End of Product

Better Mousetrap catThe phrase “Build a better mousetrap, and the world will beat a path to your door” is often used as a metaphor about the power of innovation. If it is so simple, why has building a better mousetrap been so unrewarding? Why have most new product development efforts, that follow this wisdom, resulted in market failure?

Let’s start to peel this onion by asking what “better mousetrap” really means:

  • less expensive?
  • more effective, i.e. kills more mice?
  • more attractive in appearance?

the list can go on, and incorporation of these improvements may motivate a marginal increase in units sold, but the world rarely beats a path to a door proudly labeled “new and improved mousetraps”.

Those, who subscribe to the school of thought pioneered by Clayton Christensen, would argue convincingly that the “world” would rather not beat a path to a mousetrap, preferring the choice not to deal with mice at all. It is easy to understand that customers would prefer to pay for vermin being repelled from their dwellings, rather than to buy, set the traps, and deal with the dead mice disposal. In other words, a mousetrap is not a product at all – a vermin free dwelling is what customers want.

“The customers rarely buy what the business thinks it sells them. One reason for this is, of course, that nobody pays for a product.”  Peter Drucker.

Indeed, customers pay for obtaining a desirable outcome, they “hire” a product to do a “job”. From that perspective, they would likely pay more to obtain that outcome faster and with fewer complexities. In fact, minimizing the steps in the process of obtaining a desired outcome is at the roots of true innovation, the innovation that brings commercial success. In order to be successful an innovator has to be an expert in a “job” that customers would “hire” the new product to do. Yet, most want-to-be innovators are experts in products and/or technologies their companies sell. The critical pieces of the innovation puzzle are missing:

  1. clear understanding of the actual outcomes their customers desire,
  2. intimate knowledge of how customers experience the processes they use to obtain these outcomes, and
  3. empathy to motivate an innovator to find ways to simplify their experience.

Without these three ingredients, the “magic” of innovation is not likely to happen. For all intents and purposes, you are no longer set to design a “product”, but to design a “service” to deliver a simple and consistent experience for your customers, who are trying to obtain the outcome they actually desire. The degree of simplicity and consistency, and nothing else, will truly differentiate your offering from the others and will afford you to extract premium margins.

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Airbandb vs Hotels – Which Provides Better Guest Experience

AirB&B vs HotelI recently returned from visiting Italy and for the first time used airbandb.com to find and book accommodations for a considerable number of nights. Now, whenever I share my experiences of this wonderful country with my friends, they eagerly ask for my opinion about the differences between airbandb.com and hotels. It is not surprising if you consider that relatively few people had direct and multiple experiences staying with the hosts of this well publicized, but quite new platform. Most people, who ever traveled, have experienced hotel services.

My personal experience of airbandb.com was relatively positive as the process of room selection, booking and payment is substantially simpler than most hotel booking services. In most cases (81%) the description of properties and their reviews by the guests were specific, authentic and accurate. The price, and ability to pre-pay that eliminates effects of currency fluctuation, offer substantial value advantage over the comparable hotel room rates.

One of the most important attributes of customer experience is consistency of its delivery. Customers want to know that their expectations, created by company marketing messages, are going to be met. Every time. Most of us know what to expect when we book a hotel room. Judging by the analysis of 45K customer reviews, published on sites like tripadvisor.com and yelp.com, on an average 87% of guests have their expectations met or exceeded. I could not extract a similarly sized data set of airbandb.com customer reviews, but the one I got (~3K) has a substantially lower average satisfaction rating of 69%.

It appears the customer experience delivered by airbandb.com is more like Forrest Gump’s “box of chocolates – you never know what you gonna get”.  While not explicitly promising to take care of any potential problems in interactions with hosts, the company does create the expectation of personalized service and local knowledge. I do appreciate the time difference complexity, but 12-15 hour lag in a e-mail response time to a critical customer problem, as we experienced with one of the bookings, is not acceptable. In terms of local knowledge and advice, only 60% of the hosts were willing or capable to provide anything of value.

airbandb guests growth

Airbandb.com started as a “shared economy” platform for low cost accommodation rental, “air mattress bed and breakfast” and was a better alternative to a hostel. Now, many “room” hosts are small hotels, real b&b and real estate investors. That transformation was not clearly understood by me when I made my reservations and my experience did not meet my expectations of authenticity in 3 out of 5 hosts.

In summary, I would recommend to experiment with airbandb.com only if you have more time than money as the cost advantage is indisputable at this time.


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Customer Reviews – Trust, but Verify

Customer Reviews-Trust, But VerifyDuring the last two decades customer reviews and ratings became an ubiquitous part of e-commerce. Over 88% of consumers gratefully use them to select goods and services, whether they purchase them online or off. There are numerous studies that tie in availability of customer reviews to increases in sales, occupancy rates and other business benefits. Nevertheless, there are some people who question the authenticity or usefulness of customer reviews and ratings at large. There are certainly examples of attempts to manipulate consumers with fake reviews or inflated scores, but overall the usefulness of publicly available product/service reputation information is undeniable.

While there is a law to protect consumers from predatory marketing practices, it is important for consumers to learn how to assess the meaningfulness of information they use for purchasing selections. I would like to illustrate this point with personal experiences I had during my recent travel to Italy.

After researching the reputation of multiple airlines, that fly between San Francisco and Italian destinations, I booked the flight with Turkish Airlines. The company seem to combine high levels of satisfaction (according to online customer reviews) and very attractive rates.

Turkish Air sNPSWhile in air service and schedule reliability where quite good, the experience of a layover in Istanbul was a complete buzz killer. The airline did not live up to their online reputation by failing to assist us in any way. Upon return, I took a closer look at the online reviews and noticed that nearly 92% of them was published by passengers who traveled within very close distance and did not experience layovers. In retrospect their experiences were not all that relevant in supporting my selection. Iberia, that has similar reputation scores and not prohibitively more expensive, would have been a better choice as much higher percentage of their reviews were published by the inter-continental travelers.

Since I could not get any promised assistance from Turkish Airlines, I used Bookings.com to find the hotel with the airport shuttle service. I booked the site’s highest ranked hotel since my phone’s screen was too small for reading multiple reviews. Upon arrival to the Istanbul’s airport I discovered that the Coresh Suites Hotel shuttle service did not exist, the taxi costs equaled our room rate, the hotel could not possibly be reviewed as high as Bookings.com ratings implied. The bed was tiny and uncomfortable, and the bathroom was not clean. Overall, it was a miserable experience.

A day later I received an email from Bookings.com with request to review my experience. Looking at their request form I understood what caused discrepancy between the hotel high score rating and my actual experience – Bookings.com asks guests to rate a limited number of customer experience attributes, and then algorithmically generates an overall score that they call a customer review. In my opinion such an approach makes their “customer reviews” too easily manipulable and not trustworthy. Therefore from now on I will book my hotels from TripAdvisor.com.

The customer reviews work well when consumers can read actual descriptions of customer experiences and apply them to their own expectations of experience. The details of the described experience, the language and phraseology help consumers to recognize authenticity and ascertain meaningfulness of the content to their own situation. The statistical averages offer very little utility and the algorithmically produced ones are almost as good as “faked”, regardless of the intent.

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Poll Timing Dilemma

Poll Timing DilemmaThe other day I booked a flight on a popular website. As soon as the ticket order transaction was completed, I received a nicely designed request to share my experience with the agency. That request immediately made me feel uneasy because my flight is still a month away. The fact that the booking agency thinks that their job is done, makes me wonder who “owns” the delivery of the actual experience I have paid for? This example of premature polling is not an isolated case or rare occasion. Many of you can probably recall survey requests made before the product, you have ordered, was actually delivered. A poll of my personal contacts reveals that each and every one of them had multiple instances of such requests.

On one hand, a company may initiate the surveys prematurely because they experience low response rate and want to engage their customers as soon as possible, before they forgot who delivered the initial (or intermediate) part of their experience. That is a real concern.

On the other hand, premature customer satisfaction polling is a clear indication that the polling company either does not understand or does not care about the actual experience of their customers.  Neither is reassuring to the customers. Neither motivates them to engage and respond. Therefore, an unintended consequence of the premature poll is the very low customer engagement rate that motivated the company to initiate the premature poll in the first place.

So, what is the right time to ask customers about their perception of the experience you deliver? I don’t think there is a “one size fits all” answer to this question, but ultimately there is no single “right” time to ask for it.

Holistic customer experience is a perception customers develop over multiple steps they travel from the time they realize their need to the time this need is satisfied (hopefully). If you have done customer experience mapping, the times of asking your customers about their experience are closely correlate to the milestones of the map. Your CX map may likely include multiple “partners” within and outside of your organization. Therefore, taking and recording customer satisfaction “temperature” may need to be viewed as a lengthy process, rather than an event of sending an email.

If your primary goal for asking customer’s opinion is to cover your proverbial ass, why would the customers be motivated to engage? If the process designed and communicated clearly as probing of ALL steps along the customer journey for the purpose of assuring consistent and frictionless experience, the customers are more likely to participate. Remember – “Help me to help you”?

Lastly, resist the immediate urge to start looking for a survey technology provider. Nobody needs technology to do a right thing. Technology can help us to do things fast and cheap, whether anybody benefits from it or not. Find the right process first, test it with “free” tools and calendar notes on the small subset of customers, then compare results against the engagement rate of the control group. When the engagement rate increase is acceptable, it’s time to bring a technology partner.

I do understand that the engagement rate is not the end goal, but it does closely correlates with extreme customer satisfaction or extreme customer disappointment. In either case the specific information provided by highly engaged customers will help your company to rite “the ship” or widen the gap between you and your competitors.


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How Singularity Kills Customer Experience Management

CurlyCulturally we are conditioned to look for a SINGLE reason, element or root cause to solve any problem. Remember Curly’s “One Thing” in the City Slickers movie? Well, this concept of singularity does not work in customer experience management by definition because of the complexity of customers perceptions’ “management”. Yes, how do you manage someone else’s perceptions? I have addressed this question before, but the answers did not offer a single step path to CX heaven. The answers call for a review of the existing business processes and practices, and that costs money.  Money to pay for analysis and improvement of these processes, money to pay for technology to automate these improvements, money for change and adoption management, etc. These is the money that would surely increase quarterly earnings per share and management bonuses, but instead will possibly increase “what and when”?

US Nobel-laureate economist Herbert Simon, in his 1982 book “Models Of Bounded Rationality” introduced the term satisficing:

“Examining alternatives until a practical (most obvious, attainable, and reasonable) solution with adequate level of acceptability is found, and stopping the search there instead of looking for the best-possible (optimum) solution.”

Satisficing is a valuable survival skill for decision making practitioners, who deal with endless uncertainties, but a liability for strategy/vision developers who are suppose to navigate the course to the best future destinations. That explains why visionary leaders have a better grasp of customer experience concepts than functional managers and corporate executives, who came from their ranks.

Until the advent of Customer Experience rising to prominence, corporate management was very busy minimizing the cost of everything associated with customer support and services, which is a part of the domain. For years they enjoyed the blissful illusion that the technology investments, they have made, allowed them to increase profitability without reduction in customer satisfaction. Is it really that surprising the same technology vendors re-name their products to pitch “new” solutions to the same buyers? The pitch may have changed, but the singular focus on cost reduction did not. And that will turn CEM into another fad like it did turn CRM into more efficient, i.e. inexpensive way to provide sales management reporting and low cost customer support infrastructure.

We preach that long-term growth cannot continue without an adequate improvement of customer experience, but a short-term reality check shows our managers that customers, both consumers and business, are still focused on the price more than the experience. There is strong evidence of trends that make our case more persuasive, but we need to spend less time on playing with “tools” and work more on re-framing the concept of customer experience management as an engine of growth, before it becomes a domain of corporate IT.


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Voice of Customers Challenge to Product Managers

VoC challenge to PMFor years I have been puzzled by the fierce resistance of product managers to integrate customers feedback into the products’ design and marketing process. Surely, many use elaborate survey and market focus group studies to validate and refine an original concept, but the use of the feedback to form an original concept is widely sneered upon as a fool’s errand.

Many practitioners are convinced that customers do not know what they want, until they experience a remarkable product they cannot live without. While there is some truth in the belief that customers cannot articulate their latent needs, it doesn’t mean they have nothing to contribute to the process of conceptual design. Product managers, who rely on their own vision, like to quote Henry Ford “If I’d asked my customers what they wanted, they’d have said a faster horse” without realizing that he never uttered those words. Meanwhile the dependence on Divine Intervention, i.e. visions of product managers, results in very high product failure rates and is a luxury fewer companies are willing to gamble on.

There are two basic reasons why customer feedback as source of inspiration is commonly rejected:

  1. Marketing Research proved to be very ineffective in the past in identifying truly original product opportunities. For many product marketers it offered a convenient excuse to throw the proverbial baby out with the bath water. However, the few who have learned that “The job, not the customer, is the fundamental unit of analysis for a marketer who hopes to develop products that customers will buy” – Clayton Christensen, experienced consistent improvement in bringing successful products to markets. In other words, research into the experiences of customers, who use currently existing products, will discover original product opportunities – not the research into product’s features and functions, customer personas and market sizing. The core question is why did customers buy it in the first place, i.e. what do they hope to achieve by using it?


  1. The traditional approach to the management of customer feedback is an analysis of what customers say, or how they feel, about your product and/or products offered by your competitors. However, analysis is only the first step of gaining an insight.


The terms “Voice of Customer” or “Customer Feedback” in this context do not include structured data compiled from closed ended survey questions. The response to such a question cannot help to discover a latent need, it can only validate one that was previously discovered. This discovery can only be done by a synthesis of previously analyzed open form feedback, such as unstructured commentary or review. As customers share their experience of currently available products, they often use different words and expressions to describe common frustrations or delights. It is not a trivial task to understand the specifics of their frustrations and to interpret this understanding into new product requirements, i.e. synthesis.


There are many tools available today to collect, aggregate and analyze customer feedback. The science of this process is well defined and commonly utilized. There are some capable technologies available for detailed analysis of unstructured feedback, even though they are not yet as easily productized and applied. However, the art of synthesis and translation is the domain of creative product practitioners that rely on data instead of vision.

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Which is a better investment – Customer Experience or Brand Management?

Which is a better investment
The advancement of social media during the last ten years gave rise to the power of social customers. That power precipitated fundamental shifts to the marketing paradigm which was developed over 3 decades prior. Surprisingly, only relatively few companies noted the avalanche of research into the financial implications of these shifts and made appropriate changes, while most still debate the impact of customer experience on enterprise valuations.

I documented before the multiple correlations between successful customer experience investments and creation of wealth. Now, new research published in the Harvard Business Review examines trends of brand and customer value components as percentages of overall enterprise valuation. The authors analyzed over 6,000 M&A (Mergers and Acquisitions) activities worldwide between 2003 and 2013 to reveal the dollar valuations of all assets at the time of the acquisitions. During this period, that coincides with the explosion of social customers influence, the market valuation of “brand” assets declined almost 50% while the valuation of “customer” base increased 100%.

What is better investment

The public transparency of customer experience a company delivers became very common during this period. Consumers and business buyers prefer to use such information to make purchase decisions and that erodes the power of brands.

In the past a brand was recognized by a company as the more valuable asset because they served as a proxy for the quality of products or services sold under that brand. In the vast “ocean” of uncertainties of choice (“Life is like a box of chocolates. You never know what you get”), a brand served as a life raft. The loyalty to a brand reduced uncertainties of the market place.

Today, consumers have unlimited access to better tools for reducing shopping uncertainties – the past experiences of socially connected customers.

Companies that understand this shift in marketing paradigm choose to reduce the investment in trademarks and trade names, banners and domains to focus on delivery of superior customer experience instead.

Delivery of Superior Customer Experience (SCE) means delivery of experience that is rated consistently higher than the experience delivered by your direct competitors from the customers point of view (“outside in” perspective). The only meaningful and authentic rating is done by the customers publically and “in the wild”, i.e. not solicited or influenced by a company or its agents.

Such a shift in marketing investment strategy results in a reduction of customers churn, an increase in margin and a lower cost of customer acquisition, i.e. an increase of CUSTOMER VALUE component of the overall enterprise valuation.

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Innovation and Customer Experience

We live in amazing times with endless opportunities to experience and participate in the process of many established industries being re-imagined. However, an innovation is a risky business and most attempts to re-think how things are done conventionally do not produce commercial success.

The single most important reason new products and services frequently fail to find massive commercial success is tInnovation and CX 1he misunderstanding of the core difference between innovation and invention.

Invention is about creating something new, while innovation introduces the concept of “utility” of an idea, process or method. An invention is usually a “thing”, while an innovation is often an application of one or more inventions that causes change in behavior, interactions and experience.


These terms are often used interchangeably and that inadvertently causes a shift of focus from experience to technology. That focus is what separates inventors like Dean Kamen from innovators like Elon Mask, Steve Jobs and Jeff Bezos.


Innovation and CX 2


The romance of novelty (invention) blinds many entrepreneurs to the fact that markets have relatively low capacity to absorb (adapt to) radical change. Consumers – your potential customers – are too busy occupied by the complexities of jobs they are trying to perform. There are not in the market for products or services, but for the desired outcomes these products promise to deliver. Therefore, unless the use of your product or service can dramatically simplify that “job”, they are not likely to “hire” (purchase) it in large numbers regardless how “new”, “improved”, “exciting”, and “innovative” your marketing describes it.

The domain of innovation is not defined by the best features, specifications or market segmentation, but by consistent simplification of the target customers’ experience.

Innovators should think less about market segments and more about the jobs customers want to do. The job, not the customer, is the fundamental unit of analysis for an innovator who hopes to develop products that customers will buy” Clayton Christensen (text in italics is added by me).


When I needed to re-publish a website for my wife’s business I was referred to Wix.com as the best website builder software provider. Initially, I loved its innovative design functionality until I had to actually publish the site at which point the software was not very helpful and the customer support non-existent.

After a few days of frustration I became a very grateful customer of GoDaddy.com that has substantially less creative website building software, but got me up and running within 2 days.

The examples of iPhone and Tesla show that discovery and reduction of complexities and frictions your target customers experience on their path to desired outcomes, is the shortest and surest road to innovation and creation of new markets.

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The secret to high rate of customers retention

Customer retentionIt took me a few years to realize that happiness is based on one’s ability to manage expectations. We experience happiness when our expectations are exceeded. We may experience content and satisfaction when our expectations are met, or nearly met.  A disappointment is not an experience most people like to reiterate. Regardless of our age, gender, education or social status we all have expectations. Nobody ever enters into any business or social transaction without having an expectation of outcome.

Expectations are formed by multitude of our own experiences, experiences of people we know and by marketing messaging. A price of transaction or fleeing nature of social interaction may reduce an importance of meeting our expectations, but the repeat experience of being disappointed will most definitely change our willingness to try once again. Even when you buy on a whim a $0.25 lollypop packaged in orange colored wrap at a gas station, you will be disappointed if you experience a strawberry flavor in your mouth. This experience may not make you very unhappy, and may not cause you to drive a few extra miles next time you need gas – the first time that happen. However, it may start to erode your trust in the establishment and to question its ability to deliver quality customer experience. Here are some examples:

  • My sailing friend mentioned to me a few times about great experiences he had at the Dirty Cello I purchased tickets for the next one only to be bored by pompous “community” messages and the opening act that have lasted for over an hour, before the performance we paid for started. I noticed a few customers living in disgust.
  • After watching Ford Fusion commercials about their terrific fuel economy I went to a considerable effort to secure one for my last trip rental. While it is certainly a nice car, the fuel economy is nowhere near commercial’s claims. There is no doubt my next car will not be a Ford.

From a company’s perspective it is imperative to have a clear understanding of its “best” customers’ expectations. I placed the word best in quotes because there are multiple ways to differentiate your customer base. One company may consider their most profitable customers “best” and optimize its products and processes to meet or exceed expectations of these customers without sacrificing profit margins. Another company may see those who’s feedback indicate the best fit, between their expectations and the experience the company delivers, to be their “best” customers. Such company may decide to optimize their products and processes to leverage their “best” customers’ enthusiasm to increase its market share and its share of their valet.

The point is – you cannot expect to retain your customers if you fail to deliver what the customers expect.

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Cheap Gas, Electric Cars and Customer Experience

Cheap gasEven if you sell a commodity, customer experience often outweighs price considerations. Just because the term Customer Experience Management (CEM) is  relatively new to corporate vocabulary, the power of “experience” is not lost on marketing professionals. The world of marketing is drastically changing, moving away from the hype of novelty and awareness-building through branding and advertising, towards  the creation of loyalty through great customer experiences.


As oil prices impact every element of the world economy, and markets expect the depressed levels to last for at least a decade, the future of alternative energy technologies being questioned. The sales of electric and hybrid cars  are dipping, seemingly in concert with oil prices, and auto industry analysts are trying to assess whether or not cheap gas will kill the demand for such vehicles.

It is important to remember that even at the near-record high of gas price, customer retention of hybrid vehicles was only 35%. Specifically Prius owners’ loyalty in 2012 was only 25%.

“Only 30.9% of hybrid drivers traded in for another gas-electric model in the third quarter of 2011, when gas prices were stable. But as prices at the pump surged in the final three months of that year, so did hybrid car repurchases, leading to a 40.1% loyalty rate.”

It is easy to see correlations between gas prices and sales of electric vehicles, but perhaps it is a mistake to take these as the causation.

It is true that sales of electric cars from Nissan (Leaf) are 20% down this year and gas-electric hybrid Chevy Volt’s are down 50%. However, the demand for Tesla Model S is stronger than ever and sales are up 35% during the first quarter of 2015.

Mining online reviews posted by customers, who have purchased these cars, reveal a much stronger correlation between customer experience and retention/loyalty than the correlation between sales of electric cars and price of gas. As the novelty of electric/hybrid cars and the social cache of environmentalism fade, the underwhelming customer experience these vehicles delivered to their owners, compels customers to return back to familiar, fossil fuel vehicles. That will continue until the electric cars sold provide better customer experience than conventional ones at the same or better price. The energy, that drives these cars, may be alternative, but it is not a substitute for the delivery of superior customer experience.

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