Strategy to Win Element 4 - Customer Journey

 

Listen to Customers

Welcome to "The Customer Journey" or how to win with customers. This lesson plays a critical role in creating a Strategy to Win. Understanding our customers' experience is vital because it helps us avoid overlooking what matters to them. It can determine whether we acquire customers slowly or quickly and whether we generate strong or weak word-of-mouth sales. Assuming that we have all the solutions without seeking input from our customers may be seen as a sign of stubbornness or arrogance.

 

Customer Feedback and the Customer Journey

A critical part of the customer journey is to gather customer feedback. Many companies are quick to assert that they understand their customer's needs due to their extensive experience in the field. However, this could be seen as a form of delusion. Reality often contradicts management's perception of customer satisfaction, as revealed by studies conducted by Fred Reichheld and Bain & Company. 

 

Reichheld’s research shows that a staggering 80% of management believed they provided a good customer experience. However, the customers themselves, when surveyed, painted a different picture. When asked, only 8% of customers agreed with management's overly optimistic view, indicating a significant disparity between management's perception versus the customer’s reality, referred to as the "80-8 dilemma." If you believe you are providing a good customer experience, there is still more work to do.

 

The Importance of the Customer Journey

By failing to understand the customer experience, companies may overlook opportunities to make necessary changes in the purchase process. Areas of the customer journey that could be adjusted or modified to improve the customer experience may go unnoticed. Companies need to be intentional about designing a customer journey that generates promoters rather than passive or detractor customers.

 

Promoters are customers who are not only satisfied but also eager to share their positive experiences with others, thereby helping to attract more customers to the business. Bain & Company's studies found that companies that were more successful at creating promoters experienced twice the growth rate of their competitors.

 

Just a five-point improvement in the number of promoters can result in a 75% improvement in profitability. This correlation suggests that the more promoters a company has, the more profitable it is likely to be. 

 

The Role of Choice in the Customer Journey

It's essential to remember that customers always have a choice when it comes to buying your product or a competitor's product, or even solving their problem in another way without purchasing any product. If your solution does not meet their needs, they will find a different way to solve their problem.

 

Companies that excel in delighting their customers can often charge a higher price and still secure their business. These companies can become price leaders, with customers willing to pay more for their product or service because they enjoy the experience and are dissatisfied with the competition. Customers prefer and are loyal to a better experience.

 

Knowing Your Customer

Sun Tzu in "The Art of War" points out that strategy is determined by the terrain and the conditions. Applying this principle to business, the better we understand our customers and the factors that influence their decisions, the better our sales and profitability will be. 

 

Therefore, we need to answer questions like: Why do our customers buy our product rather than someone else's? How do they use our product, and what problems are they trying to address by buying our product?

 

By understanding why customers recommend our products or services to their friends and creating a buzz factor, we can work towards creating delighted customers, which is the key to success in any business.

 

The Power of Delighted Customers

Delighted customers are more than just satisfied patrons of your business; they are active participants in promoting your products or services. They are the ones who eagerly share their positive experiences and drive organic growth. The buzz factor, or word-of-mouth marketing, is a powerful tool that businesses can harness to their advantage. 

 

Creating a customer journey that consistently delights and exceeds expectations is a critical element of fostering an environment that produces promoters. However, it's not enough to merely provide a product or service; companies must actively seek to understand their customers' needs and refine their strategies to meet and surpass these needs continually.

 

Customer Experience and Pricing

Understanding customer experiences does more than just create promoters; it also impacts pricing. Companies that are excellent at delivering delightful experiences can often charge a higher price. Customers are willing to pay more for better experiences and a superior product. Companies can become price leaders, as customers will choose their service over competition, even at a higher cost. This value creation allows companies to increase their profitability significantly.

 

Understanding Your Customer

The journey towards creating promoters and delighting customers begins with understanding your customers. By asking critical questions about why customers choose your product and how they utilize it to solve their problems, you can gain insights into the factors that drive their purchasing decisions.

 

We must understand the reason behind customers recommending your product to their peers. Identifying these reasons can offer a valuable understanding of what aspects of your product or service resonate most with your customers. You can then leverage this information to further improve your offerings and cater to your customer's needs more effectively.

 

Linking Employee and Customer Satisfaction

One of the crucial links businesses often overlook is the relationship between happy employees and delighted customers. There is a strong connection between the two, which directly impacts the success of any business. When employees interact regularly with satisfied customers, it motivates them and enhances their job satisfaction. Conversely, if employees are consistently dealing with dissatisfied customers, it negatively impacts their morale and productivity. Similarly, unhappy employees find it challenging to delight customers, thereby affecting customer satisfaction and brand loyalty.

 

Business leaders have a significant responsibility to create an environment that encourages employee satisfaction and customer delight. These two elements are so intricately linked that they cannot be easily separated.

 

Who is the End Customer?

Determining who your customer truly is can sometimes be a complex task, especially for manufacturers and wholesalers. In many cases, the individual purchasing your product may not be the end-user, creating potential confusion. Businesses need to clearly identify their customers—whether it's a distributor, a retailer, or the end consumer. Furthermore, if a business operates in a B2B context and its customer is a distributor, understanding the end consumer becomes crucial. This knowledge can enable the business to provide valuable insights to its customers, thereby increasing product purchases.

 

Examples of Customer Understanding

Walgreens serves as a prime example of a company that successfully understood its customers, significantly improving its business trajectory. Initially, Walgreens focused on profit per store, doing things to increase individual store profitability. However, after careful study, they shifted their focus to improving the customer experience, moving the pharmacy to the back of the store and placing impulse-buy items at the front. This strategic move led to Walgreens becoming one of the highest cash-producing businesses on Wall Street.

 

Understanding the customer experience can considerably impact revenue and profitability. Other terms for the customer experience include the user experience, customer purchase journey, or the voice of the customer. These terms emphasize the importance of understanding both the rational and emotional decisions a customer makes when choosing a product or service.

 

The Importance of Emotion in Customer Decisions

An emotional decision often precedes a rational decision in the customer purchase journey. If a business can provide sufficient rational information about its product or service, it allows customers to feel they've made an intelligent buying decision. Well-known brands such as Starbucks and Apple understand this concept well. Their customers know they pay more than they might for competitors' products but believe the superior quality justifies the higher price.

 

Each business will have its unique customer experience or customer journey, necessitating businesses to understand their specific customer journey. This understanding could be achieved through various methods, including costly focus groups or simpler methods such as just talking to customers about their purchasing reasons. The key is proactive and intentional customer engagement to gather these insights.

 

Trader Joe's: A Case Study in Customer Engagement 

One outstanding example of effective customer engagement is Trader Joe's, a popular grocery store chain. They are renowned for their strong emphasis on talking to customers and understanding their preferences. Trader Joe's is often listed among the top grocery store chains in terms of customer satisfaction, product quality, and overall value. In a survey conducted by Nielsen, Trader Joe's was named as one of the top three grocery store chains in the United States, along with Costco and Whole Foods Market. Trader Joe’s is well known for responding to customer feedback.

 

The Impact of Customer Engagement on Business

When businesses manage to establish meaningful connections with their customers, they are more likely to understand their needs better. This understanding can, in turn, guide business strategy and inform decisions about product offerings and customer service approaches. Importantly, it can help businesses to tailor their strategies to better meet their customer's needs, ultimately increasing customer satisfaction and loyalty.

 

The Interplay Between Employees, Customers, and Business Success 

Happy employees are more likely to create delighted customers. By prioritizing employee satisfaction and understanding the customer's journey, businesses can significantly improve their performance and profitability. Whether it's by understanding who the customer really is or providing rational and emotional reasons for a purchase, businesses can significantly enhance their customer's experience. Successful companies like Walgreens and Trader Joe's serve as reminders of how deeply understanding and catering to customer needs can radically improve a business's level of success.

 

Acknowledging and nurturing this interplay between employees, customers, and business success is crucial in today's competitive business landscape. A deliberate focus on enhancing employee satisfaction and improving customer experience can make all the difference in creating a thriving and sustainable business.

 

Exploring Different Feedback Collection Methods

There are various methods businesses can employ to collect customer feedback. These methods can be categorized as direct, indirect, or inferred.

 

• Direct Methods

Direct methods involve directly engaging with customers, such as through surveys or focus groups. Informal conversations provide an opportunity to ask specific questions and gain insights into customer experiences. Asking for reviews and feedback is helpful.

 

• Indirect Methods

Indirect methods focus on gathering feedback through online reviews, social media, and online forums. These platforms provide customers with a space to express their opinions about products and services. Monitoring and analyzing these reviews and discussions can offer valuable insights into customer preferences and satisfaction levels.

 

• Inferred Methods

Inferred methods involve analyzing customer data and trends to draw conclusions about their preferences and experiences. Companies can leverage digital analysis tools and platforms like "Think with Google" to gain valuable insights into customer behavior.

 

Balancing Customer Feedback in Innovation

While gathering customer feedback is essential for improving the customer experience, it is crucial to exercise caution when it comes to innovation. As Henry Ford once said, "If I had asked people what they wanted, they would have said faster horses." Similarly, Steve Jobs noted that customers wouldn't have asked for a larger screen if he had directly consulted them. While customer feedback plays a vital role in refining existing products and services, businesses must filter this feedback when it comes to innovative changes.

 

The Net Promoter Score (NPS)

A common and successful way to measure customer experience and gauge customer satisfaction is to use the Net Promoter Score (NPS). Developed by Bain and Company and Fred Reichheld, the NPS provides a simple and effective way to identify customers who become promoters of a brand.

 

Understanding the Net Promoter Score

The NPS revolves around a single question: "How likely are you to recommend our product or service to your family or friends?" Customers rate their likelihood on a scale from 1 to 10. Based on their responses, customers fall into three categories: 

 

- Detractors (score 0-6): Customers who are unlikely to recommend the product/service.

- Passives (score 7-8): Customers who are neutral and satisfied but not enthusiastic enough to actively recommend.

- Promoters (score 9-10): Customers who are highly likely to recommend the product/service.

 

The Value of NPS

Research indicates that the NPS question and the subsequent score correlate closely with customer behavior post-purchase. Scores below 6 typically indicate dissatisfied customers who are unlikely to recommend the product or service. Scores of 7 or 8 reflect customers who are satisfied but not particularly enthusiastic. However, scores of 9 or 10 signify highly satisfied customers who are likely to become loyal promoters.

 

While achieving high NPS scores might initially seem challenging, the key is to track and improve them over time. Businesses should focus on continual improvement rather than expecting immediate high scores.

 

Plotting the Customer Journey

Understanding the customer journey is vital for businesses looking to improve the overall customer experience. Plotting this journey helps identify touchpoints where businesses can make meaningful changes to enhance customer satisfaction.

 

The customer journey involves mapping out the process customers go through when interacting with a company, from initial awareness to post-purchase follow-up.

 

and beyond. By visualizing the customer journey, businesses can gain insights into each step of the process and identify areas for improvement.

 

Key Elements of the Customer Journey

When plotting the customer journey, it's important to consider various key elements:

 

1. **Awareness**: How do customers become aware of your brand or product? Is it through advertising, word-of-mouth, or online research?

 

2. **Consideration**: What factors influence customers' decision-making process? Do they compare prices, read reviews, or seek recommendations from friends and family?

 

3. **Purchase**: How do customers make their purchases? Do they visit a physical store or make an online transaction? What are their expectations during the purchase process?

 

4. **Post-Purchase Experience**: What happens after the purchase? Do customers receive follow-up communication or support? Are there opportunities for feedback and engagement?

 

Analyzing Customer Touchpoints

To gain a comprehensive understanding of the customer journey, businesses should analyze each touchpoint—every interaction customers have with their brand. These touchpoints can include website visits, customer service interactions, social media engagement, and more. By examining these touchpoints, businesses can identify pain points, areas of delight, and opportunities for improvement.

 

Enhancing the Customer Experience

The customer journey analysis provides businesses with valuable insights for enhancing the overall customer experience. It enables them to identify critical moments in the journey where changes can be made to create positive customer interactions. This could involve streamlining the purchasing process, improving customer service, or personalizing communications. By addressing these areas, businesses can increase customer satisfaction and loyalty.

 

Plotting Emotional Journey

Along with the customer journey, understanding the emotional aspect of the customer experience is essential. Customers often make emotional decisions before rationalizing their choices. By considering the emotional journey, businesses can align their messaging and offerings to connect with customers on a deeper level. Look for the parts of the customer journey that are emotionally difficult or discouraging and innovate ways to make them feel better.

 

Aligning with Customer Expectations

Analyzing the positioning of a business and its perception among customers is vital to understanding the alignment between the business offerings and messaging, and customer expectations. Businesses should evaluate their messaging and compare it to how customers perceive their brand. This analysis helps identify any gaps and opportunities for improvement. For example, if a business positions itself as offering great value but customers perceive it as having lower quality compared to a competitor, adjustments can be made to align the messaging and improve customer perception.

 

Understanding Competitors and Customer Feedback

In addition to assessing the customer journey and touchpoints, businesses should also consider their competitors and gather feedback about them from customers. Understanding how customers perceive competitors can provide valuable insights into areas where improvements can be made to outperform the competition. Customer feedback that compares the business to its competitors can reveal strengths and weaknesses, allowing the business to refine its strategies and enhance the customer experience.

 

Analyzing Implications and Making Strategic Decisions

Once businesses have collected and analyzed customer feedback, it is crucial to identify the implications of the findings. This involves evaluating the strengths and weaknesses of the business, comparing the positioning statement with customer perception, and considering the competition. By filling out the provided chart and thoroughly describing the implications, businesses can gain a deeper understanding of their value proposition and make informed strategic decisions.

 

Moving Forward with the Value Proposition

With a clear understanding of the implications derived from customer feedback and positioning analysis, businesses can now proceed to develop their value proposition. It is essential to consider all the data gathered, including customer feedback, competitive analysis, and market research. The value proposition should effectively communicate the unique value and benefits offered by the business, addressing customer needs and differentiating the company from competitors. It should be sustainable, defensible, and aligned with the strategic objectives of the company.