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“The Customer Experience Revolution is a book that everyone who
wants to succeed in business must read.”
—Todd Robinson, Founder and Former Chairman, LPL Financial
“Companies that delight their customers outperform their peers. This
guidebook tells us why and how they do it in industries as diverse as
retailing, smartphones, food service and driver education. I highly
recommended it to anyone building a customer-focused business or
refocusing an existing business on the experience of the customer.”
—Larry Tesler, Larry Tesler Consulting,
former Vice President and Chief Scientist, Apple Computer
“We’ve all heard about great companies like Starbucks, Apple, and
Intuit, and we enjoy great experiences with them every day. However,
few of us can truly articulate what it is that each of these experiences
does for us, much less how we might replicate the experience in our
own companies. The Customer Experience Revolution provides us with
a great framework of understanding those experiences. It is a mustread
for leaders who want to drive great customer experiences within
their own organizations.”
—Steve Albee, Senior Vice President, Union Bank
“Where does your brand begin and end? Where does your marketing
stop and delivering online start? With cloud computing, online
purchases, SAAS use, and live support in social forums, can you
even define where your product experience begins and ends? These
days you cannot and should not even try. Successful companies have
prospered in response to these mega trends by taking the holistic
approach described in The Customer Experience Revolution by Jeofrey
Bean and Sean Van Tyne. This book is a must-read for anyone in the
product delivery value chain. I fully recommend it.”
—Daniel Rosenberg, SVP Product UX, SAP
“This is the best business book in years! Bean and Van Tyne do a
brilliant job of analyzing what winners do to create a world-class
customer experience. They spell out the winning steps so you can
implement them in your business. If you want to increase sales
and customer satisfaction and, at the same time, cut your costs,
follow the advice in this book.”
—Joely Gardner, Ph.D., Instructor, User Experience and Usability Certificate program,
California State University Fullerton, and Founder, Human Factors Research
“Van Tyne and Bean explore case studies of some of today’s most successful
companies. As they look at their business, marketing and product design,
it becomes clear that the secret to success is to put the entire organization
behind creating an excellent customer experience at every point. The book
is full of both cautionary tales and inspirational stories.”
—Whitney Quesenbery, author of
Storytelling for User Experience and Global UX
“The Customer Experience Revolution is a timely addition to any
business reading list. This book provides insights to understand
these changes and what companies of all sizes can do to embrace a
successful customer experience strategy.”
—Sharon Carmichael, Manager, User Experience, Sony Direct, Sony Electronics
“The Customer Experience Revolution is a current and relevant book
highlighting the key role customer experience should play in your
company’s business strategy. Extremely well-written in everyday
language that we can all understand, Sean Van Tyne and Jeofrey Bean
have thoughtfully made a case for the changing field of customer
experience. Interspersed with high-profile case studies, along with
practical advice, this book takes the reader from the beginnings of
several start-up companies to their incredible success, and some
to their very recent and untimely demise. This book is a mustread
for the strategists in your company. If you don’t think that
your customer’s experience with your company’s processes, people,
organization, and your brand are overwhelmingly crucial, think again.
If you want to make your mark as a leader, engage your customers
and act on the advice provided in this book.”
—Carol Buehrens, Chief User Experience Architect/Customer Experience Principal,
ICW Group
“Across industries we’re approaching the ‘Vortex,’ a feature horizon
whereby winning customers and growing business is no longer a
function of new features but something else entirely. Filled with
accessible and thought-provoking examples, The Customer Experience
Revolution demonstrates how organizations both large and small
must engage with their customers to prevent commoditization and
sustain a healthy bottom line.”
—Darryl Kuhn, Chief Technology Officer, Skinit
“Creating an exceptional customer experience is critical to the long
term success of business today. The Customer Experience Revolution
contains a treasure trove of vignettes highlighting companies that
really understand what it takes to improve customer relationships via
a stellar experience. Gems and nuggets abound for the savvy business
that wants to focus on their customers.”
—Becky Carroll, Author of The Hidden Power of Your Customers,
and President and Founder, Petra Consulting Group
“Every executive in most corporations will tell you how important it
is to deliver the best customer experience. However, there are very few
companies that do it in a repeatable way. Most corporations struggle
and fail to make Experience Design an integral part of their
company’s culture. In The Customer Experience Revolution, Bean and
Van Tyne have woven together essential concepts with real-world
examples of what it takes to deliver awesome user experiences. In my
view, this work will prove invaluable to people who need to make user
experience an integral part of their business and their products.”
—Ivan Crespo, Research & Design Software Engineering Manager, Eastman Kodak Co.
“Providing great customer experiences is the foundation of business
success in the 21st century. In their new book, The Customer
Experience Revolution, authors Jeofrey Bean and Sean Van Tyne
show what separates great companies from also-rans, and what your
company has to do today to join the revolution.”
—Bilal Chinoy, Senior Vice President of Products, EMN8
How Companies Like Apple, Amazon, and Starbucks
Have Changed Business Forever
JEOFREY BEAN
SEAN VAN TYNE
The Customer Experience Revolution
Copyright © 2012 by Jeofrey Bean and Sean Van Tyne
All rights reserved. Printed in Canada. No part of this book
may be reproduced or utilized in any way or by any means,
electronic or mechanical, including photocopying, recording,
or any information storage or retrieval system without
permission in writing from the publisher.
Published by Brigantine Media
211 North Ave., St. Johnsbury, Vermont 05819
Cover and Book Design by Jacob L. Grant
ISBN 978-0-9826644-6-9
Other Brigantine Media books include:
Act Like You Mean Business by Rob Biesenbach
It’s About Time by Harold C. Lloyd
The Big Picture: Essential Business Lessons from the Movies
by Kevin Coupe and Michael Sansolo
Am I The Leader I Need To Be? by Harold C. Lloyd
Business Success in Tough Times by Neil Raphel, Janis Raye, and
Adrienne Raphel
Win the Customer, NOT the Argument by Don Gallegos
Selling Rules! by Murray Raphel
Crowning the Customer by Feargal Quinn
For more information on these books please contact:
Brigantine Media
211 North Avenue, St. Johnsbury, Vermont 05819
Phone: 802-751-8802
Email: [email protected]
Website: www.brigantinemedia.com
In memory of Steve Jobs 1955 – 2011
A visionary genius, inspirational experience maker,
and architect of the future.
Dedication
To Joanne and Laura
for their love and tremendous support
to make this book a reality.
Contents
Acknowledgements………………………………..xiii
Introduction
Customer Experience is the New Currency………..1
Chapter 1
Time for a Revolution………………………………..19
Chapter 2
Customers Take Charge……………………………..29
Chapter 3
Ask, Watch, and Listen……………………………..49
Chapter 4
Less Can Be More……………………………………59
Chapter 5
The Emotional Connection………………………..77
Chapter 6
Innovating Customer Experiences………………..89
Chapter 7
Commit to the Customer Experience…………….109
Chapter 8
The CX Revolution: Who’s Next?………………….119
Bibliography………………………………………….131
Index…………………………………………………..139
xiii
This book would not have been possible without
the support and encouragement from our family,
friends, and colleagues. Most importantly, a very special
thank you to Dr. David C. Gardner and Dr. Joely Gardner
for their confidence in us and the insights and experiences
they shared as authors of many published books. They generously
gave their time and deep knowledge to mentor us
through the book process.
We acknowledge the great Bill Gladstone, Kathleen
Rushall, and all the helpful people at Waterside Productions.
Two authors could not have asked for a better literary
agency. This is true, too, for our publishers at Brigantine
Media, Neil Raphel and Janis Raye. Neil and Janis have
been a joy to work with—lots of laughs, exceptional ideas,
and great conversations.
And we would like to acknowledge the very special
professionals who directly shared their time, enthusiasm,
and insights into how great companies create extraordinary
Acknowledgements
The Customer Experience Revolution
xiv
Bilal Chinoy
Senior Vice President of Products
EMN8
Ivan Crespo
R&D Software Engineering
Manager
Eastman Kodak
Gari Garimella
Founder and Managing Partner
I DRIVE SAFELY
Kaaren Hanson
Vice President,
Design Innovation
Intuit
Scott Jenson
Creative Director
Frog Design
Darryl Kuhn
Chief Technology Officer
Skinit
Pete Marlow
VP and General Manager,
Corporate Communications and
Marketing
J.D. Power and Associates
Donald Norman
Co-Founder and Principal
Nielsen Norman Group
Phil Ohme
Principal Interaction Designer
Intuit
Regina Pingitore, Ph.D.
Chief Research Officer
J.D. Power and Associates
Lisa Roth
CEO
Keystone Capital Corporation
Esther Stearns
President and COO
LPL Financial
Steve Swasey
Vice President,
Corporate Communications
Netflix
Larry Tesler
Founder
Larry Tesler Consulting
Gary Tucker
Senior Vice President of
Global Services and
Emerging Industries
J.D. Power and Associates
experiences, and change industries and people’s lives for
the better. They are the heart and community of this book
and include:
1
There is a select group of extraordinary companies
that develop and deliver superior products and services.
But they don’t stop there.
These exceptional companies have shown us that great
ideas and great products alone are not good enough. Not
good enough for their customers and not good enough for
their businesses or our future. These companies change
people’s lives, cause competitors to scramble to catch up,
and transform their industries forever. These companies do
it by purposely creating and delivering pleasing customer
experiences. They delight people at every step of the customers’
experience: intriguing them as potential customers,
satisfying them when they become true customers, and
continuing to outperform until their customers become
advocates for their companies.
Some of these companies, like Amazon, Apple, and
Starbucks, are household names. Other companies, such as
Introduction
Customer Experience is the New Currency
“We know from the data that people will pay
more for a better customer experience.”
—Gary Tucker, J.D. Power and Associates
The Customer Experience Revolution
2
Intuit, are known mainly by their products (in Intuit’s case,
QuickBooks, TurboTax, and Quicken). Smaller, less wellknown
companies are customer experience leaders, too:
Square, Skinit, EMN8, LPL Financial, and I DRIVE SAFELY.
They are changing their markets and their customers’ lives for
the better. Large or small, famous or not, these companies are
all part of the Customer Experience Revolution.
Few owners of the iPhone, drinkers of Starbucks lattes,
or users of QuickBooks will tell you that they are customers
because of price. They have become devoted customers
because these companies and their products deliver an experience
that they enjoy.
The companies that best understand the customer experience
have an expansive vision of when that experience
begins, and what that experience must be to convert prospects
to customers to advocates. And they are committed
to creating a great experience. They have surpassed ideas
and technology. They have leapfrogged over products
and services to deliver astonishing customer experiences.
Customer experience defined
The customer experience is the sum total of all interactions
a person has with a company. It starts when someone
first interacts with the messages, people, or processes of a
company’s products or services. That interaction can be
direct with the company’s people or advertising messages.
It includes the actual experience of directly making use of a
product or service—what is known as the “user experience.”
Interactions that are part of the customer experience can
also be indirect, through influencers such as reviews, articles,
research, word-of-mouth, social networking, or from energized
advocates of the company. All of these interactions,
taken together, comprise the customer experience.
3
Customer Experience is the New Currency
As of the writing of
this book, we estimate
that only about five
percent of all organizations
value and
deliver exceptional customer
experiences. But
we predict that number
will change, as companies
learn the value
added by great customer
experience.
Gary Tucker is the Senior Vice President of Global
Services and Emerging Industries of J.D. Power and
Associates, a global marketing information firm that
conducts independent research of customer experience,
product quality, and buyer behavior. According to Tucker,
“Delivering an extraordinary customer experience is
becoming more and more important.” Tucker says companies
generally fall in one of three categories:
1. Companies that really understand the
customer experience, and recognize its
value as a competitive advantage.
2. Companies that pay lip service to
the overall customer experience. They
understand the concept, but aren’t fully
committed to it.
3. Companies that just don’t believe customer
experience matters. They don’t
think that customer experience is a place to
differentiate. Such companies tend to be in
more commodity-driven businesses.
The
cust omer experience
is the sum total of all
interacti ons
a person has
with a company .
The Customer Experience Revolution
4
Tucker says the old concept of customer satisfaction
is too narrow. Satisfaction is the difference between what
a customer expects and what a customer gets. It is still
an important ingredient, but customer commitment is a
much more effective measure of experience. Says Tucker,
“The outcome is customer commitment, not satisfaction.”
Measuring a customers’ level of commitment is to gauge
what J.D. Power calls “stickiness,” or the “propensity to
buy a product or service again.”
Setting the bar
Gina Pingitore, J.D. Power’s Chief Research Officer,
says, “When you have a company that sets the new bar
on expectations, it sets the bar for every company.” She
cites an example: “Amazon fundamentally changed the
way that people interact and expect to interact with all
online providers. Amazon remembers what you bought,
suggests what you might like, but doesn’t oversell. It is
a very easy point-and-click experience that sets the new
stage for people’s expectations across many industries.
They start to think: ‘Why can’t I book a hotel as easily
as I can buy from Amazon? Why I can’t I do other things
that easily?’ Companies that innovate a better customer
experience and successfully deliver it ultimately set the
bar for all companies.”
Most customers do not categorize and compare their
experiences by industry. They enjoy a customer experience
that one company provides, and they begin to expect that
same experience from other businesses. Therefore, it is critical
for companies to go outside of their industry to benchmark
the best experience companies. Tucker says, “The next
frontier is not within an industry, it is outside the industry,
benchmarking the leading practices as consumers experience
5
Customer Experience is the New Currency
them. As a customer, I don’t benchmark my experience with
Hilton Hotels exclusively with my experience with the Four
Seasons.” Smart companies should use such companies as
Apple, Starbucks, and Amazon as role models for customer
experience, no matter what the industry.
Measuring customer experience
New ways of defining and measuring the value of customer
experience are emerging. J.D. Power issued a report
in February 2011, “Achieving Excellence in Customer
Service,” that measured customer interaction with the
J.D. Power 5 PsSM: a company’s people, presentation, price,
product, and process. They are the drivers of excellence for
customer experience.
J.D. Power measured the J.D. Power 5 PsSM in its
analysis of feedback from hundreds of thousands of U.S.
consumers who do business with more than 1200 different
companies. After looking across dozens of industries,
they identified forty companies that stood out from the
rest, delivering an experience consistently superior to
their competition. They called these companies “J.D.
Power Customer Service Champions.”
The data shows that these forty companies share one
extremely significant attribute. They do more than deliver on
their customers’ expectations—they exceed them. In doing
so, they raise people’s expectations for their competition.
Some examples of how companies exceed customers’
expectations include:
• Employees who are encouraged and
empowered to help solve customers’ problems.
(Ritz-Carlton and Four Seasons
Hotels)
The Customer Experience Revolution
6
• Products enhanced through effective
packaging and merchandising effort.
(Caribou Coffee)
• Prices that reflect value. (Wegman’s
Pharmacy, Lincoln and Cadillac automobiles,
and Quicken Loans)
• Easy, effective, and fast interactions.
(Amazon’s and Zappos’ product delivery
and return policies)
Better customer experience
brings better revenue
According to J.D. Power’s Tucker, “We know from the
data that people will pay more for a better customer experience.”
One example from J.D. Power’s research involved
wireless telecommunications providers, typically one of the
toughest categories from a customer experience standpoint.
A study examined service scores for wireless telecommunications
providers from syndicated analysis in 2008 and
2010. They were then compared with the publicly-available
financials of these wireless telecommunications companies,
such as net subscriber additions (i.e., the number of new
customers minus the number of lost customers) and operating
revenue.
Overall, J.D. Power’s analysis showed a positive relationship
between the customer experience of wireless
telecommunications providers and their financial results.
This relationship held over time (i.e., two-, three-, and
four-quarter lags), but was strongest after the first quarter.
The differences among these three groups are statistically
significant and lead to dramatic differences in financial performance.
Failure to excel in the minds of customers can
7
Customer Experience is the New Currency
have far-reaching implications to a company’s bottom line.
This principle works for a small company on a limited
budget as well as a large institution. A company can calculate
how much money it will spend to make a positive
difference for its customers. Then the company can make
the return on investment linkage specific to its prospects
and customers. Finally, it can measure the improvements
investments in experience have made in customer attitude
toward the company and its market share.
J.D. Power’s Pingitore offers some advice to those at
companies who want to improve on their customer experience.
She says, “First, consider where you are on the
customer experience continuum:
• “If you are a company that is way below
par on delivering the customer experience,
then you probably want to benchmark
yourself against people that are mediocre in
your industry. Get the basics right.
• “If you are at par, then you need to begin
benchmarking yourself against companies
that are the best in class and usually deliver
more than just the basics.
• “If you are a company that is one of the
best in your industry, start looking at similar
or even dissimilar industries to figure
out what lessons and innovations can be
learned to help you think beyond what you
are currently doing.”
Forrester Research, a market analysis company that
focuses on technology firms, has its own customer experience
index that is updated and reported annually. This
The Customer Experience Revolution
8
work was pioneered by Bruce Temkin, whose report, “The
State of the Customer Experience, 2010,” concluded that
90 percent of North American companies with revenues of
$500 million or more view customer experience as critical
or very important to their company’s strategy. Temkin also
noted that 80 percent of companies want to use customer
experience as a form of differentiation.
Forrester’s customer experience research has shown a
high correlation between customer experience and three
vital types of customer behavior:
1. Willingness to buy more
2. Reluctance to switch
3. Likelihood to recommend
For large companies, a small investment in customer
experience does positively affect the bottom line. Forrester
looked at $10 billion companies across 12 industries and
found that for those companies that successfully focused
on customer experience, average annual revenue increased
by $284 million.
Forrester also looked at the percentage of devoted
customers within the customer bases of more than 100
companies. They determined that customer experience
leaders have an advantage of more than 14 percentage
points over customer experience laggards across the three
indicators of trustworthiness. In the service industry, the
study found that the annual revenue gains from a modest
improvement in customer experience could total more
than $300 million for a large hotel with revenues of $300
million or more. Banks and hotels garnered the largest
gains from their current customers, while airlines gained
the most customer advocates.
9
Customer Experience is the New Currency
Wall Street rewards CX
John Picoult of Watermark Consulting examined
whether the stock market recognized the value of companies
with superior customer experience in his study, “Is
the Market Rewarding Customer Experience Leaders?”
Picoult carried out an analysis of stock market performance
for groups of customer experience leaders and laggards
from Forrester’s research from 2007 through 2009. The
top ten and bottom ten publicly-traded companies from
Forrester’s rankings were selected. A comparison was
then made between the total returns from investing in an
equally-weighted portfolio of customer experience leaders
to that of customer experience laggards and the broader
market of companies included in the Standard & Poor’s
500 index.
Picoult found that the customer experience leader
portfolio outperformed the overall stock market. The top
ten customer experience leaders generated cumulative total
returns that were 41 percent better than the S&P 500 Index.
Further, the customer experience leaders’ combined returns
were 145 percent better than the group of companies that
were customer experience laggards. The results were consistent
in each of the three years, with the customer experience
leader portfolio always outperforming the group of companies
that were customer experience laggards.
Since the years 2007 through 2009 were turbulent
years for stock market values, it is interesting to see how the
customer experience leaders held up relative to the broader
market. The value of the customer experience leaders group
did indeed decline with the rest of the market during the
recession. However, their decline was significantly less pronounced
than it was for the broader market and even more
so for experience laggards. As the force of the economic
The Customer Experience Revolution
10
recession weakened in 2009, the customer experience leaders
portfolio had more than doubled the return of the S&P
500 by year-end.
80%
60%
40%
20%
0% 10% 26% 59%
2009
n CX Leaders
n S&P 500 Index
n CX Laggards
STOCK PERFORMANCE
CX LEADERS/LAGGARDS vs. S&P 500 INDEX
TOTAL RETURN
Research analyst Andrew McInnes, working for
Forrester Research, tested Picoult’s method and results, and
confirmed Picoult’s findings: “The customer experience
leaders consistently outperformed the other two groups;
the customer experience laggards consistently fell short.”
The results of the research by these professionals help
to confirm the importance of developing and delivering
extraordinary customer experiences. Such independent
confirmation shows that the customer experience revolution
is the new way for companies to compete and excel,
especially during tough economic times.
Customer experience has great value
The research results, along with the performance of
companies like Apple, Starbucks, Amazon, and Intuit,
have shown us that the value of extraordinary customer
11
Customer Experience is the New Currency
experiences is a powerful and effective currency. Once
people have an extraordinary experience with a company,
they value it above other alternatives available to them.
Companies have opportunities to be the first to change the
currency of their markets, by positively transforming the
experience continuum. Once this happens, as it has in the
smartphone, home video, personal finance, and video camera
markets, among others, those markets are permanently
transformed. Competitors in a market who do not improve
their customer experience will be trading with a less valuable
currency going forward. They may be trading on price
or features or another currency that can be devalued by a
competitor’s superior customer experience.
Avoiding the vortex
A market for a new product is made of customers with
similar needs. Those customers will pay higher prices for
products and services when they like the innovative ideas
behind them.
However, high prices and high profit margins will not
last. Economic, technological, or competitive factors will
one day cause a company’s profit margins to sink. The
success of the attributes that make products more valuable
breeds competitors and imitators. In time, these valuable
attributes are found in many other products. Customers
will pay less because the product has lost its distinguishing
characteristics and value.
At that point, the company that makes the product has
a challenge. It needs to find a way to renew the product so
it is once again different, better, and more valuable than
what is now commonly available.
Many companies choose only to keep adding more
features and more capabilities, and often the time between
The Customer Experience Revolution
12
these renewals gets shorter and the upgrades more expensive.
Even when companies find a way to add features
cheaply, there are other risks to consider. People may stop
responding if they do not see value in the next round of
features or new capabilities. Eventually, people become
fatigued with additional features. At this point, a company
may have unknowingly entered the Vortex.
The Vortex is the strong current in a market that
demands that competitors add more features and capabilities
while profit margins shrink. The Vortex is efficient at
making commodities of anything it can pull in. The strong
current of the Vortex demands that changes in products or
services occur more often and in smaller time periods. The
distinctions between
competitors’ products
in the minds of
customers are rapidly
erased along with the
participating companies’
profitability.
Frequently, companies
see no other way
to compete and preserve
value than to
out-feature the competition.
They may
call it an “upgrade,”
but often the profits
from the product go
everywhere except up.
The Vortex
is the strong current
in a market that
demands
that competitors
add more features
and capabilities
while
profit margins
shrink.
13
Customer Experience is the New Currency
War of new innovation begins
t
Consumers start to lose interest in new
features
t
Disruptive innovation: a new product is
introduced that steals most of the market
t
Product goes off the market
t
THE VORTEX
Developing and delivering a superior customer
experience is a key way for a company to stay out of
the Vortex. In their 1999 book, The Experience Economy:
Work Is Theater & Every Business a Stage, B. Joseph Pine
II and James H. Gilmore predicted the importance of
customer experience to today’s economy: “In an age of
commoditization where most products and services are
undifferentiated, consumers shift their focus from product
and service attributes to the experience obtained
while using the product or service. The more relevant
and memorable the experience, the higher the value,
the higher the worth, the higher the price that can be
charged.” When a product becomes commoditized,
re-thinking the customer experience with the product
will be far more valuable for retaining and building new
customers than adding expensive new features.
In an interview with the San Diego Union-Tribune
in January 2011, Michael Capone, marketing professor
at San Diego State University, commented on the need
to compete using customer experience rather than price:
The Customer Experience Revolution
14
“Cutting prices is not sustainable differentiation, but creating
new and exciting shopping experiences can create a
strong consumer preference.”
Examine the do-fors
To avoid the Vortex, companies must understand their
Do-Fors. The Do-Fors are what products or services actually
do for customers that they highly value. They answer
the questions: What will that do for me? and Why should I
care? Delivering them well with an extraordinary customer
experience can create advocates and additional revenue.
A close examination of a
product’s Do-Fors will reduce
guesswork and help keep a company
from adding unnecessary
and expensive features. Knowing
what the customers want and how
they want it gives a company the
information it requires to determine and develop an experience
that pleases the customer.
Getting the Do-Fors right is no accident. It takes research,
observation, and product trials to learn what the Do-Fors are.
And they can change as technology changes or competitors
develop something new. But building a customer experience
around the Do-Fors is a great way to ensure success.
Customer experience is crucial
Potential and existing customers are having experiences
with a company’s people, processes, products, or services
regardless of whether or not the company is purposely creating
those experiences. The customer experience starts long
before people are customers. The experience begins when
15
Customer Experience is the New Currency
people come in contact with a company’s messages, people,
processes, products, or technology, directly or indirectly. In
the world of social media, experiences can come secondhand
from other people, processes, technology, or messages. The
totality of customer’s experiences with a company is now a
key determinate of a company’s success or failure.
Customer experience influences people’s intent to purchase
and their willingness to pay. Customer experience
influences actual and perceived ease of use of a product.
And customer experience influences consumers’ actual and
perceived value of a service. Customer experience influences
people’s happiness and the rate that they will convert
from customers to enthusiastic advocates for the company.
Businesses now have to deliver an exceptional customer
experience. This customer experience includes every aspect
of the business relationship with the customer:
• the promises in the first ad or review that
someone sees;
• the way a company’s website projects the
product or service;
The Do-Fors are what
products or services actually do for customers
that they
highly value .
They answer the questions: what will that do for me?
and why should I care?
The Customer Experience Revolution
16
• what a Facebook friend has to say about his
or her experience;
• how a company representative responds on
the phone;
• how easy it is to make a purchase or a return;
• how the product comes through with the
promises that have been made
The companies that best understand the value of the
customer experience deliver a consistent, pleasurable, and
valuable experience from the first time a person interacts
with a company, to the receipt and use of the product or
service, and throughout the customer’s relationship with
the company.
Leaders of the
customer experience revolution
To fully understand the impact of the customer experience
revolution, it is important to look at some of the
companies that have created a tremendous advantage by
developing and delivering the best customer experiences.
This book will tell the stories of some very well-known
companies, including Apple, Amazon, Intuit, Mini Cooper,
Starbucks, and Netflix. The book also includes stories of less
well-known companies, including LPL Financial, Skinit,
EMN8, I DRIVE SAFELY, and Square. All of these stories
demonstrate how superior customer experience helped the
companies achieve success. Through their examples, we will
draw principles that any company in any industry can use to
become a customer experience leader.
This is a revolution that every company must join in the
next decade. Companies can learn from the profiles in this
17
Customer Experience is the New Currency
book, and use the principles to create great experiences for
their customers to gain a significant competitive advantage.
In the words of Amazon CEO Jeff Bezos (as quoted
by Joe Nocera in the New York Times in January 2008):
“The reason I’m so obsessed with these drivers of the
customer experience is that I believe that the success
we have had over the past twelve years has been driven
exclusively by that customer experience.”
The customer experience revolution has begun.
19
The crowd at the MacWorld Expo in San Francisco
on January 9, 2007 could barely contain its excitement.
For months, rumors had been circulating that Apple
Computer was going to roll out a blockbuster product,
a product as significant as the 2001 introduction of the
iPod. A confident Steve Jobs entered the stage, peered out
at the suddenly hushed crowd, and confidently announced,
“Today, we are going to reinvent the phone.” It was a brand
new phone from a company new to the phone market.
Apple launched the iPhone. And in a few short months,
the phone industry was changed forever.
It was a bold step. Apple was entering a field crowded
with tough and experienced competitors. Where exactly
was the opportunity for a new entrant to compete with all
those successful companies making phones? Some companies
already in the market manufactured phones with great
value. And others were adept at consistently introducing
Chapter 1
Time for a Revolution
“We’re going to put a ding in the universe.”
—Steve Jobs
The Customer Experience Revolution
20
new technologies, styles, and advanced features.
Before 2007, there were already many successful
companies making smartphones, which combine computing,
Internet connectivity, and other capabilities
into a wireless phone. Before Apple entered the market,
these smartphone companies included formidable
competitors such as
Nokia, Research in
Motion’s BlackBerry,
Motorola, and Palm.
These telecommunication
giants leapfrogged each
other every three
months, constantly
adding innovative features
and functions.
Suddenly, one day,
with one announcement,
Apple changed
the playing field by
changing customers’
expectations of what a
smartphone should do
for them. In the first
year of production,
Apple sold 3.7 million iPhones, with one million sales
in the two months following its introduction.
Before the iPhone, Apple was primarily a computer
company, not a phone manufacturing company. And its
entry into the phone market was in many ways a competitive
failure. The iPhone was expensive, with a poor
camera, no 3G capabilities (a standard at that time), no
keypad, and no memory card. In addition, it could be
obtained from only one wireless service provider, AT&T,
…success wasn’t about
the technology,
features ,
the calling plan,
or the price.
Apple iPhone
delivered
exactly what it promised
—an extraordinary
experience.
21
TIME FOR A REVOLUTION
and required a two-year contractual commitment to be
linked to its wireless network. But this technologically
weak and feature-poor product transformed customers
to enthusiastic advocates at a rate unseen in the smartphone
market.
As Apple saw it, success in this market wasn’t
about the technology, features, the calling plan, or
the price. While all those are important ingredients,
Apple’s iPhone delivered exactly what it promised—an
extraordinary experience. From the time people heard
about the iPhone until they became customers and
then enthusiastic advocates, the iPhone offered, by far,
the best smartphone experience.
Customers flocked en masse to phone stores to replace
their old phones with the new iPhones. Even though their
old phones were quite adequate, they wanted the charm,
buzz, coolness, fun, aesthetics, and prestige of Apple’s new
product. Most of all, they wanted what they heard so much
about from other iPhone owners—the pleasurable experience
of using it. This was something unavailable from any
other phone in 2007.
Best of all for Apple shareholders, the iPhone was
extremely profitable. Apple grossed 50 percent on each sale,
gained 14 percent of the cell phone market in a year, and
its stock rose 44 percent. The industry and its customers
were so changed that four years would pass before another
company, as new to the phone industry as Apple was in
2007, would directly challenge the iPhone.
That company was Google, which introduced its
Android phone in January 2011. And the people at Google
are every bit as passionate and committed to anticipating,
creating, and coming through with remarkable customer
experiences as Apple. Like Apple, Google has superior
brand and technical staff that continue to innovate faster
The Customer Experience Revolution
22
and better than most of the competition.
It is no accident that in the experience revolution,
these two players, new to the phone industry, are battling
for smartphone supremacy. They are both masters of customer
experience—changing industries and customers’
lives forever.
Creating the iPhone customer experience
The iPhone offered an innovative experience by
intimately understanding and anticipating what people
wanted to do with their smartphones and what experience
they wanted doing it. Apple carefully combined
technology from other products into a hand-held device
to purposely create a pleasurable experience for the
smartphone user. The iPhone promised and delivered that
pleasurable experience as a phone, an Internet communicator,
and a music player.
Apple began studying the market and the competitors at
least three years before the introduction of the iPhone. The best
customer experiences had come from easy-to-use QWERTY
keyboards, phones that were smaller and lighter than average
phones, built-in cameras, Bluetooth compatibility, and screens
that made it easier to make and receive calls.
The phone makers often included a stylus to poke and
type on the tiny keys of their phones. The stylus was generally
unpopular. It was an enlarged toothpick-like pointer, a
potentially dangerous poker that was precarious to use. People
would worry about where the stylus was or even lose it. The real
job of the stylus was to help people adapt to the phone maker’s
hardware. The stylus got in the way. When smartphone owners
were focusing on poking their device, the stylus ultimately
disconnected most of them from the world around them.
Phone makers promised ease of use. But customers’
23
TIME FOR A REVOLUTION
actual experiences were hampered by phones that had
cramped keyboards and tiny hardware pieces that many
reviewers and users experienced as feeling like plastic toys.
Broken promises, hardware-centered experiences, and a
decline in consumer confidence in existing smartphones
created an opportunity for Apple to create a better product.
The smartphone experience Apple created started with
the elegance of the phone itself. During the iPhone introduction
in January 2007, Steve Jobs confidently asserted
that Apple designed something that fits beautifully in the
palm of your hand. Most people agreed. The iPhone was
thin—at 11.6 mm in depth, thinner than any smartphone
ever before. It had a 3.5-inch high-resolution screen that
occupied most of the iPhone’s front. This touch screen was
accompanied by only one button in the center below it.
That button took you “home.” Having only one button
made it difficult to get lost.
Apple changed everything by drawing on insight about
what makes successful interactions between people and
computers. They replaced the user-resistant fixed-in-plastic
buttons and tiny keyboards with a daring interface. The stylus
was replaced with the human finger—what Jobs called, “The
best pointing device in the world. One we are born with.” To
assure that the screen and finger were a gratifying and efficient
combination, Apple developed what it calls “Multi-Touch” for
the screen. Multi-Touch fine-tunes the screen to interact with
people’s fingers by ignoring unintended touches and hover
motions. Kiosks had used touch-screen technology for years,
but Apple was the first to bring a refined version of touchscreen
technology to the phone. In addition, the iPhone let
you “pinch” the screen with your thumb and forefinger to
zoom in and out on a Web page, map, or photo.
This intuitive touching of the screen, or gesture-based
interface, allowed users to “flick” through a menu, between
The Customer Experience Revolution
24
photos, or from one screen to the next. This is very much
like the experience of turning the pages of a book in real
life. It is natural, engaging, and for many, fun. Gesturebased
interfaces are not new, but Apple made them new
on a phone. A blog post by the New York Times columnist
David Pogue quoted a customer who said, “It’s fast,
beautiful, menu-free, and dead simple to operate.” Another
customer commented in an online iPhone review, “I honestly
can’t describe to you how much of a pleasure the
iPhone is to use, and compared to pretty much any other
mobile device, it’s in a completely different league.”
Jobs spoke out passionately during the iPhone’s
introduction, saying, “most phones have software that is
crippled.” He promised that the iPhone would now give
us “real desktop-class applications at least five years ahead
of the software that is now on any phone.” It did. And it
did it with software that supported almost everything that
people wanted to do with phones and computers in 2007,
including high quality sound, animation, networking abilities,
power management, and security.
E-mail was fully formatted, including graphics. You
could open Word, Excel, and PDF documents. Within
only three years of its introduction, the iPhone offered a
selection of over 300,000 applications including games,
lifestyle, social networking, and education apps.
The lure of the iPhone confounded many competitors.
Some of them had trouble understanding the customer
experience advantage of the iPhone. In an interview with
Bloomberg Businessweek, former Nokia manager Dave
Grannan described how Nokia management viewed the
new competition. When the iPhone was announced, “it
was widely disregarded. The attitude was that we’d tried
touch screens before, and people didn’t like them. [The
iPhone] had no multimedia messaging capability. The
25
TIME FOR A REVOLUTION
reception and sound quality were poor. It couldn’t be used
with one hand. There was nothing to fear.”
Inside Nokia, there was no curiosity about why the iPhone
was suddenly so successful. There was no meaningful review
of what changed the context of the market and created new
customer expectations. Nokia’s legacy company mind-set was
still evident three years later. In 2010, Stephen Elop became
Nokia’s new President and CEO. His mission: to turn the
company around. A story in Bloomberg Businessweek recounts
an early meeting with employees. Elop noted a problem with
too many different keystrokes needed to mark an e-mail
unread on different Nokia phones. A Nokia engineer said Elop
was wrong, so Elop asked him to demonstrate otherwise. The
engineer tapped on a phone for a while, then was forced to
admit that Elop was correct. Nokia’s share of the smartphone
market has gone from 49 percent before the introduction of
the iPhone to 25 percent as of the first quarter of 2011.
APPLE VS. NOKIA STOCK PRICE
Smartphone market share by type
50%
40%
30%
20%
10%
0%
2007 ‘08 ‘09 ‘10 ‘11
Apple
Nokia
The Customer Experience Revolution
26
The introduction of the iPhone is just one of an
unprecedented series of product successes Apple has had in
the last decade. The iPod, iPad, and various operating system
and computer hardware improvements have all made
Apple a company that customers care about. Apple’s ability
to give customers a great “Apple experience” has made that
company a formidable competitor.
Apple is committed to being in the business of delivering
extraordinary experiences and generates sustainable
value from its investment in that area. Morningstar, Inc.
points out in its analysis of Apple in the smartphone
market in early 2010, “We believe Apple’s soup-to-nuts
model of integrated hardware, software, and application
distribution is the key to the iPhone’s success because it
allows Apple complete control over the user experience.
The elegance of the iPhone’s user experience has attracted
a multitude of users with more than 33 million units
shipped to date. The growth in users has in turn brought
software developers to the platform, and most importantly,
developers are making money selling applications
in the App Store.”
The same can be said of Apple’s success creating the
market for the tablet with the iPad. With an average
selling price of $595 to $645, the iPad sold almost 15
million units worldwide in 2010 since its introduction
in April of that year. Apple purposely created the tablet
market by developing and delivering positive customer
experiences for mobile customers. With the release of
Apple’s operating system Lion, the customer experience
on the computer now matches the mobile experience,
with touch-screen capabilities that customers have come
to expect across all Apple’s products.
The iPhone is a great example of how a company
can create a complete customer experience that results
27
TIME FOR A REVOLUTION
in major success. Apple did its homework before it
entered the smartphone market, and then designed the
product from the ground up to reflect how customers
would want to use it. The iPhone included the features
that were important to customers—Internet connectivity,
phone and texting, a music player, strong graphics for
games—and paired them with an ease-of-use sensibility
that no other smartphone offered. Apple has been a leader
in design aesthetics since its inception, and the iPhone
continued that tradition with its minimalist look that is
driven by the way the product works.
All of these factors taken together make the customer
experience of the iPhone one that is exemplary,
and one that keeps customers buying every time a new
iPhone is introduced.
Customer experience is key to success today. A thoughtful,
well-designed customer experience will take a product
from good to great, and will make a company a market
leader. Apple has used customer experience to capture new
markets that have turned the company from a quirky computer
manufacturer to a technology powerhouse.
28
29
Listen to your customers. That’s advice every
marketing consultant gives to every client. But too
few companies really know how to listen—and how to
respond so that customers will pay attention. What is the
best way for a company to solicit input from customers?
The popularity of websites such as Yelp or TripAdvisor or
Angie’s List shows an ever-growing reliance on online review
information written by customers, not experts. Companies
that understand the importance of the customer experience
know how to use social media to get customers to comment,
then listen to what their customers have to say, and incorporate
those ideas into the customer experience.
Customers are also becoming the drivers of the platform
on which a company offers its products or services.
How many of us choose the ATM over the teller line at
the bank, or the self-scanner at the supermarket to avoid
the longer checkout lanes? Customers are choosing what
Chapter 2
Customers Take Charge
“We lived in farms, then we lived in cities, and now we’re
gonna live on the Internet!”
—Sean Parker, The Social Network
The Customer Experience Revolution
30
kind of experience they want to have, and when. (Are your
reading this book as a physical book, on a tablet or e-reader,
or are you listening to it?) The best companies know how
to expand their reach to customers with social networking
and communications devices to deliver exceptional experiences
to all their customers—in any and every way the
customer chooses to get the experience.
Starbucks—would you like some
feedback with your latte?
Starbucks was in trouble. Huge trouble.
For fifteen consecutive years, the upscale coffee seller
Starbucks had top line growth of at least 20 percent each
year. But in 2008, the company suddenly lost over 50 percent
of its operating income and its operating margins. The
great recession put a damper on the number of customers
ordering a Starbucks double-tall-one-pump-vanilla-skimcaramel
macchiato. The economic times were changing
and Starbucks was losing momentum.
Most of the stores that were underperforming had
been recently opened. Starbucks’ priorities were to
increase its market share in existing markets, primarily
by opening additional stores, and to open stores in new
markets. This strategy stopped working as the overheated
national economy slowed down. The high growth rate of
new stores was threatening Starbucks’ long-time commitment
to delivering a consistently positive and engaging
customer experience.
By September 2008 the U.S. economy was plummeting
at high speed with no end in sight. The financial and
real estate institutions that the country depended on were
failing at an increasingly accelerated rate. Starbucks’ stock
reached an all-time low of $7.83 a share in November
31
CUSTOMERS TAKE CHARGE
2008, a continuation of a steep value slide from $38.41
on October 6, 2006. Of its 9,000 stores worldwide, the
company committed to closing approximately 600 underperforming
company-operated stores in the U.S. and 61
stores in Australia.
It was time for a new direction. Howard Schultz had
built the company but had stepped down as CEO for several
years. He came back with enthusiasm and new ideas,
and revitalized a failing company by improving the company’s
customer experience.
Starbucks was a leader in customer experience from its
start. In 1982, Howard Schultz worked for Starbucks at
Pike Place Market in Seattle as the director of marketing for
the coffee bean retailer. Schultz’s inspiration for Starbucks
cafes came from a trip to Milan, Italy, where he noticed that
the small cafes that dominated most street corners were an
important part of people’s everyday lives. Schultz saw that
people were not just at the cafes for a high-quality cup of
coffee. They were there to connect with other people while
having coffee in a comfortable, casual place. He returned to
Starbucks with the idea of recreating that kind of customer
experience in the U.S. Schultz left Starbucks to start his
own cafe in downtown Seattle called Il Giornale, named
after a local newspaper in Milan. It was a shop that not
only served great coffee, but also offered its customers the
“third place” experience he had enjoyed in Milan—not
home, not the office, but a new destination to meet people
and enjoy conversation.
In 1987, with the backing of local investors, Schultz
bought Starbucks and launched the first significant geographic
expansion of the Starbucks experience.
The business continued to succeed and expand, opening
cafes around the globe.
By the end of 2000, Starbucks had more than 3,500
The Customer Experience Revolution
32
locations worldwide,
serving more than 12
million customers
per week in 17
countries, with revenues
that reached
$2.2 billion for the
year. The cafes tailored
the customer
experience to the
locales. The 2002
Annual Report
summarized the
way Starbucks finetuned
the customer
experience: “As we
reached out to more
customers than ever, we thought you might like to know
how we’re delivering the experience in Spain. In Madrid,
we open early and close late. A citrus juicing machine
presses sweet naranjas, glass by glass, and the most popular
breakfast is a traditional sticky caracola de chocolate and a
caffè latte.”
The next year, Starbucks gave customers in-store highspeed
wireless Internet access, responding to the new way
customers were “connecting” at Starbucks.
Next, Starbucks used music to invigorate the customer
experience. In 2004, the company opened a Hear
Music™ Coffeehouse in Santa Monica, California. Based
on the acquisition of a music catalog company and later
agreements with recording labels, the Hear Music brand
became the music played in each store, including in-store
sales of standard and exclusive music, branded retail stores,
and a label to distribute recordings. As of 2005, Starbucks
With the
concentration on growth
and the relevancy
of its
cust omer experience in decline,
S tarbucks had
entered the Vortex
of commoditization
33
CUSTOMERS TAKE CHARGE
reached 10,500 stores around the world.
By 2007, though, something was wrong. Inside
Starbucks there was worry.
2007 was the first year that customer traffic at Starbucks
in the U.S. declined. The number of Starbucks stores continued
to grow—now to 15,011, a 17 percent increase in
12 months. Net revenues grew to $9.4 billion, and passed
the expected 20 percent mark by 1 percentage point. But
important indicators of sustainability were pointing down.
Operating income was up by 15 percent, but the margins
from it were slightly down, for the second consecutive year.
Same store sales were down for the third year in a row, to 5
percent in 2007.
Entering the Vortex
With the concentration on growth and the relevancy
of its customer experience in decline, Starbucks entered the
Vortex of commoditization—that strong current in a market
that demands that competitors give more and lower prices
while profit margins shrink. The Vortex makes commodities
of anything it can pull in. In his autobiography Onward: How
Starbucks Fought for Its Life without Losing Its Soul, Schultz
acknowledged that in its tremendous growth period,
Starbucks made decisions
that “led to the watering
down of the Starbucks
experience, and what some
might call the commoditization
of our brand.”
Schultz understood what
had been lost at Starbucks: its
extraordinary customer experience.
He and his team set about
The Customer Experience Revolution
34
determining how to reinvigorate that experience. The biggest
challenge facing Schultz was how to make Starbucks
more relevant and exciting to customers. The critical pieces
to the turnaround included: dramatic cost reductions and
process improvements, better beverages from innovation
and better training, value offerings and loyalty programs,
improved customer service, and tastier and healthier food.
But there was another enormous influence for customers
that was changing the way customers “shopped, purchased,
and communicated about products and services,” according
to a special report by J.D. Power and Associates. Customers
were communicating via social media, and the voice from
this channel was loud and unavoidable.
Schultz knew firsthand from Michael Dell himself
about the issues Dell Computer had dealt with in 2005
and 2006. Jeff Jarvis, a dissatisfied Dell customer with an
influential blog, used his clout in the online world to get
the attention of the founder and CEO of Dell Computer.
Dell eventually recognized the need to not only respond
to Jarvis, but to create an online presence where customers
could solicit ideas from customers, based on their needs.
Dell’s experiment with social media was hailed within the
company as a success, and Schultz recognized the value of a
proactive approach with customers to help build Starbucks’
customer experience.
MyStarbucksIdea.com
Starbucks decided to embrace the changing nature
of its customer base. Salesforce.com helped Starbucks
develop MyStarbucksIdea.com, a social networking community
of Starbucks customers. The site actively solicits
ideas from customers and allows people to vote for the
best ones. The ideas are sorted by categories: products,
35
CUSTOMERS TAKE CHARGE
experience, and involvement.
According to Matthew Guiste, Starbucks’ Global
Social Media Director, the new social technology platform
includes a live feed of everything posted to its sites, including
customer ideas and the actions taken by Starbucks. The
site shows ideas that have been implemented and also ideas
that have not been accepted. Guiste believes it is important
to show customers the reasoning behind its decision to
accept or reject an idea.
Within a few months after its start, the site generated
tens of thousands of ideas from Starbucks customers.
MyStarbucksIdea.com has a fresh look and feel. It is easy
to find what you are looking for and has friendly, familiar
icons and graphics.
As of the end of May 2011, over 250,000 people have
signed up, and 109,000 ideas have been posted, garnering
over one million votes.
Starbucks recognized the value of using social media
as a two-way communication channel, rather than a oneway
method of delivering marketing messages. According
to Guiste, “It’s about relationships, not marketing. We
consciously did not want to have 12 Facebook pages and
15 Twitter accounts, each for a specific department. We
intentionally want there to be one place to start with
us in each channel. Any new community we launch is
always ‘/Starbucks’.”
MyStarbucksIdea.com has been very successful at
initiating profitable marketing ideas that further the customer
experience. Customers initiated the idea that became
Starbuck’s Treat Receipt, giving customers discounts for a
cold beverage in the afternoon after making a purchase in
the morning. Starbucks first tested the idea in several cities
and then launched the program nationally. Afternoon sales
increased. Customers also made it clear that the Starbucks
The Customer Experience Revolution
36
rewards loyalty program was important to them, so in late
2009, Starbucks integrated its Reward and Gold Cards into
a single new program, My Starbucks Rewards. In about
one year, according to Schultz’s autobiography Onward,
more than $1.5 billion had been loaded onto My Starbucks
Rewards cards.
In a video presentation, Guiste offered these insights
about what success looks like for a new social media site:
• It gives your fans great content.
• How many fans or followers you have doesn’t
matter—its what they do that counts.
• Visitors can read or watch something that
makes them feel good about the company.
• There are positive responses. You can vote
or comment on ideas.
• Customers can sign up for further
communication.
• People can share content of the site with
someone else.
• Buying something is not the primary driver
for content.
• Customers become advocates for the company.
But being a Starbucks fan is not a
requirement for commenting.
People will talk
Although some management personnel at Starbucks
were leery of this new site, such discussions were already
taking place. Many people had already established their
own unofficial Starbucks websites. An unofficial blog
37
CUSTOMERS TAKE CHARGE
called “Starbucks Gossip” already contained postings such
as news releases, articles, and anonymous opinion pieces.
People will have customer experiences with your company,
its messages, products, or services, regardless of whether
you are in charge of them. Starbucks, like Dell, had other
blogs commenting on the company. Without an official
Starbucks-hosted interactive website, independent sites
become the default hosts of important two-way exchanges
about a company’s people, processes, products, or services.
Few companies have the resources to respond to all ideas,
comments, and concerns posted by customers in real time.
But customers want real-time responsiveness. Starbucks’ site
resolved this dilemma with an innovative solution. Forty
monitors from Starbucks interact live with customers on the
site, each for at least two hours a week. The monitors are food
or beverage developers, community strategists, or quality managers.
People vote on the posts with a thumbs-up. The ideas
that get the most points and conversation are the ones that
the monitors respond to. According to Chris Bruzzo, VP of
Brand, Content, and Online for Starbucks, in a presentation
he gave in 2010 at the Social Good Summit, having experts
listening to customers helped Starbucks truly understand the
power of bringing customers into the conversation.
MyStarbucksIdea.com was the first step to connect
with customers outside the stores. The company next
added Facebook and Twitter to their social networking
mix. Today, the company uses Twitter mostly as a way to
understand customer reaction to Starbucks. The company
sometimes sends out tweets, but more often, Starbucks follows
other Twitter posts to see how people are reacting to
its products and services. According to Guiste, Starbucks
has two or three people that follow Twitter posts on their
screen all the time.
The Customer Experience Revolution
38
Results
Starbucks began to reap the benefits of its social media
efforts in 2009. The company’s 2009 Annual Report
notes that, “Because of this renewed customer focus, the
company’s customer satisfaction scores increased a full 10
percentage points.” The new offers and loyalty card program
based on the ideas from MyStarbucksIdea.com were
instrumental in helping Starbucks revitalize the customer
experience and, in turn, the company’s profitability.
While new revenues were off compared to 2008,
the big sign that the turnaround was beginning was in
operating income and margins during 2009. Operating
income increased six percent over 2008. The downward
slide of operating margins stopped for the first time in
four years.
Howard Schultz noted that 2009 was the year the company
stopped trying to protect what it had and, instead,
became proactive in dealing with its customers’ new ways
of communication.
During 2010 Starbucks revenues increased to a record
$10.7 billion. Operating income increased to $1.4 billion,
an $857 million increase in just one year. Starbucks
earned an operating margin of 13.3 percent in 2010. This
was the second consecutive year of margin growth and the
highest operating margins Starbucks had ever reached.
The company offered its first-ever dividend for shareholders
and partners. Starbucks was as solid as any company
could be amidst a continuing economic downturn.
In the Starbucks 2010 Annual Report, Schultz confidently
asserted that the company’s operational foundation
and a heightened level of innovation and customer relevance
had repositioned Starbucks to not only grow, but
also to leverage earlier and new-found strengths inside and
39
CUSTOMERS TAKE CHARGE
outside the stores. The company started multi-brand product
development (Including VIA® Ready Brew, Tazo® and
Seattle’s Best Coffee®) and introduced a digital network to
bring customers news and entertainment. Schultz acknowledged
the vital contribution of MyStarbucksIdea.com and
external social platforms in determining and delivering the
revitalized customer experience and business results. The
Annual Report noted that Starbucks was one of the top
brands on Facebook.
A report by Morningstar in April 2011 commented on
Starbucks overall market position after the turnaround and
diversification into retail and consumer goods. “With cafélike
environments and a brand that invokes a high-quality
customer experience, Starbucks enjoys pricing power advantages
over these specialty coffee peers, in our view.”
The outlook for Starbucks is now very good. Revenues
are expected to grow in the mid-to-high single digits. Same
store sales are expected to show mid-single-digits while the
company expands internationally by 500 stores, including
100 in the U.S. Operating margins will likely stay the same
or improve somewhat.
In Onward, Schultz looks back at the turnaround and
revitalization of Starbucks in a short time and sums it up
this way: “There are companies that operate huge global
networks of retail stores, like us. Others distribute their
products on grocery store shelves all over the world, like us.
And a few do an extraordinary job of building emotional
connections with their customers as we have learned to do.
But only Starbucks does all three at scale, and we increasingly
see a future where each complements the others,
forming a virtuous cycle that allows us to go to market and
grow the company in a unique way.”
The Customer Experience Revolution
40
The customer is in charge
Customers are taking charge in the customer experience
revolution. People are now communicating with new
platforms such as smartphones, tablets such as the iPad, and
are interacting more extensively with companies through
such social media networks as Facebook and Twitter, as
well as newer ones like Google+.
J.D. Power’s research notes this shift in the way customers
want to communicate with companies. In its February
2011 report on Achieving Excellence in Customer Service,
J.D. Power says, “Benchmark companies have learned that
customers want to engage with a product or service provider
in a place, at a time, and through a communication
channel of their own choosing.”
Starbucks initially engaged social media platforms as
part of its turnaround. The company recognized the need
for something to jumpstart the conversation with its customers,
and used social media platforms to engage that
discussion. Starbucks showed its customers that it had a
commitment to use the information they received from
customers, letting Starbucks customers know that they are
important to the company’s growth.
Social media—like running water
Businesses need to know what platforms their prospects,
customers, and advocates use. They also need to know what platforms
are coming in the future that people will likely embrace.
The wireless network cloud is here to stay. Just as running water,
electricity, and automobiles innovated new lifestyles and economies,
the wireless cloud is doing the same. And like running
water, electricity, and cars, those who are born and come of age
with it do not know life without the cloud.
41
CUSTOMERS TAKE CHARGE
You don’t want to be separated from potential customers
and existing customers because the preferred communications
platform changed. Businesses that use new platforms
to create exceptional customer experiences will be the businesses
that thrive in the future.
Revolutionizing the self-service experience
One company that has energized the kiosk platform
is EMN8, a manufacturer of selfservice
ordering kiosks for fastfood
restaurants. EMN8 has done
so by focusing on the customer
experience while in the restaurant
and while using the kiosk.
EMN8 knows their Do-Fors for their customers—
the restaurants:
• Increase the average check • Improve the speed of service • Lower transaction costs
In order to satisfy the Do-Fors, EMN8 wants to create
what they call “an easy, fast and engaging experience” for
the restaurants’ customers, by creating multi-lingual automated
ordering kiosks.
EMN8 was founded in 2002 and has approximately
sixty employees. Growth rate for worldwide unit sales in
2011 is at one hundred percent. EMN8 was selected for
the North America 100 and the Global 100 Red Herring
lists of the most promising private technology ventures
in North America. EMN8 crafts the customer experience
of using the kiosks at Quick Service Restaurants
(QSR) and fast casual dining restaurants, which include
The Customer Experience Revolution
42
Jack-In-The-Box, Burger King, Domino’s, and Carl’s
Junior (with annual revenues of $2.9, $8.6, $3.3, and
$1.3 billion, respectively).
Bilal Chinoy, Senior Vice President of Products at EMN8,
discussed why EMN8 has succeeded at the self-service kiosk
where others have failed. “There were other attempts to do
self service in the fast food industry and casual food markets,
but it never succeeded, for a number of reasons. One of them
is the whole user experience. What we did was revolutionize
that. Rather than take a very computer-driven approach,
we decided our role was to guide the user experience. We
focused on the user instead of the computer.”
EMN8’s kiosks create a more immersive customer
experience when ordering and selecting food, streamlining
the self-service process by guiding the customer through
the selection of choices. EMN8 introduced “suggestive sell
options,” which resulted in increased spending by each customer
and more revenue for the restaurants. Using these,
the average spend by a customer placing a self-service order
increased ten to thirty percent. Chinoy said, “Delighting
the customer is a really big influencer, before and during
the selection, then at the point of purchase.”
The EMN8 kiosk experience delights the customer by
replacing the counter experience, which can be fraught
with human error. The kiosk is an alternative to the long
lines at the counter—especially important since people
are hungry. Many people do not like the experience at the
counter when ordering. EMN8’s research and development
data and actual sales results show that younger customers,
in particular, actually prefer an automated process, because
they are in control of their own order. Accuracy is increased
with the order by kiosk, so there are fewer surprises in the
bag or on the tray. The kiosks also can help overcome language
issues, because several different language options are
43
CUSTOMERS TAKE CHARGE
available on the kiosk. This assists in speeding orders.
Chinoy described a strikingly counter-intuitive finding
about personal interactions that was uncovered during the
product’s development. “A minority of people likes human
interaction,” said Chinoy. “The majority doesn’t think automation
is a cold way of doing business. For most people,
particularly young people under 35, human interaction is
not important.”
Customer communication platforms
The communications platforms for generating and
keeping business can be:
• analog—live presentations, speaking and
personal calls
or
• digital—email, websites, video, smartphones
or tablets
It is imperative to understand which platforms are
important to prospects and customers, both in current use
and what may be adopted in the near future. Customers
will often use a combination or a portfolio of platforms.
While technology companies may create new platforms,
people choose which ones they will use. People
choose which new ones pass from fads to part of day-to-day
life. Communications platforms can be used for promotions,
building customer connections, transactions, actual
delivery of the product, or many other reasons. Regardless
of what the platform is supposed to do, the experience
people have with the platform can be decisive in converting
a prospect to a customer and a customer to an advocate.
The Customer Experience Revolution
44
Discovering the do-fors
At the core of the customer experience that people will
have with a communications platform are the Do-Fors—
what products or services actually do for them that they
highly value. Do-Fors are more impactful than tag lines,
and more important than lists of features and specifications.
Do-Fors answer the questions: What will that do for
me? and Why should I care? The Do-Fors for EMN8’s ordering
kiosks for casual dining restaurants are: Increase average
check and improve speed of service at a lower cost. Creating
a great customer experience requires real knowledge of the
markets, the potential customers, and the context of the
competition. Having valuable Do-Fors is not an accident.
Do-Fors are an important part of the process for creating a
great customer experience.
What the customers really want
The company ComplianceMAX used the concept of
Do-Fors to help build the business. Like many companies,
ComplianceMAX had avoided real understanding
of what its customers wanted. Instead, the company
tried to sell more, sell harder, lower prices, and add
Having valuable
Do-Fors is not an accident.
Do-Fors are an important part
of the process for creating the
great customer
experience.
45
CUSTOMERS TAKE CHARGE
more features. When that all failed to bring the results
the company sought, ComplianceMAX eventually
proceeded to find out exactly what those Do-Fors were.
ComplianceMAX started in 2003 with the goal of
helping its clients stay in compliance with complex,
ever-changing, legally binding financial regulations.
ComplianceMAX’s chief salesperson was co-founder
Lisa Roth, a financial compliance expert, who travelled
around the country speaking and selling ComplianceMAX
software and consulting services directly to small- and
medium-sized companies. Additionally, the company sold
at conferences and to industry contacts and people in their
professional networks. While the company had a respectable
client base, by the end of year two, growth had slowed.
There was concern about the future.
Roth recalled the situation of the company at this
critical juncture: “We were very much a startup company
for what felt like too long. We wanted to expand and we
wanted to scale.” The company engaged a consultant to
help with the process. Roth siad, “The consultant asked if
we knew exactly what we did for our clients. We stumbled
around and none of us could really articulate it.”
The consultant recommended that they listen to what
ComplianceMAX’s prospects and customers said about
what the company does for them that is better and different
from the competition. That information would be
instrumental for determining how to present the company
and connect with the market.
Roth said, “We thought that it just can’t be that easy. If
it was that easy, I could just call my clients and find out.”
The ComplianceMAX team focused on selling more
and selling harder. But the growth problem still shadowed
them.
Roth and her team returned to the consultant’s
The Customer Experience Revolution
46
recommendation that they had dismissed as overly simplistic.
According to Roth, “We started making phone calls to
our clients.” The phone calls proved to be eye-opening.
Clients were not interested in talking about compliance.
They were, in fact, completely confident that
ComplianceMAX was taking care of their regulatory
requirements. Repeatedly, clients said, “I don’t worry about
compliance because I know you have me covered.” This
was a defining moment of change for ComplianceMAX.
“In the beginning, we thought that our value proposition
was our ability to scale and stay on top of rules and drill
down technologies,” said Roth. “We realized that wasn’t it
at all. Our value proposition was our ability to translate all
of that into plain English.” ComplianceMAX’s slogan had
been “Our People and Our Technology.” ComplianceMAX
drove its revenues that way, built its office that way, hired
people and used technology that way. “When we were done
really listening to our prospects and customers,” said Roth,
“We added one line to our original value proposition and
it then became, ‘Our People, Our Technology, Your Peace
of Mind.’ It worked and was the perfect evolution.”
The company used this new information to transform
the ComplianceMAX website. Instead of expanding
it to include lots of rules and tout their experience,
ComplianceMAX cut out almost all the hard information.
“We took the bullet points off our website,” said Roth.
“We put up green grass and blue sky and a few pictures of
people. We showed them our personality. We showed them
that we weren’t compliance geeks.”
It was the beginning of getting the company on a
sustainable growth path. Roth said, “After we formulated
our message and began marketing in earnest, our numbers
soared. We went from a company of 100 clients to
a company of 1,000 clients in 18 months. We enjoyed
47
CUSTOMERS TAKE CHARGE
profitability within 24 months.”
The company found that having the “your peace of
mind” message on their website expanded the company’s
reach to a whole new community of firms, including
brokerages that had broad distribution to many broker/
dealers. Instead of going to small independent companies
one at a time, ComplianceMAX could go to brokerage
firms, each serving many brokers, or to their broker/dealers
and appeal to them.
Growth came quickly. ComplianceMAX was founded
in 2003, and in August 2007, with its base of 2000 brokerdealer
and investment adviser clients, ComplianceMAX
was acquired by National Regulatory Services.
ComplianceMAX used one of the oldest analog communications
platforms—telephone calls—to ask their
customers about what was important to them. Then they
used a more modern digital platform—their website—to
communicate back to the customers about the benefits of
ComplianceMAX to generate huge company growth. They
succeeded because they communicated well on the platforms
their customers were comfortable using.
48
49
When Betty Crocker introduced its first cake
mix in 1947, the company was sure it would be
an instant success. Instead of spending hours making a cake
from scratch, housewives only had to open the package of
Betty Crocker cake mix, add water, and bake. Sounded
like a winner. But customers rejected the product. Betty
Crocker’s parent company, General Mills, was perplexed:
Why didn’t busy housewives want to use the cake mix?
After spending some time talking to customers, General
Mills figured it out—the mix made cake-baking too simple.
There was no “pride of ownership” in the cakes baked with
the mix. They tasted fine, but they weren’t “homemade.”
Part of the pleasure of presenting a homemade cake to your
family was the knowledge that you had done it yourself,
and stirring mix and water together was clearly not enough.
The solution: General Mills modified the Betty Crocker
cake mix recipe to require the addition of an egg. Sales of
Chapter 3
Ask, Watch, and Listen
“To understand the man, you must first walk in his moccasin.”
—North American Indian Proverb
The Customer Experience Revolution
50
the cake mix soared.
Knowing your customers is a necessity for building a
great customer experience. According to Gina Pingitore,
J.D. Power’s Chief Research Officer, companies today need
to “Ask the customers and watch what they do through
different activities…we call it ‘Ask, Watch, and Listen.’”
When building an exceptional customer experience,
the customer controls the conversation and the company
needs to be a good listener.
A tedious job sparks a new company
Personal computers were still a novelty in 1982. IBM
introduced its PC only the previous year, and people were
wondering what, besides spreadsheets and word processing,
could be done with them. Noting his wife’s frustrations
with balancing the checkbook and paying the bills, it
occurred to Scott Cook that bill payment—writing checks
and reconciling balances—was a chore a computer could
do with ease.
In 1983, Cook co-founded Intuit to create Quicken,
the personal finance software that overwhelmingly dominates
its market today.
He named the company “Intuit” because he wanted its
products to be so easy to use that customers would intuitively
know how to do it. And he named its first program
“Quicken,” meaning both “to speed up” and “to give life.”
Follow your customers
When Intuit first introduced Quicken, there were a
handful of competitors, most of whom had more features
than Quicken. Quicken took over the market, in large part
because Scott Cook spent hours watching his customers
51
ASK, WATCH, AND LISTEN
balance their checkbooks and pay their bills. He didn’t
release Quicken until he knew that his customers could
quickly and easily do their most important tasks.
Today, Intuit still asks, watches, and listens to customers.
Intuit calls these site visits “Follow-Me-Homes.” They will
follow their customers at a restaurant and watch them while
they are using their mobile devices. They will follow them
in their cars, or follow them while they are in their offices.
Kaaren Hanson, Vice President of Design Innovation at
Intuit, explains the
idea behind the
Follow-Me-Home
method. “More
than just following
them where they use
the product, [we]
follow them where
they are living their
lives. That might
give you insight as
to where else that
product might be
useful or where else
you might be able
to solve their problem.
It can give you a lot of information and inspiration.”
Phil Ohme, Principal Interaction Designer at Intuit,
says that when you follow a customer, you must “get outside
your comfort zone. Figure out what is going wrong
and where the opportunities exist to do things better.
When you are observing, look at what can take it up a
notch. Don’t just look at what you can fix—look for where
you can make your experiences exceptional.”
During “Follow-Me-Home” sessions, Ohme has found
When you are
observing
don’t just look
at what you can fix—
look for where you
can make your
experiences
exceptional.
The Customer Experience Revolution
52
that customers sometimes create their own solutions to
problems they find when working with Intuit’s products. A
customer may have created special “cheat sheets” for information
that they need to use the product or service—sticky
notes all over the place or a spreadsheet on the computer
to manage information—that could be incorporated into
your solution and completely change their interaction with
your experience. “If a customer has a ‘work-around’ and it
gets them to where they are going faster, get that into your
solution because it is probably going to work for everybody,”
says Ohme.
Do it early, do it often
Intuit learned to use this strategy of observing customers
during product development after the company
experienced some unsuccessful product launches. Ohme
notes that, “At Intuit, it used to be called ‘launch and
learn.’ We had some really bad launches and failures.
Now we have more soft launches, where you launch it to
a small group of users and see how it goes. Then you go
to 100 customers, and see where that goes. And you constantly
make the product better. Then you go to 1,000.
Then you make it available to the public.
Intuit involves customers and potential customers as
early as possible and as often as possible in the product
design process. The company recognizes that getting customer
input in the early stages saves time and money later,
when it is harder and more time-consuming to make course
corrections or rework the product. Many companies prefer
to “launch and learn,” but they run the risk of learning
that they have lost customers, prospects, market share, and
revenue, by involving customers too late in the process.
Netflix uses a similar strategy of following customers
53
ASK, WATCH, AND LISTEN
to observe how they interact with the product. Steve
Swasey, Vice President of Corporate Communications
at Netflix, says, “We go to people’s homes and sit with
them while they watch a movie and we watch what they
do. Do they go to the remote control? Do they go to a
cable channel? Do they put a DVD in the tray?” Netflix
has a special center at their headquarters with a big “living
room” with televisions and laptops, where company
observers can watch customers behind a two-way mirror.
“We tell participants, ‘Here are three versions of a new
user interface,’” said Swasey. “They use them and we
watch how many times they click on the mouse, we watch
their eyeballs and how they interact.”
Gary Tucker, Senior Vice President at J.D. Power and
Associates, says that companies need continuous customer
feedback built into their processes. “Delighting your customers
is not a destination, because when you get there,
what it takes to delight them just got harder or changed.
Improving and delighting is a constant evolution.”
Intuit’s “Follow-Me-Home” program is that company’s
way to get regular customer feedback, so the customer
experience is always being refreshed and improved.
Customer information through profiles
Skinit, a company that personalizes the exterior of various
consumer devices, also enlists customers for information
about its products. Skinit’s technology lets consumers
personalize their electronic gadgets with an image—their
favorite sports team, college, Disney character, film, video
game, or their own creation. Skinit’s first product, the
“skin,” is a pressure-sensitive adhesive that consumers apply
onto devices like cell phones, laptops, tablets, MP3 players,
and gaming consoles. People “skin” their devices to show
The Customer Experience Revolution
54
their style or support their favorite team.
In 2006, Skinit had ten employees making personalized
adhesive logos and other artwork for consumers to
stick onto electronic devices. The personalization trend
for consumer electronics was just beginning to pick up
and there were only a few small players in the market.
Skinit made the decision early on to focus on quality.
Skinit needed to establish a large brand library, and to
do that, they had to ensure the brands that they could
be comfortable entrusting them with their content and
name. Because the market was so nascent, getting brands
to sign up was difficult. In most cases, the consumer electronics
category hadn’t been licensed to anyone else. By
focusing on quality, Skinit offered security for well-known
companies. Their brands wouldn’t be compromised if
they worked with Skinit.
Skinit secured more brands than any other offering.
Brands recognize that personalization offers a way to build
affinity with their base and evangelize their brand externally.
As consumer electronic devices are increasingly becoming
less differentiated from competitors, manufacturers are
looking for an edge. Offering personalization helps to sell
the product. In addition to offering products under its own
brand name, Skinit also has “white-label” and “enterprise”
offerings running personalization campaigns for companies
like Microsoft, Verizon, Sprint, and AT&T.
Skinit is now the global leader in “consumer electronic
device personalization” and powers numerous personalization
programs for Fortune 1000 companies, including
the medical, wireless, retail, consumer electronic, home
appliance, and commercial graphics markets. The Skinit
platform can be offered as a complete turn-key software
and service solution, or as a stand-alone hosted software
solution. Skinit drives a multitude of proprietary and
55
ASK, WATCH, AND LISTEN
open source manufacturing technologies such as laser
etching, paint on-demand, digital print, film conversion,
and many others.
Building the skinit customer experience
In 2007, Skinit was preparing to introduce the
“Customizer” to enhance its previously successful Photo
Uploader, a web-based application that allows consumers
to upload their own photos and manipulate designs for
their personal electronic devices. The objective was to provide
an intuitive and flexible interface with a rich customer
experience that increased conversion.
In order to understand what that customer experience
should be, Skinit’s chief technology officer, Darryl
Kuhn, created customer profiles for each group of customers
who use Skinit’s products. Building the profiles
began with examining analytic data gathered from
Skinit’s website, then third-party demographic and
psychographic (lifestyle) information data was added to
complete the picture.
Customers who look at certain kinds of skin designs
typically fall within a certain profile. Kuhn gives
examples of the way customer profiles work: “Using
analytics and demographics we gather from our online
offerings, we can see that older populations skew toward
more patriotic themes. We know sports skew to certain
regions of the country. We know that certain brands
skew to younger audiences.”
Using these profiles, Skinit can make connections
between the various themes that customers purchase and
recommend products that will be meaningful to them. The
profiles also help to identify customers who will buy more
than one item at a time.
The Customer Experience Revolution
56
Skinit used these profiles to great advantage in the
redesign of the Customizer. Kuhn explains the early design
process: “First we tested the Customizer with the employees
here at Skinit. We chose people who were new to the company
or hadn’t ever used the Customizer.” Soliciting employees
was easier, faster, and cheaper than finding and bringing in
people from outside. Then Skinit recruited friends and family
who met the target profile—another quick and easy way
to get the feedback they needed to move the designs along.
Kuhn began to understand that rather than trying to
assume that he knew what was in the mind of the customer,
he needed to review the designs with customers to
be sure the content was clear. The answers would let him
know if the customer was having a good experience with
the product and what changes needed to be made.
The process of showing customers prototypes of new
products convinced Skinit of the value of being test- and
data-driven. Says Kuhn, “You have to learn to give up the
ego and be willing to live with the results. The alternative
is to continue to interject your own ideas—guesses—and
continue to design experiences that your customers don’t
understand or like or want. ”
By integrating knowledge of their customers’ goals
into their redesign process, Skinit delivered a solution that
exceeded projected revenue estimates. They produced a customer
experience that increased conversion by 350 percent.
According to Skinit co-founder Darrin Hegemier, “Having
a more compelling customer experience met the immediate
goal of increased conversion and revenue from our
Customizer application, but perhaps more significantly, it
placed us in a clear leadership position in the personalization
space, meeting our long-term strategic objectives as well.”
57
ASK, WATCH, AND LISTEN
50%
40%
30%
20%
10%
0%
Sept. ‘07 Oct. Nov. Dec. Jan. Feb. ‘08
SALES CONVERSION RATE
The what and the why
Getting customer data through both observation and
analytic tracking is a valuable combination for developing
the best customer experience. Intuit’s Kaaren Hanson
explains, “Analytical data will track people from the offering
through various sites and that will tell you what they
are doing when they are in the space. But the observational
data lets you know what they are doing when they are not
being tracked. Observation gives you insight. There are
certain times of the day when you are using your phone or
computer. There is a lot of stuff that is happening around
your use of the device. If we were simply tracking the data
and analytics, we would not get that. Both qualitative data
and quantitative data can be very useful for inspiration.”
Analytics can tell you the “what,” but talking with and
observing your customer will tell you the “why.” You can
The Customer Experience Revolution
58
then test new ideas with customers to see if they solve the
issues you have uncovered.
You are not your customer
Scott Jenson has worked with top customer experience
companies such as Apple and Google. Jenson says, “The biggest
surprises almost always come in user testing, when I’ve taken my
precious little baby and I put it in front of users. There are times
when the users just have no idea what’s going on, and they’re
hopelessly lost. What really separates good designers from everybody
else is the number of mistakes that they’ve made.” Jenson
recognizes that a good customer experience designer knows that
he or she doesn’t know and has the humility to figure it out and
make lots of mistakes until it’s right.
Larry Tesler was Vice President of Shopping Experience
at Amazon and notes an example of the value of customer
input. Amazon was running a super saver shipping program,
but customers were having difficulty finding the
information. Teslar says, “Customers were hunting all
over the page to find out whether the product qualified
for super saver shipping—the message was an inch away
from the price, but they didn’t see it. Jason Kilar, a product
executive, asked us to test a tiny revision to one sentence:
‘Change the word and to an ampersand.’” Tesler didn’t
think a change that trivial would make any difference, but
to placate Jason, he agreed to give it a try. They ran tests
with customers, and the ampersand change worked. Being
creative and testing with customers helped Tesler remember:
you are not your customer. “Just because it doesn’t
make sense to you doesn’t mean it won’t make perfect sense
to your customers,” says Tesler.
Ask your customers what they want; watch them interact
with your solutions; and listen to what they say.
59
The best customer experience does not always
mean complexity. A great customer experience can
result from selective editing. Think about the Google home
page—a masterpiece of simplicity.
The Flip video camera was a highly successful example
of judicious editing for the improvement of the customer
experience. The camera was intentionally designed to leave
out a number of features and functionality currently available
in other video cameras. The Flip was designed for a
fun experience, and it more than delivered on its promise.
The roots of the Flip were in another product, a singleuse
digital still camera from little-known Pure Digital
Technologies, a small company with less than 100 employees.
That camera was available in 2001 at most pharmacies
under a myriad of brands for about $20. It was designed
to be returned to the drugstore so prints and picture CDs
could be created for customers. Pure Digital Technologies
Chapter 4
Less Can Be More
“We’re not going to add features and functions”
—Jonathan Kaplan, CEO, Flip Video
The Customer Experience Revolution
60
needed those cameras to be returned, to save money when
they reused the shells of the returned cameras to manufacture
new cameras.
But many of the cameras were never returned. The savings
needed from reusing shells of returned cameras fell
short. Pure Digital Technologies could no longer continue
in business with the digital cameras, even though they were
still selling. Where did they go? What were people doing
with them?
It turned out that many customers were hacking into
the cameras. After they were opened, people would connect
them to a computer and upload the photos onto the
Internet. It was easy to do with a disposable camera, and
people were eager to upload photos to share with their
friends via the Internet. Those hackers would unknowingly
play an important role a few years later in redefining
video cameras.
The founders of Pure Digital Technologies, Jonathan
Kaplan and Ariel Braunstein, had failed with their idea
of the single-use digital still camera. So they turned their
attention to video cameras.
In the stagnant, thirty-year-old video camcorder market,
Kaplan and Braunstein saw only high-end, complicated
products. The market was cluttered with cameras using
a wide variety of recording formats. The most affordable
camcorders sold for $350-$500, and prices skyrocketed
from there, depending on the additional components
needed for optimal results.
The cameras came in a variety of shapes. The standard
shape was a camera you held like a football. The upright
model was held like a soda can. Larger camcorders needed
to be perched on a user’s shoulder. It was necessary to bring
along blank videocassette tapes, DVDs, or memory cards
when you wanted to film, not to mention lens caps and
61
LESS CAN BE MORE
batteries. When you wanted to watch a video, you needed
the camera, along with connecting cables, tapes, and a
screen on which to view. For many customers, using the
camcorder was a bigger event than what they were filming—
so the cameras weren’t used.
Kaplan and Braunstein understood that adding more
features was not what customers wanted. The camcorder
market needed a point-and-shoot video camera.
Based on their experience with hackers using their disposable
still photo cameras, they developed a new digital
video camera that could easily connect to a computer and
the Internet. As with still photos, customers were interested
in recording videos quickly and
immediately sharing them on the
Internet, via YouTube and other
sites. The new video camera was
designed around what customers
wanted it to do—its Do-Fors.
The Flip’s Do-Fors: To record, connect, and share videos.
From the start, Kaplan was committed to delivering
a customer experience designed around the Do-Fors of
recording, connecting, and sharing that would be fun. Part
of building the fun customer experience involved the product
name. When the product entered the market in 2006,
it was called “Pure Digital PSV-351 30 Minute Point-and-
Shoot Camcorder.” The product took off when the name
was changed to the “Flip” in 2007. According to Kaplan in
an interview with Kara Swisher of All Things Digital, the
“Flip” name came from the concept of the car key that flips
out from the holder when you press a button.
On the Flip, the USB arm flips out from the top of the
camera with the push of a button. The Flip gets plugged
right into the computer, becoming a place for storage and
transfer, familiar and easy to access by the user. This feature
The Customer Experience Revolution
62
virtually guaranteed that there was little for customers to
learn before starting to share their videos.
The Flip required no special accessories, software,
cables, or other components. Kaplan was happy not to
include those extras, along with the other things customers
did not want. Since the Flip was essentially a camera plus
computer drive, customers no longer had to carry around
spares of blank videocassettes, DVDs, or memory cards.
The Flip Ultra video camera measured only about four
by two inches. It was thinner than one inch at its deepest
point and only had a few buttons to operate the camera
below the small one-inch screen on its back.
This first version made low-quality, 640 x 480 resolution
video. The competition from Sony, Canon, and others
offered cameras that nearly doubled that video sharpness
and clarity. This, along with the lack of obvious features
on the Flip confounded many reviewers who were used to
comparing camera features, fineness of video resolution,
and price. Some reviewers never considered fun, ease of
use, or customer experience as part of the Flip’s benefits.
As planned and promised to customers, users of
the Flip needed only a few minutes to record, connect
to the Internet, and begin sharing their videos. An early
Flip Ultra package promised the Flip owner “easy video
uploads to AOL, Myspace.com and YouTube!” The Flip
delivered. It was a perfect complement to the fast-growing
social media sites.
Pure Digital Technologies started the “Flip experience”
for potential customers by delivering fun in their messaging
about recording, connecting, and sharing videos. Visiting
their easy-to-navigate website was fun and inspiring. The
site was about people, the Flip, and what the Flip could do
for you. Whether people where looking at the new camera
online or in a store, the promise of fun was at the forefront of
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LESS CAN BE MORE
the consumer message.
Between May
2007 and December
2008, Pure Digital
Technologies generated
$300 million in revenues
from the sale of
two million Flip Video
cameras and garnered a
seventeen percent share
of the video camera
market. The Flip Ultra
video camera created a
new market segment,
the point-and-shoot
video camera. It caught
large, well-established
companies like Sony,
Canon, and Panasonic
completely off-guard
in the tenth consecutive
year of flattening
camcorder sales. Sony’s
existing market share,
21 percent at the time, began to decline. The Flip video
camera had a reasonable price and delivered on its promise
with a rewarding customer experience before, during,
and after the purchase. At the end of the summer of 2010,
almost five million Flip video cameras had been sold.
The Flip’s customer experience was elegant as well as
fun. Flip owners could record, connect, and share their
videos quickly and easily, almost anywhere they wanted.
And customers were not the only ones who appreciated the
experience. “The ease of use is incredibly seductive,” said
The Flip ’s
customer experience
was elegant
as well as
fun. Customers
could now
record,
connect,
and share
their videos quickly
and easily,
almost anywhere
they
wanted .
The Customer Experience Revolution
64
Paul Ryder, Amazon’s vice president of electronics.
Many people, including some video enthusiasts,
industry experts, and media analysts, were baffled by the
increasing sales momentum of the Flip. Why didn’t the Flip
have more features? Kaplan’s response: “We’re not going to
add features and functions.” The Flip was a better product
to its five million-plus customers because of its simplicity
and the experience it offered people. It did what users
wanted, and did it well. In a 2009 article in Wired, vice
president of marketing at Pure Digital Technologies, Simon
Fleming-Wood, defines quality of the Flip in terms of ease
of use. “The one thing everyone wants to do with their
footage is show it to someone else,” says Fleming-Wood.
This doesn’t mean that the company wasn’t open to
adding capabilities to the Flip. Since the Flip’s inception,
the company has added high definition resolution and a
better-quality LCD screen. Flip owners can personalize the
exterior of the camera with colors and special designs.
One whole year passed after the introduction of the Flip
before Sony had its competitive answer to the product. The
Wall Street Journal said that the introduction of the Webbie,
later to be renamed Bloggie, “symbolizes an important shift
in Sony’s culture.” Sony was not alone, as the list of Flip imitators
grew, with names like Kodak Playsport, JVC Picaso,
Vivitar Pocket Video, and Samsung HMX.
Surprise acquisition by Cisco
In March 2009, Pure Digital Technologies was purchased
by Cisco for $590 million in stock and $15 million
in retention-based equity incentives. Cisco is a $40 billion
publicly-traded company with over 73,400 employees in
165 countries.
Cisco’s reputation, profitability, and culture centers
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LESS CAN BE MORE
on producing and selling industrial equipment that routes
and switches data inside the networks of large communications
devices. The company has prospered by providing
industrial equipment that typically has much higher profit
margins, complexity, and longer sales and life cycles than
consumer electronics. Data switches are Cisco’s leading
product line, with over 70 percent of the market. The company
dominates the router equipment market with over 50
percent of that market. Cisco also participates in security,
data storage networks, web conferencing, and voice communications
markets. Compared to the large businesses it
serves with complex industrial communications products,
its consumer business, which includes video, set-top boxes,
and home routers, has never done well.
Cisco’s strategy, according to John Chambers, chairman
and CEO, in a presentation in June 2011, is “based
on catching market transitions that affect our customers.”
The company does this by building, partnering, or buying
what it needs to get there. Cisco claims that it applies
for over 700 patents annually and has at least 8,000 issued
in its name. The company also states in its public communications
that it meets or exceeds it major rivals IBM,
Microsoft, Intel, and Hewlett-Packard in research and
development spending as percentage of annual revenues.
Cisco wasted no time after its acquisition of Pure Digital
Technologies to start converting the assignment of patents
from Pure Digital Technologies, Jonathan Kaplan, Ariel
Braunstein and others to Cisco.
It was not clear to many experts in the communications
or consumer electronics industries what market transitions
Cisco was trying to catch by acquiring Pure Digital
Technologies. Many commentators remarked on the lack
of a fit between the two businesses. While the sales of the
Flip continued to increase post-merger, there was a lack of
The Customer Experience Revolution
66
synergies between Cisco and Pure Digital Technologies.
In early 2011, the Flip continued to be one of the
most recognized brand names in consumer electronics. Its
momentum in the market and ability to convert customers
to energized advocates was still increasing. The Flip’s
profitability as a consumer electronics product was very
competitive. Market share estimates of the Flip ranged
from 30 to 40 percent of total video camera sales. Flip was
the best-selling video camera on Amazon.
With brisk sales and a strong outlook for demand,
the people at Flip planned to release a new product with
expanded networking capabilities while retaining the fantastic
customer experience. It was an Internet camera and
would be called the FlipLive. The new camera would use a
wi-fi hot spot so users could broadcast live from anywhere
they could get connected to the Internet. The FlipLive
connection and location would create a clickable link that
could be used by anyone on the Internet, possibly millions
of people at once. Its introduction date was set for
April 13, 2011.
The Flip is gone
On April 12, 2011, Cisco announced that its Flip Video
business would be shut down. Shuttering the Flip business
resulted in 550 layoffs and a pretax charge of about $300
million in the third and fourth quarter of the fiscal year.
While Cisco did not offer a detailed explanation of why
the Flip was suddenly gone, the announcement did make
it clear that the closure decision was a strategic “part of
the company’s comprehensive plan to align its operations”
and “that it will exit aspects of its consumer businesses and
realign the remaining consumer business to support four of
its five key company priorities: core routing, switching and
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LESS CAN BE MORE
services; collaboration; architectures; and video.”
The announcement came when Cisco’s quarterly
net income decreased from $2.2 billion to $1.8 billion.
Earnings per share for the quarter were down 12 percent
to 33 cents, compared with 37 cents in the same quarter
of fiscal year 2010. Many people close to the company felt
that its drive to pursue growth, including growth through
acquisition, was more of a distraction than a disciplined
execution of strategy linked to actual opportunities.
On April 22, ten days after Cisco announced the Flip
would no longer exist, registered owners of Flip cameras
received an e-mail: “Thank you Flip fans for all your support
and comments about Flip and our team here as we
begin our transition plans to close the business. However,
do know we will continue to provide technical support for
Flip video cameras until 12/31/2013 and Flip cameras will
be available through our online and in-store retail partners
as well as our Flip store while supplies last.” The one-year
warranty would still be upheld. Support for both hardware
and software would be continued for a nominal fee and
e-support would be continued to 12/31/13. The e-mail
message ended with “The teams have been reading your
comments from emails and our social media community
pages and are touched by the overwhelming number of
thoughts and messages. [Signed] The Flip Video team.”
There was no explanation to all the Flip customers
as to why Cisco suddenly pulled the plug on the highgrowth
business with a great brand and future outlook.
Customers were deeply shocked. Competitors were confounded,
too. Their sales in the market that the Flip created
were increasing. In a statement published in PCMag.com
just three days after Cisco’s announcement, Kodak said it
was “surprised” by Cisco’s decision to eliminate the Flip.
Kodak’s sales in the personal video camera category grew
The Customer Experience Revolution
68
170 percent the previous year. “Pocket video cameras will
continue to be a strong growth area,” the company continued
in the statement.
On one of Sony’s blogs was a comment about pointand-
shoot video competition from cell phones: “We won’t
play dumb on the idea of cell phone video entering the
market but the reality is right now that we believe it’s apples
to oranges…We’ve seen a large demand for small, easy and
affordable devices with edgy features like 3D video and
dual screens.”
The easy answer to why Cisco killed the Flip is that
cell phones were providing too much competition to a
stand-alone small video camera. But David Pogue, the New
York Times technology columnist and blogger didn’t see it
that way. “Everybody’s first reaction is: ‘Oh, it’s because
of smartphones. Everybody’s shooting video with iPhones
nowadays—nobody’s buying Flip camcorders,’” said Pogue
in a New York Times blog post. Just a month earlier he was
briefed by a Flip product manager about the new FlipLive
camera to be introduced and was told that the Flip held 35
percent of the market and was selling fast.
“The most plausible reason is that Cisco wants the
technology in the Flip more than it wants the business,”
said Pogue. “Cisco is, after all, in the videoconferencing
business, and the Flip’s video quality—for its size and
price—was amazing. Maybe, in fact, that was Cisco’s plan
all along. Buy the beloved Flip for its technology, then shut
it down and fire 550 people.”
As of June 2011, a look at patent activity shows the process
continuing for the reassignments of patents from Pure
Digital Technologies, Jonathan Kaplan, Ariel Braunstein
and others to Cisco.
The Flip was a unique and wonderful product, but did
not belong in the Cisco family. Cisco’s core competency is
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LESS CAN BE MORE
in industrial communication and networking, not personal
retail products.
In that same New York Times blog post, Pogue added
that Kaplan spoke to Pogue’s Columbia Business School
class one week after Cisco’s announcement to shut down
the Flip. Kaplan addressed the idea that the smartphone
killed his baby by saying, “I don’t think the smartphone
was really at all involved. Camera phones haven’t stopped
over 35 million cameras a year from being sold in the U.S.”
Kaplan noted that the Flip was very profitable at Cisco.
“It took in $500 million the first year.” Kaplan’s view was
that the culprit was Cisco’s stock price crashing, which was
unusual for the company. “Cisco’s shareholders wanted the
company to focus on its core business.” Kaplan confirmed
that the Flip’s technology was in fact being used on other
Cisco products.
So the Flip is gone. “Is that fair to us? To the consumer?
To the world? Probably not. But if Cisco manages to turn
itself around, and the share prices go up, everyone will say
that it was a really good decision,” Kaplan said. Kaplan confirmed
to Pogue’s class that LG, Amazon, Hewlett-Packard,
Sony, and Kodak all tried to buy Pure Digital Technologies.
From video to grilled cheese
What’s next for Kaplan? He plans to open five
restaurants in San Francisco in 2011, then 500 more
nationwide by 2015. They’ll be called “The Melt.” The
company will use location-based mobile technology
combined with upscale food offerings to try to create an
excellent customer experience. The food served will be
combos of grilled cheese and soup, including such items as
“aged gruyere on white wheat with creamy wild mushroom
soup” or “smoked gouda on eight grain bread with spicy
The Customer Experience Revolution
70
black bean soup.” An order can be placed from a mobile
phone or computer and the customer will be sent a QR
code as the order ID, which the customer will scan at the
restaurant. Customers can pay through their phone and
quickly pick up their orders. From reinventing the video
camera market, Kaplan is moving on to reinvent fast food.
The Flip is dead. Long live The Melt!
Traffic tickets started a company
Another company that has been able to take a big share
of its market by focusing on the customer experience and
honing down the number of features in its products is I
DRIVE SAFELY in Carlsbad, California.
In 1998, two colleagues each received traffic tickets.
They both needed to attend traffic school. They knew that
meant taking a course in a classroom for eight hours on a
Saturday. It wasn’t a big leap for them to realize there was a
business opportunity in online offerings for traffic school.
In less than one year, I DRIVE SAFELY was in operation.
I DRIVE SAFELY (IDS) currently services more than
700,000 customers every year. The 200-employee company
has experienced a 40 percent annual growth rate from
2007 through 2010. The company is certified in more than
thirty states for online driver’s education, and does business
in all fifty states and Canada. It serves three markets:
teenagers, specialty drivers, and experienced drivers.
Co-founder and Managing Partner Gari Garimella
says, “I would love to tell you that our sustained growth is
achieved by working on some unique features and unique
selling propositions. But it is our understanding of the
audiences for our services and tailoring experiences for
those specific audiences that drives it.”
IDS makes sure to understand as much as possible
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LESS CAN BE MORE
about its customers so the company can purposely engage
those people with a customer experience that suits them.
Most of the people IDS serves do not compare their options
for online traffic courses based on features. They look for
assurance of passing, approvals and price.
The main Do-Fors of IDS are: Courses that are simple,
affordable, and hassle-free.
IDS builds the customer experience based on what each
market segment is looking for. IDS segments the market by
the types of experience the customers would like, regardless
of the price. Garimella says, “We believe it is all about
people’s expectations. Everyone in the online traffic school
market wants a good experience, even if they are shopping
on price. And the expectation of the experience can vary
greatly across a product category. We had to segment the
market, to break it into sensible and well-defined pieces
based on what people were buying and their expectations
of the experience that would work best for them.”
IDS Do-Fors for the teenage market are: the course
must be easy, fast, and online, plus have assurances that
they will pass the course for their first license. IDS makes
it easy for teens to access contracts, guides, and how-to
information and get it to their parents.
The customer experience is further tailored for mature
drivers, and those who need to mitigate traffic tickets.
Do-Fors for the experienced driver market (ages 55+): the
course is easy to take and simple to complete. In the market
for people who have received traffic tickets, the Do-Fors
are: speed and convenience, ease of ordering, an approved
program that will dismiss the points associated with the
ticket, and express delivery for people who complete it at
the last minute.
There are other competitors to IDS trying to add more
features and lower prices. Those companies are losing
The Customer Experience Revolution
72
Is feature creep
the enemy
of a good
customer
experience ?
their profit margins and customers to I DRIVE SAFELY.
Garimella says, “They do not understand the customer
expectations and markets as well as we do. Features do not
equate directly to value. Some features provide value but it
is in the context of the entire experience. You are not going
to sell a Honda to the guy that wants and can buy the
Ferrari. But if a guy wants to buy a Honda, he still needs a
tailored, pleasing experience.”
IDS recognizes that it is in the business of saving lives.
That, according to Garimella, is the ultimate Do-For for I
DRIVE SAFELY. “Understand the people who buy your
products,” says Garimella. “Know and anticipate their
needs, wants, and how they make buying decisions. Then
figure out what you can do to deliver it.”
Feature creep
Whether a product or service starts out with an extraordinary
customer experience or is trying to get there, feature
creep can be a deadly enemy of a great experience. Feature
creep is one of the main drivers in a product, especially
for a software product, where the companies compete on
giving more features and upgrades.
Phil Ohme of Intuit is aware of the danger of feature
creep at his company. Says Ohme, “When someone is shopping
for a new product, they
look at the list of features and
what they do. They usually
want all the features they do
not have. The companies
respond by adding features.
Then the companies react
to each other’s new features
by creating more features.”
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LESS CAN BE MORE
Ohme explains that many companies believe they can make
more money if they can get people to upgrade every year. But
since people don’t upgrade every year, companies put more
features in to encourage the upgrades. At a certain point, too
many features make the overall product worse.
Is feature creep the enemy of a good customer experience?
Ohme believes that “If there are so many features
that solve everybody’s needs, the product is not going to
do one given task well.” Ohme recalls Intuit’s challenge
to keep Quicken competitive, but feature creep and the
law of diminishing returns beat them. “Quicken became
bloated with features. Then one of our competitors, Mint,
a provider of online personal finance services, got people
set up with their personal finance products faster than we
did. And that is what people wanted.” Mint developed
an easier and more intelligent way for people to manage
their money. Customers responded and so did Intuit,
buying privately-held Mint for an estimated $170 million
in September 2009.
A square deal
A small company, Square, has used a better customer
experience to differentiate itself from its competition and
gain market share. Started by Twitter co-founder Jack
Dorsey, Square offers a small,
square-shaped credit card reader
that plugs into the earphone jack
of an iPhone, iPad, or Android
smartphone. Rather than loading
the reader with more features,
Square provided the simple Do-Fors that customers
wanted: “Sign up for Square, get your free card reader
in the mail, and start swiping. Accept all credit cards.
The Customer Experience Revolution
74
No hidden fees, no commitments—ever.” Square makes
money by charging merchants 2.75 percent of sales plus
15 cents for each card swipe. The company says it is adding
60,000 merchants a month.
Square’s customer experience is very simple and easy.
There is a one-page web form to complete to start accepting
credit cards. The card reader itself is provided free of
charge for anyone who signs up for the service.
Square’s easy customer experience opened up the
market for mobile credit card readers to a variety of businesses.
According to a February 2011 article in Bloomberg
Businessweek, the credit card readers are used by businesses
as disparate as farm market vendors, a house call-making
veterinarian, and heating system technicians who receive
payments on site when the work is complete. The market
for smartphone-based credit card transactions is expected
to reach $55 billion by 2015, according to estimates by
independent researcher Aite Group.
Leaving complexity behind
The examples of Pure Digital Technologies’ Flip, the
online courses of I DRIVE SAFELY, and the easy credit
card readers from Square show the great value that understanding
and anticipating what people want a product
or service to do for them can provide to a company. The
Do-Fors that customers want can guide a company toward
careful selection of features.
Although the Flip story doesn’t have a happy ending, at
least for the loyal Flip customers, it was a great success while
it lasted. Sometimes forces outside a company’s control will
affect whether the company can continue to prosper, or
even exist. Cisco clearly has made decisions about the Flip
that don’t reflect the exceptional customer experience that
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LESS CAN BE MORE
Flip customers received during the product’s heyday.
Pure Digital Technologies, I DRIVE SAFELY,
and Square, three small smart companies, had access
to ideas, technology, processes, people, and messages.
They chose to leave complexity behind when selecting
how they would determine, develop, and deliver
greater customer experiences.
76
77
Some of the best customer experiences deliberately
evoke strong emotions: attraction, trust, fun.
Experiences with a strong emotional connection can create
long-lasting customer relationships and fanatical advocates.
The customer’s connection with the experience is not solely
based on logic. It can be a customer’s personal reflection of
the company and the brand.
BMW’s Mini Cooper car is just such a product whose
customer experience is built upon the customer’s emotional
connection with the product and the company.
In 1959, designer Alec Issigonis created the first
Mini—a small family car with room for four adults that
could also be driven like a sports car. The Mini became an
icon for the swinging ‘60s in Britain.
Two million Minis were sold in the next decade, with
truck and station wagon versions added to the race carlike
sedan model. In the U.S., the Mini was discontinued
Chapter 5
The Emotional Connection
“Whatever one may think of the Mini Cooper’s
dynamic attributes, which range from very good to marginal,
it is fair to say that almost no new vehicle in recent memory
has provoked more smiles.”
—New York Times, June 2, 2002
The Customer Experience Revolution
78
with more stringent emissions regulations, but around the
world, another two million Minis were sold by 1977.
In 1999, the Mini was voted “European Car of the
Century” by international automotive writers, and second
only to the Ford Model T for the global title. But in 2000,
sales of the Mini had declined to the point where the car’s
production was discontinued. BMW brought back the
brand in 2002, changing its image from entry level to
premium, and reintroducing it to the U.S. market. The
Mini was named the 2003 North American Car of the
Year and has gained a following in the U.S. since then.
In March 2011, BMW sold 7,689 Minis, sixteen percent
more than the sales for the same period in 2007. To meet
the increasing demand for Mini models, the company’s
assembly plant is expected to increase its annual production
to 240,000 vehicles.
Why is the Mini so popular and influential? There are
plenty of small family cars in the market. Why does the
Mini make us smile?
The Mini Cooper engineers intentionally redesigned
and rethought everything about the car and the experience
to keep its customers happy and engaged with its quirkiness
and attractiveness. The Mini Cooper provides basic
transportation, getting from point A to point B, but the
experience is exciting and fun. The customer experience
was created on purpose and with purpose.
Owners of the Mini Cooper have long been known
to be one of the most fanatical and loyal of all car owners.
Mini Cooper owners are to car ownership what Apple
owners are to personal electronics. They actively participate
in local motoring clubs and are a passionate and faithful
community. The “Coop” has the same instruments any
other car has, but they are quirky, friendly forms with a
funky, modern feel and sometimes unorthodox (and even
79
THE EMOTIONAL CONNECTION
non-ergonomic) arrangement, like the larger central “speedo”
pod. The layout of the dashboard may not be the most
efficient, but it helps to provide a fully engaging experience.
The Mini Cooper makes driving fun!
The Mini Cooper experience doesn’t begin or end
with the car alone. Mini has crafted the experience of how
customers engage and interact with sales people, customer
service reps, and the website. From advertising, social
media, going online, signing on, reading the humorous
content, designing your own Mini, ordering the car, following
the production and delivery of the car online, and
even the unveiling of your car at the dealership—it is totality
of the thoughtful experience purposely executed.
Mini customers are having great experiences, not only
driving the car, but also at the dealerships. It is not uncommon
to see online customer reviews for Mini that say: “I’ve
bought well over twenty cars in my life, and I would say
the local Mini dealer was easily one of the best I’ve ever
dealt with.” Mini invests heavily in the customer experience
training of its staff, and the company is constantly
measuring the dealership experience to ensure that it is
great. A Mini Cooper dealership is clean, professional, and
a little funky, like the car. The people who work there are
laid-back, courteous, and professional.
Mini doesn’t leave anything to chance. The company
has a sophisticated internal system that is used to constantly
measure this dealership experience. Mini Cooper surveys its
customers and creates a Customer Service Index (CSI) score
for their sales and service staff. If a customer has an issue, a
staff member must respond within 24 hours. All the dealership
employees know their scores and can monitor them in
real time on their intranet, logging into minimotoringexperience.
com to track their CSI scores. Mini sales reps’ bonuses
are determined by these scores.
The Customer Experience Revolution
80
When you ask owners about their Minis, they talk
about the experience of buying it as much as they talk about
driving the car, its performance, or gas mileage. Think
about that—Mini has made the process of paying your
hard-earned money a fun experience!
Because the majority of Minis are designed by the
customer to include custom options, most Mini Cooper
dealerships keep relatively few cars in stock. This designed-bythe-
customer aspect provides a strong emotional attachment
to the car. But the wait for the completed car can be tough
on the prospective Mini owner. To alleviate the pain of waiting,
Mini has a website that allows customers to follow the
progress of their cars from the time of ordering to the day of
delivery. At the website’s “owner’s lounge,” customers track
the status of their cars through six steps: on order, scheduled
for production, awaiting transport, en route, at distribution
center, and at the Mini dealer.
Customers can call Mini anytime for more detailed
information about their cars and can speak with a representative
who can tell them exactly what is happening
with their cars at that moment. And with “Ship Tracker,”
customers can even track their own cars’ trip across the
ocean. Customers can even chat on a forum with other
customers who are having their cars manufactured at the
same time—sharing in each other’s experience as they join
the Mini Cooper league of zealots.
Understanding emotions
An emotional connection is formed with every aspect
of the relationship with the consumer: from the promises
in the first ad the person sees, to the experience of the company’s
website, to how a company representative responds
on the phone, to the experience of making a purchase, to
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THE EMOTIONAL CONNECTION
how the customer perceives the touch and use of the products
and services. It includes all the experiences a person
has interacting with a business.
The data tells us that emotions affect our decisionmaking.
Donald Norman, author of Emotional Design:
Why We Love (or Hate) Everyday Things, is one of the
leading authorities on emotion and design. Business Week
labeled him a “cantankerous visionary” and has listed him
as one of the world’s most influential designers. In his
book, Norman suggests that emotions influence product
design. “When people are anxious they tend to narrow their
thought processes, concentrating upon aspects directly relevant
to a problem. When people are relaxed and happy,
their thought process expands, becoming creative, more
imaginative.” Norman concludes, “Happy people are more
effective in finding alternative solutions and are tolerant of
minor difficulties.”
The Mini Cooper is an interesting example of how
emotion influences customer experience. Plenty of Mini
owners complain about the location of the radio or fact
that the speedometer is much larger than it needs to be,
but because of the fun of the total experience of the Mini,
they tolerate the car’s quirks. The positive emotional
experience affects their decision-making. They are happy
driving their Mini Cooper and even convince themselves
that they like the quirks.
The data tells us that people will actually rationalize
their decision based on how they feel. According to
Norman, the research shows that emotions provide critical
assistance to our decision making by helping us make rapid
selections between good and bad, reducing the number of
things to be considered. Norman explains that, “Cognition
interprets and understands the world around you, while
emotions make value judgments, deciding, among other
The Customer Experience Revolution
82
things, what’s good or bad, safe or dangerous.”
Ivan Crespo is an engineer with a passion for making
customers happy. Ivan is a software R&D Engineering
Manager at Eastman Kodak and has worked at other major
technology companies. Crespo recounts a lesson he learned
at a company earlier in his career. The company he then
worked for had a software application that allowed people
to manage their photos. This application was consistently
rated higher with
potential customers
than competitors’
software. It was found
to be quicker and
easier on several standard
measures. But
when asked to choose
between this application
and competitors’
products, people
actually preferred
the competition.
Crespo realized that
“the emotional component—
how the
application presented
itself, what kind of
relationship people
had with the other
application—made
a huge difference
with how people reacted to it. That was the biggest ‘Aha!’
that we had.” Like the Mini Cooper, that visceral, emotional
connection outweighed how easy it was to use—that
form could trump function when form is brilliant. The
People make
purchase decisions
about how they
feel
about things. And
if the feeling is strong enough,
they will
justify their decisions
to support their
emotional
connection.
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THE EMOTIONAL CONNECTION
application’s ease of use was not enough for customers to
select the product. “We had to think not only about the
functional side of the app, but also the emotional design.”
The emotional connection that customers make with
a company’s products and services is just as important,
or more important, than making an efficient product or
delivering an effective service. The emotional connection
shapes peoples’ perceptions of the company, its products,
services, and brand. People make purchase decisions
about how they feel about things. And if the feeling is
strong enough, they will justify their decisions to support
their emotional connection.
The customer’s emotional journey
Kaaren Hanson, Vice President of Design Innovation
at Intuit, says that at Intuit they give great consideration
to emotion. “We have emotion journey maps where we
deliberately map out what we want the emotion to be,”
says Hanson. “We look a lot at where there are negative or
neutral parts that we can make positive. We think about
the emotional journey over time for the customer.”
When people are anxious and doing a task they dread,
like paying taxes, understanding their emotional journey
can lead to innovative solutions. Intuit’s SnapTax is a
mobile application that runs on an iPhone or Android.
When filling out the 1040EZ, SnapTax allows you to snap
a photo of your W-2 with your mobile device. It imports
your information, then the customer answers a few quick
questions, reviews, files, and it’s done. Says Hanson, “People
can get their taxes filed in seconds. All they have to do is
snap a picture. The rush from that is amazing. One of the
reasons they feel such a rush is that it is so innovative and
surprising. Here they are doing their taxes and dreading
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that, and then they have a great experience.”
Intuit examined all the emotional connections along
the customers’ journey and found solutions that made it
easy and removed the dread from the experience. Intuit’s
“emotion journey maps” identify all the customers’ emotional
touch points with the experience and measure
those touch points based on emotional responses. Intuit
runs studies in its labs to record customers interacting
with Intuit products, measuring facial cues for happiness
and frustration.
Creating enduring relationships
with customers
In Claudel Arguin’s 2010 thesis, Emotional Durability
Is the New Sustainability: Why Are Objects Cherished Even
after Their Functionality Has Been Surpassed, he describes
the stages of relationships with products and services.
These stages along the customer’s journey are opportunities
to purposely create positive emotional connections.
The first encounter is a strong factor in shaping a
customer’s expectation of the product or service relationship.
There are many ways to discover a product or
service in the first stage of the relationship. Someone may
hear about it from a friend, or see an advertisement in
a magazine, on television, or on the Internet. The first
encounter can be an “impulse” reaction—an instant
attraction or repulsion. The company, of course, wants it
to be the beginning of a long, happy relationship full of
fun, delight, and trust. This is the point along the journey
to transform prospects to customers. Companies who
purposely craft the customer experience understand this
first encounter and work at building a positive emotional
connection right away. Today’s experience makers are on
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THE EMOTIONAL CONNECTION
top of the conversations that customers are having about
their brand. They actively monitor and participate in
these discussions and capitalize on their advocates’ praises.
They use the advocates’ “voices” in their advertisements
and ensure that the first message a prospective customer
hears is the one the company has crafted.
The second stage is commitment—choosing to purchase
the product or service. In this stage, people have two
different approaches: a researched purchase or an impulse
purchase. Consumers make researched purchases for bigticket
items that are expensive. Though these are educated
decisions, they are also deeply personal. The home and car
are often seen as extensions of our personality, and we form
strong, long-lasting connections. Mini Cooper understands
this concept. The company thoughtfully builds the entire
purchasing interaction between the customer and the sales
people, customer service reps, and the web. Customers do
their research about the car—looking at print and Internet
advertising, reading the content on the Mini Cooper website,
discussing the car in social media, designing their own
Mini, ordering the car, following the production and delivery
of the car online, and the unveiling of the car at the
dealership—which all help customers develop very positive
emotional connections with the Mini Cooper.
Impulse purchases, on the other hand, are based on
quick decisions. Emotion helps customers make the decision
quickly. Apple’s iTunes, Amazon’s books, or Netflix
movies all exemplify that impulse reaction—“I’ve got to
have that”—and ensure a strong emotional connection
in the commitment stage of the customer relationship.
Regardless of whether it is a well-researched decision or
an impulse purchase, a strong relationship will only endure
if the emotional connection lingers. After the purchase,
the next stage is the honeymoon period, where the prodThe
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uct or service is put to the test. This is when the customer
discovers how much he or she enjoys the product or service.
Following this period, the relationship moves to the
final stage, which is either to endure or break down. If
a company consistently delivers a better experience than
its competition, then customers will develop a high level
of trust with the company and the brand. If the company
consistently delivers a great experience, then the company
has won a long-lasting customer and advocate who will
likely tell other potential customers. If the promise was
not met, then the company has lost that customer, who is
equally likely to tell other people not to buy the product.
Emotional connection secures the brand
and trust
Your brand can either draw your customer towards
your products and services or away from it. Sergio Zyman,
former chief marketing officer of Coca-Cola, wrote about
“emotional branding” in the foreword to Marc Gobe’s book,
Emotional Branding: The New Paradigm for Connecting
Brands to People. Zyman said, “Emotional branding is
about building relationships; it is about giving a brand and
a product long-term value. Emotional branding is based
on that unique trust that is established with an audience. It
elevates purchases based on need to the realm of desire.”
Smart companies are building relationships with their
brand to create long-term value. They are developing enduring
emotional connections with their customers to secure
their brand and trust. Gary Tucker, Senior Vice President
at J.D. Power and Associates, says that in terms of brand
and developing trust, “customer experience, by definition,
is a sustainable advantage.” Tucker considers how the automotive
industry has evolved. He says, “Ten years ago, if
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THE EMOTIONAL CONNECTION
Customer experience,
by definition,
is a sustainable
advantage.
you went onto the J.D. Power site, it was obvious which
car to buy and which car not to buy. Today, it is not clear
that there is a car that I should or should not buy. More
emotional considerations come into play for that decision
and experience, both real and perceived, that are going to
have tremendous influence.”
Delivering the right customer experience creates a sustainable
brand that is hard for competitors to duplicate. And
consumers will pay more for it. Tucker explains this idea:
“If you are a retail bank, how much is product innovation
going to drive deposit growth? You can come up with the
next new cool product, but in sixty to ninety days, the guy
on the next corner will also have that product. Anyone can
copy it. But if you build a model around service, and hire
and train the right
people to deliver
the right experience,
that is a more sustainable
competitive
advantage, and we
know from the data
that people will pay
for it.”
Value is created
through personal
attachment. A brand can either draw a customer towards a
product or away from it. The emotional connection created
with a customer builds relationships and gives your product
long-term value.
Provoke smiles.
88
89
To be a customer experience leader, you don’t have
to invent a new technology. But if you can fit existing
and emerging technologies to customer needs, you can
innovate the customer experience to the point that you can
take over the market.
That’s the story of two companies profiled here,
Netflix and LPL. Both companies innovated the customer
experience itself, and in doing so, created whole new business
categories.
Netflix has dominated the business of providing videos
to consumers for a decade, slaying a giant in the industry—
Blockbuster—in the process. In mid-2011, the narrative
of Netflix has changed, and Netflix is experiencing severe
challenges to its business. In this chapter, we’ll describe
how Netflix created an outstanding customer experience
that revolutionized the video rental industry.
The other company, LPL, is less well known to the
Chapter 6
Innovating Customer Experiences
“We’re connecting people with the movies they love.”
—Steve Swasey, Netflix
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90
public at large but has made a huge impact on the brokerage
industry by employing some of the same techniques
used by Netflix in its early days. LPL has innovated the
customer experience for the brokerage industry, and in
doing so, has created a new category of brokerage firm that
allows independent financial advisors to compete directly
with the major firms.
Two companies with similar stories: innovating the
customer experience to change their industries forever.
Enter Netflix
April 14, 1998. Not one of the twelve people standing
in the checkout line to rent movies in the Blockbuster
store has any idea that a new customer experience will soon
change they way they rent movies.
As those people move up the line at Blockbuster past
the popcorn, Dots, and Sno-Cap candies, a start-up company
called Netflix has just announced the opening of
the world’s first Internet store to offer movie rentals. The
announcement promises that virtually every movie will be
available on DVD, a new movie format. Movie enthusiasts
can now enjoy the convenience of movie rental online.
How could a freshly-funded company less than two years
old create a serious challenge to a well-entrenched giant like
Blockbuster? The answer is in the customer experience.
The first Blockbuster video rental store opened on
Oct 19, 1985, in Dallas, Texas. At that time, most video
rental businesses were small, independently-owned stores
with a limited selection of movies. By contrast, the earliest
Blockbusters were three times larger than the biggest competitor,
offering a selection of 3,000 to 8,000 titles. But
Blockbusters were run similarly to the small independents:
they were basically movie libraries. This library experience,
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INNOVATING CUSTOMER EXPERIENCES
including check-ins, check-outs, and the dreaded penalty
fees, was not much different than a book library. The
penalty fees increased over time and Blockbuster grew to
depend on late fees as a profit center.
The company’s founder, David Cook, sold his stores
to a group of investors. One of those investors was Wayne
Huizenga, the founder of Waste Management, Inc., the
world’s largest garbage disposal company. Huizenga soon
became the sole owner of Blockbuster. Huizenga began
to acquire independently-owned video stores and grew
Blockbuster quickly. In 1988, Blockbuster was the leading
video chain in the U.S., with 400 stores. By the early
1990s, the Blockbuster chain had 1,000 retail stores and
had expanded overseas. In September 1993, Blockbuster
became part of media giant Viacom Inc., alongside
MTV and Nickelodeon. Huizenga left the company in
September 1994.
Blockbuster went through one CEO each year until
the spring of 1997, when John Antioco took the helm. The
company was in rough condition after several grandiose missteps,
including attempts to grow by adding music, computer
software, video games, and international expansion. By the
second quarter of 1997, Blockbuster’s cash flow was reduced
by 70 percent. Viacom was disappointed with Blockbuster’s
growth rate. The company had planned to use the cash from
Blockbuster to help other parts of Viacom’s business. Since
this was no longer an option, Viacom sold Blockbuster for
$115 million in August 1998—the same year that the DVD
was introduced.
In 1998, Blockbuster had over 6,000 retail stores in
26 countries, and 60 million active subscribers and 80,000
employees. Blockbuster’s worldwide revenue reached $3.89
billion with losses of $336.6 million. Blockbuster took note
of its new competition, Netflix (without naming names),
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in its 1999 annual report: “We are also moving forward
to realize the opportunities presented by e-commerce and
new direct-to-home technologies.” But it was six years after
Netflix entered the market before Blockbuster effectively
started its online DVD rental program in the U.S.
The Blockbuster customer experience
Blockbuster was clearly dedicated to running its retail
stores, which preserved the library experience for customers,
whether customers liked it or not. Interestingly, at first,
Blockbuster had been an innovator. Unlike the independent
video rental shops, Blockbuster’s video rental store
experience was consistent from store to store. It provided
a family-friendly environment. The videos were displayed
throughout the store on categorized shelves, rather than
behind the counter. Inventory and rented videos were
tracked by an automated system.
But one feature that really hurt the customer
experience was the penalty fees levied on Blockbuster
customers. Fees for returning videos late or for not
rewinding the VHS tape were a source of profits to
Blockbuster. To customers, these fees were a source of
worry, anger, and frustration. People felt pressured to
view the movies in three days or pay a fine. In addition,
the Blockbuster customer experience began with a timeconsuming
errand, leaving home to rent a movie at a
Blockbuster store.
The Netflix customer experience
It was Reed Hastings’s unpleasant customer experience
as a video renter that inspired him to start Netflix.
Interviewed on 60 Minutes in 2006, Hastings confessed
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INNOVATING CUSTOMER EXPERIENCES
his genesis of the Netflix idea: “I’d rented a VHS (Apollo
13) and I had misplaced it and it was six weeks late. So
it was a $40 late fee. I didn’t want to tell my wife. And I
thought, ‘Oh, great! Now I’m thinking about lying to my
wife about a late fee and the sanctity of my marriage for
this thing!’ I mean it was just crazy. On the way to the
gym I realized, ‘Whoa! Video stores could operate like a
gym, with a flat membership fee. I wonder why no one’s
done that before?’”
Hastings investigated the idea of a subscription service,
where VHS movie cassettes would be shipped to customers.
But the round-trip shipping cost of $12 was too expensive
for the idea to work.
Then he learned about a new technology called the DVD,
a CD with a movie on it that was not as delicate and bulky
as a VHS tape. “I ran down to Tower (Records) and bought
a bunch and mailed them to myself and then I waited,”
Hastings recalls. He wanted to see if they would get destroyed
in the mail. “And I opened them up. And they were fine. And
I thought, ‘This is gonna work! This is gonna work!’”
Hastings paired the DVD with postal delivery to create
the Netflix offer. Netflix’s special agreement with the U.S.
Post Office gave quick delivery of the movies to customers’
mailboxes. An easy-to-use website with a large database of
movies added to the Netflix experience.
Netflix’s goal was not just to overcome what was unsatisfying
about the video rental experience, but to remake
that experience. Steve Swasey, Netflix’s Vice-President of
Corporate Communications, explains: “Netflix changed
the way Americans view movies. Before Netflix you had to
go to a video store to rent movies, you had to pay late fees
which were punitive, you had pretty crummy service, and
you had pretty limited selection. Netflix changed the whole
rental business by making every title available and making
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94
it very cost effective with no return due dates and late fees
whatsoever. You never have to leave your home. Login
wherever you have your computer and the movies come
to you. The convenience, selection, and value completely
upended the entire movie rental industry and Netflix was
the catalyst for that.”
By December 1999, Netflix eliminated all due dates
and late fees, charging members a set monthly fee for a set
number of DVD rentals per month. Within the first year,
the Do-Fors at the center of the customer experience at the
Netflix online store were:
• The convenience of home shopping with
the efficiencies of an online store
• Informative content,
easy-to-use site navigation
and search
capabilities, low-cost
delivery methods and
competitive pricing
• Personalized merchandising
and recommendations based on
previous shopping sessions
• No due dates and the elimination of
late fees
Netflix included “FlixFinder,” so shoppers could
search by title, actor, or director and instantly see a corresponding
list of movies. “FilmFacts,” gave a movie
synopsis, ratings, and descriptions of the movie content,
to make movie selection easier. Netflix also included
“Browse the Aisles,” to let customers scan lists of movies
grouped around a common element, such as theme or
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INNOVATING CUSTOMER EXPERIENCES
genre. Personalizing movie recommendations was done
with very sophisticated software for each subscriber called
“Personalized Merchandising.”
In the company’s 2002 Annual Report, Hastings pointed
to Netflix’s superior competitive position compared to
other online DVD subscription services, such as Walmart.
com, Blockbuster, subscription entertainment services
including HBO and Showtime, pay-per-view and video on
demand providers, and cable and satellite providers. “We
are able to provide greater subscriber satisfaction due to the
broader and deeper selection of titles, including our ability
to personalize our selection to each subscriber based on the
subscriber’s selection history; personal ratings and the tastes
and preferences of similar users through our recommendation
service, and extensive database of user preferences; as
well as the ease and speed by which subscribers are able to
select, receive and return titles.”
By early 2009, ten years after the subscription service
was launched, Netflix surpassed ten million subscribers.
Over that time period, annual subscription growth was just
under 30 percent. For eight of those ten years Netflix was
rated the number one customer experience on the Internet
by independent research firm ForeSee Results.
The Netflix customer experience changed the industry
and people’s expectations of renting movies. People were
happy to permanently leave their frustrating experience of
Blockbuster’s retail and penalty-centric operation. And they
did. In September 2010, Blockbuster filed for bankruptcy to
reorganize under a Chapter 11 petition. The company listed
assets of $1.02 billion against debt of $1.46 billion. It was
all over for Blockbuster by early April 2011. Dish Network
Corp. won a bankruptcy auction for Blockbuster Inc., offering
approximately $320.6 million for the movie-rental chain.
Some of its creditors split just $178.8 million of Dish’s bid.
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‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11
BLOCKBUSTER/NETFLIX STOCK PRICE
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BLOCKBUSTER NETFLIX
Reaching the crossroad
Companies sometimes reach a crossroad where they
have to make a choice between the technologies and processes
they currently use to deliver products or services and
technologies and processes preferred by customers. If the
company anticipates the crossroad, it can make the decision
to change course successfully. But if a company reaches the
crossroad unaware of changes in the market environment,
or more committed to certain technologies than the experience
of their customers, or preoccupied with other issues, it
will likely falter.
Today, Netflix stands at a crossroad in technology—
Internet streaming and instant delivery of movies via a
variety of home devices. Netflix first made content available
through a device other than a television in 2008. By
2010, the list of additional ways people could access movies
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INNOVATING CUSTOMER EXPERIENCES
included Xbox, PS3, Blu-ray players, Nintendo Wii, and
iPads. According to Swasey, “Pretty soon you won’t have to
get off the couch because the Netflix button will be planted
on the remote for DVD and Blu-ray. All you will have to
do is push the red Netflix button to watch a movie.”
Not one of Netflix’s 25 million subscribers in the
U.S. had any idea that their long and extraordinary
customer experience would soon be shattered by a very
unlikely source.
On July 12, 2011, Netflix changed that experience
with one announcement. “Netflix to Offer New Unlimited
DVD Plans and Will Separate Streaming and DVD Plans
in the U.S. New Unlimited DVD-Only Plan at $7.99
is the Lowest-Ever Price Offered; Unlimited Streaming
Remains $7.99.” Suddenly, Netflix customers were forced
to pay sixty percent more for the service they had been
receiving, or make a choice between delivery methods for
their video entertainment. And price was only part of the
sudden deconstruction of Netflix’s customer experience.
The brand itself was broken, and additional work was created
for customers.
Netflix has always defined its business by its Do-Fors:
connecting people with the movies and entertainment they
love. Now the experience became not what Netflix was doing
FOR the customers, but what it was doing TO them.
Customer response was swift and strong. More than
one million subscribers in the U.S. cancelled their Netflix
accounts. The stock price plummeted 57 percent in two
months, from $298.73 on July 13, 2011 to $129.36 by
September 23.
The anger, betrayal, and confusion customers felt intensified
when customers read a letter sent to them by Netflix
CEO Reed Hastings September 19. “I messed up. I owe
you an explanation.” The letter went on to disorient people
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98
about the company’s future and the brand. “In a few weeks,
we will rename our DVD by mail service to ‘Qwikster.’ We
chose the name ‘Qwikster’ because it refers to quick delivery.
We will keep the name ‘Netflix’ for streaming.” The
letter acknowledged that Netflix’s customers were angry
and felt betrayed. “Both the Qwikster and Netflix teams
will work hard to regain your trust. We know it will not
be overnight. Actions speak louder than words. But words
help people to understand actions.”
Hastings’s mea culpa letter didn’t change customer sentiment.
Most of the 27,000 responses on the Netflix blog in
the first week showed that Hastings’s letter was received as a
late and hollow apology about the price increases. Splitting
off the DVD business to new service called Qwikster was
even more upsetting to Netflix’s loyal customer base. The
new name jettisoned DVD customers from all the good
things that the Netflix brand stood for. One very annoyed
customer framed the situation this way: “Splitting Netflix
in two so that you have Netflix and Qwikster is the worst
business decision since New Coke…Right now you have
complete convenience on your site. I can look at any movie
and see if it’s available on DVD or Instant or both. I can
right there at that moment make the decision on how to
view it, but now instead of it being simple and easy, I have
to go to two different sites. No customer will be happy that
they now have to do twice as much for the same result.”
The separation of the two delivery methods meant
price increases for customers who wanted both services,
as well as two different websites to navigate when ordering
content, and two different bills for customers to pay.
At the time of the announcement, more than twelve
million Netflix customers received content by both
streaming and DVDs.
On October 10, 2011, Netflix made another
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announcement to its subscribers: “It is clear that for many
of our members two websites would make things more difficult,
so we are going to keep Netflix as one place to go for
streaming and DVDs.This means no change: one website,
one account, one password…in other words, no Qwikster.”
Netflix is trying to get its customer experience right
again. The company listened to its customers and quickly
reversed the plan to break the service into two separate
businesses, websites, and experiences for the customer.
Other companies known for creating extraordinary
customer experiences have lost their way and found it
again. Starbucks, Apple, and Intuit have all been there and
come back. Those companies had the ability to recover by
defining their situation realistically, then regaining their
relevance, value, and customer experience advantage in a
timely way. Netflix’s customers decided that Netflix made
tremendous miscalculations in decisions that affect the customer
experience. Netflix has backed off, regrouped, and
changed its course. As we have seen with other companies,
the market will render the final decision.
The customer experience lifecycle
The customer experience relevance and value can
be inspired, shaped, and terminated by forces inside or
outside the company. The company creating the customer
experience is in direct control as a force on the
customer experience lifecycle. But other forces outside
the company have indirect control—time, technology,
and competition.
The company competes with itself to offer a more
significant and valuable customer experience, a “next
generation” experience that supplants its own. When the
company goes the other way, prematurely shocking or
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100
terminating the customer experience without a transition,
it can destroy the value of its customer experience. Doing
so can give the advantage to competitors that are ready to
take over the experience lifecycle.
For Netflix, digital delivery created the crossroad where
Netflix could be separated from its customers. Netflix participates
in a market where changes are almost constant.
Cooperation with the competition can blur the lines
between partner and competitor. One example is Netflix’s
relationship with Amazon. The company depends on
Amazon Web Services (AWS) to operate parts of its service.
As described in Netflix’s 2010 Annual Report, “Any
disruption of or interference with our use of AWS would
impact our operations and our business would be adversely
impacted.” But Amazon’s retail business is a strong competitor
to Netflix. The effectiveness of “Chinese walls” in
business may become another outside force on Netflix’s
ability to compete in the future.
The future of Netflix
Why would a company that worked so hard to achieve
extraordinary customer experiences for thirteen consecutive
years deconstruct that experience? Does Netflix have a
better experience on the other side? If so, why wasn’t there
a smoother transition from one experience to the other?
As of this writing, there is plenty of speculation about
why Netflix would shock its exemplary customer experience.
Reasons suggested include harvesting profit as the
DVD business winds down, or separating the profit and
loss statements for each line of business to position for
mergers and acquisitions.
From the beginning of Netflix’s success, there have
been several companies that claim they can displace
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Netflix—Amazon, Apple, Walmart, and even Dish, the
company that bought Blockbuster’s assets in April 2011.
Today, Apple is the biggest player in individual film
transactions, accounting for sixty percent of them, according
to IHS Screen Digest. Apple is generating more money
for the movie studios than many cable companies, and
is expected to become the largest provider of video on
demand by 2014. Meanwhile, Amazon has built its own
video subscription service to go head-to-head with Netflix.
The launch of Amazon’s own movie service started with
offering 5,000 films and television programs to stream
online. This video streaming service is available through
Amazon Prime, the company’s premium shipping service
that gives customers unlimited shipping for $79 a year.
“They’re going to be able to watch movies without leaving
Amazon or going somewhere else,” according to Cameron
Janes, Amazon’s director of Instant Video, as quoted in the
Financial Times in February 2011. Millions of customers
have already signed up for the service. Amazon plans to
expand the streaming service as they innovate the customer
experience that goes with it. And Walmart may re-enter the
movie distribution market. The company acquired Vudu
video, giving its digital movie offerings and access to many
preferred consumer electronic devices.
As of September 2011, Morningstar estimated that
Netflix’s U.S. subscriber base will grow to 41.6 million
by 2015, with 33 percent of U.S. television households.
Morningstar says Netflix is still very solid financially.
With the competitive door opened by Netflix, and
with competitors vying for Netflix’s angry, betrayed, and
confused customers, the market is ripe for competitors.
But the issue is not just about price. Customers are not in
the mood for empty promises.
Can competitors deliver an extraordinary customer
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experience to change the video rental landscape? Will that
experience include commercial-free viewing of the content
people love on their preferred devices?
Netflix is a company founded on innovation, which is
the introduction, creation, or offering of something new
and untraditional. Customer experience innovation can
create or transform an industry and change peoples’ lives
for the better. Reed Hastings began Netflix with the realization
that a video store could operate like a gym with
flat fees. He used that concept to innovate the entire customer
experience of renting videos. Will Netflix recover
by innovating its next generation customer experience?
Or will someone else pick up the lifecycle from Netflix
and innovate the customer experience in pleasing ways we
can’t yet imagine? We’ll leave this story now, but it isn’t
over yet…
Head to head with financial giants
If you were a stockbroker with an entrepreneurial heart
and an independent soul, there were not many companies
in the 1980s that would support your passions. That
changed in 1989 when Todd Robinson, a former Smith
Barney broker, created LPL Financial. He decided to build
a company on his deep-seated belief that independent
financial advisors should be able to offer objective advice,
free of conflict, to their clients.
LPL Financial provides independent financial advisors
with the technology, research, service, and support for their
own businesses. LPL Financial does not have investment
products of its own and is not affiliated with any bank. LPL
Financial is very different from other financial companies
like Merrill Lynch, Edward Jones, Morgan Stanley, and
Charles Schwab. In those companies, financial advisors are
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INNOVATING CUSTOMER EXPERIENCES
employees. At LPL Financial, they are customers.
Robinson founded the company by combining two
small financial companies, Linsco and Private Ledger,
into Linsco Private Ledger (LPL). Known today as LPL
Financial, the structure of the firm is totally opposite that of
the big brokerage houses—the advisor sets up his/her independent
investment advising business, and LPL Financial
essentially functions as the advisor’s “back office.” The independent
investment advisor chooses from a wide range of
LPL Financial resources available to support the investment
practice, including technology, research, training, practice
management, and succession planning, to name a few.
As of year-end 2010, LPL Financial reached annual
revenues of $3.1 billion and total advisory and brokerage
assets of over $300 billion. The company has over 2,700
employees and has amassed over 12,700 financial advisors,
as of September 2011.
LPL Financial competes in an enormous market.
Over $10.4 trillion in retail assets are professionally managed,
according to research firm Cerulli Associates. LPL
Financial, whose advisors work with more than four million
customers that on average have assets from $100,000 to
$1 million to invest, now ranks as the largest independent
broker/dealer in the U.S., based on revenue as reported
in Financial Planning magazine. The number of advisors
is shrinking at many big firms, while LPL Financial has
almost tripled its number of advisors during the last ten
years. LPL Financial’s advisors have constantly ranked
among the best in the last three years of J.D. Power’s U.S.
Full Service Investor Satisfaction Study.
Esther Stearns, President and Chief Operating Officer
of LPL Financial, says that from the start, “we thought
about empowering entrepreneurs and independent
financial advisors. We wanted to provide them business
The Customer Experience Revolution
104
opportunities and capabilities that were better than the
employees of the wirehouses.”
The wirehouses, such as Morgan Stanley, Merrill
Lynch, and UBS, were large, multi-office brokerage firms
that used advanced communications to transmit customer
orders for execution. They had their own computer systems
that were integrated with their communications systems.
This was the distinct advantage of the wirehouses over the
smaller brokerage firms, allowing them to be very efficient
at placing, tracking, and reporting customer’s transactions.
The wirehouses were entrenched and had networks
and computer servers that could handle huge amounts
of information. They could deliver data and capabilities
directly into their large centralized offices. They had plenty
of money to spend on technology infrastructure and offers
that independents couldn’t compete with.
In its early years, LPL Financial took advantage of the
burgeoning Internet technology to build systems that provided
independent advisors with the same kinds of data and
services previously only available at wirehouse firms. Stearns
emphasizes that in 1996, “we believed that independent
advisors had more to offer the marketplace and the right
business model for consumers. If we could help level the
playing field, the business model would do the rest.”
LPL Financial’s services for independent advisors were
slim at first. Advisors could pull customer records and
download information, but the entire customer experience
for the advisors was, as Stearns puts it, “not impressive.”
Advisors required software from other companies in
addition to LPL Financial’s in order to be fully effective.
“I realized that part of our job was going to be to
connect people to the things they really needed in a more
meaningful way,” Stearns recalls. LPL Financial made a
commitment to develop its own resources for independent
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INNOVATING CUSTOMER EXPERIENCES
advisors, creating “BranchNet,” a proprietary web-based
tool that provides services and information for advisors.
LPL Financial had to create a complete operational
brokerage system. The commitment to BranchNet and
the Internet meant that the firm’s technology, banks of
modems that allowed advisors dial-in access, would be
phased out quickly.
LPL Financial continued
to develop
BranchNet with scalability
and efficiency
in mind.
In 2000 the
company began the
process of creating a
self-clearing capability,
which would allow
LPL Financial to take
an order from an advisor
and systematically
complete the transaction
of buying, selling,
or redistributing the
investors’ assets. With
this innovation, LPL
Financial was able to
give the wirehouses real competition.
Stearns says, “After we built an operational brokerage
system and a reporting system, it became a matter of interacting
with customers about the use of their system. We
looked at the most heavily-used products, received good
customer feedback, and shaped the customer experience,
examining what worked and what didn’t work.”
By 2005, the LPL Financial model was working so
We looked at
the most heavily used
products,
received good
cust omer feedback ,
and shaped
the customer experience,
examining things
that worked
and did n’t.
The Customer Experience Revolution
106
well that advisors from the wirehouses were coming to LPL
Financial in significant numbers. In 2005, two leading
private equity firms, Hellman & Friedman LLC and Texas
Pacific Group (TPG), became majority investors in LPL
Financial. The transition from individual investor ownership
to institutional investor ownership was another milestone
for the company. This assured the company’s ability to have
the resources to continue to grow and compete on a large
scale. That December, Mark Casady was tapped to run the
company. Like Robinson, Casady is not a disciple of the
Wall Street way. As Chairman and CEO, he wants to make
sure advisors are happy and have growing businesses.
Today, independent advisors are connected in real time
to all types of assets, people, products, and pricing. They
can initiate, track, and report on a transaction at anytime
through to completion. They have information to manage
their client relationships and other tools. This includes
consolidated LPL Financial account details, balances, positions,
activity, cost basis, statements, and tax documents.
Transactions are seamless. Advisors do not have to load
anything onto their desktops or download data. Color
printers and software enable advisors to display data and
reports that are meaningful to their customers.
Stearns agrees that LPL Financial’s priority is serving
customers. “You can take our technology, but it is our
people and our processes and the experience advisors have
that is our business. It’s hard to replicate.”
Applause, please
There are tens of thousands of users accessing LPL
Financial people, processes, and tools every day, including
over 12,700 advisors and their staff. They do not hesitate to
let the people at LPL Financial know what could be better.
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INNOVATING CUSTOMER EXPERIENCES
How does LPL Financial continue to innovate a successful
customer experience? Stearns explains, “We use
our judgment, our staff’s experience, and create a list of
enhancements for our advisors. Then we go for the applause
factor. At the conferences, we let them know about each
thing on our list. We want to see which ones cause them to
applaud most at the conference. That’s what tells us.”
Stearns notes, “The most important thing is, do they
buy it? Do they pay every month for it, and if they don’t,
why not? These are entrepreneurs running tight ships and
if they don’t need it they are not going to pay for it. They
will cancel their subscriptions.” This attention to customers
drives every new service and service enhancement at LPL
Financial. In fact, it is part of every aspect of the firm’s
business, as reflected by the Commitment Creed—a pledge
that sits on the desk of every employee, reminding them to
put the customer first in everything they do.
Technology in the background
The technology that allows LPL Financial to bring the
resources of a major brokerage firm to an independent
financial advisor is a critical part of what LPL Financial has
developed. But the innovation has really been in how LPL
Financial delivers the customer experience. Technology
is in the background, and advisors choose LPL Financial
for the way it helps them use that technology with their
clients. It is easy to bring services, tools, and support to
any remote office. Advisors can concentrate on building
their businesses and accessing information for their clients,
instead of putting valuable time into learning how to use
the technology.
Stearns knows what it takes to keep the customer experience
fresh and valuable. “Prior to LPL Financial, I came
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108
from a company where you created technology for other
employees, and just gave it to them. We don’t roll it out at
LPL Financial like that. Our advisors can choose to buy or
not to buy our tools and support. That means we have to
make it very worthwhile for them and everyone who works
with them.”
LPL Financial has created an option for talented financial
professionals who are also entrepreneurs. It has become
a complete game changer for the industry.
In 2010, LPL Financial went public. In an interview
with the Wall Street Journal in July 2009 about the “Rise
of the Little Guy,” Casady commented about Wall Street’s
meltdown and its upside for LPL Financial. “There’s no
doubt we’re reaping the benefit of the destruction of trust by
Wall Street.” More and more brokers are moving from the
traditional Wall Street powerhouse firms to LPL Financial,
setting up their own independent financial advisories.
LPL financial at the crossroad
LPL Financial developed and delivered a new business
paradigm that centered on the innovation of the customer
experience and what the company’s people, processes, technology,
and services could do for customers. That customer
experience gives LPL Financial the advantage, energizing
and redefining the investment industry.
LPL Financial has not balked when reaching the
crossroad of customer experience and technology. The
company’s goal has been to connect its customers to the
services they need to run their own shops. As technology
changes, LPL Financial adopts what works best for its
customers and builds its services using the latest technological
advances.
109
For many years, one visionary entrepreneur has
been preaching the gospel of “customer experience.”
That man, Jeff Bezos, is the founder, president, CEO,
and Chairman of the Board of Amazon.com—the largest
online retailer in the world. He has been on the front line
of the customer experience revolution that has implications
for every company that wants to create a solid foundation
for future business.
Amazon has used three key strategies to build a premier
customer experience. First, the company was willing
to sacrifice short-term gains in order to build long-term
value. Second, Amazon has used data to drive its customer
experience. Third, the company continues to innovate with
new ideas that move it closer to being the place to buy
everything—books, electronics, music, clothing, household
products…everything.
Today, Amazon is riding high, with a market
Chapter 7
Commit to the Customer Experience
“Our goal is to be earth’s most customer-centric company.”
—Jeff Bezos, Founder and CEO, Amazon
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110
capitalization of over $100 billion, over 33,000 employees,
and an ever-expanding empire of products sold over the
Internet. But in 1995, this market dynamo was a start-up
company with a leader who was learning on the job.
In an interview with the Academy of Achievement
in 2001, Bezos recalled the early days at Amazon. “We
were packing on our hands and knees on a hard concrete
floor. I said to the person next to me, ‘This packing is
killing me! My back hurts, this is killing my knees on
this hard cement floor.’ I said, ‘You know what we need?
We need knee pads!’ This person looked at me like I was
the stupidest person they’d ever seen. ‘What we need are
packing tables.’”
Those humble beginnings when Amazon employees
were up late packing boxes on the concrete floor helped
create Amazon’s culture of focus on the customer. Those
early years forced them to galvanize the company culture
around the customer experience.
Bezos founded Amazon.com in 1994 based on his
recognition of the exponential growth in web usage at
that time—2300 percent. He was working at a start-up
company on Wall Street, building computer networks for
brokers to clear trades. His idea to harness the business
potential of Internet interest was to sell books online. He
left Wall Street mid-year, forgoing his year-end bonus. In
the same Academy of Achievement interview, Bezos notes,
“When…you walk away from your annual bonus, that’s
the kind of thing that in the short-term can confuse you,
but if you think about the long-term then you can really
make good life decisions that you won’t regret later.” Bezos
was committed for the long haul.
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Establishing the brand
Bezos was clear from the beginning that he had a
long-range perspective for Amazon. In an interview with
Publishers Weekly in 1998, he said, ”Our strategy is not
to make money. It’s more important to spend significant
money branding the site. We’ll be in the harvest mode in
the future.” Amazon reported $81.7 million in sales in the
first nine months of 1997 and lost $18.2 million. At that
time, Amazon had 600 employees.
Amazon was launched in 1995 as an online seller of
books. But Amazon customers were having such a good
experience buying books that they asked to buy music,
electronics, and other products. Amazon listened to its customers
and expanded its operation. Music and DVDs were
added in 1998. Electronics, toys, games, home improvement
items, software, and video games came in 1999, less
than four years after the company started.
Focus on customer experience pays off
In 2000, Business Week Online reported that Amazon’s
marketing cost to acquire a customer was less than any
other e-tailer. At the same time, as Amazon added more
products, each customer was buying more from year to
year—from $106 annually in 1998 to $116 in 1999.
In 2002, seven years after its launch, Amazon finally
showed a profit. By 2004 with $6.92 billion in sales,
Amazon ranked at the top of Internet Retailer’s annual
top 400 list, well ahead of computer maker Dell, which
posted $3.25 billion in online business-to-consumer sales
that year. Office Depot, which has a partnership with
Amazon, wasn’t far behind with $3.1 billion that year. And
in 2005, Amazon had nearly 49 million active customers
The Customer Experience Revolution
112
who bought more electronics than books during that year’s
holiday blitz for the first time. Amazon had clearly defined
itself as the leader of e-commerce by developing a company
that was built to last.
Wall Street, however, has never placed much value
in Mr. Bezos’ emphasis on customers. What he viewed as
money well spent—building customer loyalty—many
investors saw as giving away money that should have gone
to the bottom line. “What
makes their core business so
compelling is that they are
focused on everything the
customer wants,” said Scott
W. Devitt, who follows
Amazon for Stifel Nicolaus
& Company. “When you act
in that manner many times
Wall Street doesn’t appreciate
it.” What Wall Street
wanted from Amazon is
what it always wants: shortterm
results. That is precisely
what Dell tried to give investors when it scrimped on customer
service and what eBay did when it heaped new costs
on its most dedicated sellers. Eventually, these shortsighted
decisions caught up with both companies. But Mr. Bezos
refused to give in.
According to New York Times columnist Joe Nocera,
Amazon’s “dogged pursuit of a better customer experience
has turned out to be exactly right.” By the end of 2007,
Amazon customers were spending, on average, $184
a year. Forrester Research reported that 52 percent of
people shopping online said they used Amazon to
research products.
Focusing
on the customer
makes a
company
more
resilient.
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Making a company more resilient
The focus on customer experience paid off for Amazon.
In a 2009 interview with Om Malik, Bezos explained,
“Focusing on the customer makes a company more resilient.”
He purposely kept Amazon employees a key part
of the process of creating the customer-centric company.
Following the dot-com bust, he recognized that Amazon’s
business was continuing
to grow. Bezos made the
effort to communicate
more with Amazon
employees to ease their
concern about the future
of the company.
Bezos knows that
a purchase is not made
on price alone. When
Amazon first started letting
customers review
books, some publishers
were startled, because
customers give both
positive and negative
reviews. Bezos knew
that helping customers
make an informed purchase
decision creates real value. Making a bad purchase
decision isn’t just a waste of the money a customer has
spent on the product, it’s a waste of the customer’s time
spent with the product. Bezos was a pioneer in understanding
that the balance of power was shifting from the
company to the customer, and the customer was controlling
the conversation.
Bezos’s philosophy
is that
a company
is not defined
by its technology,
process,
or people,
but by its
cust omers.
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114
Constantly improving
the customer experience
In an interview with Bloomberg Businessweek in 2008,
Bezos addressed Amazon’s continuation to innovate
whether times are good or bad. “I’m not sure we have a
choice,” said Bezos. He is determined to avoid the common
business pitfall of making business decisions based
on the company’s skill set rather than on the customers’
needs and desires. “That approach puts a finite lifetime
on a company, because the world changes and what used
to be cutting-edge skills have turned into something
your customers may not need anymore.” Bezos’s strategy
has been to determine what the customers want, and
then go find people who have the skills to deliver those
products and services. Bezos’s philosophy is that a company
is not defined by its technology, process, or people,
but by its customers.
Shareowners’ interests aligned
with customers’ interests
In 2011, Amazon continues to invest heavily in innovation
for the benefit of the customer experience. But
Bezos finally has shareholders convinced of the power of
customer experience. “We have unshakeable conviction
that the long-term interests of shareowners are perfectly
aligned with the interests of customers,” he wrote in a
letter to shareholders in April 2011. “Invention is in our
DNA and technology is the fundamental tool we wield
to evolve and improve every aspect of the experience we
provide our customers.” Despite Amazon’s report of firstquarter
profit dropping 33 percent, the stock price held
steady and even increased.
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The growth of the Amazon marketplace did not happen
overnight. It evolved over time. Consistently and consciously,
Amazon perfected its technology, sold merchants on the
concept, overcame objections, and integrated the platform.
CX in the company DNA
Gary Tucker, Senior Vice President at J.D. Power and
Associates, says that companies like Amazon “pay very
close attention to culture. If we were going to make a
macro observation as to companies that ‘get it’ and those
that don’t, it is about the culture of that company from
the top down that prioritizes the customer experience.” At
these companies, customer experience isn’t a responsibility
assigned to one department or executive. Customer experience
is the responsibility of the whole company, and is led
by the CEO.
Companies that provide extraordinary experiences
have customer advocacy embedded deep in their company
culture. And it didn’t get there by accident. They work
on it every day. They don’t necessarily get it right the first
time—or the second time—or the third—but it is always
a company priority. Continuous focus assures that they get
there. The great ones also guard against complacency. A
company must make this a commitment to be successful at
delivering great experiences to its customers.
Designing great experiences must be in the companies’
DNA. At Intuit, creating and delivering great experiences
as a differentiator or margin protector is not even the focus.
They create great experiences because it is the right thing to
do. And every employee knows this. Phil Ohme, Principal
Interaction Designer at Intuit, explains, “If something is
not going to make a task or a job easier for the end consumer,
then we don’t need to be doing it.” Intuit seeks to
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116
change its customers’ financial lives so profoundly that they
cannot imagine going back to the old way.
CEO as customer experience advocate
Tucker at J.D. Power notes that customer experience
focus “has to start with the leadership—it always starts at
the top.” Steve Jobs at Apple, Scott Cook at Intuit, and
Jeff Bezos at Amazon—they have all been the Chief CX
Advocate or the
Chief “Evangelist” for
determining, developing,
and delivering
the experience. Larry
Tesler, discusses what
it was like working
directly with Steve
Jobs when Tesler
was Vice President
and Chief Scientist
at Apple Computer:
“You could show
him that X was a
better design than
Y and despite all of
the issues that people
would come back to
you with about schedules and engineering limitations and
prices and whatever, he would just cut through it and make
a decision, taking into account the users’ experience more
than anything. Whether it was positioning in the marketing
message, or customer service and support, or upgrades and
repairs, Steve Jobs usually said, ‘delay the product so you can
fix it.’” Jobs was not afraid to delay a product launch date at
When the CEO
has a
passi on
for the
cust omer experience ,
it can get into the DNA
of the
company .
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COMMIT TO THE CUSTOMER EXPERIENCE
Apple to ensure that the customer experience was right.
Tesler makes a similar comment when discussing his
time working alongside Jeff Bezos at Amazon. “Amazon’s
success is Jeff Bezos, in terms of the success of user experience.”
Bezos as the number one customer advocate at
Amazon is the reason why the company is so successful,
according to Tesler, who was Amazon’s VP of Shopping
Experience. Bezos learned very early on that Amazon’s
customer experience was the most important factor in its
success. He made customer experience a priority from the
start. Bezos made it a point to do everything he could to
learn about the customer—talk with the customer support
people, watch customers, study the A/B test results,
attend usability sessions, read emails from customers—to
ensure that Amazon paid attention to customers and
really understood their needs.
It starts with the CEO. When the CEO has a passion
for the customer experience, it can get into the DNA of
the company. Kaaren Hanson, Intuit’s Vice President of
Design Innovation, says that at Intuit, the CEO starts
meetings with his general managers by going on customer
visits first. According to Hanson, “Our CEO spends many
hours out with customers, partly because he wants to stay
in touch with customers and partly because he is modeling
the behavior that he expects from everyone on his team and
throughout the organization.”
Old school thinking—“we have always done it this
way”—is a trap. Old-school thinking—“we are making
money on our product now, why would we want to change
anything?”—will not carry you into the rapidly changing
future. Complacency in your market will cost you. You
must adapt quickly in the customer experience economy.
118
119
The customer experience journey starts when a
prospect, customer or advocate first interacts in any
way with a company. That interaction can be direct—
the company’s advertising or actual experience using a
product or service. It can also be indirect through many
influencers—reviews, articles, research, word-of-mouth,
or social networking.
Creating a company that focuses on the customer experience
takes exceptional commitment from everyone in the
company. Moving a business beyond promises, products,
services, pricing, and transactions is not an experiment, a
project, or the domain of one department.
Companies that understand the value of exceptional
customer experience start with a vision of what the customer
experience should be. The vision is based on in-depth
knowledge of the customer and the product or service.
Successful customer experience companies sometimes
Chapter 8
The CX Revolution: Who’s Next?
“It was clear to us that cost reductions and improved operating
efficiencies alone were not enough. True transformation would
require us to improve our customer experience.”
—Howard Schultz, Chairman, President, and CEO of Starbucks
The Customer Experience Revolution
120
falter or fail along
the way. But when
they have faltered,
they have regrouped
by focusing on
the rejuvenation of
valuable experiences
for customers. They
determine again what
the experience should
be, then develop it with
and for the customers.
They deliver the
product or service anew
with an experience so
extraordinary that it
changes potential customers to customers, and loyal customers
to energized advocates.
Anticipating the
customer experience lifecycle
We call the people at companies who deliver exceptional
customer experiences “experience makers.” During our
interviews for this book with experience makers at various
companies, many spoke about the surprises they had and
what they learned along the way when developing a great
customer experience. These experience makers use their
interaction with customers to help guide their decisionmaking,
but they can also anticipate what the customer
wants, even before the customer asks for it.
The ability of experience makers to anticipate the next
generation of the customer experience lifecycle is based
on their experience, business performance success, and a
Companies that
understand the value of
excepti onal
customer experience
start
with a vision
of what the
CUSTOMER EXPERIENCE
should be.
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THE CX REVOLUTION: WHO’S NEXT?
thorough connectedness with people. This creates a contextual
bridge to successfully anticipate what could be next.
Steve Jobs talked about anticipating customers’ desires in
a 2000 article in Fortune. “This is what customers pay us
for—to sweat all these details so it’s easy and pleasant for
them to use our computers. We’re supposed to be really
good at this. That doesn’t mean we don’t listen to customers,
but it’s hard for them to tell you what they want when
they’ve never seen anything remotely like it. Take desktop
video editing. I never got one request from someone who
wanted to edit movies on his computer. Yet now that people
see it, they say, ‘Oh my God, that’s great!’”
How the experience makers think
Large or small, experience makers think long term.
They are not looking to flip a company for quick profit.
Experience makers start with an understanding of
what the customer experience is now—a baseline. Then
they determine specifically what the customer experience
should be. Experience makers do not constrain themselves
by old school thinking, a single industry, or by markets or
technologies. Experience makers are, for now, uncommon,
but they are found in a growing group of companies. Their
businesses are defined by what they Do-For customers, not
by what their products or services do.
When experience makers look at an opportunity, they
evaluate the quality of the experience customers are having
both with their competitors and even outside their own
industry. A great customer experience, wherever it is found,
raises customers’ expectations for great customer experiences
everywhere.
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122
Your toughest competitor should be you
At their best, experience makers vigorously compete
with themselves. They know the answer to the question:
Are we there yet? It is generally “no.” They know that
leading the market with the best customer experience is
a brief stop along the way to innovating the next experience.
Even if they are out front with large market share,
above average profit margins, and customers advocating
enthusiastically, they constantly reinvigorate and innovate
the customer experience.
Metrics of success are aligned with
delivering extraordinary experiences
In companies that care about the customer experience,
internal measures are put in place to ensure that improvement
of the customer experience will lead to company success.
Dell Computer was one of the earliest companies to
include the term “Customer Experience” in position titles.
In an article in Fast Company in 1999, writer Scott Kirstner
noted that “nearly every bulletin board in every office has
a sign that reads ‘The Customer Experience: Own It’.” As
part of its turnaround, Dell changed its metrics of success
for customer service phone representatives from the goal
of pure internal efficiency to the goal of customer problem
resolution. That kind of customer focus showed how Dell
took its bulletin-board mantra to heart.
The customer experience hierarchy
The Customer Experience Hierarchy shows the stages
of a company’s development of its customer experience.
Most companies today are in Stages 1 and 2. Very few are at
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THE CX REVOLUTION: WHO’S NEXT?
the top of the hierarchy. The hierarchy follows a company’s
growth path as it moves from start-up to established and
successful, as it relates to the importance of building a great
customer experience.
CX
Leader
Ideas/Technology
Products/Services
Focus on UX
Focus on CX
CUSTOMER EXPERIENCE HIERARCHY
Stage 1: Ideas/Technology
Companies start with ideas, technology or
both. People commit to their ideas and move
forward with other people, resources, processes,
and messages to build the business.
Stage 2: Products and Services
The company develops its products or services.
Competition in the market is based on the
©
The Customer Experience Revolution
124
product’s or service’s features or benefits.
Stage 3: Focus on User Experience (UX)
The company develops a pleasing user experience
for its products or services. That user
experience recognizes what the product or
service will Do-For the customer.
Stage 4: Development of a
True Customer Experience (CX)
When the company recognizes that the customer
experience is much broader than the
end-user interaction, it makes a long-term
commitment to assure most interactions people
have with the company are positive. They
determine, develop, and deliver a customer
experience that is better, different, and more
valuable than the competition’s.
Stage 5: Customer Experience Leadership
The company is committed to assuring that
all interactions with their messages, people,
processes, products, or services are pleasing. It
delights people at every step of the customer
experience: intriguing them as potential customers,
satisfying them when they buy, and
continuing to outperform until their customers
become advocates. The company transforms
its market and changes peoples’ lives for the
better. From the CEO down, everyone at the
company is committed to retaining the customer
experience leadership position.
Gary Tucker of J.D. Power and Associates defines the
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THE CX REVOLUTION: WHO’S NEXT?
Stage 5 companies: “Those who really understand the customer
experience, its value as a competitive advantage and
their desire to get better.”
Customer experience twelve essentials
Companies at stages 4 and 5 on the Customer
Experience Hierarchy follow what we call the “Twelve
Essentials of Customer Experience.” These are the elements
we have identified that are key to building a company
focused on delivering great customer experience.
Commit
Innovate effectively
Know the Do-Fors
Know the market
Determine the new experience
Leverage new platforms
Measure value of CX
Ensure strong emotional connections
Involve people early and often
Use small responsive teams
Stay connected to customers
Refresh and innovate experiences
TWELVE ESSENTIALS OF CX
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126
1. Commitment from the CEO.
The companies with the best customer experiences
typically have commitment from the
top—the CEO, founder, or business owner.
Setting the direction for the company is key to
developing a customer-centric business.
2. Innovation and new ideas drive great
customer experience.
Companies need to understand how to
use innovation to determine, develop, and
deliver great customer experiences.
3. Know the Do-Fors of your product or service.
A company must understand what customers
want the product or service to Do-For
them. Then the
customer experience
is built around the
customers’ needs, not
the company’s.
4. Know the market.
Look at the customer experience for
all segments of the market—potential
customers, current customers, and advocates.
Benchmark those experiences for
the major competitors in the market.
5. Purposely design the customer experience.
The best customer experiences are specific,
and those companies know exactly how
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THE CX REVOLUTION: WHO’S NEXT?
their experiences are better, different, and
more valuable for customers. It is important
for a company to be realistic about what
it can promise and deliver.
6. Incorporate new communications platforms
into the customer experience.
Customers’ preferences change. A company
must decide which changes will keep it relevant,
create new business opportunities,
or expand the reach. Customer experiences
across different communications platforms
must be a consistent extension of the great
overall customer experience of the company.
Social technologies and new communications
platforms need to do something for
the company, not to the company.
7. Measure the value of the customer
experience.
Independent researchers like J.D. Power,
Forrester, Gartner, and others measure the
value that customer experience adds to a
business. Metrics of success should be aligned
with delivering extraordinary customer experiences,
along with other business goals.
8. Use customer experience to create
an emotional connection.
Developing an emotional connection with
the customer helps to create trust in the
product and the company.
The Customer Experience Revolution
128
9. Involve customers when determining and
developing the customer experience.
Ask, watch, and listen to customers—
early and often—when it will be less
expensive and easier to make changes,
for the biggest return and impact.
10. Small teams work best to develop new ideas.
Smaller teams of eight people or less are easier
to manage and make communication simpler.
When prototypes are simple, it is easier to do
rapid iterations of changes, increasing their
complexity as testing shows their success.
11. Stay connected to customers—not processes
When a company reaches a crossroad,
it is important to stay connected to the
customers. Leave behind methods, equipment,
processes, and technologies that
might separate the company from customers
and future opportunities.
12. Continuously reinvigorate existing customer
experiences and innovate new experiences.
The best customer experience companies
compete with themselves so that they continue
to improve.
The customer experience revolution
A quick search on Monster.com yields over 1,000 job
positions with the keywords “Customer Experience.” The
range of companies represented includes several we would
129
THE CX REVOLUTION: WHO’S NEXT?
expect to see: Intuit, Apple, Amazon. But the companies
listed also include banks, retail clothing stores, healthcare
providers, insurance companies, cable service providers,
restaurants, and many others. Some are thinly disguised
customer service positions, but more and more often,
companies have established a true Customer Experience
function and are staffing that department with employees
whose responsibilities include creating and maintaining
exceptional customer experiences.
On October 1, 2011, Paul Copses began his new job as
General Motors’ very first U.S. vice president of customer
experience. According to GM’s press release, he reports to
GM North America President Mark Reuss and “regularly
updates” GM Chairman and CEO Dan Akerson. Such
a highly-placed position in a major company reveals the
powerful influence of the concept of customer experience
among the top echelon of established corporate America.
The momentum of the customer experience revolution
is building. Industries will be transformed by companies
that embrace the concept of great customer experience.
New players are entering the customer experience
arena. Their success will depend on their ability to determine
what the customer experience should be, and their
long-term commitment to creating that experience.
The Customer Experience Revolution is here!
130
131
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139
Academy of Achievement, 110
“Achieving Excellence in
Customer Service” (J.D.
Powers), 5, 40
All Things Digital, 61
Amazon, 1, 4-5, 6, 10, 16-17,
58, 64, 66, 69, 85, 100-101,
109-117
Android, 21, 73, 83
Angie’s List, 29
Antioco, John, 91
AOL, 62
Apple, 1, 5, 10, 16, 19-27, 58,
78, 85, 99, 101, 116-117, 129
Arguin, Claudel: Emotional
Durability Is the New
Sustainability: Why Are
Objects Cherished Even after
Their Functionality Has Been
Surpassed, 84
AT&T, 20, 54
Betty Crocker, 49
Bezos, Jeff, 17, 109-114,
116-117
BlackBerry, 20
Blockbuster, 89-92, 95-96, 101
Bloggie, 64
Bloomberg Businessweek,
24-25, 74, 114
Blu-ray, 97
BMW, 77-78
BranchNet, 105
Braunstein, Ariel, 60-61, 65, 68
Bruzzo, Chris, 37
Burger King, 42
Cadillac, 6
Canon, 62-63
Capone, Michael, 13
Caribou Coffee, 6
Carl’s Junior, 42
Casady, Mark, 106, 108
Cerulli Associates, 103
Chambers, John, 65
Charles Schwab, 102
“Chinese walls”, 100
Chinoy, Bilal, 42-43
Cisco, 64-69, 74
Coca-Cola, 86
communications platforms, 43,
47, 127
Index
The Customer Experience Revolution
140
ComplianceMAX, 44-47
Cook, David, 91
Cook, Scott, 50, 116
Crespo, Ivan, 82
crossroad, the, 96, 100, 108, 128
Customer Experience
Hierarchy, 122-123, 125
Customer Experience Lifecycle,
99, 120
Customer experience, definition
of, 2-4
Customer experience,
measuring, 5-6
Customer satisfaction, 4, 38
CX, 9-10, 115-116, 119, 123-125
Dell Computer, 34, 37, 111-112,
122
Dell, Michael, 34
Devitt, Scott W., 112
Dish Network Corp., 95, 101
Disney, 53
Do-Fors, 14-15, 41, 44-45, 61,
71, 73-74, 94, 97, 125-126
Dorsey, Jack, 73
eBay, 112
Elop, Stephen, 25
EMN8, 2, 16, 41-42, 44
Emotional Branding: The New
Paradigm for Connecting
Brands to People (Gobe), 86
Emotional Design: Why We
Love (or Hate) Everyday
Things (Norman), 81
Emotional Durability Is the New
Sustainability: Why Are
Objects Cherished Even
after Their Functionality Has
Been Surpassed (Arguin), 84
Experience Economy, The:
Work Is Theater & Every
Business a Stage (Pine and
Gilmore), 13
experience makers, 84,
120-122
Facebook, 16, 35, 37, 39-40
feature creep, 72-73
Financial Times, 101
Fleming-Wood, Simon, 64
Flip, the, 59, 61-70, 74
“Follow Me Home”, 51, 53
ForeSee Results, 95
Forrester Research, 7-8, 10,
112, 127
Fortune, 54, 121
Four Seasons, 5
Garimella, Gari, 70-72
General Mills, 49
Gilmore, James H.: Experience
Economy, The: Work Is
Theater & Every Business a
Stage, 13
Gobe, Marc: Emotional
Branding: The New Paradigm
for Connecting Brands to
People, 86
Google, 21, 58-59
Google+, 40
Grannan, Dave, 24
Guiste, Matthew, 35-37
Hanson, Kaaren, 51, 57, 83,
117
Hastings, Reed, 92-93, 95, 97-
98, 102
HBO, 95
Hegemier, Darrin, 56
Hellman & Friedman LLC, 106
Hewlett-Packard, 65, 69
Hilton, 5
Huizenga, Wayne, 91
IBM, 50, 65
I DRIVE SAFELY, 2, 16, 70, 72,
74, 75
Intel, 65
Internet Retailer, 111
Intuit, 2, 10, 16, 50-53, 57,
72-73, 83-84, 99
iPad, 26, 29, 40, 73, 97
iPhone, 2, 19-27, 68, 73, 83
iPod, 19, 26
“Is the Market Rewarding
Customer Experience
Leaders?” (Picoult), 9
Issigonis, Alec, 77
Jack-In-The-Box, 42
141
INDEX
Jarvis, Jeff, 34
J.D. Power and Associates, 1,
3-7, 34, 40, 50, 53
J.D. Power and Associates, 5
PsSM, 5
Jenson, Scott, 58
Jobs, Steve, 19, 23-24, 116, 121
JVC, 64
Kaplan, Jonathan, 59-62, 64-65,
68-70
kiosk, 23, 41-44
Kodak, 64, 67, 69, 82
Kuhn, Darryl, 55-56
LG, 69
Lincoln, 6
LPL Financial, 16, 89-90,
102-108
Malik, Om, 108, 113
McInnes, Andrew, 10
Melt, The, 69-70
Merrill Lynch, 102, 104
Microsoft, 54, 65
Mini Cooper, 16, 77-82, 85
Mint, 73
Morgan Stanley, 102, 104
Morningstar, Inc., 26, 39, 101
Motorola, 20
MTV, 91
myspace.com, 62
MyStarbucksIdea.com, 34-35,
37-39
National Regulatory Services, 47
Netflix, 16, 52-53, 85, 89-102
New York Times, 17, 24, 68-69,
77, 112
Nickelodeon, 91
Nintendo Wii, 97
Nocera, Joe, 17, 112
Nokia, 20, 24-25
Norman, Donald: Emotional
Design: Why We Love (or
Hate) Everyday Things, 81
Ohme, Phil, 51-52, 72-73, 115
Onward: How Starbucks Fought
for Its Life without Losing Its
Soul (Schultz), 33, 36, 39
Palm, 20, 23
Panasonic, 63
Picoult, John: “Is the Market
Rewarding Customer
Experience Leaders?”, 9-10
Pine II, B. Joseph: Experience
Economy, The: Work Is
Theater & Every Business a
Stage, 13
Pingitore, Gina, 4, 7, 50
Pogue, David, 24, 68-69
PS3, 97
Publishers Weekly, 111
Pure Digital Technologies, 59-66,
68-69, 74, 75
QuickBooks, 2
Quicken, 2, 6, 50-51, 73
Qwikster, 98-99
Research in Motion, 20
Ritz-Carlton, 5
Robinson, Todd, 102, 103, 106
Roth, Lisa, 45, 46
Ryder, Paul, 64
Samsung, 64
Schultz, Howard, 31, 33, 34, 36,
38, 39, 119
Seattle’s Best Coffee, 39
Showtime, 95
60 Minutes, 92
Skinit, 2, 16, 53-56
Smith Barney, 102
SnapTax, 83
social media, 15, 29, 34-36, 38,
40, 62, 67, 79, 85
social networking, 2, 24, 30,
34, 37
Sony, 62-64, 68, 69
Sprint, 54
Square, 2, 16, 73, 74, 75
Standard & Poor’s, 9
Starbucks, 1, 2, 5, 10, 16,
30-40, 99, 119
Stearns, Esther, 103-107
Stifel Nicolaus & Company, 112
Swasey, Steve, 53, 89, 93, 97
Swisher, Kara, 61
Tazo, 39
Temkin, Bruce, 8
The Customer Experience Revolution
142
Tesler, Larry, 58, 116, 117
Texas Pacific Group, 106
“third place”, 31
Tower (Records), 93
TripAdvisor, 29
Tucker, Gary, 1, 3, 4, 6, 53, 86,
87, 115, 116, 124
TurboTax, 2
Twelve Essentials, 125
Twitter, 35, 37, 40, 73
UBS, 104
user experience, 26, 42, 117,
124
user experience, definition of, 2
Verizon, 54
Viacom, 91
VIA Ready Brew, 39
Vivitar, 64
Vortex, the, 11-14, 32, 33
Vudu, 101
Wall Street, 9, 106, 108, 110, 112
Wall Street Journal, 64, 108
Walmart, 95, 101
Waste Management, Inc., 91
Watermark Consulting, 9
Wegman’s, 6
Wired, 64
wirehouses, 104-106
Xbox, 97
Yelp, 29
YouTube, 61, 62
Zappos, 6
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