In many service industries, customer experience is emerging as a valuable way for companies to differentiate themselves from the competition and to increase market share. Most companies understand this, but many are unable to improve interactions with customers enough to make a difference. Why?
There are two types of disconnects that get in the way of delivering the useful, pleasurable, and repeatable experience that customers demand. The first is the “needs disconnect”: Organizations find it difficult to step into their customers’ shoes and understand their real needs, relying instead on tools that do not yield the insight required to service key customer segments effectively.
The second type is the “organizational disconnect”: Companies make it too difficult for customers to get the service they want without being shuffled among departments and receiving contradictory messages. Organizational silos, furthermore, often make well-meaning but fragmented decisions about customer service. For an organization to create a successful customer experience, it must understand its customers’ perspective and how well it is meeting customer needs across the entire organization; then it must address these needs — but only to the degree that doing so aligns with its strategic intent. In other words, a company’s customer experience design should leverage the organization’s existing strengths, support growth, manage costs, and boost revenue and profitability.
The needs disconnect became apparent in the results of two surveys conducted by our firm in 2006, one asking customers what they need and the other asking business leaders what they believe their customers need. More than 1,200 customers weighed in on the quality of service in four industries — retail banking, brokerage, health insurance, and airlines — as did executives from leading organizations across these sectors. When they were asked to rate the importance of eight customer service elements — speed, professionalism, responsiveness, timeliness, product and service expertise, accuracy, fees and charges, and personalization — the two groups diverged in every category. Personalized service, which companies said was the most important service element, was least important to customers. Customers named speed as the most important service element, whereas companies put it near the bottom. Executives assumed that customers wouldn’t pay for personalized service, but more than 25 percent of customers said they would pay for specific services they valued, as long as they couldn’t get them elsewhere free.
These disconnects are unlikely to be resolved through a onetime initiative. Rather, it will require an ongoing effort to understand the customer and apply that insight strategically. A four-step “outside-in, inside-out” technique is effective in helping an organization design and deliver a successful customer experience program.
1. Segment customer needs from the outside in. A holistic understanding of customers requires that companies recognize the various dimensions of customer need. They include the functional (what the customer wants the service offering to do), the behavioral (which delivery channel and what mix of offerings the customer prefers), and the demographic (how the customer’s needs vary by life stage, age, gender, and geography). It is vital that the organization distinguish between customers’ actual needs and their stated needs. In addition to tracking customer behavior, companies can identify actual needs by observing what customers select among different bundles of offerings and what they choose to keep and give up.
After determining customers’ actual needs, the company should figure out which of them it is already addressing and whether those efforts are effective. By knowing what it does well, a company can leverage its strengths and define what customers will associate with that company.
2. Design the customer experience from the inside out. A company should not attempt to address every customer need. Rather, it should focus on those that are of the greatest concern to the customer but also produce the greatest benefit for the company. Finding that connection starts with identifying the potentially high-value customer segments along with those that the company can afford to ignore. The company must then ensure that it maps the right needs and service levels to the different segments, prioritizing customer needs against its own operational strengths in a way that reduces complexity and lowers costs.