Managing Customer Experience and Relationships. Don Peppers
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customer-strategy enterprise. Relationships between customers and enterprises provide the framework for everything else connected to the customer-value business model, even if the customer is not aware of the relationship. After all, the customer is aware of what they experience with the company. In fact, we could say that managing the customer relationship is all about what the company does, and customer experience is what the customer feels like as a result. The exchange between a customer and the enterprise becomes mutually beneficial, as customers give information in return for personalized service that meets their individual needs. This interaction forms the basis of the Learning Relationship, based on a collaborative dialogue between the enterprise and the customer that grows smarter and smarter with each successive interaction.8
Who Is the Customer?
Throughout this book, we refer to customers in a generic way. To some, the term will conjure up the mental image of shoppers. To others, those shoppers are end users or consumers, and the customers are upstream businesses in the distribution chain—the companies that buy from producers and either sell directly to end users or manufacture their own product. In this book, customer refers to the constituents of an organization, whether it's a business-to-business (B2B) customer (which could mean the purchasing agent or user at the customer company, or the entire customer company) or business-to-consumer (B2C) customer (an individual or a family/household)—or, for that matter, a hotel patron, a hospital patient, a charitable contributor, a voter, a university student or alumnus, a blood donor, a theme-park guest, and so on. That means the competition is anything a customer might choose that would preclude choosing the organization that is trying to build a relationship with that customer. The word customer includes both current and prospective buyers and users.
How to Think about Customer Experience
In our view, any useful definition of customer experience should be based on straightforward language, while at the same time clearly differentiating the term from all the other marketing terms and buzzwords, such as customer service, brand preference, customer satisfaction, CRM, or customer loyalty. (See Chapter 3 for a deeper dive into customer experience.)
Customer experience is the sum total of a customer's individual interactions with a product or company, over time.
Individual means that we are talking about each different customer's own individual perception or impression of the experience. What you intend to provide a customer is not nearly so important as how the customer perceives what you provide.
Interactions occur in addressable or reciprocal channels, that is, outside of mass media. Marketing campaigns, taglines, and brand messages may be important, but they aren't interactions, so they lie outside the domain of customer experience. By contrast, improving your mobile app by, for instance, embedding voice or chat connections into it would definitely improve your customer experience. Similarly, when a company makes it easier for a prospect to find information about its product, that company is improving the customer experience even though the prospect may never actually become a customer.
When we talk about customer experience, we are only including direct contact. On the one hand, the interactions a customer has in person or online with other people or companies about a brand, product, or company are not really part of the customer experience. On the other hand, how your company actually engages with customers and prospects within various social channels is a direct interaction, and thus part of the customer experience.
Customer experience applies to all of a company's marketing, selling, and servicing entities. This includes dealers and distributors, marketing and advertising agencies, any retailers that sell your product, and any service firms that install or repair your company's product or that handle customer inquiries or interactions of any kind. For each of these interactions, you can contract out the task but not the responsibility—at least not as far as the customer is concerned.
Each customer's experience is not an isolated event; it accumulates through time. For instance, a company improves its customer experience by making it easier for a repeat customer to pull up what they ordered before, or configured before, and do it instantly, or when a call-center agent already knows what a prospect was recently looking up on the website.
A company cannot improve customer experience without considering all of these issues, including how each one impacts the others. Integrating all interaction channels is one of the first, and possibly the most important, steps a company can take to improve customer experience.
LEARNING RELATIONSHIPS: THE CRUX OF BUILDING CUSTOMER VALUE
The basic strategy behind Learning Relationship (Quadrant IV in Exhibit 1.2) is that the enterprise gives a customer the opportunity to teach it what they want so the company can remember it, give it to them, and keep their business. The more the customer teaches the company, the better the company can provide exactly what the customer wants, and the more the customer has invested in the relationship. Ergo, the customer will more likely choose to continue dealing with the enterprise rather than spend the extra time and effort required to establish a similar relationship elsewhere.9
The Learning Relationship works like this: If you're my customer and I get you to talk to me, and I remember what you tell me, then I get smarter and smarter about you. I know something about you that my competitors don't know. So I can do things for you my competitors can't do, because they don't know you as well as I do. Before long, you can get something from me you can't get anywhere else, for any price. At the very least, you'd have to start all over somewhere else, but starting over is more costly than staying with me. As long as you like me and trust me to look out for your best interests, you're likely to do more of your business with me.
This happens every time a customer buys groceries by updating their online grocery list or adds a favorite movie to “My Stuff” on their favorite streaming provider. Even if a competitor were to establish exactly the same capabilities, a customer already involved in a Learning Relationship with an enterprise would have to spend time and energy—sometimes a lot of time and energy—teaching the competitor what the current enterprise already knows. This creates a significant switching cost for the customer, as the value of what the enterprise is providing continues to increase, partly as the result of the customer's own time and effort. The result is that the customer becomes more loyal to the enterprise because it is simply in the customer's own interest to do so. It is more worthwhile for the customer to remain loyal than to switch. As the relationship progresses, the customer's convenience increases, and the enterprise becomes more valuable to the customer, allowing the enterprise to protect its profit margin with the customer, often while reducing the cost of serving that customer.
Learning Relationships provide the basis for a completely different arena of competition, separate and distinct from traditional, product-based competition. An enterprise cannot prevent its competitor from offering a product or service that is perceived to be as good as its own offering. Once a competitor offers a similar product or service, the enterprise's own offering is reduced to commodity status. But enterprises that engage in collaborative Learning Relationships with individual customers gain a distinct competitive advantage because they know something about one customer that a competitor does not know. In a Learning Relationship, the enterprise learns about an individual customer through their transactions and interactions during the process of doing business. The customer, in turn, learns about the enterprise or the website through their successive purchase experiences and other interactions. Thus, in addition to an increase in customer loyalty, two other benefits come from Learning Relationships:
1 The customer learns more about their own preferences from each experience and from the firm's feedback, and is therefore able to shop,