Where's the Loyalty on Black Friday?

From a services perspective, Black Friday is a tremendous loyalty creating / loyalty disrupting exercise. Companies lower margins and spend madly on advertising to induce trial from all customers, whether they’re loyal patrons or whether they’ve never passed through the doors before. Yet financial promises – the killer deal with a ticking clock – are the weakest form of linkage between a company & its customers. Like many, I hit Walmart with the precision and timing of a military operation. I checked my list off for nieces & nephews, bought nothing extra, and got out alive.

I also stopped at Nordstrom yesterday, though not because they had a once-in-a-calendar-year sale going on (they didn’t). Unlike the stores hit early, Nordstrom has developed a social bond, or relationship, with me. Kevin in the men’s department sends me a quick note when a new line comes in or when there is a sale, though there was no prompt for yesterday’s visit. I didn’t follow a script for this visit, but generally found what I was looking for, paid full price and still went away happy.

Going beyond social bonds, some retailers offer customization of the service experience. Some modify the experience through special “members-only” events where the store is open to serve the best / most loyal customers.

On Black Friday, the masses of customers are looking for a deal, and the transaction volume created through financial incentives rule. But these are temporary ties to a customer, until the next deal comes along.

I’m surprised more companies – the ones that can’t compete with Wal-Mart on price for the other 364 days of the year – don’t put effort into events taking advantage of stronger ties (with more margin) through relationship events or customized service experiences for loyal customers.

Recession Over? Check the Customer Satisfaction Index.

Most economists & business pundits agree that we’re slowly emerging from the current economic downturn, but that the turnaround won’t really accelerate until the consumer spending that comprises about 70% of GDP returns.

They suggest the reason for the reluctance of the consumer is the perceived frailty of the turnaround – jobs are still being lost, the housing market is still in a funk and equity markets are still not performing to pre-recession levels – but that once feel perceive security in their job, their home and their 401k, they’ll start spending again.

I’ll suggest an additional reason consumers have been slow to resume spending: a decrease in satisfaction with how companies treat their customer relationships.

There’s a perceived lack of equity & fairness in the customer-business relationship. Many don’t trust government (the dollar-for-dollar most expensive service we use) or financial institutions on Wall Street responsible for enabling economic growth through responsible lending. We’re suing our banks over credit card practices and ancillary service fees, and we don’t believe our news sources are representing anything other than a profit objective.

Particularly critical in service businesses, where customers give information and effort of themselves in the relationship, the public won’t resume full consumption until faith has been restored that they are not being taken advantage of by companies they trust with their time, effort and money.

The American Customer Service Index reporting satisfaction with financial services providers won’t come out until February. While it was trending downward in 2008, we could expect to see a greater decline in 2009 as twelve months of bank bailouts, suits over overdraft fees and the CARD Act are factored in.

Equity & fairness are basic requirements of the service companies we use. If we don’t feel we can trust our banks, healthcare providers, news networks, and government, we’ll choose not to consume beyond the basic requirement.

The consumer is the key to the turnaround, but to a greater extent than currently thought. While we’re investing as taxpayers in everything from financial institution to auto makers, business should also be investing in activities that result in customer satisfaction, starting with transparency, equity & fairness.

Arguing over “Adequate”

I don’t know which seems sillier – Verizon launching their national holiday ad campaign differentiating on the strength of a table-stakes service attribute, or AT&T going to the trouble to sue them over their representation of it.

Verizon is actively promoting their nationwide 3G coverage and pointing out a perceived weakness in the 3G coverage of AT&T, who has sued them in response, claiming “their use of white space in their advertisements misleads people into thinking that AT&T offers no coverage in most of the country."

Does any of this really matter?

Plotted against population density, the two networks are within percentage points of each other in terms of coverage.

Further, “coverage” isn’t a service delighter, or even representative of customers’ desired service. It’s an indicator of available service alternatives, or an identifier of adequate levels of service. If you have the coverage, you’re in the consideration set. If you don’t, you’re not. The more alternatives customers have, the higher the level of expected service.

For most consumers, this conversation is about nothing.

It’s easy for network-based services (airlines, cable, shipping, telecom) to focus on coverage, mostly because it is operational and tangible.

But of all the complaints people have about their wireless service providers, 3G coverage represents a minority. Follow either Verizon or AT&T on Twitter for half a day, and you’ll get an idea of how important 3G coverage is to consumers, compared to the themes of my phone doesn’t work / I can’t get the plan I want / my bill is never correct / I can never get through to a customer service agent that can fix my problems. I have yet to see, “I’m in the Tetons, and can’t get 3G coverage!”

By focusing on network coverage, Verizon & AT&T neglect the service their customers desire, and focus on who is doing a better job delivering on what is adequate. When adequate is the goal, I don’t wonder why churn rates in telecom are among the highest in any industry.

Who is developing the innovation you won't?

The only time most of us interact with our energy service providers is during the monthly billing cycle, though they have the ability to engage us more often using their knowledge – both of how energy is used and of our historical use of it – to offer tips on how to conserve energy, improve the survival chances of the planet and save money.

Mine has made some strides toward adding value beyond their core offering by helping turn the mountain of my personal usage data they maintain into useful information to help me understand and lower my energy costs. The functionality of their tools is a long way from what I desire or expect, consisting mostly of calculators that estimate usage based on my profile and compare it to mean users, while feeding me factoids I could generally get from reading my bill.

Their delayed action on service innovation lost them the advantage of the industry expert incumbent holding all the consumer usage data. (no small feat)

Two tech applications powerhouses have entered the market for virtual energy monitoring. Google PowerMeter is still in development stage, but looks to be a simple platform for collecting and sharing personal energy information. MicroSoft Hohm has energy company-provided usage information and smart sensors feeding a consumer’s Quicken-like energy management interface.
Because legacy service providers don’t know the emerging needs of their market, haven’t maintained innovation capabilities and got comfortable with their well-bunkered margins, they let companies who don’t know their industry innovate for them on their own terms.

The market need will get fulfilled, but I’d bet the Google & Microsoft apps are better, more quickly than what the energy companies ultimately produce. Companies that complain that their customers see them as a commodity seldom realize the extent to which they act like them.

Amazon: more reliable than a letter to Santa

Spent some time last night creating my 4-year-old’s Amazon holiday wish list for the out-of-country grandparents. For a family of expats, the combination of wishlists, universality of ecommerce, and the emergence of inexpensive / free shipping has been a lifesaver for people who care about us but can’t be with us for every holiday.

It got me thinking, however, about what a lifesaver wishlists are in general.

The holiday gift-giving traditionalists will say that wishlists are almost the copout that gift cards are. (and they’re right, to some extent)

Shopping for someone else intensifies every aspect of the retail experience, particularly for a major holiday event or a birthday. In these cases, our expectations as customers are reflective of the expectations of the people we are shopping for. We want the experience to go flawlessly, not only because we want the object of our gifting to be satisfied, but because the result of the service is a reflection on us as well.

Holiday shopping isn’t the only place this happens. Think of taking an out-of-town friend to your favorite restaurant and how heightened you are to every aspect of the service. Satisfaction and loyalty payoff in these situations is more that 1:1, as you get to satisfy two parties, one where the service expectations are at their highest.

More experiences than we realize are subject to these sort of heightened service sensitivities, driven by the expectations and perceptions of another customer present or downstream.

Much of Amazon’s success owes to consideration of the full consumer experience in the online retail environment. With service-enabling technology, they've solved problems of customer understanding that few retailers can in a bricks & mortar setting. The wishlist goes a step further, considering parties beyond the active consumer experience, using their input to improve the success of other customers’ retail experiences at the very time they have heightened expectations.

So many other service businesses would be benefited by taking a likewise step beyond the customer in front of us, to understand downstream consumers and others depending on the product of the service transaction currently taking place.

Score one for un-planning

I had my first taste of Chicago’s famous Manny’s Deli earlier this week. Proof positive that a service experience doesn’t have to be overly planned and positioned in order to be successful.

In simplest terms, if you know a customer you want to serve, create an experience they find compelling and execute consistently at a high level, people pay attention, and you will develop a following.

Manny’s provides high quality deli fare with deep Jewish roots in irreplicable atmosphere to the Chicago lunch crowd – from blue-collar to politico alike. If you don’t believe they are artisans, Google “Manny’s Deli” & see what comes up. From their website, “At Manny's you don't diet. You don't snack. You don't nosh. You come to this landmark lunchroom to pile your tray high and eat like there's no tomorrow.” They’ve been so focused on their target, it took more than 6 decades to open for dinner.

The bricks & mortar could be replicated. Melamine, formica and laminate aren’t hard to come by, even in 2009. But the atmosphere couldn’t be recreated anywhere. The staff (Manny’s is a 4th generation family business.) knows their clientele from decades of interactions. Even if you’re a newbie, they know why you’re there. The customer-to-customer interaction is great, everyone in a better mood because of where they’re eating.

It’s possible they’ve never had a planning session. Never touchpoint-mapped their customer experience, never ideated around core purpose and vision or what the organization needs to look like in 3-to-5 years.

Maybe they have by now. The website is professionally done, they’re active in social media, and they serve customer-fans by shipping nationwide. But they didn’t become a local and national landmark through countless hours spent in service development and market planning.

They did it though dedication to solid service fundamentals. Making a service promise that people found attractive, making the promise available, and delivering on it every day, for almost 70 years.

It’s that easy. And that difficult.

My Mistake, Your Problem.

What is an airline to do when someone ruins their experice for them.

The flight my spouse came home on was early, and I was late to the airport to pick up my exasperated wife and our beyond-tired 8 month-old. Reliability is equal parts precision and accuracy – it’s consistently doing what you say you are going to do. An early flight can be as bad as a late one.

I didn’t check the flight status from my smartphone, relying instead on an web update before after I had left the house for the day.

As part of my familial service recovery, I investigated what my actual options would be for future cases.

Of course, I can ask for flight status via the web, cell, PDA. These methods are all passive, as though the airlines are saying, “We’ll tell you if our flights are running late, but only if you ask us.”

I also could have subscribed to travel alerts. Or rather, my wife could have…well in advance.

With Northwest, you can subscribe to receive texts & emails of flight schedule changes as they happen. The downside is that you have to be a loyalty program member. You can then adjust your account settings to receive updates on your flights, and you can include someone else in your profile to receive them as well. (of course, I did not tell my wife it was her fault for not being a Skymiles member and not having signed me up to receive updates)

Here’s where holistic mapping of the experience would help.

I wasn’t either the paying customer or the service provider, but I had an impact on the experience. The service outcome was a failure, but the actions of a complete outsider to the encounter caused the negative reflection on the performance of the airline.

When looking at the service moments-of-truth where satisfaction or dissatisfaction occur, you often have to look beyond where your part in the service provision starts and ends. Include the actions of customers - and sometimes people not directly involved in the service at all - that need to use the product of your service to dowork of their own.

Several of these things are not like the others.

Last month, I posted on Children’s Mercy Hospital and how they effectively used the physical environment to create expectations, facilitate the service exchange and differentiate it from other care experiences.

Yesterday, I had the opportunity to visit a specialist clinic considered a branch location of the hospital.

Great care once again, but a completely different experience.

The physical environment of the main location was not nearly as evident as it was the main hospital. Though partly due to working out of a leased space vs. the owned environment sculpted to fit the strategic service vision, the effect was evident throughout. The staff was not visibly oriented to perform child health care, making it feel like a regular, every day clinic.

Providing consistency in service experiences is tough. Operating from multiple locations makes it even more difficult, adding differences in the experience from location to location. Even if the quality of outcomes is consistently high, an inconsistent experience diminishes the reliability of the brand promise.

To combat the effect that location-to-location differences have, the “keep it simple” mantra works well.

If the experience is going to be managed centrally, focus on replicable aspects. Standardize core service processes, while giving front line service employees the ability to work outside process to stay true to the spirit of the service. Create uniformity of the service philosophy through how internal service providers, performance measurement and front-line hiring principles, and consistent internal brand messaging. Where service-enabling technology is used, implement system-wide.

There was no outcome failure. The care given by the branch of CMH was consistently exceptional, but because the location had less focus on the unique needs of the child customer than the main branch, I left with a diminished opinion and future expectation of the brand.

If you love your customers, set them free.

LinkedIn and Twitter, two social media platforms I use to maintain professional networks and develop personal brand, have announced they will now have cross-platform connectivity for users. For now limited to the status update functionality, it is reasonable to assume that eventually, LinkedIn contacts and Twitter followers could be easily converted between platforms.

Both networks are immensely valuable to their users, and this development was embraced by users that now have an easier time doing business with both service platforms .

Service integration, driven by technology, is creating possibilities to improve experiences across the spectrum of B2B and B2C services. Driving this wave of innovation is the depth of engagement of the individual, enabling companies to provide better service than ever before based on an ever expanding understanding of customer needs and an equally expanding capacity to serve them. Like with the marriage of LinkedIn and Twitter, customers’ transaction costs are reduced and they become better performers of their service role.

But the new technology is also freeing. As more services are linked together, the customer becomes more portable, easier to migrate between businesses. Switching costs are reduced to the point where customers can leave as easily as they arrived.

The old mantra was to make your product or service as sticky as possible - that a customer captive to high switching costs was ideal. This notion is now challenged by the idea that the best way to keep customer is to provide more network value by linking them to as many complementary services as possible.

To the old guard of business, a scary notion. They can envision a mass exodus of customers to their age-old competitors.

Truth told, the only companies that have anything to be scared of are the ones who aren’t providing market value or better, and for the first time face the risk of their customers finding out.

Just give the kid a toy already.

In any child-oriented service experience where the objective is repeat business, the service provider should give their child-customers some tangible evidence of the positive experience.

It doesn’t have to be expensive – just a small token that prolongs the experience by making it tangible once the child is out of context and serving as a memory trigger of a positive experience.

Many companies providing service experiences for children line their walls with merchandise and wouldn’t think of giving anything away. I can almost hear them rationalizing that “It would interfere with their merchandise sales and suboptimize revenue from the retail side of the house.”

Chuck E Cheese gets this concept, as every child leaves with something. Something of nominal value, to be sure, but a reminder doesn’t have to be expensive. Even the dentist hands out a lollypop at the end of a checkup.

Too many companies miss this easy opportunity to create repeat business in young customers. Experiences that have separate service and retail operations (themed restaurants, child hair salons) are the worst. It would take almost nothing in incremental cost to add a memory device to extend the experience and provide a positive reminder.

A child won’t want to come back if they can’t remember how much fun it was to be there in the first place.

Are you ready for your customers to be your Marketing Dept?

In a service design group Slideshare presentation posted by UK design group Engine, I read the following line:

"The service economy is here, but it's just not very well designed yet."

True, but it’s quickly becoming an understatement.

Sure the service economy is here. >70% of GDP is represented by services. Even in product-based businesses, service and services are the differentiators that separate category leaders from the commoditized also-rans.

Here’s where I’d go farther.

In a service economy enabled by the connectivity of social media, companies need to put the best marketing tools in the hands of front line service employees AND customers themselves in order to prosper.

Unique to services is that the line of production also serves as a company’s primary marketers. The faces providing the service experience are the face of the brand. And because the “product” is intangible, customers’ only reference is the feeling they were left with after having used a service. What they say to others will be determined by the outcome of the service and how they were treated while receiving it.

Social media has connected us all. It has it enabled a greater depth of interaction between companies and the customer they serve, and a MUCH greater connectivity between past and prospective users of your service.

Instead of allocating marketing budgets to all of the traditional activities, companies need to be spending time, effort and capital on putting the best marketing tools in the hands of the people best suited to market the service - front line service employees and customers themselves.

The Importance of the Professors at Southwest U

The Southwest agent I spoke with at check-in today had just returned from a week’s worth of training in Dallas.

I asked her (and her more experienced peer also helping me) about the LUV-fest. Specifically, what immersion into the Southwest culture looked like.

Interestingly, they didn’t give much detail about the training itself, mentioning only that the environment was fun but VERY fast paced. What they did go into detail about was the role that leadership played in their indoctrination. Specifically, that Herb and Gary were all over the training sessions, and that Colleen was present as well. Even more interesting was that they mentioned Founder Herb Kelleher, CEO Gary Kelly and former President Colleen Barrett by first name, as though there was no doubt that I would know exactly who they were talking about – which, of course, was a correct assumption.

The agent that has seen more service also mentioned that she had multiple instances where Herb and Gary had hopped behind the agent desk to help move luggage at check-in and board passengers at the gate.

Service businesses are distinct from their product counterparts because they are fundamentally represented by people, working with a process and supported by technology, to serve other people.

In no other business are the business aspects of customer orientation, quality and engagement of the employee workforce as important.

Southwest does this as well as anyone in a big company setting, and it starts with the way senior leaders approach the business and the employees. Watching Colleen speak on servant leadership, it is no wonder that at any given time, Southwest has 10,000 pilot resumes on file.



They have the best employees because good people want to work there. Good people perpetuate good service, leading to good performance, which attracts more good people.

Easy, right?

TSA could be better, but so could their customers

I feel for the TSA and the service workers charged with providing a very important service in a difficult environment.

While as a service the TSA has its flaws, we’re not very good consumers of their services either. We don’t play our roles, or worse, actively try to subvert theirs. Travelers present some of the least high performing customers in any service environment.

The TSA could do themselves a favor by improving the physical environment where their service is performed.

We’ve figured out how to put advertising in the bottom of bins, but we can’t get people to put their shoes on the belt. Instead of the hopeless voice shouting over the din of travelers, why not paint outlines of a pair of shoes every few feet on the conveyor? Stencil, “place shoes here” if you have to.

TSA area signage generally consists of letter-sized memos topping waist-high rope-posts while the surrounding walls are covered in giant back-lit ads for consulting services. Bring the signage to eye level, make it larger, make the messages shorter. Even better - work with the airport to reclaim some ad space in order to improve service operations with really effective signage.

The metal detector alarms are too unobtrusive, and too kind to offenders. Why not switch out the generic alarm sound with something intentionally embarrassing, such as, “I still have metal,” repeated over and over. After a few embarrassing moments, people would conform.

The TSA has a great website geared towards preparing travelers for airport security, and they’re all over social media. This is great, but while most travelers go online for boarding passes, they’re not planning their trip through security.

For the most impactful results, TSA has some major work to do in understanding and improving their physical environment’s ability to convey the customers’ roles more effectively than they do today.

We know you have to follow a script, and we do not appreciate your apathetic delivery

Most airlines seem to spend much of their innovation effort actively undifferentiating their service, me-tooing every good idea anyone in the industry has. (Most of which – over the last 20 years at least – have originated from Southwest)

Today’s example: It seems everyone has co-opted a version of the phrase, “We know you have a choice of airlines when you fly, and we want to thank you for flying with (us).”

It was novel when we first heard it, but in replication, the effect has worn off.

The phrase itself has become a negative, partly because the deliveries are almost undistinguishable, and partly because we can associate poor air travel service experiences with the lifeless delivery of this now-hackneyed line.

If you’re going to thank customers for being with you, it HAS to be heartfelt, and it should feel different from everyone else who does it.

On some Southwest flights, flight attendants sing their appreciation. Sometimes good, sometimes awful, it at least shows that they feel strongly enough to not do it by rote.

Thank you doesn’t have to be said at the end of the flight. Midwest makes cookies as their calling card. They could say during the inflight service, “We like you so much, we baked you cookies”. Different, but the message gets across.

Airlines could visibly reward passengers randomly. “We love all of you, but we’re going to buy everybody in row 12 a beer today for flying with us.”

The execution of the message is almost irrelevant – the point is that an insincere “thank you” is as damaging in a service environment as it is in our personal lives.

Lose the line, lose the script. It doesn’t have to be creative, it just has to be heartfelt.