.

Over the last few weeks, my colleagues and I presented value propositions to separate audiences in Europe, Africa and the Middle East. Clients in each of these markets face unique challenges and opportunities to be sure. Our offerings addressed their different needs, but our approach is fundamentally the same everywhere.

Our work consists of three steps:

1)      Develop a better understanding of customer needs by getting closer to customers and engaging them wherever possible,

2)      Use customer insights to continually improve offerings,

3)      Deliver a customer experience that’s better than the rest.

The good news is that these steps apply to clients everywhere, despite cultural variations. The not-so-good news is that succeeding with these steps is almost impossible unless there is substantial buy-in at the highest level in an organization.

We’ve learned that it doesn’t pay to work with companies that aren’t “customer-centric,” no matter how attractive the opportunity appears on paper.

Let me restate the lesson. If the person or team that sets the tone for the organization doesn’t see the inherent value of improving the customer experience, there is little that our interventions can do to move the performance needle.

Putting it another way: the organization’s “champions” must know, at the time that we’re presenting our value proposition, that it pays to improve their customer experience.

This is our “smell test”.  And, it’s crucial to run this test early in the conversation with a client—the earlier, the better. When we encounter a prospect who doesn’t pass the test, the smartest move is to politely step away from the table.

The  opportunity costs of  choosing inappropriate assignments can sink a company.  Our organization thrives when we concentrate on assignments that improve the way our clients relate to their customers.

Let me be clear. We’re not looking to avoid tackling difficult problems. Working though vexing challenges keep us sharp;  they give us the confidence to set our sights higher.  Looking back, partnering with the “right clients” to solve daunting challenges have been our most satisfying and beneficial assignments.

Who are the “right clients”?

For us, the “right clients” – whether they’re in Baltimore, Brisbane or Berlin – know they’re in the business of serving people.  Whether they’re airlines or retailers, they know that winning the hearts and minds of their customers is the true test of a market leader.

Once we recognize that a client accepts this principle, our mission is clear: help them out-perform the competition.

That’s what we do.

____________________________

As always, I’d love know what you think.  How does your company choose which opportunities to pursue and which ones to avoid?  Have you made exceptions to your selection criteria?  If so, how did that work?

Related:

Want to know more about Opportunity Costs?  www.investorwords.com offers this definition:

“The cost of passing up the next best choice when making a decision. For example, if an asset such as capital is used for one purpose, the opportunity cost is the value of the next best purpose the asset could have been used for.

Opportunity cost analysis is an important part of a company’s decision-making processes, but is not treated as an actual cost in any financial statement.”

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You never know with these things when you’re trying something new what can happen. This is all experimental. ~Richard Branson

Over the years, there have been surprisingly few breakthroughs in the airline customer experience - until recently. Sir Richard Branson’s venture into the U.S. market, Virgin America, (VX) is redefining air travel by providing passengers with a fresh, distinctive on-board experience. The carrier is less than two years old but it’s quickly becoming a template for what’s possible in the future.

The choices VX is making demonstrate a “customer experience mindset” that’s all too rare in the industry. It’s evident that the VX team devoted their attention to passenger comfort and convenience. Features “baked in” to the customer experience include seats with power-outlets and USB ports. Cabins in their new A320s have soft mood lighting.

Healthy, appetizing meals designed by star-chef Luke Mangan show that the company knows what their customers prefer.  Features like these aren’t found on any domestic airline, let alone a low-cost one.

Last week, VX announced that its fleet is 100% WiFi-equipped (Gogo). They only have 28 planes, but they can boast that they’re the world’s first airline to reach that coveted milestone.

What’s most impressive is VX’s touch-screen, interactive entertainment system. The platform, known as Red, enables passengers to watch movies and live TV, play games, chat on-line with other passengers, and sample or even download MP3s from a massive digital library. Passengers can also use Red to order and pay for food and beverages which they receive “on-demand”.  For the digitally-inclined traveler, this is the way to fly.

Given the prohibitive cost of installing systems like Red on their existing fleets, it’s doubtful that any of the major network carriers will soon match VX’s “at-seat” amenities. But, the toughest feature for VX’s rivals to co-opt is its “customer experience mindset”.  These advantages could give the carrier a strong lead in the service innovation race for years to come if it stays healthy during this slowdown.

The airline serves only a handful of markets (New York, Boston, DC and the West Coast).  But, they’re big league markets where VX is attracting a cadre of loyal, well-heeled fans.  As an industry guy, I’m tipping my hat to Sir Richard Branson and VX’s San Francisco-based team for rethinking the in-flight experience, and for executing it well.

What do you think?  Have you sampled Virgin America?  I appreciate your perspective.

_____________________

Want more on this subject?

Richard Branson (Reuters, 6-2-09): “It’s unlikely all the big U.S. airlines will survive.”

Read Red Orbit’s piece (10-16-08), “Virgin America Wins Best Domestic Airline in Conde Nast Traveler’s (’08) Readers’ Choice Awards”.

Check out SimpliFlying’s series on Richard Branson and Virgin America.

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Let me be clear. It’s crucial to satisfy customers’ needs and preferences. It’s also vital to know how customers perceive your offering so you can pinpoint areas that need attention. But, C-SAT misses a critical piece of the puzzle. It doesn’t indicate customers’ intention to remain loyal to your brand. If they’re defecting, it doesn’t tell you why.

Studies show that customers can be reasonably satisfied with your offerings yet still switch away from your brand. In fact, they may be extolling your brand’s virtues even as they’re signing up with your rival. If they do intend to stay, C-SAT won’t tell you if they’re inclined to buy again. And, you can’t know if they’d prefer to get your service through a different channel. At best, C-SAT is a barometer of how customers perceive your brand based on their prior experiences with it.

Is Net Promoter Score the answer?

A newer metric, Net Promoter Score (NPS), is gaining steam. NPS is based on asking customers: “How likely is it that you’d recommend our brand to a friend?”  Depending on their answers, respondents are classified as “Promoters,” “Passives,” or “Detractors”.  But is NPS is any more predictive of customer behavior than C-SAT?

The answer is a resounding “maybe”. Whereas C-SAT tries to gauge the customers’ perceptions of experience, NPS measures their enthusiasm for your offering.  NPS takes aim at attitude which does tend to be more predictive of  behavior. But neither metric identifies the unique drivers that motivate customers to remain loyal and buy again so that you can take steps to influence their behavior.

Where these kinds of metrics create problems is that they give organizations a false sense of insightfulness.  Unfortunately, at a lot of companies, NPS has become the new C-SAT — a surrogate for customer insight. Like C-SAT, it’s relatively easy to collect and track over time. But many organizations are merely substituting a newer, shinier metric for the traditional, time-worn measure of service performance.  These businesses are being ill-served.

So, what’s the fix?

There’s no substitute for getting to know the people you serve. Enlightened companies engage in frank conversations  with a fair cross section of their customer base. They engage the people they’re serving as well as those they want to serve.  They talk with defectors as well as loyal customers. They ask purposeful, specific questions to understand customers’ attitude toward their offerings. And they listen intently.

Talking directly with customers is a golden opportunity if you make the most of it. Use every channel to foster genuine, two-way communications. Solicit and collect feedback before, during, and after the service experience. Make it easy for customers to respond. Ask specific questions and listen from the standpoint of  discovering new information.

Here’s a caveat: Recognize the limitations of customer feedback. For example, many people can’t readily explain their intentions, and many are prone to misrepresenting their perceptions. But these constraints don’t deter skillful  practioners from probing customers to learn what drives their loyalty and intention to repurchase.

Get involved.

Don’t rely solely on your customer-facing reps to gather feedback. Too many managers think they know what’s going on by perusing weekly feedback summaries. It’s vital to get personally involved, and to encourage your peers up and down the line to join you.

Surveys have their place if they’re well-crafted. Asking specific, purposeful questions in the proper sequence is key.  Comparing different surveys, using advanced techniques like conjoint analysis, can provide a dimension of information not available  through any single questionnaire. If you don’t have the know-how to do this, get sound 3^rd party advice.

Can you handle the truth? Engage in purposeful inquiry to uncover actionable insights — not to reinforce what you want to hear. Done properly, you’ll be amazed at what your customers know about your business that can guide you. My litmus test for inquiry is simple: If I’m not consistently discovering new things, I’m not doing it effectively or sufficiently.

Building relationships isn’t about achieving C-SAT or NPS scores. Talking with customers takes time and skill.  Purposeful inquiry requires more effort than tabulating survey scores. It’s worth it. If you’re genuinely interested in what drives your customers but rely solely on C-SAT or NPS scores as your basis for knowing, you’re probably paying a stiff penalty. Can you afford it?

_____________________

Want more on this subject?

My company, Osprey, specializes in helping global firms gain deeper insights about the people they serve. Our focus is on identifying loyalty and repurchase drivers. To read case studies or to get more info, please get in touch.  Let’s talk about your particular challenges and opportunities.

Suggested Reading:

Why Satisfied Customers Defect (’08 article) from Harvard Business Publishing.

Predictably Irrational: The Hidden Forces That Shape Our Decisions (’08 book) from HarperCollins.

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Our practice is concerned as much about the human and organizational issues enabling the successful application of business intelligence and analytics. These include management vision and commitment, organizational alignment, culture, and skills. We’ve learned that buying “yet-another-tool” seems easier than solving these broader challenges, but it’s rarely the answer companies are looking for.

The most successful practitioners of analytics somehow manage to create an environment where decisions across boundaries are made on the basis of evidence that comes from rigorous analytics.  Management at those companies enncourages a “test-and-learn” approach to refine products, services and offers.  So analytics encompasses the tools and practices that produces insights as well as the way the company uses the insights to contour its offerings.  Hope this is helpful. 

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Klein says, “When I think of air travel, there is a conditioned response that it is going to be bad,” and adds, “We’ve forgotten it is a social occasion. I can’t think of any acknowledgement of that by the airlines today.”

He’s so right.  He’s probably someone the industry should tap to help redesign on-board service programs.  In fact, bringing experts from analogous fields like hospitality is a great place to start when rethinking services.  Successful restauranteurs can also bring a lot of practical insight.  Of course, we’d have to bring designers and artists to the party.

I like the concept of tapping experts from a variety of fields and disciplines outside the industry – along with customers – to come with distinctive alternatives that make the on-board experience more enjoyable.

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According to Eva Ziegler, a senior VP who is driving the transformation, “When the business guy who just did 10 meetings in a day arrives at the hotel, all he can dream of is room service and sleep,” he says. “We want to reset his mind!” She added, “My role is to create unique experiences for the guest that stimulate all five senses.”

How are they doing it? The hotelier set out to create a rich, even suprising experience for the customer from the time he or she arrives.  That includes music, art, and food—even scents that waft through the hotel.  The ambience of the hotel is infused with elements that engender a pleasurable experience.

Ziegler set up the LM100, a rotating group of artists assembled to enhance the service experience.  Her mission has been to “court LM100′s cast of artists – painters, designers, and architects – to transform more than 50 aspects of the hotel.”  The artists have created a range of unique artifacts to enhance the customer’s experience.

Le Meridien is already enjoying impressive results. In February, its 2.4 million on-line bookings were 41% higher than the year before.

Branding consultant Steven Addis observes: “The old-school version of this would have been to put together a committee, redesign the hotel, and that’s it.” He adds, ”Instead, these guys are going to be perpetually curating on behalf of — not marketing at — its audience.”

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VA’s success stems from their attitude that the customer is at the center of their universe.  They relied on service design – the art and science of devising an environment that enables the customer to enjoy a rich, satisfying experience.  Unfortunately, it’s an approach that has been largely ignored by the industry.

Design-minded managers relentlessly ask: Who is the person we’re serving, and how can we make their service experience better?  That thinking encourages listening intently to what the customer says along with what isn’t said, but is felt.

Design-mindedness is uncommon in a traditional, operations-centric industry where running an efficient operation is prized above all other endeavors.  That mindset inhibits innovativeness, and too often, the customer is left out of the equation.

As a result, commercial air travel, with some notable exceptions, is perceived as a commodity, i.e. competitors’ services are virtually indistinguishable from each other, and customers tend to buy on price or schedule-convenience alone.

Historically, the major airlines have viewed their central challenge as getting passengers from point A to B as safely and efficiently as possible.  Their organizing principles arise from a linear manufacturing model which hasn’t changed much over time.

The University of Toronto’s Roger Martin observes, “The dominant attitude in traditional firms is to see constraints as the enemy and budgets as the driver of decisions… The traditionalist belief is, “We can only do what we have the budget to do.”

By contrast, design thinkers view their central challenge as solving ”unsolvable” problems. Design-thinkers venerate the customer, and relentlessly seek novel novel ways of overcoming constraints.

VA’s corporate culture – clearly influenced by Richard Branson’s intense creativity and drive – is customer-driven, encouraging design-inspired choices.  Branson’s mission for the Virgin group is to make flying fun again.

Recognizing that they’d have to look outside the industry – to Silicon Valley – VA hired software engineers rather than airline vendors. The mix of engineers and process owners led to some interesting choices.

For one thing, they came up with the novel idea of using an open-source (Linux) platform, named Red, to power a range of nifty features, like touch-screen food and beverage ordering, on-demand media on a high-resultion monitor, and even in-seat chat. Internet connectivity will be available soon. Moreover, Red affords VA the flexibility to support future low, cost innovation.

There are bugs to be worked out. Customers have reported re-boots and other glitches. But, I think VA is well ahead of the innovation curve, and their service platform gives them a clear competitive edge.

How will the industry respond?  Carriers are taking a beating from record fuel prices and reduced demand, and in this cycle, the carriers will be treading water for some time. Under the circumstances, will the U.S. airlines open the door to design-minded, customer-centric thinking? What’s next is anybody’s guess.

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