“At every level in the organization, if people don’t understand what’s going on face-to-face with the customer, it doesn’t matter what else you’re doing.” That’s the advice of Rhoda Olsen, CEO of Great Clips. It’s the same strategy that has driven 30 straight quarters of same-salon revenue growth. But it wasn’t always that way. Back in 2005, “We thought we were a pretty customer-focused organization, as everyone does,” says Olsen. But that year sales and customers dipped for the first time in history. This wake-up call showed Great Clips they needed to better understand the current state of their customer needs. After conducting significant research, they discovered their brand wasn’t very well-defined and category confusion was significant. Customers had a difficult time distinguishing Great Clips’ value proposition from other salons. Read more the full interview, including an analysis of efforts, in Great Clips – Driving Organic Growth through Customer Focus Interview with CEO Rhoda Olsen.
Resources & Customer Journey Mapping Tools
Customer experience is the driving force behind any business. Resources such as suggestions from experienced CX professionals, white papers, case studies, and journey mapping tools can help you improve your business’s ROI and overall health. Access these valuable resources below.
In 2009, Seth Godin wrote Linchpins, on the need to make a difference. A group of us, motivated by his call to action, led efforts to bring him to town, and have continued to meet afterwards. These monthly sessions focus on solving business problems – an organization brings in their challenges, and we break into groups and brainstorm suggestions. The team then comes back in a few months to share their results. In the past we’ve worked on such diverse offerings as helping an author promote her book, developing a lawn service, and working with America Public Media on new distribution options for Marketplace (the NPR radio show).
Our next effort is on February 29 at the 50th and France Lund’s Community Room. We will be focusing on HOBY (Hugh O’Brian Youth Leadership) Minnesota. HOBY sponsors an annual leadership seminar where we expose high school sophomores to community and business leaders, then challenge them to commit to 100 community service hours in the following year. The graduates from the last four years have combined to serve over 19,000 hours! You can read more at HOBY overview for Linchpins.
I hope to see you there!
How do shoppers learn what they need to know about new products? Traditionally, the retail associate provided this product wisdom, but slashes to labor budgets have left shoppers on their own, accelerating their move to online competitors.
The Harvard Business Review’s The Future of Shopping by Bain consultant Darrell Rigby is an outstanding article on the future of retail. Rigby shows the risk to brick and mortar retailers if they do not react to the growth of online shopping. He proposes a vision for omnichannel retailing – combining the impact of a physical store with the opportunities of online and mobile shopping. It is a terrific call to action, filled with great thinking. The original link requires a registration to HBR, but you can also access it here.
This article led me to consider one aspect only briefly referenced: the role of product and category information in the shopping experience, and how changes in retailing have removed the traditional source of information from the shopping experience.
Consider the evolution of bricks-and-mortar retail as it experienced the growth of its online cousin. As Rigby recalls, in the early days of online shopping retailers built separate Internet organizations, dreaming of spinning them off for Internet riches. This separate reporting structure led to disconnects between the online and in-store experiences. With the crash of the DotCom bubble, companies eventually integrated the Internet with their brick and mortar stores.
Or did they?
Certainly, integration is better today than in the past. Shoppers can research whether a book is available at their local Barnes and Noble. They can order a product at Best Buy and pick it up 30 minutes later (Penney’s, on the other hand, has had issues). The Bricks and Mortar experience has merged into the DotCom. But physical stores have not returned the favor.
To understand why this is important, we need to review the Price War between traditional retailers and Wal-Mart and online competitors, and how this war impacts the store experience.
The Price War
Much of retail lives in conflict with Wal-Mart and its Every Day Low Pricing. Costco and low-cost pure-play Internet competitors such as Amazon.com have only increased these pricing concerns. These are not trivial fears, as these competitors’ continued growth shows the impact of Every Day Low Pricing. But selling against low price is nothing new. Retailers can still win, even with this price disadvantage.
But retailers cannot match Wal-Mart on price without a complete revamp of their business model. The fastest way to Chapter 11 is to attempt to pair a high-service experience with the lowest price. The economics simply do not work. Unfortunately, many retailers are landing in this No Man’s Land, with Best Buy as Exhibit A.
Last February Best Buy floated moving to Every Day Low Pricing. At the same time, they made no effort to discontinue their sales-focused labor strategy (as opposed to the cheaper “Where is this product” labor approach at Wal-Mart and Costco, or no labor at Amazon). Neither did they end their use of promotions to drive sales. This disconnect creates higher labor costs than competitors like Wal-Mart, who already enjoy the advantage of traffic drivers such as groceries. It is a no-win game, and Best Buy’s recent results show what happens when you try to play in this No Man’s Land. Neither they nor their customers are winning.
The alternative is to embrace the shopper, equipping her with the information she needs to make a purchase, rather than leaving it up to her to do the research.
Consumer Education: The Loser in the Price War
Consider how high-consideration products were purchased before the Price Wars or the rise of the Internet. TV created awareness, leading consumers to talk it over with a few friends before going to the store. Shoppers reviewed the product packaging (P&G’s “First Moment of Truth”), then found a sales associate to learn more about the product and its alternatives. They either purchased it, went home to read Consumer Reports, or visited a competitor to talk with their sales associate for a second opinion. Overall, a fairly linear experience, and one on which the store associate had a huge impact on a shopper’s (and retailer’s) success.
That world no longer exists. As Google argues in Zero Moment of Truth, consumers are now much more likely to search for information or ratings before making a purchase. This is partly because the growth of the Internet and product rating sites makes it easier. But a contributing factor is that retailers forced consumers into this model.
The Price War caused retailers hoping to keep track with low-cost competitors to cut any cost possible. Labor was their biggest expense – so it was reduced substantially, with disastrous impact to the customer experience. While this Wall Street Journal article focuses on the checkout line, shoppers see the same results in the aisles: Retailers have cut labor for short-term gains, but with long-term consequences to the customer experience.
Remember Circuit City? They were once the consumer electronics leader, even being featured in the seminal Good to Great. They were a model company. Until they weren’t. What big decision accelerated their demise? They fired “3,400 of arguably the most successful sales people in the company” in a move to save costs. But this type of move was not unique to Circuit City – retail labor was seeing regular cuts across the board.
Unfortunately, now that this labor has been slashed, shoppers are expecting more education than ever before. They want to compare products and learn what others think. They once went to stores specifically to ask associates for this type of information. With no one to ask, consumers are finding it the only way possible – by turning to alternate methods, particularly the Smart Phone.
Imagine this scenario: Your shopper is at your store when she remembers she needs a new coffee maker. She looks for a sales associate to help narrow down your ten models, but you do not staff this aisle. She reads the packaging, but does not find enough comparable information to make an informed choice. She reviews the shelf tags, but its four bullet points only repeat what is on the packaging.
You have now left her with three choices:
- Make her best guess (if she’s wrong, expect a return – which is bad for both you and her);
- Go home, do some research, and buy one from you (or your competitor) next week;
- Use her Smart Phone to educate herself on the product and check out reviews.
What do we expect? Of course she uses her Smart Phone. And once she pulls it out, you have lost. Because why wouldn’t she pull up a competitor’s site while she’s at it? And if their pricing is better, she will order it from them – especially if she can pick it up on her way home.
The irony is, you as the retailer have all the information she needs to buy today. You have the ability to accelerate her purchase, sending her home with the perfect coffee maker today. For example, Target’s website offers 15 separate product details: product height, width, and even the surface treatment (matte!). It is easy to compare between models, and she can also read reviews (43 for the Mr. Coffee 12-Cup Programmable Coffeemaker – Black). But none of this is in your physical store – at least not conveniently. There may be a kiosk five aisles over – but she is not going to go look for it.
A 2011 study at an international retail chain found that “Insufficient Product Information” was a top driver of customer disengagement, resulting in significantly lower spend for consumers reporting this problem. Today’s shoppers expect more information – not only in consumer electronics, but also in:
- Groceries (Is it healthy? Organic? Low fat?)
- Appliances (Is it green? How much energy will I need to run it?)
- Pet food (According to Google, 1/3 of pet food consumers search for information on these products)
In Zero Moment of Truth, Google reports that the average customer uses 10.7 sources of information before buying. How many of these are yours?
How has it come to this?
How is the store, where we traditionally learned about our product choices, now the place with the least information? It is almost as if we designed the experience to accelerate shoppers’ transition to online shopping.
Product Education is a missing sales driver
It is time for a customer experience do-over. How do you provide the information necessary to accelerate consumer purchases so shoppers buy from your store today, instead of your competitor’s website tomorrow? A quick review of some options:
Increasing labor is clearly one alternative. Retail associates can not only educate shoppers, but also close the sale and add in complimentary products. Best Buy found that for every 10th of a point it boosted employee engagement, its stores saw a $100,000 increase in operating income. While this is distinct from adding labor, it does show that effective associates improve financial results.
Apple is another example. Apple elected an anti-Wal-Mart retail model, refusing to compromise on staff talent or shopper information, and has been rewarded with sales-per-square-foot of $5,626 – easily the highest of any national retailer. I was at a competitor when Apple started their huge retail growth, and we studied them to improve how we educate shoppers. Unfortunately, we could not replicate their model: We had signs, they had people. And people always win.
Labor is the most expensive option, but it is also the most powerful. A 2009 study shows that 10% of all retail revenue was spent on employee wages. However, it also found that increases in labor at the chain they studied were correlated with increases in store profitability. Effective labor works.
But not any labor will do. Apple invests significant time and money into their training, teaching its sales associates a different sales philosophy: not to sell, but rather to help customers solve problems. The quality of your associate talent and management is what makes the difference.
You can also learn from Apple’s merchandising, particularly as it applies to shopper education. Apple supplements their labor with an innovative use of the iPad as a product information source. Each item at the Apple Store has an iPad placed right next to it with links to product information.
Or consider the digital price tag. Today’s paper tag is outdated – information is limited and static. Digital price tags offer the ability to provide updated and detailed product information, supplementing the traditional role of the associate.
The goal of this post is not to put out the all-inclusive guide on how to merchandise effectively, but instead to show how the Price War has impacted the customer experience, particularly regarding how customers research products and categories. Shoppers are leaving bricks-and-mortar retail now – and we are pushing them away. It is time to help them buy from us.
There is still time to react. You can fight the Internet at its own game, by bringing your online information to the shoppers in your stores. Better yet, unleash your killer app – your associates – in the battle. Fighting the Price War while simultaneously trying to engage customers is a losing battle. Select a path today, then invest whole-heartedly. Your customers will thank you.
Segmentation is a critical tool in developing products and marketing offers. Companies routinely separate customers into segments to understand and satisfy their unique needs. So why is segmentation so rarely used when measuring the customer experience?
Some segmentation methods include:
- Demographic. Best Buy built customer segments such as Jill (the Soccer Mom) or Buzz (the young tech enthusiast), creating successful store offerings around each.
- Behavioral. Health insurance companies build segmentation schemes around consumer behavior and demographics such as Young and Healthy or Chronics.
- Psychographic. Can be based on lifestyle, opinions, hobbies, or similar items. Grocery stores use segments such as the Indulgent Shopper and the Convenience Shopper.
- Geographic. Suburban, rural, and urban are common B2C segments.
- Industry. Most B2B companies include at least some segmentation around industry.
When conducting a Customer Experience Measurement survey (whether Satisfaction, Net Promoter Score or Engagement), most programs combine all respondents into a consolidated set of results, combining customer segments into a watered-down whole. There are clear logistical reasons to do this – it is easier and cheaper to build one set of results than 3-7. But what is the impact?
>>> Read more in the attached white paper: Measuring the Segmented Customer Experience.
The Ownership Quotient by James L. Heskett, W. Earl Sasser, and Joe Wheeler
My rating: 5 of 5 stars
What if your employees felt like they owned the company? If they were so engaged to be there that they went out of their way to make a difference on a regular basis? Just as importantly, what if your customers felt the same way, and invested the time to help your business grow, giving referrals and great ideas?
These are the central ideas behind The Ownership Quotient. Leading businesses have realized the limitations of satisfaction. Measuring satisfaction does not link to improved business results except at the very low end. The question is: what do we replace it with?
The leading candidate is the Net Promoter Score, which has created great buzz. Other contenders include Emotional Engagement, and Ownership. All do better than satisfaction – which is best depends significantly on your business, and what you are trying to address.
Moving beyond the measurement, though, this book does an excellent job of outlining the steps necessary to increase your customers’ and employees’ sense of ownership in your business. Utilizing case studies from Harrah’s, Apple, Rackspace and others, a philosophy of ownership is outlined that can definitely drive improved business outcomes.
Heskett and company do a great job of showing the limitations of Net Promoter’s one question, capturing the essential emotional nature of ownership. True leaders understand that peak performance requires capturing the hearts of your customers and employees, and this book showcases many best-in-class examples. I particularly like the ING Direct example of how they specifically “fire” customers who do not fit their ideal mode – one of the hardest (yet most impactful) efforts a business can undertake in order to focus on the most engaged and profitable customers.
Driving your employees and customers’ sense of ownership is critical, and this book makes a compelling case, including many great examples used by companies today.
NPS – opinions vary as to whether it’s the “best” way of measuring your customer engagement. The problem is that the industry is looking for a measurement that works for any industry or company. And such a tool does not exist.
Nevertheless, NPS is a good measurement, and Reichheld lays out how to be successful with the program.
The important thing that the author notes is that NPS does not stand for Net Promoter Score, but Net Promoter System. And it’s this System that is critical. In fact, if you replaced the measurement with Satisfaction, Engagement, Ownership, or your favorite home-brewed system, your business will still see significant growth if you apply the disciplines he outlines in his book.
A good book to get you started with NPS or any system. Highly recommended.
It’s not easy to think like a customer. In Made to Stick, the Heath Brothers talk about “The Curse of Knowledge.” We often know so much about a topic that we simply can’t understand the perspective of those who don’t know as much.
This is critical to keep in mind as you develop your customer experience. We get so accustomed to the way things are that it takes a very deliberate effort to step back and see it from a customer’s perspective. Over-featured phones, sales-prevention processes and convulated forms are constant reminders of what happens when you design the experience from a company-centric eye.
Seeing things through the customer’s eye is clearly critical to developing a successful experience. The challenge is: how do I do it? And how do I get the rest of my company to think this way?
Retailers have a fairly easy to watch customers shop. But that doesn’t mean they necessarily do it. In Why We Buy, Paco Underhill tells a story about working with Macy’s. While they were investigating a different part of the store, their cameras also picked up a tie rack on the race track, and they saw something amazing. Particularly on busy days, customers would browse for ties until somebody walked close behind them and accidentally brushed their backside as they went by – what Underhill called “butt brush.” Once customers (especially women) experienced butt brush they immediately abandoned shopping. Once the problem was spotted, the response was easy. Macy’s moved the tie rack and sales increased immediately!
But how many store associates walked by that tie rack every day? If you take the time, you will realize that there are dozens of ways to improve the customer experience right in front of you. But we’re often so busy running the business that we miss simple opportunities to improve our customer’s lives, and thus our results.
Retailers have no excuse for these types of problems. In the Lund’s example from my earlier post, how much effort does it take to walk a store and look for problems? But how often do we do it? Clearly, not often enough!
But this opportunity extends far beyond retail. Almost every service business has its own way of going “undercover customer.” While the watching cannot always be literal, customers share their experience in more ways than you might expect. Intuit developed its software by following people home to watch them install it, recording every misstep or issue along the way. At a healthcare financial services provider we “watched” our customers by matching behavioral data with demographics to get a better understanding of who was opening accounts and how they saved or spent their dollars. Clickstreams are another example – who is using your website, and how? Where do they come from, and where do they go next? Use inductive reasoning to look for trends, and use these to improve your customer experience.
Watching customers helps you understand what they actually do, breaking your myths about your customers’ behavior. Have you watched your customers today?
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