Last week, we took a few days to host what we called the Customer Experience Innovation Workshop here at SAP in Palo Alto. We were joined by some of the best thinkers in the business—Lior Arussy, Ray Wang , Henry Chesbrough, and Michael Krigsman—along with business people from some of the world’s top companies in a variety of businesses.
The focus of the one and half day event: customer experience. We wanted to zero in on the practices and techniques that monetize customer experience. Participants agreed you need to be as targeted and surgical in your approach as possible, otherwise customer experience can drop off to being just the latest corporate fad.
Panel with (left to right) Henry Chesbrough, Ray Wang, Michael Krigsman, Reza Soudagar
The Customer Value Landscape
The customer value landscape breaks down into four basic customer quadrants:
- Frequent and profitable
- Frequent and unprofitable
- Infrequent and profitable
- Infrequent and unprofitable
The second group is a major concern. Every call into your call center (or other type of interaction) costs you money. Some companies say each call center call costs in excess of $3—which adds up quickly. If the profit generated by the customer doesn’t outpace how much it costs you to interact with that customer, or if they only purchase when motivated by deep discounts, then something needs to be done. There are two basic options:
- You can fire that customer (pretty much guaranteeing you’ll never have a profitable relationship with him or her)
- You can attempt to move them up the customer value chain
One thing is for certain, these customers know how to pay full price when they see the value of what they’re getting. These are the same customers who spend $100 for a bottle of fine Champagne for a special occasion or sleep in line in front of the Apple store to buy the latest iPhone at full price. They just don’t see value in what you’re providing!
Moving Customers Up the Value Chain
How do you move this type of customer up the value chain? Participants at our workshop agreed that if you take a deeper dive into understanding what kind of experience your customer wants and needs from you, you can add services or other special touches that make the whole experience invaluable. If you get that right, all agreed, the customer will be—if not completely immune to price—at least not in a mood to comparison shop.
A great example is Moishe’s Moving and Storage Company in New York that refused to be commoditized and listened to what customers valued most, transforming itself over time to meet those needs. Moishe continuously transformed itself from a moving company to a wine storage company and finally into Mana Contemporary, New Jersey City’s largest art center—a story recently covered in the Wall Street Journal. Anybody can move my boxes and store my old books and papers, but who do I trust with my best bottles of wine or a piece of art that I inherited from my grandparents? Suddenly price is less important!
The key is to look at your business as a provider of solutions or complete experiences rather than just a vendor. Take, for example, a flower shop, a market highly subject to comparison shopping and price sensitivity. Let’s say the flower shop gets a call from someone who says he needs same-day shipping on a nice bouquet for his wife. The customer says it’s very important that the flowers are delivered that day, because yesterday was his wedding anniversary, a fact that he’d overlooked.
At this moment, the florist has an opportunity. The customer needs more than flowers, he needs redemption. If the florist can somehow be the agent of that redemption, this customer will come back for life. So, sizing up the situation, let’s say the person taking the order offers to send a note apologizing to the wife for the florist’s mistake in sending the flowers a day late. It’s a bit of subterfuge, to be sure, but one that could lead to the customer’s undying gratitude. There is little more valuable than spousal forgiveness. This customer is likely to stick with this florist at least as long as he has anniversaries.
Purveyor of Rich Experiences vs. Provider of Commodity Products
A common mistake that companies make, according to our experts, is viewing themselves as providers of a commodity product, as opposed to purveyors of a full, rich experience. Take the B2B example of a company that sells stents used in heart surgeries. That company might view itself as just another player in an overcrowded, if important, market.
Peeling back the layers, we discover that this company has an unsurpassed track record of speed and reliability in order delivery—a critical element of the experience it provides. Emphasizing its delivery speed and reliability, this company can now tout itself as a lifesaver, as opposed to a hum-drum commodity provider. It helps its customers (surgeons) provide lifesaving procedures. As value propositions go, “life” is even more powerful than marital forgiveness.
Companies often get so wrapped up in the day-to-day activities of business, they somehow lose sight of their own value—they see themselves as a commodity. Exiting the commodity trap means adding value in the form of services or additions that boost your offering from product to savior. It’s not always possible to be a lifesaver, marital or otherwise, but by understanding exactly where your customer is coming from you’ve a much better chance of filling in the gaps and increasing value to your customer. And if you can do that, they’ll increase their value to your organization.
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