Measuring the Segmented Customer Experience

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.  

Measuring the Segmented Customer Experience White Paper

Surveys – a Force for Good or Evil?

The Internet is a wonderful thing.  With little effort, we can connect to hundreds (or millions!) of people.  That access makes it really easy to conduct surveys.  So easy, in fact, that we no longer have to spend much time thinking about it.  And it’s obvious that many companies don’t.

While a proper survey can teach you about your customers, poor surveys lead you down the wrong path, sacrificing development dollars on delivering something your customers just don’t want.

Survey problems show up in three ways:

  • Asking for opinions instead of using readily available data
  • Outsourcing your thinking to your customers, asking them what you should develop
  • Piling on “just one more question”

Surveys vs. Data

It has now become easier to ask a survey than to do actual research.  Just because you can ask a survey, though, doesn’t mean that you should.

About 18 months ago the financial management website Mint conducted a survey that has been used by a host of speakers purporting to show the huge impact the economy has had on spending habits. One often-used slide:

You can see one presentation using this data at http://www.slideshare.net/MirrenBizDev/2010-new-business-conference-mintel. This slide is used to show how consumers are abandoning credit cards – 12% discontinued their use in 2009!

Not likely. Can you imagine the ripple effect if one out of every eight consumers completely discontinued the use of credit cards? The fallout would be massive!

The biggest problem is the question Mint asked.  Just because respondents said they discontinued credit cards does not mean they actually did it. Worse, the real data is only a short search away. What was the real change in credit card usage in 2009? According to the Fed, credit cards did decline – but by 0.2%! Yes, this is a dramatic change from the growth of previous years – but nothing like the impact that the Mint survey suggests.

Predicting the Future with Surveys

Survey data are frequently used as input to business decisions. Asking customers what we should develop feels right – but doesn’t work.  Consumers are notoriously bad at predicting what they want. Take this survey by the Consumer Electronics Association. While it’s dated, I saw the waste it generated at a consumer electronics retailer firsthand.

In this survey the CEA asked consumers what content they wanted to watch on their HDTVs. 47% said they wanted to watch home videos, while 44% wanted to view digital photos. This survey was cited in numerous business cases, and the retailer developed dozens of endcaps showing customers how they could do this through adding a computer to their home theater or connecting their Xbox 360 to the computers on their home network. We invested hundreds of thousands of dollars in these displays – likely millions when inventory is considered – yet sold very few.  What went wrong?

You can’t ask customers to predict the future – even their own behavior.  When asked whether they wanted to see their home videos on their computer, almost half the respondents clicked yes. Clicking a Yes box is a far cry from actually purchasing a thousand dollars of equipment and installing it into your home theater.  When it came to actually installing a computer to the home theater, very few were willing to take that step in order to watch their videos of photos.  Predicting the future is always risky business – this survey is just asking for trouble.

Yet, there is some truth to this data. Consumers clearly did want a better way of viewing their home photos. But when compared with the daunting task of getting computer content onto their TV, most took the sensible path of a digital photo frame – much easier, with almost the same result. Surveys are a great way to learn about your customer – but not a great way to learn what they will do.

Question 21.1.2.1

There is also the issue of the rapidly growing survey. Since it’s easy to ask 5 questions, why not 10? 20? Or, in my favorite “Bad Survey” example, why not 45?

This survey is by one of my favorite retailers. But it is a poster child for bad survey design, featuring a total of 45 questions, 40 of which are required. There’s even a question “21.1.2.1!”

When you’re writing a survey, it’s tempting to include everybody’s input. And that’s a good idea. But every question you add results in a few more customers dropping out.  Surveys require discipline:  prune the non-critical items to be sure customers will give you good data on what is left.

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Does this mean that you don’t need surveys? Of course not – well-designed surveys provide critical input. But you need to spend the time to do surveys right. Some tips to success:

  1. Start with the end in mind. What is the #1 thing you need to learn? Is the rest critical? If you need to accomplish two very different things, consider a second survey.
  2. Decide whether a survey is really the right tool. If you want to understand behavior, observational data or behavioral analytics will typically give you much better results.  Surveys are best if you want to compare data over time, or compare results from two different groups.  Just keep in mind that the specific numbers (47% want to watch videos on their TV) are almost certainly wrong.  It’s not about predicting the future – it’s about understanding customer needs.
  3. If a survey is the right tool, determine how much patience your target market has. If it’s a free survey, keep it to no more than 5-7 minutes in length.  This is especially true for satisfaction or NPS surveys – keep these focused on this specific outcome, and use other surveys for market research.
  4. Consider using an expert to help you design the questions. Poorly-phrased questions will give you data – but sometimes customers answer different questions than you think you’re asking. If you cannot afford an expert, at least use an outsider to review what you develop.
  5. Test out the survey first. Have people outside the development team take the survey, and talk to them as they go through it – make sure their understanding of the question matches yours.

While the Internet makes it cheap and easy to do a survey, it also makes it cheap and easy to do crappy work. But if you take the time to do them right, surveys can be an excellent view into the Heart of Your Customer!

– Jim Tincher, Heart of the Customer

Review of The Ultimate Question 2.0

The Ultimate Question 2.0 (Revised and Expanded Edition): How Net Promoter Companies Thrive in a Customer-Driven WorldThe Ultimate Question 2.0 (Revised and Expanded Edition): How Net Promoter Companies Thrive in a Customer-Driven World by Fred Reichheld
My rating: 5 of 5 stars

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.

View all my reviews

Give Customers the Information They Need

How do you know what your customers need?

This is no idle question.  Giving your customers what they need is critical to building their engagement and loyalty.  You cannot create a great customer experience by leaving them guessing.

The first step is to put yourself into your customer’s shoes. This is pretty common practice– most companies provide ample opportunities for their employees to use their products through discounts, distribution of free product, etc.

But the problem is, as members of the company, we’re not real people. We get so used to our products that it is almost impossible for us to think like our customers do. But we go on assuming that if we build products that we like, customers will like it, too. While this classic Dilbert post is clearly tongue-in-cheek, it’s funny particularly because so many of us assume customers are as passionate (and patient) about our products as we are.

For instance, at Best Buy I implemented multiple attempts to sell Media Center PCs. These were special Windows computers with home theater capabilities that were going to be the hub of the American home theater. Why not? Our computer merchandise team used them and loved the experience. Unfortunately, it turned out real-life customers weren’t as keen on loading virus checkers on their TVs, or rebooting their DVD players.

Putting yourself in your customer’s shoes is a critical first step – but it’s just the first step. To further develop your insight, you need to take a step back and watch your customers. See where they struggle. This is how Intuit’s Quicken became the leader in personal finance software. The idea for Quicken was hatched when founder Scott Cook watched his wife struggle with tracking their finances. As Cook was quoted saying in the Harvard Business Review, “Often the surprises that lead to new business
ideas comes from watching other people work and live their normal lives… You see something and ask ‘Why do they do that? It doesn’t make sense.’”

This philosophy led to Intuit’s unique “Follow Me Home” program, outlined in Inc. Magazine’s profile of Cook. Intuit uses continual customer observation to drive development. And here is the key to their philosophy– “If there were problems, the fault was Intuit’s, not the customer’s.”

A retail experience last holiday season reminded me of what happens when you don’t take the time to understand the customer experience. I placed an order for my wife’s present on December 12 at JCPenney’s online site and received an immediate confirmation. I didn’t think much more about it, waiting to be told that the order was in.

After ten days, I realized I hadn’t heard anything– and it was just three days until Christmas. Getting nervous, I checked the status of the order online. Each item was listed “in stock” with no other status, so I assumed it must be ready and went to the store. There I learned that the order wasn’t in – they were back-ordered. I was assured it would be ready the next day. At home I looked at the order again, with everything still “in stock.”

The next day I called the 800-number before wasting time at the store, waiting for 20 minutes before being told my order was already at the store waiting for me (no notification had come yet), so I picked it up. Then, six hours after I picked up my order I received an automated call that my order was ready. This was December 23, cutting it a bit close!

The designers of this experience clearly did not take the time to consider the information customers need – particularly when problems occur. “In Stock” suggests it is ready to go – “In Transit” or “Back Ordered” would have been better. This was a routine order, but the experience left me very frustrated.

Contrast this to when I ordered an iPod and an iPad for store delivery at Best Buy. While placing the order online I was informed that the iPod was back-ordered, but the iPad would be shipped to the store immediately. An email alert came once the iPad was ready, including the expected delivery date for my iPod. When the iPod was further delayed, a third email alerted me of this. During all of this time I was able to view the order online, including the up-to-date status. Another notification told me when the iPod was at the store, and a follow-up email confirmed that I had picked it up.

Unlike JC Penney, Best Buy kept me fully informed of the status of my back-ordered item. How much more does it cost to alert customers that there are issues?  More importantly, how much does it cost when we don’t communicate?

Barnes and Noble also gets it. When I order a book online I receive a confirmation, and they send another email letting me know the book was waiting for me behind the counter.  Domino’s goes to the extreme – not only do they email when the pizza goes out to delivery, their website tells you when it is put in the oven, and even who is putting on the toppings! They understand that customers want information.

How do you determine what information customers need? Don’t base it off of your own experience. You have access to more tools and information than any customer. Instead, learn from Intuit.  Watch a real customer place an order. See where they have issues. Then follow up with them regularly as the order progresses. That is the only way to truly design the experience around the customer.

This holiday season, give your customers a present.  Give them the information they need.

Seeing through your customers’ eyes

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?

Get out of here!

How often do you visit with customers?  Do you do quarterly visits?  Monthly trips?

Clearly, the answer will vary across different types of businesses.  A restauranteur can visit sites daily, and really should do it at least weekly.  A designer of nuclear plants probably can’t visit as often.  But the primary question is:  are you visiting often enough to stay fresh?

I typically find people on either extreme.  At Best Buy we had the Steve Jensens of the world (used without his permission!), a VP who visited stores for hours multiple times each week, talking to customers and associates to understand their thinking.  You could always count on Steve to know what was on the mind of our customers.  Unfortunately, we also had no shortage of people who had to be forcibly dragged to visit a store.  When a store is only a mile away from your desk, there’s no excuse for not visiting regularly.

Contrast that to a B2B company I once worked with.  After spending a few hours brainstorming on a new reporting package, I recommended we put together some mock-ups and run them by a customer.  The room went silent.  Finally, one person asked:  “Why would we do that?  It will take too long”  It didn’t take long before I realized that not a single participant in the meeting (besides myself) had ever met with a customer.  How does a product manager create great products from their desk?

When was the last time you visited a customer?  And, more importantly, when is the next time?

Soft Rock Does Not Always Mean a Great Customer Experience

My local Lund’s grocery store offers a mostly-great shopping experience. Good produce, nice staff. But there’s one element of the experience that absolutely drives me crazy.

They contracted with Big Bowl to provide Chinese food, which is a great idea. Customers can stop in, grab supper, and likely pick up a few groceries while there. Genius! So, what’s the problem?

For whatever reason, while the rest of the store plays one soft rock station, Big Bowl plays its own DIFFERENT soft rock station! That results in an area in the store where you hear both stations. And there’s nothing worse than hearing two different soft rock songs at the same time!

Actually, there is one thing worse. One day when I was shopping, both stations were playing the same song – but out of sync! Imagine hearing “Billy, don’t be a hero” in one ear, “The soldier blues were trapped on a hillside” on the other!

So, what happened, and how has this continued for over a year now (despite several requests to fix it)? Does the store manager not care? Is he/she so overwhelmed with managing the store that there’s no time to pay attention to the customer experience? Or has the manager become so attuned to the annoyance that it’s faded into the background?

This is what this blog is all about. Especially in a down economy, superior products and services are no longer enough.  You need to provide a better experience than your competitors, in order to build that emotional engagement that will keep your customers loyal when your competitors send out their latest sales ad.

Creating that experience that resonates with your customers requires that you go beyond the research to truly understand their experience.  Try on the customer’s shoes.  Experience your product or services like they do.  And ask them questions – tons of questions – to make sure you truly understand the heart of the customer.