The CEO guide to customer experience
Companies
that create exceptional customer experiences can set themselves apart from
their competitors.
What do my customers want?
The savviest executives are asking this
question more frequently than ever, and rightly so. Leading companies
understand that they are in the customer-experience business, and they
understand that how an organization delivers for customers is
beginning to be as important as what it delivers.
This CEO guide taps the expertise of
McKinsey and other experts to explore the fundamentals of customer interaction,
as well as the steps necessary to redesign the business in a more
customer-centric fashion and to organize it for optimal business outcomes. For
a quick look at how to improve the customer experience, see the summary
infographic.
Armed with advanced analytics,
customer-experience leaders gain rapid insights to build customer loyalty, make
employees happier, achieve revenue gains of 5 to 10 percent, and reduce costs
by 15 to 25 percent within two or three years. But it takes patience and guts
to train an organization to see the world through the customer’s eyes and to
redesign functions to create value in a customer-centric way. The management task
begins with considering the customer—not the organization—at the center of the
exercise.
Observe:
Understand the interaction through the customer’s eyes
Technology has handed customers
unprecedented power to dictate the rules in purchasing goods and services.
Three-quarters of them, research finds, expect “now” service within five
minutes of making contact online. A similar share want a simple experience, use
comparison apps when they shop, and put as much trust in online reviews as in
personal recommendations. Increasingly, customers expect from all players the
same kind of immediacy, personalization, and convenience that they receive from
leading practitioners such as Google and Amazon.
Central to connecting better with
customers is putting in place several building blocks of a comprehensive
improvement in customer experience.
Identify
and understand the customer’s journey.
It means paying attention to the complete,
end-to-end experience customers have with a company from their perspective. Too
many companies focus on individual interaction touch points devoted to billing,
onboarding, service calls, and the like. In contrast, a customer journey spans a progression of touch points and has a
clearly defined beginning and end.
First, even if employees execute well on
individual touchpoint interactions, the overall experience can still disappoint
. More important, McKinsey research finds that customer journeys are
significantly more strongly correlated with business outcomes than are
touchpoints. A recent McKinsey survey, for example, indicates customer
satisfaction with health insurance is 73 percent more likely when journeys work
well than when only touchpoints do. Similarly, customers of hotels that get the
journey right may be 61 percent more willing to recommend than customers of
hotels that merely focus on touchpoints.
Quantify
what matters to your customers.
Customers hold companies to high standards
for product quality, service performance, and price. How can companies
determine which of these factors are the most critical to the customer segments
they serve? Which generate the highest economic value? In most companies, there
are a handful of critical customer journeys. Understanding them, customer
segment by customer segment, helps a business to maintain focus, have a
positive impact on customer satisfaction, and begin the process of redesigning
functions around customer needs. Analytical tools and big data sources from
operations and finance can help organizations parse the factors driving what
customers say satisfies them and also the actual customer behavior that creates
economic value. Sometimes initial assumptions are overturned. In one airport
case study, customer satisfaction had more to do with the behavior of security
personnel than with time spent in line.
Define
a clear customer-experience aspiration and common purpose.
In large, distributed organizations, a
distinctive customer experience depends on a collective sense of conviction and
purpose to serve the customer’s true needs. This purpose must be made clear to
every employee through a simple, crisp statement of intent: a shared vision and
aspiration that’s authentic and consistent with a company’s brand-value
proposition. The most recognizable example of such a shared vision might be the
Common Purpose2of
the Walt Disney Company: “We create happiness by providing the finest in
entertainment for people of all ages, everywhere.” The statement of purpose
should then be translated into a set of simple principles or standards to guide
behavior all the way down to the front line.
Customer journeys are the framework that
allows a company to organize itself and mobilize employees to deliver value to
customers consistently, in line with its purpose. The journey construct can
help align employees around customer needs, despite functional boundaries. As
McKinsey’s Ron Ritter elaborated in a recent video, rallying around customers
can bring the organization together.
Shape:
Redesign the business from the customer back
Customer-experience leaders start with a
differentiating purpose and focus on improving the most important customer
journey first—whether it be opening a bank account, returning a pair of shoes,
installing cable television, or even updating address and account information.
Then they improve the steps that make up that journey. To manage expectations,
they design supporting processes with customer psychology in mind. They
transform their digital profile to remove pain points in interactions, and to
set in motion the culture of continuous innovation needed to make more
fundamental organizational transformations.
Apply
behavioral psychology to interactions.
Deftly shaping customer perceptions can
generate significant additional value. One tool leading customer-experience
players deploy is behavioral psychology, used as a layer of the design process.
Leading researchers have identified the major factors in customer-journey
experiences that drive customer perceptions and satisfaction levels. For example, savvy
companies can design the sequence of interactions with customers to end on a positive note. They can
merge different stages of interactions to diminish their perceived duration and engender a feeling of progress. And they can provide
simple options that give customers a feeling of control and choice. One pilot
study at a consumer-services firm found that more improvements in net-promoter
scores accrued from “soft” behavioral-psychology initiatives rather than from
“hard” improvements in operations.
Reinvent
customer journeys using digital technologies.
Customers accustomed to the
personalization and ease of dealing with digital natives such as Google and
Amazon now expect the same kind of service from established players. Research shows that 25 percent of customers will defect
after just one bad experience.
Customer-experience leaders can become even
better by digitizing the processes behind the most important customer journeys.
In these quick efforts, multidisciplinary teams jointly design, test, and
iterate high-impact processes and journeys in the field, continually refining
and rereleasing them after input from customers. Such methods help
high-performing incumbents to release and scale major, customer-vetted process
improvements in less than 20 weeks. Agile digital companies significantly
outperform their competitors, according to some studies. To achieve those
results, established businesses must embrace new ways of working.
Perform:
Align the organization to deliver against tangible outcomes
As the customer experience becomes a
bigger focus of corporate strategy, more and more executives will face the
decision to commit their organizations to a broad customer-experience
transformation. The immediate challenge will be how to structure the
organization and rollout, as well as figuring out where and how to get started.
Applying sophisticated measurement to what your customers are saying,
empowering frontline employees to deliver against your customer vision, and a
customer-centric governance structure form the foundation. Securing early
economic wins will deliver value and momentum for continuous innovation.
Use
customer journeys to empower the front line.
Every leading customer-experience company
has motivated employees who embody the customer and brand promise in their
interactions with consumers, and are empowered to do the right thing.
Executives at customer-centered companies engage these employees at every level
of the organization, working directly with them in retail settings, taking
calls, and getting out into the field. In the early years, for example, Amazon
famously staged “all hands on deck” sessions during the year-end holidays, a
tradition that lives on in the employee-onboarding experience. Some
organizations create boards or panels of customers to provide a formal feedback mechanism.
Establish
metrics that capture customer feedback.
The key to satisfying customers is not
just to measure what happens but also to use the data to drive action
throughout the organization. The type of metric used is less important than the
way it is applied. The ideal customer-experience
measurement system puts journeys at the center and connects them to other
critical elements such as business outcomes and operational improvements. Leading practitioners start at the top, with a metric
to measure the customer experience, and then cascade downward into key customer
journeys and performance indicators, taking advantage of employee feedback to
identify improvement opportunities.
Put
cross-functional governance in place.
Even for companies that collaborate
smoothly, shifting to a customer-centric model that cuts across functions is
not an easy task. To move from knowledge
to action, companies need proper governance and leadership. Best-in-class organizations
have governance structures that include a sponsor—a chief customer officer—and
an executive champion for each of their primary cross-functional customer
journeys. They also have full-time teams carrying out their day-to-day work in
the existing organization. To succeed, the transformation must take place
within normal operations. To foster understanding and conviction, leaders at
all levels must role-model the behavior they expect from these teams,
constantly communicating the changes needed. Formal reinforcement mechanisms
and skill-building activities at multiple levels of the organization support
the transformation, as well. In a recent video, McKinsey’s Ewan Duncan
describes how rewiring a company in this way is typically a two- to four-year
journey.
Log
early wins to demonstrate value creation.
Too many customer-experience
transformations stall because leaders can’t show how these efforts create
value. Executives, citing the benefits of improved customer relations, launch
bold initiatives to delight customers that end up having clear costs and unclear
near-term results. The better way is to build an explicit link to value
creation by defining the outcomes that really matter, analyzing historical
performance of satisfied and dissatisfied customers, and focusing on customer
satisfaction issues with the highest payouts. This requires discipline and
patience, but the result will be early
wins that will build confidence within the organization and momentum to
innovate further.
Delighting customers by mastering the concept and
execution of an exceptionally good customer experience is a challenge. But it
is an essential requirement for leading in an environment where customers wield
growing power.
http://www.mckinsey.com/business-functions/operations/our-insights/the-ceo-guide-to-customer-experience?cid=other-eml-alt-mkq-mck-oth-1608
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