The CEO of Zappos is Tony Hseih, a Harvard graduate who has created and sold a number of companies, the most successful of which was LinkExchange which he sold to Microsoft for $265 million. Having sold LinkExchange he then went on to invest in Zappos although it had only been in existence for a few months and was trading under a website called ShoeStore.com. The decision for Hseih to sell his previous company was motivated in part by his disappointment in the corporate culture at the company. He had decided that any future company he would be involved in would be obsessed with creating and fostering a strong corporate culture that had at its foundation a great customer experience.
In a number of interviews, Hseih has stated that Zappos had decided that its focus would be on building long term customer relationships because he was convinced that the majority of the company’s business would come from repeat customers. This proved to be the case with 75% of revenue coming from repeat customers. The way that the company built the customer loyalty it needed to fulfill the strategy was to study the customer interaction and do everything they could to “deliver Wow through Service” (one of its ten guiding principles).
For Zappos, this means: always having goods in inventory before it sells them (no goods on back-order); staffing call centers for 24x7, 365 days a year with well trained, dedicated employees and moving anyone and everyone in the company trained to deliver service on to the phones in peak periods; free shipping on orders and on returns; ‘surprising’ repeat customers with free upgrades to shipping so that they get their purchases with next day delivery. These tactics have built very high levels of customer loyalty. Like the other companies in this analysis, Zappos uses the Net Promoter Score to give it an independent measure of the success of its customer experience. For Zappos its score translates to well over 90% of its customers consistently being willing to recommend it to their friends and colleagues.
In July of 2009, Zappos was acquired by Amazon for a cash and stock deal valued at around $1.2 billion but as part of the deal with Amazon it is keeping the two companies separate in order to preserve the corporate culture at Zappos. In an interview, Jeff Bezos of Amazon acknowledged that part of the value that Amazon was acquiring with Zappos was the corporate culture and trying to merge the two companies was likely to damage that culture. Zappos has a number of unique approaches to maintaining the vibrancy of its culture, including extensive use of social media; YouTube videos, Twitter and Facebook entries that are also accessible from outside the company as well as the creation of an annual ‘culture book’ which is an expression from the employees at Zappos of what the company’s culture means to them.
We’ve taken a look at three well known companies that are commiteed to differentiating on great customer experience. For these three companies, the customer experience is central to the view of what the company believes it exists for – it appears to be imprinted in the DNA of each of these enterprises and the remarkable thing about these companies is the sustainability of the vision. For Lego that is a legacy that has survived and grown across three generations of family ownership, for JetBlue it has survived the departure of a charismatic founder and for Zappos it has, so far, survived the acquisition of the company by a much larger competitor. The common theme that appears to unite these stories is that when the commitment to providing a great customer experience is deeply embedded in the corporate culture; reinforced through the measurements system used to run those companies and motivate employees; and when employees care deeply about delivering on the promise of the company’s customer experience the legacy becomes unstoppable.
In my last post, we began to explore customer experience management, the laws of customer experience, and measuring customer experience. In addition, we took a look at the unique model of customer experience executed at Lego. In this post, we explore the customer experience model used at JetBlue Airlines.
JetBlue Airlines was launched in 1999 by David Neeleman, an airline entrepreneur who created his first airline, Morris Air at the age of 25. As the team creating JetBlue started the process of designing the airline’s customer experience, Neeleman directed them to focus on the things that really made a difference to its customers. As a result, its all-leather seats include seat back TVs with DirecTV service and 100 channels of Satellite Radio – JetBlue provides high quality snacks but does not provide meals and encourages its customers to bring food onto the airplane and the airline trains its staff to assist customers in stowing their carry-on bags to ensure a quicker boarding process but as a byproduct create a feel of superior customer service not matched by other airlines – JetBlue has extra legroom seats available at a premium price but no first class. The airline consciously thought about eliminating the things that customers didn’t care about but which could produce negative outcomes such as serving a poor meal or being denied an upgrade to first class.
The early days of the airline were marked with great success and rapid growth and by the beginning of 2004 the company had developed a great reputation, Neeleman was listed by Inc. magazine as one of the top ten entrepreneurs in the US and the company had a market valuation of $2.7 billion, more than Delta Airlines and Continental combined. But then on Valentine’s Day in 2007, a severe ice storm hit the northeastern US, grounding flights across the country. JFK airport, which is also JetBlue’s home airport experienced over eight hours of continuous icing conditions and hundred of flights were cancelled. JetBlue did not have the gate capacity to get all of their airplanes back to the terminal and unloaded and as a result passengers became stranded on the tarmac, some for as long as eight hours. The impact of the canceled flights snowballed and it took JetBlue another six days to recover to a point where it was flying all of its scheduled flights.
As a result of this customer service catastrophe, JetBlue refunded millions of dollars worth of tickets and decided to create the JetBlue Airways Customer Bill of Rights. The Bill of Rights, among other things, guaranteed a set of communication commitments and compensation levels for customers when they are impacted by delays, that are unmatched by other airlines currently operating and went well beyond any FAA guidelines. The Bill of Rights was used as a tool across the company to re-educate employees and refine processes to ensure there would never be a repeat of the Valentine’s Day issues. Since then, although Neeleman left the company to form yet another new airline, this time in Brazil, JetBlue has reestablished its reputation for great customer service. (Bruce Tempkin, author of Customer Experience Matters, has a great post on JetBlue’s Experience Based Differentation with the “Happy Jetting” Initiative) One of its recent innovations was to include in its renovation of Terminal 5 at JFK a comfortable seating area for the TSA agents working at its security gates. JetBlue realized that although the TSA employees were not part of the company they had a remarkable ability to affect the JetBlue customer experience positively or negatively. The airline decided that if the TSA agents were happy and comfortable they would be much more likely to provide a pleasant experience for JetBlue passengers. JetBlue uses the Net Promoter Score to assess its performance and in March 2010, JetBlue Airways was recognized as the top airline, scoring more than 40 points above the average for the Net Promoter Industry Benchmark for customer loyalty in airlines.
I’m curious, if you’ve travelled lately, what was your experience like? Have you seen a noticeable increase or decrease in the traveller experience?
In my final post of this three part series, we’ll take a look at Zappos and how they are “Delivering Happiness” in a box.
There are a number of disciplines at play in this area and each of these has a different focus and application: Experiential Marketing, Brand Management, and Customer Experience Management.
This 3 part blog will explore customer experience management, the laws of customer experience, and measuring customer experience. In addition, we’ll take a look at three inspirational companies that have built fascinating and unique models of customer experience; where the entrepreneurs that founded these companies placed the customer experience as a key component of the overall company mission. In each of these companies the concept of the customer experience has become sustainable by being embedded in the core cultural values that these companies promote.
Experiential marketing uses multi-sensory experiences to enhance the way in which customers interact with the company, typically in a retail environment; a great example of this is the youth-oriented retailer, Abercrombie & Fitch, injecting perfume into the air around its stores and playing dance music to connect with its customers in more ways, using more senses, than the style, fit and appearance of the products in its stores. But no better exponent of experiential marketing exists than theme parks whose primary product is the multi-sensory experience; movement, sights, sounds and smells that create the experience that the consumer is buying. The latest example of this phenomenon is the recreation of the Wizarding World of Harry Potter at Universal Studios Orlando, that includes the experience of selecting a wizard’s wand, riding on a broomstick, and eating and drinking the products described in J.K. Rowling’s books.
Brand management on the other hand concerns itself with attempting to create unique value in a specific product by emphasizing brand values, reinforced by consistent messaging and product pricing and positioning. Defined first by managers at Proctor and Gamble in 1931 it is the most widely practiced, long-lived, and pervasive of these disciplines
Customer Experience Management incorporates and goes beyond brand management and can also incorporate the ideas behind experiential marketing to focus on all aspects of the customer experience. Customer Experience Management requires the customer experience to be mapped and tracked as a customer goes through the process of interacting with a company, or purchases and uses a company’s products or services. The customer experience is more long-lived than a multi-sensory buying experience and is more personal than the values of the brand – it takes into account the whole lifecycle and every aspect of the interaction – the product or service itself, how it is purchased, how it is delivered, how issues and concerns about the product are handled and how the customer is treated before, after and during the interaction.
The Laws of Customer Experience
Bruce Temkin, formerly of Forrester Research and now an independent consultant and thought leader on the management disciplines surrounding customer experience, has developed “The 6 Laws of Customer Experience” and while these may not be immutable and self-evident they do provide an interesting framework to assess a company ‘s efforts in this area:
1. Every interaction creates a personal reaction
2. People are instinctively self-centered
3. Customer familiarity breeds alignment
4. Unengaged employees don’t create engaged customers
5. Employees do what is measured, incented, and celebrated
6. You can’t fake it
The first law is critical in establishing that delivering great customer experience is an emotional, subjective, and elusive goal. As Temkin points out, customer experience exists in the eye of the beholder and it exists at a point in time (although the opportunity to test it exists over and over again in every interaction that a company has with its customers). The second law acknowledges that companies need to organize around its customer’s interests; without a focus on the second law companies will tend to organize the customer interface around internal company organization and impose internal rules that constrain the customer experience – customer’s require a company to organize around their interests and those companies that fail to recognize this fact will fail in delivering on customer experience. The third law requires that companies understand their customer’s needs and create alignment around fulfilling those needs – this requires deep customer knowledge and great customer insight to achieve. The fourth and fifth laws acknowledge that the creation of a superior customer experience depends upon having committed employees who understand and are motivated to supply the customer experience that a company’s leadership has designed. Without the connection to the employees, the greatest customer experience design and insight in the world is ultimately useless – the three companies I will discuss clearly understand this dimension of delivering a great customer experience. Finally the sixth law identifies that only with a genuine, end-to-end commitment - that comes from the top and is present at every layer of the company, can a company create a great customer experience.
Measuring the Customer Experience
Management systems are not complete without measurement systems and several measurement systems have emerged to attempt to measure a company’s achievement in delivering on its goals for customer experience. The American Customer Satisfaction Index (ACSI) was established in 1994 at the University of Michigan’s Ross School of Business and it uses structured customer interviews as input to a multi-equation econometric model that derives a score that can be derived for a single company or aggregated by industry or even nationally to deliver a national customer satisfaction index. The researchers at ASCI claim a correlation between ACSI data and an individual firm’s performance and that it can be used to predicting corporate revenue, earnings growth, and stock market performance.
A newer measure has also become popular in recent years but not without some controversy about its applicability, the Net Promoter Score. Originally developed by Fred Reicheld of the management consulting firm Bain & Company, the Net Promoter Score is designed to establish a measure of customer experience by asking one question , “How likely is it that you would recommend our company to a friend or colleague?” and then asking the customer to rate the answer on a scale of 1 to 10. The higher scores indicate that the customer is a promoter of the company; middling scores indicate the consumer is passive; and low scores indicate that the customer is a detractor of the company. The scores of a population of the company’s customers are aggregated together and the resulting score indicate how many net promoters there are for the company in the population. The proponents of the Net Promoter score believe that it is a simple mechanism that yields a result which can also be used to predict performance in other areas such as financial results and company value.
Three Examples of Outstanding Customer Experience:
In the first of a this three part post, we’ll explore Lego, the Danish toy company that has grown to become the world’s fifth largest toy maker, but started from humble beginnings producing simple plastic building blocks used to stretch the imagination of children. The company lives by a set of corporate ‘promises’ to its stakeholders, including a ‘Play Promise’ that measures its success in creating a positive customer experience for the children that play with its toys and a promise to the parents of those children that it will be a safe and educational experience. In our next post, we’ll take a look at JetBlue. JetBlue is a startup airline that was designed by its founder, David Neeleman, around providing a different customer experience for air travelers – the company was severely tested by a public relations disaster on Valentine’s Day 2007 and although Neeleman has now left JetBlue, the airline has since recovered by re-focusing on the customer experience and its duty to its customers. Finally, in our third post, we’ll take a look at Zappos.com one of the most successful e-tailers in recent times, whose growth has been fueled by the vision of its CEO Tony Hseih. His relentless drive to put the customer experience at the heart of the company is admirable, and clearly intriguing – just take a look at the success of his recent book, “Delivering Happiness.” Most remarkable is that he is maintaining that focus while the company has been acquired by Amazon.
Lego Lego was created in 1932 by Ole Kirk Christiansen, a Danish carpenter and toy-maker, and although theories of customer experience lay far in the future, he named the company to capture his intent for customers; the Lego name, adopted in 1934, was formed from the Danish words “LEg GOdt” meaning “play well” and from 1932 onwards the motto of the company was “Only the best is good enough”. The company remains in family ownership but went through difficult times at the beginning of the past decade but has turned around the company’s performance by rededicating itself to its core beliefs. The company has embodied its mission in four promises in the form of a Play Promise, a People Promise, a Partner Promise and a Planet Promise. These four promises allow Lego to manage and measure its progress against these measures of corporate responsibility but the Play Promise captures its intent with regard to customer experience measured by the number of product recalls experienced in a year; the number of customer complaint calls received and the company’s Net Promoter Score.
The company’s renewed focus on the customer experience has led it down new delivery paths and new dimensions to its products and relationship to its customers. Lego Design byME is a new website it has provided where kids can design their own unique creations in Lego building blocks and then order online their personalized kits including customized building instructions. Lego will be introducing Lego Universe this year, an online gaming platform designed to be a safe and exciting game for children focused on working with others to build and create your own corner of the Lego Universe. The company created Lego Serious Play, an initiative, set of tools and process approach aiming to work with corporations and other institutions on fostering innovation and creativity. The company also created the Lego Learning Institute which invites leading academics in the area of child development to work on research projects focused on creativity, learning environments and child’s play. Cecelia Weckstrom, head of the Lego Learning Institute developed an initiative to map customer experiences into a Customer Journey map, for example, the one above shows the multi-dimensional aspects of the customer experience of a flight from London to New York City. The map identifies opportunities for enhancing the customer experience and the ‘make or break’ moments that define a great or lousy customer experience (thanks and acknowledgements to Bruce Temkin for publishing this example in his blog).
I noticed something missing at the Gartner Customer 360 Conference
The conference showcased the latest and greatest uses of customer relationship management technology – affectionately referred to as CRM. What struck me as odd during the conference was the conspicuous absence of any reference to “customer satisfaction”. Over the years, increasing customer satisfaction was a primary driver for companies to make investments in CRM. It was all about “knowing the customer” and the “360 degree view”. It seems that today, the focus is all about “customer experience.” The Board Room is buzzing about customer experience and companies are hiring Chief Customer Experience Officers. Is this a fad? A trend? The next hot hashtag to bubble up on Twitter?
One thing is certain: the notion of improving the customer’s experience is here to stay. I was a very loyal (another buzz word) customer of a brand name internet security and anti-virus package that I used for many years. I was satisfied, obviously loyal, renewed and paid on time, and as far as the company would assume, would have been around for life. One day, smack in the middle of my day, the program failed and froze my system. I was on a deadline and suffering productivity paralysis as my new state-of-the-art laptop was useless – and I was on the road. There was only one thing to do: call customer support.
Long story short: the company had made an error in sending out an update patch. That in and of itself was not a huge deal – mistakes happen and I’m a pretty understanding guy. However, it was during my journey to forgive (by calling support to get the fix) where my satisfaction took a turn and my experience fell apart. Instead of admitting the mistake and then giving me steps to fix it, I was treated like a kid who just got busted for breaking Dad’s favorite model airplane. Needless to say, this was a bad customer experience. So, like any self respecting, card carrying consumer, I woke up the next day and replaced the software at a lower price with a competitor that I never would have bothered to look at in the past. (Take that!!)
So what has changed? Companies, more than ever, have little or no margin for error. But mistakes are made in the real world, and they always will be. So the differentiating factor will be how companies handle ”negative” customer experiences and what they do to prevent them from happening again. Bruce Tempkin, author of the blog, Customer Experience Matters posted a thought provoking graphic explaining the fundamental misunderstanding of how loyalty and satisfaction are connected.
As for my experience, the software company could have “saved” me (or in the vernacular, lowered their churn) with only a few simple things. First, they could have showed me that they cared about me personally and recognized my customer lifetime value – they’ll need to acquire ten new customers just to replace me. Second, they should have contacted me when the problem occurred. They have my phone number, email, you name it - they failed there as well.
Thinking about my personal experience brought home for me what is changing in CRM technology – it’s what we DO with the information. Simply aggregating key account information about customers is no longer enough. Companies need to look beyond general account and transaction information and start recognizing the importance of customer lifetime value and satisfaction drivers like communication preferences and propensity or ability to buy.
True, this may be “the time” for customer experience to get the attention it deserves, but keep in mind – experiences have quite a range – all the way from exceptional to horrible, so let’s not forget to remain focused on satisfaction (or as Bruce would encourage, focus on fixing the cause of dissatisfaction!).
If you’re paying attention at all you’ve noticed that the mobile space is blowing up.
From the recent launch of the new iPhone to the rise of Android to the mind blowing valuations of mobile ad platforms, the Smartphone is the new platform. Annually, Mary Meeker, of Morgan Stanley, outlines leading web trends. This year’s presentation (available at: http://www.morganstanley.com/institutional/techresearch/pdfs/MS_Internet_Trends_060710.pdf) is fascinating. Meeker compares the rise and consumer adoption of the mobile space to the rise of PCs and the web.
Check out the trend:
That’s some hockey stick. The total number of Smartphones is predicted to eclipse the total number of personal computers in 2012 (provided the Mayans are wrong.) I’d argue that if you’re a technology company it’s a space that you absolutely have to be in. We’re certainly making significant investments to deliver rich interaction management applications to mobile platforms. That said, most, if not all, of the buzz around mobile is in the consumer space. That stands to reason as eyeballs drive ad revenue and the eyes are moving from static PC screens to anywhere mobile devices. So where does that leave businesses that sell to other businesses? It’s something that we think about every day and believe represents a lot of untapped value and opportunity.
Take a mobile sales force as an example. Let’s say you have sales reps that go into the field daily to sell your products or services to businesses. Perhaps you’re selling phone and internet services to small and medium sized businesses. Or you’re selling pharmaceuticals or medical devices to doctors. If you have a field sales force selling sophisticated products than you’ve probably faced the classic challenge of how to deliver information to the field that transcends basic information and actually drives and tracks behavior. Sales organizations rely on the field to make efficient, profitable decisions, but rarely arm their teams with the tools necessary to do so. We think that Mobile Decision Management is an underserved space but a solution whose time has come.
Consider what a mobile sales rep has to deal with manually: Complex customer and prospect segmentation, dispersed geographic territories, constantly changing internal and external business drivers, communications via additional channels and frequent change in team structure. We believe that sales reps empowered with Mobile Decision Management tools will be significantly more effective than those that aren’t. And sales management has nearly perfect insight into where the rep went, what they offered and how the prospect responded, all in real-time.
In a blog post from his decision management blog, James Taylor writes, “One of the key aspects of decision management is a focus on taking action using insight gained from data - not just showing someone the data or just letting them create or update it. Identifying the decisions that drive the behavior of your employees is crucial. If the mobile employee is a claims agent then the decisions that matter are ones like “is this claim fraudulent”. If the mobile employee is an account manager then the decisions that matter are thinks like “is this prospect entitled to a credit account”, “will this account get these products in time”, “what’s the best up-sell or cross-sell for this account” and so on.
If you focus on managing and automating these decisions then you can use the information the phone has (geo-location), insight from the data the company has (fraud likelihood of this claim based on analysis of similar claims, predicted wait times for a product delivery based on analysis of the supply chain, propensity to buy of the account for highest margin products based on analysis of similar accounts and products) to take an action (tell the person using the phone to do or not do something).”
Automating the decisions of the sales team, via existing devices used in the field (think iphone, Blackberry, Droid…) adds a level of efficiency, profitability and reporting that most sales organizations just fantasize about. We’re ready to make fantasy a reality.