How frustrated are your customers?Affiliated to:

All rights strictly reserved. The intellectual capital contained and illustrated in this presentation is the sole property of Consulta Research (Pty) Ltd and may not be copied, infringed upon in whatever manner, without the written consent of the proprietary owners

Overview of Customer Experience in South Africa - 2016

NetworkingEvent:26May2016

1

“Cultureeatsstrategyforbreakfast.”- PeterDrucker

2

The war between “Blink” & “Think”

3

Malcolm Gladwell’s Blink popularized “Thin Slicing” as the new source of human

decision making – BUT it is found “Blinklike" judgments are not a substitute for critical

thinking!

• MalcolmGladwell(Blink)describesthemainsubjectofhisbookas“thin-slicing":ourabilitytogaugewhatisreallyimportantfromaverynarrowperiodofexperience.• Inotherwords,thisisanideathat“spontaneous decisionsareoftenasgoodas—orevenbetterthan—carefullyplannedandconsideredones.”

4

T h ! n k

5

• Inessence,Mr.Gladwellismakingacaseforone-halfofaclassicfalsedichotomy.Afalsedichotomy, sometimesalsocalled“thefallacyoftheexcludedmiddle,”isaneither-orproposition presentedinsuchawayastomakeusthinkonlyone,notbothof thechoices,canbetrue.(ALSOcalledPolarity)

• Inotherwords,lyingbehind these“snapjudgments”areeducatedimpressionsformedbyyearsofstudy, thought, andanalysis.

• Iamcertainlynotouttoburyintuition, “ah-ha”moments,oremotion…theseelements…areallindispensable tocriticalandcreativethinking.Butasfarasdelivering results,thatis,favorableoutcomes,criticalthinkinganditsmainelements,observation, logicalreasoning,andskepticismhaveademonstrablybettertrackrecord.

T h ! n k

6

• "Wecanbedistractedbythemostvisibleandsalientaspects…,"Bernieri (Phd,SocialPsychologistatOregan StateUniv)says.…. canhidetheinner layersoftheonion”

• RichardPosner, aProfatUniv ofChicagoandajudgeontheUSCourtofAppealsfortheSeventhCircuit,arguesthat“Gladwell… makesavarietyofunsupportedassumptionsandmistakesinhischaracterizations oftheevidenceforhisthesis.”

• TheDailyTelegraphreviewwrites,"Rarelyhavesuchboldclaimsbeenadvancedonthebasisofsuch flimsyevidence.”

• NobelprizewinnerDanielKahneman,authorofThinking, FastandSlowwhichspeakstorationality'sadvantagesoverintuition, says,"MalcolmGladwelldefinitelycreatedinthepublicarenastheimpressionthatintuition ismagical...Thatbeliefisfalse."

7

Evolution of the Brain

400mYrs 80mYrs 10mYrs 800kYrs 50kYrsReptilianBrain

MammalianBrain

PrimateBrain

HomoSapiensBrain

ModernCognitiveBrain

LimbicSystem Neocortex

8

The Core Dimension

9

FightingFleeingFreezing

BrainStem

EmotionSelf esteemMotivation

Values

LimbicSystemHigher cognitive functionsRational thinking

Neocortex

SYSTEM 1 DECISIONS vs SYSTEM 2 DECISIONS

Fast

Unconscious

Automatic

Everydaydecisions

ErrorProne

System1

Slow

Conscious

Effortful

Complexdecisions

Reliable

System2

10

RememberingtheExperience

Remembering=Self

StrategicOperational

=ExperiencingSelf

11

TheMomentsinBuyingExperience

System1– ExperienceSelfBuyingScenario(Buyingacolddrink)NeedArousal

1

IntuitiveAutonomousaction

2

Buy withoutmuchthought

3

HardlyanyPostPurchase memory

54

Immediategratification

System2– RememberingSelfBuyingScenario(LifeInsuranceApplication)NeedArousal

1

Collectionofinformation

2

EvaluationofInformation

3

PostPurchasingBehaviour

54

PurchasingDecision

12

SYSTEM 1 DECISIONS VS SYSTEM 2 DECISIONS

13

System2System1System2istheonlyonethatcanfollowrules, compareobjectsonseveralattributes,andmakedeliberatechoicesbetweenoptions.

System1detectssimple relations(“theyareallalike,”“thesonismuchtallerthanthefather”)andexcelsatintegratinginformation aboutonething,butitdoesnot dealwithmultiple distincttopicsatonce,norisitadeptatatusingpurelystatisticalinformation.

…aneedfororderandstructure,apassionfordetail&combiningintuitionwithknowledgemakesSystem2veryeffective

IT IS NOT SYSTEM 1 vs SYSTEM 2 : RATHER SYSTEM 1 & 2 INTEGRATED – CONCEPT OF FLOW

14

System1System2

The Hybrid Model of Experiencing & Remembering

TransactionalCustomer Feedback

Reported CustomerSatisfaction

r = 0.40

15

Near-real time recall of

ExperienceOperational

Memory of experience = Satisfaction

Strategic

! 3!

feedback programs (see Hayes (2009) for details of the study methodology). A total of 277 customer feedback professionals from midsize to large companies completed a survey about their company’s customer feedback program. The respondents indicated whether their company adopts 28 specific business practices related to their customer feedback program (e.g., senior executive is champion of customer feedback program; Web-based surveys are used to collect customer feedback). Additionally, respondents were asked to provide an estimate of their company’s customer loyalty ranking within their industry; this question was used to segment customers into loyalty leaders (companies with a loyalty ranking of 70% or higher) and loyalty laggards (companies with a loyalty ranking below 70%).

Table 1. Adoption Rates of Customer Feedback Program Practices of Loyalty Leaders and Loyalty Laggards

The survey results revealed real differences between loyalty leaders and loyalty laggards in their customer feedback programs (See Table 1). There were statistically significant differences in adoption rates between loyalty leaders and loyalty laggards across many of the business practices. Loyalty leading companies were more likely to adopt specific practices compared to their loyalty lagging counterparts, especially in areas related to strategy/governance, integration and applied research. In upcoming posts, I will explore each component of the customer feedback program and present best practices for each.

! 2!

Components of Customer Feedback Programs Before I talk about how to best structure a customer feedback program, let us take a 30,000-ft view of an enterprise-wide customer feedback program. A customer feedback program involves more than simply surveying customers. To be useful, a customer feedback program must successfully manage many moving parts of the program, each impacting the effectiveness of the overall program. The elements of customer feedback programs can be grouped into six major areas or components. These components are: Strategy, Governance, Business Process Integration, Method, Reporting, and Applied Research. Figure 1 below represents the components of customer feedback programs.

Figure 1. Elements of a Customer Feedback Program Strategy involves the executive-level actions that set the overarching guidelines around the company’s mission and vision regarding the company objectives. Governance deals with the organization’s policies surrounding the customer feedback program. Business Process Integration deals with the extent to which the customer feedback program is integrated into the daily business processes. Method deals with the way in which customer feedback data are collected. Reporting is involved in the way in which customer feedback data are summarized and disseminated throughout the company. Finally, Applied Research focuses on the extent to which companies gain additional operational and business insight through systematic research using their customer feedback data. Best Practices Study and General Findings While many companies have a formal customer feedback program, only some of them experience improvements in customer loyalty while the other companies find that their customer loyalty remains flat. To understand why this difference occurs, I conducted a study to understand how loyalty leading companies, compared to loyalty lagging companies, structure their customer

Best Practices in Customer Feedback Programs –Bob Hayes

16

Source:20BestPracticesinCustomerFeedbackPrograms:BuildingaCustomer-CentricCompany– BobHayes(BusinessoverBroadwayBlog- http://www.businessoverbroadway.com

Top Customer experience trends

CX Training & Engagement

Mobile formulationsVoice of Customer

Renovations

Corporate Culture Conversations

Source: Temkin Group 2015

Customer Experience Trends – The SA CX-Industry

17

PurposefulLeadership

CompellingBrandValues

EmployeeEngagement

CustomerConnectedness

Doyour leadersoperateconsistently withaclear,wellarticulatedsetofvalues?

Areyourbrandattributes driving decisions abouthowyou treatcustomers?

Areyouremployees fully committed tothegoalsofyour organization?

Iscustomer feedback&insight integratedthroughout yourorganization?

Source: Temkin Group – June 2015

Corporate Culture Conversations

18

“Therootofourproblemisnotthatwe’reinaGreatRecessionoraGreatStagnation,butratherthatweareintheearlythroesofaGreatRestructuring.Ourtechnologiesareracingahead,butour

skillsandorganizations arelaggingbehind.”-ErikBrynjolfsson /AndrewMcAfee/RaceAgainstTheMachine

“Theilliterateofthe21stCenturywillnotbethosewhocannotreadorwrite,butthosewhocannotlearn,unlearn,andrelearn.”-

AlvinToffler

CX Training & Engagement

19

70%

41%

37%

30%

22%

Soliciting customer feedback

Sharing feedbackacross theorganization

Developing actionable insightsfromthedata

Making changes tothebusinessbasedon theinsights

Reviewing implications thatcutacrossorganizations

Source: State of VoC Programs 2014 – Temkin Group

Voice of Customer Renovations

20

Success Stories

ImagePlaceholderii70%

OftopCXcompaniesuse

CXFeedbackforStrategicdecisions

21

A Step-by-Step Plan to Improve CMO-COO Collaboration –HBR Article by David C. Edelman, Dorian Stone & Harald Fanderl (HBR Jan 2015)

1. Develop a shared vocabulary and shared metrics

2. Build a structure for collaboration

3. Work together on a few customer journeys that matter

4. See the customer journey all the way through

22

https://hbr.org/2015/01/a-step-by-step-plan-to-improve-cmo-coo-collaboration

CMO

COO

Putting Customer Experience in Perspective of Brand & Future Lifetime value of customers

Adaptedfrom:BitnerM-J,“Buildingservicerelationships:It'sallaboutpromises”,JournaloftheAcademyofMarketingScience,Vol23(4),1995&KirkbyJ,WecksellJ,JanowskiW&BergT,“TheValueofCustomerExperienceManagement”,StrategicAnalysisReport,March2003

23

CXO

CMOCMO/CXO/COO

Porter & Deloitte agree on differentiation as key strategic option for modern business & only one cost leader can survive…

24

PORTER - Three Generic Strategies:

• Differentiation

• Cost Leadership

• Focus

Raynor & Ahmed (Deloitte) – Three Rules:

• Better before Cheaper

• Revenue before Cost

• No other rules …

In the 2016 Customer Experience Landscape – do we believe that customer experience focus will deliver the

promised business outcomes?

25

LaggingCompanies

Leading-edgeCompanies

TyingCustomerExperiencetoBusinessOutcomesisdifficultforeveryone

Source:HarvardBusinessReviewAnalyticServices2014, SponsoredbySASInstitute

19%

34%

38%

ExtremelyDifficult

VeryDifficult

Somewhatdifficult

10%

24%

49%

ExtremelyDifficult

VeryDifficult

Somewhatdifficult

Source:Gupta,S.&Zeithaml,V.,2006.CustomerMetricsandTheirImpactonFinancialPerformance.MarketingScience,25(6),pp.718–739.

2.37%

+1%ROICustomer

Satisfaction-1%

-5.08%

The satisfaction to profit link is non-linear

27

CUSTOMEREXPERIENCEINSOUTHAFRICAFouryearsofTrackingSAcsi

Introduction

Integrated Measurement Framework

Strategic/Visionary

Operational/Realtime

NationalandInternationalBenchmark

ProprietaryStrategicMeasures

Operational/TransactionalFeedback

IntegratedFramew

ork

CopyrightConsulta 2016

Market Value Added - Top & Bottom ACSI

30

Source:FCIGroup.,2007b.TheAmericanCustomerSatisfactionIndex(ACSI) Technology:AMethodologicalPrimer.pp.1–37.

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Top25%ACSIBottom25%ACSI

SAcsi Model

Complaints

IncidenceHandling

Loyalty

RetentionPriceSensitivity

PerceivedValueIndex

PricevsQualityQualityvsPrice

PerceivedQualityIndex

CustomerExpectations

Index

OverallQualityMeetingNeeds

Reliability

OverallQualityMeetingNeeds

Reliability

SAcsiSatisfactionExpectationsComp.toIdeal

TCF Index (7 pillars)

Net Promoter Score & Consumption Appetite

Additional Included Metrics

National Sentiment Index

Statistics to Date

TOTALSAMPLE=183180

Brandsincluded=238

Industriesincluded=35

33

Three Year SAcsi Trend = Flat

76.40 75.80 76.91

SAcsi 2013 SAcsi 2014 SAcsi 2015

76.7 75.8 74.3

ACSI 2013 ACSI 2014 ACSI 2015

*SAcsiBase=Similarindustriesover3years

34

Perceived Value – Down over 3 years

60

80

100

Avg:75.2

Min:60.6

Avg:77.1

Max:88.7

-1.9

60

80

100

2013 2015

Min:60.7

Max:85.9

-2.9

35

Complaints – The Focus of CX industry

2015

Min:3.8%

Max:49.0%Max:

46.6%

Min:4.7%

60% 0%

2013

30%

60% 0%

30%

-2.4%

+4.1%

<10%

Avg:17.1%

Avg:13.0%

36

The1st Wavefocusseemstopay-offsinceweseeCustomerComplaintsdown&gettingclosertotheworldclassbenchmarkof10%– although somecompanies/industries stillstruggle (increaseinmaxcomplaints)

Complaints Handling – CX Industry getting a handle on it

2015

Max:74.6%

Min:4.1%

0% 100%

2013Avg:55.8%

+8.9%

Avg:55.1%

Min:29%

0% 100%

Max:83.5%

50%50%

+24.9%

>50%

37

The1st Wavefocusseemstopay-offsinceweseeComplaintsHandlingataboveworldclass(>50%)onaverage.Bothonthebottomandtopendofcomplaintshandling weseesignificantimprovements (+24.9%&+8.9%)

BUT … we do not get the Loyalty as a result (yet)

60

80

100

Avg:72.5

Min:58.8

Avg:72.1

Max:82.4

60

80

100

2013 2015

Min:56.5

Max:82.3

-2.3

38

…butloyaltyover3yearsstillflat&evenseedeteoriationonthebottomend(minimum downby2.3points)

… and tracking NPS is not helping either (we are more confused)

20152013

0%

Avg:31.1%Min:-11.7%

-100%

Max:60.1%Max:

71.1%

Min:-19.9%

0%

Avg:28.8%

+100%

-14%

-100% +100%

-11%

-2.3%

39

…NPStrendmorevolatile– butalsoindicatingtheinabilitytotranslateindustrywideCXeffortsincomplaintshandling tobetterloyalty.

Sustainable Key Take outs

• More comprehensive model for CX-measurement – break the feedback-mentality

• Journey to Customer Centricity will take 3-5 years (of consistent clear strategy) – break the start-and-stop-and-start mentality

• We need more evangelist CX professionals by ”educating” business about the true scope of CX implementation – break the silver bullet 6-months project mentality

• Business needs to ”walk-the-talk” – break the PR-Ra-ra podium lip service mentality

• More CCO’/CXO’s that will represent the customer at C-level –break the “we focus on the customer, but prefer profit” mentality

40

Exciting Industry News

41

Coming toSouthAfricaJune2016

nextarrival…

TIXCI- CustomerExperienceStandard(workinprogress)

The Customer is King

42

The Team

StephanduPlessis

ManagingDirectorstephan@consulta.co.za

T:+27126656200M:+27725385362

Prof.AdréSchreuder

Founder&ChairSAcsiCEOConsulta

adre@consulta.co.zaT:+27126656200M:+27824521666