The Truth About Customer Experience PDF

HBR.ORG September 2013 reprinT R1309G...

HBR.ORG September 2013 reprinT R1309G t os rP The Truth About Customer Experience yo op Touchpoints matter, but it’s the full journey that really counts. by Alex Rawson, Ewan Duncan, tC and Conor Jones No Do This document is authorized for educator review use only by UPASANA GUPTA, Lal Bahadur Shastri Institute of Management until Jan 2023. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860  t os rP Touchpoints matter, but it’s the full journey that really counts. by Alex Rawson, Ewan Duncan, and Conor Jones The Truth yo About Customer op Experience tC Companies have long emphasized touchpoints—the many critical moments when customers interact with the organization and its offerings on their way to purchase and after. But the narrow focus on maximizing No satisfaction at those moments can create a distorted picture, suggesting that customers are happier with the company than they actually are. It also diverts attention Illustration: Melinda Beck from the bigger—and more important—picture: the customer’s end-to-end journey. Do 2 Harvard Business Review September 2013 This document is authorized for educator review use only by UPASANA GUPTA, Lal Bahadur Shastri Institute of Management until Jan 2023. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860  For article reprints call 800-988-0886 or 617-783-7500, or visit hbr.org t os Alex Rawson and Ewan Duncan are partners in McKinsey’s Seattle office, and Conor Jones is a part- ner in its Dublin office. rP yo op tC No Do Copyright © 2013 Harvard Business School Publishing Corporation. All rights reserved. September 2013 Harvard Business Review 3 This document is authorized for educator review use only by UPASANA GUPTA, Lal Bahadur Shastri Institute of Management until Jan 2023. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860  The Truth About Customer Experience t os Think about a routine service event—say, a the high levels of satisfaction on specific metrics product query—from the point of view of both the made it hard to motivate employees to change. company and the customer. The company may As company leaders dug further, they uncovered rP receive millions of phone calls about the product the root of the problem. Most customers weren’t fed and must handle each one well. But if asked about up with any one phone call, field visit, or other inter- the experience months after the fact, a customer action—in fact, they didn’t much care about those would never describe such a call as simply a “prod- singular touchpoints. What reduced satisfaction uct question.” Understanding the context of a call is was something few companies manage—cumula- key. A customer might have been trying to ensure tive experiences across multiple touchpoints and uninterrupted service after moving, make sense of in multiple channels over time. the renewal options at the end of a contract, or fix Take new-customer onboarding, a journey that yo a nagging technical problem. A company that man- typically spans about three months and involves ages complete journeys would not only do its best six or so phone calls, a home visit from a technician, with the individual transaction but also seek to un- and numerous web and mail exchanges. Each in- derstand the broader reasons for the call, address teraction with this provider had a high likelihood of the root causes, and create feedback loops to con- going well. But in key customer segments, average tinuously improve interactions upstream and down- satisfaction fell almost 40% over the course of the stream from the call. journey. It wasn’t the touchpoints that needed to be In our research and consulting on customer jour- improved—it was the onboarding process as a whole. op neys, we’ve found that organizations able to skill- Most service encounters were positive in a narrow fully manage the entire experience reap enormous sense—employees resolved the issues at hand—but rewards: enhanced customer satisfaction, reduced the underlying problems were avoidable, the funda- churn, increased revenue, and greater employee mental causes went unaddressed, and the cumula- satisfaction. They also discover more-effective ways tive effect on the customer was decidedly negative. to collaborate across functions and levels, a process Remedying matters would add significant value, tC that delivers gains throughout the company. but it wouldn’t be easy: The company needed a Consider a leading pay TV provider we worked whole new way of managing its service operations with. Although it was among the best in the indus- in order to reinvent the customer journeys that mat- try at managing churn, it faced a maturing market, tered most. heightened competition, and escalating costs to keep its best customers. Churn was a familiar prob- More Touchpoints, More Complexity lem, of course, and the typical reasons for it were The problem the pay TV provider encountered is well understood: Pricing spurred some customers far more common than most organizations care to No to leave, while competitors’ technology or product admit, and it can be difficult to spot. At the heart of bundles lured others away. The common ways to the challenge is the siloed nature of service delivery keep customers were also well known, but they were and the insular cultures that flourish inside the func- expensive, including such things as upgrade offers, tional groups that design and deliver service. These discounted rate plans, and “save desks” to intercept groups shape how the company interacts with cus- defectors. So the executives looked to another lever— tomers. But even as they work hard to optimize their customer experience—to see if improvements there contributions to the customer experience, they of- could reduce churn and build competitive advantage. ten lose sight of what customers want. As they dug in, they discovered that the firm’s The pay TV company’s salespeople, for example, Do emphasis on perfecting touchpoints wasn’t enough. were focused on closing new sales and helping the The company had long been disciplined about mea- customer choose from a dense menu of technology suring customers’ satisfaction with each transaction and programming options—but they had very little involving the call centers, field services, and the website, and scores were consistently high. But fo- cus groups revealed that many customers were un- happy with their overall interaction. Looking solely at individual transactions made it hard for the firm to identify where to direct improvement efforts, and 4 Harvard Business Review September 2013 This document is authorized for educator review use only by UPASANA GUPTA, Lal Bahadur Shastri Institute of Management until Jan 2023. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860  For article reprints call 800-988-0886 or 617-783-7500, or visit hbr.org t Idea in Brief os The Problem The Argument The Solution Many companies excel in indi- Companies that perfect cus- Companies need to combine vidual interactions with custom- tomer journeys reap enormous top-down, judgment-driven ers, but they fail to pay adequate rewards, including enhanced evaluations and bottom-up, data- attention to the customer’s customer and employee satisfac- driven analysis to identify key complete experience on the way tion, reduced churn, increased journeys, and then engage the rP to purchase and after. revenues, lowered costs, and entire organization in redesigning improved collaboration across the customer experience. This the organization. requires shifting from siloed to cross-functional approaches and changing from a touchpoint to a journey orientation. yo visibility into what happened after they hung up the significant journeys and the pain points within phone, other than whether or not the customer went them—the specific service shortcomings that dam- through with the installation. Confusion about pro- age customers’ experience. That research is typically motions and questions about the installation process, fragmented and often includes data on the customer hardware options, and channel lineups often caused volume in a given journey, reasons for call center dissatisfaction later in the process and drove queries complaints, and obvious gaps in performance—for to the call centers, but sales agents seldom got the example, discrepancies between promises made in feedback that could have helped them adjust their marketing materials and services actually delivered. op initial approach. At three companies we’ve worked with, sessions The solution to broken service-delivery chains of this type directed attention to key customer jour- isn’t to replace touchpoint management. Functional ney problems. The executive team at a fixed-line groups have important expertise, and touchpoints telecom focused on the 50% dissatisfaction rate will continue to be invaluable sources of insight, with the installation process; the team at a leading particularly in the fast-changing digital arena. (See energy player targeted the 40% churn among cus- tC David Edelman’s “Branding in the Digital Age: You’re tomers moving houses; and executive sessions at an Spending Your Money in All the Wrong Places,” HBR integrated telecom zeroed in on the more than one December 2010.) Instead, companies need to em- third of new fiber-optic customers who canceled bed customer journeys into their operating models before installation or within 90 days. In each in four ways: They must identify the journeys in case the executive attention led to a concerted which they need to excel, understand how they are effort to fix the targeted journey, while currently performing in each, build cross-functional leadership’s “walking the talk” gener- processes to redesign and support those journeys, ated support for improvement pro- No and institute cultural change and continuous im- grams and broader organizational provement to sustain the initiatives at scale. changes. These results show how initial top-down work can iden- Identifying Key Journeys tify early wins (often policy or Defining the journeys that matter and deciding process changes that can be where to begin the transformation requires both top- implemented quickly and down, judgment-driven evaluations and bottom-up, centrally) that set the tone for data-driven analysis, to varying degrees. We recom- further transformation. mend pursuing these efforts in parallel whenever For companies seeking just Do possible. to fix a few glaring problems An executive working session, drawing on exist- in specific journeys, such top- ing research, may be sufficient to identify the most down problem solving can be September 2013 Harvard Business Review 5 This document is authorized for educator review use only by UPASANA GUPTA, Lal Bahadur Shastri Institute of Management until Jan 2023. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860  The Truth About Customer Experience t os enough. But those that want to transform the overall ish. The mapping exercise also exposes departures customer experience need to simultaneously create from the ideal customer experience and their causes, a detailed road map for each journey, one that de- and often reveals policy choices or company pro- rP scribes the process from start to finish, takes into ac- cesses that unintentionally generate adverse results. count the business impact of optimizing the journey, For example, many companies charge for phone- and lays out a commonsense, feasible sequence of based technical support, thinking that imposing a initiatives. fee will steer customers to self-service options. But This is a bottom-up effort that starts with addi- the consequence may be numerous callbacks or in- tional research into customers’ experiences of their adequate do-it-yourself fixes, both of which degrade journeys and which ones matter most, both to cus- the customer experience. tomers and to business performance. A company Consider the telecom faced with 50% initial cus- yo should draw on customer and employee surveys tomer dissatisfaction. Executives knew the “provi- along with operational data across functions at each sioning journey”—the process of installing fixed-line touchpoint, to assess performance and gauge how service at a customer’s home—was a priority, and as it is doing relative to the competition. Best-in-class they probed new data, they began to see an ominous companies use regression models to understand pattern. When they surveyed new customers about which journeys have the greatest impact on overall their experience from the time they ordered service customer satisfaction and business outcomes, and through installation and activation (a journey that then run simulations to get a picture of the potential spanned four touchpoints), they learned that al- op impact of various initiatives. though about half were thrilled with the service, giv- Doing this research and analysis well is no small ing it an eight or a nine on a 10-point scale, the other task, because it typically means acquiring new types half were incensed, giving it a one or a two. of information and assembling it in new ways. For On further investigation, the firm discovered that many companies, combining operational, market- the installation process for unhappy customers was ing, and customer and competitive research data to compromised by delays that ultimately stemmed tC understand journeys is a first-time undertaking, and from misaligned incentives: Back-office employees it can be a long process—sometimes lasting several weren’t measured on or rewarded for the accuracy of months. But the reward is well worth it, because order tickets and so sometimes processed them with the fact base that’s created allows management to missing or incorrect information. The company’s tra- clearly see the customer’s experience of various ditional customer-experience dashboard had missed journeys and decide which ones to prioritize. the problem because it included no measure of end- to-end success. “Our dashboard metrics were like a Understanding Current Performance watermelon,” one senior manager told us. “On the No Once a company has identified its key customer jour- outside everything was green, but when you looked neys, it must examine each one in detail in order to inside, it was red, red, red.” understand the causes of current performance. This deep dive involves additional research, including Redesigning the Experience and customer and employee focus groups and call moni- Engaging the Front Line toring. Combined with the initial bottom-up analysis, Once a company has identified its priority journeys it allows the company to map the most significant and gained an understanding of the problems within permutations of each journey as the customer ex- them, leaders must avoid the temptation to helicop- periences and would describe it, revealing the se- ter in and dictate remedies; indeed, they should Do quence of steps she is likely to take from start to fin- refrain from any solutions (including ones from out- A company may get millions of calls about a product and must handle each one well. It must also address the root causes of the calls. 6 Harvard Business Review September 2013 This document is authorized for educator review use only by UPASANA GUPTA, Lal Bahadur Shastri Institute of Management until Jan 2023. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860  For article reprints call 800-988-0886 or 617-783-7500, or visit hbr.org M How Journeys Pay Off t os ost executives we talk to readily grasp the journey concept, but they wonder whether perfecting journeys pays off in hard dollars. Our annual cross- side experts) that don’t give employees a big hand in industry customer experience surveys (including shaping the outcome. Even if a fix appears obvious pay TV, retail banking, and auto insurance firms, from the outside, the root causes of poor customer to name a few) show that it does. rP experience always stem from the inside, often from Companies that excel in delivering journeys tend to win in the cross-functional disconnects. Only by getting cross- market. In two industries we’ve studied, insurance and pay TV, functional teams together to see problems for them- better performance on journeys corresponds to faster revenue selves and design solutions as a group can compa- growth: In measurements of customer satisfaction with the firms’ nies hope to make fixes that stick. most important journeys, performing one point better than peer The energy company identified “moving house” companies on a 10-point scale corresponds to at least a two-­ as a journey it needed to get right. Executives started percentage-point outperformance on revenue growth rate. (See by gathering representatives from the various op- the exhibit “Good Journeys Fuel Growth.”) Moreover, the compa- yo erational and commercial groups involved in that nies that excel in journeys have a more distinct competitive journey. The setup for the meeting was low-tech yet advantage than those that excel in touchpoints: In one of the powerful: One wall of the conference room was de- industries we surveyed, the gap between the top- and bottom- voted to posters, customer quotes, and visual depic- quartile companies on journey performance was 50% wider tions of what customers experienced from the time than the gap between top- and bottom-quartile companies on they decided to move until service was activated in touchpoint performance. Put simply, most companies perform their new homes. fairly well on touchpoints, but performance on journeys can set It proved to be a breakthrough meeting. Seeing a company apart. op the journey represented from start to finish was Our research also shows that performance on journeys is more powerful, because no single group had ever had vis- predictive of business outcomes than performance on touchpoints ibility into—let alone accountability for—the entire is. Indeed, across industries performance on journeys is 30% to experience, and therefore didn’t recognize the jour- 40% more strongly correlated with customer satisfaction than ney’s shortcomings. It immediately became clear performance on touchpoints is—and 20% to 30% more strongly that the process had evolved into something far correlated with business outcomes, such as high revenue, repeat tC more complex than anyone had realized; there were purchase, low customer churn, and positive word of mouth. 19 customer interactions in all. Many of the steps in- volved complex handoffs between internal groups, creating multiple places where things could—and Good Journeys fuel growth Studies of companies in the pay TV and auto insurance industries did—go wrong. But the “ahas” were not just about reveal a strong relationship between customers’ satisfaction with the operational glitches: Some of the unhappy custom- end-to-end service experience and revenue growth. The chart below ers’ frustration arose from a lack of communication shows the results for seven companies in each industry. at key moments when, operationally, things were No 14% Revenue growth working fine—for example, when scheduling end- 2010–2011 of-service at an old address. At other points (for in- 12% stance, after starting service at a new address), cus- tomers got too much information and were confused 10% by apparently conflicting messages. Pay TV Auto insurance Once the team members had identified the rea- 8% sons for the myriad handoffs and begun to appreci- ate the challenges their counterparts in other opera- 6% tional groups faced, they could sit down to design Do a new approach. They brainstormed solutions in a 4% “war room,” launched frontline teams to pilot and improve upon ideas, and empowered the teams to 2% take risks and experiment through trial and error. 0% Finally, they engaged customers in the design pro- 6.0 6.5 7.0 7.5 8.0 8.5 9.0 cess, to ensure that the approach developed would –2% please them. The result: a new process that was four Average satisfaction with each company’s three key times as efficient, far more satisfying to customers, journeys (on a 10-point scale) 2011 and much better aligned with the company’s brand September 2013 Harvard Business Review 7 This document is authorized for educator review use only by UPASANA GUPTA, Lal Bahadur Shastri Institute of Management until Jan 2023. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860  The Truth About Customer Experience Navigating a Customer Journey t os Moving to a new home launches a customer on an array of journeys with service providers, including phone, internet, cable, and utility companies. The “moving journey” begins with a call informing the company of the move and ends with an accurate initial bill at the new ad- dress. The diagram below shows a simplified electrical-service journey from the perspectives of both the customer and the provider. rP The customer The customer The utility The billing The customer The billing yo buys a new contacts the elec- sends her a confir- department reads the meter department house. trical utility’s call mation letter and a tags her old and at her old address, sends her the center and provides final meter-reading new addresses to marks the card, final bill for her her moving date. card. indicate the move. and mails it to old address. the utility. promise, “We deliver.” The proportion of customers had climbed 5%, and the cost of serving customers op dissatisfied with the experience of moving house had dropped 10%. In addition, the marketing team— dropped significantly, resulting in a revenue gain involved from day one—helped identify changes to of €4 million. (For an example of a typical working the exit process (when customers pick up a car on process, see the exhibit “Navigating a Customer the lot) that boosted upsell by broadening the choice Journey.”) of available vehicles. A leading car rental company we worked with ran tC a similar series of cross-functional efforts—pilots at Sustaining at Scale by key airport locations involving frontline teams in- Changing Mind-Sets cluding counter staff, car cleaners, exit gate person- Of course, analyzing journeys and redesigning ser- nel, and bus drivers. Management chose several tar- vice processes get a company only so far. Implement- get geographies, assigned a senior executive to each, ing the changes across the firm is hugely important— and tasked the frontline teams with three things: and hugely challenging. A detailed discussion of mapping the customer experience and looking for how to scale and sustain transformation initiatives is fresh service ideas to improve it; getting frontline beyond the purview of this article. However, deliver- No employees from each of the functions to collaborate ing at scale on customer journeys requires two high- on identifying the causes of problems and finding so- level changes that merit mention here: (1) modifying lutions; and coordinating activities to maximize the the organization and its processes to deliver excel- speed of service from the customer’s point of view. lent journeys, and (2) adjusting metrics and incen- A team in one region discovered a major bottle- tives to support journeys, not just touchpoints. neck: The company frequently fell short of clean Organizationally, adopting a journey-centric ap- cars during peak demand. Among the remedies proach allows companies to move from siloed func- it suggested was installing a buzzer between the tions and top-down innovation to cross-functional rental counter and the car lot. When the line at the processes and empowered, bottom-up innovation. Do counter grew long, staff members could alert work- Most companies keep their functional alignments ers in the lot that they would soon need more cars. intact and add cross-functional working teams and By the end of the pilot, the unit’s on-site customer processes to drive change. To that end, many com- service scores had doubled, revenues from upselling panies we have studied set up a central change lead- 8 Harvard Business Review September 2013 This document is authorized for educator review use only by UPASANA GUPTA, Lal Bahadur Shastri Institute of Management until Jan 2023. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860  For article reprints call 800-988-0886 or 617-783-7500, or visit hbr.org t os rP The customer The call center The service The customer The service The billing yo reviews the bill and has the billing department moves into her department department contacts the call department mail arranges for new house. activates service sends her an initial center about an her a corrected bill. activation on the at the new address statement and an error on it. moving date. and reads the explanation of pay- meter. ment options. ership team with an executive-level head to steer CFO, for example, might be responsible for keeping op the design and implementation and to ensure that tabs on cross-functional improvements in the Phila- the organization can break away from functional delphia area and for taking any issues that arose, biases that have historically blocked change. These including purely operational ones, up the chain of roles tend not to be permanent—indeed, success command. And although the company had a solid ultimately involves changing company culture so playbook for its first pilot, it explicitly challenged much that the roles are no longer needed—but they the teams in each location to adapt the playbook tC are critical in the early years. The energy company and make it their own, and to try to beat the original located its change team right next to the boardroom location’s results. The frontline teams were empow- to signal the importance of its effort. The pay TV ered to continually test new ideas that the execu- provider promoted a functional leader and had him tives heading the teams could then spread to the rest report directly to the CEO. Several telecoms we have of the business. worked with that elected more-permanent organiza- Back at the energy company, the scope was tional change left the cross-functional change teams broadened to include five critical journeys, with in place to ensure sustained checks and balances to an executive team member leading each effort and No the natural tensions across functions. In the most conducting weekly reviews with stakeholders from effective cases, companies design cross-functional each function. And at the integrated telecom, the working and accountability into their core business executive team created a new permanent role, rede- processes, establishing clear ownership, authority, ploying senior people from siloed functions to be- metrics, and performance expectations that supple- come “chain managers” responsible for overseeing ment the existing functional structures. specific journeys, such as fiber cable provisioning. It Consider how this worked at the car rental busi- created war rooms where the chain managers could ness. As efforts ramped up at the pilot locations, monitor the efforts and meet with the functional the CEO gave each member of his executive team teams involved. Thus the program was driven by Do responsibility for implementation across all sites in cross-functional, bottom-up idea generation but a particular geographic region, knowing that had enough top-down ownership and co- would require the executives to partner ordination to maintain momentum and with peers in challenging new ways. The focus. September 2013 Harvard Business Review 9 This document is authorized for educator review use only by UPASANA GUPTA, Lal Bahadur Shastri Institute of Management until Jan 2023. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860  The Truth About Customer Experience Using Journeys to Differentiate I t os dentifying the journeys that matter most can be beneficial even when companies don’t have a nagging customer service problem—the effort can help them find a competitive differentiator. One car rental agency wanted to improve its already good service and distinguish itself from its competi- tors in light of the increasingly commoditized nature of the industry. Its investigation into what mattered to customers highlighted the airport pickup, rP a journey that might take less than an hour but that crossed a half-dozen or more touchpoints. The most important aspect was the end-to-end speed of service, from bus to rental counter to car to exit gate—but no one person owned that issue. By focusing cross-functionally on delivering speed at the airport pickup, the company was able to innovate in ways that helped set it apart: It intro- duced more flexibility in car selection, developed technology to help cus- tomers manage their reservations from mobile devices, and installed virtual yo customer service kiosks at high-volume locations to give people the option of skipping the line but still working with a live agent. It also pushed hard to shift the emphasis from “cars available” to “the right car for the right customer at the right time.” These efforts provided a real opportunity to differentiate not just the service experience but the brand itself. op tC Once their new management structures are in reviews, it assesses each frontline team member on place, organizations must identify the appropriate his or her customer-friendly skills. And one large re- metrics and create the appropriate measurement tail bank started requiring each executive-team and systems and incentives to support an emphasis on board member to call five dissatisfied customers a journeys. Even if a company already uses a broad month—a simple but effective way of holding the No customer satisfaction metric, moving the focus from leadership’s feet to the fire on customer experience touchpoints to journeys typically requires tailored issues. metrics for each journey that can be used to hold the relevant functions and employees accountable Optimizing a single customer journey is tactical; for the journey’s outcome. Very few companies do shifting organizational processes, culture, and that today. For the telecom focused on new product mind-sets to a journey orientation is strategic and installs, this meant holding the sales agent, the tech- transformational. Journey-based transformations nician, the call center, and the back-office agents are not easy, and they may take years to perfect. But responsible for a trouble-free install and high cus- the reward is higher customer and employee satis- Do tomer satisfaction at the end of the process, instead faction, increased revenue, and lower costs. Deliver- of simply requiring a successful handoff to the next ing successful journeys brings about an operational touchpoint. For the energy company, it meant new and cultural shift that engages the organization cross-functional measures for each frontline em- across functions and from top to bottom, generating ployee who handled address changes (for example, excitement, innovation, and a focus on continuous error-free capture by call center agents of informa- improvement. It creates a culture that’s hard to build tion needed downstream). Disney famously builds otherwise, and a true competitive advantage goes to its entire theme park culture around delivering the companies that get it right. guest experience: From hiring through performance HBR Reprint R1309G 10 Harvard Business Review September 2013 This document is authorized for educator review use only by UPASANA GUPTA, Lal Bahadur Shastri Institute of Management until Jan 2023. Copying or posting is an infringement of copyright. [email protected] or 617.783.7860