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Posts in the ‘Product Management’ Category

Two major threats to superior customer experience

  1. ROI becomes IOYInadequacy of connection between customer experience investment and financial benefits.

 

It is very hard to provide direct, causal, linear connections between investment into customer experience management and growth of revenue, reduction in operating cost or improvement of profit margins. To be fair, there is plenty of evidence that uses correlations to illustrate the impact of customer experience improvements on:

However, none of the evidence demonstrates an indisputable cause and effect relationship that could be attributed by non-believers to other variables like successful marketing campaign or state of economy. The certainty of money outflow to fund customer experience improvements is hard to overcome by uncertainty of outcome and time horizon.

 

  1. The practice of estimating operational ROI without evaluation of impact on customer experience.

 

Utilization of this methodology is too common and often constitutes the triumph of efficiency over effectiveness. While it simplifies estimation and measurement of isolated results for a specific business unit, it completely ignores the effects of the proposed investment on the overall goal of any business:

“The purpose of business is to create and keep a customer” Peter F. Drucker

Applications of this methodology are responsible for:

  • cutting costs of customer support labor at the expense of an increase in customer churn rate. While it could be profit margin positive for the next few quarters, this investment threatens the long term viability of the entire business.
  • cutting costs of market research at the expense of increasing the product return rate and poor market adoption.
  • paying minimum wage plus commission on the retail floor to the detriment of customer experience and destruction of loyalty.

Customer experience management is a holistic discipline which means that a variety of factors, internal and external, can influence the perception of your customers at any given period of time. Top level customer experience metrics cannot deliver definitive proof that cx investment into specific improvement generates factual return within a specific period of time. Detailed analysis that identifies and measures components or attributes that influence the top level customer experience metric, can enable direct association with specific operational KPIs. The correlations between a department KPI and the associated CX attribute trends should be monitored monthly or quarterly for possible diversions that serve as alerts. Most importantly, no operational investment ROI should be estimated without thorough examination of its potential impact on customer experience.

Why are Consumers Jaded by Marketing Messages?

Try this product because we screamWe live in the age of abundance. From tropical fruit during winter to a choice of tools for any conceivable job, most of us have more “stuff” than we really need. One thing most of us are short of – is an attention span. Our post-industrial society suffers from collective Attention Deficit Disorder.

 

This problem manifests itself in Politics and Marketing above all. It is very difficult to communicate complex issues clearly in the confines of 30 seconds or 140 characters. This leads to  ambiguous communications designed to elicit simple, strong and binary reactions. Agree or disagree, love it or hate it! In politics, such practices result in a highly polarized society. In marketing – it drives consumers to look elsewhere for help in making choices. In most cases, the end result is  failure to act constructively.

 

There are two main reasons why collective ADD became such a problem – too much noise and too little trust. From traditional advertisers to content marketers, we all want to grab that elusive attention of our potential customers. We construct catchy titles that have little to do with actual messages we want to convey, and broadcast them as often as we can. By trying to be heard we create even more noise and distrust.

 

In evolutionary terms, an overload of “noise” inevitably leads to “better” filters. Attempts to break through the filters puts one on the “wrong” side of evolution, the side without a bright future.

 

Every time my entertainment is interrupted by a car commercial, I yearn for driving Tesla S. I’ve never seen it advertised anywhere and yet they sell every car they make before they make it. How do they do this? I suspect Tesla knows precisely Who wants to buy their cars and Why, before they design and build them. The distinction is Why customers want “it”, instead of What they want. People actively seek  fulfillment of their desires, but build protection against unwanted interruptions.

 

Fortunately technology can enable both. There are means and tools to learn Why people would want products you may be able to build. All you have to do is to figure out How. If you select to continue “screaming”, your former customers have technology to “filter” you out. Click!

Disclaimer: This post was written to have every sentence not to exceed 140 characters. Think of it as a string of Tweets. :)

Market Segmentation and the Myth of Demographics

Market SegmentationDo you really believe that all 24-36 year old men buy your product for the same reason? If you do, I have a slightly used bridge at a very attractive price for you.

Demographic segmentation strategy is based on the assumption that a specific group – based on age, gender, etc. – is the primary consumer of your product or service. Regardless of the validity of this assumption, it does not often provide insight on why this demographic segment selects the product in question or how they use it. For that reason segmenting a market by demographics has very limited utility. It has become so popular only because no better intelligence about customers was available at the time it was introduced.

Today, a much better approach to market segmentation is available. Grouping potential customers according to the expectations they would have from a proposed product is much more useful. This outside-in approach is similar to the “persona” concept often used by product managers, but uses actual market intelligence instead of imaginary characters.

The first step is identification of “the job-to-be-done” by the proposed product to be “hired” by the customers.

The second step is identification of the products/services the customers use today to do that “job”. This list will likely include products/services that you would not normally consider your competition, but customers may.

The third step is aggregation and analysis of a statistically representative set of “stories” describing the experience of customers who have used currently marketed products/services to do that job. I use the word “stories” deliberately to describe unsolicited and unstructured descriptions of the experiences in the customer’s own words. Any use of survey or focus group methods will “color” the output with a 3rd party bias. The best content is customer biased only.

The result will expose the attributes of the experience that are most important from the customers’ perspective. It will also provide an assessment of how well each attribute met the expectations of these customers. Focus on the attributes with low scores may provide important insight for designing a product that is very likely to take this market segment by storm.

Click here to request a copy of the Mining Social Media to Boost Segmentation paper published by QUIRK’S Marketing Research Review.

If demographic data is pertinent for your product, you can compile it’s distribution by an attribute to improve your chances for success even further. As the GPS
technology taught us: The multiplicity of signal sources results in better decision quality.

Do not confuse Customer Experience with Customer Service

CX is not CSThere are too many people who use the customer experience and customer service/support terms interchangeably. Even well respected authors and customer centricity consultants, like Don Peppers, occasionally slip into this ambiguous trap. Here are some basic definitions found on the web with a simple query:

 

“Customer experience (CX) is the sum of all experiences a customer has with a supplier of goods and/or services, over the duration of their relationship with that supplier. This can include awareness, discovery, attraction, interaction, purchase, use, cultivation and advocacy.”

 

“Customer Service is the assistance and advice provided by a company to those people who buy or use its products or services. “

 

Customer service is just one of the attributes that comprise customer experience, but it is most definitely not the same thing. For some businesses it could be the most important ingredient, and for others in could be completely inconsequential one.

 

Here are some examples to make the distinctions a little more clear:

 

• You can have great customer experience without the participation of the customer service department at all, but sometimes even the best customer support efforts cannot salvage overall customer experience:

o The most attentive waiter can’t improve a poorly cooked dish, but a scrumptious meal can be remarkably experienced in self-served establishment.

o Expertly installed TV cable service does not guarantee quality entertainment.

o Customer Success Managers can only help to retain customers for a short period of time if the software does not perform as expected.

 

• A product plays the leading role in delivering customer experience, not efforts of customer-facing employees. If a product sucks, no heroics of the front line personnel can deliver excellent customer experience. From this perspective it is difficult to understand how product managers, and even more so product marketing managers, manage to avoid the customer experience responsibility spotlight. These are the people who interpret customer needs and wants into a product design. It is a best practice to have them handle customer support lines on a regular basis to learn firsthand how accurate were their interpretations.

 

• Marketing is the group that creates customer expectations, and when these expectations do not meet reality of a product, customer experience suffers. Classical marketing is supposed to “learn” what customers need and translate this learning to product designers and advertising messages that attract the “right” customers to the “right” product. Instead, marketing is too often focused on “pimping” products designed by engineers overseas without any connection to actual consumers. Focus groups and survey are designed to figure out how to sell what they have got, rather than to make what customers want. No wonder the distinction between “market research” and “marketing research” is so blurry. Customer service can be very helpful to facilitate the return of an unwanted product and deliver great product return experience, but it cannot deliver a great customer experience.

 

Confusing customer service/support with customer experience puts an unfair and unbearable load on the shoulders of an organization that already is the second most stressed group, after sales, in the company. Even though its performance has relatively limited ability to influence delivery of customer experience, it is measured, dissected and optimized completely out of proportion. When you see that happen, it is the first sign that the company is focused on financial engineering – not on their customers.

 

The root of all great products

The root of all great productsGreat products come from a deep understanding of customers’ needs and wants. Such understanding is best formed by observation of customers using a product. Hence, the proverbial chicken/egg situation – a product that has not yet been developed cannot be observed.

One way to deal with this challenge is to start by identifying a “job” the customers of your future product needs to do. As Theodore Levitt observed,

“People don’t want to buy a quarter-inch drill; they want a quarter-inch hole.”

Therefore, a savvy product marketing professional can observe people doing the job with whatever tools (i.e. products) are available to them currently. A keen observation will likely reveal an opportunity for improving the customer’s job, i.e. simplifying the customer’s experience of obtaining the desired outcome.  This approach is championed by Clayton Christensen in his book The innovator’s solution: creating and sustaining successful growth.

Observing customers in the process of using products is not a new concept, and it is known as ethnographic research. However, it is primarily used for learning how to enhance existing products, not to improve customer job experience. The cost of ethnographic research is very high and that forces very limited scope and data samples which would be unlikely to help discover a market segment deficiency of unmet customer needs. That ocean is too big to boil by means of ethnographic research.

The latest developments in big data and opinion mining technologies, combined with growing availability of customer experience testaments available online, offer new opportunities for uncovering unmet customer needs on a market scale. However, there are no widely accepted methodologies available to take advantage of these developments just yet.

The remaining challenges involve:

  •  A market segmentation approach that identifies a job by expanding the view of competition from the products on the same shelf to any product or service that customers could deploy to get this job done. Traditional segmentation methods are based on the assumption that your customers are defined by the demographic group they belong to. Some use a secondary qualifier of buyer persona to refine the target segments. These methods worked reasonably well in the age of mass markets and clever advertising campaigns, before the rise of the social customer. Today we do have the data and tools enabling us to learn who are the customers that purchased products like this and how they experienced them. We can even map them back to the demographics and persona profiles which can provide much better understanding of their real needs.
  • Rigorous data governance methodology is focused on real customers and real communications. Higher volume and velocity of data does not translate directly into market intelligence that is capable of driving business decisions. It often creates even more noise at greater expense and results that are not relevant to business reality. We have to discriminate between endless repetition of mindless remarks by ambiguous digital entities and unique descriptions of real customers’ experiences with specific products or services. We should re-focus from inclusivity of content data sources to exclusivity of authentic content.

Please click here to request the iPod case study that illustrates this process.

Finding the Fine Line: Customer engagement into a product development

Customer Engagement into product developmentMost startups, and many well established companies, utilize “agile” methods to develop new products. These methods involve customers trying early versions of a product in order to validate conceptual viability and provide feedback to be used for further iterations. There are books and training courses sold to promote “lean” development approach, which I have no quarrel with, but I have  yet to see a clear articulation of what stage of such product development process it is appropriate to start billing customers for use. 

Here is the dilemma – wait to charge until the product is completely developed (and foot the expenses while early adopters enjoy the benefits without knowing if they ever going to pay) OR start early and risk repelling valuable development partners.

Both parties in this partnership have to see a benefit to participating in the agile development process to get involved. Customers anticipate that the product will improve their life, when developed, and developers need the customers’ knowledge and experience to develop marketable products. The balance of risk and reward for each party should be periodically assessed to produce a list of necessary conditions to be met before billing can be initiated.

The risk for the development team depends on how much knowledge they possess about the market they plan to address, the processes they target to optimize, and the customer experiences they want to simplify. The risk for the customer is in disruption of their existing process, time investment in learning new workflows, and political capital that may be lost if the product does not materialize.

The trust is the most critical condition for any partnership:

  • Do not ever try to masquerade “puppy” sale strategy as product development partnership;
  • Always communicate how and when, if ever, you will use the feedback given to you;
  • Help the customers sell your product when it is ready to be sold. They will be much more effective than your sales team. 

Validate that the product as-is meets initial customer expectations in terms of functionality and performance before starting to bill the customers. Functionality allows customers to simplify their workflow and process, i.e. save time/effort by a measurable amount. Performance means customers have the functionality available to them consistently and without interruption. Even though these customers are a part of your development effort you cannot expect them to pay for debugging your product. The balance is critical because too much agility can be too disruptive.

I don't always test the code

I’ve experienced both sides of such partnerships. When they worked it was a glorious experience producing very successful products, but when they don’t the developers can lose more than time and money they have invested into the project.  Customers can share their negative experience with the development team publically, before the product launched, to destroy any chance of it to succeed.

 

How to Develop Awesome Products? Focus on Customer Experience

Awesome productsInvolving customers into the product development process is one of the most controversial subjects in product marketing/management communities. Like with most “religious” issues, the arguments are more about the extension of  and the form of involvement, as opposed to product development in a vacuum.

The works of Clayton Christensen, the author of the seminal book “Innovator’s Dilemma“, inspired our thinking about the development of new products methodology that is focused on Customer Experience. Over the years, a few of our clients used this method in their processes to one degree or another, and every time the resulting increase in product sales exceeded their expectations.

We used MindMiester to put together a new interactive e-book “How to Develop Awesome Products”. Please click on the image below to see the table of contents. Contact me for the access, or check back later for download availability.

NPD e-book table of content

Social Customer and the Quest for Better Margins

New Product DevelopmentIt is no secret that most new products taken to market do not perform to management expectations. While there may be a myriad of reasons to explain the high rate of failure, I would like to focus on the fundamental inadequacy of commonly used market segmentation methods. Don Peppers wrote that

“Many, if not most, corporate CRM efforts have floundered or failed because they were oriented exclusively around segmenting customers by their value to the company – diamond, platinum, gold, whatever. But if you want to be smart about your customers, then you have to know how customers differ from each other in terms of what they need from you, not just what you want from them.”

Following this line of logic, most product developers fail because they segment their customers by their demographic characteristics (age, gender, education, income, etc.) rather than their needs. The assumption these marketers make is that similar demographic segment would have similar needs.  The introduction of customer “personas” allows marketers to assign a proposed product’s functions and features to specific customer groups within the demographic segments. Subsequently, all these assumptions are validated by surveying consumers, who belong to the chosen segments and correspond to a “persona” as defined by product developers.

I see three fundamental flaws in the described methodology:

  1. Multiple layers of assumptions are constructed before the validation of an entire construct;
  2. The validation methods are highly subjective and often produce low integrity results;
  3. The method uses an inside-out view of potential customers.

These flaws lead to the introduction of products that are very difficult for consumers to differentiate, and as the result lead to lower profit margins.

The advent of The Social Customer provides product developers with an alternative segmentation method – an approach that at once zeroes in on a market segment composed of customers (not consumers) who have purchased existing products that the planned product intends to challenge. In particular, it analyzes actual customer experience with those existing products. The relative frequency with which customers mention certain attributes tend to indicate those attributes’ importance to the customers. On the other hand, customers’ satisfaction or dissatisfaction with a product in terms of those attributes tends to denote particular strengths or deficiencies. Accordingly, those white spaces where existing products are unable to meet key customer expectations present potentially lucrative opportunities for new product differentiation.

This outside-in approach may be reminiscent of ethnographic market research, but instead of actual observation of customers it relies on analysis of online customer reviews to generate much more statistically representative results much faster.

Customer Intelligence and Innovation

A few months ago, I wrote in this blog about Musing on difference between successful product and Innovation.  This article was re-published in a few online venues and generated a few critical comments about lack of clarity in definition of terms, specifically about what makes a product “innovative.” Many people would agree that most products that the market considers innovative often do not include any technological breakthroughs.

I keep struggling with the definition of what is an innovative blockbuster product (or service), and this is yet another attempt: A truly innovative product is the one that delights its customers by anticipating their needs before they knew they have them. In other words, if you want to develop a blockbuster product, you should stop trying to better serve the existing needs of your customers and instead try to discover needs that customers may not realize they have and address them.

That definition was not quite satisfactory either, so I kept thinking about it, and I think this is a better version: An innovative product is the one that significantly simplifies customer experience of performing the “job” they “hired” this product to do.

I think simplification of customer experience in achieving the desired outcome is an ultimate goal of any product creator. In my opinion, the experience starts with the recognition that the product is a potential “candidate” for the “job” on hand, and continues from a process of acquisition of the product through different steps until the desired result is achieved. If a product can reduce the number of steps in that sequence by 30% or more without sacrificing the quality of the experience or by improving it, it is truly an innovative product.

So how one goes about creating one?

1. Stop seeing a product as a collection of functions and features. Specifications are not what makes a product innovative. Get a clear understanding of what is a “job” this product will apply to do.

2. Stop thinking of “competition” as products similar to yours, or products in the same price range and sitting on a store shelf next to yours. Think of “competition” as any alternative candidate for the product’s “job” regardless of technology, price or package. Would you think of a digital camera as a competitor of a mobile phone?

3. Gain deep empathy of customers’ experience on their journey to a desired outcome. Learn what is important to them, not to your engineers or marketing people. No disrespect intended towards your partners, but they will be first to thank you when your focus on customer experience will result in a truly innovative product.

We have developed a webinar “Why Companies Do a Poor Job Planning New Products” that provides more details about the ideas and process involved. Please click here to view the schedule.

 

 

Deciding What Not To Do

Every great product starts with a great idea. Unfortunately, many mediocre products and outright flops have also started with an idea that seemed great at the time. I would like to evoke a memory of the patron-saint of Product Managers and quote:

“Deciding what not to do is as important as deciding what to do. That is true for the companies, and it’s true for products.” – Steve Jobs

Unfortunately, we fall in love with our great ideas all too often and tend to overvalue creativity at the expense of critical thinking. Let’s face it – we are paid to create great products, not to engage in “paralysis through analysis.” The cost and effort required to conduct market research is most frequently invested into finding evidence to support our great idea, not to challenge it; hence the survey questions and focus group discussions often default to a pro bias.

I do not believe that human beings are capable of processing information without a bias; however, customer bias is much more valuable than a company/product bias to support critical GO/NO GO decisions. Insights found in experience of consumers, who are most likely to become customers for your proposed product, are in my opinion the best information to help us make that decision.

Insight is a tricky concept that is often used without clear definition of its meaning. I would like to suggest a few ideas on how to define it:

Insight is…

• Penetrating understanding of consumers

• An undiscovered truth that suggests an unmet need

• Something that makes you go, “AHA!”

These came from member contributions to a Customer Intelligence LinkedIn Group discussion and do not pretend to be an exhaustive list. The classic example I have come across is:

“People don’t want quarter-inch drills. They want quarter-inch holes.” – Theodore Levitt, Harvard Business School

Here is a “best practice” used by some of our clients to make this decision:

  •  Identify and articulate a “job” the proposed product (or service) is going to be purchased by its customers to do. If you are not familiar with this product/job correlation concept, you want to learn about research of Clayton Christensen.
  • Identify the most successful products currently available on the market that people buy to do that “job.” These products may or may not have anything to do with the technology, features and specifications of your proposed product.

  • Find and aggregate customer-generated content describing their experience with products identified in the previous step.
  • Analyze this content to identify shortcomings or inadequacies of currently available products to fulfill customer needs from their experience and perspective. Our clients use Market Intelligence Analysis reporting service to save time and effort, but it can be done manually as well.

 

  • “Deep Dive” into those elements of customer experience that score below customer expectations as a group to generate an insight.

  • Ask yourself if your proposed product can improve customer experience based on the insights you have discovered in previous steps. If the answer is ‘No, but…’ follow the advice of Ron White who said, “If you have got an idea… let it go.” The best hope for this product is to become one of many options available to consumers “to-do-the-job” and no fancy marketing communications would be able to differentiate it in their mind.

The cost of error can be relatively low in an agile software development business, but it quickly escalates into millions if product has to be manufactured in volume and brought into consumer market to be tested. On that scale, even a small reduction of product failure ratio will generate outstanding return on investment in this methodology and effort.