June 29th, 2010

Using the Model

The principle behind using the model is that you identify and choose 1-3 key issues or opportunities that would improve the total customer experience across each phase of the model. This approach would generate a list of 8-24 opportunities that you could work on that would improve upon the existing total customer experience.

Here are some examples of how we used the model at HP.

1)      We used the model to improve our understanding of how customers used our LaserJet printers in emerging markets. We learned that many customers buy lower end products and used them like higher performance products in high dust/dirty environments. These combination of factors lead to increased product failures and some customer dissatisfaction. By better understanding this, we could improve the way we developed products for emerging markets. Perhaps by offering a different product platform or attaching dust/HEPA filter to printers sold there.

2)      We also used the model to create printer-based MFPs that would deliver a better total customer experience than existing copiers coming from established companies like Xerox or Oce. HP wanted to enter this market, but we wanted to build a better mousetrap and have a more differentiated product. We looked at specific things we could improve on our product line that enhanced our existing customer experience as well as what was being done by our competition. As a result, we made changes in our product designs, usability, and messaging. Our changes worked and we achieved #1 market share in the IDC S4 monochrome speed segment. For example, when Xerox tried to emulate we were doing I was able to show how HP’s total customer experience was better in performance, installing, and using the product.

TCE reports help us understand quantitatively how hp and our competitors perform and compare at each of the lifecycle stages and touch points.  Areas for improvement were identified and projects initiated to close the gaps.

The way to use the model would be to decide how to improve or maintain customer experiences for a product in each of the 8 areas of the ACOILUSD model. It might look something like this.

Click to Enlarge

It is important to make an additional comment about B2C vs. B2B TCE models. They are virtually the same with one exception. Often times for consumer products, “USE”is broken into less than 30 days and more than 30 days. Here is the reason. If a consumer has a dissatisfying experience, he is likely to return the product to the retailer in the first 30 days rather than try to solve the problem. Therefore, companies must do everything that can to help a customer achieve a great customer experience in those crucial first 30 days. If a product breaks or the customer cannot use the product, it is highly likely he will return it and buy something else in those first 30 days.

The TCE model is also very steep in buyer psychology and behavior. The goal of any customer experience system should move buyers from emotional disloyalty (I hate it) and rational dissatisfaction (nothing special) to rational satisfaction (this works very well) and emotional loyalty (I can’t live without it). Properly done, it moves behaviors of loathing and functional to enjoyable and almost a Zen-like level of satisfaction. Wouldn’t that be a great place to be with your customers?

How do you measure success? In terms of measuring the results from improving customer experience, I propose three methodologies. The first is to actually compare your company’s TCE to the competition for the 8 segments of the wheel.  If your company’s experience is best in class in 6 of the 8 categories, chances are you are doing a great job. Other methods of measuring include looking at brand preference, especially if brand preference is significantly lower than brand awareness. If brand awareness is high and preference is lower, chances are something is happening in the sales process that needs to be looked at. It could be a variety of things – pricing, channel switching, not enough product differentiation, etc. In addition, I have found that the state of the TCE can also be a very big contributor. Finally, look at your company’s Net Promoter score. This is probably one of the best measures and can be used as a reliable and important measure of TCE success or failure.

Companies that don’t feel comfortable driving this process on their own can employ a third party to company to help them  with elements of their total customer experience. Companies like Frog Design and Touch360 are examples of firms that can help move a company down the road of improving their TCE.

In conclusion, total customer experience (TCE) is a powerful tool that can improve customer satisfaction, loyalty, and provide meaningful competitive differentiation for your company and its products. It is a significant commitment in both time and money and spans across many functional areas within a company – marketing, sales, channels, operations, product development, etc. At the same time, TCE initiatives are also a great way to engage the overall company in programs and activities that are extremely customer-centric and focused.

Please share your stories of total customer experience on this blog by replying to this post!

Additional Resources:

http://www.1000ventures.com/business_guide/crosscuttings/customer_retention.html

http://wehner.tamu.edu/mktg/faculty/berry/articles/Managing_the_Total_Customer_Experience.pdf

http://jobfunctions.bnet.com/abstract.aspx?docid=149049

http://www.ibj.ca/view_article.asp?intArticle_ID=299

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Posted By Vince Ferraro

June 20th, 2010

Overview

I want to devote this blog post to building and using a customer experience models as part of your overall marketing mix. If you have a new or mature business, developing and delivering great customer experiences can be one of the most important ways to create sustainable, differentiated competitive advantage for your company and products. Think about it, if you have a product line where performance and price are roughly comparable to other market share players, what levers are left that are going to truly propel you to a differentiated market position? I believe there are two key things companies can do beyond executing their core business and marketing strategy. First, build exceptional customer experiences and second, drive more customer-appreciated innovation.

Why do we, as marketers, care about all of this? The economics of customer retention and defection and its impact on profitability are very high. According to research I read, the cost of acquiring new customers costs 5X more than retaining and satisfying existing customers. Average satisfied customers tell 5 others. Very satisfied customers are 6X times more likely to repurchase your products and pay higher prices. On the other hand, consider the economics of dissatisfied customers.  On average, companies loose 10-15% of their customers annually. As a result, average unhappy customers tell 9 others and 91% of them will never buy your products again. Finally, loyal customers are not as price sensitive and research has shown a 5% increase in retention can lead to a 25-80% boost in profits!

Although, HP did not develop it, I believe the ACOILUSD total customer experience framework is one of the most valuable models out there that can help a company document existing and improve future customer experiences. In fact it is so important to HP, that they actually have a patent on the process that uses it. Interesting … don’t you think?

The ACOILUSD model of total customer experiences is a fairly straight forward approach. This model proposes that there are 8 stages of a buyer’s customer experience, which are touch points to a buyer’s entire evaluating, buying and usage cycle. If company’s can improve their products’ total customer experience at strategic touch points, the theory is that brand equity, preference, market share, and product satisfaction/loyalty will increase. These enhancements will ultimately drive more revenues and enhanced profitability. My experience with the model would validate this claim. I will talk more about specific examples in a minute.

Here is the model:

8 Phases of the ACOILUSD TCE Lifecycle

The model simply breaks down a product’s evaluation, purchase, and use lifecycle into 8 discreet components.

The idea being that customers touch a company (and their products) at each phase of the lifecycle wheel and (as a vendor) we should strive to enhance our TCE delivery in each phase. Also, the phases are interconnected and work together to build the overall customer experience.  Therefore, the experience in one phase, can affect the experience in other phases.

The Model

Below are summarized descriptions of each segment of the TCE lifecycle wheel with some examples of what is contained in each one

Aware – What customers hear and read about the brand is the way they become aware of us.  It’s the first opportunity we have to make a genuine, personal connection with customers – to show that we are people dealing with people that care – not a corporation dealing with an impersonal set of customers.

Choose – Once customers know about our products and services, they decide whether or not to choose the brand to meet their needs.  Well-made, dependable products that can be adapted to future needs are one reason customers choose your company’s products. Customers rely on us to help them find a solution that’s right for them.

Order – We inevitably touch customers when they order our products—whether it’s through our Web site, at a retail outlet or over the phone. Ordering is often where customers find out how genuinely friendly, approachable, and easy to do business with we really are.

Install – Quick and easy installation can be facilitated by solid reliability and quality that is built into everything we do. This component can also be applied to opening the box and assembling the product for first use. This is often referred to as the “out of box experience” or OOBE. A very helpful and informative presentation on the topic can be found here.

Learn – Everything from the clarity of our printed instructions to the effectiveness of our training courses impact the learning segment of the customer experience.  Learning is an especially important way to show that we are inspired – passionate about helping people achieve their goals and enabling smarter ways of working and living.

Use – The ability of your company’s technology to perform as it should and deliver what the customer needs every day demonstrates that we are dedicated to making things better for our customers, and results from applying intelligence, innovation, and inventiveness.

Support – Support is a key touch point for retaining trust, demonstrating that we are best at partnering with customers and industry leaders, and treating customers with care and respect whether their support is web-based,  call center, or on-site.

Dispose/Upgrade – Environment-friendly disposal is just one way we make things better for our customers, and upgrades at the right time and right price help people to continue to achieve their goals. Think green programs, recycling, and sustainability initiatives.

Relationship: The relationship phase reminds us about the personal connection we need to make with our customers.  Whether the relationship is directly with your customers or indirect through partners, resellers, and/or retailers – we want all our customers to feel that the company cares about them and treats them well.

In Part 2,  I will write  about how to use and apply this model in your company’s overall strategy and how to analyze results from the efforts.

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Posted By Vince Ferraro

June 2nd, 2010

Competitive Differentiation – Does Your Product Strategy Have a Halo?

What do Mercedes-Benz, Hewlett-Packard, Virgin Air, and Sony all have in common?

They all develop and launch halo products as a way to differentiate their brands and products from the competition.

What Are Halo Products?

Halo products are specially developed products that feature advanced technology, capability, and are usually produced in limited quantities – typically for consumer markets and customers. Often times, they are used in a product portfolio to showcase market-leading technology, advanced industrial design, enhanced customer experience, or new, advanced capability that is meant to promote the product and brand leadership of the company. They are called “halo” products because the concept is that the “halo” or “aura” of this type of product leadership will convey to the rest of the product line – the product line you are most likely going to buy. In other words, the halo effect is one where the perceived positive features of a particular item extend to a broader brand. Typically, these halo products are very high priced, relative to the rest of the company’s product portfolio.

Examples of halo products include the following:

Mercedes-Benz SLR McLaren

HP TouchSmart Inkjet Printer

Virgin Galactic Suborbital Flights

Sony Aibo Robot

There are some companies that try to launch all of their products as halo products. Examples that come to mind are Apple, Trump Hotels, and exotic car brands like Ferrari and Lamborghini.

What Can Halo Products Do for a Company?

For many companies, halo products provide a number of benefits. First, they are products that are so interesting and futuristic; they can generate a lot of positive press and PR. Of course the benefits here are obvious for a company. Second, they showcase technology and capabilities that, while not readily available, may eventually migrate down to the rest of a product portfolio over time as the technology becomes less expensive and more mature. Halo products can also convey exclusivity and status. For example, all my friends may drive a Mercedes SL Series but I have a Mercedes-Benz SLR McLaren.  Meaning … I have something special and different than everyone else. Finally, halo products may drive more consumer awareness and preference for your brand. The idea being if you read about or see the halo product (and you like what you see), you are more likely to buy a product from the rest of the company’s product line up.

Should Your Company Launch a Halo Product?

Perhaps it should. Halo products require resources – development, operations, marketing, etc. and funding to create and deploy. Also, a company has to have access to advanced technology, design, performance, etc. to build products that people are going to be interested in and can generate a halo effect. It should be tied to real customer needs and a relevant customer experience. A halo product strategy can be a very beneficial approach for a company, especially when combined with aggressive PR and strategic messaging. For companies that strive to be a premium brand in their industry and want to be seen as a technology leader, a carefully crafted halo strategy can be indispensible in conveying that premium brand image.

There are less expensive ways to create halo products for less money. For example, at HP, our team in Middle East created a gold plated LaserJet printer to celebrate a twenty anniversary for the business. Another example is the use of a limited edition product strategy to deliver a halo-like product. The only barrier here is your imagination and creativity.

Do you have examples of halo products you have seen or created? If so, I would like to hear from you! Please post your comments to my blog.

Additional Resources:

HP Halo Products

Definition of Halo Effect

Creating the Brand Halo Effect

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Posted By Vince Ferraro

January 30th, 2010

This week Apple announced their much-anticipated iPad, a tablet-like device which has been described as a supersized iPhone, a shrunk down (or new form factor) notebook, or a competitive product with Amazon’s Kindle and other e-readers. At a base price of $499, the iPad has hit a price point to give people who want to purchase an e-reader time to ponder their purchase decision. From a market perspective, I believe their timing was excellent. There was a good article in the Washington Post , Top 10 Reasons The Apple iPad Will Put Amazon’s Kindle Out of Business that has more fact than fiction in it. Truth be told, Apple is going to revolutionize yet another category and give many a competitor angst and a run for consumers’ purchasing dollars.

As a pundit of the high technology marketing, I would be remiss if I did not try to look at this and break down some of the key things that make Apple’s entry into new market so formidable. So I am going to comment on a few marketing strategies I have observed that make this such an interesting case study.

1. Great Pricing Strategy. Everybody knows that Apple has a premium pricing strategy. At $499, Apple surprised the market and priced the iPad $10 higher than the Kindle DX. For $10 more of course you would want to buy the Apple over the Kindle. Why not? Well to begin with the iPad display is color while the Kindle is monochrome.  Think it will cost you $499 over its lifetime? Think again. If you want 3G wireless, it will cost you an additional $130. More memory – an extra $100. Want a data service to run the 3G network capability and connect to the internet beyond basic Wi-Fi connectivity? That could easy cost you $500 a year. So the total cost of ownership (TCO) of the iPad is going to be pretty high – probably over a $1000 for the first year. And don’t forget the e-books at $9.95 each. The point is that Apple has created a pricing strategy that will lure buyers in. With desirable extra features and services, many buyers will leave a few hundreds of dollars poorer than they expected. Will customers be unhappy? No, because they will have created as product that has delivered an excellent customer experience vs. what the competition can offer.
2. Excellent Customer Experience. Much of Apple success can be attributed to developing products that are game changing – not first to market. Did Apple develop the first e-reader, smart phone, or MP3 player? No they did not. What Apple is brilliant at doing is creating a unique product experience that is so engaging and fun, that they can significantly differentiate themselves from any other competitor. Michael Porter, in his book, Competitive Advantage, would call this a differentiated advantage. Differentiation advantage is aimed at the broad market that involves the creation of a product or services that is perceived throughout its industry as unique. The company or business unit may then charge a premium for its product. This specialty can be associated with design, brand image, technology, features, dealers, network, or customer service. With Apple, this differentiated experience comes in the form of its industrial design, cool factor, brand name, Apple retail stores, software user interface, application widgets, iTunes/App store and synching software. In addition, Apple has figured out how to wrap a business model around it and make money as well! There are many models on how customer experiences can be defined and delivered. HP used a model called ACOILUSD and it will be the subject of a future post. By delivering an excellent product experience, Apple hopes to increase customer loyalty and preference for its products – now and in the future.
3. If First You Don’t Succeed, Copy. If I was an executive at Apple, I would enjoy watching how the competition responds to my new products. In fact, most companies that compete with Apple just try to copy the features and capabilities of the Apple product, in hopes that it will make them a closer compare to the Apple device (and most likely sold at a lower price) at the time of purchase. Now this can be a respectable strategy when applied properly. After all, Microsoft has Zune, Samsung introduced its Galaxy i7500 Android phone, and RIM announced widget support for its Blackberry. To be honest, I would find new marketing executives in these companies, if that is the best they can do. Instead of trying to up the ante and create better, alternative, and differentiated experiences that delight customers, these vendors decide that following Apple is better than trying to beat them the old fashioned way – by developing and delivering innovative new customer experiences and products.  Have they conceded to Apple? Don’t have any better ideas? Do they believe following/copy cat strategy is better than the status quo? I have no idea, but there must be a better way. The question is which company can do it? Take Apple to the mat, to use a wrestling metaphor.
4. Scarcity of Value. Probably the most important idea here is that Apple depends on a “scarcity of their products” in markets of high demand. What does this mean? What I am trying to say is that when Apple goes into a new market, the markets are relatively big, can be big, or converging into a big market. The scarcity of supply simple means is that there are no other competitors out there delivering a comparable product value or customer experience. Using MP3 players as an example, this means you will pay more to enjoy the Apple experience vs. the competition – even in a market where there is tons of competition. Because there is not a direct replacement product – hence scarcity! The best examples of this concept are people who bought another brand of product, perhaps due to budgetary constraints, and wished they had bought the Apple product instead!

Taking a high road product and pricing strategy is not the only strategy a company can deploy. If you are not in a commodity market, most markets are stratified into different price points and volumes. A company can build a value proposition in the low end, the middle or top end of a market. I think what the Apple example illustrates is how delivering great marketing through excellent product value and customer experiences, a company can become a dominant market force and game changer in the market, even though they might not always be the volume leader.

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Posted By Vince Ferraro

January 25th, 2010

Love them or hate them, loyalty programs/clubs have become an important marketing tool in many industries. According to Wikipedia, in marketing generally and in retailing more specifically, a loyalty card, rewards card, points card, advantage card, or club card is a plastic or paper card, visually similar to a credit card or debit card, that identifies the card holder as a member in a loyalty program. Of course, some of the biggest examples of loyalty programs come from the travel industry (frequent flyer, hotel points), retail (grocery, gas, and sundries), and credit cards (AMEX). A retail establishment or a retail group may issue a loyalty card to a consumer who can then use it as a form of identification when dealing with that retailer. By presenting the card, the purchaser is typically entitled to either a discount on the current purchase, or an allotment of points that can be used for future purchases. Of course, managing your points so that you can use them (before they expire) has become one of the biggest drawbacks of these programs.

In addition, loyalty programs have expanded globally and in the types of industries one might find them. For example, Hewlett-Packard induces small and medium business to spend more money on branded supplies through their Purchase Edge Program.  And they are pervasive too. According to Jupiter Research, more than 75 percent of U.S. consumers now have at least one loyalty card. Most people belong to multiple loyalty programs.

Marketers intend to maintain loyalty program spend in 2010, with 34 percent increasing investments. In fact, a key area of spend will be investments into online communities and social networks that will allow members to share and connect.  Unfortunately, according to consumers, online communities, social networks and connecting with other members are among the least valued inducements to participate and remain active in loyalty programs.  

The CMO Council’s latest report, The Leaders in Loyalty: Feeling the Love From the Loyalty Clubs, reveals that marketers are failing to fully connect with consumers and are missing a big opportunity to leverage member insights to deliver on rewards, value and engagements customers say they really want. The full report contains detailed findings from both the marketing and the consumer research, along with over two dozen qualitative interviews from brand leaders from American Express, Etihad Airways, Giant Eagle, Jet Airways, Marriott, Office Depot, RIM, Shell, Travelzoo, Virgin Atlantic, and more.  It also contains key findings,  loyalty rankings and contributed insights from industry leaders. Get a complimentary summary of the study at the CMO Council’s web site.

Love them or hate them, loyalty programs and clubs are an important part of the marketing mix and spend for many industries. Yes … they can help in building and maintaining brand loyalty. In addition, they also act as a gigantic CRM database that identifies and tracks high usage customers. Finally, they link consumer buying and shopping habits with demographics at the individual or family level. This data is then used to formulate offers and programs to drive more purchases and demand for a company’s product. Powerful marketing tools for sure (in the right hands).

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Posted By Vince Ferraro