Excerpt. © Reprinted by permission. All rights reserved.
Chapter 1
Customer Experience
Let's begin with a little bit of history. Though many of you are likely familiar with these broad strokes, taking a step back to understand how a maniacal focus on customer experience developed will shed some light on how we got to where we are today. The First and Second Industrial Revolutions were typified by an increase in production capacity and output. Companies were labeled as "product-centric" or "product-led," competing on the basis of their advanced products, irrespective of whether people wanted these product improvements. The Third Industrial Revolution, which began in the 1950s, welcomed advancements in telecommunications, the rise of electronics, and the development of computers, forever changing how businesses operate.
With new capabilities to track and solve customers' problems, meet their new demands, and provide increasingly better service, the experiences customers had with brands improved. With a growing global supply chain, there was also an increase in the diversity and availability of goods and services. Equally as important were new ways for customers to shop and buy products and services online. As a result, not only did their purchasing behaviors change, but their experience expectations continued to increase with the new capabilities technology provided, such as e-commerce.
In response, companies shifted away from a product-led model and focused instead on the customer. As compared to a one-size-fits-all model, specific customer data could be captured and used to create a better experience for a diverse set of customers and their needs. Embracing this attitude meant that new products, features, and functionality could be traced back to a real customer problem. Customer-centric companies also offered customers value at every interaction, based on their actual interests and desires.
This philosophy quickly caught on because it made logical sense: Customers are the source of revenue. Without revenue, there is no company. What's more, focusing on the customer, though myopic, works. Like hopping on one leg, it will move you forward, albeit slowly.
Becoming more customer-focused required an accompanying attention to customer experience. Providing positive CX then became the prime C-suite approach to strengthening competitive advantage. It wasn't that products no longer mattered; they did, and they still do. They just don't matter as much if great customer experience isn't there as well.
And today, with the Fourth Industrial Revolution upon us-pushing technological capabilities and uses to a whole new level with AI, IoT, Web 3.0, and the metaverse-customer experience is valued more heavily than ever, and for good reason. According to Salesforce, 88 percent of customers feel that the experience a company provides is as important as its product or services (2022), up from 84 percent in 2019. Obviously, CX is vitally important.
Every company should strive to provide an incredible experience to the customers or businesses it serves. As discussed in the introduction, instead of doing something to customers, or to businesses, you must do something for them, reframing your thinking from B2C and B2B to B4C and B4B. To do so, you must first recognize what makes a memorable customer experience.
Raising the CX Bar
In 2004, Zappos's biggest challenge was customer service. Specifically, they were struggling to find the right employees to staff their call center. Though the online footwear retailer was an e-commerce company through and through, they realized that every new customer called them on the phone at least once on average. Handled well, that call could create an emotional connection and a lasting memory. Whiffed, it could lose that customer for good.
Tony Hsieh, Zappos's founder and its CEO at the time, had decided from the company's start to make service the company's main product. After all, customers could buy shoes anywhere. Hsieh believed they would only stick with Zappos if it "went the extra mile to WOW them," so he allocated the resources to staff the customer service line 24/7. Any similar company would have spent that money on advertising to drive awareness and demand. Rather than advertise, Hsieh wanted to make his customers so happy that they advertised for him via word of mouth, advocating on the company's behalf.
This was not the norm in 2004. Call centers were considered cost centers, not growth engines. But under Hsieh, Zappos looked at every interaction through a "branding lens instead of an expense-minimizing lens." This meant running and staffing its call center very differently.
For example, there are many stories of Zappos customer service agents staying on the phone for marathon sessions. The average call duration at most call centers is four minutes. The longest Zappos customer service call to date took place in 2016 and lasted ten hours and forty-three minutes. Now, not every call center agent should stay on the phone with a customer for ten-plus hours, but the mindset is what matters here. The rep knew he could stay on that call without worrying about an arbitrary metric or "getting in trouble" for spending so much time with one customer.
Stories like this one have become central to the Zappos culture. The company has never stopped raising the CX bar while also empowering its employees to go the extra mile for customers. Noting a drop in call volume at the start of the COVID-19 pandemic, the company decided against furloughs. Instead, it launched a special customer service line for people who just wanted to chat about anything: future travel plans, TV shows, whatever was on their minds. (The idea was the brainchild of a Zappos employee.) Customer service reps were known to sometimes help callers source items beyond shoes. As pointed out in a statement on its website, "Searching for flour to try that homemade bread recipe? We're happy to call around and find a grocery stocked with what you need."
The reps also proved willing to help with more urgent issues. When David Putrino, director of rehabilitation innovation for the Mount Sinai Health System, struggled to find pulse oximeters online due to pandemic demand, he reached out to Zappos. To his delight, the company located a stash of the critical devices, shipped five hundred to Mount Sinai within days, and went on to donate another fifty.
I had the pleasure of meeting Tony Hsieh a few times over the years before his tragic passing in 2020. Our conversations were always filled with laughter and joy, and the mark he left on so many people will keep his legacy of "delivering happiness" alive for many years to come. Hsieh recognized that investing in customer service could create "stronger brand loyalty and leave your customers coming back for more." He understood that customers recall brand experience and interactions far more than they do other differentiating factors like price.
You are much more likely to remember service reps that went far out of their way to help you than the amount you paid for a pair of sneakers. This emphasis on CX correlates to consumers who are "very likely to purchase more from a company" regardless of industry (Table 1.1). As you can see, the "very good" and "good" CX shows significantly better results than the others.
A great CX experience is not defined by what you offer but how your customers feel when they engage with your products and services, your employees, and your brand, and how well you enable them to achieve the outcomes most important to them.
These interactions between a company's employees and their customers are truly significant as they are often the moments that matter. If the past decade is any indication, continuing to improve CX is unquestionably worthwhile. For example, mass-market auto manufacturers that improve CX by 1 percent can generate more than $1 billion in additional revenue. Further, as shown in Figure 1.1, CX leaders had three times higher returns to shareholders than CX laggards in the aftermath of the 2008 financial crisis.
The Characteristics of Superior CX
So what is actually meant by a superior customer experience? Let's look at the specific characteristics businesses utilize to accomplish this feat:
Efficient: Minimize the time and effort customers are required to spend to buy a product or service or to receive support for it. For example, many hotels no longer require customers to go to the front desk and talk to a clerk to check in and get a key. Instead, customers can use an app to not only check in and receive a digital room key but even order room service or make a housekeeping request. Done right, this "low-touch" approach-in which customers and employees have little contact-is highly effective at delivering a great experience.
Personalized: Ensure employees know customers' names, purchase history, and any issues they've experienced in the past. Customers want to feel that their business is valued, not that they are dealing with a different company at every moment that matters.
Predictive: Expect what customers may need next. For example, anticipate what products or services they may be interested in based on their prior buying data and compared against other customers like them. When done right, companies can uncover hidden buying signals and focus the efforts of a salesperson more effectively or use automation to streamline the sales process.
Proactive: Anticipate reasons why customers may reach out and proactively reach out to customers. An example might be sending an e-mail alerting customers that their warranty or credit card expires in ninety days, which may disrupt service. In a recurring revenue business, this type of proactive, value-based outreach is critical to minimize unnecessary churn.
Flexible: Enable customers to buy, communicate, or engage through their preferred channels both online and offline. For example, provide multiple options for customer service and support via phone, e-mail, online FAQs, chatbots, and social media. By doing so, you can capture prospective customers where and how they prefer to buy.
Responsive: Solve customers' problems in a timely manner. While it might not always be at first point of contact, being responsive is also about following up and following through on those issues that require more time and attention. With service expectations increasing, response time matters. If customers have to wait too long, it negatively impacts CX; if you are able to get back to them quickly and solve their issue, it positively impacts CX.
Value-based: Focus on customers' needs so they can make a decision based on the potential value they'll get out of your product or service. For example, under a value-based health care model, health care providers (including hospitals and physicians) are compensated on the quality of services rendered based on patient health outcomes as opposed to the quantity of patients a physician might see. Being value-based is essential to the B4B and B4C approach. Ask yourself, what can you do for your customers to add value to their lives or their businesses? You want the customer to know you truly care about their needs and the outcome based on the tailored solution you've provided.
Each of these seven characteristics can be boiled down to reducing customers' effort, thereby bettering the experience they have with your brand and increasing their loyalty. As competitive advantage is increasingly defined by the experience you provide, rather than the products you sell, customer-centric solutions are paramount. However, those solutions alone will not remain competitive over the long term. Long-term success will only come from creating frictionless and seamless interactions between employees and customers by decreasing the amount of effort both need to put into those interactions.
Interaction and Effort
There are two categories of effort to consider: the effort required of the customer to achieve their expected outcome and the effort required of the employee to meet the customer's expectations and do their job. Throughout recent history, customer effort and employee effort had decreased pretty much in sync, especially during the First and Second Industrial Revolutions when companies were, as mentioned, more product-centric. With an emphasis on productivity and output per person, machines and automation began taking over employees' redundant and tedious tasks, ultimately reducing their effort.
While there wasn't yet a full-court press focused on CX, there were new benefits to customers as it became easier for companies to procure products and services with greater consistency and quality. As new technology began to take hold in the Third Industrial Revolution, the effort needed to perform and complete tasks started decreasing, creating better results and experiences for both customers and employees. However, as the Third Industrial Revolution gave way to the Fourth, and digital technology investments further increased, the effort required for customers to engage with brands decreased. Subsequently, their CX improved-but the same could not be said for employees. In fact, many employees saw the effort required to do their jobs increase. As a result, their satisfaction decreased, causing EX and CX to fall out of sync.
Take, for example, a hypothetical bank operating in today's economy. This institution, like many banks, has a mix of customers and small-business clients who have come to expect more and more digital banking capabilities. To increase customer loyalty and improve CX with its small-business customers, the bank conducted focus groups and surveys to determine what products and services they would be interested in.
It determined that video banking services would be a great addition to the in-branch services currently provided. This service would allow customers to converse "face-to-face" with their banker at their convenience, 24/7, without having to drive to a branch to do so. The goal was to reduce effort for the customer, increase the level of service, and establish a strong differentiator in the market.
It seemed like a foolproof plan, and the response from customers was overwhelming-too overwhelming. While customer satisfaction scores went up and overall CX improved, employee satisfaction in the newly created video team cratered. The video offering resulted in far more work for the employees than a traditional call center, taxing them with additional technology to navigate and processes to follow.
Furthermore, they weren't trained on the depth and breadth of questions they were now receiving, and they found themselves having to escalate a majority of the video calls to their managers to resolve. Unbeknownst to the customers, chaos reigned behind the scenes. Senior management was oblivious as well-until a third of the staff quit. While there was a lot of fanfare when the new service launched, the bank was forced to temporarily pause the video service after six weeks.
Though it proved to be a well-received service for customers, the bank didn't take into consideration what the downstream effect would be on its employees, their workload, or their inability to respond to such a diverse set of questions. Instead, the bank exclusively focused on improving customer experience and customer-based metrics, while employees paid the price in increased effort.
