Barcelona was the setting for KP Morgan’s 2014 International Customer Experience Summit. European executives from the Retail banking and Telecoms sectors came together to share their experiences, reflect on the CX journey so far and discuss future challenges and opportunities. I was asked to deliver a keynote presentation to discuss the urgent need for a more ambitious and transformational approach to CX if maturing industries are to escape from the clutches of commoditisation and high customer churn and become truly customer-centred. My presentation is available on slideshare; here are the headlines.
Customer experience: does it matter and are we doing enough?
by Andy Wilkins
Commoditisation brings CX centre stage
Retail Banking and Telecoms share similar customer challenges. Both are largely service-based organisations that seek to nurture and retain long-term relationships with the customers they serve. There is a need to extend the commercial relationships through new products and services whilst improving the efficiency and effectiveness of delivering them. New digital based competitors, more demanding customers and high levels of churn are all posing major threats to legacy business models as both industries attempt to avoid the slide towards commoditisation and utility status.
From the presentations at ICEM it was clear that the main focus for today’s CX initiatives is trying to fix problems associated with the customer journey caused by siloed touchpoints. It was reported by many that the creation of CX teams to elevate visibility and drive customer-centred service improvements has at least started to produce some modest improvements in CX KPIs.
Current CX KPIs are not enough
One of the key problems reported at ICEM was that despite all the efforts and rhetoric associated with the new focus on being “customer-centric”, improvements in CSAT or NPS scores aren’t directly correlating with improved loyalty or better financial results.
Although CSAT and NPS scores can be used to track progress or provide an indication of relative performance vs competitors they are not enough on their own to deliver the full insights required to drive business strategy and performance. To use a healthcare analogy, measuring someone’s temperature doesn’t tell us what health problem they might be suffering from or what the most effective treatment should be.
Why is it so hard to build a truly customer-centric organisation?
For organisations relying on long-term service relationships the word “relationship” is critical. We all intuitively recognise that a relationship implies a two-way connection built on mutual value, trust, care and respect.
Despite a string of initiatives and substantial investment in customer-centred improvements such as TQM, Customer Satisfaction, CRM and now CX why have levels of customer loyalty remained so stubbornly low?
Mis-selling scandals in retail banking and deliberately confusing tariffs and rip off roaming charges in mobile are just a few of the examples that have led to the need for government intervention to protect the public from predatory and exploitative behaviour. Obscure Ts & Cs, frustratingly unhelpful IVR menus and heavily scripted call centre engagements are further examples of the realities experienced by customers that fly in the face of the loving and caring platitudes that are eagerly pumped out of an organisation’s marketing machine.
Clearly there is something seriously wrong. If we are indeed moving away from a traditional transaction based economy founded on shifting product, towards a relationship economy based on nurturing sustainable customer relationships, then something more fundamental needs to change.
For organisations that depend on nurturing long-term customer relationships, customer-centricity needs to drive its core strategic decision-making and flow through the veins of its everyday actions. This change cannot be limited to a cosmetic airbrushing of customer touchpoints but must involve a more fundamental change within the DNA and operating models of organisations.
Good targets, bad targets and how they drive behaviours
Targets and KPIs drive behaviours. Behaviours drive culture and culture determines what is deemed to be important and ultimately the quality of CX provided. Targets also come from the top and are cascaded down the organisation in the form of local, functional and management targets. A focus on quarterly financial metrics has forced a short-term target based culture that often works against the interest of investing in and building long-term customer relationships.
Many staff feel the frustration of a target based culture that often seems to work against the long-term interest of their customers and their organisation. It’s not surprising that a recent US employee satisfaction survey reported 70% of employees feeling either partly or completely unsatisfied with their job. Given that front line staff provide the main customer interface, this level of dissatisfaction doesn’t bode well for improving long-term CX.
In a relationship economy new improved metrics are required to assess how well the organisation is meeting its customers’ needs.
Transformation to a customer-centred organisation
Transitioning to be a truly customer-centred organisation, focused on long-term customer relationships requires nothing short of a transformation in business thinking and behaviour. The old industrial age logic of shifting product first and CX as an after thought risks leaving organisations blind sided to the real threat of new competitors, as well as a weaker understanding of what customers truly value. This means that customers will continue to view their relationship as a transactional one driven by price rather than long-term value. An organisation operating on relationship logic will be ruthlessly focused on ensuring that long-term value is created leading to greater loyalty and opportunities for improved revenue and margins. How should this be done?
1. There needs to be a real commitment from the top that a customer-centred organisation needs to be driven by a common purpose dedicated to nurturing long-term customer relationships. All actions, priorities and culture will flow from this.
2. There needs to be a much better understanding of how value is created for customers in areas of activity that the organisation operates in and what drives the overall customer experience.
3. There needs to be an alignment of the organisation’s resources and culture to deliver the transformation required to move from a product based model to a relationship based one.
4. There needs to be a realignment of channels and processes to support how value is maximised for customers. This will inevitably require a move to omnichannel service delivery and the simplification and personalisation of customer experiences to meet their needs.
5. Through a deeper understanding of what customers value there is an opportunity for organisations to look beyond their current products and services to identify opportunities for them to play a deeper role in customer’s lives.
This is an important moment in the history of the customer-centred movement. Increasing levels of commoditisation in many industries mean that the strategic importance of CX is now starting to permeate the boardroom. A number of major companies have taken decisions unheard of a couple of years ago. Both Barclays and GlaxoSmithKline have recently removed all sales targets for customer facing staff in recognition that these targets created behaviours that were not aligned with the best interests of the customer. Instead they have been replaced with service based metrics. Unilever also recently announced the end of quarterly reporting to the city in recognition that it creates behaviours that are not in its long-term interests.
More broadly companies such as Vodafone and others are creating internal CX teams and cross company programmes that seek to promote principles and behaviours that are orientated around the customer. The long-term success of these programmes in terms of their customer impact will depend on the ability to transform the DNA of the organisation. Time will tell how many will be able to make the transition as the waves of commoditisation wait for no one and are already washing ashore…