The 12th Annual Joint ISBM-CBIM Conference Understanding...

2006 Joint ISBM-CBIM ConferenceUnderstanding Customer Needs

Institute for the Study of Business MarketsCenter for Business and Industrial Marketing

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The 12th Annual Joint ISBM-CBIM Conference

Understanding Customer Needsand

Managing the Customer Experience:End-to-End, B-to-B

February 7 - 8, 2006Atlanta, GA

© 2006, ISBM & CBIM



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Presentations summarized (in order of presentation):

• Lou Carbone, Experience Engineering, Inc., “Engineering the Customer Experience:End-to-End, B-to-B”

• Christi Pedra, Siemens One, “Connecting to and Learning from Customers:Practical Insights from Siemens”

• Fred Reichheld, Bain & Company, “Building, Measuring, and Profiting From Your ‘NetPromoters’”

• Richard Owen, Satmetrix Systems, “Achieving is Always Better than Believing”

• Simon Lyons, Aggreko plc, “Go On … Ask the Question”

• Virginie Harris, IBM, “Engineering the IBM SMB Customer Experience for StrongerConnections and Better Insight”

• Bradley Gale, Customer Value, Inc., “Analyzing the Worth of Your CustomerRelationships”

• Das Narayandas, Harvard Business School, “Building Loyalty in Business Markets”

• Liam Fahey, Emotion Mining Company, “The Total Customer Experience: How EmotionsExplain and Drive Brand Behavior”

• Mohan Sawhney, Kellogg School of Management, Northwestern University, “Insights onCustomer Insights”




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Engineering the CustomerExperience:

End-to-End, B-to-BLou Carbone

Founder and Chief Experience OfficerExperience Engineering, Inc.

[email protected]

Keynote address:


Key insights from Lou Carbone

Author of:Lewis P. Carbone, Clued In: How to Keep Customers Coming Back Again and Again, (New York: FT Prentice Hall, 2004)



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The “customer experience” is not the same thing as “customer service.”• Managing the customer experience requires changing how we do business, being able to sense andrespond to adapt our business models to customer needs.• We’ve got to look at the holistic customer experience and not just bolt on pieces and look at things in silos.

In the Brand CanyonTM we must monitor not only what people feel about the company and the service they receive, but also the experience: what they feel about themselves,the value they derive emotionally and rationally in the experience. • “Brand value” and “customer value” are inextricably linked.

• Brand-driven perspectives tend to originate from the company, going out to the customer• Experience-driven perspectives tend to originate with the customer, reflecting back on the company.

• In the Experience Preference ModelTM customers implicitly rate brands as negatively differentiated (rejection), undifferentiated commodity (acceptance), or positively differentiated (preference).• We’re seeing growing interest in B2B customer experience management.

Marketing has amassed a lot of knowledge around the power of the unconscious mind.• Gerald Zaltman (Harvard) of ZMET perspective: “The tangible attributes of a product or service have far less influence on consumer preference than the sub-conscious sensory and emotional elements derived from thetotal experience.”• 95% of our processing takes place at the unconscious level• Customers consciously & unconsciously filter a barrage of clues and organize them into a set of impressions -- some rational, some emotional.

• Rational, functional clues about the good or service• Emotional “mechanic clues”: stimuli associated with things – sights, smells, sounds, textures • Emotional “humanic clues”: stimuli associated with people – choice of words, tone of voice, level of enthusiasm, appearance, body language





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Customers look for humanic clues.• Customers cannot not have an experience. How well managed or haphazard will it be? • We can systematically & purposefully design experience clues to create feelings that emotionally engage & bond with customers.

5 disciplines used in managing the customer experience. • Learn:

• experience assessment™• experience audit™

• Create• experience design™; creating the “experience motif” (a dominant idea or theme)

• Do• experience implementation™• experience stewardship™

Experience engineering helps understand, align and manage experiences to optimize the value of those experiences• Experience assessment needs to know

• how customers view themselves • how customers feel about themselves • how customers desire feeling about themselves• how customers establish goals and objectives • how customers determine and define metrics





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• An experience audit uses distinctive tools and techniques to identify, understand and close the gap between the current experience customers have with the experience they desire.

• Understand current experience• experience language analysis™: little words make a big difference• cluescan™: examining an experience to codify the clues• experience intervention interviews™• experience reflection interviews™• customers’ psychological pathways®• reality tv

• Understand the desired experience• ZMET® to understand unconscious thoughts and feelings• experience intervention interviews™• experience reflection interviews™

• Experience design of the experience motif: • The unifying element for every clue in an experience design provides alignment for emotional and rational elements in the experience.• Use the motif as a north star to generate experience designs embedded with clues:

• eliminate or abate negative clues• improve neutral clues • dial up or create preference clues

• Experience implementation:• pilot & test the whole experience design, individual clues or clusters of clues• evaluate impact on closing the gap• impact on financial metrics • calculate costs and return on investment• revise, cost engineer, implement and continuously improve





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• Experience stewardship:• provide continuous leadership and leadership training

• to constantly sense and respond to customers needs and desires• be experience aware and clue conscious

• keeping the motif ever present and central to shaping experiences and measuring emotional connection• e-metrics, balanced scorecard, net promoter, etc.

A marketing tip: At a trade show, don’t just put your giveaways in a bucket for booth visitors to take. Hand them the giveaways personally, to create a bond, a social contract trading on the principle of reciprocity.

B2B case examples of customer experience management• Bremer Financial:dramatic increases in employee ratings for pleasant experience and “getting things right” at service center for internal clients.• Deluxe Financial Services: boosts retention, profit and extra business from banks (primary customers) and consumers (the banks’ customers).• Knutson Construction: used ZMET to discover and accommodate to customer (new building future owner)perceptions of job-site ownership.• Penske Leasing: discovered heavy emphasis on relationship emotions on the B2B side, more so than B2C.

Keys to what makes engineering customer experiences different and vital to creating distinctive value and a competitive advantage• customer back (emotional/rational commitment)• role of the unconscious mind• clue management• a rigorous holistic systems-driven perspective

Q&A tips:• Engineer experiences even for hard-nosed purchasingmanagers who need to win something in pricenegotiations.• To inspire employees in a program, emphasize theirroles, not job descriptions, in the customer experience.





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Connecting to and Learning fromCustomers

Practical Insights from Siemens

Christi PedraVice President and Chief Operating Officer

Siemens One, [email protected]


Key insights from Christi Pedra

s



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• Siemens: $91.5 billion in FY ’05 sales - $18.8 billion in U.S.• Technology leader in the global electronics/ electrical engineering industry. • 75% of sales from products less than 5 years old

• Siemens One, launched in 2002, very successfully integrates Siemens’ many operations:

© 2006, Siemens Corporation




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Siemens One’s practical, customer-focused insights build Siemens revenue and earnings:• Cross Selling allows Siemens to strengthen customer relationships as well as our value proposition• Integrating Sales Activities and Marketing resources enhances the customer relationship• Building and Managing C-level relationships supports a Customer-Focused orientation

Stronger Customer Relationships Through Cross-Selling• Getting a customer to buy more from Siemens across the entire portfolio.

• A unique value provided by a single point of contact for Siemens customized, integrated solutions.• Top-down initiative• Clear responsibility; it’s clear who is in charge.• Clear accountability• Relationship-focused; critical, from a customer and internal business unit perspective.• Results measured

• For example, integrating Siemens healthcare, communications, power generation, and construction offerings for the construction of a new healthcare facility; a $200 million partnership agreement

• How we provide the “One Siemens Solution”• Understand customer’s needs, particularly among Fortune 500-size firms. What is the opportunity?• We build a virtual team that one of our people leads, composed of operating people from the Siemensunits participating in the project. What relationships do we already have with the customer? With Siemens One, one voice speaks consistently for the entire company.

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Integrated sales & marketing increases customer awareness of Siemens by spending money at the appropriate time during the sales cycle.• Opportunity-driven; looking for integration opportunities rather than long-term key account management.

• About 20% of our marketing budget devoted to promoting opportunistic projects.• Collaborative relationship: sales team working closely with marketing team to create momentum during sales cycle.• Comprehensive approach, with exhibits, customer hospitality, events, sponsorships, “Thought Leadership” seminars and events, publicity, and public relations.• Contributing to corporate results: from $15 billion Siemens U.S. sales three years ago to $19 billion FY05.

Building and managing C-level executive relationships supports a customer-focused orientation.• A critical element of our success,• Optimizing every encounter; meaningful dialogue makes every contact count. • Executive relationship management

• Dedication to preparation for political, social, and business encounters. Preparation meets opportunity.• “City ambassador” community service program in 5 key company cities.

• Targeted messages; knowing what’s important in the top five customer executives’ mind.• Solid follow-up items: action items ensure reconnects• The opportunity to unwind customer problems at the time

• Results: we win customer trust; do more business with the customers whose executives we spend time with.





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Building, Measuring, and ProfitingFrom Your ‘Net Promoters’

Fred ReichheldDirector Emeritus and Bain Fellow

Bain & [email protected]


Key insights from Fred Reichheld

sAuthor of, most recently:• The Ultimate Question: Driving Good Profits and True Growth (Boston: Harvard Business School Press, 2006)• Loyalty Rules! How Today’s Leaders Build Lasting Relationships (Boston: Harvard Business School Press, 2001)



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“Loyalty is a joke” for most of society, but people do care about growth.• It’s “close to impossible to build a business without earning the loyalty of your customers and employees.” • Besides reducing costs and earning price premiums, loyalty drives growth through repurchase, buying additional products, referrals, and constructive feedback.

• “How many companies measure these true drivers of growth? The accountants have made us oblivious to what drives growth.”

• Loyalty leaders are not just small niche firms, but include market leaders such as Southwest Airlines, DellComputer, Four Seasons Hotels and many more that earn 50+% Net Promoter Scores. • Their secret? They say it’s practicing the Golden Rule and treating people right.

• They avoid dysfunctional “bad profits” that anger customers and demotivate employees. (Typical firmsbook “bad profits from 25% to 50% of customers.)• They treat loyalty as a C-level executive issue and a component of executive compensation.

The ultimate loyalty question for a customer: “Would you recommend us to a friend?”• It probes both the head and the heart dimensions of loyalty.• The Net Promoter Score depends on the percentages of customers rating the firm on a 10-point scale:

• Promoters, the customer assets driving growth, rate the firm a 9 or 10.• Passive customers, rating the firm 7 or 8, think the firm is okay but they keep looking for a better deal.• Detractors, the customers who hate you and drive your employees nuts, rate the firm from zero to 6.

• A company’s Net Promoter Score (NPS) is the % of Promoters less the % of detractors—assets less liabilities.• NPS scores correlate positively with customer retention, cross-selling, referrals, and superior growth.

• NPS leaders grow 2.5-times faster than their industry averages, our study of nearly 30 industries found.• Jeff Immelt, General Electric’s CEO, calls NPS, “The best customer relationship metric I have seen.”• NPS is at least as significant as Six Sigma, maybe more for B2B firms, because NPS addresses the sources of organic growth, not just efficiency and cost reduction.





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The best companies apply a 3-D view.• They design the right propositions for the right customers, guided by market research statistics.• They deliver the highest quality at the lowest possible cost, guided by Six Sigma statistics.• They develop capabilities to listen, learn, and improve, guided by human resources statistics.• NPS provides a common language.

• “It’s a new way of doing business,” says the chairman of PetsMart, a successful builder ofextraordinary customer loyalty, growth, and stock market value. “It’s a shift in thinking that puts ourfocus keenly on the customer and has the power to drive growth for years to come.”

Segment customers by profitability and NPS, to create more profitable Promoters.• Most companies take such customers for granted.• Companies that emphasize only profit drift toward “bad profits” and creating more detractors.• Successful companies continuously upgrade the customer experience by listening, learning, andresponding.

• Intuit, an early NPS user, creating high lifetime-value customers, invites an “inner circle” ofPromoters to join a customer council online. Intuit found that the marketing department’s list of top-10problems, based on surveys, did not match customers’ concerns.• SAS software polls its customer council members regularly.• Enterprise Rent-A-Car holds employees accountable for customer scores. Says CEO Andy Taylor,“The only way to grow a business is to get customers to come back for more and tell their friends.”





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An NPS rollout “is not as easy as meets the eye, but it’s completely doable.”• It requires a practical segmentation.• It creates new tools for customer dialogue.• It challenges IT capabilities.• It demands cross-functional alignment.• It requires new metrics linked to compensation.• It involves both senior executives and the front line.

Some B2B tips:• Although customer retention is important, NPS can be a better metric in B2B marketing, especially withpurchasing influencers who are forced by contract or policy to keep buying from a particular supplier.• When interviewing customer personnel who might not be in a position to recommend suppliers, track severaldifferent types of behavior and see which predict purchase activity the best.• Balance successive waves of interviews (i.e. quarterly, six-month, etc.) among different purchasing influencers• First run an NPS pilot test and gain experience before linking NPS scores to compensation. A poorly managedprogram will put NPS metrics in disrepute within the company..



For more information, see ultimatequestion.com and netpromoter.com



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Achieving is Always Better thanBelieving

How Customer Experience ManagementMakes the Difference

Richard OwenPresident and CEOSatmetrix Systems

[email protected]


Key insights from Richard Owen



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Although customer loyalty is among CEOs’ top priorities, few companies use the feedbackthey collect. But performance belies perception, creating two types of companies.• Believers: the 80% of firms thinking they provide a superior customer performance.• Achievers: the 8% of companies whose customers agree that they provide a superior experience.

• Achievers vastly outperform competitors in revenue and income growth.• A major shortcoming among firms---failure to develop capabilities to renew the customer experience.• Loyalty correlates with organizational strength and growth. “You can’t afford to not track it.”

Net Promoter® elements: a discipline for profitable growth by focusing on customers.• Metrics proven to link to growth• Leadership practices that instill customer focus, passion, and values• Organizational strategies to ensure adoption• Integration with core business processes• Operational systems to support the initiative

Net Promoter® and Customer Experience Management• Net Promoter is a flavor of customer experience management, like Six Sigma is a flavor of quality programs.• A complex sale will be affected by the last 3-6 months of the customer’s transactional experiences• Detailed feedback on individual customer touchpoint events leads to overall satisfaction scores and strategicperceptions of the firm (e.g. trusted advisor, ease of doing business).• Data produce a Loyalty Index based on “recommend,” “continue buying,” “choose again,” and “overallsatisfaction” scores.• Data produce the Net promoter Score, which should be granular when presented to employees, so eachknows and is accountable for his or her part of the score.





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Customer Experience Management Best Practices Key Ingredients

People: executive leadership and commitment

AchieversBelievers

Communication to customersNo broad communicationCommunication

Program is owned by employeesincluding touch-the-customer

Program is owned by theprogram team

Ownership

Program is seen as change agentProgram is measurement,low expectations of changes

ChangeManagement

Financial and behavioral incentivesaligned; penalties for gaming

No impact or incentivesIncentives

Ownership driven by linemanagement

Delegated involvement byline management

Line Management

Senior staff actively engagedConstant re-commitment

Limited CEO/Exec staffinvolvement

Leadership

© 2006, Satmetrix




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Programs: getting the right information at the right time from the right respondents to the rightaction owners.

AchieversBelievers

Enterprise-wide, includes cross functionalCustomer Champions

Limited to program teamProgram Plan

Enterprise-wideMedia depends on audience

Limited to program teamDistribution

ContinuousIncludes Transactional

Low frequencyCurrency

Goals and targets linked with KPIs/corpmetrics, established improvement goals

No linkageMetrics

Media depends on respondentOne size fits allMedia

Multi-strataCensus philosophy

Limited segmentationSample Philosophy

Respondent

Measured x-all touchpointsEnterprise solution

Department levelsystems

Lifecycle


© 2006, Satmetrix



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Process: Aligning the CEM program with organization strategy and operations.

AchieversBelievers

Integrated into corporatedashboard/reporting

Outside mainstream corporatereporting

Corporate Reporting

Aligned with partner strategyNo channel or partner inputDistribution Strategy

Actions segment specificGeneric action plansSegmentation

LeveragesDisconnectedInternal Best Practices

Single Customer ViewMultiple views, no consistencyCustomer View

Closed loop processIntegrated into core processes

Independent of core corporateprocesses

Action Process

If you have a separate set of meetings to discuss CEM data, you’re missing the point and youare not integrating CEM into existing processes.


© 2006, Satmetrix



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Practical steps for the Net Promoter discipline• Don’t sample, take a census• Business to Business requires census, not samples. Net promoter data are used for informing planning as well as conducting timely account-level reviews.• Stratification of respondents improves quality and account-level dialog.

• Different execs (CEO, CIO, etc.) have different satisfaction criteria.• Customers vary by many dimensions: segment population, small vs. enterprise accounts, likelihood ofmany touchpoints, unit contribution to financial success, specialized servicing, need for/deserving ofattention

• 75%+ response rates are achievable.• Low response rates are caused by asking people who don’t care. • Never ask someone for an opinion unless you’re prepared to accept a non-response as a“dissatisfied” customer.• Accounts with lower response rates generally have lower percentages of Promoters and higher rates of“lost” customers.• Low response rates (<25%) from accounts should be viewed as a “red flag” that the relationship may beat risk.

• Micro data analysis rather than heroic extrapolation.• Subjective account level review is valuable• Integrate tracking and monitoring into the business reporting and account management processes.• Confidential interviewing will give an accurate answer, but non-confidential interviews can get into details thatare actionable. There’s no reason you cannot get high response rates from non-confidential interviews.• Don’t interview specific people frequently, more than every six months. Keep questions short, one openended, one closed. In B2B where interviewing timing might be a problem, Web-based interviews work fine.• Higher level execs are direct in answering questions. In B2B, they have a stake in your success.





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Go On … Ask the Question

Simon LyonsGlobal head of Communications & Marketing

Aggreko [email protected]

+447736112OO8


Key insights from Simon Lyons



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Aggreko (based in Glasgow, Scotland) is a specialist rental business• Renting power, temperature control, and oil-free compressed air equipment• Global: subsidiaries in 27 countries, doing business in 80• £1bn in assets, 2000+ employees, £1bn revenue• Major projects (75% of our business) and local business. Transactions average £15k; one-week rentals• Solutions driven, wide and surprising variety of applications• Referrals are critical to growth.When we started …• Poor mechanisms for customer feedback

• Unstructured, anecdotal• Incomparable across time and geography• Hypothesis-based strategies, resulting in

• Weak customer based arguments• Triumph of factual finance over cuddly customer issues• Rear view mirrors rather than predictors

• No collation of customer issues • No structured issue handling• Time lags between detecting operational issues and action• Annual satisfaction surveys – unsatisfactory• We could predict usage, but we didn’t know what customers thought of usHow we got into Satmetrix• Prof. Reichheld’s seminal article in Harvard Business Review (“The One Number You Need to Grow,”December 2003).• Great idea but can we do it ourselves? Worth investigating – we are Scottish and frugal• Satmetrix had the smarts, experience, analysis, user interface, credibility, and comparative data• Potential for immediate benefits vs. opportunity costs of delay while customers defected





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How the system works at Aggreko• Low-tech system that doesn’t interfere with day-to-day operations triggers sales force when customerfeedback at time of equipment return signals outstandingly good or bad service; results posted on the Web.


© 2006, Aggreko plc



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Questionnaire format• 3 loyalty questions—recommend, satisfaction, future intentions• Drivers of that loyalty through customer touch-points;

• Sales professionalism• Service Performance• Equipment performance• Invoicing

• Value for money? People tend to answer more honestly via email than face-to-face (“could be cheaper”)• We found that higher ratings allowed higher prices and upselling enough to pay for the system.

• Experience variance on expectations [open]• Nominate one area of improvement [open]• All results available to be seen by Aggreko personnel on the Web. The transparency helps us break throughregional fiefdoms worldwide.

Scoring and action agenda• Customer Loyalty Index (CLI) score – average of recommend, satisfaction and future intention scores• If CLI is <2, or >8 then automatically triggers an email to salesperson, his manager and regional manager – action plan requirement• If CLI 2-5, then salesperson must develop an action plan• Net Promoter Score = advocates less detractors. It’s our external efficiency metric.

• Defined as those scoring 9+ on the recommend question less those that score 6 or less• A single metric that works across areas, function, equipment, processes etc





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Customer Experience Management & Satmetrix benefits• Real time measurement

• Urgent and important issues become actionable immediately• Opportunity to identify “at risk” accounts• 20 seconds after the customer has registered a poor score, the CEO could be on the phone to get

the customer’s viewpoint.• Allows measurement of operational performance as a balance to financial metrics• Gives fact-based operational reporting

• Customers give their unadulterated perspectives• No hiding or moderating in translation through the workforce.

• A credible method of comparing operational performance• Standardized – across geographies, functions and drivers• Customer defined and externally focused• Fact based and actionable

• Allows the business to develop fact-based propositions around the preferences of customer sectors.•You can allocate money to areas that are important to the customer.• Counters the scourge of averages

• “Never attempt to cross a river that is on average 5ft deep” ©

• Even in successful areas of a business, the spotlights need to be shone on underperforming accounts,functions and products. We found, for example, some of our worst-performing areas were tucked withinour best-performing regions. Averages had hid that.

• Visibility of the customer’s view of the relative value of different parts of the service proposition• All business drivers are equally valued internally but the customer did not think so?• CEM reports highlight what is important to the customer and how we perform against it.• Is it possible to over-perform, spending too much where it’s not important?





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Where next?• System on board for six months. “It’s changed how we think and manage our business.”• Still need to fully embed it across our business

• Common reporting platform -- dashboard• Minimum threshold requirement of data integrity before it can be used for bonuses and rewards.

• Collect 18, 24 months of data before applying data to compensation.• Database will help to spot system gaming.

• Redesign around insights and then develop capabilities to stretch our market lead• Look at customer feedback in tandem with share of wallet data.

• Drive business performance in the accounts where we can show there is most potential• The data could also have value for

• due diligence examining possible acquisitions.• predicting future revenue• test marketing new products and price variants

• CEM helps to loosen the grip of financial metrics on the company.





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Engineering the IBM SMBCustomer Experience for Stronger

Connections and Better Insight

Virginie HarrisDirector of Integrated Marketing Communications

IBM [email protected]


Key insights from Virginie Harris



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Despite market perception that giant IBM primarily serves large companies, our Small andMedium Business (SMB) operation is the second largest sector of the company.• Our new program, just rolling out, draws on products and services from the entire company to serve small and medium business. • SMB has the most aggressive growth goals and is expected to be IBM’s largest sector in a couple of years.• SMB work on the customer experience reflects IBM’s commitment to the midmarket• We are still in the launch stage for the program described here.Understanding current perceptions was the basis for looking at new approaches• We found that greater company awareness and preference creates a shorter sales cycle.• We studied the drivers of preference

• We needed to overcome perceptual barriers: not having the right offerings for SMB customers; overpriced; difficult to do business with;not being committed to the mid-market.• At the same time, we needed to leverage IBM “aspirational brand” image among SMB customers. Theywanted to do business with us, but thought we didn’t care about them.

Building a strong foundation: driving internal alignment with market requirements• Coverage model: aligning the right selling and marketing resources with the right customers and prospects; optimizing our cadence. We had been serving only a small pool of customers in a 500K customer universe.• Ecosystem: expanding our channel reach and effectiveness by helping partners grow their businesses, skills, and network.• Offerings: having the right offerings, integrated in the right industry programs, with the right selling skills.

• Just scaling down big-company solutions did not signal a commitment to SMB.• We surveyed SMB customers about wants and needs and developed 10 criteria for new offeringsconstituting an IBM “subbrand,” so to speak, tailored for their specific needs.•These offerings were the keystone to our credibility as they were a tangible proof point of our commitment.





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We unified and enhanced these initiatives so customers would feel they have a relationship with IBM, a differentiated emotional bond via the experiences most relevant to customers.• Researched the customer journey, the “moments of truth” at each stage, and IBM capabilities at each stage. • Our differentiated value promise: “IBM offers simplified access to an unparalleled network of people, products, and services designed to help mid-sized clients solve their business problems.” Key moments of truth in the customer journey: The differentiated experience needed tocreate a positive takeaway.

graphic © 2006 IBM Corporation





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Delivering the promise to current and prospective customers:

graphic © 2006 IBM Corporation





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Developing proof of concept to quantify the business impact was key to getting internalsupport• Quantify the potential revenue opportunity of the overall experience.• Measure potential impact on key mindshare measures• Provide the rank order and relative magnitude of impact that each program element will have on IBM’s fivebrand dimensions and likelihood to consider.

• Qualitative research provided feedback on the concept and identified attributes for quantitative research• We designed our quantitative research to feed data into with IBM’s mid-market brand equity modelprojecting share-of-wallet impact.• Projected 3.3 share-point gain (in a multibillion dollar market) if we achieved 100% awareness and100% delivery But even10% awareness/delivery makes a viable business case with a 0.3-point gain.

• The study also identified the relative contribution of program elements. The Concierge has the most impact.Post-sale Call Back program to customers build loyalty and provide institutional feedback. Unresolved problems are taken to management to be fixed. Call backs generate positive feedback and possible additional sales. No system is 100% perfect as we roll this out, but our philosophy is to get it going and then improve. Get everyone in the organization to embrace the vision. Good ideas can come from outside the design group.Importantly, brand differentiation that extends beyond offerings alone is key whenovercoming well-entrenched brand perceptions.• A strategy which is modular, executable and delivers on the experience promise• A programmatic architecture which is flexible in order to accommodate the needs of the organization• An extension of our channel progress• Demonstrates significant potential opportunity.• Continues to put the customer first• A repeatable asset. For example, IBM is leveraging its customer experience expertise into a product designconsulting practice launched in 2005.





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Analyzing the Worth of YourCustomer Relationships …

by integrating data on product, service,relationship, brand and price

Bradley T. GalePresident

Customer Value, [email protected]


Key insights from Brad Gale

Author of, most recently:Managing Customer Value: Creating Quality and Service That Customers Can See,(New York: The Free Press:1994)



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You need competitive price information as well as competitive attribute comparisons toanalyze the worth of your customer relationships. Are you overpricing or underpricing?• A lot of companies have such data already—locked in functional silos. Few firms put it all together for acustomer value analysis and value-based pricing.• Sources of B2B customer-perceived value (CPV) data:

• Performance scores • Your mental models refined by customers • Market perception surveys• Engineering measurements, normalized

• Attribute importance • Mental models refined by key accounts• Stated scores direct from surveys • Influence weights derived from surveys

• Transaction prices: Competitive intelligence• Customer’s other costs: Cost-in-use analysis• Market-share trends: Industry analysts• Your unit costs: Your cost accounting

• Industrial purchasing managers do such value analyses• The key is monetizing the value of competitive attributes to determine value delivered vs. price charged.





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Sample cost and performance input data: industrial air cleaner market• Data concerning brand, relationship, and customer experience could be added.• Can you assemble similar data on one piece of paper in your company?

graphic © 2006, Bradley T. Gale





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Generic data input form: the marketing equivalent of the income statementStandard Input Form (Input Generic)

Market Segment

Data source

Analyst Date 1/31/06

F-V Slope (Value of 1 benefit point. Program will suggest a value if this is left blank.)

Currency $You C1 C2 C3 C4

SuppliersDimension Attribute Percent(Optional) (Required) Weight Score Score Score Score Score

Benefit Scores

Sum of weights 0

Prices Initial price 100Other cost 1 100Other cost 2 100






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DW

R refers to the D

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The Value Map: You can set prices based on the worth of your product knowing your cost, competitors’ prices, and the worth of their products. Analyzing performance and price together produces a “fair value” linereflecting the average price you would expect customers to pay for a given level of performance in the market and a "best value frontier" curve connecting the actual price-and-benefit data points of individual competitors offering the most customer surplus at various performance levels. • The fair value price less the actual price charged by a vendor represents the “customer surplus” portionof transaction value captured by the customer.• The price less the cost indicates the profit margin portion of transaction value captured by the vendor.






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Building Loyalty inBusiness Markets

Das NarayandasProfessor of Business Administration

Harvard Business [email protected]


Key insights from Das Narayandas



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Four steps to manage customers1. Select the customers you want to serve, and deselect those you don’t want to serve.2. You’ll need a portfolio of strategies to service relationships, driven more by capability and skills issues, and transactions, driven largely by capacity and constraint issues.3. You need a method to monitor the health of relationships.4. Are you making money in the long- and short-run?

A framework for communicating customer benefits

matrix © 2006 by Das Narayandas





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Be sure you understand the difference between features and benefits (many apparentlystill do not) and which features link to which benefits. • Few companies will find all their benefits falling into one quadrant.• Benefits can be moved among quadrants. Benefits in time become part of your company’s reputation.• Benefits in all but the lower right quadrant are used to acquire customers.• The upper left quadrant is the easiest to manage, although it is the most competitive and offers the greatestrisk of commoditization. Make it clear to customers how you are better than competitors. If you get a jump on the competition, you can become the benchmark, setting the rules of the game.• Marketing in the upper right quadrant copes with skeptical customers. The key issue is performance measurement. Don’t let customers perform their own measurements; do it jointly to ensure correct measurement and customer recognition for your superiority. Another option: third-party verification.• Operating in the lower left quadrant, ask customers how they perceive your firm, your products, your brand and your solutions. B2B marketers tend to give away the power of these benefits.• Benefits in the lower right quadrant are experiential, they cannot be used to acquire customers, but they arethe benefits that are most important to the relationship, and which counter competition in the other quadrants. Keep reminding customers of your value to them. Idea: Inform customers of costs incurred but not billed whenyou deliver free services beyond the contract.



For additional information, see Das Narayandas, “Building Loyalty in BusinessMarkets, Harvard Business Review (September 2005).



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Link benefits to appropriate members of the customer’s decision-making unit.

The ideal situation is understanding what’s important to whom, in terms of the entireexperience.

Graphics © 2006 by Das Narayandas

• I don’t see this kind of clear mappingof benefits provided to decision makers as often as I’d like to.• If you get this right, only then can youactually develop good metrics to measure the health of the businessrelationship, and price your offeringappropriately.





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Managing your portfolio of opportunity: your customer revenue streams.• Manage key customers as a portfolio rather than trying to be all things to all customers.

Graphic © 2006 by Das Narayandas





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The Total Customer Experience:How Emotions Explain and Drive

Brand BehaviorLiam Fahey

Executive DirectorEmotion Mining Company

[email protected]


Key insights from Liam Fahey

Author of, among his eight books:Competitors: Outwitting, Outmaneuvering, and Outperforming, (New York: Wiley, 1998)



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Emotions & Customers: Insights into What?• Latent Customer Needs: What emotional aspirations are not being met? What product/solution irritants need to be eliminated?• The Customer Experience: How do customers experience and value the firm and its products, solutions, services, relationships, price, image, reputation, etc.?• Explaining Customer Behavior: Why do customer segments behave and not behave in particular ways?• Brand Comparisons: How are brand preferences explained by emotional needs and aspirations?• Motivating Customer Behavior: What messages generate new interest and motivate new customer behaviors?

Levels of Emotion Mining



Graphic © 2006, Emotion Mining Company



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Customers might not be able to articulate the factors that influence their behavior, andcompanies presume that emotional research is somehow separate from the factors thatlink marketing to cash flow.

A research solution• Tom Snyder, founder of Emotion Mining Co., developed research technique in 1992 now adapted to B2B.• The insight into behavior and for managing the customer experience comes from distinguishing conscious andsubconscious emotions.• Our method identifies the words and associated behaviors of customer emotion without interviewing bias,providing an enjoyable experience to the respondent.

• Software assigns emotional labels to customer expressions of how they feel, collected in an online survey.• Software ranks emotions by intensity and invites respondents to write down associations and behaviors tied to each.• Analysis reveals subconscious feelings about brands in the customer’s emotional context.

Emotional segmentation dimensions: for whole organization and individuals• Pleasant vs. unpleasant emotions• Outward-focused vs. inward-focused emotions

Identifying unmet customer needs• Indices: Quantification of emotion “positives/negatives” reveal blatant and subtle service “advantages/ deficiencies” dominating the view of the product and company.• Profiles: Quantification of subconscious “aspirations/pitfalls“ reveal leverage points not being exploited.• Codings: Quantification of “emotional/rational/social” themes reveal the “impulsive/practical/creative” appeals of tcompany and brand.• Verbatims: Quantification of key “attributes/features/benefits” reveal new ways to enhance solution functionality, new service possibilities, and new requirements for information and knowledge





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An Industrial Component Case StudyStudy design• 120 CEOs and general managers of small (20-99 employee) and large (100-250 employee) firms with sole or ultimate budget authority, recruited by a professional agency.• Executives completed the six-step survey process on computer screens at their own convenience, asked:

• How does the [industrial component brand] make you feel?• How does managing your company’s industrial component needs make you feel?• How does purchasing industrial components make you feel?

Results and implications• Indices

• Pleasant/Unpleasant: Unpleasant strongly evident suggesting there’s scope to improve the experience.• Outward/Inward: Inward predominant, implying that a solution and messages focused on the inward (i.e. the personal) benefits will be appealing and compelling (relevant, likeable, entertaining, persuasive),especially to small firm executives.• Active/Passive: Active predominant, suggesting these executives find themselves “overly active” and desire to be more “passively assessing,” especially large firm executives.

• Profiles• Managing: Feel consciously confident, kind, worthy, and proud, BUT

• feel subconsciously uncomfortable and afraid of unrelenting technological change• caught up in the current reality of many business challenges and issues, about which they reveal themselves to be fearful, unprepared, and anxious.

• Purchasing: Feel consciously joyful, confident, worthy, BUT• feel subconsciously serene, joyful, hesitant, and insecure• uncertain state dealing with the inevitable changes in the industrial component world—can we really get there?





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Results and implications (continued)• Codings

• Personal (what they say about themselves): Express more “personal” (especially in smaller firms), implying they have strongly established personal meanings and goals.• Rational (what they say about products and solutions): Express more “rational” (especially in larger firms), suggesting they desire solutions to hold but are concerned about technology change - want to create infrastructure.• Social (what they say about relationships): Express less “social”; it’s not enough about customers, employees, and competition.

Action possibilities—changing what we sell• We MUST move from a product to a solution perspective• Our solution is not the products we sell - it’s all that we wrap around them• We CAN sell (enable) the customers/executives to devote themselves to what they believe is important - and relieve them of the hassles they associate with industrial component purchasing and management• We CAN sell (enable) a paved way for the customers/executives and their fellow employees to reach new competency levels

Action possibilities—changing how we sell• Our sales force MUST be trained to shift from selling products to delivering services (and dealing with intangibles)• We CAN build relationships with more than one executive (even in small firms)• We CAN create a number of advertising and promotion themes around unleashing employees to be truly productive





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Insights on Customer Insights

Mohan SawhneyMcCormick Tribune Professor of Technology

Director of the Center for Research inTechnology & Innovation

Kellogg School of ManagementNorthwestern [email protected]


Key insights from Mohan Sawhney

Co-author of, most recently:Mohan Sawhney, Ranjay Gulati and Anthony Paoni, TechVenture: New Rules on Value and Profit from Silicon Valley (New York: Wiley, 2001)



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Customer insights do not come from quantitative market research. You cannot generateinsight out of numbers. Numbers help you to validate insights.• A customer insight is a fresh and not-yet obvious understanding of customer beliefs, values, habits,desires, motives, emotions or needs that can become the basis for a competitive advantage• You have to go deeper than what customers themselves say. Insights are not immediately apparent.• Anomalies are an excellent starting point for generating insights. Search for the element of surprise.

Examples of customer insights• Apple’s i-Pod as “being able to take all your music with you” but yet being “unobtrusive”• P&G’s learning about Japanese mothers as being fastidious about personal hygiene, spending a lot of time outside their homes and traveling on public transportation• HP’s measurement instruments being about “flexibility” in design applications, “ease of use” in manufacturing applications and “ruggedness” in field applications• Cemex’s learning that money transfer, financing and construction assistance was the breakthrough inselling cement to lower-income Mexican customers

Seven characteristics of insights1. Not immediately apparent2. Can be based on one data point3. Often come from unusual sources4. Often discovered accidentally. A customer complaint could indicate an opportunity (Intuit developed Quickbooks, the small-business accounting software, in response to complaints about Quicken’s limitations for small business)5. Often rooted in observed anomalies. You must observe your customers closely.6. Rarely emerge from quantitative analysis7. Need to be useful





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Problems in listening to what customers say• Customers often don’t want to, and sometimes simply cannot, articulate their needs and wants• Customers edit out solutions that they don’t know are possible – new materials, new technologies• Customers tend to ask for missing “me-too” features that other manufacturers already offer• Customers have a tendency for “functional fixedness”, and find it hard to imagine alternativeuses or functions of products• Customers try to offer solutions when asked about problems, not outcomes they really want

Research considerations• Don’t ask customers for solutions. They don’t know. Ask about their problems. And observe.• Don’t tell engineers “how to.” Tell them “what.” They want to figure out the “how to.”• If a focus group moderator takes 10 minutes to describe a new product concept, the concept is in trouble!• Your goal is not testing a hypothesis you don’t even have yet, but applying inductive (aka “interpretive”) research based on observation to form a theory or idea. Quantitative research draws on deductive (aka“positivist”) research to validate ideas.

Tools for customer understanding• What customers say. Focus groups, surveys, and depth interviews work best for articulated needs andexplicit knowledge.• What customers make, studied with tools such as metaphor elicitation, lead-user analysis, and toolkits.• What customers do, studied with tools such as ethnography and netnography, human factor research, andcustomer experience mapping.





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• Ethnography and contextual design in observational research:• Observe customers in their native surroundings to understand unarticulated needs. All behaviormust be studied in context, which can be hard to do in B2B settings• What it Entails:

– Observation of actual behavior– Interactions between engineers and customers– Exploitation of existing technological capabilities

• When It Works Best:– When developers are proposing solutions for an identified potential user population, whose needs are poorly understood.

• What to watch out for: – Time consuming, costly, serendipitous. – Immersing vs. drowning!

• Customer experience mapping: Experience mapping is a form of exploratory research that uses interviews and observation to trace the full stories of how real customers buy, use, and consume products. Experience mapping can uncover hidden purchase drivers and inhibitors, including:

– What is the end-to-end activity sequence in the experience?– What is the nature of the “ideal” experience at each stage?– What are the key frustration points?– What are the disconnects and hand-offs?– What are the opportunities for differentiation?

• Map different business segments individually.





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Principles of insightful customer research• The Right mindset -- 10 tips

1. Experience the task2. Open your mind; no preconceived notions. The enemy is success that closes your mind to alternatives3. Enter the mind4. Peel the onion; keep asking why.5. Respect the choice6. Learn to listen7. Be there yourself8. Look for anomalies9. Trespass to strange domains10. Keep moving on

• The right tools and techniques of investigation• Ideas from innovative customers and partners • Introspection, intuition and brainstorming• “listening in” on customer complaints• Observing customer behavior in native surroundings• Anomalies and discrepancies• Sales force and channel partner dialogue

• The right customers -- Thinking beyond your customers, listening to non-believers• Abandoners• Prospects• Competitor’s customers• Bottom of the pyramid customers• Adjacent customers• Actual end-users• Extreme users





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• The right metrics -- measuring the value of research• Decision value: What decisions did the research cause to be:– Different– Not taken– Improved• Learning value: What new understanding did the research provide usabout our customers and markets that:– We did not know before– Customers could not have told us– We would have guessed differently• Business value: What implications does the research have for:– Identifying new opportunities– Developing new products– Differentiating us from competitors– Seeing the market differently• Option value: How can the insights from this research be leveraged:– Across business groups– Across functional areas– Across research projects

For more information, visit www.mohansawhney.com



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