Chinese water torture

An early observation on this excellent interview: Of course Yamaha did not have an "aha!" moment to spur a customer experience program. Big companies have set up systems that mute and manage customer voices and that don't report long-term trends in customer engagement as a competitive advantage. 

creating product value with "backstory"

Do I need to explain this?

Well, at least let me offer two questions:

1. If you saw one of the artworks here and heard the backstory about the (fictitious) artist, would the art have more meaning and value to you?

2. Knowing that the artists were all invented by an artist, how much value these objects have with this "meta-backstory"? More? Or less?

luxury, desire, and pain

I'm involved in a heated discussion among luxury-focused professionals on LinkedIn. The question we're approaching relates to typical failures in luxury retail customer service. The general consensus among most is that customer service personnel should, in a phrase, cater hand and foot to everyone who walks in. After all, they argue, you cannot tell just by looking at people whether they are your target customer. 

Note the implied syllogism: "Anyone can be our customer, so we must make them all happy from the moment they walk in." 

Luxury marketing, however, makes this seemingly logical conclusion incorrect.

I think the important point for luxury brands has to do with desire, which implies a distance. That distance can be "distance between one's reality and the brand's fantasy", or "distance between one's power and the brand's power as expressed in the store," and many nuanced variations. This distance - which CREATES desire - is essentially painful. It is what creates immense delight when that distance is overcome; for example, when you finally walk out of the store with a $5K LV bag. The brand does not exist without desire, with distance, and without pain.

Power distance, individualism, culture, and pain

A useful analysis of power distance in culture - across cultures - is to ask, in which countries is there large power distance? Do these countries produce luxury goods generally, or desire them? Why? Check out this excerpt (thanks to Google Books).

Power distance in many developed countries such as the United States and Germany is moderate. In Asian countries, it is high. This is in part cultural, and in part economic. This relates directly to how and why people spend money on luxury items. Check out this excerpt. (Interesting sections follow on Country of Origin effect, by the way.)

If you think this power distance construct isn't useful for figuring out your luxury strategy, take a look at this:

Notice where France lies in the chart. Now, in analyzing the Brazilian company Natura's strategy in entering France to sell its cosmetics and lotions, do you think Natura would be well-advised to consider that contrast in power distance between Brazil and France? 

Power distance is not just imposed from above, either. We unconsciously adopt that construct in our own societies; it is a core belief. In fact, some researchers call the phenomenon "power distance belief." You don't want to offend your customers by violating their beliefs, do you? Then perhaps you should reconsider your attempts to overcome the power distance between you and a customer. Interesting, odd conclusion: Perhaps that distance is affirming of your customer. (This analysis applies to all kinds of consumer brands.)

Pain

Now, pain is negative, right? 

My answer is, yes it is, and no it is not. That is, the right kind of pain makes the brand both desirable and memorable (unique). The wrong kind of pain (from failed service experiences) is to be avoided. But it does not follow that any service experience that is free of pain is a good service experience. In fact, it is plainly wrong that this is the case. 

1. If all luxury stores catered perfectly to customers to avoid a painful experience, their in-store experiences would be undifferentiated. Given, as you say, that the associate and the retail store is often the face of the brand, then such painless experiences are a waste of money. If everyone kisses everyone, you might as well be kissing no one. 

2. The pain one feels in a luxury store should focus on desire; if the customer enters the store and does not feel an almost painful level of desire to participate in the brand, something has failed. Think of the goal as "almost kissing." 

3. The differentiable elements of the in-store experience should be on-brand, and in fact the brand should be defined in large part based on how target customers will respond emotionally (affectively), cognitively (rationally), and conatively (driven to act). So, compare perfumes that appeal to sexuality vs elegance. Both are perfumes. But the brands, and the stores, should elicit responses in the customer that generate "pain" (distance between customer and brand) in different ways. One brand asks, "Are you sexually powerful enough to follow through when you wear this perfume?" The other brand asks, "Are you elegant enough to cause others to desire your world-view and lifestyle? If so, this perfume is yours." 

This notion of pain being a positive element in an experience design seems counterintuitive, but that's because our intuitions were developed when we were quite young, when pain is bad and pleasure is good. Pain was useful then as a way of determining what was safe. But as we grow up, without realizing it, we replace this hedonic view of the world with another view, one that Victor Frankl might characterize as driven by meaning. Pain and suffering, caused by a desire to participate in a brand's vision or essence (which by implication we do not currently participate in), is made meaningful through a purchase - and sometimes display - of a product. 

The meaning in our lives that we attempt to create in a luxury purchase can be generally broken down into two characteristics: the quantity of power distance we overcome in the purchase; and the amount of knowledge needed for others to decode the meaning of the purchase. Stew on those two variables for awhile, and I expect you'll discover a whole range of strategies for your luxury brands.

Training for luxury differentiation

How would you train customer service personnel to generate distance between the customer and the two perfumes mentioned above?  The question becomes:

For each brand, how do you accent the sexual (or elegance) power distance between the prospective customer and the brand while in the retail store? How do you show the prospective customer that people who "really know" perfumes, sexuality (or elegance), and personal power will understand - and even desire - what this brand represents? 

empathy, desire, the brain, and post-modern branding

Empathy is an interesting thing. It's built into (most) people's physical brains - you can actually identify the central area in the brain where empathy resides.

Desire is an interesting thing as well. Many brands use empathy (a limbic response to external emotional states) and desire (a state of craving) together to create a customer's brand desire.

On desire/craving: 

http://www.sciencedaily.com/releases/2004/11/041108025155.htm

A survey of fMRI use in "reward paradigms":

http://www.stanford.edu/group/neuroeconomics/pdfs/bk05con.pdf

For example, how much MORE would a brand be desired if the model, company, spokesperson was genuinely empathetic?

And then there's the opposite: How much MORE empathy would a customer feel for a brand if the spokesperson, company, or model was desired?

And then, finally, the post-modern switch-around:

1. Make the brand desirable by making the model, company, spokesperson UNEMPATHETIC. (Diesel.)

2. Make the brand EMPATHETIC by making fun of the model, company, or spokesperson. (Old Spice Guy.)

innovative camera: what does this tell us about customer experience megatrends?

Concept Camera: The WVIL from Artefact on Vimeo.

I'm a tech junkie but don't take this post as the ravings of someone who loves shiny, expensive toys. Instead, look at the video and answer these questions:

1. Why do cameras matter? In the US? In Japan? For young people? For older people?

2. Why are camera and phone manufacturers caught in the competitive spiral of increased megapixels, video formats, and miniaturization?

3. Compare a great photo with a great piece of video. How easy is it to take a great photo compared to telling an awesome, compelling story in video?

4. What huge gap do such cameras create in the market?

5. Who will fill that gap?

If your answers don't include things like, audio, color correction, format transcoding, cloud storage, intuitive editing, collaborative production, flexible workflow, story-driven product, sharing, emotion, social networks, and terabytes, then keep at it! 

Oh, and I suppose the answers may include Apple.

why women rule the internet

The logic of the article isn't airtight, but the statistics are compelling: women are creating more economic value on many top social sites than men. 

What's not clear is the extent to which women's presence on these sites is a result of male presence on the sites. It's also not clear what specific behaviors and motivations are precursors to transactions. Is this an example of a lot of women individually using the sites to enable transactions? Or are they exploring their buying options, tastes, self-image, collective image, etc., first, as a prelude to making a buying decision? Are they doing all this by interacting with other people? Men? Women? Both? Why? 

Given that computers and the Internet started off being dominated by males, what does this observation tell us about megatrends in the market? Business imperatives? Analytical tools yet to be developed?

cem's five forces

I keep getting asked about my five forces model for customer experience management. And while I certainly crafted them thinking specifically about customer experience, the framework fundamentally redefines how a business should operate.  It clarifies what a business should measure and how they interact with various "forces" that surround them. 

I saw a great article that summarized a few top marketing frameworks, and I was inspired to comment on it giving a quick summary of my model. Here's what I said:

Five forces of customer experience

A model I've been developing and applying successfully is what I call the Five Forces of customer experience.

The core inspiration is the idea that value is created in the mind of the customer. What someone is willing to pay is based on a complex mix of perception drivers. How these perceptions are created, and can be managed by companies, are topics critical for businesses to understand. It makes explicit a lot of the underlying assumptions in Porter's Five Forces - you'll note that his forces do not explicitly include people.

The five forces of customer experience that I have identified and names are:

1. The person (how do I define value? how do I define values? what emotions are in play? what rationales are in play?). This is the discipline that brings together decades of work on cognitive, behavioral, cultural, and brain studies. You can't be a good marketing company anymore without knowing who Daniel Kahneman is. Nor can you be an international company without knowing the work of Sproles, or the GLOBE cultural taxonomy. 

2. Networks of data. (Comparison sites may be an example, but they quickly morph into the third force below.) A network of data might include product specifications, maps, fact sheets, Wikipedia. They tend to allow the customer to form an opinion with minimal tendentiousness. While these sites are important, especially for complex or technical purchases and in the B2B environment, in my own view, their value is swamped by the third force.

3. Networks of opinion. (Comparison sites, UGC sites such as Yelp, Facebook, etc.). Networks of opinion are trusted because they include "people like me." These people may be proxies for networks of data (experts), or they may simply be taste-makers/trendsetters (the hipsters on Yelp). Influence analytics matter here.

4. The company's brand. (What do you expect from a company based on their public presence and reputation?) Boy, we could go on and on about brand. What I love is the concept of "brand hijack," which shows that a customer-centric set of forces is essential to understanding a company's market valuation.

5. The company's interactions with the customer. (How do representatives of the company, and representations of the company, such as CSR personnel, websites and tweets, advance or destroy my sense of the brand and/or support or threaten my value/values/emotional/cultural frameworks?) 

foley in film: lessons for customer experience management

SoundWorks Collection: Gary Hecker - Veteran Foley Artist from Michael Coleman on Vimeo.

What does the craft of adding sound effects to film teach us about customer experience?

Think of customer experience this way: The narrative can be strong, but the details - often unconsciously perceived - can make or break the impact of the narrative. It takes people with experience and expertise to deliver the unconsciously perceived components of your customers' experiences. 

Some examples: Angela and I are shopping for a new car. After doing the usual things, including taking test drives, and reviewing features, the salesman left his office for fifteen minutes, purportedly to take care of some task.

My own view is that he left us alone to talk about our experiences. This allowed us time to review our priorities, show our passion for the cars we had driven, and imagine our future with one of these cars. 

A key part of the experience, then, might well have been the time we were left alone. 

Another example, often cited, is the role that bathrooms play in how people assess restaurants. If the bathroom is a mess, then it's not an unconscious experience. But if the bathroom is beautiful and well-maintained - and on-brand - it can indeed be an unconscious reinforcement of what you might expect from the restaurant, what you might imagine the kitchen is like, and what you might say about the restaurant the next day. 

Citi vs Egg: A lesson in capital structure, experience design, and reputation

Citibank tried several years ago to integrate Egg, a UK-based online-only bank, into the Citi way. 

Disaster ensued.

Luckily for us, the whole story raises profound questions about the role of customer experience in an M&A strategy. 

At the root of the problem: Citi "fired" undervalued customers. Value, of course, defined by Citi. In short, they did what CRM gurus have been promoting for years: dividing your customers by the value they represent to you, and then adjusting your corporate processes to be cost-effective within those profit-bands. Any customers for which you make insufficient profits are targets for firing. 

This is a perfect example of how CEM differs from CRM. The scope and scale of the branding, process design, and technology integration into customers' lives are completely different. This is where a change in scope becomes a change in kind. To see what I mean, click here and enjoy the case study!

hierarchy of values: moving on from maslow

Big discussion going on at NeuroScienceMarketing.com (nice site) about Maslow's Hierarchy of Needs. A guest blog author submitted the idea that Maslow's framework could be used to organize the service experience. 

Lots of people loved the article. I did, too, but it was because the article is flawed: Maslow (even by his own admission) needs to be tested, and taken with a grain of salt. In fact, it HAS been tested, having been the subject of many articles, studies, and critiques. That's OK. We still love the guy. And getting things sort of right is better than doing nothing at all. It gives the serious business person, the academic, and the thinking person grist for the mill, and we love that.

In my research and work in customer experience management, I decided early on to make sure I backed my methodology with research that was cross-cultural. Having my global executive MBA from TRIUM, a very prestigious institution, I knew the hazards of applying what is "true" in one country to another country. 

As a result, I looked meticulously for research and frameworks that advanced my ability to discern and leverage cultural differences in values, motivations, and behaviors. I chose not to use frameworks where that work would be muddy or difficult. For example, I chose a construct culled from marketing research that breaks down people's thinking, feeling, and acting as being motivated by three broad "dimensions": the physical, the time-based activities, and the hierarchy of values activated in a touchpoint (or point of reflection). 

Another very popular construct breaks down thinking, feeling, and acting differently, focusing on cognitive (thinking), affective (feeling), and conative (acting) dimensions. Makes sense - except where do variations in cultural values, or the physical environment, live in this construct? Actually, they live in all three dimensions - which means that the cognitive/affective/conative framework requires that we ask questions about how hierarchy of values influence thinking, feeling, and acting by the customer. 

If you always have to ask how these three "independent" dimensions are in fact a function of hierarchy of values, then why not choose a framework that starts with a hierarchy of values dimension? Also, my preferred construct (environment/time/hierarchy of values) has two elements that are clearly focused on merchandising and process design (environment and time). Businesses understand these activities. 

I wanted to share with you here some of the research I've looked it on this topic. I summarized it as well at NeuroScienceMarketing.com, but you deserve it here.

• Sproles & Kendall, Consumer Style Inventory (varies across cultures, see follow-on research regarding Germany, Korea, and China)
• Research by Steven Reiss, of OSU, on fundamental desires and values (which I think is flawed as it omits storytelling as a way of creating value from non-desirable aspects of our lives - see logotherapy).
• N.T. Feather, et al., Values, expectations, and the prediction of social action: An expectancy-valence analysis.
• M.A. Morganosky, et al., Complaint Behavior: Analysis by Demographics, Lifestyle, and Consumer Values
• M.E.W. Varnum, et al., The Origin of Cultural Differences in Cognition: The Social Orientation Hypothesis
• Shalom Schwartz, et al., Value Hierarchies Across Cultures: Taking a Similarities Perspective
• Pamela Odih, The Women's Market: Marketing Fact or Apparition? (not research, but a compendium and analysis of meanings and values that can be so plastic as to make key assumptions (e.g., that there is a "woman's market") invalid or at least less than useful.
• Daniora Grundey, Delineating values, emotions, and motives in consumer behavior: An interdisciplinary approach. Another nice compendium of research. 
• Cathal Brugha, Trust and Commitment in Relationship marketing: The Perspective from Decision Science. Nice analysis of how market research is flawed, where her key assertion is that factors showing some level of independence in statistical analysis are imputed to be "dimensions" (which in math are absolutely independent). The article is probably not sufficiently independent for our work, but it does reference Maslow and Jung's personality types (which later evolved into Myers-Brigg). 

required reading

Discovered a new book today.

Organizational realities:
studies of strategizing and organizing

By William H. Starbuck, Michael L. Barnett

This book is great and you can preview it Google Books. There's enough good stuff in here to transform even the hardest-nosed manager into someone who understands strategy, self-deception, and human capacity.

global capital, global markets, and creating value

A partner at Palamon Capital talks about the inevitability of global financial regulation (to an extent we have this with Basel III). 

One interesting consequence of a more uniform global financial regulatory structure is a destruction of value through the creation of efficiency. Right now, the very differences between markets (capital markets, commodity markets, media markets) create wealth. This can happen through pricing arbitrage, creation of multiple product lines that generate overall more profit, and getting access to market information more quickly than your competitors.

I'm all for global financial regulations, incidentally, as long as they are meaningful. (That last caveat might be the sticking point.) Frankly, Africa and China did OK in the financial crisis, while the US and Europe - chief architects of Basel II - tanked. Something was missed. Credit, reserves, and their interplay got more intricate and smoky with securitized assets and a hunger by many organizations to sell-sell-sell mortgages during the real estate bubble. Many were, indeed, competing to see who could be stupider with their credit risk. 

In the customer experience management context, the same issues arise. Differences among cultures and countries can be key sources of competitive advantage. If you're Carrefour, you are more adept than Wal-Mart at adapting to local country norms, aspirations, supply chains, product strategies, and so on. The Carrefour "wet market" in China is an attempt to fit the cultural need for seeing your fish alive, not cleaned and neatly wrapped in cellophane. But as a global citizenry develops, thank to instantaneous communications, international education, frequent travel, and a brand ecosystem that's increasingly familiar everywhere, will the "glocal" strategy begin to lose value?

Perhaps, but really the "glocal" strategy was still a pretty ham-handed way to address your customers' needs. Micro-segmentation will prevail. Customer-defined services, products and experiences will generate a micro-segment containing just one person, over time. And I would argue that supporting such innovations will create more value than will be destroyed. 

Is there a parallel in global capital markets? Can products be so customized that the credit risk and financial profile of each individual can generate a unique product? 

Why not? 

Recall Egg, the online bank in the UK that Citi just about hacked to death. It moved from a customer-centric, happy bank with loyal customers to a shell of its former self, when Citi "fired" customers in part because they paid their credit card balances off on a regular basis. That makes sense in the old school way of optimizing customer profitability. It costs money to deal with customers who pay off their credit cards, but if they don't borrow money from you, costs exceed revenues. They're money-losers. Fire 'em by uninviting them to the party, closing their accounts, and calling them names. (Citi essentially accused them of being poor credit risks. What?)

Citi - and global banks - could have done this differently. But they needed first to see that their way of accounting for customer value (current, not future) was fundamentally flawed. Customers who pay off their credit cards can afford more debt. Keep 'em. If you ignore people with future value (as Citi did), and embrace people with future liabilities (as subprime mortgage sellers did), you're just asking for trouble.

So, to banks - and to other industries likely subject to future global laws - I say, fix the regulatory system, but make sure the real opportunity is still in your sights: create value the best way possible. No, not with interest rate arbitrage. I'm talking about the future spending capacity of your loyal customers.