Forbes.com

Winning with customer experience

Companies that have thrived in this difficult economy have done so by providing a customer experience their competition can’t match.

Par Tom Springer, Domenico Azzarello and Jeff Melton

First published on décembre 07, 2011
min


Generating consistent, profitable revenue growth has never been easy, but in the current economy it is easily the biggest challenge most executives face. Many companies have reacted by cutting costs and hoarding cash, waiting for the horizon to clear. Yet some are managing to grow despite these choppy markets. Companies like Apple, BMW, Amazon and Charles Schwab have thrived through this difficult period in vastly different industries with widely divergent business models. What do they have in common? Each has become expert in providing a customer experience the competition can’t match. From the product itself to the series of customer interactions that develop into a relationship, they zero in on what their customers care about most and deliver an end-to-end experience designed to satisfy and delight them. The result is a large group of passionate customer advocates, devoted enough to sing the company’s praises far and wide. And that adds up to steady revenue growth, even in a flat market. It’s easy to assume that Apple, for instance, has vaulted into the ranks of the world’s most valuable companies purely on the back of its superior product development. But the reason the iPad, iPhone and iPod set the pace in their markets is because each is an extension of Apple’s digital media ecosystem, a customer experience that excels in utility, style and efficiency. Any company can learn to delight its customers with similarly pleasing experiences. But first, it must look at customer interaction in a different way. Companies that create the best customer experiences have learned to view their markets through a fresh lens: loyalty economics. They understand that a devoted customer is significantly more lucrative than an indifferent one. If people love doing business with you, they’re less likely to defect, they are cheaper to serve and they buy more over time. Most important, they evangelize your product to other potential customers—friends, colleagues and complete strangers via social media. As our colleagues Fred Reichheld and Rob Markey demonstrate in their bestselling book, The Ultimate Question 2.0, these behaviors have quantifiable economic benefits and can be measured through a metric they call the Net Promoter score. NPS is a survey-based system that asks customers the question—“Would you recommend this product or service to a friend or colleague?”—and tallies the percentage of “promoters” in a company’s customer base minus the percentage of detractors. Charles Schwab used NPS to transform its customer experience over the past several years. Between 2003 and 2005, the discount broker struggled with negative growth of 3.6 percent annually. But over the next two years, it began a dramatic recovery, growing at an average rate of 17.5 percent, regaining its position as an industry leader by 2008. One big reason for the change was Schwab management’s large investment in creating a stellar customer experience. That boosted the company’s NPS score from negative 34 percent in 2005 to positive 42 percent in 2010. Companies looking to improve their customer experience often make the mistake of approaching the problem from the inside out—trying to design the “perfect” customer experience while sitting around a conference room table. But our research shows it is much more important to look at product characteristics and customer touch points like brand marketing and retail outlets from the outside in, asking a key question: What really matters to our target customer? For BMW, the premium is on innovative engineering and superior performance. For an insurance company it may be more important to focus on how quickly customers can get information, make claims and deal with a service representative. In any case, designing the appropriate experience involves focusing investment on what will most alter the mix of promoters and detractors among your most profitable customer segments. Schwab, for instance, developed a state-of-the-art system for generating regular, timely feedback from customers. Based on those findings, executives made customer experience a part of all business reviews and strategy discussions. Branch managers began talking to customers every day and learned to quickly address issues. Generating more promoters and fewer detractors ultimately became a central business focus. In the end, that is the real value of building excellent customer experience into a company’s DNA. To do it right takes a substantial investment in time and money. But the payoff is a customer experience so powerful that it creates advocates who tell your story in the marketplace every day across multiple platforms. That’s a competitive advantage at any point in the economic cycle. But when times get tough, it can make all the difference. Tom Springer, Domenico Azzarello and Jeff Melton are partners with Bain & Company and leaders in Bain’s global Customer Strategy & Marketing practice. They are based in Boston, Paris and Sydney, respectively.

Generating consistent, profitable revenue growth has never been easy, but in the current economy it is easily the biggest challenge most executives face. Many companies have reacted by cutting costs and hoarding cash, waiting for the horizon to clear.

Yet some are managing to grow despite these choppy markets. Companies like Apple, BMW, Amazon and Charles Schwab have thrived through this difficult period in vastly different industries with widely divergent business models.

What do they have in common? Each has become expert in providing a customer experience the competition can’t match. From the product itself to the series of customer interactions that develop into a relationship, they zero in on what their customers care about most and deliver an end-to-end experience designed to satisfy and delight them. The result is a large group of passionate customer advocates, devoted enough to sing the company’s praises far and wide. And that adds up to steady revenue growth, even in a flat market.

It’s easy to assume that Apple, for instance, has vaulted into the ranks of the world’s most valuable companies purely on the back of its superior product development. But the reason the iPad, iPhone and iPod set the pace in their markets is because each is an extension of Apple’s digital media ecosystem, a customer experience that excels in utility, style and efficiency. Any company can learn to delight its customers with similarly pleasing experiences. But first, it must look at customer interaction in a different way.

Companies that create the best customer experiences have learned to view their markets through a fresh lens: loyalty economics. They understand that a devoted customer is significantly more lucrative than an indifferent one. If people love doing business with you, they’re less likely to defect, they are cheaper to serve and they buy more over time. Most important, they evangelize your product to other potential customers—friends, colleagues and complete strangers via social media.

As our colleagues Fred Reichheld and Rob Markey demonstrate in their bestselling book, The Ultimate Question 2.0, these behaviors have quantifiable economic benefits and can be measured through a metric they call the Net Promoter score. NPS is a survey-based system that asks customers the question—“Would you recommend this product or service to a friend or colleague?”—and tallies the percentage of “promoters” in a company’s customer base minus the percentage of detractors.

Charles Schwab used NPS to transform its customer experience over the past several years. Between 2003 and 2005, the discount broker struggled with negative growth of 3.6 percent annually. But over the next two years, it began a dramatic recovery, growing at an average rate of 17.5 percent, regaining its position as an industry leader by 2008. One big reason for the change was Schwab management’s large investment in creating a stellar customer experience. That boosted the company’s NPS score from negative 34 percent in 2005 to positive 42 percent in 2010.

Companies looking to improve their customer experience often make the mistake of approaching the problem from the inside out—trying to design the “perfect” customer experience while sitting around a conference room table. But our research shows it is much more important to look at product characteristics and customer touch points like brand marketing and retail outlets from the outside in, asking a key question: What really matters to our target customer?

For BMW, the premium is on innovative engineering and superior performance. For an insurance company it may be more important to focus on how quickly customers can get information, make claims and deal with a service representative. In any case, designing the appropriate experience involves focusing investment on what will most alter the mix of promoters and detractors among your most profitable customer segments.

Schwab, for instance, developed a state-of-the-art system for generating regular, timely feedback from customers. Based on those findings, executives made customer experience a part of all business reviews and strategy discussions. Branch managers began talking to customers every day and learned to quickly address issues. Generating more promoters and fewer detractors ultimately became a central business focus.

In the end, that is the real value of building excellent customer experience into a company’s DNA. To do it right takes a substantial investment in time and money. But the payoff is a customer experience so powerful that it creates advocates who tell your story in the marketplace every day across multiple platforms. That’s a competitive advantage at any point in the economic cycle. But when times get tough, it can make all the difference.

Tom Springer, Domenico Azzarello and Jeff Melton are partners with Bain & Company and leaders in Bain’s global Customer Strategy & Marketing practice. They are based in Boston, Paris and Sydney, respectively.