In the New Economy, the customer is king. Or should be. But according to e-business consultant Patricia Seybold, most companies still don't get it. It's time, she says, for companies to give customers the very best customer experience possible.
When it comes to the importance of the customer experience in the New Economy, nobody waxes more evangelical on the topic than Patricia Seybold.
Founder and CEO of the Patricia Seybold Group, a Boston-based high-tech and e-business-focused consulting and research group, Seybold has been talking up the value of customers and good customer relationships for nearly two decades - long before "customer relationship management" became part of the e-commerce lexicon.
In fact, her revolutionary ideas about the customer experience -- and its importance to maintaining profitability in increasingly competitive times -- have turned Seybold into anindustry guru. In her first best-seller, Customers.com, she argues that any e-commerce initiative must start with the customer.
She then goes on to give examples of 16 companies, among them Amazon.com, Cisco, Wells Fargo and American Airlines, that have recognized the value of the customer and designed their e-business strategies accordingly.
Seybold came out with her second title, The Customer Revolution, which also shook up conventional wisdom in corporate America. In it, she outlined the basic principles of the "customer economy" and went on to give examples of companies that were retooling or refocusing their businesses to run on metrics, such as customer satisfaction, acquisition, and retention rates.
She even predicted the emergence of a new metric, the "Customer Value Index," which would allow investors to measure a company's performance by looking at the current and future value of its customer base.
Seybold spoke with Enterpriseleadership.org about this second book, the ongoing transformation of corporate culture, and what it takes to create the total customer experience.
EL: The mantra of your first book, Customers.com, was "make it easy for customers to do business with you." What is the mantra for your second book, The Customer Revolution - and what is its significance?
PS: I'm saying that customer relationships count to the bottom line of your company, that the value of your company in this new, customer economy is going to be based more than ever on the value of your customer franchise.
That means the actual net present value of the lifetime earnings from your current customers -- that's usually referred to as customer lifetime value -- and what I call the customer momentum, which is your estimated future earnings from your projected future customers. That combination is your customer franchise.
EL: So building good customer relationships needs to become a core competency for everyone who wants to do well.
PS: That's right. Both business-to-consumer and business-to-business. And one additional thing I would suggest is that companies with B2B relationships need to understand that a customer is not an account, but a set of individuals within the account they're servicing.
EL: In an age where everyone is talking about CRM and personalization and things like that, it seems as though customer service is getting worse, not better. What is that all about?
PS: There are a couple of things at play. One is that our expectations as customers have actually gotten higher. Because of Amazon, we expect immediate responsiveness. Because we do have enough good examples of a really good customer experience, it has raised our expectations.
It's also partly because of technology and what technology enables. We don't understand why the companies we deal with don't have a 360-degree view of our relationship with them.
Number two, as companies have moved to more customer self service, they've actually ended up triaging customer support in such a way that customers can actually do the easy stuff on their own. So you can typically check the status of things: you can check your account balances, you can suspend delivery of a newspaper, you can order tickets, all that kind of stuff.
The things that we actually need a person for tend to be much more complex and they often tend to be things that involve cross-functional expertise. It's not just a technical question; it may also be a technical question, a billing question, and a legal question. It's more complex, and one person may not have the answers or access to the information to really solve that problem.
EL: What are customers demanding of businesses these days?
PS: Number one is, I want to know the price. I want to know the list price for the product and the price for me, which might be a volume discount price, before I even consider buying it. So I expect to have pricing be very transparent.
Number two, I expect to know about inventory availability. And this is very hard. A lot of companies just aren't set up to do this, particularly if they've got retail channels. It's not just supply-chain management, it's also distribution-chain management.
The biggest area of pain often has to do with the distribution channel. A manufacturer may know that they shipped 100,000 printers, but they may not know which printers are in what store. So if you go to the Web site and say, "I want this printer. What store nearest me has it in stock?" I can't tell you that.
EL: In your opinion, does content really "want to be free?" Or is there a new customer-centric model that creates a balance between intellectual property and free-for-all distribution?
PS: What the world is telling us is that digital content of all types - I'm not sure that it wants to be free - wants to be manipulated. Customers are making it very clear that they want to be able to slice and dice, mix and match, roll their own, customize, etc. We, as information providers, need to account for that in the way we package and sell our information. That's number one.
Number two is that we have to understand that information goods need to be sampled just like any other kind of goods. So we have to make sure there's enough for free so customers can decide whether or not they want to spend for it.
I think we're also going to find increased price pressure. There is so much information of all kinds that is free, of good and mixed quality, that people who have been able to charge a very high price for information in the past, are going to find a lot of pressure on their margins.
EL: Michael Porter has a point when he said that all these Internet companies, in their rush to emulate each other, basically killed each other because they eliminated any source of differentiation. They were all chasing the same best practices, and the net result is that you destroy your own industry.
PS: Another way to think about this is that all these companies showed us what best practices were, and now everybody is making that the standard way of doing business.
EL: How is a company's brand related to the customer experience? What is a "branded experience," as you call it?
PS: The branded experience has to do with all of the different ways that you interact with the customer, how easy you make it for the customer to deal with you across different touch points and channels. That's really the branded experience.
EL: The Customer Revolution describes a framework for the transformation of corporate culture. You describe eight steps to a great "total customer experience?" What is a "total customer experience?"
PS: The biggest shift, I think, when you're trying to transform your corporate culture, is that you need to have a customer-caring culture. So from the top down in your company, it has to be very clear that customer experience matters, that we are going to do what it takes to give our customers the very best possible customer experience.
It's a major culture change. And it's not just the "e" part of the business. That's what makes it difficult. You've got to do this customer experience across all of your touch points and distribution channels and, most importantly, across all of your product lines.
EL: So before people do their e-reengineering to do e-transformation, they should become more customer-centric first.
PS: Yes, and in particular, they need to focus on the quality of the customer experience. We've already talked about the brand personality and the brand experiences, and then there's the second step, which is caring about customers and creating a seamless experience. Then, in order to know that you're doing a good job with customer experience, you have to measure what matters to customers.
There are two ways that you measure. One of them is measuring customer satisfaction on a per-incident basis. So every time a customer interacts with you using any channel, you want to randomly survey them to see how you're doing.
But more important and less intrusive to the customer is instrumenting. You need to figure out the key customer scenarios, the outcomes that customers care about and then, within those scenarios, the particular steps that customers most care about.
Within any customer scenario, you're going to find there are maybe one to three of the five or six steps that the customer is pretty fanatical about. You'll find different preferences, and usually you'll find that they're based on two things. First is the customer segment: What kind of customer is it, and what role are they playing?
Second is the context. If I'm customer who's a purchasing agent at a large corporation and my context is that I'm negotiating a contract for something we're going to buy later, that's one thing. If I need to procure an emergency replacement of something, that's a completely different context.
So basically, in this measure of what matters to customers, once you figure out for each customer segment and each of the key customer scenarios what they care about most, then you should be using whatever technology you can to put instrumentation in. Then you will know proactively how you're doing on the things that matter most to your customers. That's part of the flight deck.
EL: Your "flight deck" metaphor is a powerful tool for managing performance in real-time. Can you explain what the flight deck is and what metrics should companies measure?
PS: The implementation of the customer experience is that whole customer experience row in the customer flight deck. The rest of the flight deck has to do with value metrics: How many customers do we have? How many are we retaining? How much are they spending with us?
EL: What are some of the companies that are managing the customer experience correctly? What are they doing right and how are they doing it?
PS: The book has detailed case studies of 13 companies.
Take Charles Schwab. In Schwab's case, they're fanatically focused on the quality of the customer experience and they measure customer satisfaction by interaction. They figure out what customers care about, and then they monitor that very proactively across their systems and their touch points.
Most importantly, they monitor how they're doing on meeting customers' outcomes - in Schwab's case, that's "Is my investment growing?" Not only do they monitor it, but they actually compensate their employees based on how well they're doing in meeting customers' outcomes and objectives. So that's when you've got your entire company aligned to what customers care about.
Notice they've got a lot of competition from E*Trade and others coming into the discount and online brokerage area, and then Merrill Lynch, waking up and saying "We can do this e-game just as well" and, frankly, doing a pretty good job at it.
Despite all that, Schwab is still retaining its value vis a vis those other folks. Their pricing isn't being commoditized. They're able to basically hold their prices at about $10 above the lowest player per trade because their customers actually value the quality of the customer experience and they value the "bricks and clicks" experience.
EL: Lots of companies have given lip service to "customers are most important." Where do you start if you really want to practice this?
PS: It does start with the CEO, and it's very difficult to do if the CEO isn't on board. In addition, the single most important organizational shift is that you need to have a high-level executive who's responsible for the customer experience, a buck-stops-here person.
They have to have a lot of clout and respect, and they have to be operationally involved so they set the benchmark for customer satisfaction and customer loyalty. A total customer experience officer. Cisco was the first company to do that. Schwab is another. It's really rolling now, and quite a few companies are picking up on it.
EL: Any tips for the energy industry? How should they be managing customer experiences in California, for example?
PS: California's story is only a small piece of the story. If you look on the East Coast, you'll see that things are playing out quite differently. The problem with California, according to people I know in the energy industry, was partial deregulation, which was badly done. Whereas on the East Coast, deregulation went faster, sooner.
Look at a company, one of my clients actually, that used to be called Brooklyn Union Gas. And then they merged with Long Island Energy Company and they keep acquiring more pieces.
But they've gone through deregulation. I wouldn't say they have the perfect customer experience yet, but they're very focused around the customer experience. One of the things they did very early was redesign all their information systems with the customers at the core.
The other area is airline travel. Notice that Delta Airlines has actually redesigned all of its information systems infrastructure around customers' itineraries. And they're beginning to gain a lot of traction against their competitors.
EL: What has happened since this book was published? What's next for you?
PS: What I'm looking at now is globalization. One of the biggest areas of pain for both very large companies doing business worldwide and also smaller companies like ours, who need to do business in a global market, is that we really don't know how to do it. Neither of us.
It doesn't matter that you're huge and you have offices in 58 countries around the world. The fact of the matter is that it's still very difficult to provide a great customer experience that is culturally appropriate for different people in different countries at different stages of economic development, and that is still going to be a consistent branded experience.
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Christian Sarkar is editor-in-chief of christiansarkar.com. A collection of his works may be viewed at onewwworld.com.
