Customer is Always Right = Happy Customer?

ABSTRACT

Businesses have seemingly valued the relevance of the customer for decades now and have built elaborate customer service strategies, as demonstrated by immortalized mottos such as “The customer is always right” (originally coined by Harry Gordon Selfridge, founder of Selfridge’s department store in London in 1909). Customer loyalty programs with preferential treatment for the most loyal customers have been one of the key strategies to not only retain customers but also to encourage them to spend more. So why then do businesses continue to be plagued by churn? What are they not doing, or worse still, doing wrong?

The reality is that globalization and the advent of technology (internet, digitization, SMAC – Social media, Mobile, Analytics and Cloud) has increased competition while reducing the barriers for customers to switch service providers. To make matters worse (or better from a customer’s perspective), the “born digital” companies such as Amazon and Uber have significantly raised the bar on the extent of control and visibility that customers have while interacting with businesses today. So businesses that continue to build their core customer service strategy solely around previously tried and tested philosophies such as “Money back guarantee” or “Price match guarantee” are dramatically poised to fail!

So what should businesses do in order to survive and succeed in today’s world? The answer is simple – listen to your customers and give them what they want! Customers today want as much self-service as possible (three clicks or bust strategy)… They demand full visibility on what they are buying, when it will arrive, the offers they are eligible for, etc… They ultimately want personalized treatment (Know Me, Anticipate Me, Guide Me, Listen To Me, Nurture Me and Sell To Me) delivered to them at their terms (anytime, anywhere, on any device and any service).

A holistic approach to human-centric customer experience management is the answer. The right solution essentially focuses on designing human-centric experiences from the perspective of each user stakeholder (Customer, Partner, Employee, etc.) by incorporating usability, functionality and navigational insights from user groups through a collaborative design process that taps into an Experience Lab construct. The human-centric design will access a layer of micro services that provides service orchestration for complex workflows to maximize self-service functions and provide real-time visibility into the process status. The solution must also provide the necessary service-enablement for existing applications so as to support a services-oriented orchestration.

THE PARADIGM SHIFT ON EXPECTATIONS

We live in interesting times where technology innovation has fueled unprecedented market and business disruption that we could not have imagined even a decade ago!

Who would have thought back in 2005 that smart devices (phones and tablets) would become the preferred video consumption channels (adults spent an average of 26* minutes daily watching online video on smart phones and tablets against 24* minutes spent on laptops/desktops watching online video)? In fact Cisco forecasts a 53% CAGR for monthly mobile data traffic from 2015 to 2020 to 30.6 Exabytes (1018 bytes, or 1 billion GB) per month by 2020.

Very few would have ever imagined that online streaming would be the preferred mode of video consumption with one of the early movers (Netflix) growing from 4.18 million subscribers in 2005 to over 65 million subscribers in 2015? Or that Netflix would consume over 37% of all internet bandwidth?

Why is all this relevant to customer experience? Well, for one, these trends clearly demonstrate the fundamental paradigm shift in the way businesses service customer needs. In the past, businesses would design the customer interaction channels around the products or services that they offered (product-centric experiences). However, today customers want simplified and highly personalized interfaces that gets them what they need, and when they need it, with the shortest number of clicks!

One of the simplest ways to relate to this expectation shift is to compare the “buying experience” across “traditional” and “born digital” channels. If one had to request a taxi in the pre-Uber days, it would mean accessing a poorly designed and performing web site and keying in a lot of details such as pick-up and drop-off addresses, paying method and requested time. The other channel (phone) would mean long wait and hold times, the anxiety of saying out the credit card details in public areas, and the risk of a wrong order entry (poor or noisy conversation, agent error, etc.). The highest degree of frustration was felt when one tried to check on the status of the taxi request, and this would require the customer to call the call center again, talk to the dispatcher, etc.

Now, let’s compare this to the experience one may expect while using the Uber service. The interface is highly intuitive and the request can be placed in a few clicks as all we need to do is to enter the destination address (which could again be a saved query), select the type of service (Uber Pool, UberX, etc.) and submit the request. The app instantly tells us when to expect our ride, details about the car and the driver, and the rapid way of communicating with the driver if required (call or text). Customers know exactly where the ride is at any given point of time (before pick-up and during the ride as a safety measure).

As one may expect, poor user experience is one of the most common reasons for churn. A few industries have taken this threat more seriously than others, as illustrated in the industry-wise CSAT comparison by American Customer Satisfaction Index (ACSI) below.

As seen above, the lagging segments are the communication and broadband service providers. Incidentally, these are the industries where we see the most churn as none of the established players have really gone the extra mile to differentiate themselves from a customer experience perspective. These segments had the ability in the past to limit churn by depending on service contracts. However, the “un contract” phenomena introduced by T-Mobile has taken away this safety net from the wireless segment.

 THE PRICE OF IN-ACTION

History is rife with instances where well-established industry leaders that had seemingly cemented their market position failed spectacularly because of ignoring to listen to and respond to changing customer needs. Some recent examples include Borders and Sports Authority. Both these companies failed to sense the threat posed by “born digital” companies and the digital commerce channel that was increasingly becoming the preferred option for customers. They had both thought of the digital channel as just one of the ways of catering to the customer and therefore did not focus on truly modeling their digital presences on customer preferences. On the other hand, Barnes and Nobles took the challenge head-on with Amazon and even had its own proprietary digital reader device to counter the trend of digital consumption of books.

Among subscriber-based businesses, such as carriers and broadband service providers, the price of not catering to changing customer needs is even more profound. The increased competition, technology disruption (read as “cord cutting”) and commoditization of traditional voice and data services have all resulted in very high churn rates in this industry segment.

As illustrated in the table above, the only major wireless carrier in the US that had a year-on-year increase in monthly churn rate was Sprint. This correlates with its declining market share and increasing high customer acquisition spend (more promotions and freebies to acquire new customers). In spite of its customer acquisition campaigns (Bill in Half, etc.), Sprint lost roughly 230,000 subscribers more than it was able to acquire in Q4 2015 (Net Adds).

At the other end of the spectrum is T-Mobile, which had the best improvement (3.12% in Q4 2014 to 2.44% a year later). As can be seen in the table above, this reduction in churn rate directly correlated with its ability to add a net increase of over 2 million subscribers (Net Adds), which is significant considering that its total subscriber count is an order of magnitude lesser than that of Verizon Wireless and AT&T.

A sound customer experience strategy not only helps reduce churn (and therefore increases profitability by limiting customer acquisition costs), but also offers an opportunity for optimization of direct sales and care costs by promoting sales and care (self-service) completions on its digital channels. This strategy may ultimately drive brand affinity and NPS scores as customers today are looking at digital channels with high degree of self-service capabilities as the way they would prefer to be served! 

SUMMARY

Customers today expect access to services in a highly personalized and intuitive manner such that they have full visibility into every aspect of ordering, delivery and installation, along with a maximum focus on self-service, as seen in “born digital” channels (e.g., Uber experience). Fierce competition coupled with high “cost of churn” has forced subscriber-based businesses to re-align their strategies towards customer experience. The stage is set for Service Providers to implement Customer Experience Management solutions that can help accelerate their journey to offering human-centric, multi-channel customer experiences that aim to excite customers, energize the brand and improve profitability!