Imagine we run a simple business making and selling rubber dog toys.

Each costs $8 to manufacture and we sell them for $10, making $2 on every sale.

If we sell a million units our gross profit is $2m. Very simple.

Here's where things get interesting:

If we reduce our price by just 4% (to $9.60), how many more units do we need to sell to make the same $2m profit as before? The answer, which shocks most people, is an extra quarter of a million units! 25% more sales, to compensate for just a 4% price drop.

By contrast, if we increase our prices by just 1% (to $10.10) how much more profit will we make if we sell a million units as before? An extra $100,000 — 5% more for nothing!

As you can see, the impact of minuscule price changes on profitability is typically massive, especially for big businesses. So why are arguments for CX investments so often based on the same bilge about retention, loyalty and satisfaction, all of which do nothing to increase contribution margins? It's shocking when you think about it.

If improving our customer experience gave us greater pricing power — reducing the need for discounting, or allowing us to charge just half a percent more for example — the top and bottom line benefits to the company would be off the charts!

See this post on LinkedIn

Cleverness vs. randomness…

Most of what we learn in business books or articles are forms of cleverness — better processes, techniques, etc. — for managing factors under our control.

However, much of our success in business is due to randomness — factors that we can’t predict or influence. Sometimes for the worse: a client gets fired, a company changes ownership, budgets are cut. And sometimes for the better: a conversation with a stranger on a plane becomes a work opportunity. A contact you haven’t spoken to in five years unexpectedly puts you forward for a project.

To close out 2019 then, I’d like to share the most powerful concept I learned this year, from a mentor who introduced me to Jason Robert’s idea of “Luck surface area” — effectively, to embrace randomness and try to maximize the likelihood of serendipitous outcomes.  

How do we do this? As we go into 2020 here's a few simple ways to expand your luck surface area:

- Be more vocal about what you do and are passionate about
- Meet and introduce more people
- Pay it forward
- Listen more intently to what others say
- Tinker and experiment more
- Read stuff that is totally unrelated to your field (you’ll find new ideas there)

I wish you all a fulfilling and prosperous 2020!

See this post on LinkedIn

When developing or improving a value proposition it's helpful to think of customers not as rational thinkers, but as rationale thinkers* — where the stronger the reasons are for choosing your product or service the better.

Rationales fall into three categories: 

Functional - What it does
This is the most basic rationale — the need you satisfy, problem you solve, or "job to be done" (if you favor that parlance).

Experiential - How it does it
Faster, safer, more beautiful, more reliable, more comfortable, easier to use are all examples. Focus on identifying two or three compelling ones.

Financial - What it costs
Is it cheaper? Does it appreciate in value? Is it fairly priced considering the quality? Is it a Veblen offering? These are some examples of financial rationales.

Every proposition combines all three rationale types. The tricky part is identifying a distinctive combination that a) people care about and b) where you can out perform alternatives.

These rationales are important considerations for existing offerings too. If they aren't clearly understood and agreed upon internally, other activities — CX initiatives, advertising, etc. — will tend to lack solid foundations and focus.

*Stole this term from Rob Walker's excellent book "Buying In".

See this post on LinkedIn

Customers want simplicity. "Don’t make me think!" we’re told. But is this true?

Examine any aspect of life that’s meaningful or pleasurable and you’ll find the opposite — complexity abounds.

Bland food is nasty. Wines, music and art are often praised for their complexity. Books or films with basic plots are tedious. Many devote their lives to mastering pursuits that require great technical skill and nuanced judgement.

Relationships are also rich and highly complex. Communication too, thrives on complexity — of vocabulary, gesture and inflection. To call something “Thought-provoking” is a compliment not an insult.

Why then the obsession with simplicity?

Because most interactions are unwanted impediments to engaging with the complex experiences that brings meaning to our lives. Distractions or obstacles that prevent flow.

Ask yourself then — what rich, complex experiences do we or could we enable? A relationship, dialogue or creative act perhaps?

No less important, consider this — how can we be less intrusive or disruptive to people's lives, rather than demanding their precious attention?

Most of the world’s best design is like a clean windshield — vital yet invisible — helping the user immerse themselves in a more complex experience.

See this post on LinkedIn

No business should be customer-centric.

The term implies that the customer is at the center — the focal point of decision-making — and by virtue of that fact, other things are orbital or of lesser importance.

This can't be true because a business is a complex, dynamic system with inter-connected parts. To function well it shouldn’t have a center, it should balance elements of equal importance — customer desires, competitiveness, profitability, compliance, adaptability, employee well-being et. cetera — for the good of the whole.

The key to success is always making astute trade-offs, not maximizing along a single axis. Fixation on one piece of the puzzle always ends in failure. Lurching from obsession to obsession wastes money and induces instability.

Imagine an F1 team saying they are engine-centric, tyre-centric, driver-centric, or aerodynamics-centric. They’d never win because the real challenge is combining these elements into a single package. Great engine and bad tyres? Back of the grid for you.

Should many businesses be more focused on their customers? Absolutely. Should they be customer-centric? Absolutely not. What you need is a balance between desirability, profitability and longevity. Get just one right without the others and your days are numbered!

See this post on LinkedIn

There's a difference between what creates experiential value for customers, and what falls under the remit of "customer experience".

Consider a running shoe. A key reason for buying might be comfort, how it looks, etc. These factors are experiential in nature, but nobody says, "I had a great customer experience running in my running shoes." Despite being experiential factors, comfort and style are inherent properties of the product.

Art too is inherently experiential, but nobody says, "I'm having a great customer experience looking at my Van Gogh painting." We say, "I love this painting" - again referencing the product directly.

How about air travel? Here's where things get messy. What's part of the product or service, and what would a CX team be responsible for? It depends who you ask. The destination and price are definitely the product (to me). Check in process? I'm not so sure.

Two key points:

First, acknowledge that not everything that creates experiential value is the domain of CX teams, or you'll end up trying to take over everything, or be reduced to toothless advisors.

Second, decide within your business exactly exactly what you mean by customer experience and what you don't. Without a common understanding you're going nowhere!

See this post on LinkedIn

No concept is more central to business success than value creation. But what exactly is value?

Put simply, it’s a perception of worth, with perception being the key word.

Value isn't real. It’s a belief in someone’s mind. Artworks become priceless or worthless depending on their provenance. Stocks go up and down. A real Rolex is worth more than a fake, even if we can’t tell the difference. In all situations, belief determines worth.

Value then, isn't built into a product or interaction. It’s built in a buyer’s mind. How do we do this? Every way we can.

We try to form or change beliefs through awareness, communication, brand building and first hand experiences. We position our offerings as superior alternatives to something that's already valued by making it cheaper or better, for example.

But more than anything, we must start by understanding what beliefs our customer already has. What they believe about us, about themselves and about the world around them. What they want to believe about those things. What they might refuse to believe, even if it's true.

And to do that you need to spend time with them. Observing, asking questions, and listening. Because otherwise, whose beliefs will we design for? Our own, and who knows if others will share them...

See this post on LinkedIn

If you're a CX pro, UX or service designer, keep these 4 features of the human condition in mind and you can't go far wrong:

1. Our intrinsic motivators
We all want to be effective in life’s pursuits: to accomplish tasks, feel in control and establish truth — what's real and reliable. These basic drivers explain many common themes behind quality experiences: facilitating task completion, consistency, expectation setting, etc.

2. Costly signaling
Many experiences are impactful not because of the value they contribute to the customer's life per se, but what they cost the provider. Experiences that convey unusual thoughtfulness, effort or attention to detail will always be appreciated.

3. Pleasure
Our pleasures reflect what is evolutionarily advantageous - socializing, eating, etc. Unsurprisingly then, experiences that are physically, socially or intellectually gratifying are sought after.

4. Mood management
Daily habits are often strategies for balancing the two variables that underpin our mood - our energy and tension levels. As such, effortless and stress-free experiences are highly preferable.

Reference material:
Beyond Pleasure and Pain - Higgins
The Handicap Principle - Zahavi
The Pursuit of Pleasure - Tiger
The Origin of Everyday Moods - Thayer

See this post on LinkedIn

Even though customer experience is apparently at the top of everyone’s agenda:

Marketing week reported last week that only 10% of UK brands excel at customer experience. Admittedly they drew this conclusion using NPS scores, but given that it’s the main metric CX teams are trying to improve, clearly something has gone awry.

For all the endless bloviating about retention, Nielsen report that consumer loyalty has declined in the last five years.

Only 28% of CX professionals surveyed by MaritzCX think their programs are succeeding, and last year only 20% of businesses surveyed by Conformit had a rock solid ROI from their CX initiatives.

Clearly something's gone very wrong, but what? Some common culprits:

Prescribing CX improvements as the solution, without diagnosing the problem
Unwillingness to tackle root causes of CX problems
Ill-defined success criteria
Unclear responsibilities / poor integration with other departments
Paltry spend on qualitative research
Taking way too long to do far too little
Measuring the wrong things, making ROI impossible to prove
Too little focus on customer acquisition, increasing share of wallet and memory building
Ignoring category basics in favor of attempts at differentiation
I could go on...

What's your assessment?

See this post on LinkedIn

I’m sure you’ve been told that emotions are an important element of design and CX projects, but what of moods?

We are always in some kind of mood, and arguably — since they provide the backdrop to our lives — moods are far more important than emotions, yet the latter hogs the limelight.

Perhaps people assume that moods are too mercurial to be worth considering. Can you really design with mood in mind? The answer is yes. Not only that, the primary role of many products and services is actually mood regulation.

According to psychologist Robert E. Thayer — an authority on the topic — the entire mood spectrum is underpinned by the interplay of two variables: our energy and tension levels; the optimum mood being calm yet energized.

Most habitual behaviors move us in this direction by affecting either or both factors. Drinking coffee or alcohol, exercising, or checking social media are common mood management strategies, for example.

The CX and design implications are fascinating, in part explaining why low effort, low stress experiences are highly preferable — principles I explored in my first book. In retrospect it's unsurprising that these two principles (along with expectation management) have had the broadest and most successful application on client projects since.

See this post on LinkedIn

An astonishing amount of our behavior involves signaling — communicating our intentions, trustworthiness, values, et cetera. But for a signal to be reliable, it needs to be costly. People can lie. Signals that come at expense to the sender are more reliable.

This is easily observable in nature — a stag’s antlers are a handicap, but signal true fitness since they can survive despite them.

Costly signaling also explains many quirky human behaviors. People often tilt their head when having their photo taken, which exposes the jugular vein. Dilated pupils — a sign of affection — limit our field of vision. Being skinny in a world of abundance signals self-discipline and fitness. Committing to the great expense of TV advertising is a costly signal regardless of the advert itself. Examples are everywhere.

Costly signaling also explains the success of many CX initiatives. Often improvements are impactful not because of the added value to the customer per se, but because of what they cost the provider and what that signals.

As such, anything that demonstrates discretionary effort or thoughtfulness stands out, however trivial. Such opportunities are everywhere and — best of all — it’s greatly rewarding to make others feel special, regardless of the benefit to you.

See this post on LinkedIn

Here are some of the reasons a customer might stop buying from you:

They relocated
A change in life circumstances
Their problem is now solved (thanks to you)!
Their needs changed
Their budget got cut
Procurement policy / mandatory re-pitches
A rival offered them a better deal
A way better alternative came to market
A poor customer experience
They felt like trying something else for variety's sake

Look at this (admittedly incomplete) list and one thing should be quite obvious: most of the reasons that customers stop buying from us are beyond our control.

Even if we provide an exceptional customer experience, they can and do leave us — a crucial point that is roundly ignored by many CX advocates. Just Google “Reasons for churn” and you’ll see many of the obvious factors above are absent from the discussion.

Does this mean we shouldn’t care about customer satisfaction or try to hang on to our customers? Of course not. But it does mean that the growth potential through improved retention tends to be massively overstated, especially for the majority of businesses with mostly satisfied customers. It’s also one reason why the credible evidence points in one direction: brands grow through acquisition not retention.

Don't take my word for it - do your research!

See this post on LinkedIn

Here’s an interesting exercise or thought experiment to try:

Write down all the things that you think might affect a customer’s satisfaction. Off the top of my head, stuff like:

Price
Product functionality
Quality / reliability
Ease of use
Brand associations / expectations
Interactions with employees
Advertising / promotional activity
What a salesperson promised them
Word of mouth / reviews
Customer service

Now — if you’re a CX professional — ask yourself, honestly, how much influence you have over each.

Do you directly control any of them? Are any completely off limits? Do you have a bit of sway with others? Chances are you directly control zero to two. Most are somebody else’s turf, and some you have a degree of influence.

Now ask yourself whether — given the number of factors involved and the amount of control that you have — it makes sense to measure the success of your CX program with satisfaction scores or not. Does it honestly seem logical to measure your performance with a metric you have such little control over?

Instead, you can better prove your success by using project specific metrics that more clearly link your exact interventions to revenues or costs. This is often quite easy in practice and makes for a far more compelling narrative!

See this post on LinkedIn

In the broadest sense, marketing is about creating value for customers. As such, CX initiatives — which share the same aim — are fundamentally marketing activities.

Unfortunately though, many in CX — and the gurus they follow — don’t consider their work to be a form of marketing at all. Many even find the suggestion distasteful.

Either way, as a result they ignore law-like principles that should guide their work, instead pursuing strategies that are all but destined to fail.

As a profession, we urgently need to:

Stop trash-talking other disciplines, see our work as complementary to other specialisms, and seek ways to make our efforts work together for the greater good.

Stop believing mistruths about satisfaction, retention, loyalty, word of mouth, brand "love" and super-fans, and instead focus more attention on acquiring new customers to help our organizations grow.

Stop trying to deeply tailor experiences to small segments, and devote more resources to improving the basic experiential elements that appeal to everyone in the category (especially light buyers).

And we definitely need to stop using bogus statistics to sell the value of CX improvements. If you follow the laws of marketing instead, the results will speak for themselves!

See this post on LinkedIn

If you’re writing a proposal for a client, and need to provide an estimate — not a fixed price — here’s a simple approach that's worked well for us that you might want to try:

- Provide a range, not a single figure.
- Express it in the format "No more than X...no less than Y".
- Explain the assumptions behind the figures.

Here’s why this approach works:

A single figure (especially a precise one) tends to be interpreted as a commitment, not an estimate.

Expressing your estimate as a range shows that you’re thoughtful, acknowledge that there's almost always uncertainty and risk, and are probably a more trustworthy, higher calibre professional.

You’re setting an expectation with the client that significantly reduces their risk and yours.

By leaving room for contingency from the start, you’re setting a sensible precedent for the rest of the working relationship.

In providing clear rationale for how you arrived at the figures you don’t only show a proactive willingness to manage risk, you provide stimulus for discussion and make the client wonder how the other suppliers can be so sure of their single figure quote...

Good luck!

See this post on LinkedIn

I'm interrupting the regular schedule of value-creating content to share something a little more personal.

In March 2012, at the tender age of 28, I started work on my first book — The Ten Principles Behind Great Customer Experiences — a dream I never thought would come true. A dozen or so publishers had rejected the proposal before Christopher Cudmore at the FT Press took a leap of faith.

As fate would have it, he backed a good horse. The book won the CMI's Management Book of the Year and miraculously, 7 years later, the accompanying keynote speech is still in high demand and the book continues to sell well.

Not only that — at an age where most business books are being put out to pasture, I have just received my copy of the Chinese edition, which is now on sale.

The book has changed my life beyond recognition. The principles themselves have been used by thousands of organizations with millions of customers between them. By far the best thing about it has been the amazing people it has allowed me to meet — many of whom are connections here.

I'm grateful to everyone who helped bring it to life, everyone who has read it, and to the event organizers who have given me a platform to share the ideas — thank you.

Normal service will now be resumed!

See this post on LinkedIn

I’ve not seen much dialogue about personas / profiling / customer segmentation from the CX community, but it’s a topic I’m keen to hear opinions on so please share yours, especially if you disagree with mine.

While the evidence suggests that marketing efforts should target the whole category, with my design hat on I’ve always found creating personas or user profiles a worthwhile activity because:

- The research required to create them immerses you in the customer’s world
- The process encourages debate and surfaces assumptions
- The resultant profiles can be a useful communication tool
- They can help you identify candidates for further research, requirements gathering and testing

That said, for a set of profiles to be valuable I look for a "Yes" to these 7 questions:

1. Do the profiles explain observable differences in behaviors?
2. Can you point to real people who fit them?
3. Are they clearly distinctive from each other?
4. Do they cover the whole customer base?
5. Can each be sized by measurable parameters: value to the business, no. of customers represented, etc?
6. Does each represent a significant business opportunity?
7. Is it clear how these profiles aid our decision-making?

Most of the time, unfortunately, the answers tend to be "No"!

See this post on LinkedIn

Our design / strategy business, Methodical, doesn’t have a grand purpose. We don't even have a USP. But we do have some principles that we try to apply consistently, which I think is more beneficial in practice. They've worked well to guide our decision-making, so might provide food for thought:

1. Aim for a win win win
Greater value for your customers, an ROI for you, and a margin for us is our aim. The distribution of benefits may vary, but no party should get a bum deal.

2. Do the right thing and do the thing right
Invest the time to discover the real problem, then solve it as efficiently and effectively as possible. Don’t do anything that would upset you if the shoe was on the other foot.

3. Pay with grace
The unique goodwill that comes from paying our partners ASAP is way more valuable to us than better cashflow. We want people to do their best work without stupid distractions.

4. Practice what you preach
Do we use the grid? Yes. Do we use our CX worksheets? Yes. Do we try to show some thoughtfulness towards our clients? Yes. It greatly improves our credibility.

5. Use the best people you can afford
Top-flight pros estimate more accurately, produce better work in less time, and are typically self-managing. Ultimately this leads to better work and margins!

See this post on LinkedIn

Satisfaction is not enough, we need to delight our customers with every interaction. In fact, we don’t want customers at all, we want super-fans! I'm sure you've heard such earnest proclamations from CX gurus, but are they right? No.

In reality:


1. Delight is an impossible goal for most businesses because what they’re selling — parking cones for example — doesn’t have the potential to provoke such reactions, the cost of achieving it is prohibitive or both.

2. Once expectations are met, exceeding them doesn’t have as much impact as we think. We’re so used to poor service that we’re usually happy just to get what was promised consistently (a la Amazon).

3. Brands with super-fans tend to be niche players who deeply satisfy a small group, but at the expense of broader market appeal. So if we're big (or aspire to be) creating brand fanatics is at odds with our growth ambitions / market positioning.

4. Some customers just like variety so can’t be converted into loyalists, however hard you try.

5. Super-fans are typically the least valuable to a business because they're almost always a tiny proportion of buyers, so have limited spending power and capacity to raise awareness.

Be careful — what inspires from the podium may be dangerous in practice!

See this post on LinkedIn

Stop me if you’ve heard this one before: “It costs X times more to acquire a customer than to keep one, so we should focus on retention.” You may even have said it yourself. However:

1. Acquisition drives growth
Research consistently shows that successful acquisition drives growth and poor acquisition causes decline, more so than retention.

2. You might be retaining unprofitable customers
Many brands don’t know which customers are profitable or loss-making so fight to keep them all, to their detriment.

3. Acquiring more customers gives you greater leverage
The less each customer contributes as a revenue percentage, the less bargaining power they have, while a larger customer base can also give you more negotiating power with suppliers. Both can improve profitability.

4. Newly acquired customers recommend you more
Research shows a neutral or negative association between recommendation rates and brand tenure so if we want word to spread, we want acquisition.

5. Acquisition costs vary, so average figures are irrelevant
Category maturity, switching costs, brand strength and many other factors affect acquisition costs. The only figures you should care about are your own, not arbitrary, attention-grabbing stats.

The true costs might not be what you think!

See this post on LinkedIn