What are you afraid of this Halloween?  That your customers might disappear like ghosts?  That your competitors might pick them off like vultures?  That it’s all going to drive you batty?  In the spirit of All Hallows’ Eve, Watermark Consulting brings you The Top Ten Ways To Spook Your Customers:

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10.  Respond to customer requests like a zombie.

Are your responses to customer inquiries heavily scripted like they came out of some low-budget horror movie?  Might your customers feel like no matter what they say, they get form letters and teleprompter-like messages in response?  Remove active listening, critical thinking and personalized problem solving from your front-line and you miss a huge opportunity to impress your customer.  If your front-line personnel perform like zombies, you can guarantee that customers will run from them.

9.  Communicate in gobbledygook (or, on Halloween, goblin-dygook).

Having trouble reading a billing statement?  Or your health insurer’s explanation of benefits?  Or correspondence from your financial institution?  You’re not alone.  Businesspeople are steeped in the practices and language of their respective industries.  As such, they often forget to translate their communications for easy public consumption.  Instead, they convey their messages using jargon, terminology and acronyms that make their customers head for the hills.

8.  Cut expenses and operate with a skeleton staff.

Particularly in times of economic distress, many companies’ first reaction is to slash investments in post-sale operations, since these areas are not viewed as revenue-driving and therefore become easy targets when profits need to be propped up.  But while skeleton staffs might offer some immediate gratification in expense reduction, they also foster negative impressions that could snuff out your company’s true brand.  Bare bones operations translate into long checkout lines, miserable 800-line hold times, overall inattentive service, as well as visibly overworked and irritated employees – characteristics that are hardly the best ingredients for great customer experiences.

7.  Embark on monstrous transformation projects.

Business transformation is overrated.  It’s good to have high aspirations and stretch goals, but you’ve got to eat the elephant one bite at a time.  Big, hairy, audacious projects have a tendency to be ill-defined and nearly impossible to manage.  Plus, most companies suffer from “organizational A.D.D.” and have trouble staying focused on a 3-month project, let alone a 3-year one.  Transformational projects make for good annual report copy, but they often fail to deliver valuable improvements to employees and customers.  (Sometimes, all they deliver is disruption and dissatisfaction.)  Yes, have a long-term vision – but never underestimate the power and efficiency of incremental advances toward that destination.

6.  Never do a post-mortem.

In the whirlwind of daily business activities, people rarely take the time to dissect and diagnose customer annoyances.  Customer complaints present a wonderful opportunity to not just recover gracefully (and perhaps win back a consumer’s loyalty), but to also dig up the root cause of a problem and fix it, once and for all, so it never again rears its ugly head.  What’s even rarer than post-mortems on customer complaints?  Post-mortems on customer compliments.  There’s great value in pinpointing what employee or practice generated customer delight and then figuring out how to replicate that outcome more routinely.  Post-mortems can yield silver bullet-like learnings that forever eradicate customer frustrations or permanently institutionalize loyalty-enhancing business practices.

5.  Create a workplace that sucks the lifeblood out of people.

To create happy, satisfied, and loyal customers, you need happy, satisfied and engaged employees.  Create a work environment where employees don’t feel appreciated, respected or well-equipped to do their jobs – and you’re guaranteed to make their energy and passion go away faster than a vampire at dawn.  And if you don’t think your customers will notice that difference in your staff, then you really are starting to hallucinate.

4.  Don’t tell your customers what’s lurking around the corner.

Creating satisfied, loyal customers is a lot about managing expectations.  People’s frustration (or delight) with a business is closely tied to the expectations they had of that interaction.  Customers don’t like ambiguity or unpleasant surprises.  If you don’t tell them what to expect – how long they’ll be on hold before speaking to a live person, how much paperwork they’ll need to fill out for a mortgage application, what information they’ll need to provide to get an insurance quote, etc. – then they’re more likely to be annoyed when the interaction isn’t as quick, simple or straightforward as they anticipated. 

3.  Give your customers tricks and never treats.

Do customers walk away from dealings with your business feeling good about the interaction?  Do they get what they expected; do they feel like they got a good value?  For lots of businesses, the answer is no.  Customers will rarely tell you that, choosing instead to just vote with their feet (and wallet) and do business elsewhere.  From products that don’t work exactly as expected, to special offers that exclude desirable merchandise, to fine print that can’t even be understood – these are examples of “tricks of the trade” that may draw consumers in momentarily, but certainly won’t create a foundation on which to build loyal customer relationships.  Contrast that with the indelible positive impressions left on customers who experience treats – pleasant surprises and personal touches that they never expected or anticipated.  That’s what legendary service brands are made of.

2.  Avoid ownership and accountability like the plague.

A gruesome ailment has descended upon the business community, eradicating all vestiges of ownership and accountability.  Customer calls are not promptly (if ever) returned.  Commitments are not kept.  Obligations are forgotten.  Here’s a little secret:  customers don’t care if your store is immaculate, if your employees have smiles, if you send them fancy newsletters or any of that fluff if your product doesn’t work as advertised and your people don’t follow through on their promises.  Want to create a brand experience that outshines all others?  Start by nailing these basics and making sure your customers feel cared for.

And the Number One way to spook your customers…

1.  Put scary people on your front line.

Who’s interacting with your customers on a daily basis?  Is your front-line comprised of superheroes who go the extra mile for your customers, or soulless automatons who frighten your customers with their discourtesy, uselessness and utter inability to honor commitments?  No matter how sophisticated your customer relationship management systems are, or how spectacular your retail store looks, or how advanced your customer segmentation strategy is – it means nothing if the people interacting with your customers are not professional, responsible and genuinely helpful.

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No right-minded business sets out to spook its customers.  But that’s inevitably the outcome when companies lose sight of what’s important and valuable to the people they serve. 

Are you haunted by the prospect of your customers defecting to a competitor?  Do something about it before your worst nightmares become a reality.  Let these ten tips serve as your guide, and before you know it, you’ll be casting a spell on your customers that’ll have them coming back for more.

 In their quest to deliver a warm, personalized customer experience, some companies cut corners and end up tarnishing their brand instead of enhancing it.

Take, for example, this information folder from a division of the world’s fourth largest bank.  It’s given to customers who open a new account, and contains all the associated paperwork.

Looks OK from a distance – but what’s the white sticky note that’s slapped onto the folder, a bit askew?  Let’s take a closer peek:

How sweet…  It’s a note telling me that this information packet was “Prepared especially for you, our valued customer(s).”

What a remarkable example of customer experience customization!  It must have taken years of R&D (and hundreds of laser printer adhesive labels) to develop this.

The message is so precise, so insightful – it almost felt like they were looking through my soul(except for the fact they couldn’t tell if I was singular or plural).

Here’s the lesson:  When it comes to personalizing the customer experience, it’s better to be generic than clumsy.

By defacing an otherwise elegant communications piece, and conveying a message of personalization in the most inauthentic manner, this little sticker contradicts pretty much everything the bank is trying to promote about its brand. 

In a word, it makes this global financial behemoth look amateurish, which is probably the last thing they were hoping for.

Outrageous service fees.  Rude staff.  Unintelligible correspondence.  What would Santa say to all those businesses that are naughty to their customers?

With a nod to Clement C. Moore’s “A Visit From St. Nicholas,” Watermark Consulting Founder Jon Picoult wishes you Happy Holidays with this tale about what ails businesses today:

*     *     *

‘Twas the night before earnings release, at the office.

Everybody was stirring…  especially Horace.

As Chief Accountant, with numbers he’d trained

But looking at these figures, his spirits waned.

Sales were down; expenses were climbing,

And it wasn’t just due to the seasonal timing.

Something awful was happening behind the scenes.

That was clear, even to the guy who counted beans.

So he summoned his staff about what to do next:

“We need answers to share with the corporate execs!”

They dug into the numbers, and analyzed trends,

And began to see things through a shiny new lens.

The executives gathered, though it was Christmas Eve.

“What’s the purpose of this?” asked the CEO, aggrieved.

“Well,” Horace replied, his voice cracking with fear.

“I’ve got something, sir, that I think you should hear.”

“There’s a lot to explain, but I’ll try to make it snappy.

I’ve reviewed our financials and they won’t make you happy.

Those great retention numbers we saw in the fall?

Well, turns out our customers weren’t loyal after all.”

“They were waiting around for a better provider.

As soon as one came, they switched their supplier.

There’s a new firm that’s doing something astounding,

And some of their tactics are truly confounding.”

“Like what?” scoffed the CEO.  “We can’t be upstaged.

We’ve bought Super Bowl time.  Made a Facebook page.

How can some other firm possibly strike us

When we’ve got six ‘Friends’ who say that they ‘Like’ us?”

Horace took a deep breath and met the chief’s gaze.

“Their customers seem to have nothing but praise.

When a client calls, for example, humans answer the phone.

They don’t have to listen to some automated drone.”

The Service VP raised his chin, in a snit.

“For the record,” he said, “I don’t buy this one bit.

Our voice response system is very helpful.”

Horace grinned.  “Maybe, if you get past the eighth menu level.”

The Marketing VP then entered the fray.

“I know what’ll keep this competitor at bay.

We’ll expand our products! Add bells and whistles, too!

I guarantee this little upstart won’t know what to do.”

“That isn’t the answer,” Horace said, perplexed.

“This upstart knows customers dread what’s complex.

Their product suite’s lean in a deliberate attempt

To avoid the confusion that breeds discontent.”

“But we’ve got the best salespeople,” their VP declared.

I promise you, in this fight, no expense will be spared!”

Horace sighed.  “But our people are paid on commission.

And consumers these days view that with suspicion.”

“There’s more,” Horace said, to the ol’ CEO,

“There’s another big problem compounding our woe.

Employees are frustrated; turnover’s on the rise.

Folks just aren’t happy, is what I surmise.”

The CEO shrugged in silent disbelief.

“I don’t understand,” he said. “What’s the staff’s beef?”

Horace measured his words, tried to hide his smirk.

Everyone knew this wasn’t a good place to work.

“Well, sir, it’s complicated and it’s not just one thing.

But it’s all lowered morale, which now hangs by a string.

We tell them we want quality, yet measure them on quickness.

That conflict creates stress, so they call out with sickness.

We implore them to exceed our customers’ expectations,

Yet give them poor systems requiring manual machinations.

And on top of it all, they’ve got supervisors who don’t listen.

Focused less on their people, on more on their own mission.

Just as the CEO rose to make his case,

There was a noise from the boardroom fireplace.

The execs stood in awe as a black boot appeared.

And heard from above the clatter of reindeer.

It was Santa himself who stepped forth for a turn.

“When,” he cried, “will you bozos ever learn?

I’ve worked with you for years, but I’m sorry to say.

The way you treat customers…  is driving me away!

Your quality’s suffered, and the fees are too numerous.

To think you’ll get loyalty is really quite humorous.

The elves give me an earful, day in and day out.

Say we can do better with our North Pole clout.

So I’m putting you on notice: get this shop in order,

Otherwise I’ll move the work south of the border.

And if you don’t think all of these problems phase us,

Just watch me forge a larger agreement with Bezos.”

As he stepped into the fireplace, Santa gave them a wink.

“You simply must pull yourselves back from the brink.

Think you know your business? I’ll throw you a curve.

No matter what you’re selling, your business is to serve.”

What does a company get by investing in a high-quality customer experience?

That was the central question behind Watermark Consulting’s very first Customer Experience Stock Performance Analysis, conducted back in 2009 and described in the article “Yes, Virginia, There Is A Return On Customer Experience.”

Each year since, we’ve refreshed the analysis with the latest data, watching to see if customer experience Leaders would continue to outperform customer experience Laggards.

Now it’s time to reveal this year’s results…

The Methodology
For those unfamiliar with our earlier studies, here’s how the analysis works:

We look at the cumulative stock returns for the Top 10 and Bottom 10 publicly traded companies in Forrester Research’s annual Customer Experience Index ranking (Watermark defines these two groups as the Leaders and Laggards, respectively).

We compare the total return from investing in an equally-weighted, annually readjusted portfolio of customer experience Leaders to that for customer experience Laggards and the broader market (as reflected by the S&P 500 index).

The Results
For the five-year period from 2007-2011, the customer experience Leader portfolio outperformed the broader stock market, generating cumulative total returns that were 27% better than the S&P 500 Index and 128% better than the customer experience Laggard portfolio.

This pecking order of performance held true even on an annual basis.  In all but one of the five years, the Leader portfolio outperformed the index, which in turn outperformed the Laggard portfolio.

The Conclusion

The pattern evident from this analysis has been remarkably consistent.  For five years running now, we see that companies which bring great customer experiences to the marketplace are being rewarded – by consumers and investors.

The customer experience Leaders are clearly enjoying the many benefits of consumer loyalty.  They see higher revenues from better retention, greater wallet share, lower price sensitivity and positive word-of-mouth.  They see lower expenses from reduced acquisition costs, fewer complaints, and the less intense service requirements of happy, satisfied, long-term clients.

And the customer experience Laggards?  They erode business value by creating experiences that are rife with friction – stoking customer frustration, increasing attrition, generating negative word-of-mouth and driving up operating expenses.

Yet many business leaders still don’t get it.  They pay lip service to the customer experience, but continue to harbor skepticism about the value of differentiating oneself along that axis.

For evidence of this, look no further than the many corporate debacles of 2011, where the misguided judgments of high-profile companies like Bank of America, Verizon Wireless and Netflix made it seem like CEOs were collaborating on a book titled “How Exactly Not To Do Things.”

Perhaps now, with half a decade of supporting data under our belts, the skeptics will reevaluate their position.

Of course, while they ruminate on that, lots of other companies (maybe even some of their competitors) will continue to take this strategy to the bank.

Few people associate hospital emergency rooms with customer experience excellence.  But some hospitals are working to change that.

If there’s something consumers associate with ERs, it’s long wait times and crowded quarters.  But as reported in The New York Times this week (“For The Elderly, Emergency Rooms of Their Own“), some hospitals are applying the concept of customer segmentation to create more customized and appealing ER experiences.

The article describes the advent of “Geriatric Emergency Rooms” – urgent-care facilities with a design, layout and patient care approach that’s tailored to the needs of the elderly.

One of the hospitals featured, Mount Sinai in New York City, has seen patient satisfaction scores for its Geriatric ER go “off the scoreboard.”  Given that healthcare organizations typically bring up the rear in customer experience rankings, how is Mount Sinai achieving such remarkable results?

The answer is that they’re applying some time-tested customer experience management principles – albeit in a venue that rarely demonstrates any real customer orientation.  Here are just a few of the strategies the hospital is employing:

·         Personalize the experience.  This is a about a lot more than just calling patients by name!  Personalization also involves architecting the experience in a way that aligns with the needs and interests of the target consumer (in this case, an elderly ER patient).  For Mount Sinai, that means a facility with things like non-skid floors and hand rails along the walls – accoutrements that are especially relevant to this audience.

·         Preempt service failure.  In this context, service failure is when, for example, the ER patient loses their footing and suffers a new injury – while in the ER!  Or the patient becomes confused, disoriented and difficult to manage.  The hospital has considered where and how things are most likely to go wrong for these elderly patients, and preempts many of these issues through environmental design and staff training.

·         Be accessible.  Mount Sinai has an iPad in each room of the Geriatric ER, so patients can contact a nurse – and have a face-to-face video chat – when they need something or have a concern.  Presuming these iPads are easy for the patients to operate, they not only provide good accessibility to the ER staff, but do so in a warmer, more personalized way than is possible with a two-way intercom.

While there are probably elements of these Geriatric ERs that would benefit patients of all ages, it’s still an encouraging first step. 

Rarely do you see healthcare providers evaluating their patient experience through a customer lens, and then taking action to enhance it.  For those that do, it’s a real prescription for success.

Delta Airlines has done something novel.  They’ve rolled out a boarding pass travelers can actually understand.

The airline boarding pass is one of those classic examples of customer communications gone wrong.  It’s something used by every traveler on every trip, yet airlines seem to be in a competition to create the most cryptic, perplexing boarding document.

As is the case with most customer communications, complexity comes with a cost.  When travelers (particularly novice ones) can’t easily and correctly interpret boarding pass information, bad things happen.  They go to the wrong gate.  They arrive late for boarding.  They misplace their second-leg boarding pass.  In short, this complexity triggers frustration for the consumer and cost for the company.

So Delta decided to do something about it, rolling out a simplified boarding pass.  And while this airline isn’t yet a poster child for customer experience excellence, they do deserve credit for making this particular touchpoint a little less confusing for their customers.

Delta’s Old Boarding Pass

Delta’s New Boarding Pass

The rationale behind their redesign is outlined in a recent Wall Street Journal article (“Rethinking the Lowly Boarding Pass”).  The approach Delta took reflects several best practices for customer communications improvement:

1.  Pay attention to design details.

If you want to create customer communications that are simple, engaging and refreshing – focus on more than just content development.  The first impression your communication makes on a customer will come from its visual appeal, not its content.  Delta rightfully paid close attention to visual cues in their boarding pass redesign, obsessing over things like typography, font sizes, headings and white space.

2.  Look at the world through your customer’s eyes.

The best communications are designed with the primary user in mind.  In this case, that’s not your Legal department, your Compliance specialist, or your marketing staff.  It’s your customer.  Before putting pen to paper, Delta first considered how customers interacted with boarding passes.  That helped inform the design objectives – such as eliminating multiple boarding documents (because travelers misplace them) and accentuating the destination city (because travelers already know what city they’re leaving from).

3.  Design with your employees in mind, too.

While customers may be the primary constituency served by a communication piece, employees are often a secondary audience.  That’s because when customers have a question about a document, they’re likely to ask one of your employees for assistance.  So make it easy for your staff to locate the information they need off the document, in order to better serve your customer.  For Delta’s boarding pass, this meant displaying the passenger’s first name first and last name last, making it easier for employees to spot that information and address customers by name.

When it comes to creating a great brand experience, customer communications rarely get the respect they deserve.  Things like boarding passes, bills, statements, contracts, and product instructions represent high-frequency customer touchpoints for many businesses – yet they are often treated as boring, administrative documents.

What impression do your customer communications leave on people?  Do they inspire confidence in your company?  Do they reaffirm the purchase decision?  Do they reflect positively on your brand?

If not, then it’s time for you to get on board with customer communications that are simple, clear and engaging.

If you’re trying to build a relationship with your customers, you might be starting off on the wrong foot.

That’s the takeaway from a new Corporate Executive Board study, which found that the vast majority of consumers (77%) had no interest in developing a “relationship” with the businesses they patronized.

Most people view relationships as being reserved for friends and loved ones.  (“It’s just a brand, not a member of my family” was how many of those surveyed described their feelings.)

Customers don’t want a relationship with your business.  All they want is for the products they purchase to work as promised, as expected.  All they want is for your front-line staff to do what they said they were going to do.  All they want is for your company to make their lives easier, not harder.

The irony is, if you deliver all those things consistently, customers will love you for it – because they rarely get that from most firms.  Though they may still claim to not have a “relationship” with your company, they will be drawn to do business with you again and again.

And the value of that loyalty is something any business can relate to.

The balance of power between companies and consumers has shifted.  As firms like Netflix, Verizon, and Bank of America have learned, consumers are more emboldened than ever — eager to express their outrage when they feel a business has wronged them.

Watermark Consulting Founder Jon Picoult was interviewed for this cover story in The Conference Board Review, where he explains how companies can guard against the bad decisions that trigger customer revolts.

With 2013 less than a month old, I realize it’s a bit early to come out with the “best” awards.  But when I saw this story about LEGO’s interaction with one of its young customers, I was willing to go out on a limb.

What I love about this story is how it illustrates that the best customer experiences can’t be scripted.  So much depends on the people and personalities who are delivering the experience – and the leeway they’re given to make a positive, memorable impression.

As you read about this LEGO customer experience (see the link at the bottom of this post), think about your own business and ask yourself:

• Are you filling your front-line roles with people who have the right attitude and the intrinsic motivation for making customers feel special?  Are you trying to train new hires to be happy and personable, or are you hiring happy and personable people?

• Would your business’ approach to performance measurement have encouraged – or inhibited – the type of behavior demonstrated by this LEGO employee?  Do you gauge employee performance largely by how many widgets people produce, or do you also consider how many raving fans they create?

• Do you give your front-line staff some latitude to exercise judgment and make independent decisions, particularly when faced with unusual customer circumstances?  How rigid are the procedures and scripts that govern their role?  How do you respond when someone on the front-line makes a poor judgment?

Might LEGO products be more fun and creative than whatever you’re selling?  Perhaps, but that doesn’t mean the lessons from LEGO are any less pertinent to your company.

The fact of the matter is, LEGO has long understood the building blocks of customer loyalty, and we can all learn something from them.

Enjoy the full story at The Huffington Post.

What would it take to convince consumers that your business delivers a great customer experience?  For Microsoft, the answer appears to be $1.5 billion.

Forbes recently reported that the software maker would spend an estimated $1.5-$1.8 billion on the marketing campaign for Windows 8, presumably to convince us all that Microsoft’s new operating system is indeed the best thing since… umm, Windows 7.

And so how’s that working for them?  According to ComputerWorld, not so good.  Windows 8 sales have been underwhelming, garnering far less market share than Windows 7 at the same point in its release cycle.

Granted, the Windows 8 user interface is a significant departure from prior versions, so one could argue that adoption will slower.  But let’s not kid ourselves, Windows 8 is no beacon of customer experience excellence.

The word many software reviewers seem to use when describing the program is “confusion.”  Software design guru Jakob Nielsen went a step further, declaring that Windows 8 “smothers usability.”  Probably not the kind of press coverage Microsoft was hoping for…

But this isn’t a story about the usability of a new software program.  It’s just a sobering reminder that great, loyalty-enhancing customer experiences – the kind that get people talking and buying – can’t be created with Super Bowl ads, stadium naming rights, public relations blitzes, or any type of marketing campaign.

No matter what you’re selling, be it a piece of software or an intangible service, consumers will ultimately judge your customer experience based not on what you say, but on what you do.

The real battle for consumers’ hearts and minds isn’t waged on billboards and airwaves.  Marketing campaigns may provide air cover, but it’s the hand-to-hand combat of each customer interaction where true loyalty is forged – the usability of your software, the clarity of your communication, the helpfulness of your staff, the ease of doing business, etc.

So before you hang your hat on an expensive marketing campaign to convince consumers how wonderful your product or service is, ask yourself… why do they need convincing at all?

Earlier this month, a major U.S. airline did the unthinkable – it actually showed some heart.

Even more surprising:  this glimmer of hope, in an industry consumers love to hate, came from United Airlines – not exactly a poster child for customer-centricity.

You might recall, a few years ago, United was at the center of one of the first viral social media rants that woke companies up to the power of “word of mouse.”  (For more on that debacle, read about how “United Breaks Guitars.”)

But we’ve got to give credit where credit is due, and even if United isn’t yet a shining beacon of customer experience, they did something really right this time around.  And, ironically, the story went viral and has given United the kind of PR boost that money can’t buy.

Read the full story at CNN.com – “United Airlines Delays Flight For Man To See Dying Mother.”  While the title may seem to give it all away, read it anyway, because the details matter here – and they reflect some key principles that any business should employ when trying to deliver a more positive, memorable customer experience:

• Take personal ownership.  When the pilot and flight attendants became aware of this passenger’s situation, they took personal ownership for shaping the outcome of the story.  Oftentimes, the difference between a really bad and a really good customer experience can be found in the level of personal accountability that front-line staff take for assisting customers.  It’s a decidedly low-tech lever, but a remarkably powerful one.

• Advocate for your customers.  Consumers are so accustomed to seeing companies look out for themselves that it’s actually pretty striking when a business behaves to the contrary.  In this extraordinary circumstance, United chose to put the customer’s interests (getting the man to his dying mother’s bedside) ahead of its own (on-time performance).

• Personalize the experience.  As the man was rushing to his connecting gate, the United agent spotted him 20 yards out and yelled, “Mr. Drake, we’ve been expecting you!”  Addressing a customer by name and giving a personal welcome – they’re small gestures, but they make people feel less like a generic revenue source and more like an individual, valued client.

• Pay attention to the details.  The pilot of the incoming plane radioed ahead to the connecting city, to make the United staff aware of the passenger’s situation so they would hold his connecting flight.  But someone in the ground crew had the sense to realize that it wasn’t just this man who needed to get on the connecting flight — but his bags, too.  Delivering a great customer experience means leaving nothing to chance.  The details matter, and this United ground crew was all over it.

• Socialize the right behaviors.  Even after the incident, United continued its string of good decisions, by highlighting this story in its employee newsletter.  Don’t assume that your staff knows exactly what it means to deliver a great customer experience.  Showcase behavior that they can model, by making heroes out of those who do it right.

Becoming an airline industry customer experience leader will be a long-haul flight for United.  But if they just study this particular, poignant interaction – they’ll know what direction to head.

What’s a great, differentiated customer experience really worth to a company?

It’s a question that seems to vex lots of business executives – many of whom publicly tout their commitment to the customer, but then are reluctant to invest in customer experience improvements.

As a result, companies continue to subject consumers to complicated sales processes, cluttered websites, dizzying 800-line menus, long wait times, incompetent customer service, unintelligible correspondence and products that are just plain difficult to use.

Admittedly, it can sometimes be difficult to quantify the return on customer experience improvements.  What’s the dollar value of a better trained front-line staff?  Or a streamlined sales process?  Or a voice-of-the-customer program?  The financials surrounding such initiatives are often less precise than those of hard-dollar initiatives, like the renegotiation of real estate leases or the consolidation of corporate functions.

Yet executives routinely make big investments in other types of initiatives that are notorious for their vague and questionable ROIs:  corporate re-brandings, advertising programs, “synergistic” mergers, and even the hiring of highly compensated, star CEOs.

It suggests a double-standard, perhaps reflecting executives’ deep-seated skepticism around the benefits associated with customer experience differentiation.

It was this dichotomy that drove Watermark Consulting to elevate the dialogue – getting executives, even for just a moment, to focus less on project-by-project justifications and more on the macro impact of customer experience excellence.

We’ve accomplished this over the years by studying the total returns for two model stock portfolios comprised of the Top 10 (“Leaders”) and Bottom 10 (“Laggards”) publicly traded companies in Forrester Research’s annual Customer Experience Index ranking.

The results of our latest analysis are in, and they are, in a word, striking:

For the 6-year period from 2007 to 2012, the Customer Experience Leaders in our study outperformed the broader market, generating a total return that was three times higher on average than the S&P 500 Index.

Furthermore, while the Customer Experience Leaders handily beat the S&P 500, the Laggards trailed it by a wide margin.

Keep in mind, this analysis reflects more than half a decade of performance results.  It spans an entire economic cycle, from the pre-recession market peak in 2007 to the post-recession recovery that continues today.

The Customer Experience Leaders in this study are clearly enjoying the many benefits that happy, loyal customers deliver:  better retention, greater wallet share, lower acquisition costs and more cost-efficient service.

And the Laggards?  They are being crushed under the weight of high customer turnover, escalating acquisition costs and an uncompetitive cost structure that is inflated by each customer complaint and avoidable inquiry.

In the pecking order of strategic business investments, customer experience often gets short shrift.  Perhaps it’s that executives view these projects as less glamorous than other initiatives.  Or maybe they just don’t intuitively believe that a better customer experience will drive business results.

Watermark’s analysis demonstrates that the ROI of a great customer experience isn’t soft and sketchy.  Companies that excel in this regard are rewarded, by consumers and investors alike.

And that’s a finding that even the most skeptical executives should find hard to ignore.

Jon Picoult is Founder of Watermark Consulting, a leading customer experience consultancy that helps businesses impress customers, inspire employees and improve brand loyalty.  Prior to establishing Watermark, Jon led service, technology, sales and marketing for Fortune 100 companies.  Learn more at www.watermarkconsult.net, or follow Jon on Twitter @JonPicoult.

The company that pioneered ultra-low cost, no-hospitality air travel is encountering some turbulence with its strategy.

For years, Ireland’s Ryanair has prided itself on being the ultimate no-frills airline with unapologetically poor customer service.  They lead with low fares, and then layer on an endless series of fees for everything from speaking to a live representative to printing your boarding pass at the airport.

Their CEO, Michael O’Leary, once called his customers idiots, and has also floated the idea of charging people to use the lavatory.  (Thankfully, lavatory use is still free – what a bargain!)

The low-cost, no-service strategy had legs.  Ryanair’s passenger volumes, and profits, grew rapidly for years.

In the past, I’ve pointed to them as an example of a company that set very clear expectations with its target clientele (i.e., we will nickel and dime you, and won’t offer good service in return) and, as a result, was able to consistently deliver on customer expectations and grow the business as a result.

Fliers may have scoffed at Ryanair’s tactics, but when they wanted a really low fare, many managed to look past all the ugliness.

Until now.

A few weeks ago, Ryanair shocked the stock market with a profit warning (the first in a decade), as flight bookings have fallen appreciably.  And at the firm’s latest annual meeting, several shareholders went public with their concerns that the company’s abysmal customer service is hampering growth.

O’Leary probably didn’t help matters by proclaiming in the company’s most recent quarterly earnings presentation that Ryanair was “Number One” for customer service (as selectively measured by on-time performance, mishandled bags and cancellations).

But, in light of the disappointing forecast, the CEO is starting to change his tune.  At the latest shareholder meeting, he acknowledged that the company “should try to eliminate things that unnecessarily piss people off.”

How’s that for an insightful revelation from the corner office?

The lesson here (beyond reconsidering that Ryanair flight you were going to book) is that there are certain basic needs demanded by any consumer who has at least a few brain cells left.

No matter how well you telegraph your brand and manage expectations (which, let’s face it, Ryanair was pretty adept at doing), consumers will draw the line somewhere – and they’ll let you know when you’ve crossed it.

I’ll leave it to others to debate just what threw Ryanair’s customers over the edge – the perceived absence of basic fairness, the company’s antagonistic posture towards people, the inflexible enforcement of irrational policies…  Take your pick, there are so many irritants to choose from.

Being a low-cost, low-service provider is a legitimate business strategy, and it can work in some circumstances.  But if that’s the strategy you’ve embraced, think carefully about where your customer draws the line.

Because, as Ryanair is discovering, there are limits to how bad an experience customers will tolerate – no matter how low your price.

As Hurricane Sandy barreled towards the Northeast a year ago, insurance companies missed a huge opportunity to engage and impress their policyholders.

It’s the kind of opportunity that insurers frequently overlook, because if they focus on anything, it tends to just be their claimants – not all of their customers.

Learn more about this missed opportunity by reading Watermark Founder Jon Picoult’s latest article in National Underwriter.

During the holiday season, it seems the best surprise most airlines can muster is a flight delay.  Or, if you’re really lucky, a flight cancellation!  And that’s part of what makes this story from Canadian airline WestJet so striking.

For the second year in a row, WestJet has enlisted its employees to engineer a “Christmas surprise” for some unsuspecting passengers.  Last year, it was a flash mob.  And this year?  Well, let’s just say they raised the bar considerably.

WestJet set up kiosks at two airport boarding gates, one for a flight from Toronto to Calgary and one for a flight from Hamilton to Calgary.  Upon scanning their boarding pass at the kiosk, passengers were greeted, via video, by a purple-clad Santa Claus (purple so that kids could distinguish him from the real thing).

Santa greeted the passengers by name (he knew it from the boarding pass they scanned) and proceeded to ask what they’d like for Christmas.  Cute, right?

Then, as these two planeloads of passengers boarded for the four-hour flight to their destination, Calgary-based WestJetters (as the company’s employees are called) sprang into action – engaging in a mad dash holiday shopping spree to get personalized gifts for each passenger.

Imagine customers’ surprise when wrapped presents from Santa (each with their name on it) rolled down the Calgary baggage carousel upon their arrival.  Well, you don’t need to imagine – just watch the video of it all:

Once you see this footage, it will perhaps not surprise you to learn that WestJet has collected an impressive set of industry awards over the past few years, recognizing the company for both its great customer experience and the workplace culture that stands behind it.

Through this stunt, alone, WestJet demonstrated some key principles that customer experience legends typically embrace:

• Deliver pleasant surprises.  Assuming you’ve nailed the fundamentals, injecting a pleasant surprise into your customer experience can help distinguish your brand from others.  And, no, you don’t have to give your customers a free big screen TV (as WestJet did for one of its lucky passengers).  Pleasant surprises can also be small, branded acts of kindness – a handwritten thank you note, an escort to the door, an occasional free product or service upgrade, etc.

• Personalize the experience.  WestJet made clever use of technology, using a scanned boarding pass so Santa could address passengers by name (an unexpected surprise, all on its own).  Personalization is an important ingredient in a distinctive customer experience, as it makes people feel more valued – treated not just as another revenue source, but as a real person.  While technology can be a great enabler for such personalization, it’s not the only avenue.  Something as simple as giving a customer your undivided attention, looking them in the eye, listening intently – these small gestures can all bring a more individualized feel to the experience.

• Enlist your staff in a captivating mission.  The passengers on those two flights weren’t the only beneficiaries of the WestJet Christmas Miracle.  Think about the employees who were involved in the project – how it made them feel to be part of something like this.  Heck, even WestJetters who weren’t directly involved are probably standing a little taller today, proud to be associated with a company and a story that’s generating such awe across the social media universe.  People like to be part of something that’s bigger than themselves – a compelling, purposeful mission that makes them feel valued, appreciated and important.  Give employees that and they’re far more likely to be vested in your business’ success.  And that’s something your customers will notice.

Hats off to WestJet for engineering such a memorable holiday experience for its passengers and its staff.  This is one Christmas Miracle that we can all learn from!

Bloomberg Businessweek ran an article a few days ago (“Proof That It Pays To Be America’s Most-Hated Companies”) that claims to demonstrate customer service performance has no relevance to stock market returns.

They took the most recent American Customer Satisfaction Index (ACSI) scores for publicly-traded companies and plotted them against the firms’ 2013 year-to-date stock returns.

Yes, you read that right.  Bloomberg based its conclusion on stock market data covering less than one year of performance!

Leave it to a Wall Street-centric publication to mistake short-term stock movements with long-term value creation.

If you look at customer experience rankings and stock market performance over a longer time horizon, as Watermark Consulting does in its annual Customer Experience ROI analysis, the data tells a very different story:

From 2007 to 2012, customer experience leaders outperformed the broader market, generating a total return that was three times higher on average than the S&P 500 index.

This isn’t to say that a great customer experience guarantees stock market outperformance, or that a poor experience will surely undermine it.  Customer experience is critically important, but it is just one of many factors that drive business results.

However, what this 6-year stock performance analysis does demonstrate is that on average, over the long-term, a great customer experience will be rewarded by consumers and investors alike.

It’s that time again, when all the customer experience gurus come out with their predictions for the coming year.

So what customer experience trends do the gurus foresee in 2014?  What do they predict organizations will focus on?  Here’s a sampling of their ideas, culled from some recently released prediction lists:

• Companies will create more customer-centric cultures, using new recognition systems and training programs.

• Companies will use technology to personalize the customer experience.

• Companies will go the extra mile by empowering their employees to surprise and delight.

• Companies will focus not on multi-channel service, but omni-channel service.  (Yes!  A new buzzword!)

• Companies will create synchronized mobile device strategies across functional groups like marketing, customer service, and IT.

• Companies will use predictive analytics to create more personalized cross-sell offers to customers.

• Companies will overhaul their voice-of-the-customer programs, relying more on text analytics of unstructured content, such as survey comments, call center recordings, social media conversations, and online chat sessions.

It all sounds like wishful thinking to me – or perhaps just some firms trying to promote their products and services under the guise of a supposed business trend.

Call me a cynic, but here’s my bold customer experience prediction for most companies in 2014:  Not much will change.

• Most organizations will lumber along, spinning their wheels on this topic, discussing it endlessly, executing on minor improvements that amount to window dressing, just so someone can “check the box” on their next performance review.

• Most organizations will continue their navel-gazing, focusing inward on organizational changes, role shifts, political infighting and silo strife.

• Most organizations will lose whatever little momentum they may have gained around customer experience improvement, as top executives with Organizational Attention Deficit Disorder spot some shiny new object that becomes the next initiative du jour.

Forgive my pessimism, folks, but most organizations are unremarkable, and are destined to stay that way.  That’s precisely why, when a company actually does break from the pack and deliver a differentiated experience, it turns heads.

So, rather than obsess over what everyone else will be doing (or what the gurus say everyone else will be doing), focus instead on what your company can do to avoid the fate of mediocrity.

Think about how to send a clear, unmistakable signal to the marketplace — and your workplace — that something fundamental is changing.

A signal that you’re no longer going to do it “like we’ve always done.”

A signal that you’re disrupting the status quo in your industry.

A signal that you’re liberating consumers from long-simmering frustrations.

A signal that you’re dispensing with the typical customer experience platitudes, in favor of very tangible and compelling changes that make a difference in the lives of your customers and the employees who serve them.

If, at the end of 2014, you don’t want to be among the many companies that validate my bold prediction… then go do something bold!

There isn’t a lot of love out there for financial services companies.

This was underscored most recently with the release of The Reputation Institute’s annual survey of consumer perceptions.  For quality of reputation, financial services came in dead last out of 17 industries — scoring even lower than the widely despised cable companies!

Financial services is an industry that many consumers love to hate, thanks to hidden fees, complex documents, and a generally poor customer experience.

Yet I encounter many financial services professionals who feel their industry gets a bad rap – that the negative reputation is undeserved, or merely the consequence of peddling an unglamorous product that must be sold rather than bought.

I think that view is a bit too charitable, though.  The fact is, the financial services industry is often its own worst enemy.  Few other verticals antagonize consumers the way this one does, with business practices that alienate rather than endear.

At its core, this is a story about an industry that’s increasingly disconnected from the needs, wants and emotions of its customers.  It’s an industry that seems to disregard how its words and actions are perceived in the marketplace.  It’s an industry that is, in a word, tone-deaf.

That shortcoming is currently on display in the industry’s vigorous fight against the application of a “fiduciary standard” to a wider body of financial professionals, such as insurance agents and investment brokers.  A fiduciary standard obligates the financial professional to act in the best interests of his or her customer (what a groundbreaking concept!).

However, many financial services providers want to be held to a looser standard – recommending products that are merely “suitable” for the customer, but not necessarily best for the customer.  (Why would they do that?  They might get a higher commission for recommending one product over another.)

Fiduciary standard.  Suitability standard.  They’re just more terms of jargon that make the average person’s head spin.

Here’s what most consumers will take away from the debate, as crystallized by this recent New York Times headline:

With press like this, is it really any wonder that financial firms have a reputation problem?

Some in the industry may argue that the headline is unfair, that it oversimplifies a complex issue.  But that’s almost beside the point.  In the arena of customer experience, perception is reality.  If financial firms’ position in this debate is simply too convoluted to explain to the average consumer, then the industry has already lost the battle.

(That industry position, incidentally, is that the higher regulatory costs imposed by a fiduciary standard would lead brokers to stop servicing lower-value clients.)

Perhaps there are legitimate circumstances when adherence to a “suitability standard” actually makes sense, not just for the provider but also for the consumer.  But if those circumstances truly exist, financial firms have done a poor job describing them — and an even worse job appreciating the optics around the industry’s current policy stance.

In the end, what will matter to consumers is advocacy – one of the pillars of a great customer experience, in any industry.  Few things are as engaging to a customer as knowing that the company you patronize puts your interests ahead of theirs.

For financial professionals who already embrace the fiduciary standard, it represents a key selling point that deserves to be accentuated, particularly as consumers become more aware of the distinction.

And for all those brokers who cling to the suitability clause, it’s time to adapt – either by embracing a fiduciary standard, or by making a cogent case to the consumer about why a suitability-oriented broker can still effectively serve their needs.

Whatever the outcome of that debate, it’s merely one battle in a larger war to build trust in an industry where it is sorely lacking.

Financial firms need to step back, consider their customer’s point-of-view, and then craft a credible and trustworthy value proposition that will resonate accordingly.

Until that happens, many financial services providers will find their “message to the market” still falling on deaf ears.

What’s a great, differentiated customer experience really worth to a company?  Quite a lot, according to a new study released today by Watermark Consulting.

That’s the conclusion from the firm’s 2014 Customer Experience ROI Study, which analyzed seven years of stock market returns for companies that lead in customer experience versus those that lag.

“This year’s results provide the strongest support yet for why every company should make differentiating their customer experience a top priority,” explained Jon Picoult, Founder of Watermark Consulting.

The annual Watermark study, one of the most widely-cited analyses of its kind, offers a striking reminder that a great customer experience is indeed rewarded, by customers and investors alike.

It looks like Sprint needs some Framily counseling.

This past January, the wireless carrier introduced (with much fanfare and an expensive ad campaign) its “Framily” plan – which was essentially a family-shared wireless plan that could be adapted to groups of friends.  The more people in your Framily, the lower the cost per phone line.

At the time, Sprint CEO Dan Hesse touted Framily as the company’s “platform for growth.”

Fast forward seven months later and Framily is no more.  Sprint replaced the program with a more traditional family-share plan like those offered by other carriers.  In addition, Dan Hesse was pushed out of the Sprint Framily and a new CEO was hired to replace him.

What went wrong?  Sprint violated some cardinal rules of customer experience with the Framily plan.  Here’s where they went astray, along with some advice on how you can guard against similar missteps:

1.  Nail the fundamentals, first.

For any product or service, there are elements that are “must-have,” “nice-to-have,” or a “delight-to-have.”  Customers will penalize you for focusing on the latter two categories before nailing the first (think of it as putting the icing before the cake).

In the case of wireless carriers, a key “must-have” attribute is reliable cellular service.  Drop my calls or lose my internet connection and you’re dead to me, no matter how economical the wireless plan.

Sprint’s made no secret about the quality of its wireless network.  It needs work, and the carrier is investing a reported $7 billion this year on network improvements.  During the first half of 2014, when Sprint launched and promoted its Framily plan, the carrier scored dead last in overall network performance, trailing far behind Verizon and AT&T in nearly every measure – including reliability.

The absence of that must-have element translated into a hard sell for Framily, contributing to its ultimate failure.

Key takeaway:  Think carefully about the pecking order of your customer’s priorities.  Pinpoint what the must-have, fundamental product/service attributes are – then execute on them exceptionally well before adding too many bells and whistles.

2.  Minimize customer effort.

Oftentimes, it’s not the best or most economical product that wins in the marketplace.  Rather, it’s the one that is easiest to understand, purchase and use.  The more effort you ask customers to expend when buying, setting up, utilizing or servicing your product, the less appealing that whole experience will be.

The Framily plan sounded good conceptually, but in practice, it was pretty onerous for the consumer to set up and maintain.

First you had to herd cats to get friends and family to agree to be part of your group.  Then you had to establish a Framily ID to link everyone’s accounts and communicate that ID to all parties.  And then, every time someone tried to join the Framily, you had to provide verification that they were allowed in.

But wait, it gets worse…  There’s even more mental effort involved in the form of “stuff” that consumers had to think about when considering the Framily plan:  Who am I comfortable inviting into my group?  What if I have a falling out with someone who’s in my Framily?  Can I kick them out?  Will other Framily members have access to my calling/billing information?

All those thoughts and questions created a cognitive impediment, making it difficult for consumers to wrap their heads around Framily, let alone decide to purchase the plan.  Even though other carriers’ offerings may have been more expensive, they came without all this cognitive baggage and, as a result, were perceived as more appealing alternatives.

Put simply, the aggravation of setting up and monitoring a Framily plan just wasn’t worth it for many consumers.

Key takeaway:  Look for every source of unnecessary, avoidable effort when customers interact with your company and its products – then root it out.  With every ounce of effort required, consumers will be less inclined to explore, purchase, use and, ultimately, recommend your company’s products/services.

3.  Create a consistent and controllable experience.

Two things that are inherently unsettling in any customer experience is a lack of consistency and an absence of control.

Consistency comes into play when the quality, speed or price of an offering is unpredictable.  That’s jarring to a customer, particularly when their expectations have been honed through prior interactions with the business.

Lack of control becomes an issue when those variations in quality, speed or price are disconnected from the customer’s own behavior.  We’re OK if a shipping fee changes because we’ve chosen expedited delivery, but we’re not OK if the fee fluctuates due to circumstances beyond our control.

By design, the price of one’s Framily plan could be inconsistent and uncontrollable.  If someone in your group decides to defect (to another Framily, or a different carrier), your phone bill goes up – and there’s nothing you can do about it.

In essence, the cost of your wireless service is no longer in your direct control, and can be adversely impacted by people over whom you have limited influence.  That concept simply didn’t fly for many consumers.

Key takeaway:  Make your customer experience consistently good before you make it sporadically great.  And if, by design, there are variations in the features/quality/cost of the experience, let customers influence how those variations manifest, so they at least feel “in control” of the delivered product.

*      *      *

Over the past few years, Sprint has been dealing with a lot of challenges.  Instead of helping the company, the Framily plan gave consumers yet another reason to hang up on the carrier.

It’s a valuable example of a poor customer experience design that was virtually doomed from the outset.  Framily was one product launch where Sprint simply made the wrong call.

Jon Picoult is Founder & Principal of Watermark Consulting, a customer experience advisory firm that helps companies impress their customers and inspire their employees.  As a consultant and keynote speaker, he has advised thousands of executives across some of the world’s foremost brands.  Learn more at www.watermarkconsult.net, or follow Jon on Twitter @JonPicoult.