METRIC Customer Lifetime Value (CLV) is a prediction of all the value your business will derive from the relationship with a customer over a lifetime. Because we don't know how long each relationship will be, we make a good estimate (close enough is good enough, right?) To do this, we usually say “this customer's 12-month (or 24-month, etc) CLV is $x”.
If your goal is to build a sustainable business for the long haul, looking at short-term revenue or making a quick buck off of people just won’t cut it • The key is to surface your most valuable customers and determine the low-value ones to help you strategically allocate resources to grow your business  • Never talk about the average customer – it only leads to average results • Once you’ve calculated your customers’ lifetime values and retention rates, it’s time to make sense of those numbers and take action.
DON’T BE TRANSACTIONAL Focus on your CLV. You don’t want your efforts in obtaining new customers to outweigh their CLV. If we’re not focusing on ways to make our existing customers happy and even marketing to those who have already bought from us, the cost of the acquisition will outweigh the amount we can make from a single customer. How do you move from being transactional?
THE PERATO PRINCIPLE  Roughly 80% of the effects come from 20% of the causes. When applied to your business, this means that 80% of your revenue can be attributed to 20% of your customers. While the exact percentages may not be 80/20, it is still the case that some customers are worth a whole lot more than others, from a profitable growth perspective, identifying your ‘all-star’ customers can be extremely valuable to your business.
Check out how you can calculate your CLV and it’s impact through this Starbucks case study:
Rewards are not enough! Being smart about it means developing a program to find out information about what changes or offerings would most likely make them come back for more.
Win back defectors
Companies with the highest levels of fiercely loyal customers have achieved that loyalty because of a dependable core offering that appeals. The data from a good loyalty program will help improve this core offering by tailoring and moulding it to delight, surprise and exceed expectations.
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You can use your program to focus on the ‘lost’ customers rather than just gaining new customers. The advantages are, you probably already have information on their history, such as where and how to reach them and their preferred communication channels. You just have to tap into them.
Focus on acquiring data, not just repeat visits
How can you make sure that your loyalty program pays off?
A well designed and run loyalty program is only one aspect of your overall customer experience and retention strategy. When used to its full effect, it’s quite simple: a business that retains its customers for longer is more profitable. Simple sounding – yes. Simple to do – not always. Loyalty programs that drive customer engagement put the customer before the business. They show the customer that we see them as a person, not just as dollars coming in the door. To make them work for the long term, they need to change over time or risk losing their value and interest.
Develop a core offer that can’t be refused
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Sssshhh, wanna know some secrets? • Gain buy-in from your customers. Find out what they want and need. • Reward only the ‘right’ behaviours that create a win-win for the customer and your business. • Look out for patterns that tell you why customers leave and be agile in your response. • Look at your customers’ loyalty needs throughout their life cycle with your product or service. How does it change? How can you anticipate what they need? • Make sure the rewards are attainable. • Keep the program simple to understand and use. • Measure all campaigns and results continually.
DID YOU KNOW?
Boost juice has the ‘Vibe’ reward club. With your smartphone, you download their free app and have access to offers, competitions, the Boost menu and store finder. Each time you buy a juice you earn a point and after 10 points, you get a free juice. A nice bonus is that you also get a free juice on your birthday. Who doesn't love a present ? This loyalty program is personalised, creating the element of surprise and delight for the customer.
ASOS is an online global fashion destination for 20-somethings. They take digital and personalisation to the next level when its comes to rewarding their loyal customers. Using Google Hangouts, called ‘help outs’, they offer their customers the chance over live webcam to chat face-to-face with a stylist, show items from their wardrobe and discover new and different ways to wear them, as well as receive advice on what to wear to a special event. They make their customers feel like the ‘rock stars’ that they could be – they grow with them, becoming a part of their lives, which helps to build a community of fans.
ASOS
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Check out how it can be done by looking at these examples of building customer loyalty.
BOOST JUICE
The ‘My Starbucks’ reward program offers customers ‘stars’ by paying with their registered cards, participating in product promotions and completing incentivised actions. Once stars are earned, they are stored in the customer profile until redeemed for drinks, food items, and more. Customers are offered the chance to move from green to gold levels of the program once they earn a certain amount of stars, with each level offering more customer benefits. Customers earn stars for online and offline actions, like engaging with the brand’s mobile app, buying coffee in stores, and engaging through social channels and public promotions. The loyalty program is focused around the customer, and each piece of the experience is easy for them to understand.
Walgreens, the American pharmaceutical brand, is moving back to its health-focused beginnings. Part of their ‘health first’ initiative can be seen through their ‘Balance’ loyalty program. Members can earn points by taking care of themselves through filling prescriptions, receiving immunizations, logging points for walking and/or running, tracking weight loss, or participating in physical activities. Once points are earned, they can be redeemed in increments for in-store gift cards up to $50.  Walgreens is inspiring their program members to invest in their well-being first. When brands think beyond how loyal actions will help only their brand, customers are placed first and begin to give back to the brand by engaging at higher rates. Changing your customers lives, one reward at a time.
WALGREENS
STARBUCKS
Exclusive experiences the payoff for customer loyalty
Don’t forget the big bucks! Consider your most profitable customers. Do you treat them differently? Do you need an elevated loyalty program? Take a look at how these companies take loyalty programs to the next level!
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How to identify and retain your most valuable customers
How you currently perform in each of the 5 areas of RATER
The "place" you want to be in each of the 5 areas of RATER
A Gap Analysis is a tool that allows you to compare where you want to be with your current state. The aim is to develop an action plan based on the steps required to fill the ‘gap’. A great activity is to assess each element within the GAP Analysis to identify where you need to focus your attention.
How you'll move from your current reality to where you want to be
So what did they do? Well, they posted this response. “... the Disappointment is more than we can bare! Private message us your number and we will hook a brother up.” In return, Ryan followed up with this post. What followed were thousands of ‘likes’ for the retailer, showing that you really can turn around any challenge with the right strategy.
Dear Woolworths, Here I was having a good time with my mates, just sitting around eating some steak and broccoli (which i got from you guys), when i decided oh i know what would turn my average everyday meal into a extra creamy mouthful of meaty sensation... A perfectly ripe avocado! As i cut into the strange shaped food my eyes quickly changed from having a certain spark of hope and desire in them, into holding nothing but disappointment and despair. As you can see from the picture below, the avocados i bought tonight are not really living up to the whole 'Woolworths the fresh food people' idea. I am not calling you guys liars but if you guys have a slogan maybe you should live upto it. P.s. I want you to know I am not angry, I am just disappointed.
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Congrats on getting through your unit to this point! So what have you done in this chapter? Well, you’ve:Identified the most effective metric to measure customer service within your industry Utilised the RATER model as a method of customer experience management Developed strategies to enhance the customer lifetime value Developed an understanding of customer loyalty programs and how to implement these So what now? We recommend you put into practice some of the new skills, techniques and principles you’ve just learned. This is the best way we know, to ensure you know what you need to be successful on your journey – know what we mean? Now, let’s get into the next chapter!