innovative camera: what does this tell us about customer experience megatrends?

Concept Camera: The WVIL from Artefact on Vimeo.

I'm a tech junkie but don't take this post as the ravings of someone who loves shiny, expensive toys. Instead, look at the video and answer these questions:

1. Why do cameras matter? In the US? In Japan? For young people? For older people?

2. Why are camera and phone manufacturers caught in the competitive spiral of increased megapixels, video formats, and miniaturization?

3. Compare a great photo with a great piece of video. How easy is it to take a great photo compared to telling an awesome, compelling story in video?

4. What huge gap do such cameras create in the market?

5. Who will fill that gap?

If your answers don't include things like, audio, color correction, format transcoding, cloud storage, intuitive editing, collaborative production, flexible workflow, story-driven product, sharing, emotion, social networks, and terabytes, then keep at it! 

Oh, and I suppose the answers may include Apple.

why women rule the internet

The logic of the article isn't airtight, but the statistics are compelling: women are creating more economic value on many top social sites than men. 

What's not clear is the extent to which women's presence on these sites is a result of male presence on the sites. It's also not clear what specific behaviors and motivations are precursors to transactions. Is this an example of a lot of women individually using the sites to enable transactions? Or are they exploring their buying options, tastes, self-image, collective image, etc., first, as a prelude to making a buying decision? Are they doing all this by interacting with other people? Men? Women? Both? Why? 

Given that computers and the Internet started off being dominated by males, what does this observation tell us about megatrends in the market? Business imperatives? Analytical tools yet to be developed?

cem's five forces

I keep getting asked about my five forces model for customer experience management. And while I certainly crafted them thinking specifically about customer experience, the framework fundamentally redefines how a business should operate.  It clarifies what a business should measure and how they interact with various "forces" that surround them. 

I saw a great article that summarized a few top marketing frameworks, and I was inspired to comment on it giving a quick summary of my model. Here's what I said:

Five forces of customer experience

A model I've been developing and applying successfully is what I call the Five Forces of customer experience.

The core inspiration is the idea that value is created in the mind of the customer. What someone is willing to pay is based on a complex mix of perception drivers. How these perceptions are created, and can be managed by companies, are topics critical for businesses to understand. It makes explicit a lot of the underlying assumptions in Porter's Five Forces - you'll note that his forces do not explicitly include people.

The five forces of customer experience that I have identified and named are:

1. The person (how do I define value? how do I define values? what emotions are in play? what rationales are in play?). This is the discipline that brings together decades of work on cognitive, behavioral, cultural, and brain studies. You can't be a good marketing company anymore without knowing who Daniel Kahneman is. Nor can you be an international company without knowing the work on extending Sproles/Kendall to multiple cultures, or the GLOBE cultural taxonomy, or concepts like power, distance, and so on. 

2. Networks of data. (Comparison sites may be an example, but they quickly morph into the third force below.) A network of data might include product specifications, maps, fact sheets, Wikipedia. They tend to allow the customer to form an opinion with minimal tendentiousness. While these sites are important, especially for complex or technical purchases and in the B2B environment, in my own view, their value is swamped by the third force.

3. Networks of opinion. (Comparison sites, UGC sites such as Yelp, Facebook, etc.). Networks of opinion are trusted because they include "people like me." These people may be proxies for networks of data (experts), or they may simply be taste-makers/trendsetters (the hipsters on Yelp). Influence analytics matter here.

4. The company's brand. (What do you expect from a company based on their public presence and reputation?) Boy, we could go on and on about brand. What I love is the concept of "brand hijack," which shows that a customer-centric set of forces is essential to understanding a company's market valuation. The brand (with positive and negative spill from the sector or past history) is a key component of reputation, and therefore reputational risk.

5. The company's interactions with a person. (How do representatives of the company, and representations of the company, such as CSR personnel, websites and tweets, advance or destroy my sense of the brand and/or support or threaten my value/values/emotional/cultural frameworks?) Of all the forces, this one is probably the most important for any company. Gallup and Carlson have both developed bundles of experience drivers, named in a proprietary way, that are heavily driven by interactions, usually over time. These interactions happen at "touchpoints" -- and companies have an opportunity to manage these touchpoints to trigger and mitigate the forces above, in a way that balances customer needs with brand values. Nevertheless, if a company's interactions with customers have been positive, but the company does something that violates the values frameworks obtaining in a market relationship, all those past interactions are discounted. (Just look at Netflix's stock performance after then announced their plan to break up the DVD and streaming businesses.) 

You can find out more about CEM's Five Forces at these links:

The Five Forces of CEM

Culture: A CEM "Five Force" Member

Whole Foods and the FTC

foley in film: lessons for customer experience management

SoundWorks Collection: Gary Hecker - Veteran Foley Artist from Michael Coleman on Vimeo.

What does the craft of adding sound effects to film teach us about customer experience?

Think of customer experience this way: The narrative can be strong, but the details - often unconsciously perceived - can make or break the impact of the narrative. It takes people with experience and expertise to deliver the unconsciously perceived components of your customers' experiences. 

Some examples: Angela and I are shopping for a new car. After doing the usual things, including taking test drives, and reviewing features, the salesman left his office for fifteen minutes, purportedly to take care of some task.

My own view is that he left us alone to talk about our experiences. This allowed us time to review our priorities, show our passion for the cars we had driven, and imagine our future with one of these cars. 

A key part of the experience, then, might well have been the time we were left alone. 

Another example, often cited, is the role that bathrooms play in how people assess restaurants. If the bathroom is a mess, then it's not an unconscious experience. But if the bathroom is beautiful and well-maintained - and on-brand - it can indeed be an unconscious reinforcement of what you might expect from the restaurant, what you might imagine the kitchen is like, and what you might say about the restaurant the next day. 

Citi vs Egg: A lesson in capital structure, experience design, and reputation

Citibank tried several years ago to integrate Egg, a UK-based online-only bank, into the Citi way. 

Disaster ensued.

Luckily for us, the whole story raises profound questions about the role of customer experience in an M&A strategy. 

At the root of the problem: Citi "fired" undervalued customers. Value, of course, defined by Citi. In short, they did what CRM gurus have been promoting for years: dividing your customers by the value they represent to you, and then adjusting your corporate processes to be cost-effective within those profit-bands. Any customers for which you make insufficient profits are targets for firing. 

This is a perfect example of how CEM differs from CRM. The scope and scale of the branding, process design, and technology integration into customers' lives are completely different. This is where a change in scope becomes a change in kind. To see what I mean, click here and enjoy the case study!

hierarchy of values: moving on from maslow

Big discussion going on at NeuroScienceMarketing.com (nice site) about Maslow's Hierarchy of Needs. A guest blog author submitted the idea that Maslow's framework could be used to organize the service experience. 

Lots of people loved the article. I did, too, but it was because the article is flawed: Maslow (even by his own admission) needs to be tested, and taken with a grain of salt. In fact, it HAS been tested, having been the subject of many articles, studies, and critiques. That's OK. We still love the guy. And getting things sort of right is better than doing nothing at all. It gives the serious business person, the academic, and the thinking person grist for the mill, and we love that.

In my research and work in customer experience management, I decided early on to make sure I backed my methodology with research that was cross-cultural. Having my global executive MBA from TRIUM, a very prestigious institution, I knew the hazards of applying what is "true" in one country to another country. 

As a result, I looked meticulously for research and frameworks that advanced my ability to discern and leverage cultural differences in values, motivations, and behaviors. I chose not to use frameworks where that work would be muddy or difficult. For example, I chose a construct culled from marketing research that breaks down people's thinking, feeling, and acting as being motivated by three broad "dimensions": the physical, the time-based activities, and the hierarchy of values activated in a touchpoint (or point of reflection). 

Another very popular construct breaks down thinking, feeling, and acting differently, focusing on cognitive (thinking), affective (feeling), and conative (acting) dimensions. Makes sense - except where do variations in cultural values, or the physical environment, live in this construct? Actually, they live in all three dimensions - which means that the cognitive/affective/conative framework requires that we ask questions about how hierarchy of values influence thinking, feeling, and acting by the customer. 

If you always have to ask how these three "independent" dimensions are in fact a function of hierarchy of values, then why not choose a framework that starts with a hierarchy of values dimension? Also, my preferred construct (environment/time/hierarchy of values) has two elements that are clearly focused on merchandising and process design (environment and time). Businesses understand these activities. 

I wanted to share with you here some of the research I've looked it on this topic. I summarized it as well at NeuroScienceMarketing.com, but you deserve it here.

• Sproles & Kendall, Consumer Style Inventory (varies across cultures, see follow-on research regarding Germany, Korea, and China)
• Research by Steven Reiss, of OSU, on fundamental desires and values (which I think is flawed as it omits storytelling as a way of creating value from non-desirable aspects of our lives - see logotherapy).
• N.T. Feather, et al., Values, expectations, and the prediction of social action: An expectancy-valence analysis.
• M.A. Morganosky, et al., Complaint Behavior: Analysis by Demographics, Lifestyle, and Consumer Values
• M.E.W. Varnum, et al., The Origin of Cultural Differences in Cognition: The Social Orientation Hypothesis
• Shalom Schwartz, et al., Value Hierarchies Across Cultures: Taking a Similarities Perspective
• Daniora Grundey, Delineating values, emotions, and motives in consumer behavior: An interdisciplinary approach. Another nice compendium of research. 
• Cathal Brugha, Trust and Commitment in Relationship marketing: The Perspective from Decision Science. Nice analysis of how market research is flawed, where her key assertion is that factors showing some level of independence in statistical analysis are imputed to be "dimensions" (which in math are absolutely independent). The article is probably not sufficiently independent for our work, but it does reference Maslow and Jung's personality types (which later evolved into Myers-Brigg). 

required reading

Discovered a new book today.

Organizational realities:
studies of strategizing and organizing

By William H. Starbuck, Michael L. Barnett

This book is great and you can preview it Google Books. There's enough good stuff in here to transform even the hardest-nosed manager into someone who understands strategy, self-deception, and human capacity.

global capital, global markets, and creating value

A partner at Palamon Capital talks about the inevitability of global financial regulation (to an extent we have this with Basel III). 

One interesting consequence of a more uniform global financial regulatory structure is a destruction of value through the creation of efficiency. Right now, the very differences between markets (capital markets, commodity markets, media markets) create wealth. This can happen through pricing arbitrage, creation of multiple product lines that generate overall more profit, and getting access to market information more quickly than your competitors.

I'm all for global financial regulations, incidentally, as long as they are meaningful. (That last caveat might be the sticking point.) Frankly, Africa and China did OK in the financial crisis, while the US and Europe - chief architects of Basel II - tanked. Something was missed. Credit, reserves, and their interplay got more intricate and smoky with securitized assets and a hunger by many organizations to sell-sell-sell mortgages during the real estate bubble. Many were, indeed, competing to see who could be stupider with their credit risk. 

In the customer experience management context, the same issues arise. Differences among cultures and countries can be key sources of competitive advantage. If you're Carrefour, you are more adept than Wal-Mart at adapting to local country norms, aspirations, supply chains, product strategies, and so on. The Carrefour "wet market" in China is an attempt to fit the cultural need for seeing your fish alive, not cleaned and neatly wrapped in cellophane. But as a global citizenry develops, thank to instantaneous communications, international education, frequent travel, and a brand ecosystem that's increasingly familiar everywhere, will the "glocal" strategy begin to lose value?

Perhaps, but really the "glocal" strategy was still a pretty ham-handed way to address your customers' needs. Micro-segmentation will prevail. Customer-defined services, products and experiences will generate a micro-segment containing just one person, over time. And I would argue that supporting such innovations will create more value than will be destroyed. 

Is there a parallel in global capital markets? Can products be so customized that the credit risk and financial profile of each individual can generate a unique product? 

Why not? 

Recall Egg, the online bank in the UK that Citi just about hacked to death. It moved from a customer-centric, happy bank with loyal customers to a shell of its former self, when Citi "fired" customers in part because they paid their credit card balances off on a regular basis. That makes sense in the old school way of optimizing customer profitability. It costs money to deal with customers who pay off their credit cards, but if they don't borrow money from you, costs exceed revenues. They're money-losers. Fire 'em by uninviting them to the party, closing their accounts, and calling them names. (Citi essentially accused them of being poor credit risks. What?)

Citi - and global banks - could have done this differently. But they needed first to see that their way of accounting for customer value (current, not future) was fundamentally flawed. Customers who pay off their credit cards can afford more debt. Keep 'em. If you ignore people with future value (as Citi did), and embrace people with future liabilities (as subprime mortgage sellers did), you're just asking for trouble.

So, to banks - and to other industries likely subject to future global laws - I say, fix the regulatory system, but make sure the real opportunity is still in your sights: create value the best way possible. No, not with interest rate arbitrage. I'm talking about the future spending capacity of your loyal customers. 

the new new venture capital paradigm

I've been doing a lot of work globally setting up big deals lately in my role as managing partner at Avos. It has given me a chance to dig into and improve success factors for the investments we're lining up. 

One client has a half billion dollar capital raise I'm helping with and a key issue there is how the Web fits into their strategy. They had a plan that sounded pretty good, but after some basic analysis, I've moved the conversation closer to what it needs to be: social, low startup cost, SEM compatible, full of experimental mini-value props that help us figure out what engages the target clientele. 

This brings up the evolving criteria used by the venture capitalist in selecting and shaping their portfolio.  I agree with much of Dave McClure's analysis (find it here) about the need for venture capital to move beyond its expectations of use of funds (build a darn expensive product and then find huge customers to buy lots of it). He proposes another angle, much more in line with how businesses succeed in the Web 2.0 world: 

• Build a product (cheap and fast)
• Market it (cheaply with SEM)
• Create revenue (integrating third-party payment systems)

His point is that the huge up-front costs in starting (certain kinds) of businesses are unnecessary and actually counterproductive to VC's needs for returns. This is a good analysis. VC will take too long to pick it up unless, as Dave says, they're innovative.

The reason VCs will be slow to adopt this approach is that they distrust cheap assets. They want their money to buy expensive, protectable things, systems, and markets. The old way? Do patentable stuff, or to build a service ecosystem that's hard to copy just by being very expensive. 

And yet expensive and protectable are two concepts that can be separated. It's far cheaper to start a new company whose brand is strongly differentiated (trademarks, customer behaviors, etc.), and lawyer up on protecting the brand.

Dave - whose street cred is impeccable in understanding the increasing returns generated from socially connected customers - misses the spine that should be throughout his product-market-revenue model.

As I posted on his blog, I would want Dave to look at the root causes of increasing total return to shareholders. This is essentially what gives VC their exit ... it bolsters their argument for the future value of the venture's cash flows.

It's precisely this argument that VC can sell to people whose money will replace theirs (next tranche, IPO). Don't forget, your first product, market, and customer is venture capitalists.

So, the problem to solve is creating a company that measures how to create increasing total return to shareholders (TRS). Drive that, you will please the VC.

What are the drivers for increasing TRS? 

1. Compelling and engaging value prop - for social media plays, this means solving a problem, engaging the imagination, architecting a user experience that is easy to adopt AND YET NOT GENERIC (god, I hate those 'don't make me think' UI people who make everything so 'web 2.0' that it's all the same vanilla cr*p), lowering barriers to recommendation, allowing co-creation and sharing, and enhancing the customer's reputation. When possible, make vendors/advertisers a legitimate, welcome part of the recommendation, co-creation, and sharing network. This builds into the customer's mental model that the value exchange in the model might, occasionally, and when appropriate, include money. You don't want to introduce the revenue model later, after the customers have gotten used to "free", and even worse, have embedded their own "advertisers suck" values into the brand.
2. Cognitive sophistication in customer experience management. Most Web 2.0 business are woefully lacking in this. But that's because most business people are woefully lacking in this. 
3. Well-designed multitouchpoint ecosystem, including partner ecosystems, that is measurable. (Both behaviorally and attitudinally. This innovative voice of the customer systems. Most existing ones are terribly intrusive.)
4. Hella analytics. You cannot fix what you do not measure.
5. Lots of experiments, well-designed and targeted to increase customer engagement (see Gallup and Carlson). Got ten features? Six generate 90 percent of your income? Find out why by running more and better experiments. See step 4 above, lather, rinse, repeat.

And you're done.

The rest of Dave's argument can fit with what I outlined.

Remember, the goal is NOT to make it cheaper, or to engage customers sooner, or even to get revenues. Cheap can be bad. Engaging early adopters is not enough. And revenues can be expensive: you have to have profitable revenues that are also early indicators of future customer value. (Whuh? If you don't know about total lifetime customer value, how to measure it, and how to create it, you've got some fun reading - and necessary hiring - to do.)

All that equals ... increasing total returns to shareholders.

THAT you can get funded.

apple, inc. versus consumer reports

Consumer Reports, the venerable US magazine with over 7 million subscribers and a product quality laboratory, has recently reversed its approval of the iPhone 4, saying they cannot endorse it because of real, measurable issues with its antenna reception.

But Apple has such a strong brand, will such an announcement harm it? iPhone demand has recently been announced to remain strong throughout the supply chain, with Apple still struggling to keep up. Clearly customers want what they sell. 

You bet Consumer Reports' refusal to endorse the product has hurt Apple -- for now. See the Google finance chart comparing Apple's stock price to NASDAQ (APPL trades on NASDAQ). 

Apple got hit by the news Tuesday, and its stock promptly dropped.

And who might be benefitting from Apple's woes? Take a look at Dell's and HP's stock prices, compared to Apple's.

Now, Apple-haters may find this really good news. Apple's loss is the PC world's win. A few extra points for Linux and Windows!

Ah, but as I contemplated this fiasco for Apple, I noted a silver lining, to wit: Apple is a consumer product company, right? Why would companies whose bread and butter is B2B benefit from Apple's decline?

My conjecture: Apple is increasingly being viewed by investors as a business products company. That, my friends, is a huge win for Apple. 

Provided, of course, they can restore their former luster by dealing with this PR issue and making up with their audiences - customers of all types, the media, and the pundits. Apple, you gotta pay the piper this time, I'm afraid. There's too much at stake.

save me from the "timely, quality customer service" cheerleaders

A recent LinkedIn colleague, in a sincere attempt to provide value to her audience, posted a link to a white paper that was equally sincere in its "common sense" observations about the value of "timely, quality customer service" for creating loyal customers and profit. 

Save me.

Common sense is not always correct.

"Don't treat customers with indifference," claims the white paper. Let's talk about indifference, and its antonym in the world of service, empathy.

When is an indifferent experience "on brand"? We've done studies that show that the indifferent treatment of a customer in a Louis Vuitton store is correlated with their purchase satisfaction. Seems contrary to logic. Until you remember that really hot girl (or boy) you were attracted to in college who wouldn't give you the time of day. A brand is not about service alone. It's about desire. I am not saying that Louis Vuitton's customer experience throughout the entire lifecycle should be indifferent. However, its brand values are not advanced by consistently being empathetic. This is not common sense, but it is critical to understanding their brand and how processes, people, and technology should be aligned.

When is an "arm's length" experience "on brand"? Ritz-Carlton's experience is far more collegial and subtle than Wal-Mart's (at Wal-Mart's best). But collegial, subtle experience is best for Ritz-Carlton's brand. (The Four Seasons, I think, would be called more deferential in its luxury service brand, contrasting Ritz-Carlton's collegiality. Ritz-Carlton's mantra is "We are ladies and gentlemen serving ladies and gentlemen. We can talk about masculine and feminine cultures in another posting - in the meantime, you might enjoy Gordon Rattray Taylor's coverage of the topic in "Rethink".)

When is an experience, even an enthusiastically empathetic service experience, OFF-brand? Wal-Mart's ejection from Germany was driven in large part because they were "too" service oriented. Germans have a different buying style. The last thing Germans want is a warm, extroverted welcome by a blue-smocked employee at the entrance. 

The white paper goes on: "Minor, incremental service improvements can be hugely profitable." True, but that does not mean that good customer experience is a "continuous improvement" process.

The interaction points between a brand/company/product/service and a customer do not uniformly create value. Some of these touchpoints - if they go badly - are "moments of truth" for the customer where experience is so bad they will not return. But the customer may not blame the brand.

Consider an incremental improvement in the wobbly, or even non-functioning, wheels of shopping carts. Surely, that's a problem worth solving. Many shopping carts have wobbly wheels. It's frustrating, but do customers blame Safeway over Giant? The effort involved in fixing something that has zero impact, positive or negative, on the brand, could be spent elsewhere.

Other touchpoints - if they go badly - also destroy brand value, particularly if the promise of the touchpoint - if it had gone right - would have been to deliver a key element of the DNA of a brand. The point is, if these touchpoints go well, they can make customers happy, and brands stronger - but not every positive experience is necessarily a "branded" experience. If you get valet parking at every hotel you go to, how does that build loyalty to the brand? In fact, "minor, incremental improvements" to arbitrary touchpoints can be a WASTE of money. Focus on what's good for the customer AND what's good for the brand.

"Timely, quality care is a crucial factor in retaining customers," says the white paper. This is true to a point, but timely, quality care for many companies is expected. What this adage says, then, is, "If you offer timely, quality care, you will not upset your customers, and therefore will not give them a reason to leave." But think about that - just because you don't give a customer a reason to leave, does that mean they'll stay? That depends on the competition, on convenience factors, and a bunch of other stuff out of your control. In fact, I would say that timeliness and quality should be appropriate to the brand and those brand values you most depend on should drive your allocation of innovation and quality assurance effort. 

Let me give you an example: I just rented two cars on a recent business trip to the West Coast. Two different companies - but the car return process was the same. Simple, easy, fast. But not memorable. Is this timely, quality care? Yes, and that's good. But have these companies wasted their money? Yes, because I will not choose one company over the other in the future. Now, suppose they had e-mailed me my receipt afterwards (as Apple Stores do after a retail purchase). Now I have an "end experience" that reinforces the brand. Suppose they pegged me as a "growable customer" in their CRM analytics. They could upsell me with a coupon. Suppose instead they pegged me as a loyal customer. They could reward me with a free upgrade on the next visit. And if their brand values were "fuel-efficient cars from a time-efficient rental company" (hey, it's not a tagline, it's a concept), then maybe I'd be offered a discount on a Prius if I joined their "save trees" club. 

All in an email - which kills no trees.

So, the end experience is far beyond "timely, quality care". It is a moment of truth for the brand - and in this scenario, a moment of truth for me and my personal values. 

The efficiency of the rental car return REDUCES the opportunity for a warm thank-you. For this kind of brand, it needs a human face. Otherwise, car renters will just think of all these companies as "rental car" companies. Which, sadly, is how they think of themselves, because they're leaving a lot of loyalty, and profit, on the table.

viral marketing: curiosity as drug

J.J. Abrams, the Hollywood director-writer-producer wunderkind responsible for a seemingly unending stream of successful TV and movie products, is beginning filming on Super 8, a movie set in 1979 with an aliens-among-us theme.

The interesting part is that a well-organized alternate reality game (ARG) has already been launched. It got on people's radar with the appearance of the movie's trailer shown during Iron Man 2's run, and now it's taking off. 

If you missed the Cloverfield movie and its viral marketing, you're in for a treat. In the latter case, the viral marketing helped make Cloverfield's January 2008 debut the strongest January opening ever.

Expect series box office on Super 8. It's got what they call in Hollywood "pedigree", and it's got Paramount on the viral marketing ARG job, and boy howdy, they're good.

It works for a simple reason: When a person becomes curious about something, chemicals are released in the brain that feel so good, you become "addicted" - perhaps not literally addicted, but it sure feels good. If you need the studies backing that up, let me know.