If you want to deliver a great customer experience, you better be prepared to pay up…  right?  Maybe not.

Conventional wisdom suggests that with an enhanced customer experience comes greater expense.  But that’s not always the case.  The fact is, a better experience and lower costs can actually go hand-in-hand.

The origins of that unlikely pairing lie with a fundamental principle that many businesses fail to appreciate:  Broken, or even just unfulfilling customer experiences, inevitably create more work and expense for an organization.

That’s because sub-par customer interactions often trigger additional customer contacts that are simply unnecessary.  Here are some examples:

• An individual receives an Explanation of Benefits (EOB) from his health insurer for a recent medical procedure.  The EOB is difficult to read, let alone interpret.  What does the insured do?  He calls the insurance company for clarification.

• A cable TV subscriber purchases an add-on service, but the sales representative fails to fully explain the associated charges.  When the subscriber’s next cable bill arrives, she’s unpleasantly surprised and believes an error has been made.  She calls the cable company to complain.

• A mutual fund investor requests a change to his account.  The service representative helping him fails to set expectations for a return call.  Two days later, having not heard from anyone, what does the investor do?  She calls the mutual fund company to follow-up on her request.

• A student researching a laptop purchase on the manufacturer’s website can’t see the difference between two closely related models.  To be sure he orders the right one for his computing needs, what does he do?  He calls the manufacturer.

• An insurance policyholder receives a contractual amendment to her policy that fails to clearly explain, in plain English, the rationale for the change and its impact on her coverage.  What does the insured do?  She calls her insurance agent for assistance.

In all of these examples, less than ideal customer experiences generated additional calls to centralized service centers or field sales representatives.  But the tragedy is that a better experience upstream would have completely eliminated the need for these customer contacts.

There are both real and opportunity costs incurred as a result of these unnecessary inquiries.

Every incoming call, e-mail, tweet or letter drives real expense – in service, training and other support resources.  Plus, because many of these contacts come from frustrated customers, they often involve escalated case handling and complex problem resolution – which, by embroiling senior service professionals, managers and executives in the mess, drives the associated expense up considerably.

Layer on top of that all of the associated opportunity costs:  the diversion of company staff from more valuable, profit-enhancing activities, because their time is consumed handling customer inquiries that shouldn’t even exist.

Studies suggest that at most companies, as many as a third of all customer contacts are unnecessary – generated only because the customer had a failed or unfulfilling prior interaction (with a sales rep, a call center, an account statement, etc.).

In organizations with large customer bases, this can easily translate into hundreds of thousands of expense-inducing (but totally avoidable) transactions.  Take into account the additional opportunity costs and it’s enough to make a CFO cry.

To avoid this profit-sapping outcome, consider these three tips:

• Really understand why customers contact you.  Whether your company handles a thousand customer interactions a year — or millions — don’t assume they’re all “sensible” interactions.  Identify and drill into the top ten reasons that customers contact you.  You’ll likely find that for some subset of those categories, these contacts can be avoided with upstream changes, in the form of streamlined procedures, simplified communications or revised marketing materials.

• Drill the importance of ownership into all sales and service staff.  How many of your customer contacts are really just follow-up inquiries – generated only because a staff member failed to keep a promise or honor a commitment to the customer?  Absence of ownership drives customers crazy.  Yet, with good training and executive support, it’s one of the easiest ways to improve service and reduce costs.

• Promote a balanced orientation on quality and quantity.  A single-minded focus on volume measures (e.g., how many calls you answered, how many sales you closed) can compromise quality.  The resulting errors – by triggering unnecessary contacts and driving corrective re-work – will offset any productivity gains you thought you were realizing.

Great customer experiences can be powerful drivers for a firm’s top line.  Even small improvements in customer loyalty, retention and repurchase can have a huge impact on revenues.

What gets far less attention, though, is the fact that better experiences can also translate into expense reduction and avoidance, given that poor customer interactions spawn lots of unnecessary work that consumes organizational resources.

So the next time you’re looking to control costs, consider a counterintuitive approach:  deliver a better customer experience.  It’s a great way to turn customers (and CFOs) into raving fans.

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, follow Jon on Twitter @JonPicoult, or subscribe to Watermark’s eNewsletter.

NBC News contributor Herb Weisbaum (a.k.a. the “ConsumerMan”) recently interviewed Watermark Founder Jon Picoult about the firm’s 2014 Customer Experience ROI Study.

The two discuss the results of the ROI Study, as well as the reasons why many executives are skeptical about the value of an improved customer experience.

Listen to the interview.

Download the complimentary report describing the study’s results.

Outrageous service fees, unintelligible correspondence, poorly organized websites, overly complex products, inept staff, long hold times…  What would Santa say to all those businesses that are naughty to their customers?

With a nod to Clement C. Moore’s poem “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.”

*     *     *

Jon Picoult is Founder & Principal of Watermark Consulting, a customer experience advisory firm that helps companies get off the naughty list.  As a consultant and keynote speaker, he has advised thousands of executives across some of the world’s foremost brands.  Follow Jon on Twitter @JonPicoult, or subscribe to Watermark’s eNewsletter.

[Editor's note:  This article was originally published by National Underwriter Life & Health magazine on December 18, 2014.]

*          *          *

‘Tis the season for health insurance open enrollment, which can mean only one thing…  My blood pressure’s going up.

Health insurers talk a lot about how they’re my “wellness partner,” helping me “live a healthier life” and “empowering me to make good decisions.”  But I find all they do is make me ill…  sick with aggravation and annoyance.

That’s perhaps best evidenced by the annual health insurance open enrollment process, when insurers put on a master class in exactly how not to treat your customers.

My open enrollment journey began with a letter from my insurer, indicating that my current health plan would no longer be available next year.  However, the letter explained, they had already selected a replacement plan that would best meet my needs.

Of course, they neglected to tell me what that plan was.  Perhaps they felt adding an element of mystery and suspense to the process would make it more exciting?

A few weeks later, they graciously revealed their plan selection in a second notice.  They picked a coverage option that was nearly twice as expensive as my current one – with a narrower provider network, to boot.  It seemed like a selection that best met their needs, instead of mine.

So off to the Internet I went to research my alternatives.  That alone was an adventure, given how many insurers’ health plan websites appear to have been designed by crazed, blind hermits.

My personal favorite was one major insurer’s site where about half the links to their health plan details yielded the dreaded “404 Web Page Unavailable” error.  I guess they really weren’t interested in getting my business (or anyone else’s).

After evaluating other offerings, it was time to figure out what my options were with my current insurer.  Naturally, their online plan descriptions triggered more questions than they answered – which meant I’d have to contact the insurer’s 800-line service center (also known as Dante’s 9^th Circle of Hell).

All I wanted was to speak with someone who could help me.  But that was clearly setting the bar too high.

Once I navigated the labyrinth that was the 800-line menu, I was subjected to a series of pre-recorded messages, including one that felt less like a call center greeting and more like an oral history of the Affordable Care Act.

Then there was the twenty-minute wait until a representative was available, with the on-hold music periodically interrupted by an ironic recorded assurance that the company “values my time.”

They valued my time so much that they made sure to consume a lot of it.  That first call lasted more than two hours and included ten transfers, because nobody seemed to be the “right person” to help me.  You’d think I was asking about some arcane plan feature, but all I had were some straightforward questions comparing networks and benefits across two of the company’s plans.

Each service representative I spoke with began the conversation using the same scripted phrase:  “What would you like to accomplish today on this call?”

“I’d like to not get transferred,” was the reply I started using about an hour into the odyssey.  “That’s my goal on this call.”  The vast majority of the people I spoke with were unable to satisfy even that simple request.

Oftentimes, I found I knew more about these plans than the enrollment representatives themselves.  I even resorted to walking one of them, step-by-step, through the company’s own website materials, when they insisted the plan I was considering had no out-of-network coverage.  (It did, and they finally concurred.)

Even after this first marathon call ended, I was compelled to call again…  and again and again.

In some cases, it was to follow-up on information that enrollment representatives had promised to send me, but never did.

In other cases, it was just to ask the exact same questions of another person, because I had absolutely no confidence in the responses I was getting.  I would pose the same question to three representatives and get three different answers.  That’s how my insurer empowers me to make a good decision?

My experience is not uncommon; health insurers routinely bring up the rear in cross-industry customer satisfaction rankings.  It begs the question, though, how much unnecessary expense are these companies incurring as a result of all this incompetence?

If health insurers simplified their products a bit, if they made their information materials a little clearer, if they trained and equipped their staff better – how much consumer confusion would they mitigate?  How many incoming calls, e-mails and tirades would they preempt?  How much operational savings could they pass on in the form of more affordable coverage?

In a health insurance marketplace that’s becoming increasingly consumer-directed, many insurers have taken to the airwaves to highlight how they enrich our lives and improve our well-being.

But you can’t advertise your way to a good customer experience.  If health insurers are serious about improving my well-being, they can start by creating an open enrollment process that’s more satisfying than it is sickening.

 *          *          *

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, follow Jon on Twitter @JonPicoult, or subscribe to Watermark’s eNewsletter.

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 2015 Customer Experience ROI Study, which analyzed eight 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.

[Editor’s Note:  This article was originally published in Carrier Management magazine.]

How can a company liberate itself from the death spiral of product commoditization?

Competing on price is generally a losing proposition – and a very exhausting way to run a business.  But when a market matures and customers start focusing on price, what’s a business to do?

The answer, as counterintuitive as it may seem, is to deliver a better customer experience.

It’s a proposition that some executives would reject outright.  After all, a better customer experience costs more to deliver, right?  How on earth could that be a beneficial strategy for a company that’s facing commoditization pressures?

Go From Commodity to Necessity

There are two ways that a great customer experience can improve price competitiveness, and the first involves simply removing yourself from the price comparison arena.

Consider those companies that have flourished selling products or services that were previously thought to be commodities.  Starbucks and coffee.  Nike and sneakers.  Apple and laptops.  They all broke free from the commodity quicksand by creating an experience that their target market was willing to pay more for.

They achieved that, in part, by grounding their customer experience in a purpose-driven brand that resonated with their target market.

Nike, for example, didn’t purport to just sell sneakers – they aimed to bring “inspiration and innovation to every athlete in the world.”  Starbucks didn’t focus on selling coffee, they sought to create a comfortable “third place” (between work and home) where people could relax and decompress.  Apple’s fixation was never on the technology, but rather, on the design of a simple, effortless user experience.

But these companies also walk the talk, by engineering customer experiences that credibly reinforce their brand promise (take, for example, the carefully curated sights, sounds and aromas in a Starbucks coffee shop, or the seamless cross-platform integration across Apple devices).

The end result is that these companies create something of considerable value to their customers.  Something that ceases to be a commodity, and instead becomes a necessity.  Something that people are simply willing to pay more for.

That makes their offerings more price competitive, but not because they’re matching lower-priced competitors.  Rather, despite the higher price point, people view these firms as delivering good value, in light of the rational and emotional satisfaction they derive from the companies’ products.

The lesson:  hook customers with both the mind and the heart, and price commoditization can quickly become a thing of the past.

Gain Greater Pricing Latitude

Creating a highly appealing brand experience can certainly help remove a company from the morass of price-based competition.  But the reality is – price does matter.  While people may pay more for a great customer experience, there are limits to how much more.

And so, even for those companies that succeed in differentiating their customer experience, it remains important to create a competitive cost structure, one that affords some flexibility in pricing without crimping margins.

At first blush, these might seem like contradictory goals:  a better customer experience and a more competitive cost structure.  But the surprising truth is that these two business objectives are actually quite compatible.

A great customer experience can actually cost less to deliver, thanks to a fundamental principle that many businesses fail to appreciate:  Broken, or even just unfulfilling customer experiences, inevitably create more work and expense for an organization.

That’s because sub-par customer interactions often trigger additional customer contacts that are simply unnecessary.  Some examples:

• An individual receives an Explanation of Benefits (EOB) from his health insurer for a recent medical procedure.  The EOB is difficult to read, let alone interpret.  What does the insured do?  He calls the insurance company for clarification.

• A cable TV subscriber purchases an add-on service, but the sales representative fails to fully explain the associated charges.  When the subscriber’s next cable bill arrives, she’s unpleasantly surprised and believes an error has been made.  She calls the cable company to complain.

• A mutual fund investor requests a change to his account.  The service representative helping him fails to set expectations for a return call.  Two days later, having not heard from anyone, what does the investor do?  She calls the mutual fund company to follow-up on her request.

• A student researching a computer laptop purchase on the manufacturer’s website can’t understand the difference between two closely related models.  To be sure he orders the right one for his needs, what does he do?  He calls the manufacturer.

• An insurance policyholder receives a contractual amendment to her policy that fails to clearly explain, in plain English, the rationale for the change and its impact on her coverage.  What does the insured do?  She calls her insurance agent for assistance.

In all of these examples, less than ideal customer experiences generate additional calls to centralized service centers or field sales representatives.  But the tragedy is that a better experience upstream would eliminate the need for many of these customer contacts.

Every incoming call, e-mail, tweet or letter drives real expense – in service, training and other support resources.  Plus, because many of these contacts come from frustrated customers, they often involve escalated case handling and complex problem resolution – which, by embroiling senior staff, managers and executives in the mess, drives the associated expense up considerably.

Studies suggest that at most companies, as many as a third of all customer contacts are unnecessary – generated only because the customer had a failed or unfulfilling prior interaction (with a sales rep, a call center, an account statement, etc.).

In organizations with large customer bases, this can easily translate into hundreds of thousands of expense-inducing (but totally avoidable) transactions.

By inflating a company’s operating expenses, these unnecessary customer contacts make it more difficult to price aggressively without compromising margins.

If, however, you deliver a customer experience that preempts such contacts, it helps control (if not reduce) operating expenses – thereby providing greater latitude to achieve competitive pricing.

Putting The Strategy To Work

If your product category is devolving into a commodity (a prospect that doesn’t require much imagination on the part of insurance executives), break from the pack and increase your pricing leverage with these two tactics:

1. Pinpoint what’s really valuable to your customers.

Starbucks tapped into consumers’ desire for a “third place” between home and work – a place for conversation and a sense of community.  By shaping their customer experience accordingly (and recognizing that they were much more than just purveyors of coffee), Starbucks set it itself apart in a crowded, commoditized market.

Insurers should similarly think carefully about what really matters to their clientele, and then engineer a product and service experience that capitalizes on those insights.  Commercial policyholders, for example, care a lot more about growing their business than insuring it.  Help them on both counts and they’ll be a lot less likely to treat you as a commodity supplier.

2. Figure out why customers contact you.

Apple has long had a skill for understanding how new technologies can frustrate rather than delight customers.  They’ve used that insight to create elegantly designed devices that are intuitive and effortless to use.  (Or, to invoke the oft-repeated mantra of Apple founder Steve Jobs, “it just works.”)

Make your customer experience just as effortless by drilling into the top ten reasons that customers contact you in the first place.  Whether your company handles a thousand customer interactions a year — or millions — don’t assume they’re all “sensible” interactions.  You’ll likely find some subset that are triggered by customer confusion, ambiguity or annoyance – and could be preempted with upstream experience improvements, such as simpler coverage options, plain language policy documents, or proactive claim status notifications.

By eliminating just a portion of these unnecessary, avoidable interactions, you’ll not only make customers happier, you’ll make your whole operation more efficient.  That, in turn, means a more competitive cost structure which can support more competitive pricing.

*          *          *

Whether it’s coffee, sneakers, laptops, or insurance, every product category eventually matures and the ugly march toward commoditization begins.  In these situations, the smartest companies recognize that the key is not to compete on price, but to compete on value.

They focus on continuously refining their brand experience – revealing and addressing unmet customer needs, identifying and preempting unnecessary customer contacts.

As a result, they enjoy reduced price sensitivity among their customers, coupled with a more competitive cost structure.  And that’s the perfect recipe for success in a crowded, commoditized market.

*          *          *

Jon Picoult is Founder & Principal of Watermark Consulting, a customer experience advisory firm that helps companies impress their customers and build brand loyalty.  As a consultant and keynote speaker, he has advised thousands of executives across some of the world’s foremost brands.

Contact Jon at www.watermarkconsult.net, or follow him on Twitter @JonPicoult.

In their zest to demonstrate customer experience ROI to skeptical business leaders, some customer experience evangelists are getting too revved up over revenue growth.

But how could revenue growth be a poor measure of success?

Profit Is Paramount

There are two important drawbacks to using revenue growth as a macro indicator of customer experience ROI.  The first is grounded in one simple fact:  Most businesses exist to make profit, not to make revenue.

Growing revenue at the expense of profitability is rarely a sustainable strategy (at some point, investors do expect to make money).  Indeed, focusing too much on revenue growth can actually drive the wrong behavior in an organization, potentially leading people to focus on businesses, segments, or customer experience enhancements that boost sales but not profits.

Most company boards will have limited patience for executives who deliver sales, but not earnings.  If the goal is to help executives appreciate the value of customer experience differentiation, then for goodness sake, use a metric that won’t get them fired!

When the benefits of customer experience are framed largely as a revenue play, the implied message is that profitability is a secondary concern – or worse, that profitability improvement isn’t an anticipated consequence of a better customer experience.  Either way, it sends the wrong message.

Revenue Is But Half The Equation

But there’s also a second important shortcoming to using the revenue growth metric:  It completely ignores the expense-saving aspect of a better customer experience.

A great customer experience, if properly engineered, should affect a business’ income statement in two places – the revenue line and the expense line.

When customers love you, revenue goes up because they refer others to you, they buy more stuff from you, and they’re less price sensitive.

But loyal, happy customers also help to control, if not reduce, expenses – by generating referrals that shrink new business acquisition costs, and by putting less stress on operating infrastructure (via fewer complaints, for example).

Revenue growth, as a measure of customer experience ROI, completely misses the expense half of this equation.  And the impact isn’t just on numbers, it’s on people, too.

When companies define customer experience ROI purely in terms of revenue growth, employees who aren’t directly connected to sales get disengaged from the whole improvement effort.  In their eyes, they have little opportunity to influence a revenue metric.

A broader measure of customer experience ROI, one that accounts for both revenues and expenses, has more relevance to more parties.  And when employees – in sales, service or any other function – believe that they can personally move the needle on customer experience success metrics, then it’s a lot easier to enlist them in the whole improvement endeavor.

A Better Measure of Customer Experience ROI

So what’s the solution?  No macro measure of customer experience ROI is perfect; they all have imperfections.  But the one I’ve long favored is a more holistic measure of business performance  – namely, stock appreciation.

Over the long-term, stock price is a reflection of a company’s future cash flows (its “earnings growth,” in Wall Street terminology).  And how do you maximize cash flows?  You improve profitability.  And how do you improve profitability?  By growing revenues and reducing expenses – two tasks that will have immediate relevance to most anyone in an organization.

What’s more, there’s good evidence that, over the long-term, customer experience excellence is indeed rewarded by investors (check out Watermark Consulting’s 2015 Customer Experience ROI Study).  It’s not a perfect correlation, but it is an intriguing indication that customer experience leading firms are often viewed as more valuable than their laggard counterparts (a discovery that has relevance to any company, public or private).

Stock price appreciation is by no means a flawless measure of customer experience ROI, but it is, without question, a more holistic measure of business success than revenue growth.

That’s a key distinction, because if you’re seeking to influence executive mindsets around the importance of customer experience, you need to speak in terms that will resonate with everyone in the C-Suite.

A conversation about stock appreciation and long-term profitable growth accomplishes precisely that.

*          *          *

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.

Contact Jon at www.watermarkconsult.net, or follow him on Twitter @JonPicoult.

Last October, when activist hedge fund Starboard Value ousted the entire board of Olive Garden’s parent company, the newly installed Directors probably never imagined where their new role would take them…

Straight to the kitchen.

That’s right – the company’s new CEO, and everyone on the Board of Directors, spent a night working in an Olive Garden restaurant.  They spent time greeting guests, serving food, and yes, even preparing meals in the kitchen.

CEO Jeffrey Smith explained it like this, in an interview with Bloomberg News:  “It was an amazing experience because we felt, as board members, how are we going to make good decisions in the boardroom without really knowing what’s going on in the restaurants?”

He added that getting into the restaurants to see how things operated was “about making sure we’re giving [employees] the tools so that they can do the best job succeeding for us, for everyone.”

Kudos to Starboard for arranging this in-the-field exercise for its top leadership.

At most companies, there’s usually a huge chasm of perception between the corner office and the front-line.  Executives have views about what’s going on in the trenches, while employees have views about what’s going on in the C-suite.

Both parties’ views about the other are rarely entirely accurate.

An immersion experience, like that engineered by Starboard, helps break down the walls between these two constituencies.

Executives get an unfiltered view of what it feels like to be a customer (or an employee who serves them).  Employees, in turn, get to educate their leaders about what really matters on the front-line.  And both parties get a chance to see one another not as stereotypes (a naïve employee or a cold-hearted executive), but as real people.

The ideas that emerge from such exercises, and the trust that it cultivates, can be quite powerful.

So how has Olive Garden performed over the past year?  The company has posted four straight quarters of same-store sales growth and its stock has outperformed the S&P 500 Index by 25 percentage points.

When explaining the great results, among the changes Olive Garden executives point to are new menu items such as “breadstick sandwiches” – a creation born from the chain’s signature chewy breadsticks which accompany every meal.

Oh, and the idea for the new breadstick sandwiches, where did that come from?  An Olive Garden restaurant manager.

Just more proof that getting executives out of their offices and onto the front-line, listening to customers and staff, is a true recipe for success – in any business.

*          *          *

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.

Contact Jon at www.watermarkconsult.net, or follow him on Twitter @JonPicoult.

What do you do when a company asks for your opinion… and then refuses to let you voice it?

A few years ago, I wrote about how companies often inadvertently make it difficult, if not impossible, for customers to provide feedback.  Common culprits include things like complicated survey design or malfunctioning survey administration systems.

Recently, however, I came across the most startling example yet of this dynamic – startling because it wasn’t inadvertent, but rather, quite deliberate.

The company behind it all was health insurer Anthem, a firm that finds itself perennially at the bottom of many prominent customer experience rankings (and here’s yet another reason why).

Anthem periodically surveys its health insurance policyholders via e-mail, with the help of its research supplier, Burke.  Upon clicking though the survey’s e-mail invite, customers are brought to this landing page:

They’re then asked to indicate the nature of their most recent interaction with Anthem:

Now here’s where it gets interesting.  Upon selecting one of the above interaction types, some customers will receive the following message (as I did):

And that’s it.  Game over.

How do you think that message feels to customers who were gracious enough to take a few moments of their time to provide Anthem with feedback?  Mind you, we’re not talking about unsolicited feedback.  This is feedback that Anthem explicitly requested from that customer.

The answer is it’s a horrible feeling.  It’s a sign of complete and utter disrespect to the customer.

It’s particularly infuriating for customers who were already sour on Anthem and saw the survey as an opportunity to get a few things off their chest.  For them, the aborted survey is a major letdown – and just serves to reinforce and amplify their negative impressions of Anthem.

Why on Earth would Anthem and its survey administrator choose to shut off the feedback spigot so abruptly?

It is, quite simply, a matter of statistics.

For a researcher, surveys are all about sample sizes – collecting enough responses so the information gathered is statistically significant (i.e., it provides an accurate reflection of the views of the overall customer population).

Once enough people respond to the survey, and a statistically significant sample size is achieved, researchers will tell you that there’s no need to collect additional responses.

So, for example, when enough people have completed the Anthem survey about a recent prescription filling experience, that part of the survey “closes” and all subsequent respondents get rebuffed.

From a pure research perspective, shutting the survey down makes sense.  Why incur the expense of collecting and analyzing responses that are statistically unnecessary?

But from a customer experience standpoint, shutting down the survey – after invites are sent – is just about the worst thing you can possibly do.

From the customer’s perspective, the feedback they have to share is significant, no matter what the statistics say.

Surveys are much more than a research instrument, they are part of a company’s customer experience.  In this case, for many of Anthem’s policyholders, a survey that was intended to be a constructive feedback exercise devolved into yet another customer annoyance.

No offense to research specialists (good ones are invaluable), but if you’re embarking on a customer feedback program, don’t hand the keys over to the statisticians or survey wonks.  Instead, make sure someone with an eye towards the customer experience is overseeing the effort.

Statistically speaking, that’s your best bet for success.

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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.

Contact Jon at www.watermarkconsult.net, or follow him on Twitter @JonPicoult.

It’s not just the food that’s making people sick at Chipotle.

The restaurant chain’s workplace policies might also be to blame – and therein lies an important customer experience lesson.

Last fall, Chipotle grappled with an E.Coli outbreak that sickened dozens of customers across multiple states.  That would be a problem for any restaurant, but even more so for Chipotle given that fresh, locally-sourced ingredients have been central to its “food with integrity” brand positioning.

Then, in December, things got even worse when over 100 people got sick with the norovirus upon eating at one of the chain’s Boston area restaurants.  Media attention led to increased scrutiny of other Chipotle food safety incidents, including a norovirus outbreak that affected over 200 customers and employees at a California store last summer.

While health officials have yet to identify the specific source of the E.Coli outbreak, the culprit is almost certainly within Chipotle’s food supply chain, since the incident affected multiple stores across the country.  (In response, Chipotle is changing how it sources and prepares its food ingredients.)

In contrast to the E.Coli outbreak, the two norovirus incidents were traced back to specific Chipotle employees working at the stores.  These individuals, health officials discovered, were ill just prior to the outbreak, but came to work anyway.  Why might they do that?

It turns out that hourly employees at Chipotle are not offered paid sick leave like their salaried counterparts.  Inadvertently, the company had created an incentive for sick hourly workers (who are already paid a meager wage) to drag themselves out of bed and into the store, where they could infect customers and colleagues.

To address this issue, Chipotle will reportedly begin offering paid sick leave to hourly employees, one of several new food safety-related policies that will be introduced at all-employee training sessions scheduled for February 8.

(Interestingly, it was at a Human Resources convention last summer that Chipotle executives first expressed their intention to offer paid sick leave to hourly employees — yet the company’s Careers website still shows that as a benefit reserved for salaried employees.)

The absence of paid sick leave – and the potential influence that has on employees (and, ultimately, customers) – is a great example of how behind-the-scenes workplace practices can adversely influence a company’s customer experience.

Despite their best intentions, employees’ behavior (towards each other, and towards customers) will necessarily be shaped by “internal infrastructure” that is arguably out of their control (but not out of executive control).

Food service employees who choose to work while ill, because they don’t get paid sick leave, are just one example of this dynamic.  There are many others:

• Call center representatives who rush customers off the phone, because their performance is measured largely by how many calls they answer each day.

• Employees who spurn teamwork, because their compensation is tied exclusively to their individual results, without regard to the broader performance of their unit.

• Sales staff who make awkward attempts to cross-sell customers, because they must follow a strict sales script that allows little room for judgement.

• Service staff who must repeatedly transfer callers to other areas, because their narrow job design doesn’t allow them to address common customer requests.

• Employees who are slow to transact business for customers, because of the archaic point-of-sale systems they must navigate.

These are just a few illustrations of how workplace infrastructure – things like benefit offerings, measurement practices, reward programs, front-line systems, and job designs – can adversely affect the customer experience.

As Chipotle has discovered, these “backstage” components, which are largely hidden from customers’ view, can often influence the delivered experience just as much as more visible “onstage” elements (such as the design of a product or a retail store).

So, if you’re exploring ways to improve your company’s customer experience, remember this:

It’s quite possible those loyalty-sapping issues your customers see in front of the curtain can only be truly remedied by doing something different behind the curtain.

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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.

Contact Jon at www.watermarkconsult.net, or follow him on Twitter @JonPicoult.

Uber Technologies last month took action to heal a rift with its drivers, but it may have inadvertently created a rift with its customers.

The company announced a class action settlement with its California and Massachusetts drivers, who had sued Uber for classifying them as independent contractors, rather than as employees.

The settlement, if approved by a San Francisco judge, would leave the independent contractor classification intact, but would also give Uber drivers some new rights.

Among those new rights is allowing drivers to post signs in their cars soliciting tips from customers.  And that’s where Uber’s ride might get a bit rocky.

Uber and its ride-hailing app arrived on the scene in 2009 and the company has enjoyed spectacular growth ever since.  Fueling that success has been Uber’s innovative customer experience – which isn’t just great… it’s magical.

With the push of a smartphone button, a private car rolls up curbside, ready to take you wherever you need to go.  You get in, you go, you get out.  That’s it.

There’s no fumbling for cash to pay the driver, no math problem at the end of the ride to calculate a tip from a fare meter.  Uber just charges a flat fee for the trip to the credit card on file for the customer.

It is, in a word, effortless for the passenger – both physically and mentally.  But that could change if drivers start soliciting tips.

Uber’s app has no facility for adding a tip to the fare, and the company has indicated it has no intention of incorporating that functionality.  So the cashless interaction, a hallmark of Uber’s customer experience, is replaced by one that looks and feels a lot more like a traditional taxi cab.

Furthermore, a service that had been free of the emotional baggage of tipping (should I or shouldn’t I, and if so, how much?) will suddenly become more mentally taxing.

Instead of feeling liberated from the typical taxi fare ritual, Uber riders may feel guilted into tipping their driver (especially since Uber’s bidirectional scoring system lets drivers and passengers rate each other).

In Uber’s defense, it’s possible tip solicitation was the least of all evils that they had to choose from at the settlement negotiating table.  What’s troubling, though, is that tipping – as it would be handled in the Uber ecosystem – undermines a key point of differentiation for the service.  What was effortless before, suddenly becomes effortful.

That could present a problem for Uber down the road, and perhaps even give a lift to Lyft, their primary competitor in this space (who, incidentally, does offer cashless tipping via their app).

In order to survive long-term, businesses have to adapt, be it to changing circumstances, marketplaces, regulations, or other environmental influences.  What’s important, though, is to make sure those adaptations don’t undermine foundational elements of your company’s value proposition (in the case of Uber – rider convenience).

Southwest Airlines, for example, has long resisted charging fees for baggage, even as the rest of the industry has jumped on that bandwagon and collected billions of dollars in revenue as a result.  Why?  Because they view that as a central component of their passenger-friendly policies – policies which, to quote their stated brand purpose, give people the “freedom to fly.”

Southwest has also avoided flying any aircraft other than the Boeing 737, viewing that operational simplicity as a critical ingredient to delivering a superior passenger experience.  (Southwest’s entire acquisition of AirTran in 2011 was almost derailed over this point – until Southwest got Delta to take over every non-737 airplane in AirTran’s fleet.)

So, follow Southwest’s lead and ask yourself:  What elements of my firm’s customer experience are truly sacrosanct?  What are the characteristics or components that are so central to our brand experience, they should never change?

Put your finger on those elements now, when you’re not in the midst of a difficult, stressful business decision that might cloud your judgement.

Then, do your best to protect those pillars of the experience, limiting adaptations and accommodations to areas that are less likely to dilute the brand differentiation you’re trying to cultivate.

With Uber opening the door to gratuities for its drivers, we may be witnessing a “tipping” point in the evolution of the company’s customer experience (and not for the better).

Avoid putting your business in a similar situation by clearly identifying – and preserving – that which sets you apart in the marketplace.

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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 business leaders across some of the world’s foremost brands.

Contact Jon at www.watermarkconsult.net, or follow him on Twitter @JonPicoult.

A strike of 40,000 Verizon employees could be the best thing that’s ever happened to the telecom company’s customer experience.

That’s not because the managers filling in for the front-line workers are any better at serving customers (a company executive acknowledged as much in a recent Washington Post interview).

Rather, it’s because these managers are getting a first-hand, unvarnished look at what it’s like to be on the front-line.  They’re seeing, with their own eyes, the obstacles that hamper employees’ best efforts to deliver a consistently great customer experience.

Verizon managers and professional staff who normally work with spreadsheets, reports and legal briefs are instead donning call center headsets, laying fiber optic cable and installing Internet service.  And, as the Wall Street Journal recently reported, when these organizational leaders temporarily take on a front-line role, they’re spotting a variety of improvement opportunities.

An operations head whose management reports frequently showed wide variations in TV/Internet installation times suddenly saw the reasons why such variations exist – putting him in a much better position to come up with solutions.

An engineer who normally monitored Verizon’s network from an office cubicle quickly discovered how work schedules can be completely disrupted when installers don’t get the information they need (such as whether a customer’s residence has previously been wired for cable or internet).

Front-line annoyances – things that make workers’ jobs harder than they need to be – also came to light, such as how quickly the batteries drained in field technicians’ smartphones and tablets.  (A Verizon manager is now exploring supplying the company’s installers with portable battery packs for their devices.)

What all of these examples illustrate are the inherent limitations of relying on spreadsheets, reports and other traditional management information sources to reveal workplace impediments.

The internal obstacles that undermine a company’s customer experience are frequently rooted in some of the most mundane and unglamorous activities.  They involve things that often don’t make it into a management report or get discussed at an executive staff meeting.

By periodically venturing “into the wild” and stepping into the shoes of their employees, managers can guard against this blind spot.  They can witness what’s really happening on the front-lines, and gain insight that’s difficult to obtain in any other way.

When armed with this unfiltered perspective, managers are much better equipped to develop actionable improvement plans – the kind that don’t just enhance the customer experience, but the employee experience, too.

Don’t wait for a worker strike or some other crisis situation before venturing out to your front-line.  Set aside time now and start walking a few miles in your staff’s shoes.

As Verizon’s managers are fast learning, there’s no better way to understand – and start overcoming – the internal impediments that can sabotage your customer experience.

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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 business leaders across some of the world’s foremost brands.

Contact Jon at www.watermarkconsult.net, or follow him on Twitter @JonPicoult.

Six years ago, we launched the Customer Experience ROI Study to illustrate the impact of a great customer experience – using the universal business “language” of stock market value.  The analysis has since become one of the most widely cited research studies of its kind.

To date, all of our studies were based on cross-industry customer experience ratings, covering more than 200 companies from over a dozen sectors. But readers of the studies often asked us:  Had we conducted a similar ROI analysis within specific industries?  We hadn’t…  until now.

Watermark Consulting is pleased to release our first sector-specific Customer Experience ROI analysis, covering the insurance industry.  As was the case with our previous studies, the results of this one are sure to make many business leaders rethink their priorities.

This past May, in honor of Mother’s Day, JetBlue released a 3-minute YouTube video paying tribute to mothers who fly with young children:

The video is sure to make you smile, and there’s no doubt it’s a great marketing instrument for the airline.  But what’s also noteworthy about the clip is how it illustrates the importance of understanding your target customer and their state of mind.

As any parent or guardian who flies with little ones knows, it can be a stressful experience (perhaps the understatement of the year).

There are all kinds of fears and negative emotions swirling through one’s head:  Have I packed everything I need?  Will my baby behave on the flight?  Will fellow passengers scowl at me when the child cries?

Understanding your customer’s mindset is an important first step in engineering a brand experience that people will appreciate and seek out in the future.

JetBlue, perennially rated a top airline in customer experience, realizes this.  The fact that they even thought to produce a video highlighting the passenger experience, from a mother’s perspective, is a testament to that.

The key takeaway?  Well, don’t scowl at crying babies and their parents on your next flight, of course.  But equally important:  think carefully about what’s going on in your customer’s head, in order to really figure out how to best serve them.

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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 business leaders across some of the world’s foremost brands.

Contact Jon at www.watermarkconsult.net, or follow him on Twitter @JonPicoult.

Someone’s figured out how to bottle a great customer experience.

No, this isn’t a magic elixir that, when applied to any customer interaction, turns disappointment into delight.  This is, quite literally, a bottle that delivers a great customer experience.

It’s called “ClearRx” and it was developed in 2005 by graphic designer Deborah Adler.  She sought to improve what is actually a pretty crummy customer experience – one’s interaction with a prescription medicine bottle.

Traditional Prescription Medicine Bottles

If you think about it, prescription bottles don’t sport a very customer-friendly design:

• Childproof caps, while great for keeping medicine out of the hands of children, also make it difficult for less dexterous people (many of them elderly) to easily access their drugs.

• The most prominent feature on the prescription label itself is often the pharmacy’s logo, which is actually the least important piece of information for the patient.

• Reading the label requires some mental gymnastics, as the drug name, dosage and intake instructions are printed in a tiny font that meanders around a cylindrical bottle. It’s hardly the ideal platform for easy viewing.

• Color-coded warning stickers (indicating, for example, that the medicine should be taken with food) are typically printed on orange labels, which don’t stand out well on a traditional amber-colored prescription bottle.

• If your household stores prescription drugs in a drawer, good luck finding the right one. Since the drug name is printed on the side of the prescription bottle, you need to pick up and inspect each one in order to locate the right medication for the right person.

• Some of the most important information, such as that about drug interactions and side effects, is usually printed on a separate sheet that’s stapled by the pharmacy to a paper bag. That sheet often gets discarded with the bag, and therefore isn’t readily available when people actually need to consult it.

When her grandmother misread a prescription bottle and mistakenly took pills meant for her grandfather, Deborah Adler decided there must be a better way.  And that’s when she invented the ClearRx system, which was later licensed to Target’s pharmacies.

ClearRx Prescription Medicine Bottles

ClearRx essentially reinvented the prescription medication bottle, creating a far more customer-centric product.  Here’s how Adler did it:

• A reshaped bottle now allows for a flat surface on which prescription information can be printed. No more reading while rotating the bottle.  All the key information is clearly visible to the patient from a single vantage point.  In addition, the drug name is printed on the top of the bottle, as well, so even if stored in a drawer, it’s easy to find the right medication.

• The information architecture of the label itself better aligns with what the patient needs to know. Pharmacy branding takes a backseat to safety.  The top half of the label prominently displays the drug name, dosage information and intake instructions.  The bottom half of the label, printed in smaller type, is reserved for less critical information, such as the quantity of pills and the name of the prescribing physician.

• The drug information sheet (describing interactions and side effects, among other important details) is now neatly tucked behind the prescription label – always easily accessible when you need it. There’s also a rudimentary magnifying glass inserted behind the label, for people who need some extra help reading the bottle.

• Essential warnings, such as whether to take the drug on an empty stomach, are more prominently delineated on the back side of the bottle (instead of crammed onto a small warning sticker).

• The bottle cap was redesigned to still be childproof while allowing for easier access by elderly patients and others with limited dexterity.

• Colored rubber rings attach to the neck of the bottle, allowing each individual in a household to choose an identifying shade so they can spot their prescriptions at a glance – even if the bottles are co-mingled with those of other family members.

ClearRx was a huge hit with Target’s pharmacy customers, many of whom are now lobbying CVS to embrace the design.  (CVS acquired Target’s pharmacies in 2015 and subsequently converted all prescription bottles to their more traditional design, in the name of “cost efficiency.”)

Here’s what you should take away from the ClearRx story:  everything has a customer experience.

Yes, even the act of opening up a prescription medicine bottle is a type of customer experience.  And when such seemingly inconsequential interactions are intentionally engineered, it can distinguish the experience (and the associated company) in the marketplace – as ClearRx and Target so skillfully accomplished.

Think broadly about the types of interactions that constitute your company’s customer experience.  It’s not just about interactions with retail store associates, call center staff, or onsite sales reps.  There are likely more subtle components to the experience that deserve to be managed just as carefully – for example, the act of opening a box of shipped goods, or installing a piece of software, or reading an account statement.

Be deliberate and thoughtful in shaping the design of all of these interactions, always incorporating the perspective of those who actually use your product or service.

The brilliance of ClearRx is that it took a meaningful but overlooked touchpoint and redesigned it with the customer in mind – thereby creating a source of competitive differentiation, where before there was none.

That’s a prescription for success, in any business.

Faced with increasingly commoditized markets, more and more companies are launching customer experience improvement programs to differentiate themselves.  However, there’s something many of these companies don’t yet realize:  the vast majority of their programs will fail.

In a survey of over one thousand companies by communications provider Avaya, an astounding 81% indicated that their customer experience improvement programs had failed to deliver results.

Those are a lot of companies wasting a lot of time and a lot of money on something that isn’t working.

What’s worse, given how these failures typically play out, companies end up losing more than just their investment in a better customer experience.  They lose credibility – in the eyes of their employees, and potentially even their customers.

Launched with great fanfare, most of these programs are left to die a slow death, starved for funding and attention.

What remains strong, however, is the signal that sends to their workforce – confirming the staff’s suspicions that customer experience really wasn’t that important to the company.  These programs become yet another casualty in the long line of corporate transformational changes that, in reality, just turn out to be the “initiative du jour.”

Given how that realization can take the wind out of an organization’s sails, many companies are probably better off never launching a customer experience program in the first place, as opposed to pursuing one halfheartedly and letting it wither over time.

With so many of these programs cratering, it’s no surprise that one of the most common questions companies ask about these initiatives is “what’s the number one driver of success?”  I love that question because the answer is so clear and unambiguous:  it’s executive commitment.

Having witnessed many organizations tread the customer experience strategic path, there’s no doubt in my mind that the unflinching commitment of a company’s senior leadership is the single greatest predictor of success for these programs.

That’s not to suggest that a compelling vision, flawless execution and skillful change management aren’t critical to the journey.  They absolutely are.  But it all has to start with a level of executive commitment that goes beyond mere sponsorship for the customer experience cause.

To be among the 19% of companies that succeed on this journey, what does that required level of commitment involve?  Here are three markers to look for:

#1:  Consistency

If you view customer experience improvement as a project like any other, with a defined beginning and end, then you may want to reconsider this path.

Companies that succeed in this realm recognize the need to embed customer experience in their DNA, to make it an integral and enduring part of how they do business.  That work never ends.  Customer expectations and preferences will always evolve, as will a firm’s products and services.  As a result, fixing, polishing and tuning the customer experience is an ongoing task.

If yours is an organization that easily gets distracted by the “next big thing” – whether it’s Big Data, predictive analytics, AI, or some other shiny object – then that may foreshadow problems down the road.  When it comes to building an effective customer experience improvement program, the importance of consistency – in organizational focus and executive messaging – cannot be overstated.

#2:  Appreciation of Scope

Some business leaders think customer experience initiatives are about a good tagline or a clever marketing campaign.  Others think it’s about sending satisfaction surveys to customers, or putting staff through soft-skills training.

These may be components of a customer experience improvement effort, but they alone hardly constitute a robust one.

Executive support for these programs tends to wane once business leaders realize how comprehensive this work can be.

Creating an environment that cultivates customer-centricity requires setting a myriad of organizational switches and dials in just the right position:  hiring and training practices, performance measurement and recognition programs, compensation and incentive systems, IT infrastructure and business processes, customer research and feedback instruments…  just to name a few.

This is precisely why a superior customer experience accords sustainable competitive advantage – because it’s not as simple as making an advertising shift, revising a training program or installing a new CRM system.  It requires much more holistic change, involving not just customer-facing activities, but employee-facing ones, as well.  Do it right and it can be very difficult for competitors to replicate.

The unfortunate reality, however, is that most organizations don’t have an appetite for such sweeping change.  And that ultimately fuels the demise of many customer experience programs.

#3:  Receptiveness to a New Economic Calculus

Not unlike the customer experience itself, the benefits from these improvement programs tend to cut across organizational silos.

For example, enhancements in the clarity and readability of customer communications (such as contracts, correspondence or bills) may appear, based on traditional business accounting, to drive a net increase in expenses.  What traditional accounting doesn’t easily account for, however, are the savings associated with reduced inquiries from less confused customers.

Effective customer experience design frequently involves upstream improvements that pay dividends downstream, often in a totally different organizational unit, cost center and time period.  That economic calculus can be unsettling for some organizations that are more accustomed to the clear-cut ROIs of office consolidations, lease renegotiations and distribution expansions.

That doesn’t mean the ROI of customer experience improvements is any less compelling (see this research if you need convincing).  It does, however, require a more thoughtful, holistic and long-tailed approach to benefit quantification.

Without executive openness to that kind of economic calculus, it’s likely that an organization’s customer experience projects will be subordinated to other business endeavors, sowing the seeds for the program’s downfall.

Customer experience differentiation is hardly a waste of money.  In a highly competitive marketplace, it is perhaps the best and only way for companies to stand out from the crowd.

Investments in this area, however, do become wasteful – and potentially even harmful – when companies underestimate the commitment and fortitude needed to shape a truly customer-centric organization.

Before embarking on a customer experience improvement program, executives should engage in some soul-searching, looking for those three markers to gauge their personal commitment to this journey.

And if those markers aren’t present, then perhaps the best thing those business leaders can do for their organizations…  is to focus on something else.

[Editor’s Note:  A version of this article originally appeared in Carrier Management magazine.]

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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 business leaders across some of the world’s foremost brands.

Contact Jon at www.watermarkconsult.net, follow him on Twitter @JonPicoult, or sign up for Watermark’s bi-monthly eNewsletter.

Eight years ago, Watermark Consulting launched the Customer Experience ROI Study to illustrate the impact of a great customer experience – using the universal business “language” of stock market value.  The analysis has since become one of the most widely cited research studies of its kind.

We started with a cross-industry study that covered more than 200 companies over a dozen sectors.  We then moved on to our first sector-specific Customer Experience ROI analysis, focused on the insurance industry.

This year we’ve expanded the ROI Study to yet another industry, one that consumers love to hate — airlines. Could there possibly be a Customer Experience ROI in such a seemingly commoditized business?  The answer holds lessons not just for airline executives, but for any business leader who questions the value of customer-centricity.

What do you do when a company asks for your opinion… and then refuses to let you voice it?

A few years ago, I wrote about how companies often inadvertently make it difficult, if not impossible, for customers to provide feedback.  Common culprits include things like complicated survey design or malfunctioning survey administration systems.

Recently, however, I came across the most startling example yet of this dynamic – startling because it wasn’t inadvertent, but rather, quite deliberate.

The company behind it all was health insurer Anthem, a firm that finds itself perennially at the bottom of many prominent customer experience rankings (and here’s yet another reason why).

Anthem periodically surveys its health insurance policyholders via e-mail, with the help of its research supplier, Burke.  Upon clicking though the survey’s e-mail invite, customers are brought to this landing page:

They’re then asked to indicate the nature of their most recent interaction with Anthem:

Now here’s where it gets interesting.  Upon selecting one of the above interaction types, some customers will receive the following message (as I did):

And that’s it.  Game over.

How do you think that message feels to customers who were gracious enough to take a few moments of their time to provide Anthem with feedback?  Mind you, we’re not talking about unsolicited feedback.  This is feedback that Anthem explicitly requested from that customer.

The answer is it’s a horrible feeling.  It’s a sign of complete and utter disrespect to the customer.

It’s particularly infuriating for customers who were already sour on Anthem and saw the survey as an opportunity to get a few things off their chest.  For them, the aborted survey is a major letdown – and just serves to reinforce and amplify their negative impressions of Anthem.

Why on Earth would Anthem and its survey administrator choose to shut off the feedback spigot so abruptly?

It is, quite simply, a matter of statistics.

For a researcher, surveys are all about sample sizes – collecting enough responses so the information gathered is statistically significant (i.e., it provides an accurate reflection of the views of the overall customer population).

Once enough people respond to the survey, and a statistically significant sample size is achieved, researchers will tell you that there’s no need to collect additional responses.

So, for example, when enough people have completed the Anthem survey about a recent prescription filling experience, that part of the survey “closes” and all subsequent respondents get rebuffed.

From a pure research perspective, shutting the survey down makes sense.  Why incur the expense of collecting and analyzing responses that are statistically unnecessary?

But from a customer experience standpoint, shutting down the survey – after invites are sent – is just about the worst thing you can possibly do.

From the customer’s perspective, the feedback they have to share is significant, no matter what the statistics say.

Surveys are much more than a research instrument, they are part of a company’s customer experience.  In this case, for many of Anthem’s policyholders, a survey that was intended to be a constructive feedback exercise devolved into yet another customer annoyance.

No offense to research specialists (good ones are invaluable), but if you’re embarking on a customer feedback program, don’t hand the keys over to the statisticians or survey wonks.  Instead, make sure someone with an eye towards the customer experience is overseeing the effort.

Statistically speaking, that’s your best bet for success.

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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.

Contact Jon at www.watermarkconsult.net, or follow him on Twitter @JonPicoult.

It’s not just the food that’s making people sick at Chipotle.

The restaurant chain’s workplace policies might also be to blame – and therein lies an important customer experience lesson.

Last fall, Chipotle grappled with an E.Coli outbreak that sickened dozens of customers across multiple states.  That would be a problem for any restaurant, but even more so for Chipotle given that fresh, locally-sourced ingredients have been central to its “food with integrity” brand positioning.

Then, in December, things got even worse when over 100 people got sick with the norovirus upon eating at one of the chain’s Boston area restaurants.  Media attention led to increased scrutiny of other Chipotle food safety incidents, including a norovirus outbreak that affected over 200 customers and employees at a California store last summer.

While health officials have yet to identify the specific source of the E.Coli outbreak, the culprit is almost certainly within Chipotle’s food supply chain, since the incident affected multiple stores across the country.  (In response, Chipotle is changing how it sources and prepares its food ingredients.)

In contrast to the E.Coli outbreak, the two norovirus incidents were traced back to specific Chipotle employees working at the stores.  These individuals, health officials discovered, were ill just prior to the outbreak, but came to work anyway.  Why might they do that?

It turns out that hourly employees at Chipotle are not offered paid sick leave like their salaried counterparts.  Inadvertently, the company had created an incentive for sick hourly workers (who are already paid a meager wage) to drag themselves out of bed and into the store, where they could infect customers and colleagues.

To address this issue, Chipotle will reportedly begin offering paid sick leave to hourly employees, one of several new food safety-related policies that will be introduced at all-employee training sessions scheduled for February 8.

(Interestingly, it was at a Human Resources convention last summer that Chipotle executives first expressed their intention to offer paid sick leave to hourly employees — yet the company’s Careers website still shows that as a benefit reserved for salaried employees.)

The absence of paid sick leave – and the potential influence that has on employees (and, ultimately, customers) – is a great example of how behind-the-scenes workplace practices can adversely influence a company’s customer experience.

Despite their best intentions, employees’ behavior (towards each other, and towards customers) will necessarily be shaped by “internal infrastructure” that is arguably out of their control (but not out of executive control).

Food service employees who choose to work while ill, because they don’t get paid sick leave, are just one example of this dynamic.  There are many others:

• Call center representatives who rush customers off the phone, because their performance is measured largely by how many calls they answer each day.

• Employees who spurn teamwork, because their compensation is tied exclusively to their individual results, without regard to the broader performance of their unit.

• Sales staff who make awkward attempts to cross-sell customers, because they must follow a strict sales script that allows little room for judgement.

• Service staff who must repeatedly transfer callers to other areas, because their narrow job design doesn’t allow them to address common customer requests.

• Employees who are slow to transact business for customers, because of the archaic point-of-sale systems they must navigate.

These are just a few illustrations of how workplace infrastructure – things like benefit offerings, measurement practices, reward programs, front-line systems, and job designs – can adversely affect the customer experience.

As Chipotle has discovered, these “backstage” components, which are largely hidden from customers’ view, can often influence the delivered experience just as much as more visible “onstage” elements (such as the design of a product or a retail store).

So, if you’re exploring ways to improve your company’s customer experience, remember this:

It’s quite possible those loyalty-sapping issues your customers see in front of the curtain can only be truly remedied by doing something different behind the curtain.

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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.

Contact Jon at www.watermarkconsult.net, or follow him on Twitter @JonPicoult.

Uber Technologies last month took action to heal a rift with its drivers, but it may have inadvertently created a rift with its customers.

The company announced a class action settlement with its California and Massachusetts drivers, who had sued Uber for classifying them as independent contractors, rather than as employees.

The settlement, if approved by a San Francisco judge, would leave the independent contractor classification intact, but would also give Uber drivers some new rights.

Among those new rights is allowing drivers to post signs in their cars soliciting tips from customers.  And that’s where Uber’s ride might get a bit rocky.

Uber and its ride-hailing app arrived on the scene in 2009 and the company has enjoyed spectacular growth ever since.  Fueling that success has been Uber’s innovative customer experience – which isn’t just great… it’s magical.

With the push of a smartphone button, a private car rolls up curbside, ready to take you wherever you need to go.  You get in, you go, you get out.  That’s it.

There’s no fumbling for cash to pay the driver, no math problem at the end of the ride to calculate a tip from a fare meter.  Uber just charges a flat fee for the trip to the credit card on file for the customer.

It is, in a word, effortless for the passenger – both physically and mentally.  But that could change if drivers start soliciting tips.

Uber’s app has no facility for adding a tip to the fare, and the company has indicated it has no intention of incorporating that functionality.  So the cashless interaction, a hallmark of Uber’s customer experience, is replaced by one that looks and feels a lot more like a traditional taxi cab.

Furthermore, a service that had been free of the emotional baggage of tipping (should I or shouldn’t I, and if so, how much?) will suddenly become more mentally taxing.

Instead of feeling liberated from the typical taxi fare ritual, Uber riders may feel guilted into tipping their driver (especially since Uber’s bidirectional scoring system lets drivers and passengers rate each other).

In Uber’s defense, it’s possible tip solicitation was the least of all evils that they had to choose from at the settlement negotiating table.  What’s troubling, though, is that tipping – as it would be handled in the Uber ecosystem – undermines a key point of differentiation for the service.  What was effortless before, suddenly becomes effortful.

That could present a problem for Uber down the road, and perhaps even give a lift to Lyft, their primary competitor in this space (who, incidentally, does offer cashless tipping via their app).

In order to survive long-term, businesses have to adapt, be it to changing circumstances, marketplaces, regulations, or other environmental influences.  What’s important, though, is to make sure those adaptations don’t undermine foundational elements of your company’s value proposition (in the case of Uber – rider convenience).

Southwest Airlines, for example, has long resisted charging fees for baggage, even as the rest of the industry has jumped on that bandwagon and collected billions of dollars in revenue as a result.  Why?  Because they view that as a central component of their passenger-friendly policies – policies which, to quote their stated brand purpose, give people the “freedom to fly.”

Southwest has also avoided flying any aircraft other than the Boeing 737, viewing that operational simplicity as a critical ingredient to delivering a superior passenger experience.  (Southwest’s entire acquisition of AirTran in 2011 was almost derailed over this point – until Southwest got Delta to take over every non-737 airplane in AirTran’s fleet.)

So, follow Southwest’s lead and ask yourself:  What elements of my firm’s customer experience are truly sacrosanct?  What are the characteristics or components that are so central to our brand experience, they should never change?

Put your finger on those elements now, when you’re not in the midst of a difficult, stressful business decision that might cloud your judgement.

Then, do your best to protect those pillars of the experience, limiting adaptations and accommodations to areas that are less likely to dilute the brand differentiation you’re trying to cultivate.

With Uber opening the door to gratuities for its drivers, we may be witnessing a “tipping” point in the evolution of the company’s customer experience (and not for the better).

Avoid putting your business in a similar situation by clearly identifying – and preserving – that which sets you apart in the marketplace.

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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 business leaders across some of the world’s foremost brands.

Contact Jon at www.watermarkconsult.net, or follow him on Twitter @JonPicoult.