Customer Experience Management — By Design

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Customer Experience Management (CEM) is one of those business terms bandied about, but what is Customer Experience Management? Search the web and you’ll find “the process of strategically managing a customer’s entire experience with a product or a company” (Customer Experience Management, Schmitt, 2003, p. 17). The root of the term probably lies in the 1999 book, The Experience Economy, by Joseph Pine II and James H. Gilmore. (They also wrote a synopsis of their book for a Harvard Business Review article in 1998.)  The concept — and creation of it. Basically, CEM has become the child of a thousand mothers.

Notice the lack of “service” in the first definition, yet the “experiences” one has with a company are heavily derived from the service the company provides, building on the core product — comprising the so-called product-service bundle. These services could include order & fulfillment, installation, customer usage support, remedial or problem-solving services. Another type of service interaction is a “service recovery experience” that is put into effect when the primary experiences fail in the eyes of the customer.

While customer experiences are the result of all interactions, positive customer experiences don’t “just happen.” The nature of the experiences are the direct outcome of the design of the operation. Thus, they are a managerial responsibility. The elements that a CEM focus brings to the operational design process is twofold:

  • Enhance key value drivers to differentiate the customer experience, and
  • Include a systematic response to address the negative experiences.

I can best explain these points with three experiences of my own that represent The Good, The Bad, and The Ugly of CEM – with apologies to the movie by that name.

The Good. Whenever I travel to Washington DC, I try to share a dinner table with a close college friend. Last spring, we dined at Tuscana West, a fine Italian restaurant in the heart of the city. Of course, the downside of much Italian food is that you frequently wear some of the food. My friend got a bit of red sauce on his dress shirt. Seeing this, I made a motion to him by touching my own shirt to indicate where the stain was.

Before my friend could reach for his napkin, the host appeared seemingly out of nowhere and without a word offered to bring a glass of club soda to help get the sauce out. (And, no, he didn’t charge us for the soda.) The host must have been chatting with folks at a nearby table and saw my motion. I did not see him in my peripheral vision.

Wow! Talk about quick reaction to a customer’s unspoken needs! This is a restaurant, and they had managed well all the positive elements of that product-service bundle: attentive wait staff, good menu selection, nice atmosphere, quick seating, very good food, and so on. But the host also recognizes another common, negative element of a restaurant experience, spilling some food. They were tuned into the possibility and knew exactly how to react. We were highly impressed. Calling this example, The Good, is a gross understatement.

The Bad. I brought my Subaru into the local dealership, Village Subaru, to get the alternator replaced. (Of course, my car’s 60,000 mile warranty had just expired 3,000 miles before.) The dealership has an adequate waiting room around the corner from the welcome desk with WiFi and complimentary coffee — though they no longer have that really good coffee in the individual packets. A number of us were seated there reading and working. (Thank goodness the TV was off.)

At some point in the morning, we all hear one of the service desk agents talk loudly to what appeared to be one of the repair mechanics, who responded even more loudly. At first, I thought this was all in jest, but an escalating exchange ensued. Eventually. the service manager intervened. “You guys don’t have to like each other, but you do have to work together. Knock it off!” We customers in the waiting room all heard every word clear as a bell. We looked at each other grimacing a bit uncomfortably. One person broke the ice, “I sure hope he’s not working on my car!” We all giggled in agreement. End of event. The service manager didn’t come into the waiting room to explain or apologize.

While I do judge a repair shop primarily on the quality of the repair service and its price — and I have some reservations about this shop on those points — other factors do come into play in my assessment. Listening to a fight among employees could never be a positive element in our experience, especially since it serves as an indicator of the management of the operation. The fact that no one came to apologize cast a long pale over the experience. Will I return? The shop is very convenient, but the negative experiences do accumulate.

The Ugly. I recently got a letter from a collections agent at Thrifty Rental Car. I was threatened with collection procedures for not paying an administrative fee to Thrifty that resulted from my not paying a toll outside O’Hare airport while driving a Thrifty rental car. Note that Thrifty had not paid the fine and was not coming after me for that money. They were billing me $25 (which is in the contract) for having to process the letter from the highway authority, which supposedly meant sending them my contact information. I have rented frequently from Thrifty, and in fact I had rented half a dozen times from this very facility in the past year. Thrifty in its marketing copy frequently tells me I’m a valued customer. The tone of the letter puts a lie to the marketing copy. That’s not how a valued customer should be treated.

I don’t dispute any of the facts, but this franchise demonstrates a very narrow view of the “customer experience.” Why didn’t I pay the toll? I hate to use this phrase, but the toll is a form of entrapment by the highway authority. The toll booth plaza has no attended booth! You must have exact change — and the toll is 80 cents! Show me a business traveler with 80 cents in change and I’ll show you a traveler who sets off airport metal detectors.

Are there highway signs to this effect? Perhaps, but I didn’t see them, and if there are, what would I have done? I purposely don’t travel with change. (My “solution” now when I’m driving in Illinois is simple: I never take the toll roads. I’ve learned the back roads. Note to State of Illinois: you’ve lost my toll revenue.) When I returned the car to the rental location, I actually asked an employee what happens under this circumstance. I got a shrug.

You might be thinking that Thrifty is innocent here, and you’d be right. I am responsible for the tolls. But here is an opportunity for Thrifty to think about the customer experience and score big points like the host at the restaurant. As I wrote in my letter to them, they could 1) Put a notice in the cars that the toll plaza is not staffed and that 80 cents change is needed. 2) Provide information at the time of rental return about how to pay the toll after the fact. (They could even print up a slip with the car’s plate number to simplify the process.) Imagine how impressed one would be at that level of forethought. What would it cost? (See answer below.) At minimum, their staff should be able to answer that question.

The negative experience I had with Thrifty was not my first. I had a minute chip out of a windshield in the Phoenix franchise. (I’ve never had a car examined upon return this closely. Yet, at the time of rental I was not offered the standard form to indicate existing damage. I had to ask for it. I wonder how many damages have been paid for twice?) I contacted my insurance company upon return to my office. They acted promptly, but would not pay a small amount of the charge for the lost rental day. Within a week, the franchise sent me a dunning notices threatening collection procedures. I did contact Thrifty headquarters, telling them what a good job their franchise owners were doing in alienating customers. The Thrifty Customer Advocate thanked me for my letter. Apparently, the home office had been trying to get the franchisees to be more sensitive to the customer experience. The O’Hare facility is run out of the home office. I guess when the home office does the alienating, it’s okay.

Thrifty views itself as in the car rental business, not a customer service business. Worst of all, my letter about this latest incident to the manager of the franchise, copied to Thrifty’s customer advocate, went unanswered — except for the cashing of my check.

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All you reading this probably have similar experiences, hopefully including positive ones. But what differentiates the Superb Customer Experience Management from the Ugly Customer Experience Lack-of-Management?

  1. Recognition that customer interactions are customer experiences. Pine & Gilmore argue that we’ve transitioned from a service economy to an experience economy. I agree but disagree. The experience is a function of the products and services companies provide to their customers.  That’s been true since people first engaged in trade.Perhaps what is new is the extent to which competitive advantage is gained through a focus on the customer’s experiences, and our focus as customers on the importance of the experience in our buying choices. Products are increasingly commodities, and when all service is also essentially the same, no experience jumps out. But when one company’s service is exemplary, the positive experience shines. We all are so busy in our professional and personal lives that we value more highly those companies that provide us with good experiences.
  2. Designing the process with the customer in the forefront of consideration. Companies with superior CEM practices design their business processes cognizant of the customer, especially in those customer touchpoints which are concentrated in the service functions. These companies put themselves in the customer’s shoes and consider what creates value from the customer’s standpoint, thus making their company stand out. This value focus reduces the price focus in customers’ decision making calculus.
  3. Recognition that variability is the enemy of effectiveness. I teach operations management (OM) courses, and in OM we typically teach that variability is the enemy of efficiency. Six Sigma and other quality management programs aim to reduce variability in products because processing those units with variability out of the norm cause a huge proportion of operating costs. (This is an application of the 80/20 rule.  80% of costs are caused by 20% of the incidents.)Similarly, variation in the service interactions also leads to a loss of effectiveness in the customer’s eyes. Recently, in a one of those horrible travel experiences that lead to multiple calls to the US Airways call center, I encountered competent and caring agents as well as incompetent and uncaring agents. The variability tainted my experience.  The variability creates uncertainty and a lack of confidence in the provider.Do recognize that part of what makes managing services more challenging than managing products is that the customer introduces variation. Robust service operational designs can handle this introduced variability, centered on capable employees, but the factors under the company’s control should not introduce additional variability.
  4. Instilling the customer experience focus into the culture. A key to creating these robust service operational designs is through company culture. Service people make the difference, and if the culture does not support people enhancing the customer experience, it will not happen. Look at my Thrifty experience. I have little doubt what cultural message top management sends through the hierarchy. A focus on the customer experience is clearly not the ethos of the company. Yet, I have little doubt that all members of the staff at Tuscana West would have done what the host did.
  5. Recognition that good CEM design costs little — and may in fact be free. The Wall Street Journal recently published an article, “Selling the Special Touch,” discussing how various companies with generally poor customer service records are turning to training from four-star hotels to enhance the customer experience. Many of the examples they cite cost little to implement, and I am a believer that small, simple gestures can have an out-of-proportion impact.sweat-peaMy wife and I recently said goodbye to a beloved feline friend whose cancer had spread to her lungs.  Our veterinarian at Lancaster Animal Hospital showed true compassion — that culture thing — and after Sweet Pea had passed, he shook our hands and thanked us. (We wanted to thank him.)  His act was genuine.  A card was included with the urn of her ashes with handwritten notes from our vet and two technicians who had cared for her.  We were truly touched.What did that cost?  What kind of value did it deliver?Now, consider my suggestions above to Thrifty. These may seem costly, given that they don’t relate directly to the car rental process, but in fact they are free! I know I am not the only person with this experience since the copy of the letter from the state of Illinois included 2 other similar citations for Thrifty cars on the same day. The cost of implementing my suggestions is pretty negligible, and it would avoid the cost of processing the violation letters. (The conspirator in me believes this is a profit center for Thrifty. That is, the $25 administrative fee more than covers their costs. So, they want these problems.)  More importantly, they would avoid the loss of future revenue from people like me who will only rent from Thrifty ever again — only — if the price is extremely favorable.  They’ve turned me into a pure price shopper.This is an example of Joseph Juran’s Cost of Quality analysis in action. The Prevention Costs are likely overwhelmed by the External Failure Costs of lost customer goodwill — not to mention bad publicity. Conversely, consider the benefits Tuscana West gained from their extended service.
  6. Sensory agents for when the customer experience needs to be rescued. No process is perfect, and even the best designed process needs updating. Eventually that “special touch” discussed in the Wall Street Journal article becomes commonplace. Superior CEM actively captures customer feedback to identify where business processes need updating and to identify those customers with negative experiences in need of a service recovery. Consider the Subaru example above. A feedback survey might have captured this unfortunate incident and brought to management’s attention the impact of employee behavior upon customer experiences. Without that survey, they’re in the dark. Superior Customer Experience Management requires — and even starts with — Superior Customer Feedback Management.

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Superb Customer Experience Management is not rocket science. It just takes a logical approach to business process design, applying a variation of the Golden Rule our parents taught us. Do unto customers as we would want done unto us as customers.  Good customer experiences don’t “just happen.” They are the result of thoughtful design and solid execution with feedback mechanisms to improve upon the design. To use Branch Rickey’s wonderful quote, “Luck is the residue of design.”