Why you need to pay attention to customer experience

Why you need to pay attention to customer experience

Next        What to watch out for when researching and testing journeys

 

The chicken and egg question always fascinated me. When it comes to business models I find the same conundrum with customers and profits. Michael Porter once said that the purpose of a business is “to create value for customers”. Although we all assume it was inferred in there, he never bothered to mention profits.
The reality every business faces however it that creating value comes first and monetization follows.

1. Compare the debacle of the great Thatcherite privatisations to the often maligned success story of dot com.
In the UK we have a raft of privatised utilities who still have not “got it”, they still think in terms of Oligopoly, force, bullying, price rigging. They think and act like tax collectors. The total innovation from all of them over two decades could be written on the back of a credit card along with a full list of their happy loyal customers.
Amazon, ebay, Paypal, Google and many more have on the other hand built world beating businesses on the back of profitless customer satisfaction and only now are monetising these business models. They operate at P/Es up to 500 and have no shortage of investors.

The message is clear, the customer is king and until you can demonstrate value to them you don’t have a business model.
“ Sooner or later regardless how much cash you have stashed away, you will learn to create value for customers or fail.” We even see this law apply itself to dictatorships.

2. What is customer value and how can you create it?
The biggest possible blunder any business can make is to quantify customer value in terms of product features. I cringe when I see these neat spreadsheets listing product x competitior1, competitor2 etc and how well they score on each (in the marketing trainees opinion).
Customers buy an experience, even hard nosed corporate customers. That begins with the interaction with “People” in the supplier side, or “friendly” and human like ecommerce site and carries right through to anticipating delivery, opening the package, using it for the first time, bragging to friends, interacting with support and many more. Many of these are remarkably powerful influencers and even though supported at times by product features, most of the time they are a separate source of value, or indeed antagonism.
Next we return to the chicken and the egg.

3. Does customer experience exist without customer value and who foots the bill?
The problem here is thus: If you ask the customer how much extra they would pay for their phone to float up out of the box on a mechanism with a Jingle playing, be fully charged, sense the old phone and offer to copy the contacts and messages etc in a sweet voice, accept a voice answer. The customer might well offer a price that made this simply not feasible. However, when that same customer experiences it once, the likelihood is that she won’t want to be without it and when she hears her friends talking glowingly about it, it becomes a must-have at almost any price. Soon it is talked about and develops a cult status and then we have a brand value to take into account. That’s a whole new ball game.
I’m not suggesting we deliver high quality customer experience at all costs, I’m simply saying that you must understand the true value and what people do is far more revealing than what they say.

The point I’m making here is that sometimes you have to take a small hit to let customers realise what they value before it becomes indispensible to them. Henry Ford would have built a more comfortable horse carriage if he had asked the customer what to do. The distinction in marketing terms is between “True value” (product features) and perceived value ( How the customer sees it)
“There’s more than one way to ask the customer and more than one way to interpret the answer, if you listen with an open mind, sometimes you will be surprised pleasantly.”

4. We can’t have a discussion on customer experience without discussing the brand.
There are many definitions out there of a brand and I’ll leave that to those with little to do, for me the important point is that expectation which a customer carries as a result of the brand. That is what drives her through our door or to our site.
Let’s not gloss over the word “expectation”. Whether you are playing poker, editing movies, or doing magic tricks for your children, you will quickly realise that everyone, and that includes market researchers, sees what they expect to see, hears what they expect to hear and feels what they expect to feel. Most people could probably say yes to that statement glibly, but very few would appreciate the profound power of it.
In a previous blog I described the experiment when scientists used MRI brain scans to identify the increased satisfaction enjoyed by a coke drinker who had poured it from a branded can into a branded glass over that of another drinking it from a plain glass, all in stark contrast to the memorable testimonials of thousands who preferred Pepsi over coke when offered both in unmarked glasses and could only focus on taste.
Expectation is created in many ways, but primarily by the chatter of others and the perceived opinion of peers. That is the territory of Brand managers, Marketing people and Social Media experts.

The key Point here is that creating an expectation associated with your product is the most powerful way to create value for your customers and often the cheapest and mot certain way also.
“Innovation is critical, but don’t confine it to the engineers and inventors, the ultimate playing field is inside the customer’s head”

5. Customer Lifetime Value is not an old, or boring idea it has never been more relevant, or more critical.
One of the first things we tend to look at with a new product is a breakdown of the cost of product, cost of selling it and gross margin. The cost of selling a product usually surprises newcomers to the field.
In competitive markets with a lot of equal offerings a small price advantage can drive large sales increases so price is critical and it is driven primarily by cost. i.e you cant reduce price below a level that is profitable. In most markets price is sensitive and if it isn’t then investors are sensitive to margins, earnings and dividends. In all cases no business can indefinitely carry unnecessary cost and in a competitive market. Sooner or later the competition will do it and steal a march. Of course there are many pricing strategies and this is not a discussion on price
The money you spend on marketing and selling your product is critical to the success of your product, yet it comes under less scrutiny than any other budget apart from the CEOs expense account.
Let’s say you sell 1m units of a product at £100 retail. Your production cost is 20 and your marketing/selling costs are £30 operating costs are £40 and net profit is £10
That’s 100m t/o, 30m spent on selling 40m operating profit and 10m net profit

Suppose you convinced 1% of your customers to recommend the product to a friend
Now your t/o is 101m selling and operating costs stay the same and net profit is 11m.
That’s a ten percent increase in earnings- a darling of the markets if you can repeat it.

Let’s say that you have a Million customers, every customer has to be replaced after 4 years and they pay £1000 a year for your product. That’s t/o of £1b
To maintain that t/o you have find 250,000 new customers at a cost of £1000 each
That’s £250m a year in marketing/selling costs.
Now suppose you are so nice to these customers that they stay for 5 years instead of 4

Now your costs are reduced to £200m a saving of £50m
if your net profits were, for arguments sake, £100m on £1b now they would be increased to 150m a 50% increase in earnings. What would that do for your stock?

These are simplified figures used to demonstrate a point, so lets not get into a investment analysis discussion. The message is clear:
“Treating your customers well enough to retain them a little longer can deliver huge dividends while enlisting them onto your salesforce is the next killer app and make no mistake about it.”
That means paying attention to the user journey long after the “order to pay “ stream has completed.

Bridging between the web and the real world

Soviralnetbusworks and all that jaz

How do you find the longest way form a to b. Well here’s a good contender, call the guy in the next room on his mobile.  That message will go into space bounce off a satellite and return to your pal next door.

In a world of 7000,000,000, in a country of 60,000,000 in a town of 30,000 people, how do you find 100 clients for your new accountancy business?
Why you search the 7 billion of course via the internet until you find some who happen to be near you and need an accountant, or at least like you enough to pay you anyhow. OK got that thanks.

Here’s the official theory, in so far as there is one:

You build as big a network as you can and you keep sending emails and publishing tweets and blogs so they all wake every morning wondering what you have to say to them today.

You keep asking what you can do to help and trying to get them business, or worrying about their personal lifes, until eventually they give in and say I know you don’t really want to be my accountant, but if I begged you, would you do my accounts?

Sales and marketing theory

This is one of the times when I can speak as an authority and indeed the principals are so widely taught and so well understood that it takes little effort to make the points successfully. Here goes.

You start with a product for which there is a defined market, i.e. You know that  they have  a need and that they are accessible and that it is possible to service this need profitably Product, Place, Price Promotion etc.(Common sense stuff)

Next you design your messages to position your offering so that people can understand it and can hang it on their mental notice board as close to the top of the list as possible. E.G. “The guy to call when you want straight talking and common sense solutions”   “Mr No Bull …”

Now you need to target this market so you are delivering  the messages to the right people, not the whole 7 billion, or even the 65 million, but maybe a few  thousand. If you’re an accountant you might time this with a pressing annual need and you wouldn’t send it to too many Non-Doms. With me so far.

Now you give them an opportunity to put their hand up and say, I’m possibly in the market. E.G.  A free booklet on setting up offshore trusts might attract them.

Next you need permission to pitch a few of these and permission to stay in touch with the others in case they need your products at some future time. The relationship building begins now, but most business people are strapped for time, so references and case studies, professional memberships and guarantees are a very important part of the mix.   2, or 3 out of every four who meet you will be unsure about some aspect of you, or the product, or their need and not do business this time, but most can remain in contact and maybe do business in future.

 

How I approached this confuddle

I have been planning this series for a while and always reluctant to make a start because there just seemed to be more to learn and new angles to consider.

I was faced with an agonising choice between methods of presenting the information. E.G. taking all the new information and then comparing it to what I already knew, superimposing it on this framework and presenting the differences.  This is a great way to assimilate new knowledge and skills, but sometimes it blinds you to the whole concept so that you just miss the point.
 Imagine introducing wine for the first time to a 10 pints a day man and having him approach the subject in this way?

As a natural born cynic  (survivor) I am not good at the other method, E.G. suspending disbelief while you listen intently and even in the cinema, it had better be good or I’ll probably leave early, so I was not about to immerse myself in the” religion” of the thing in the hope that at some point I’d have a divine revelation.

What I have done is adapted a sort of midway approach that considers all viewpoints without extending the blog to book length.  I hope you find it as useful, as I did.

 Coming next week …

Making sense of Soviralnetbusworks

Why is it there? Is anybody really making any money form it? Why would it work as a way of winning customers? Why would anybody give up so much time for this when they could do it much more effectively by other means?

Bridging the gap between the web and the real world part 2

Part one: Bridging between the web and the real world

This one is a real enigma, no matter what angle you approach it form you get an entirely different viewpoint and just when you think you’ve nailed it along comes somebody to spoil your party with a new twist in the tail.

What is it?

This is the fun bit, it is not at all unusual to follow a conversation on this subject for some time and see everyone nodding sagely in agreement only to discover later that they were all talking about different things, sometimes very different things. Even when I pointed this out recently to a group, they seemed unperturbed and continually agreeing what a wonderful thing “it” was as though I had been merely a figment of their imagination.

I recently started a discussion on networking on one of the social networks.  I have done this every year since 2004 and previously it had always been obvious to the users of the “online network “what I was referring to.  This time, it was not the case.  This time person after person steamed in to tell me how well they are doing out of ”networking” and when questioned, “networking”  covered every flavour of human communication from trade shows, to conferences, breakfast meetings, Facebook and Twitter and meeting your pals in the pub.

The thing that stood out in fact was the deliberate omission of online networking in the majority of answers and those who did mention it were rarely very positive.

Also significant for me was the volume of private messages I received that were negative about all forms of networking online and offline, but especially online. The negative comments about offline activity mostly focused on bad manners at events.

My conclusion was that there is no definition at all out there for networking and it basically means communication.  If you want to narrow it down and have a useful discussion then you have to enforce some rules very aggressively on the conversation.

 Based on responses so far, I am defining networking as: ” making new contacts and keeping in touch with old ones for the purpose of gaining business”

This is not necessarily my definition, but this is as close as I could get to a consensus of opinion.

Define boundaries by agreeing  what it is not.

Many people responded to this with remarks to the effect that it is “not selling”. When probed, they defined selling as approaching a stranger and trying to sell them your product or service. I tried probing to discover why it was OK for the other networker to assume they were looking for business, but not OK for them to be up front about it.  I.E. Everyone at a breakfast meeting  is there because they want business and therefore they know why you are there, so why carry on a pretence, or why be scared to ask for business?  I found almost everyone evasive and extremely reluctant to pursue this discussion.

For the purpose of this discussion I am defining networking as:” making new contacts and keeping in touch with old ones in the hope of getting business from them”

 

What is the demographic of networkers? And what can we learn from it?

This bit was very easy, over a five year period there has been no change at all in this and it is driven home by the owners of all the major online and offline social networks, the users of business and social networks of all kinds are self-employed people who work either alone or in very small companies and partnerships and these are primarily knowledge workers as opposed to artisans, or sellers of goods.

 The only exception to this on a fairly large scale is recruiters who dominate LinkedIn in particular and they only differ in that they work for large organisations, but act independently for the most part. They also differ in that they are actively targeting and approaching customers with immediate propositions.

The key piece of information in this, I believe, is that we have a large group of self-employed people who need to find themselves new customers from time to time, but have no sales , or marketing training or ability and suffer from  a classic sales phobia (over active cringe gland). Interim and contract agencies capitalise heavily on this market need.

Is anyone making any money out of it?

Linkedin have built a huge job board for passive candidates and they are making a fortune. Others online networks are doing well too, The likes of BNI are doing well out of it. 

Stories of people actually building up sizeable small businesses, let alone large businesses are pretty thin o the ground and when you challenge the claims, it is even hard to find many self-employed consultants that have earned considerable fees via online networks.

In terms of offline networking, then it is somewhat different.  Financial advisers and management consultants have always used referral selling as the number one source of new business. They sold intangible products that were bough on trust and these huge financial and consulting firms recognised the need to invest in building this trust, so they focused on building strong relationships with good customers and then asking for referrals.  The new “prospects” were receptive because a large part of the critical trust building had already been taken care of via the recommendation.

Professional firms continued to curt their big influential clients by inviting them to events networking with them. This still continues and generates the billions turnover in consulting business.

I do believe that, in a ham fisted sort of way, modern networking follows this same principal . I certainly believe that modern networking offers professionals the chance to achieve the same ends on a smaller scale, though the skills are still required and the training and back-up is missing.

In conclusion

The key to understanding modern networking is to realise that no two people are talking about the same thing they are mostly just talking and indeed that, for them is the end goal.

Hardly anyone is gaining very much from online networking and in many ways it is probably because it needs to mix with offline interaction on order to let people build trust before making business arrangements, but the role of online is steadily growing and in my personal view it will steeple some time in the next  ten years as the Facebook  generation become influential in the marketplace.

Offline networking is producing gains, but in truth it is far inferior form the professional networking carried out for two centuries by the best financial and consulting firms, it is suffering bad press due to rude predatory members and just like so many bartering clubs in the past, it falls foul of “too many sellers and no buyers” syndrome

 

 Next:

Are there really clear parallels between Soviralnetbusworks and Sales and Marketing theory?

 

 

 

How can Soviralnetbusworks become a key part of the marketing mix as opposed to an alternative lifestyle?

 

What is the right strategy for me?

Persuasion for project managers

Tiger Woods, champion golfer, drives the ball ...

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 This blog is intended to give a simple no nonsense overview of persuasion based on a single universally accepted theory that can be adapted to any set of circumstances, but I have presented it in a way that is focused more closely on the needs of the project manager.

Six laws of persuasion

Cialdini‘s six laws of persuasion goes like this:

Law of Reciprocity

People tend to help those who have helped them or shown willingness to help.  Marketing departments give small unsolicited gifts in the expectation that a sense of duty will result in the recipient reciprocating. It works.

The project manager can use this law by getting to understand the needs of his/her stakeholders and staff and helping them when he gets an opportunity. The result will be reciprocation when in need of help or goodwill.

Law of Commitment and Consistency

People don’t like to be seen to change their stance on things once they have gone public. They believe that it is a sign of weakness. They will often stick to their guns even when it is costing them money or reputation.

Don’t under any circumstance place key people in a position to oppose your goals early on, because you will face an enormous uphill struggle to affect any sort of change.  Create a situation whereby you are in agreement about something and become allies early on, then respect that relationship by providing a robust rationale for everything you ask of them.

Law of Liking

People do business with people they like and the best deal gets refused when the salesman is someone they dislike or mistrust. We tend to like and trust people who are like us and share experiences.

It’s not necessary to become like someone to get on with them, only to find and focus on the areas you genuinely share interests in ,or experiences you have shared. This is easier than it sounds. You may not play golf, if you are a parent, you have something you can share passionately with Tiger Woods.

Law of Scarcity

Nobody is highly motivated to buy something when there’s plenty of it around, but when it’s the only one in the shop, suddenly it takes on a whole new dimension and you can become obsessed with acquiring it. Don’t make your deal, your proposition or even you too unattractive by making it too readily available.
Be approachable, but decisive and in possession of other options when you present an opportunity to someone to come on board with you. It’s down to you to make sure those options exist and that they are real and believable.

Law of Authority

Marketers and sales-people use testimonials to lend authority to their products.  In management you gain authority by supporting highly cherished beliefs and  goals, by working towards important KPIs, by demonstrating the support of your superiors and that of other important stakeholders.

Law of social proof

Social proof is the idea that everyone is on board with this idea and that to reject it would mean being left out.  One on one persuasion sufficient to get attendance a t a group event is often the best starting point, once they are all in the room you have produced the first element of social proof, now you have to maintain their interest.

 A simple process that may help

This is a process I learned in my marketing days and is widely used for things like writing copy or creating presentations.  It’s easy to remember  AIDA  pronounced “ayeeda” and it goes like this:

Attention.

First get their attention any way you can.

Interest.

Now maintain their interest enough to keep reading or listening. This usually requires well presented arguments and rationale.

Desire.

Make them really want to do this, buy this, be part of this.  This is where your colourful pictures, happy sounds and warm fuzzy feelings come in useful. Once they see themselves in that picture, they are yours.

Action.

Don;t wate it all, call for action. It could be enquire now, download this paper, sign here, or a simple question like “what’s the next step?”, but you must conclude the conversation.

 

That’s it.  Watch the adverts this evening and start noticing how they do this,  especially the lenghts they go to to get your attention and to get you seeing the pictures that will convince you.

 

 

 

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