Tag Archives: Customer engagement

To save the retail store, think about real customer engagement

It’s human nature. We try to protect what we have even though we know that change is coming. In this post I’ll bring out some real drivers of customer engagement, and provide some tactics to get ahead.

There has been lots of buzz that the store can never die (Amazon is also getting into physical now), and how customer experience must be enhanced instead to make the store a place of enjoyment and social interaction. That’s all very true. However the fact is that if we think of retail as a store, we’ll be in deep trouble. We need to think of deep customer engagement instead, and that starts with knowing who our customers are.

All the analytics so far hasn’t gotten us any closer and I’ll explain why here. You’ll see that the analytics needs to be directed differently.

Plain vanilla eCommerce won’t help either. Because eCommerce itself is changing as the world is connected. The game is not about channels, its about the customers and creating context aware visibility. “20% other customers also bought a tent” was a great model when it came out, but is not the way of the future.

What you need is tcustomer engagement anywhere retail o think beyond the store, about how the store stocks items, how we run promotions, what amazing digital technology we have,  and how the supply chain feeds into the store.

Instead let’s turn the entire paradigm on its head.

Ignore the store, and just think of who our customers are, what they want, and why they want it?

Because thinking of the  store and our catalog is like looking inward. Instead, let’s look from the outside at what our business looks like – from the customer’s eyes.

When we start thinking like that we’ll notice that we don’t really know that much about the customers. What we really need is to think like a “marketplace” from the vantage point of our customers so that we can embark on a customer engagement strategy.

Here’s a supermarket example which will carry well to other scenarios as well:

1. What are customers thinking? Why do they pick up a Lean Cuisine meal?  Why are they buying 3 packs of Tofu when they normally buy one? Why did they pick up both soy and dairy yogurt?

2. Then let’s go back to the drawing board for our business. How can we meet their needs better? We’ll find that they are buying for a party they’re hosting, they are on a diet trying to prepare for that upcoming full marathon, and they have a kid at home with food allergies.

3a. Then let’s bring together all the actors who will make our retail business aka “marketplace” thrive? Perhaps the local fitness center, the local nutritionist,  a local restaurant, and the list will go on depending on what you want your business to be. You must engage customers in context, and tie in the places they go to.

3b. Then we establish a relationship with customers by finding a way to get in touch, and begin to address the core issue of customer engagement. It’s amazing how many retailers have no way to contact their customers?

3c. Finally let’s think of context every time we get in touch. Context means that we toss the catalog aside and begin the communication template with the customer – who are they? What did they buy before? Is there a pattern or anomaly in the latest behavior or transactions? Is there an intelligent guess we can make? Can we know something more about them by asking them? These questions lead to real customer engagement.

Because, capital, size, infrastructure, technology, and presence are not the real constraints. Those who have those things are not engaging customers any better either. But once you begin to think of your business as a customer engagement powerhouse, not a physical store or website, the momentum you generate will provide the solution to the constraints you face for customer engagement, and hence growth & commerce.

Photo credit: oliva732000 / Foter / Creative Commons Attribution 2.0 Generic (CC BY 2.0)

Based on the principals from my book Connected! How Platforms of Today Will Become Apps of Tomorrow. Get the models in your inbox for FREE by signing up.

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.

 

Pokemon Go beyond the initial rush?

pokemon-1555036_1280Timing is everything. Brands and businesses worldwide were quick to cash in on the Pokemon Go launch mania. Businesses jumped in with all kinds of promotions and offers as millions of people took to the streets hunting Pokemon on their mobile phones (I did too). For the most part, the promotional tactics for customer engagement by businesses can be categorized as:

  1. The lucky ones – some businesses were just plain lucky that their locations became part of the predefined Pokestops (where players come to collect virtual goodies) or Gyms (where players pit their Pokemons in battle). If you could handle the additional but distracted foot traffic, then you have the games inherent features working to your advantage. You can set up Lures for a few dollars and can make your location a hot bed of Pokemons to catch, or you could create specific promotions around the Pokemon battles if you are a gym. The possibilities for creating awesome customer engagement are endless and all that’s left is to tie these events to products and services.
  2. The not-so-lucky ones – Then we have the unlucky ones who got left out from the initial list of locations for Pokestops and Gyms. (these locations were pulled from another game and imported into Pokemon Go). These businesses who did not fall in a designated Pokestop or Gym area are relegated to running promotions the old way and hoping to catch some of the glitter associated with the hot new game. For example, Uber launched a promotion where you get free Uber rides if you catch a certain number of Pokemons in a given time. Other retailers launched similar promotions and invested in Lures at Pokestops nearby to try to get foot traffic in, and to get some brand recognition going. Still others launched offers where gamers can post pictures of Pokemon captured in their locations, while others launched Pokecrawls with series of stops to enjoy discounted drinks, catch Pokemons and meet other people. However, all said and done these customer engagement efforts didn’t really need to leverage Pokemon Go specifically. The only reason to do so was the novelty of it all. And that’s going to fade after a while.

As the novelty of the game wears off, what can the second category of businesses do to tap into this and other such developments sure to come up in the future? While its important for these brands to find a way to drive customer engagement, it’s also effort probably well spent. Thinking about this problem will help them become readier to tap into the next such launch, and perhaps create recurring events to celebrate what gamers – their customers – love. Moreover, the issues of the predetermined locations were specific to Pokemon Go so they will not always be hurdles. In the mobile and social world, its probably good to come up the hard way.

Image courtesy: https://pixabay.com/en/pokemon-pokemon-go-pikachu-pokeball-1555036/

 

Building the Future of the API Economy

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The impact of API economy is across all industries. Because APIs by their very definition are supposed to promote interaction and dialog across multiple companies, often in different industries.

In my article on American Banker Don’t Give Away The Store When Enabling APIs, I brought out the focus on ensuring that banks maintain their customer experience front end, while allowing additional channels for growth. For example, allowing travel sites, Facebook and retailers to access the bank’s services were examples which if taken too far with potential competitors could result in commoditization and loss of value (as the service providers are hidden as utility providers).

APIs are the future in today’s connected world. In this new post on American Banker titled 3 Steps to API Success, I tried to provide a simple framework to guide the development of Bank APIs with those customer experience principles in mind. Essentially, apart from going to market rapidly by opening up new channels, it is important to start building a sticky and value-adding customer experience by focusing on projecting the bank’s brand, not just the utility service itself.

The 3 steps in the framework sort of follow a road-map because they increase in complexity of course. Also read the full article on American Banker.

  1. Fill in the gaps in our customer journeys: Like any business, we often fulfill our end of the bargain, while leaving the remaining customer needs to the other players in the industry.  However, in this rapidly innovating world, the most important use cases for API banking will be driven by 3rd party applications that help customers accomplish the objectives that ultimately matter. Otherwise, this gap will be filled quickly by someone else. For example, banks provide a bank account but the space is rife with innovations around P2P payments and check sharing, spending pattern analysis, savings goals and calculators etc. Examples abound for small businesses, as well as commercial banking. Perhaps the first step could be to address these end to end journeys by enabling a 3rd party ecosystem around APIs developed for these purposes. These applications meets the objectives of low cost services provided to niche customer bases. These innovations often failed the “business case criteria” for in-house development. But they help the bank establish its brand by creating an umbrella ecosystem that is similar to how enterprise technology providers create their partner ecosystem.
  2. Moving towards an App Ecosystem model: The next level of the API model will go beyond exposing APIs to third parties towards building controlled environments where discovery, adoption, experimentation and payments will be seamless. Fidor and Mondo are 2 European banks that have laid the foundation of this model. Powered by 3rd party innovation and supported by customer experience experts from the bank, this app model brings a much tighter integration of the banks offerings and aligns them with the customers. Such a model reduces the go to market friction for partners (e.g. advertising, or fulfillment). It also ensures that the bank can market the entire package of services to customers and create conversations around their end to end needs, instead of negotiating on product features and price.
  3. Becoming a connector of value: The ultimate goal is not just to provide a service, but to anticipate customer needs, and ensure they are receiving the assistance they need as they make financial decisions. Over the years, banking has evolved naturally (like any service) from being a custodian of money, to being an agent that helps (or can help) make the right financial decisions. The API model now provides banks the right tools to make this mission come true. For example, helping the customers maintain the right balances for their upcoming payments, their IRA contributions, or just sticking  to a monthly budget for various categories of spend. As customers utilize the banks services (or the apps), this ecosystem will tend to grow stronger. In summary, for the first time, banks will be able to connect the different use cases and bring singular focus on the overall customer objectives. For example, Citi’s Price Rewind program tries to do this but relies on customer signups instead to gain access to transaction data and customer context. The Bill Payment service comes close but it needs to be integrated with the rest of the bank’s ecosystems.

Connecting individual value propositions by creating overarching customer identities and helping customers with proactive advice is what will differentiate one banking API platform from the other. And for this to take off, banks must take steps to make customers aware of the new capabilities, clarify each value proposition from the customer’s perspective, and on-board customers quickly and comprehensively. Such a model will obviously be based on ensuring privacy through various opt-in mechanisms. In summary, working backward from the customer motivations and experiences in the digital economy is key to innovate and maintain relevance.

Read more on American Banker at 3 Steps to API Success. Your thoughts and suggestions are welcome. Image taken from https://pixabay.com/en/users/geralt-9301/