How come there often seems to be no direct connection between the things we choose to measure and the goals we are hoping to achieve? Here are a few examples:

• If a company management’s goal is a sustainable long-term growth, why do they measure their decisions based on IRR (Internal Rate of Return)? The metric is useful for measuring a transaction, but it can likely lead to an ultimate distraction of an enterprise vitality if applied to strategic decision making.

• If a Customer Service organization’s goal is Customer Satisfaction, why do we measure performance of the employees based on how quickly they complete a call with a customer? Driving down the cost of customer interaction is a meaningful operational metric, but there is no profitability if customers abandon your operation.

• If an ultimate goal for Product Marketing is demand generation, wouldn’t it be critical to measure why customers buy your product? “The customer rarely buys what the company thinks it is selling him,” as Peter Drucker said.

According to Clayton Christensen, a professor in Harvard Business School and brilliant scholar of Innovation, the root of this problem is the quality of education offered in our business schools. He makes a great point illustrating how wrong choice of key metrics leads to deconstruction of enterprises and entire industries. Clayton is famous for his efforts to re-focus marketing “a job customers hire products to do” as opposed to product’s specs.

As consumers, we all know that our experience with “products” depends on many factors that are not connected to or even correlated with its specifications, functions and features. Quite often customers are more influenced by how easy it is to deal with the supplier or how reliably a product performs, or how simply and consistently it delivers the outcome we require. Yet when we try to measure customer satisfaction, we ask them to score their opinions about characteristics of the product itself. I do appreciate the elegant simplicity of NPS (Net Promoter Score) methodology and its well-documented correlation with profitability, but what specific action can it suggest to a product manager whose product earns a low score?

Steve Blank, Silicon Valley entrepreneurial marketing genius and the author of The Four Steps to the Epiphany book, seconds Christensen’s opinion about the quality of our business schools and is working on the development of an alternative curriculum that is focused on customer development as opposed to financial engineering. Blank is preaching the importance of customer involvement into a product development that appears to be a no-brainer to me, but apparently is a relatively challenging concept to most marketing professionals according to Kristin Zhivago.

The choice of measurements we make has a dramatic influence on the probability of a startup success, according to Eric Ries—a creator of the Lean Startup movement—who has very interesting thoughts on creativity and innovation. Eric thinks that we prefer to use “vanity” metrics that make us feel good instead of helping us to make quality decisions.

So it appears that according to the experts, institutional indoctrination and lack of intellectual honesty are two major reasons for the gap between organizational goals and performance measurements that negatively affect our probability to succeed in business.

I would like to suggest that our compensation system methodology is the third leg of this proverbial stool. Since a majority of the workforce is not compensated for producing results aligned with a long term goals of organizations they work for, we instead end up measuring what is easy to measure and makes us look good.

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.

Traditionally, companies use customer feedback to assess satisfaction with existing products and to validate product developer’s ideas for the improvements. One of the most popular methods used for collecting customer feedback are survey and panels, where the questions asked or topics moderated tend to reflect interests of product development team and focus on how customers experience their product.

I would like to pose that truly innovative product developers use a different perspective to discover the needs customers cannot articulate in controlled or moderated environment – the perspective of holistic experience of a job the customer “hired” the product in question to do.

The journey starts with the understanding of what the “job” they want to do is and what a desirable outcome is. The next step is to imagine how this whole experience can be simplified in its entirety, which may or may not involve your product. I use the word “simplified” because it is an ultimate description of improvement in a context of “desirable outcome.” Terms we usually use to describe improvements – Better, Faster, Cheaper – are traps anchoring us to the incremental changes of status quo.

The complete customer experience starts with a notion that the desired outcome can be achieved, and goes through discovery of components required, acquisition of the components and/or materials and skills all the way through a process of applying them. Your product may be just one of many in that process, but if you can make it easier to find at the conception stage, simpler to understand that it is the best alternative to get the job done at the acquisition stage, and require less skill and/or effort to operate, that will make your product a lot more successful. However, truly innovative products do often have an element of disruption that does not easily fit into organizational structures. If you are a drill product manager, and survey satisfaction of a drill purchasers, the ideas of alternative wall anchoring to hung pictures will not likely come up. However, even if it does, how does it help you or your department?  I wonder if a celebrated genius of Steve Jobs could only manifest itself because he operated from above of organizational hierarchy.

The question is, “Can Customer Feedback help to create innovative products?” If you define Customer Feedback as the results of survey or other structured information-gathering method, the answer is NO. The best outcome of these exercises is reduced uncertainty about your assumptions (i.e., confirmation of what you already know). The probability of discovering an idea that could lead to the conceptualization of an innovative product is extremely low, but could be improved somewhat by allowing open-ended questions and a lot of unstructured comments.

I define Customer Feedback as any and all customer-generated content available about a product/service in any form customers chose to communicate it. That includes company and public forums, customer support notes and call transcripts, company sales notes, customer’s Facebook comments, and customer videos and reviews published online. The wider Customer Feedback “fishing” net is cast, the higher probability of innovative ideas discovery. Combine it with the right analysis methodology that does not tie you up with pre-conceived keywords and ontology, and your chances are looking even better.

The discussions on importance of innovation are all over Social Media. The calls for innovating ourselves out from the current economic malaise are coming from the President of Consumer Electronics Association to the President of the United States. In the words of Louis XIV (or was it Mel Brooks?) – “It’s good to be the King!” – for the rest of us it would be helpful to put some definitions around these terms. I do not pretend to be an expert on the subject of innovation, but I like to be specific and want to offer some ideas for discussion.

So what differentiate commercially successful product or service from the innovation?

I would like to propose that successful products gain market traction, meet their sales forecasts and generate anticipated profit margins.  Innovative products re-shape the market place, create new categories, and generate blockbusting profits. Innovative products successfully defeat the competitors’ assaults for long periods of time.

Development and introduction of successful products or services is a very challenging and risky endeavor, as we are well aware.

The Recent Portfolio Management Benchmark Survey sponsored by Planview, reported that only 52.3% of products meet with commercial success, while 21.2% were “killed prior to launch”.  They did not specify the type of products or industries covered by this survey, but my personal experience pegs the success ratio well under 40% mark.

The risk level for innovation is even higher. It is estimated that only 1 out 3,000 new innovative ideas becomes a commercial success. We also know that most innovative products rarely have anything to do with technological inventions, but have everything to do with the scale of market adoption. Peter Dreker, the father of modern Management Science, wrote in his book “Innovation and Entrepreneurship”, that a 15 year “gestation” period is the average time observed between the time of an original invention and the time of its commercial realization.

We all know examples of such innovations as Ford T, Microsoft Word, iPod and iPad to name a few that dominated and still dominate their product categories. These are very different products, however the thought process, methods and techniques of the people who are behind the creation of these products, are a mystery we want to discover.

I would like to propose that the key difference between really good Product Managers and the Innovators is in a way they perceive and understand the markets they target.

While a Product Manager segments the markets in terms of demographics or personae for which they develop a product, an Innovator is focused on the Customer Experience of people, who struggle to use existing products to do their chores, and interprets these struggles into the definition of innovative vision for new generation products.

In other words they concentrate on improvement of EXPERIENCE as oppose to improvement of a PRODUCT.

Many marketers are wrestling with practical implications of Social Media Marketing concept. One of the challenges is a lack of a clear and practical concept definition. Everyone seem to know what it means and doing “something” about it, but only very few can boast a provable and measurable success. I chose to focus on a specific subset of the SMM that in my opinion provides the most effective method on increasing sales without monumental budget requirements.

If you agree that consumers, and that include businesses in context of this conversation, fundamentally shop for “desirable outcome” and a shopping process is focused on risk reduction of achieving that outcome, you would probably see why the customer reviews are so important. Many marketers are often uncomfortable with an idea of funding a messaging effort without retaining control of the content, but that is precisely why this Media is called Social.  A customer review is usually a personal “story” describing how a person, who had expectations (possibly similar to yours) experienced reality of of their decision to purchase that product or service. A “negative” review can often sell your product or service more effectively by alleviating prospective customer’s fears because the review writer expectations were different from the the reader’s, the writer’s experience was closer to the reader’s desirable outcome, and negative tone gives the story a lot more credibility.

Let’s assume that I masterfully convinced you that customer reviews, under curtain conditions, provide sizable uplift in sales. If you don’t buy this line of reasoning there is some research on that subjects which supports the premise. You can find here and here. If you knew it all along, you are more interested in what are the “certain conditions”, and how exactly do you get your customers to write these reviews.

Humans communicate by telling the stories – stars (Liekert scales and such), attribute ratings and any other attempts to filter and organize customer reviews, are helpful, but they often fail to produce sales uplift if used excessively. They distract consumers from reading the “stories” and prevent them from personal engagement. The idea of engaging customers in writing more reviews by offering them “fill in the blank” forms often leads to waste and distrust as consumers, who look for this product reviews, feel cheated when they land on the product page with  pre-fabricated, check box reviews.

Number of reviews is critically important for production of sales uplift. There is no exact, magic number that would guarantee the desired effect as it is highly contextual to the complexity of the product or service and its price (i.e. risk involved). Too few reviews for a product may make it look not credible to many consumers, and too many reviews may intimidate some from even making the decision. The latter case could possibly be mitigated by thoughtful “filtering” mechanisms and it is not a problem for most marketers. Only a very small number of customers are engaged enough to write a review. I “mashed” TV units shipped data from iSuppli Market Research with a number of reviews for these TV brands available online to come with an average that is well below 1%.

Engaging your customers to write more reviews is probably the most challenging task. There is no shortcuts here. Any marketers who succumbed to a “brilliant” idea of planting reviews written by not-customers should know that it is illegal ( it was successfully prosecuted in NY),  it produce adverse effects, and did I mention that it is not ethical? Misleading social media seeding techniques have become so widespread that the European Union enacted Consumer Protection from Unfair Trading Regulations to protect the public from the most deceitful activities.

To do it right you need to understand why customers write the reviews on the first place. What are the motivations? There are a few studies conducted by Cone Research and others that delved into this subject. When you understand what motivates very few of your customers to write the reviews you need to select appropriate existing interaction points between your company and a customer, such as warranty registration process or scheduled maintenance, to ask them for it. The way you communicate the request is very important and has to loop back to the motivations. If you ask for endorsement or referral – you miss the mark and fail in this Social Media Marketing class.

I was reading a post by Bruce Temkin about power of the VOC (Voice of Customer)

It turns out that more than half of the large companies had a formal VoC program in place. And when we asked about the results, the data was amazing — 83% of companies reported that they had positive results from those efforts.

I am surprised and encouraged that large companies are so interested and invested in this large and not very clearly defined area of a Customer Experience Management. Mostly I am surprised to learn that these companies claim they are actually act on their findings. I am not challenging Bruce’s findings, I just would like to see it as a consumer more often.

Meanwhile I would like to muse on one of my favorite subject – how to make your customers to market your products – i.e. Word of Mouth Marketing.  The WOM became an important part of VOC enterprise strategy as social media enabled consumers to become much more influential than we used to be. However WOM is the original form of advertising and it played an important role in every day life on issues of much more importance than selection of a product purchase or store preference for millennium. People have, and still do, share information about our experiences with each other across dinner tables, camp fires or customer reviews websites because WOM is much more relevant to an individual needs, concerns or desires than a broad advertising messaging addressed to the market place. Marketers try to improve relevancy of the advertising through segmentation, but their assumptions and biases limit effectiveness of their messages, while WOM is ultimately more effective as its recipients control the message they decide to accept or trust, and then reinforce it by sharing their own experience.

I would like to quote a LinkedIn discussion tread here:

People decide intellectually but buy emotionally. Selling based on features and benefits won’t close the sale for the customer, but emotional messages from WOM (“This product is great because it met this need for me”) will do it. All people make decisions intellectually but will buy emotionally – particularly if the purchase resolves a ” pain “for them as recommended WOM

37 years of being in the brand building business has made me realise that the CONSUMER IS THE MEDIUM. Sumit Roy

Here are few more quotes from the same conversation

1- CONSUMER is MEDIUM – implies there are great opportunities to tap into for better and faster business results. The medium, which is in the process of being discovered and integrated into strategies and business models.

2- WOM is AMPLIFIER, i.e. ADs x WOM – implies that WOM can be that multiplier improving the result beyond your “traditional” mediums diminishing returns curve. In fact, WOM is the enabler to make that curve steeper (you get more with every additional dollar invested) and higher (you can enjoy that for longer than usual).

However this is my favorite – “Trust is what helps social intercourse breed healthy brands”. My deepest thanks to everyone who contributed to that discussion.

I understand brand as a collection of products, marketed under common name/trademark by a specified company.  While the brand is “owned” by a company, perhaps a symbolic image of a brand resides within the minds of consumers.  Formerly, when tenative threats were made to a brand, it could take months for it to be publicly identified.  Social media has altered the timeframe to mere minutes.

Recent blogs discussing the topic of real-time brand management were based on the March 13 Virgin America flight detained for more than 4 hours due to inclement weather.  I find the debate quite interesting.   The story suggests passengers and crew on this flight became quite restless and nerves were waning.  During this time, David Martin, the CEO of Kontain.com, utilized a social media app on his IPhone to “share” the unbelievable experience.

This effort initiated a phone call to Martin from a Virgin marketing officer with a $100 voucher proposal for his inconvenience.  His response was that all the passengers deserved more.  Subsequently, he was called by Virgin’s CEO, David Cush where Martin maintains he negotiated a full refund and a $100-per-person voucher for all passengers.

While you cannot amend the acts of Mother Nature, I am concerned that spontaneous reflexes such as this will begin to emerge when they are more likely very expensive patches for inadequate customer service processes or poor brand management.    A deeper analysis of root causes for poor customer experiences with a goal of the these causes systematic elimination constitutes a real “function” of brand management.

In response to the Virgin account John Sviokla suggested, “Every company must have “a brand radar system” to constantly monitor social media.”  He also states in a recent blog for the Harvard Business Review that businesses need to adjust to the new reality of being “on stage” at all times.   However, Real-time brand management is more than responding at the speed of a tweet.  Conceivably, we should strive for real-time identification, monitoring and analysis of customer feedback in an effort to develop a consistent set of rules that makes our brand stand out. 

These days a huge gap has formed between listening to our customers and actually understanding what they are saying.  It’s now evident to most companies that Social Media has opened new doors for listening to customers.  Although it seems they are drowning in volumes of voices, without good tools and/or methods to extract clear and actionable signals.  In a sense they can’t see the forest for the all the trees.

While CRM has become the hottest way to connect with customers, it is often mistaken as a form of technology used to disclose customer feedback throughout a company.  CRM is much more than technology; it’s an ongoing process to improve relationships with your customers resulting in better customer service, improved customer satisfaction, retention and loyalty.

So what is Social CRM?  Simply defined, this new advancement is a way to manage social relationships.  Its function is collecting data found in social networks and disseminating among the areas within the company that can respond to it. In the words of Paul Greenberg:

“Social CRM is a philosophy & a business strategy, supported by a technology platform, business rules, workflow, processes & social characteristics, designed to engage the customer in a collaborative conversation in order to provide mutually beneficial value in a trusted & transparent business environment. It’s the company’s response to the customer’s ownership of the conversation.”

Typically, it has taken a drastic measure such as decreased revenues, customer churn or product issues to compel us to reach out to our patrons. On average, this knee-jerk reaction is short-lived and dropped once the next crisis appears.

Customer satisfaction surveys are also utilized by many companies as a way to ‘connect’ with consumers. Although well intentioned, satisfaction surveys are often self serving and primarily give management the impression they are accomplishing something.

A good place to start connecting with your customers is by way of:
- Buyer behavior – adopt a ‘buyer orientation’ vs. the typical ‘seller orientation’
- Voice of the Customer (VOC) programs – go beyond satisfaction.  Bruce Temkin, a principal analyst at Forrester, defines VOC as “a systematic approach for incorporating the needs of customers into the design of customer experiences.”
Empowerment – make sure your organization is focused and able to make changes based on customer feedback.  Lack of this key element is often why customer satisfaction surveys are typically a flop.

Another interesting fact is the correlation of customer satisfaction with a company’s market performance.  A study published in the Journal of Marketing found that companies at the top 20% of the American Customer Satisfaction Index greatly outperformed in the stock market, generating a 40% return.

There is also a strong correlation between customer satisfaction and financial performance.  A study by JD Power and Associates discovered that organizations with the highest levels of customer satisfaction experienced profit margins at three times the growth rate than those with medium levels of customer satisfaction and more than 21 times that for low customer satisfaction ratings.

Often an organization may possess various methods of obtaining customer feedback but they are not able to comprehend it, creating action plans while many do not have the resources to try.  As a veritable strategy, perhaps we should be focusing more than ever on CRM (& Social CRM) development to bridge the enormous gap between listening and understanding our customers.

It seems words like “hope”, “change”, “renewal” help us to detach our actions from their inevitable consequences, at least in our own minds. At the turn of the New Year  we habitually make ourselves (and others) insincere promises to change, to start working out, to start learning languages or skills, to lose or gain weight, etc. We also like to make predictions nobody takes very seriously or calls us on.

Here is an example predicting the Death of Marketing

Gone are the days when marketers could carefully craft messaging and then broadcast that message in a few channels to huge portions of their audiences.  Oh, you can still spend money that way if you want to but in our transparent world, no marketing budget can possibly overcome the actual experience consumers have (and share with friends, followers and Google) with the product, service, or organization.  It no longer matters what you say;  in 2010, your brand will be more defined by what you do and who you are!

I wish Augie Ray, the author of this prediction and a new Forrester analyst, was right, but we both know that he is not. I am hoping that we will see consumers re-gain their power of choice and intelligent, rational selection and I believe that it has already started happening as reported by many observers. Here is an example from the Gerson Lehman Group quoting a McKinsey report:

“Two-thirds of the touch points during the active-evaluation phase involve consumer-driven activities such as Internet reviews and word-of-mouth recommendations from friends and family” .

I just don’t believe that “it” will happen in 2010, primarily because the fundamental change is not an event, it is a process. A process that takes time and a lot of education as too many consumers have willfully relegated their power of choice and are more comfortable to see themselves as victims. Here is an example of a discussion “Does your Company’s Reputation Really Matter?” that illustrates my point:

Perhaps things will change if capitalism develops into a more socially equable system, or a new form of leadership evolves for the 21st century. In the meantime, what do you think? Is reputation still something to be valued and maintained? Does it really count for anything? And how do we ensure that our voices — customers, citizens, taxpayers — are heard amid the deafening noise of spin?

It is interesting to see a victim-hood mentality spilling over from Harvard Business Review by a “Leadership Coach”. I suppose if you don’t believe you have the power – you do not have it.

All the moaning, blaming everything in sight and somehow hoping for a better outcome, meanwhile continuing our patronage of those who don’t deserve it, is not going to bring any change for the better.

I rather do without many things I deem to be necessary – many are not. I stopped buying products that do not deserve high regard from customers who experienced them. I’d rather be without or pay more for quality if it is available. I have enough headaches, thank you very much. I stopped flying anywhere I can drive within a reasonable time, and I do a lot of my long distance meetings using technologies ranging from Skype to Cisco.

For the same reason you cannot change your weight without changing your diet, you cannot get the quality you deserve without demanding it — consistently. Change before you have to.

I used to have a sign in my office that said – “Happiness is expectation management” that could be interpreted as “It’s hard to be disappointed if you don’t expect much”. Apparently this wisdom does not resonate with a lot of consumers:

A recent Brandweek article titled “Retail Customer Service Stinks” reported that the service received by shoppers in over 1000 retail interactions in the study rated 48.2 out of a possible 100 points – a flunking grade. The study, conducted by the research firm The Salt and Pepper Group, examined retail interactions in 73 stores over a four-month period.

This quote, and the others to follow, came from an excellent article by @RetailProphet appropriately called  How Consumers Killed Customer Service. In this article, the writer puts responsibility for deteriorating Customer Service on the shoulders of Consumers with our focus on low price.

We demanded the lowest airfare wherever we flew. We went to the buy-one-get-one sales. We made Walmart what it is today. We camped out for Black Friday. We built the dollar store channel. The bottom line is that we voted with our wallets and customer service lost. We killed customer service.

I’m glad this is finally articulated as I’ve felt this way for a long time. It is rare to see an advertising campaign that is focused on quality of experience, and the only differentiator seems to be the price. These unbalanced optimization attempts inevitably trigger a “law of unintended consequences”. Results range from retail stores, that both feel and smell like dumps, to rising costs of waste disposal caused by purchases of low quality products, that do not last and are priced too low to fix. Apparently most of us do not value the extra time, effort and energy wasted to deal with inferior products and services, to balance the economics of our decisions.

Examples of better balanced services (Apple Store, Nordstrom, etc) point to the fact that market segmentation works as intended and some of us, who expect more than just the lowest  price, can still find better experiences.

For most of us it’s become a matter of making trades and concessions based on the type of product, the brand, or the store we choose to shop at. Just as we don’t expect the lowest price for a laptop at the Apple Store, we can’t in good conscience demand brilliant service at Sears, whose stores have become a virtual sea of sale banners. And if in fact we really can’t live with that trade-off, then I’m afraid we’ll need to rethink our definition of value as consumers and as a society.

I have encountered some mixed emotions among some Market Research and Customer Experience Management practitioners about the usefulness of Customers Reviews as a source of real business intelligence, as opposed to their use as marketing gimmicks. I do not fancy myself as a true professional in these fields as I lack true hands-on, hard core operational experience; however, I doubt these mixed emotions and remain determined to develop technology that “listens” to the stories of customers to “learn” and measure how a product experience meets customer’s expectations.  I ran across this post today from ClearAction that clarifies some of these doubts:

What’s the difference between the way customers volunteer feedback versus the way they’re requested to give feedback? One revolves around outcomes in the customer’s world, whereas the other revolves around customer satisfaction enablers in the company’s world. True customer-centricity requires primary focus and decision motivations be centered on the customer’s world, rather than the company’s.

It is easy to imagine that politics, real or perceived loyalties and conflicts of interest can easily skew the results of customer satisfaction research. However biases, mistakes and algorithmic-imperfections can also result in low quality output. The method is less important than the intent.

customers “hire” a product or service to get something done for them. When we understand the circumstances motivating the customer to hire a product or service, then we gain insight into the customer’s jobs-to-be-done. A great way to identify customers’ desired outcomes throughout the customer experience is to scan customer-generated inputs on your brand category. Good sources of customer-generated inputs include contact center and sales call logs and social media.

Ethnography, or observation research, is also instrumental in understanding outcomes in the customer’s world. What value does your organization place on these customer outcomes sources relative to your formal research that is typically organized from a customer satisfaction enabler viewpoint? Why not consider revising formal research to focus on customer outcomes rather than enablers?By really understanding customers’ jobs-to-be done, constraints, work-arounds, hassles, and other elements of their world, new insights emerge for superior alignment with customers. Adopt the customers’ jargon — don’t make them adopt yours. Cater to the customers’ world — don’t make them cater to yours. Your jargon and world are customer satisfaction enablers, or a means-to-an-end toward customers’ desired outcomes. The outcomes are the direct link to re-purchase behavior and propensity to recommend a brand. In the end, it’s only the outcomes that matter.

The important point is that no single source of data, or method by which such data is acquired, produces viable knowledge. At this point I need to channel Chance, “The Gardener” from “Being There” by relying on my sailing experience – you cannot navigate by less than 3 points of reference; that is why the word “triangulation” was introduced. Our technological approach does not change this any more than the invention of GPS.