Notable passages from
Managing the Customer Experience
by Shaun Smith & Joe Wheeler

FT Prentice Hall, Harlow, 2002

   Clever themes are not enough to sustain a leading position. They can be copied and become commonplace. It is only when the experience is so embedded in the culture of the organization that every single employee delivers the promise again and again that the organization thrives.


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   "It's not about customers being loyal to you. It's about you being loyal to your customers. You earn loyalty by giving it," says Clive Humby of Dunhumby Associates.


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   The economics are simple. It costs six times more to acquire a new customer than it does to keep an existing customer. At the same time, a 5 percent increase in customer loyalty increases the lifetime profits of a customer by as much as 95 percent. Investing in building loyal customers is an investment in profitable growth.


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   In an often quoted study, Xerox is said to have polled 480,000 customers for several years regarding product and service satisfaction using a five-point scale from 5 (high) to 1 (low). Until a few years ago Xerox's goal was to achieve 100 percent satisfaction – 4's (satisfied) and 5's (very satisfied) combined. But the company discovered that the relationship between loyalty and satisfaction differed depending on whether the rating was satisfied or very satisfied. In fact it found that those customers awarding a 5 were six times more likely to repurchase Xerox equipment.
   In a survey conducted in 2001 by Forum with consumers in the US, Canada and the UK, 69 percent of customers who awarded top scores for satisfaction indicated their intention to be loyal to that organization. That figure dropped to just 19 percent for customers who were still satisfied but rated one box lower.


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   Revenue growth has everthing to do with "advocacy," the readiness of cutsomers to prefer a supplier and then refer friends, relatives, and colleagues. Advocacy is genuine, deeply felt, loyalty. The dictionary definition of "advocate" is "plead for, defend, champion, recommend, support." This is much more than customers who come back time and time again. Advocates are people who are prepared to argue your case. They are willing to offer their support as well as their business.


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   Many organizations seem to adopt the strange strategy of rewarding new customers rather than their most profitable customers. For example, some banks offer better rates of interest to prospective customers than existing clients. In supermarkets there are checkout lines reserved for those customers with "5 items or less." What about those customers spending $7,500 a year or more who are standing at the back of a 20-minute checkout line? A true reward for loyalty would be if these highly profitable customers were awarded a gold card and sped through special fast-track checkout lines.


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   "People don't quit companies. The quit their leaders." Carolyn Clark, vice president, Human Resources, Fairmont Hotels & Resorts.


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   To put it simply: the customer experience is a leadership issue.
   "Find a way or make one," advised Hannibal as he led legions in his conquests of mountains, countries and armies. His admonition has stood the test of time. It embodies the fundamental spirit of leadership in setting a direction and challenging the troops during the conquest. A similar spirit of leadership is required in companies that set out to win customer loyalty. The commmitment of leaders to the experience is central. They must be champions of the customer experience in order for it to succeed.


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   As a leader, Nelson's example remains useful because he:

  • conceived an innovative strategy, to beat the competition;
  • aligned all his key leaders behind the strategy by involving them in designing the detailed execution;
  • empowered his team, within a given framework, to react to changes in circumstances;
  • had the common touch and demonstrated care for his employees;
  • led from the front.


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   One-dimensional heroic leaders are no longer appropriate. MIT's Peter Senge explains that the sort of leadership required today is that which is elicited and developed "throughout the organization." This stands in contrast, Senge asserts, to the heroic brand of leadership still aspired to in many organizations. "The new hero-CEO then pumps new life into the organization's suffering fortunes, typically by cutting costs (and usually people) and boosting productivity and profit," Senge writes, "But the improvements invariably do not last." A downward spiral of new crises addressed by new hero-leaders ensues, with "dramatic changes imposed from the top, increasing fear, and diminishing leadership within the organization, leading eventually to new crises and calls for more heroic leadership."


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   With a customer experience-based scorecard, on financial services company has found that the entire agenda for business meetings has changed. Where business reviews used to be strictly about the numbers—forecasts, currents sales, and so on—they are now about what customers are saying, what is happening with customer retention, and—oh, yes—what the numbers are as a result. The impact is both dramatic and subtle. The entire approach to measuring and managing the business has changed. Leadership conversations have also changed. The questions leaders ask have shifted to focus on what can be done to boost customer value, satisfaction, and loyalty. But none of this would have happened without the top executive team committing to this scorecard as the way to run the business. The analogy is a simple one: if you want to improve your golf game focus on your swing, not reading your handicap.


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   Operations or customer services is responsible for: creating the processes and environment whereby employees can deliver the customer experience; leading them in a way such that they want to; empowering them to act in the interests of the customer; and recognizing good and bad performance. Finally, operations in conjunction with marketing needs to measure the customer experience, compare this to what is promised, and then feed this back to the front line.


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   Forum asked consumers to rate the extent to which a number of different attributes create a customer experience that drives loyalty. This was the rank order of importance we discovered:

  1. People
  2. Product and service delivery
  3. Place (convenience)
  4. Product features
  5. Price
  6. Policies and procedures
  7. Promotion and advertising


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   The "State of the Industry" report issued by the American Society for Training and Development (ASTD) highlights the value of investing in people. For example, companies spending at the higher end of training per employee outperformed those at the lower end on each of three business measures:

  • net sales per employee + 57%
  • gross profits per employee + 37%
  • "market to book" shareholder value + 20%


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   Great leaders spend 20 percent of their time talking about what they want people to do and 80 percent of the time talking about why.


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   In each sector there are product brands that differentiate themselves and attract a loyal, and in some cases, evangelical following of customers. Sometimes this is because the product is perceived to perform better – look at Dyson vacuum cleaners – sometimes it is because the product is is enjoyable to use or cool – think of the Apple iMac – sometimes it is becuase the buying or ownership experience creates entertainment value – build a bear – and sometimes it is because the brand provides a desired lifestyle – Harley Davidson.


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   [During a merger] the mechanics of the merger opportunity—the growth potential, reorganziation, harmonization of the pension schemes, re-sizing the workforce, etc.—tend to dominate the management agenda. In fact, what should be most important is what will the merger or acquisition do to our customers' perception of our brand? The reality is that most mergers erode brand value because management becomes internally focussed during the transition and the brand promise and customer experience can become confused or diluted by the new combination.


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   "To improve is to change; to be perfect is to change often." – Winston Churchill


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