If you think you know your customers well enough, think again. It doesn’t matter if sales are good and profitability meets expectations. Every organization, regardless of its earnings and marketing sophistication, can benefit from a better understanding of the people who represent its bread and butter, especially today. Indeed, figuring out how to dramatically improve your customer experience isn’t something to think about at your next strategy meeting. It is something to think about now, at least if you want your organization to have a future.
While you may not be dedicating significant time and resources to focusing on customers like never before, it is a safe bet that someone else is passionately working on how to revolutionize the customer experience you currently provide, hoping to put you out of business. As John Sculley, the former CEO of Pepsi, not to mention Apple, recently pointed out in Ivey Business Journal, coming tidal waves of disruption threaten every established business on the planet. And since these waves are driven by a shift in market power toward consumers as well as a number of low-cost and reliable new technologies, they are unstoppable.
“The cloud, mobility, data analytics, the Internet of Things,” Sculley told IBJ. “Never before have we had four major areas of affordable and accessible technology all growing at exponential rates. The ability to take advantage of all these things at the same time is the game changer of all game changers.”
Sculley, who developed the Pepsi Challenge strategy that won the legendary Cola Wars, adds: “How else can you explain why companies like Uber and Airbnb really haven’t spent any significant amount of money on marketing? They are taking over by word of mouth. They are creating value by servicing customers in better ways, and the people are saying to each other, ‘Hey, you’ve got to try this service.’”
If they want to survive, Sculley advises all established players to figure out how to proactively raise the customer service bar and offer a “lights out” experience that can’t be beat. He also advises them to remember what happened as a result of myopic thinking at Kodak. The company had very talented executives along with the best engineers and chemists. But all its smart people focused on Walmart gaining market share with its single-use film camera when wireless operators were enabling consumers to send digital photos over mobile devices, which reinvented what consumers could do and wanted to do with photography. As a result, while Apple was reinventing the mobile phone with multimedia capabilities that matched what was going on in the big picture, the world’s best brand in photography spent billions expanding its investment in an old technology.
“Kodak,” Sculley notes, “got caught looking backward when it should have been looking forward and taking risks to reinvent the company.”
To survive the coming storm, the former CEO of Pepsi and Apple says to forget your traditional business plan, which he argues is basically the result of infighting over resource allocation based upon what happened last year. What Sculley insists you need is a customer plan that looks forward and focuses on customer metrics. How can you better engage the customer? How can you improve customer acquisition and retention? What can be done to improve customer satisfaction? How can we solve a really big problem that customers need solving? According to Sculley, this sort of customer-focused planning is something that brings talent across the organization working together toward retaining and growing recurring revenue. “And that’s always been how great leaders succeed. If you don’t focus on what it takes to get customers to stick with you, then the cost of customer acquisition becomes incredibly expensive and you end up losing money.”
So how do you develop a customer plan? Big Data obviously has a role to play. But relying on Big Data is not enough. Keep in mind that many organizations that jumped on the data-mining bandwagon in the 1990s failed to see any ROI whatsoever. In fact, the estimated failure rate for early adopters was 70 per cent because mining internally generated data for profitable insights into customer behaviour has always been easier said than done. The potential of Big Data, of course, has experienced exponential growth along with the data available to be mined. Social media, for example, has created an opportunity to analyze the data actually provided by consumers themselves. “Unlike transaction records collected from legacy systems, consumer-generated product reviews contain rich insights into behavioural information and product attributes that matter most to consumers,” Ivey Professor Xin (Shane) Wang recently told Impact magazine.
But as valuable as Big Data can be, deploying analytics alone can no longer be relied upon as an automatic source of competitive advantage because most analytics strategies can be easily replicated. Indeed, as Ivey Professor Peter Bell pointed out to Impact, “The deployment of contemporary analytics is now often just the table stakes required to be competitive in today’s markets.”
Simply put, to follow Sculley’s advice, companies need to investigate what customers want before they want it — which requires real leg work, including conducting stakeouts like a private eye.
“As important as Big Data can be to understanding customers, we’re almost talking about the exact opposite,” says Ivey Professor June Cotte, who teaches Ivey’s Understanding Your Customer executive-education program. “Even really successful businesses need to ask themselves when was the last time they shadowed customers in a store or observed them in their homes.”
According to Cotte, knowing where customers want you to take them before they realize it (or someone else takes them there) involves unfettered creativity and design thinking. And that requires understanding how generational thinking can bias your product or service development. It also requires getting outside of your industry and understanding how and why the ideal customer experience changes.
“When I teach this stuff to executives,” she says, “we don’t focus on what they already know. We use cases and scenarios from a range of industries along with retailing exercises to develop insightgenerating skills that are transferable from market to market. We look at the drivers of change, ranging from technology to demographics. We use design exercises to teach the process of customer experience improvement. And we send people out into the field, where they learn to make observations that are much deeper and can be more valuable than survey-based responses.”
Surveys, Cotte points out, collect self-supported data that people can report. “They don’t give you a deep understanding of unmet market needs or the all-important emotional side of the customer experience equation. That’s why Steve Jobs had a problem with traditional market research. It failed to show him the big picture he could see. Unfortunately, most people are not as visionary as Steve Jobs. That’s why they need to learn how to see customer experiences through visionary eyes, especially in today’s market environment.”
Cotte agrees with Sculley when he advises companies to rethink everything about the customer experience they currently offer. “But that isn’t easy,” she warns. “You must look at your offerings through the eyes of competitors, and that requires training and discipline, especially if you are currently doing well. Keep in mind that your company designed its current offerings the way that they are for a reason, and that can make you really blind to the faults that others see.”
In other words, Cotte says don’t be fooled by good surveys, good reviews, good sales, or good market share data. “They won’t tell you what’s coming or what weaknesses expose you to eager competitors with a better emotional connection to your market.”