The Experience Design Scout

marketresponse researched what customers want from a company for it to be called ‘customer-friendly’:

1. Live up to the promises you make
2. Admit mistakes and solve them perfectly
3. Be accessible when I ask for it
4. Don’t be difficult regarding formalities
5. Leave me alone, unless you have something to offer

“Traditional entertainment retailers should modernize their instore experience” 

Background

By 2008 the purchase of music on the Web accounted for about 31% of total US music sales (eMarketer) — three times more than in 2005. Digital movie downloading follows a similar trend: in 2005 total spending was just $11M. and in 2007 already $114M. This shift towards online distribution primarily changes the way traditional entertainment (music, video, games) retailers have to make their revenue growth numbers. 

Many companies put all their efforts to the Web. E.g. retailers like Tesco, HMV and FNAC have redesigned their websites and changed their organizations to better drive online sales, others such as Best Buy are buying Internet companies to acquire the necessary skills. While many entertainment retailers deal with the Internet threats, many seem to have frozen their offline activities. Today’s high-street stores don’t look a lot different than a few years ago, right? Case in point, 1997 was the last time the HMV store was redesigned, one of the largest entertainment retailers in the world. 

Today’s challenges for entertainment stores

There are a few problems with the in-store experience, in specific I think they:

• Haven’t caught up with consumers’ technology shift. Years ago we ‘only’ had a hifi-system, a walkman and a video recorder to play music and movies. Today we play entertainment through a variety of devices including mobile phones, games consoles, mp3 players, set-top boxes/DVRs, and PCs. While stores sell the hardware, retailers have yet to find a good way to sell hardware more compellingly than electronics retailers, and to offer digital formats in an offline retail experience. 
• Don’t resemble how we use entertainment products. Vinyl discs were the only choice until the digital format arrived. When it arrived our options to play and share music kept on growing. We can send music to friends and even to our cars, we can reformat it into a ringtone for our smartphone, and use our TV to watch stored movies on our PC. We don’t see a lot of these applications in the entertainment stores.
• Don’t allow us to find what we really want. Online we can easily preview a movie trailer or listen to a song’s 30-second sample. We quickly find the music that is most popular among those with a similar taste, get specific recommendations, and create customized playlists. On the Web we don’t have to buy all the songs of an album, yet offline we do. Try stations only feature one game, scan and listen technology is weak, staff isn’t always helpful to find what we need.

Some companies are changing course

HMV: Increase spontaneous purchasing with more excitement

Seven out of 10 HMV visitors have strong or moderate purchase intentions, yet 30% are actually buying something. Two-thirds of the non-purchasers were open to purchasing while 28% of non-buyers claim ‘nothing caught their eye’. To increase the number of buyers, HMV wants to:

Blockbuster: Increase revenue per store through different concept stores.

Blockbuster revenues have gone down since 2003 and to turn the tide, a program is under way to redesign the instore experience. Several concepts are created:

Summary

Traditional entertainment retailers that want to increase store revenues with an improved instore customer experience must consider to:

• Increase value and relevancy to customers by dividing up store space to specific, clearly-defined customer segments. Family/kids, technology-savvy, and gamers are the top picks.
• Inject technology into the in-store experience to better align with consumer expectations.
• Navigate customers better with improved signage and cleaner layouts.
• Let employees play a key role in the new concepts. Pretty design, latest technology and quality materials can do a lot to improve an experience, but it largely comes down to staff to make the new format a success. How well can they answer difficult questions on technology? Are they helpful and friendly to customers? If you make corners to separate customer segments, have dedicated staff specialized for that segment only.

Direct costs:

• Internal staff. Primarily: UX team (IAs, interaction designers, visual design, developers, strategists, etc). Secondary (shared): Senior managers, members of ebusiness department. 
• Research. Web analytics, user research (focus groups, ethnographic research, usability reviews), satisfaction surveys, voice of the customer programs, etc.
• Agency and consultancy fees.
• Independent contractor fees. 
• Software. Web/IVR/POS analytics, ‘customer experience management solutions’.
• ‘PP&E’.

Indirect costs:

• Product margin. Premium pricing erodes when customers are not willing to pay a higher price for the great experience they are getting.
• Repeatable business / loyalty. The better the customer experience, the more likely customers are to stay, to keep buying the same product, or to renew the service.
• Marketing. Great customer experiences are passed on by word of mouth which is free advertising. The better your customer experience, the smaller the marketing budget?
• Missed business. Design errors and usability issues reduce conversion rates and increase the chance consumers choose a competitor.
• Customer service staff. The less usable and useful kiosks, IVRs and websites are, the more people will use the more expensive channels to operate like call centers and branches/stores.
• Processing costs of returned goods.
• Complaint handling.
• Employee training and motivation. An overlooked cost entry. Unmotivated store staff negatively impact the customer experience. 

This list is not exhaustive, so I’m keen to hear your ideas. And, is employee training a direct cost?

That’s a quote from Bain & Company research. Keep this in the back of your mind.

It’s September. The month when companies kick-off their intense annual budgeting rounds. Budgeting is probably the number one distraction among C-level executives and what suffers is strategy design and implementation. Chris Zook, partner at Bain and author of ‘unstoppable‘, mentions that on average top managers spend 5% of their time on strategy definition.

Question for these executives: What if you cut just 5% of your time wasted allocated to forecast company performances, and devote it to customer-facing activities? My three pieces of advice:

1. Spend (more) time listening to your customers. Talking is fine too, probably better, but scarier. Three customer calls a day? You can even do this indirectly — web analytics reports tell you what people search for, voice of the customer programs give you the complaints from last week, or just check what is written by customers in their emails to Support.
2. Experience mission-critical customer journeys. Are you with a bank? Try to fill in some online application forms for an insurance product. Executives including the CEO at Credit Suisse already do this frequently. You with an utilities company? Measure the time it takes from finding Customer Support’s phone number until actually talking to an agent. Believe me, you will be surprised when you drive home at night.
3. Walk down to the Market(ing) Research department. Executives all agree that to grow you need to innovate, and to innovate you need to create a deep understanding of customers (source: BCG). The good news is that executives are very confident that their internal processes work well to uncover latent needs. The bad news: they believe that ‘not enough customer insight’ is currently a major show-stopper in achieving innovation. So my advice: figure out where and why Research lacks effectiveness.

Looking forward hearing what you found. ;-)

Interesting findings from a Boston Consulting Group survey of senior managers/executives. The three most innovative global firms by number of votes are: Apple, Google, and Toyota Motor. [Noticed the names are the same as the leaders of the Q2 2008 American Customer Satisfaction Index?] To weigh down the ‘voting’, 20% of the ranking is determined by three-year revenue growth, three-year margin growth, and three-year shareholder return.

• Unique customer experiences is a key output of innovation. 15 of the most innovative firms get this status because they designed unique customer experiences that create loyalty. Breakthrough products is still the main manifestation of innovation.
• Developing a deep understanding of customers is firms’ best performing innovation capability. This finding is worrying. So, most executives think their firms know their customers well enough to be able to innovate through breakthrough products or services, or through applying a differentiated business model. I’ve seen too many (dis)satisfaction surveys where customers don’t feel understood by the companies they hold products from to believe that executives are wrong here.
• A risk-adverse culture is the main obstacle to ROI on innovation. The other primary obstacles are lengthy development times, difficulties selecting the right ideas to commercialize, and lack of coordination internally. A quarter mentioned they don’t have enough customer insight – obstacle number 5. Huh? So, managers believe that getting deep understanding of customers is the best performing process behind innovating, but a lack of customer insight is a key reason why innovation is not happening. Sounds like research and marketing don’t have lunch together!
• Customer satisfaction is the number one measure for innovation success. Second is percentage of sales from new products or services and third overall revenue growth.

Download the full report here.

Quickly: Medium-sized and large European firms lack process, vision, and internal cooperation to improve their customer experience (CE).

CE is important to firms strategies, but they are not disciplined about it.

I thought I share some of my researching findings from earlier this year: findings from a survey of 101 managers with customer experience management (CEM) responsibilities at European firms with annual revenue of $100 million or more . (The Forrester report is called “Obstacles To Customer Experience Success 2008, Europe”.)

• Unsurprisingly, 9 out of 10 firms believe customer experience (in the simplest way defined as ‘how a company interacts with customers’) plays an important or critical role in the firm’s overall strategy for 2008. 
• 3 out of 10 firms describe their CEM practices as undisciplined.

The lack of discipline shows up by low adoption rates of some key customer experience activities.

• Two-thirds of surveyed firms do not have a company-wide program to improve the experience and service across channels
• Almost a third doesn’t have a single set of customer feedback scores

In terms of day-to-day management, the top 3 obstacles to improving the customer experience are:

1. Lack of cooperation across organizations
2. Lack of a clear customer experience strategy
3. Lack of CEM processes. 

Interestingly, $1B+ companies lack customer understanding significantly more than smaller firms.

Earlier I referred to the six laws of customer experience. One law is that employees are “motivated to do what is measured, rewarded, and celebrated”. Data in this research shows that this is a serious problem for European firms: only a third of firms agree with the statement that employees across the company are recognized and rewarded for improving the experience of target customers.

In terms of customer experience investments, the top 5 items that firms are planning to spend more on in 2008 compared to 2007 are:

1. Web analytics
2. Customer behavioral research
3. Customer satisfaction research
4. Usability labs
5. Focus groups

Only a quarter of firms plan to invest in more services from design and marketing agencies.

My tips:

• Find out where CE (customer service, product satisfaction) stands now. Most firms don’t know where they are in terms of customer success. Just last week we got a request from a large telco to determine the quality of their call center — they had no clue. So, review the experience of your two groups of clients: your customers and your employees.
• Determine where you want to be in two years. Analyze your industry’s future and study what products and services matter to your customers. (Research tip: keep asking the why question until they are fed up with the interview/survey/test.) Interview employees what works and what doesn’t work internally and externally (where they think customers are let down). Then, articulate your experience strategy. Chances are high you need to look at and reengineer your business processes, not just build a pretty-looking website.  Ron at Marketing Whims just wrote a great post about this.

My two cents. I’m interested in your comments!

Qash is will be a Dutch community website that allows people to better understand how they spend their money. People can share tips or give advice to each other how to make better financial decisions. Another component is that people are able to create financial goals and track how well they do in reaching them. By uploading your bank statements from your main bank(s), and categorizing / tagging expenses, you can compare your spending with others. It is basically the Dutch Wesabe, Mint, or Geezeo.

To give subscribers the best experience, Qash should:

• Allow people to compare against peers, not just everybody. To understand better how I am doing financially, I’d prefer to compare my spending with people who have similar demographics such as education, income and age. I am not really interested how big the monthly mortgage payment is of fifty-year-olds or how many Euros teenagers put aside every month. I am curious to know the percentage of people with similar age and income who invest more than me and how this impacts the speed in which I reach my financial goals (just like Pertuity’s Dare To Compare function).
• Give proactive advice. Qash would really rock if it can make us all smarter in making financial decisions. From my research at Forrester I know that just 4 out of 10 consumers like to do their own research before making any financial purchase. The main reason is that financial services is a boring, difficult and tricky topic — still a lot of consumers simply don’t trust banks and insurers. Qash has therefor a great opportunity to link community-generated tips and ‘did you know’s?’ to my personal situation. So, alert me when more and more people are buying their TVs at MediaMarkt, or recommend opening a savings account at a specific firm when you see my account balance grow with a certain amount each month.
• Build tools that are useful. Useful means a) tell me how I am doing and b) what I should be doing to improve. Just last week someone pointed me to Barclays’ new ‘Little Extras Calculator’. Like many other online tools, it looks pretty and is built as a rich-internet application. But – unfortunately also like many tools – it is useless: I’m not getting any smarter, the product recommendations are based on ones of that firm only, and I can’t store what I have done. So, Qash, please create a savings calculator that shows me in one graph the end sum that I can expect when staying with my current bank compared with switching to any other bank.

Banks – are you listening?