"Bad CX is about what companies want. Mediocre CX is about what companies do. Really great CX is about how the company works."
This is one of my favourite quotes from this week's interview with Augie Ray, VP Analyst at Gartner.
So often, companies approach customer experience with a brand-centric focus.
They ask questions like, 'how can this reduce costs?' or 'how can I build an experience that gets people to take notice of me so I can acquire them?'
But this is marketing, not customer experience.
They're important questions, no doubt. But they should be secondary to, 'what is the impact on the customer?'
Really great CX focuses only on the customers needs. Really great CX is about understanding your customers wants and needs so that you can deliver experiences that meet or exceed their expectations, all so that you can improve customer satisfaction, loyalty and advocacy.
It's the flip side of acquisition. It's about growing the business through retention—which is often cheaper and more profitable than acquisition.
So much of initiating great CX is about how we sell it internally.
That's why, this week we deep dived into the definition of CX, how it can be linked to revenue, and the questions that need to be asked to make sure your projects are truly customer-centric.
Topics covered include:
Ben Goodey: I'll just start by saying thank you for coming on and welcome to the On Hold Podcast.
Augie Ray: Thank you.
Ben Goodey: So I have one question for you that I think you'd be perfect to answer as one of the thought leaders in this space: what is and isn't customer experience?
Augie Ray: Yeah, it's my favorite question. It's a challenge, as somebody who covers customer experience and has done customer experience, one of the things that I observe is that a factor that really contributes to whether or not it will be successful in the end has a lot to do with how people define it at the beginning.
If you define it wrong, you're going to set bad measures, you're going to do bad things, wrong things. If you define it right, you obviously ended up in a better place.
And so, at Gartner, there are two definitions. One of them is the customer side of this equation and it is "customer experience". It is the sum total of their experiences and it's effect on their perception of the organization, regardless of whether those experiences of course are online or offered with your employees or your vendors or your advertising, your content, your product.
That's a very broad definition, of course, but we know that the sum of what we do with our customers has an impact on what they think of us and their perception. In fact, I sometimes joke that definition of CX is identical to the definition of brand. The flip side, and this is where it becomes important to define it, is that customer experience management is defined as how do you understand and know what people want, need and expect from you, so that you can deliver experiences that meet or exceed expectations and ultimately improve-and I'll always dramatically pause and say, this is the important part of the definition- customer satisfaction, loyalty and advocacy.
In other words, the journey that people take to acquisition is certainly important, but we have marketing, which is a discipline dedicated to understanding how to raise the awareness and consideration and inbound, traffic, and acquisition and leads and conversions. What makes CX management different is this focus on satisfaction, loyalty and advocacy, because normally that's scattered around the organization. People do or don't care about it: the customer care group might think it's all about the customer service interaction we provide, the product group might think 'product is King' and it's all about what people say about the product. And, so what makes CXM different is this idea of focusing on satisfaction, loyalty, and advocacy.
And right off the bat, what you get from that is that, I talk to a lot of marketers who want to talk customer experience, and they think it means what are the experiences that will get people to take notice of me so that I can acquire them. And I'll say, you don't need to redefine marketing, right? That's marketing's definition. It's an effective definition. It's a science. We know how to do it. Giving marketing a new name doesn't in fact, improve marketing. What it does is it takes away from customer experience.
And so, what are you trying to achieve? Is it how satisfied are people? How loyal are they? And of course there are ways of measuring this there's attitudinal behavioral loyalty on the behavioral side aside, it means things like reduced churn, increased retention, improved, cross sell breadth of products that are sold, those sorts of things.
And advocacy, how much referral volume, how much word of mouth, and ultimately what we generally find is that getting this definition right is really key to being able to be truly customer-centric and not just brand-centric.
Ultimately if your question is, how do I get more people to buy my stuff? You're being very brand centric and that's great, you need that, that's a great business outcome, but brands don't thrive only by attracting new customers, they thrive by keeping them growing up and that's where customer experience comes in.
Ben Goodey: Is that something then that is the responsibility of every team. So like you said, the product people have the metrics that they find important, and each team like the customer support team will have their part of customer experience, they find important, but is customer experience management the thing that brings those all together?
Augie Ray: There's value in collaborating across the organization.
If every team only optimizes the touch points they're responsible for, we forget to pay attention to the journey and the connective tissue. We also can make mistakes if every team does their own surveying and their own research, then we can annoy our customers by serving them or over-serving too much.
And so the idea of customer experience management as a discipline is it's the bringing together of the methods for understanding 'what customer perception is of our organization'. Things like customer research or voice of the customer tools.
We work together to understand the connective tissue in journeys. That it's not just about optimizing any one touch point. We have to understand how people move from one step to the next and ultimately, by bringing this together, what we end up doing is being able to do a better job of changing the perception of what seems like a fluffy thing to organizations.
When I start talking about let's raise our net promoter score, our customer satisfaction is low what will happen is that nobody will ever say "I don't care". Nobody ever says that, but nobody ever argues that we are going to do better. If we have lower customer satisfaction, we all know that we want to improve it. But when it really comes time to make hard financial decisions, when our leaders are looking at the 100 proposed projects and 90 of them have a hard ROI associated with them, and I show up and say, "Hey, we should do this to improve net promoter score", I will typically lose.
And so by bringing these things together, what we end up doing is creating a mechanism where we can work together to understand that as we lift satisfaction, we actually deliver greater margin and growth and that my most satisfied customers, in fact, buy more, stay longer, have a lower cost to serve or retain, and refer more business. And by bringing all of this data and thought together from across the organization, we turn this from something that seems nice to do and fluffy to do into something that is actually a driver of business success. That doesn't happen if everyone does their own thing and is only focused on 'what score am I getting?'
There are all sorts of ways that we see that groups will come together. Organizations will bring groups together from across the organization. As you just hinted at, customer experience management is a discipline of getting the groups to work together and tearing down silos, of having a more unified view of customers.
And ultimately what we want to do is to get customer service out of thinking that customer service is the only important touch point in the product team to think it's all about product and the content team to think it's just about content and everyone ultimately is competing with each other instead of collaborating together to see how the pieces of the whole ended up creating that unified customer experience.
Ben Goodey: Definitely. And how would you tie NPS to financial metrics?
Augie Ray: We've done some research on this. In fact, what I'll tell you is that in 2019, our study of customer experience found that around three quarters of organizations have already done what we would consider to be a best practice. And the way to do this is to start with some level of customer feedback, or voice of customer data, and generally what we want to do is to source this from the customer. We can't say that we're doing customer experience unless we're being customer centric.
If all we care about at the end of the day is how many clicks we get or how much adoption or how many sales, ultimately we're not measuring things from the customer's perspective. We're still measuring them from our perspective and so what we wanted to do is start with a customer sourced measure. Their perception of what they think. Typically this is going to be things like net promoter score, customer satisfaction, customer effort score.
That's our starting point. And if we can identify by customer what their scores are and then bring our operational data together, can we demonstrate that, let's for instance use the language of NPS, if we look at our promoters versus our detractors and on a customer by customer basis aggregate the data, can we see that they, in fact, will churn less? Will our promoters churn less? Will they stay longer? Do they call us less often?
All of which means they've got a lower cost to serve in the B2B world. I have clients that will calculate a cost to retain their customers. When it comes time to renewal, how much effort, how many hours is going into retention.
And one of my clients found that they had half the cost to renew and retain from there promoters as their detractors. And so what we're really doing is trying to make that customer sourced effect of their perception the measurement that we then turned into a more financial measure.
Let me back out a little bit and just say it this way, because, this tends to resonate.
I have clients and vendors who will want to brief me on their programs, their customer experience programs. The one common thing is that I see a lot is the vendor will say 'we are in the next best action and personalization world and we improve customer experience'.
And I'll say, great. How do you measure it? When my clients implement my platform, their conversion rate goes up, their sales rate goes up, they make more money. And I'm like, great. That's a wonderful business outcome. Another example would be, on more of the customer service side, I'll have, let's say we did a CX program to do self-service, as a result, our call volume dropped and we were able to decrease headcount and decrease cost. I'm like great that's, a great business outcome.
But neither of those cases did we measure whether the customer was any happier. Were they more loyal? Are they less likely to churn? All we did was measure the increase in conversion or the decrease in costs. And so, what we want to do with customer centricity and with this analysis we're talking about is to demonstrate not just that we will look for the most directly attributable short term financial goals, but that we recognize as we improve satisfaction, as we improve the relationship with our customer, that's a leading indicator of future success.
We keep them longer, they spend more, they acquire more from us. And so by bringing this data together at a customer level, look at your NPS promoters, your NPS detractors. And again, it could be C-SAT effort score or anything. Can you demonstrate by bringing your data together, that they stay longer and spend more and have a lower cost to serve and refer more business?
I have many clients that will do this analysis and find that essentially, what we're doing is distilling this into a lifetime value question. Do we know that our most satisfied customers drive a higher lifetime value than our least satisfied customers? And if so, what do we need to do to make our least satisfied customers more satisfied?
So that's the general approach. It tends to be quite practical, but a lot of organizations struggle because they may not have the data or the means to bring it together.
Ben Goodey: I think your point that is really interesting about focusing on the wrong metrics. So I think a lot of teams do this. If you're trying to reduce, like you said, the head count on the customer support team, and to deflect and reduce more tickets , it doesn't necessarily mean those people are happier. And I think taking that holistic point of view is really important.
Augie Ray: Yep. And so what's interesting is a lot of my customer experience clients will immediately jump to 'what am I doing to improve acquisition' and 'what am I doing to reduce costs'? And what we would urge is that, those are important parts of the story, but make those the secondary part of the story, the primary part of the story, if we're going to do CX, if we're going to be customer centricity, has to be what our impact on the customer is.
How are we measuring it? Are we demonstrating that it's important?
Ben Goodey: Do you have any examples of people you think are doing this really well?
Augie Ray: It's interesting because people often ask, who are the leaders in customer experience?
And usually the same sorts of names get mentioned. Everyone loves Disney. Everyone loves Ritz Carlton. Costco gets mentioned. Starbucks gets mentioned. USAA happens to be a firm I worked at, a financial services firm, in a category that rarely gets much love USAA gets some of the highest net promoter scores of any company in the US.
So when you say, who are the firms doing that well, we can look at the Amazons, the apples, and all these companies that I mentioned and say, look, they're doing well, and we know they're doing well because they keep their customers and they grow their customers. And as a result, they get a market value because their stock value improves because people recognize these are strong brands with strong relationships.
The real question you're asking, which is interesting, and this is where we can't begin to point out specific ones is what are the firms that are trying to become that next USAA or Starbucks or Amazon or Disney, that are not right now enjoying a very high level of satisfaction. What are they doing about it?
And I have clients that are thinking about how do they want to capture this VoC and survey data. They want to know 'how do I combine it with other data?' Much as we just spoke about. And then how do I disseminate it back up to people in meaningful, relevant way? What you don't want to do is just report an NPS score across the company, what you want to be able to do, we've alluded to this earlier, is tell the product people what they need to know as they develop their next product. Tell the customer care people where they need to know as they think about their next iteration of customer care strategy. That's a lot of hard work goes into doing that. And I know organizations are being enormously effective.
I have clients on the financial services side, for instance, that have literally thousands of employees that have their own dashboard telling them information that is relevant to their job from the customer care rep on the front lines, all the way up to vice presidents over regions. So there are a lot of organizations doing the right thing , it just isn't always as apparent because we know that a brands makes us extraordinarily happy, but we don't always see the hard work going into making a brand achieve that.
Ben Goodey: What I find a little bit confusing is that there are some companies let's say like Disney, who can be so big, but also do this so well. But then there's a lot of corporate companies that we all know that seem to struggle to make any kind of change happen. Why do you think that's the case?
Augie Ray: There's a number of factors for that. One of the things that we have to acknowledge is that there are verticals where customer experience is frankly, just a little easier, right? If you're a Disney and you're in the resort and theme park business, you are inherently in the experience business.
Now, I would argue that every company is in the experience business, but at the same time, if you're a bank and what you do is offer checking accounts, what you don't need to do is create a theme park that people will experience to tell them to give them a great experience of how to get into your bank.
And so there are these verticals that are a little more challenging. So what becomes important is to focus, not so much on the experience, but the customer. That's one of the problems that we see. Another common situation when you focus on the experience, not the customer is we talk a lot about innovation these days, digital transformation.
And I have lots of brands who have asked about a problem that they have, which is: they heard that voice technology was hot based on all the data of voice devices that are in people's homes these days. And so they said, we're going to be innovative. We're going to have a voice application. Then they spend some money, they launch it.
And I've talked to companies that are getting literally zero usage of their voice application. And it's because, and any of us who have these wastes devices recognize it, we ask it to play music. We ask it what the weather forecast is. We ask it to turn on and off lights. We generally don't want to have a conversation with their voice application to ask what our account balance is.
We've got perfectly acceptable ways of finding our account balances on these things. It's private. I don't have to speak it. Nobody around me has to hear what my account balance is or that I'm overdrawn, and so what happens is with focusing on the experience, not the customers, we ended up developing solutions in search of a problem, and then we wonder why they don't work.
Instead, what we want to try to do is put that onus on: what do we understand about customer needs? Two things that begin to drive this conversation is: 1. What are the drivers of dissatisfaction? What are our broken touchpoints, of course, and what is not working for people? But also 2. What are the unmet needs that people have where I could begin to apply an innovative solution?
And so, the idea of what are the needs and is voice application the best way of solving those needs, is the way to think about whether to develop a voice app or not. Just thinking I should develop a voice app because this is a hot tech people will beat a path door's not the path to success.
So I always say focus on the customer, not the experience. If you focus on the customer, then you will naturally develop the experiences people want. And that's how we overcome that problem where not every company can be Disney.
Not every company could have walking plush toys, greeting kids and theme park rides, and so it's great to use Disney as an example, cause we've been to bad theme parks, we've been to good theme parks, I'm not saying that it's an easy vertical, but some brands do have it easier. And if you really understand the customer, what their needs and wants are and what your organization is doing to meeting those, you'll be able to find those experiences, maybe not theme park rides and restaurants, but at least the experiences that your customers want.
Ben Goodey: I definitely agree in some industries it's much easier to focus on customer experience. But I think with the banking example, there are plenty of challenger banks, like Revolut and Monzo in the UK. Who have dramatically improved the customer experience for people, and other banks are now following.
Augie Ray: Yeah. One of the problems in the two, so I just talk about innovation and one of the downsides of simply chasing new technology to chase it, the flip side is that what happens with new technology, and we've seen it in retail, we've seen it with banking, is that it changes people's needs. And too many organizations get very comfortable with the current situation. And they miss that these needs that are changing. Which just brings us back to the conversation of how are you listening to your customers and what their needs are. Are their values changing? And if their values are changing, then their needs are changing with them.
So it's interesting here in the US, I like to point out a lot of retailers are struggling. I'm not saying Best Buy is necessarily the strongest retailer around, but this is a company that five years ago people thought was going to be showroomed out of existence.
Why do they need all of this physical space everything's going online? And when you look at what Best Buy did bringing the best of online and offline together, really understanding that people's expectations were changing of being able to order online and pick up in store for instance, and the role of geek squad, even their product mix, the fact that they have begun to emphasize appliances more, something that people will want to touch and to close and open the door. Best Buy is a really good example of an organization that I think that so many people thought was on its way out of existence that listened to customers, tracked values, looked at the way they were shopping and made some very smart decisions about how to bring the best of online and offline together.
So there are examples.
Ben Goodey: I think it takes some really forward thinking dedicated teams to make sure that companies like Best Buy don't miss the customer needs completely.
Augie Ray: Yeah. The other challenge that we have to acknowledge is it takes great leadership, right? I have to be cautious because I advise customer experience leaders in organizations, and I need to help them whether or not they've got great leaders.
But you can't shake the feeling when we start listing the firms that we've talked about, that having really great leadership that starts with customer centricity, that bakes into the organization the idea of listening to customers and responding to needs of running pilots, of taking risks so that, as we do things that fail, that doesn't become a problem for our organization, but a learning part of the process.
And I am a pretty harsh critic of Jeff Bezos for many reasons, I will tell you, but I have to give him a lot of credit for structuring an organization that is built from scratch to be so focused on customer needs, that they are able to explore these things. And so often we think of Amazon as a company that just succeeds, they succeed at everything. And I love to point out, they tried to launch a competitor to Android, an iPhone. There was the fire phone that came and went awfully quickly. It was a pretty dismal failure. It didn't last in the market place longer than 18-months. Amazon can fail, but they're always trying new things and they don't let their failures define them. And that's a really important aspect of this that gets lost when we are trying to talk about a customer-centric organization.
Ben Goodey: Definitely. And it seems like great leaders will take a risk and will invest in getting the voice of the customer into the experimentation process for sure. so I was wondering, We talked a little bit before about getting the right information to the right team, the right time. For example, getting the product team the insights that they need from customer support to help them build a better product, how important do you think real-time insights here are like the speed to insight?
Augie Ray: Real-time becomes really important, but there is absolutely a balance here. You mentioned NPS, I mention it a lot. But let's talk about that. Is that on a real-time basis, if you monitor NPS on a day-to-day or week-to-week basis, it's going to go up and down, we wouldn't advise our clients to get too bent out of shape about those fluctuations. What you want to be able to do is to pull the signal from the noise.
So real-time data becomes especially important in certain circumstances and use cases. A really good example is when a company launches something new or a new iteration of something, they want to be listening in real-time to see whether people are more satisfied. And they might do that, for instance, if we launch a new app by watching the app store ratings, they might look at in app surveys that they execute.
They certainly are going to look at their adoption, usage and engagement metrics. So there's a variety of real-time ways to know that when I make a change, this change is in fact, delivering the experience that my customers expect and want.
At the same time, real-time also becomes a real, obsessive focus, that can get in the way of understanding the larger themes that are happening.
And so we absolutely see real-time data as being really vital but we also will urge our clients to think about monitoring trends. These are things that only develop over time. You know, during COVID, this is a really excellent time. People want to know what's next and what the new normal is going to be.
And, the questions are valid and are interesting ones, and everyone's got an opinion, but it comes down to how are the values of our customers changing? Are people going to race back into workplaces? Are they going to work from home more permanently? I've got a bet on that. I think work from home is going to become a whole lot more common in 2021 and 2022 than it wasn't in 2019.
But the way to find that out is to listen to customers and see if their values are changing. And that's not a real-time thing. we know what's happening right now during COVID when we really want to see what's ahead, we have to begin to listen for those value changes. I think there's a lot to real-time, but I also would caution clients from making sure that they get out of the constant rushing waters of real-time data to pay a little attention to whether the river there is in fact rising or falling.
Ben Goodey: That's a great metaphor everyone needs to step back sometimes and look at the overall strategy from a long-term perspective. So you mentioned Covid-19 there, what are the biggest challenges and changes that you've seen that people need to be aware of?
Augie Ray: COVID-19 has been an interesting thing for all of us. Of course, one of the things we've tracked as we talk to our clients and vendors in the space is that interestingly enough, a lot of scores went up in spring, which people didn't necessarily expect. There's a lot of concern that as COVID happens, as people end up being caught at home and doing the staying at home or the quarantining that, maybe they'd be frustrated and scores would go down.
In fact, we broadly across a lot of brands saw scores going up. NPS scores, C-SAT scores. That, for many brands, has begun to reverse, not a uniformly across all categories, and the reason it seems to be reversing is that a lot of brands biased in spring to really helping clients.
I was really impressed with how many brands started with: 'we have to help our customers'. Banks immediately started waiving fees. Companies stopped late penalties and collections. There were special programs to help people who had lost their jobs. A lot of brands stepped up and I think we got to give a lot of credit to companies that don't always have a sort of customer first mentality, to the fact that their initial reaction in this crisis was to help people, which is terrific.
The problem is that the attitude that people had in March and April was that this was going to be short term. There was talk of a sharp V recovery. We thought we'd get through this period and din oing so get back to normal. You heard people starting to talk about when things are normal in summer and those of us tracking COVID knew that things weren't going to be normal in summer.
We were really going to go through waves. We still might face additional waves of infections this fall and winter. What's happening is a lot of brands that bias toward 'let's do what we can to help customers', now that they're two, three, four months into this are beginning to ask if and how they can sustain that.
Lots of companies are struggling with their own financial struggles. And so a lot of companies are beginning to dial back some of the offers and concessions that they offered people. And as a result, we're beginning to see scores begin to vacillate a little more.
And so one of the things that I just say that we've seen is it's been interesting to track the data, but a lot of brands have got to give some serious consideration to what it's going to take to get through what certainly promises to be a pretty long situation. W we are not going to be out of this in December. We may or may not have a vaccine. God only knows how many people will take it or how widely it can be disseminated and how quickly. This is going to be something we're going to struggle with a winter.
If you begin to track some of the economic impact forecasts from the World Bank or the IMF or the congressional budget office here in the US, we expect GDP to be impacted negatively.
Not as negatively this year as next, but we're going to be well below 2019 levels. We think there's going to be, here in the US, double digit unemployment through much, if not most or all of next year, brands have gotta be thinking about a scenario ahead that isn't geared only to an optimistic, rapid recovery, but to think pretty long and hard about what a scenario might look like if, this becomes a very hard lengthy recession. And so we're talking to our clients a lot about scenario planning, good to have that optimistic scenario, but if it doesn't work out that way, what are the plans you need to do? What are the signals you need to listen to so that you can be prepared for a less optimistic, more difficult road ahead?
So those are some of the conversations we're happy to be having with our clients these days.
Ben Goodey: It's really interesting. If only companies could take such a customer first attitude and have the resources to do so all year round without this sort of crazy situation going on. So I've just got time for one more question. I've looked at the Gartner quadrant that has challenges, leaders, nice players and visionaries. How can a company get into that top right hand corner of leader within customer experience?
Augie Ray: Yeah, it's a great question. What's interesting about it is what happens is a lot of organizations say we want to do what Amazon did. Amazon's visionary. They're in that top quadrant. Tell us what Amazon did.
And one of the answers is that first of all, in a lot of verticals, you can't do what Amazon did. Again, we talked about some of the different, unique challenges and opportunities in different verticals. Maybe you can't be the Amazon. Second of all, you don't get to be Amazon by repeating what Amazon did, Amazon didn't get to be Amazon by repeating what anyone else did.
If you want to be visionary, you've got to be customer centric. You have to understand, as a result, why you should be focusing on measures of satisfaction, loyalty, and advocacy. Equally, to short term financial measures, if all you're doing is making short term financial decisions, you can't get to be visionary.
And understand the economic impact of stronger relationships and the value of customer centricity. Create those mechanisms for understanding and learning. There's a lot of things here and we touched on some of them, but again, having a culture of test and learn and of not punishing failure, of making sure that you understand the ways to limit the adverse impact of failure.
So there's a lot of things that we see we'll define those challenges. And so often what happens is organizations will only repeat sort of the very thin, facile stuff. It's like 'Amazon does technology so we're going to go through a digital transformation'. That's great. You should, but don't think that's gonna make you a visionary because you can digitally transform your tools in a way that focuses on your needs, focuses in short term basis, does a bad job of providing better customer experiences. There certainly are lots of company that have deployed technologies that have hurt their relationships and their customer experience.
So we'll always try to step back from some of the surface practices and really begin to explore these questions of how are you listening? How are you disseminating? What are your goals? What are your metrics? How do you balance some of those things that we tend to focus on when we're trying to help an organization get out of one of those other quadrants and in to visionary.
Ben Goodey: So it's about getting the building blocks very solidly in the right place.
Augie Ray: Yeah. I posted something on LinkedIn the last week that really generated a lot of interesting buzz, but I said bad CX is about what companies want. And we talked about this brands will say, I want more conversion so what's the CX that I should provide. Mediocre CX is about what companies do, so what I'll see is a lot of brands, they haven't taken the time to do that listening, we've talked about, they're just biasing the action. We're going to implement this and that, and we're going to do this and we're going to that. And if I say 'why?' they don't know. It seems like it would provide good CX, everyone agrees. But it's based on internal assumption and that's mediocre. Really great CX, to your point, is about how the company works, which is weird because people expect the great CX is going to be about the customer and it ultimately it is, but it is: how are you listening? How are you learning? how are you focusing? How are you measuring? How are you prioritizing? It is really about how the company works and is it going to reward and implement a customer centric culture?
Ben Goodey: Augie. I think that's a really impactful and poignant place to end thechat. Thank you so much for coming on. It's really been great chatting to you, and we've learned a lot today.
Augie Ray: Thank you. I appreciate the time.
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