How to create 3-Tier loyalty models?

In Connected!, one of the 5 strategies I outlined towards being a connected company was about creating 3-tier loyalty models. It means that we start thinking about extending our loyalty programs. Every industry can do it – banking, retail, CPG, travel etc. All we need to do is to think of what our customers want beyond the products we are selling. (The book is on Kindle as part of the launch offer for 99c) and this post is sort of an advt too (sorry about that)!

3-Tier-Loyalty-Model

In Tier 1, I show how traditional redemption based models (miles, points, discounts etc.), can be expanded to consider experiential, and finally aspirational loyalty. Studies have shown that our loyalty programs are becoming too discount focused, and customers are getting used to (even waiting for) the discount. That’s not bad but we can do even better! So the 3 levels of loyalty in Tier 1 are not just a way to jazz up the program, but also leapfrog competition by engaging customers as per their core purpose. And before you start getting nervous, know that this is not dramatically new. Anyone remember the awesome concerts that our Amex cards used to give us exclusive access to? The trick is to start thinking of exclusivity for our customers, and ultimately something they can look forward over a longer time horizon.

In Tier 2, I show how we can extend our programs to include additional players who will make our programs more effective. That’s the core idea of connected anyway – build an ecosystem. The basic premise is that the needs of our customers are broader than the products we are selling. So why not address that by being more inclusive. Being digital is about escaping our silos, and looking outside-in. Don’t just pay lip service to outside-in, do it!

And in Tier 3, I show how we should become reference anchors in our customers minds. We can do that by 2 ways. First, every brand today needs reinforcement. How can we translate the promises we make in our advertisements and slogans into physical experiences? If we claim trust, do we deliver it during and after purchase? Second, how do we start providing advice instead of just selling. We all know that customers always look for second opinions (check prices while in your store or bank branch, go to aggregator sites for travel bookings etc.). Instead of fighting it and calling it showrooming and other negative things, think of how we can make it easier for customers to get the same advice from us! Don’t let normal customer behavior cause a break in their engagement with you. I won’t say that Tier 3 is not complex but I will definitely say that it is not difficult. All we need to do is to start putting customers at the center of our universe! Rest will follow.

In short, reduce the cost of redemptions, encourage higher wallet share, and boost retention! Isn’t that what we all are looking for!

Get your copy of the book to read more. It’s available for 99c only as part of the introductory launch offer! That’s as close to FREE as you can get on Amazon Kindle. Sorry again for the shameless plug! Images are from the book.

Kindle Link: https://www.amazon.com/dp/B06Y3SZBZK

Connected! is now live!

connected book frontExcited to announce from Barcelona, Spain, that my second book “Connected! How #platforms of today will become apps of tomorrow” is now live as a Kindle eBook! The paperback & hard cover versions will out through the distributors soon. I’ll also make the eBook available on Barnes & Noble & Apple in the next few weeks.

For a limited time, get  it now at the special price of 99 cents only!

This launch is truly special to me because it’s on my Dad’s birthday. I’ve been working towards this goal for a while, so its very fulfilling. 47K words seem to do just enough justice to this topic, and I did have this important deadline to meet!

The book covers some pretty awesome ground on how the new digital and connected marketplace is going to evolve, and how we can take steps to prepare our products and companies for it. The notion that platforms will become like apps is a very interesting one, but is also a gradually emerging reality. Something we should all be thinking about as we evolve our products and companies. I’m sure you’ll like the book. I’ll be posting blogs on on my website to cover some of the topics in more detail.

A note on reviews: Some independent reviews are coming soon, but do let me know if you’d like to review the book (a brief 2-3 sentence or longer honest review). As a sincere thanks, I’ll send you a signed paperback for free when the review is posted. Your reviews will help a great deal to spread the word, and to cover additional material through blogs and articles. The process is just a little involved when you don’t have a traditional publisher’s army behind you to guide you and do all the heavy lifting! I’ll appreciate your help. Access the Kindle eBook here.

Looking forward to yet another amazing journey! Adiós amigos, and see you soon!

“What we call the beginning is often the end. And to make an end is to make a beginning. The end is where we start from.” – TS Eliot (courtesy Brainy Quote)

Is being customer centric bad for business?

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As part of my research for Connected!, I came across an interesting research study titled Effects of Customer-Centric Structure on Firm Performance (1). The study shows that being customer centric can actually decrease financial performance by almost 23%. Wow! This research definitely got my attention. Especially in an age where everyone is singing how wonderful customer centricity is.

As I dug deeper, I found that the study brought out 3 key aspects:

  1. First, customer satisfaction positively increased due to better and more focused attention by firms on their customers
  2. Financial performance increased by 8% in cases where competitive activity was weak, and where competitors were not already customer centric
  3. Financial performance degraded by 23% where competitors were already customer centric and where competition was strong

The first result was sort of expected. But result 3 above was surprising. So I dug deeper.

Apparently, there were 2 core drivers of the above results. First, organizational overhead or coordination increased significantly in a customer centric organization. This wasn’t too much of a surprise. Second, in cases where there were high levels of competitive activity, very little was typically gained by way of uncovering innovative approaches and meeting unaddressed customer needs. Given that being customer centric is actually supposed to drive this very result, the study brought out a very interesting anomaly.

There is no arguing with data. Ready to abandon being customer centric?

Not quite because I do have good news for you! Here goes.

  1. First, how customer centric you are probably cannot be determined solely by top level organizational structures and business divisions. Empirical data is always collected “after” such studies bring out these dramatic revelations. The catch-22 is that existing data does not always tell the whole story.
  2. Second, even in an organization structured by customer segments, there is lots of coordination and alignment of incentives against a largely standard product portfolio that doesn’t actually change much by customer segment. The results of the study may have been skewed by this fact. Many organizations hence are never really customer centric to begin with. They are just organized like that.
  3. Finally, organizations may indeed have specific and tailored product offerings aligned by customer segments. The claims of being ineffective in a strong competitive field are true only if we factor in the dominance of uniform and similar offerings from one organization to the next. Such product portfolios hence are actually also commoditized.

Clearly the right kind of innovation and how we meet customer needs is a critical factor. Brand plays an important role in being distinctive and preferred but it must be supported by the underlying differentiated value propositions. Innovation is much needed, not only to rejuvenate existing product lines, but also to introduce new products that will fuel the future and protect against competitive advances.

However, innovation today must be different given the increasingly connected nature of businesses. A central premise of my upcoming book is that the world is getting connected (of course) across industry boundaries. Hence our traditional go-to-market by product lines is slowly being rendered inadequate. Instead, we need to define our go-to-market by cross-industry customer experiences. These  experiences in turn must be defined by the overall purpose of our customers. Consequently, that focus on the customer’s purpose will extend beyond our products alone.

Everywhere we look, the market is evolving slowly towards this new model. But many of us are still looking inside-out, not outside-in. Hence our customer centric structures don’t yield results. Think of the following industry examples which show how the world is getting connected: Google Home, banks connecting with fitness centers,  Apple Siri connecting with Uber, Amazon Alexa connecting with banks, chabots on popular chat platforms such as Facebook and WeChat, student education programs like uPromise connecting all kinds of spending and occasions, wells Fargo connecting with accounting programs, Blue Cross Blue Shield connecting with Lifetime Fitness, and the list goes on. These examples serve as good indicators of the oncoming trend.

So what can we do to meet this challenge of being customer centric? In my book I outline how we must think of executing and organizing for a connected world. The chapter is very innovatively named as “Execution”! Execution is the fifth and final element of the Connected Company framework I lay out in “Connected!”. The other elements being cross-industry customer journeys, 3-tier loyalty program, a new equation for customer engagement, and a model to integrate our products and focus them on customer purpose.

The 3 methods outlined in “Execution” are below:

1. Connected Communities

One of the biggest issues with innovation is execution. Either we can’t seem to channel the right ideas through, or good ideas don’t seem to get executed well. Innovation and research groups are often misaligned or unable to tangibly meet the constant ROI demands made of them.

This problem was summed up very well in Innovators Dilemma (Clayton Christensen) which recommended that breakthrough innovation be set up as a separate business unit to be successful at delivering. Various other approaches have been recommended including the concept of ambidextrous organizations which studied various org designs and recommended an approach  similar to that in the Innovators Dilemma.

However, the challenges for innovation today are different from what these concepts outlined. In fact, business innovation today is more than about core products and business alone. The connected nature of businesses can render an innovative product obsolete rapidly. Innovation has to be thought about in an ecosystem, and for that reason, the traditional approach of setting up separate business units is insufficient. The design must be created consciously with a focus on customer purpose, with the aim of rejuvenating not only the product lines, but also how we go to market. The “connected communities” as I call them are almost like industry consortiums but only much broader – operating across industries. They are formal creations and have a simpler charter – to span connected customer experiences. They need to operate much like an industry consortium and cut across industry and product lines. The communities include partners from multiple industries to bring cross-company customer journeys to life. And then, looking outside in, create and pilot new CX programs within their organizations and their partners to stitch various product portfolios together. These connected communities must have the budget and resources to execute the entire lifecycle of innovation, before mainstreaming the pilot.

The important message is to create and gain momentum on a CX program from the outside in, and then use it to enhance and evolve the core. The next big hurdle is to operationalize these CX programs. CX Focused Org design explains this. 

2. CX Focused Org Design

We are all customer centric. Or at least we claim to be. We put the customer at the center of everything we do. But then, we turn around and divide our organization by products, businesses, and geographies. Next, we valiantly strive to realize the power of all our capabilities to serve the customer through layers of integration and coordination. This gives rise to the dismal results revealed by the research I referenced in the beginning. Obviously, this approach is missing an essential ingredient that causes us to fall short of realizing the full potential.

Let’s consider the top level org structures to be superfluous (for reporting purposes only). Then there really are 2 basic go-to-market models. 1) brands or products going straight to customers, or 2) through an account or customer group often segmented by customer types. Both these models need to be augmented to compete for the connected future. In a CX focused design, this is done by including an overarching CX program layer which is essentially the connected community. Designing for the future is about thinking very clearly about customer experiences in an ecosystem, not just in an independent corporate context. Hence, our top level products should be a combination of value propositions from the entire ecosystem that supports the customer experience. These value propositions will be an output of the Connected Communities. The Nike+ program, and the new Plenti loyalty program could be considered broad examples of this approach. They signify an overall program, but also allow for individual products. Our challenge is to make this CX focused org design standard, not optional. One of the primary hurdles is explicit measurement and accountability. The next section addresses that.

Connected Scorecard

We all know about the Balanced Scorecard and the associated tool called the Strategy Map, originally made famous by Dr. Robert Kaplan. Regardless of how extensively you use these tools, the concept is important to apply and understand, even at a high level. The strategy map alone gives tremendous food for thought. People and how they are motivated along the desired path are critical for a good org design. No amount of coaxing can accomplish what we don’t or can’t measure.

The effectiveness of any methodology depends on what we feed into it. In this case, the primary input is the strategy or the way to play. I’ve introduced a simple, easy-to-use Connected Scorecard as an input to existent management methodologies. This scorecard brings the outside-in perspective to the top of the food chain. It provides a simple way to measure how we are achieving the goals of meeting the needs of our customers in a connected world.  There are only 2 measurement groups  – ecosystem, and customer journeys. The first one measures how well we are including players in a cross industry fashion (coverage, relationship strength, competitive parity) . The second one measures the breadth (how many) and depth (how well, financial contribution) of the customer journeys we are enabling. The Connected Scorecard will hopefully mitigate the problems of isolated innovation, competitive inertia, and the issue of balancing the future with the present. It gives us a practical framework for driving and measuring our effectiveness in a connected world.

In summary, measuring the effectiveness of being customer centric can be viewed in one way through the lens of finding unmet needs to leapfrog the competition. In order to do that, it is critical to actively address customer journeys in a world where industry boundaries are crumbling. The concept of connected communities, CX focused org design, and the scorecard are possible techniques to help us accomplish that.

(1) The research study referenced can be found here.

(2) Image credit

Thanks for reading! Please do share your feedback and thoughts. This blog is based on my upcoming book Connected! – How #platforms of today will be apps of tomorrow. The book outlines how the platform story of today will evolve in the near future, and presents a “Connected Company” framework. One of the pillars of the framework is Execution (which we read about today). Read about the book here, and sign up to receive updates and launch discounts. Also visit my first book Dancing The Digital Tune which brings out 5 principles of customer engagement and creating a strategy for the digital world. It was of course, also the foundation for Connected!

 

Moving towards Ecosystem based CX

One of the primary goals of the “Connected Company” framework is customer engagement. The terms customer engagement and customer experience take on a new meaning in the connected context. In Connected!, I bring out the need to focus on Ecosystem based CX instead of company specific CX.

Ecosystem Based CX

Traditionally, we’ve relied on industry based customer personas and use cases. And we’ve measured our effectiveness through channel maturity and execution. But as we move towards a connected world, those use cases and personas will be woefully inadequate. The value we bring to our clients may look to be exceptional if we look inwardly, but to our customers, we will appear to be stuck in the stone-age.

Consider these examples:

  • The financial technology (FinTech) revolution is emerging in the banking industry. Banks have excellent products and robust risk management procedures. They even have free checking accounts, great cash back programs and even protect us 100% in case of fraud on our cards and accounts. But they are far from being the heroes today. Instead our heroes are those that are able to capture the customer front end, look beyond the core banking products and provide a service which banks fail to do. Our hero is the mobile phone app that takes the change from our retail spend and invests it into a retirement account. Or the app that lives off commissions on payments transactions but provides a seamless experience.
  • Retailers are trying to reach customers by way of coupons, promotions and deals of the week. We’ve reached a point where customers have become so accustomed to price discounts that a deal must always be present, and customers will always double check it too! Efforts to change this has resulted in huge failures (e.g.  J.C. Penney). Moreover, an offer never reaches customers when they need it. To the customers, despite all our attractive stores and technology, we are still stuck with the marketing models of the old. If customers are actively engaged the game can be instantly raised by many levels. Many retailers are now partnering with the mobile apps of our banks to provide us with deals (e.g. card linked offers). This capability helps both retailers and banks create new ecosystems around the customer and raise the level of one-one dialog and wish-lists. The difference this approach brings from bulk campaigns is profound – especially because we combine a sticky relationship (banking) with a fleeting relationship (retail). Such an approach also mitigates the privacy conundrum plaguing the industries. The Customer Interaction Spectrum explains this well and is an integral part of the Ecosystem Based CX framework .

It is clear that Ecosystem based CX is the need of the future. Consider the following additional scenarios where industry boundaries are being transcended:

  • A retailer partnering with a fitness center to better personalize both sides of the customer experience and commerce
  • A travel agency partnering with a bank to manage 3rd party local payments and risk management. Both of these examples will leverage IoT and rely on digital ecosystems to deliver the experience.
  • A bank partnering with retailers and brand organizations to push personalized promotions to their customers.

As is evident, industry based personas and use cases have their place in the planning and execution of business processes such as support and sales. But they are grossly insufficient to drive the customer experience of the future. We need to build real customer personas, which by their very definition cannot be limited to an industry alone. We need to think of our customers as people. In Connected!, I outline practical ways to develop Ecosystem Based CX – identify the ecosystem, balance corporate priorities, and develop the customer journeys that will propel us into the future.

 

Connected Company

The Connected Company Framework

Preparing for the connected future will have a far reaching and profound impact on our organizations. We cannot not change how we work, and how we think, and still expect to be creating magic with our customers.

Connected CompanyThe framework that I detail in the book “Connected!” provides a simple and immediately actionable blueprint. It consists of defining what a connected company is, and 5 important capabilities to support the vision.

What is a connected company?

The philosophy of being a connected company relates to an expansion of what we consider as boundaries or limits of our products and resulting customer experiences. Physical boundaries between industries are falling. Measuring ourselves on digital capabilities for distribution and access to our products alone is an approach that is strikingly inadequate for the future. We must instead look at the entire customer engagement ecosystem. We must think of our own products portfolio as an extension of the ecosystem.  That is not an easy evolution. But its becoming easier today with technology. Think of  voice activated devices or chatbots that can connect with your bank and book your flights for you. Or cars fitted with advanced technology that can drive themselves too. Or how Apple is bringing the power of loyalty programs right at the point of sale. These are just the beginnings of this exciting trend.

As a result, the entire concept of digital maturity assessment must change. While individual portfolios and channels can still apply the traditional definition of digital maturity, those parameters are no longer very useful in defining overall competitiveness. To summarize, digital strategy is not about our digital capabilities, but instead it’s about defining how to compete in a digital world.

The 5 capabilities necessary to be a “connected company” are:

  1. Block 1: The concept of Ecosystem based CX shows us how we should be building customer journeys that span not only our channels and products, but instead focus on the customer and leverage the power of our ecosystem. This means that an inside-out customer journey that shows customers interactions and touchpoints with our channels and products across the purchase lifecycle are no longer adequate. We must look outside-in.
  2. Block 2: The 3 Tier Connected Loyalty model will outline how the concept of loyalty has to tap into customer aspirations and motivations and how to extend the loyalty and rewards model to span the connected ecosystem. This approach also helps reduce the “cost of loyalty” while adding greater value to our customers.
  3. Block 3: The connected model of Customer Engagement shows us how emotional and physical engagement touchpoints should and can complement each other. It also shows how to reinforce customer confidence in our brand so we can become a reference anchor in our customers’ minds by being an advice engine. And it shows how to do that the ecosystem we define and evolve for ourselves.
  4. Block 4: The connected model of Integration is about how we present ourselves to our customers to build lasting and meaningful customer relationships. It will show us how we need to unify the combined appeal of all our products and services. In addition, this capability will show us how to extend the value of our portfolio by bringing the power of our ecosystem to our customers.
  5. Block 5: The Execution capability will perhaps clarify the biggest challenge facing leaders today – how to execute and thrive in a new connected world. This block combines various techniques and outlines practical methods to get going and build on the momentum, We will explore the concept of creating and leveraging Connected Communities, what a CX focused organizational design looks like, and how the traditional concept of the balanced scorecard model should be adapted to turn our companies into connected powerhouses.

Now that we have a blueprint of what it means to be a connected company, explore these in more detail.  Get your own copy of Connected! here.