Business Accent

Using technology to improve the customer experience

William Band, principal analyst, Forrester Research, on using experience-based differentiation strategies to get ahead.

Companies are looking for another edge to stand out from the competition. They are turning to experience-based differentiation (EBD) strategies to find new formulas for attracting and retaining customers. IT’s role as conveyor, sustainer, enhancer (or possible destroyer) of brand identity is often overlooked. To become EBD leaders within their organisations, IT executives must build EBD alignment with business executives, close business process expertise gaps, strengthen communication and influence skills, understand customer management packaged solutions, and leverage knowledge about the most current IT architectures.

Creating branded customer experiences is critical to success

Traditional ways for organisations to distinguish themselves in the marketplace are becoming more difficult. Price, quality, accessibility, delivery, and product features are very limited in their ability to serve as differentiators. Companies are looking for another edge to help them stand out from the competition. They are turning to EBD strategies to create new formulas for building brands that will attract and retain customers, and IT executives can play the role of brand enhancer (or default to the role of brand destroyer). To avoid eroding brand identity, IT executives must take a leadership position for EBD initiatives because:

• EBD is becoming critical for success. Forrester recently surveyed decision-makers at 176 North American organisations with annual revenues in excess of $500 million, and found that 60 percent feel it is ‘critical’ their firm improve customer experience. Brand loyalty is eroding or nearly gone in many sectors, pushing enterprises to pursue EBD to encourage customers to choose and stay with their products and services. EBD means systematically integrating experience within the design and delivery of products and services. Although everyone seems to be discussing customer experience, most firms do not know how to channelise their thinking.
• Consumers are demanding seamless experiences. Internet connectivity is ubiquitous, so products and devices are naturally coming with an online service component, expanding the customer experience. Through tools such as the Web, peer networks, and social networking, customers have more information about competitive products / service offerings, so feature sets are quickly commoditised. Switching costs are so low for many products / services that customers feel little pain in changing providers.
• Multi-channel experience integration is problematic. Firms have better data about consumers, including complex cross-channel analytics and behaviour tracking which allows them to micro-segment and tailor individualised user experiences. But they recognise that the growing multiplicity of customer interaction channels exacerbates the problem of creating a coherent set of interactions with customers. Forrester’s survey revealed that 61 percent of firms are satisfied that the customer experience delivered by phone representatives almost always meets customer needs, but only 51 percent feel the customer experience meets customer needs at retail branches. Firms are even more uncomfortable with how well the customer experience meets customer needs when delivered through newly emerging interaction channels. For example, only 41 percent feel that their Web channel satisfied customers, 34 percent feel that the mail / catalog channel satisfied customers, 30 percent view kiosks as fully meeting customer needs, 23 percent feel that phone self-service channels meet customer needs, and only 19 percent feel that chat / IM channels satisfy customers.
• Technology is fundamental in delivering a branded customer experience. As companies add more interfaces to their growing portfolios of products and services, they are interacting more with customer’s lives every day, and creating a growing opportunity to weave those touchpoints into an overarching branded customer experience that sets their offering apart from competition. Apple’s real business is the iTunes store, not iPods; digital cameras come with photo processing services; HDTV is worthless without high-definition cable service.

IT leadership can make or break EBD strategies

The role of IT as conveyor, sustainer, enhancer or possible destroyer of brand identity is often overlooked. Enterprises are struggling with defining accountabilities for managing the customer experience and seek more guidance from IT. According to the clients we interviewed, issues include:

• Organisational accountability for EBD is lacking. Despite the importance that enterprises place on EBD strategies, they have difficulty organising to deliver on their intentions. In our survey, we found that only 24 percent have an executive (other than the CEO) responsible for the ‘whole customer experience.’ Service sector companies reported that there was a single executive responsible for the customer experience in 36 percent of the cases, but retail and wholesale trade organisations said this was true for only 7 percent of organisations in that sector.
• IT is critical to delivering EBD. In cases where an organisation does have a single point of accountability for the customer experience, it generally rests with the marketing, service or e-commence departments. IT virtually never assumes a lead role. But when it comes to delivering the right customer experience, 60 percent of executives who were surveyed by Forrester cite ‘implementing technology’ as the second biggest obstacle to EBD strategies, just behind ‘gaining organisational alignment’ and ahead of ‘trying to change employee behaviour.’
• Business executives want more EBD leadership from IT. In the survey the question was asked, ‘how important is it for the IT organisation to support the corporate goal of acquiring and retaining customers?’ 79 percent in tech and telecom said it was a top priority. Other industries showed nearly as high an interest: retail, 76 percent; services, 66 percent; finance and insurance, 62 percent; distribution, 61 percent; manufacturing, 55 percent; chemicals and energy, 51 percent.

How Vanguard is succeeding

The Vanguard Group, the well-known American investment fund that offers mutual funds and other financial products and services to individual and institutional investors, has made EBD central to its strategy for success in its 401(k) business. The company, with $900 billion in managed assets, and 10,000 employees, has long been a virtual company. It primarily serves clients through telephone contact centres and company Web sites. Delivering a differentiated customer experience is heavily dependent on technology, and its Managing Director of IT, Mortimer Buckley, is central to driving the design and delivery of high-value interactions with customers. To ensure that Vanguard’s customer experience is superior, the company follows five principles:

• Ground new technologies in business strategy. Vanguard’s customer experience proposition has expanded considerably in the years from basic investment education and account information to transactions, account services and advice. New technologies are not adopted simply because they are available. Instead, Vanguard harnesses new capabilities in the service of long-term business objectives.
• Design for the user. When designing new customer-facing technologies, Vanguard teams developers with subject-matter experts who understand personal finance. In addition, it interacts with customers through usability labs, and collects feedback by e-mail and phone about the user interface experience. Improving the customer experience is a central design criterion.
• Make it easy to take action. To spur customer adoption of new Vanguard services, the company learned to make it easy for the customer to take action. For example, Vanguard requires only a customer signature to start the process of setting up a 401(k). From that point on, the company creates a recommended portfolio for the customer, and re-balances it as needed. It only takes 15 minutes to set up a new IRA online, and 30 seconds to check asset allocation.
• Integrate the online experience with other channels. Online interactions are not viewed as a separate part of the customer experience. Vanguard service associates use the company Web site as their desktop. When a retail client or plan participant phones in with a question, the associate logs into the same screen that the customer sees. Vanguard encourages customers to use its channels in the combination they choose, and the company strives to make customer interactions across channels work in a seamless manner.
• Collaborate with the user. To create a more comprehensive user experience, agents can use Web collaboration with customers (page push, co-browse, joint form-fill), walking the customer through the site, reviewing investment choices, and filling out forms, including electronic signatures. The customer is receiving a fuller experience, as well as being educated on how they may use self-service options in the future.

The author may be reached at wband@forrester.com
For more information, contact Sudin Apte, Forrester India Country Manager, at sapte@forrester.com, or phone 020 2567 4390 / 91