This post is a transcript of S2 E4 of the Voices of Customer Experience Podcast with Mary Drumond and James Conrad, featuring Prof. Dr. Phil Klaus, of the International University of Monaco.
Customer Experience as a Growth Strategy
In his studies, Prof. Dr. Phil Klaus has studied all sorts of companies and has found out that there are not many companies who do customer experience right, but those that do do it right outperform the others by 600%. He mentioned that it is not easy to become one of the ones that outperforms everyone else, but that if you align what you already have to that goal, you will become more profitable. He added that you don’t have to go to the 600% but just going in the right direction will help you to do the right thing.
Everybody agrees that customer experience is important in a world of commoditization and only ⅓ of companies think they are doing a good job in customer experience, so we asked Prof. Dr. Klaus what he thinks the barriers are to providing a good customer experience. He said that there are many hurdles and that most companies talk customer experience but never practice it.
The Struggle with NPS
Klaus discussed the problems with NPS and that it has no correlation with building value for the firm. He added that there is no proof that NPS has any correlation to what customers do, so it is mind-boggling that everyone is using this as the key KPI. He said that the main reason for this is that managers are lazy, but if you keep working toward better customer experience with baby steps, one day in the future you will begin to outperform everybody else.
He added that part of the past success of NPS was that it fit really well into the North American way of doing business, which is driving quarterly results without worrying about looking ahead.
According to Prof. Dr. Phil Klaus, the companies that outperform other companies by 600% are called vanguards. These CX vanguards got it right from the start. There are not many companies who became vanguards though. Most of them started right away.
Defining Customer Experience
Customer experience is hard to define because nobody ever agrees on the definition. However, as Prof. Dr. Phil Klaus says, “I don’t define it, your customers define it.” Companies have to know how they fit in customers’ lives. Companies need to stop talking about customers like they are aliens, and managers need to disconnect from everything that drives their behavior.
He added that one of the biggest problems when it comes to customer experience and customer centricity is that the people at a company that we call up when something goes wrong or the people that work at a store determine whether customers buy or come back again. However, they are the least educated, the least appreciated, and the worst paid in the company.
Klaus then provided an example of how companies don’t truly put themselves in the customers’ shoes. When there are complaints about wait times with the call centers, the company says they are going to hire more people to work in the call center. They don’t think about instead fixing why so many people are calling in the first place. The managers don’t think about this.
Companies have to realize that people don’t buy products and services - they buy experiences. There are very few companies that realize that customers use your product or service because they want something in their life to be better, simpler, or more effective. There are so many companies trying to delight customers, but customers do not choose a company based on how delightful the purchase was, but because that company upset them less than another one did.
Klaus added that in order to find out why customers choose you, you have to look at much more than a NPS. Even if you get NPS 100% right, you still have 99 reasons customers could be choosing you.
A Holistic Approach to Customer Experience
In the cx industry, people keep saying we need to take a holistic approach to customer experience, but the problem is that CX is becoming generic. Every single touchpoint is important, and you need to set priorities.If you have 25 potential drivers for behavior, and you have 3 that are the true drivers, then you should not waste your time on the others. He added that a customer journey has nothing to do with the goal you have to get out of it, and that you asa manager need to make it manageable and say these are the 3 things that really make a difference if the customer chooses us over someone else. He also mentioned that it is important to know that customer experience DOES NOT equal investment.
A major problem is that CEOs and the people that are so far from the front line think they already know what customers want. Every company has massive data but they don’t have any actionable data. They can say what their customers are doing it, when they are doing it, how they are doing it, but they do not know why they are doing it. Companies are not asking their customers why do you buy from us and why do you buy from others. Instead, they come up with a survey so we confirm what we already know.
Prof. Dr. Klaus's Research
In his research, Prof. Dr. Klaus did not start with a hypothesis. He instead sharted with data collection. He said that with customer experience, everyone talks about it, but nobody really knows what it is. In his research, he and his colleagues came up with only 300 components of the customer experience. In the the next stage of their research, they quantified which one was the most important one in making your decision to purchase or not purchase. He said that we can statistically prove which ones are really relevant and came up with 25 key components that are there in every customer experience, no matter what type of company or what industry they are in.
They also found out that things are not context specific and that the way you choose your partner is the same way you choose your car or your toothpaste. The things that you value and are important to you are not just valuable in one part of your life but in all parts of your life.