5questions about Strategic Services Marketing

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hbr.org | February 2007 | Harvard Business Review 117

ANYONE WHO HAS SIGNED UP RECENTLY for cell phone service

has faced a stern test in trying to figure out the cost of carry-

forward minutes versus free calls within a network and

how it compares with the cost of such services as push-to-

talk, roaming, and messaging. Many, too, have fallen for a

rebate offer only to discover that the form they must fill out

rivals a home mortgage application in its detail. And then

there are automated telephone systems, in which harried

consumers navigate a mazelike menu in search of a real-life

human being. So little confidence do consumers have in these

Companies that systematically monitor customer experience can take important steps to improve it – and their bottom line.

by Christopher Meyer and Andre Schwager

L au

re n t

C ill

u ff

o

UNDERSTANDING CUSTOMER

EXPERIENCE

Understanding Customer Experience

electronic surrogates that a few weeks after the Web site

www.gethuman.com showed how to reach a live person

quickly at ten major consumer sites, instructions for more

than 400 additional companies had poured in.

An excess of features, baited rebates, and a paucity of the

personal touch are all evidence of indifference to what

should be a company’s first concern: the quality of customers’

experiences. In the first example, the carrier offered a jumble

of phone services in part to discourage comparison shopping

and thus price wars. In the second, the company offered a

hard-to-obtain rebate to stimulate a purchase. And in the

third, the goal was to slash staffing costs, despite soothing

claims of 24-hour self-service availability. Unfortunately, such

cunning makes for customer experiences that engender re-

gret and then the determination to do business elsewhere.

Customer experience encompasses every aspect of a

company’s offering – the quality of customer care, of course,

but also advertising, packaging, product and service features,

ease of use, and reliability. Yet few of the people responsible

for those things have given sustained thought to how their

separate decisions shape customer experience. To the extent

they do think about it, they all have different ideas of what

customer experience means, and no one more senior over-

sees everyone’s efforts.

Within product businesses, for example, product develop-

ment defers to marketing when it comes to customer expe-

rience issues, and both usually focus on features and specifi-

cations. Operations concerns itself mainly with quality,

timeliness, and cost. And customer service personnel tend

to concentrate on the unfolding transaction but not its con-

nection to those preceding or following it. Even then, much

service is rote: Otherwise, why would service reps ask, as

they so often do,“Is there anything else I can help you with?”

when they haven’t even dealt with the original reason for

the call or visit?

Some companies don’t understand why they should

worry about customer experience. Others collect and quan-

tify data on it but don’t circulate the findings. Still others

do the measuring and distributing but fail to make anyone

responsible for putting the information to use. The extent

of the problem has been documented in Bain & Company’s

recent survey of the customers of 362 companies. Only 8%

of them described their experience as “superior,” yet 80% of

the companies surveyed believe that the experience they

have been providing is indeed superior. With such a dispar-

ity, prospects for improvement are small. But the need is

urgent: Consumers have a greater number of choices today

than ever before, more complex choices, and more channels

through which to pursue them. In such an environment, sim-

ple, integrated solutions to problems – not fragmented, bur-

densome ones – will win the allegiance of the time-pressed

consumer. (For more on making the buying process simpler,

see James P. Womack and Daniel T. Jones, “Lean Consump-

tion,” HBR March 2005.) Moreover, in markets that are in-

creasingly global, it is dangerous to assume that a given offer-

ing, communication, or other contact will affect faraway

consumers the same way it does those at home.

Although few companies have zeroed in on customer ex-

perience, many have been trying to measure customer satis-

faction and have plenty of data as a result. The problem is

that measuring customer satisfaction does not tell anyone

how to achieve it. Customer satisfaction is essentially the

culmination of a series of customer experiences or, one could

say, the net result of the good ones minus the bad ones. It oc-

curs when the gap between customers’ expectations and

their subsequent experiences has been closed. To understand

how to achieve satisfaction, a company must deconstruct it

into its component experiences. Because a great many cus-

tomer experiences aren’t the direct consequence of the

brand’s messages or the company’s actual offerings, a com-

pany’s reexamination of its initiatives and choices will not

suffice. The customers themselves – that is, the full range and

unvarnished reality of their prior experiences, and then the

expectations, warm or harsh, those have conjured up – must

be monitored and probed.

Such attention to customers requires a closed-loop process

in which every function worries about delivering a good

experience, and senior management ensures that the offer-

ing keeps all those parochial conceptions in balance and thus

linked to the bottom line. This article will describe how to

create such a process, composed of three kinds of customer

monitoring: past patterns, present patterns, and potential

patterns. (These patterns can also be referred to by the fre-

quency with which they are measured: persistent, periodic,

and pulsed.) By understanding the different purposes and

different owners of these three techniques – and how they

work together (not contentiously) – a company can turn pipe

dreams of customer focus into a real business system.

What Customer Experience Is Customer experience is the internal and subjective response

customers have to any direct or indirect contact with a com-

pany. Direct contact generally occurs in the course of pur-

chase, use, and service and is usually initiated by the cus-

tomer. Indirect contact most often involves unplanned

encounters with representations of a company’s products,

services, or brands and takes the form of word-of-mouth rec-

118 Harvard Business Review | February 2007 | hbr.org

Christopher Meyer ([email protected]) is the chairman of Strategic Alignment Group, a consultancy based in Portola Valley, California, that spe-

cializes in innovation and time-based competition. He is the author of Fast Cycle Time (Free Press, 1993). Andre Schwager (aschwager@

customersenseconsulting.com) is a former president of Seagate Enterprise Management Software and a founder of Satmetrix Systems, a cus-

tomer experience software company based in Foster City, California.

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hbr.org | February 2007 | Harvard Business Review 119

ommendations or criticisms, advertising, news reports, re-

views, and so forth. Such an encounter could occur when

Google’s whimsical holiday logos pop up on the site’s home

page at the inception of a search, or it could be the distinc-

tive “potato, potato” sound of a Harley-Davidson motorcy-

cle’s exhaust system. It might just be an e-mail from one cus-

tomer to another.

The secret to a good experience isn’t the multiplicity of

features on offer. Microsoft Windows, which is rich in fea-

tures, may provide what a corporate IT director considers

a positive experience, but many home users prefer Apple’s

Macintosh operating system, which offers fewer features and

configuration options. A customer’s experience with an

Apple device begins well before the purchaser turns it on –

in the case of the iPod, perhaps with the dancing silhou-

ettes in the TV advertisements. The origami-like (and recy-

clable) packaging enfolds the iPod as though it were a

Fabergé egg made for a czar. A small sticker, “Designed in

California, Made in China,” communicates the message that

Apple is firmly in charge but also interested in keeping costs

down. Even Windows users appreciate the device’s intuitive,

Mac-like feel and find that downloading tracks from iTunes

is easier than buying a CD on Amazon. Every Apple prod-

uct is designed with the overarching purpose of making the

time one spends with Apple an enjoyable experience.

A successful brand shapes customers’ experiences by em-

bedding the fundamental value proposition in offerings’

every feature. For BMW, “the Ultimate Driving Machine”

is much more than a slogan; it informs the company’s man-

ufacturing and design choices. In 2000, Mercedes-Benz intro-

duced a system that automatically controls the distance be-

tween a Mercedes and the car in front. BMW would not

consider developing such a feature unless it amplified rather

than diminished the driving experience.

Service quality and scope matter, too, but mostly when

the core offering is itself a service. For example, the tracking

and shipping support FedEx provides on the Internet and

by phone is as important to customers as its fundamental

value proposition – on-time delivery.

In their concern with logistics – how something is pro-

vided, not just what is provided – business-to-business com-

panies take after consumer-service companies. For both, the

goal is to provide a positive experience to the end user.

The business partner or supplier of a B2B company helps

the latter do that first by understanding where in its direct

customers’ value chain the B2B can make a meaningful con-

tribution, and then when and how. Those are different un-

dertakings from capturing and parsing a given human

being’s internal, ineffable experience. A business’s “experi-

ence,” one might say, is its manner of functioning, and a B2B

company helps its business customers serve their custom-

ers by solving their business problems, just as an effective

business-to-consumer company fulfills the personal needs of

its customers. In a B2B context, a good experience is not a

thrilling one but one that is trouble-free and hence reassur-

ing to those in charge.

Thus, a supplier satisfies the purchasing department of

its business customer by providing a balance of costs and

benefits; it satisfies operations by offering products or ser-

vices that are easy to use; and it satisfies a customer’s execu-

tives by expanding capacity at the same rate as the customer

and in general evolving alongside it. Accordingly, sales and

marketing do not necessarily monopolize points of contact

with customers: Operations people at the first company deal

directly with their counterparts at the second, and so forth.

The functional nature of the relationship – indeed, the fact

that it is a true relationship – creates a pervasive awareness

of experience issues and priorities.

Whether it is a business or a consumer being studied, data

about its experiences are collected at “touch points”: in-

stances of direct contact either with the product or service it-

self or with representations of it by the company or some

third party. We use the term “customer corridor” to portray

the series of touch points that a customer experiences. What

constitutes a meaningful touch point changes over the

course of a customer’s life. For a young family with limited

time and resources, a brief encounter with an insurance bro-

ker or financial planner may be adequate. The same sort of

experience wouldn’t satisfy a senior with lots of time and

a substantial asset base.

Not all touch points are of equivalent value. Service inter-

actions matter more when the core offering is a service.

Touch points that advance the customer to a subsequent and

more valuable interaction, such as Amazon’s straightforward

Corporate leaders who would never tolerate a large gap between forecasted and actual revenues prefer to look the other way when

company and customer assessments diverge.

1-Click ordering, matter even more. Companies need to map

the corridor of touch points and watch for snarls. At each

touch point, the gap between customer expectations and

experience spells the difference between customer delight

and something less.

People’s expectations are set in part by their previous ex-

periences with a company’s offerings. Customers instinc-

tively compare each new experience, positive or otherwise,

with their previous ones and judge it accordingly. Expecta-

tions can also be shaped by market conditions, the compe-

tition, and the customer’s personal situation. Even when it is

the company’s own brand that establishes expectations, the

customer can be set up for disappointment. For example,

Dell transformed buying computers over the Internet from

a risky to a reliable experience. When it extended that set

of procedures to the selection and purchase of expensive

plasma HDTV sets, however, it disappointed. Dell did an ef-

fective job of creating positive customer expectations, but

they turned out to be better fulfilled by the in-person sales

force at Best Buy.

Ideally, good design makes both the most routine and

the weightiest customer experiences – checking a price, get-

ting a question answered, or placing a multimillion-dollar

order – pleasant and efficient. However, even when dissatis-

faction or wariness arises, artful control of consumer experi-

ence can overcome it.

In its development of a new AIDS drug, Gilead Sciences

provides a good example of how a failure to understand the

experience and expectation component of a consumer seg-

ment’s dissatisfaction can turn into a failure to reach that

segment. Upon releasing the new medication, which had

demonstrated advantages over existing ones, Gilead noticed

that while sales to patients new to therapy were robust, sales

to patients already undergoing treatment were growing far

more slowly than expected. For HIV/AIDS patients, switching

medications, Gilead discovered, is very different from choos-

ing an alternative cold remedy. Switching requires ending

a trusted relationship in the hope of reaching an uncertain

improvement level. The company also learned that HIV-

positive patients are far more interested in the potential ad-

verse effects of a new drug than in its supposedly superior

efficacy. With this new understanding, Gilead decided to em-

phasize in its marketing the new drug’s lower incidence of se-

rious side effects. It also segmented the patients’ physicians

by their willingness to prescribe a different medication from

the ones they knew. Once Gilead made it easier for patients

to switch drugs, the market share of the company’s main

competitor dropped 33%.

Understanding Customer Experience

120 Harvard Business Review | February 2007 | hbr.org

CEM Versus CRM

Customer experience management and customer relationship management differ in their subject matter, timing, monitoring, audience, and purpose.

Customer

Experience

Management

(CEM)

Customer

Relationship

Management

(CRM)

What

Captures and distributes what a customer thinks about a company

Captures and distributes what a company knows about a customer

When

At points of customer interaction:

“touch points”

After there is a record of a customer interaction

How Monitored

Surveys, targeted studies, observa- tional studies,

“voice of customer” research

Point-of-sales data, market research, Web site click- through, automated tracking of sales

Who Uses the Information

Business or functional leaders, in order to create fulfillable expecta- tions and better experiences with products and services

Customer-facing groups such as sales, marketing, field service, and customer service, in order to drive more efficient and effective execution

Relevance to Future Performance

Leading: Locates places to add offerings in the gaps between expectations and experience

Lagging: Drives cross selling by bundling products in demand with ones that aren’t

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hbr.org | February 2007 | Harvard Business Review 121

Why the Neglect? CEOs may not actively deny the significance of customer ex-

perience or, for that matter, the tools used to collect, quantify,

and analyze it, but many don’t adequately appreciate what

those tools can reveal. Three forces in the main conspire to

preserve this gap.

Too much money already lavished on CRM. Having spent millions of dollars on customer relationship management

software, many CEOs consider their problem to be not a lack

of customer information but a superfluity of it. Before invest-

ing more time and money, executives justifiably want to

know how customer experience data are different and what

their value is.

To put it starkly, the difference is that CRM captures what

a company knows about a particular customer – his or her

history of service requests, product returns, and inquiries,

among other things – whereas customer experience data cap-

ture customers’ subjective thoughts about a particular com-

pany. CRM tracks customer actions after the fact; CEM (cus-

tomer experience management) captures the immediate

response of the customer to its encounters with the com-

pany. Employees accustomed to reading the marketing de-

partment’s dry analyses of CRM point-of-sale data easily

grasp the distinction upon hearing a frustrated customer’s

very words. (For a detailed account of the difference between

the two approaches, see the exhibit “CEM Versus CRM.”)

Moreover, many CEOs don’t sufficiently appreciate the

distinction between customer satisfaction, which they be-

lieve they have heavily documented, and customer experi-

ence, which always demands further investigation.

Lack of attunement to customers’ needs. Leaders who rose through customer-facing functions, such as Cisco Systems

CEO John Chambers, are more likely to act with reference to

customer experience than those who have not. When com-

peting new technologies are difficult to choose among, Cisco

defers its choice until key customers have registered their

reactions. Because the company knows there will be a mar-

ket for the choice it finally makes, it can afford to commit

itself later than its competitors.

In contrast, executives who rose through finance, engi-

neering, or manufacturing often regard managing customer

experience as the responsibility of sales, marketing, or cus-

tomer service.

Fear of what the data may reveal. It’s easy to say one’s busi- ness is customer-driven when there are no data to prove oth-

erwise. Once data start flowing, the bogeymen come out of

the closet. Can we afford to do what customers are asking

for? How do we choose between conflicting preferences? Can

we accept what customers say they are experiencing with-

out first telling them what they should be experiencing? Cor-

porate leaders who would never tolerate a large gap between

forecasted and actual revenues prefer to look the other way

when company and customer assessments diverge, as they

do in the Bain survey.

Executives also hesitate to act on findings because experi-

ence data are more ambiguous than customers’ actions – the

orders they place, for instance. However, statistical analysis

has developed to the point where it can dependably quantify

both the relative importance of each touch point and the ex-

perience it provided. It can also isolate key transactions, ac-

counts, regions, customer segments, and so forth, and then

parse the resulting data. About ten years ago, companies

started collecting experience information electronically. Now

they can instantly combine it with data collected from CRM

systems and other customer databases, conduct analyses of

both individual and aggregate responses in real time, and

then automatically route and track issues needing resolution.

Squishier are observation studies and verbatim com-

ments, which for that reason don’t get the attention they de-

serve. Approached, however, with the requisite empathy and

insight, they can be in their own way more revealing than

concrete findings. For one thing, even consumers sharply

aware of a product’s or brand’s deficiencies can’t quite pic-

ture what might replace it. That’s why Henry Ford said that

if he asked his customers before building his first car how he

could better meet their transportation needs, they would

have said simply, “Give us faster horses.” Properly under-

stood, the currents beneath the surface that direct the flow

of customer experience data will indicate the shape of the

next major transformation.

All Hands on Board Many organizations place responsibility for collecting and

assessing customer experience data within a single, IT-

supported customer-facing group. Doing so accomplishes

Understanding Customer Experience

at least three things: It saves money; it protects customers

from redundant and annoying solicitations; and it permits

direct comparison of customers on the basis of their location,

choice of product, or some other criterion.

But it is a mistake to assign to customer-facing groups

overall accountability for the design, delivery, and creation of

a superior customer experience, thereby excusing those more

distant from the customer from understanding it.

In contrast to this common pattern, Palm drew on cus-

tomer experience to make the Treo one of its most success-

ful products ever. A combination of cell phone and Palm

Pilot, the original Treo used the same built-in rechargeable

battery as the Palm organizers. When used as a cell phone,

the device consumed far more power than it did when used

as an organizer. So customers who were heavy users of the

cell phone feature found that their Treos were often losing

power – and often at an inconvenient distance from their

rechargers. Complaints about this problem began showing

up in Palm’s customer-service transaction surveys. But the

customer service department could offer the Treo’s unhappy

owners only minor power-saving tips.

Dissatisfied with the status quo, customer service vice pres-

ident Dan Gilbert, showing unusual initiative, distributed

the experience data his department had collected to product

development, which went to work on the problem. The next-

generation Treo came with a battery that users replace. In

2005, sales were 71% higher than the previous year.

Typically, however, a vigorous reaction to intelligence

gathered on customer experience requires general manage-

ment to orchestrate a response to customer problems. Intuit

learned that when it tried to address the trouble customers

were having installing a new release of TurboTax. The solu-

tion turned out to be cross-functional, but no one who had

been asked to deal with it was senior enough to “own” the

entire installation process.

Obtaining the Right Information There are three patterns of customer experience informa-

tion, each with its own pace and level of data collection. (For

a detailed breakdown of the three patterns, see the exhibit

“Tracking Customer Experience: Persistent, Periodic, Pulsed.”)

When companies monitor transactions occurring in large

numbers and completed by individual customers, they are

looking at past patterns. Enterprise Rent-A-Car is supposed

to ask every driver returning one of its vehicles, “Would you

rent from Enterprise again?” Any new service a France Tele-

com customer receives is followed by a brief questionnaire

on the quality of his or her experience. As these two examples

demonstrate, each attempt to determine the quality of the

experience directly follows the experience itself. So compa-

nies receive by this method an uninterrupted, or “persistent,”

flow of information, which they then analyze and communi-

cate internally. Although surveys are the tool used most

often for gathering data on past patterns, customers are

sometimes approached through online forums and blogs.

Companies are mostly guided by assertions that win custom-

ers’ strong agreement, but sometimes customers’ failure to

react strongly to some feature or service can be just as telling.

For this reason, the employees evaluating results must be at-

tuned to areas of customer experience that a survey or other

tool does not directly address.

Analyses of present patterns are not simply evaluations of

the meaning and success of a recent encounter. They envi-

sion a continuing relationship with the customer. Conse-

quently, questions may extend to the customer’s awareness

of alternative suppliers, new features the customer might

desire, and what it sees as challenges to its competitiveness.

Given the broad scope of the inquiry, this type of monitor-

ing shouldn’t be triggered solely by a customer-initiated

transaction. Instead, information on a company’s key prod-

ucts and services should be gathered at scheduled intervals,

or “periodically.” Hewlett-Packard and the consulting firm

BearingPoint, for example, approach every key customer an-

nually. By initiating contact with different customers at dif-

ferent times throughout the year, BearingPoint has created

an almost persistent data flow that does not depend on the

completion of a given transaction, while permitting compar-

isons among customers on a range of issues. BearingPoint

learned in this fashion that the best practices it had estab-

lished in one vertical-market group had not migrated to

other groups.

Present patterns are collected through surveys or face-to-

face interviews, studies tailored to the subject, or some com-

bination thereof. It helps to prepare customers for the in-

quiry by telling them the purpose of the survey, how they

will hear about the findings, and what role they might play

in addressing them. Accordingly, Hewlett-Packard rewards

its account managers on survey-participation rates as well

as results.

Potential patterns are uncovered by probing for opportu-

nities, which often emerge from interpretation of customer

data as well as observation of customer behavior. Like the

study Gilead conducted, such probes are outgrowths of

strategies usually involving the targeting of particular cus-

tomer segments and are therefore unscheduled, or “pulsed.”

The findings are often used to inform the product develop-

ment process.

Most companies apply a single summary metric to data on

past and present patterns. The customer experience metric

Net Promoter, for example, registers customers’ experiences

in aggregate–that is, their positive ones minus their negative

ones. Intuit’s founder, Scott Cook, uses Net Promoter scores

for goal setting and engaging the organization’s attention,

though he recognizes that a rising or falling score doesn’t

begin to reveal what is driving the trend.

As relationships with customers deepen, companies tend

to collect data with greater frequency. The patterns that

122 Harvard Business Review | February 2007 | hbr.org

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hbr.org | February 2007 | Harvard Business Review 123

emerge suggest further areas of inquiry. For example,

present-relationship studies may indicate that on-site service

experience is wanting. After improvements are made, it’s

common to use a transaction survey following each service

call to assess progress. A subsequent, more comprehensive

survey may show good experience with service response

time but low overall ratings, triggering a special study to

identify customers’ priorities among a range of service expe-

rience factors.

Low cost and ease of modification make surveys the over-

whelming favorite for measuring past and present patterns.

E-mail–based surveys are superior to paper-based ones be-

cause they can be more easily shared; they allow rapid distri-

bution; they give the surveyor the flexibility to extend or

Tracking Customer Experience: Persistent, Periodic, Pulsed

Companies can monitor various patterns of interaction with customers to gain a better under- standing of the customer experience they are providing. Depending on the precise information a company is seeking, it may choose to analyze past patterns, present patterns, potential patterns, or a combination. Each pattern requires a distinct method of generating and analyzing data and will yield different types of insights.

Pattern and Purpose

Past Patterns: Captures a recent experience. > Intended to improve

transactional experiences > Tracks experience goals and

trends > Assesses impact of new

initiatives > Identifies emerging issues

Examples: Post-installation or customer service follow-up, new-product-purchase follow-up

Present Patterns: Tracks current relationships and experience issues with an eye toward identifying future opportunities. > Keeps a consistent yet deeper

watch on state of relationship and other factors

> Looks forward as well as backward

> Used with more critical populations and issues

Examples: Biannual account reviews, “follow them home” user studies

Potential Patterns: Targets inquiries to unveil and test future opportunities.

Examples: Ethnographic design studies, special-purpose market studies, focus groups

Owner

Central group or functions

Central group, business units, or functions

General management or functions

Data Collection Frequency and Scope

Persistent: > Electronic surveys

linked to high- volume transactions or an ongoing feed- back system

> Automatically trig- gered by the comple- tion of a transaction

> Focused, short-cycle, timed data collection

> Feedback volun- teered by users in online forums

Periodic: > Quarterly account

reviews > Relationship studies > User experience

studies > User-group polling

Pulsed: > One-off, special-

purpose driven > Interim readings of

trends

Collection and Analysis Methodology

> Web-based, in-person, or phone surveys

> User forums and blogs

> Web-based surveys preceded by preparation in person

> Direct contact in person or by phone

> Moderated user forums

> Focus groups and other regularly scheduled formats

> Driven by specific customers or unique problems

> Very focused > Incorporates existing

knowledge of cus- tomer relationship

Discussion and Action Forums

> Analyzed within functions, central survey groups, or both

> Cross-functional issues directed to general managers

> Strategic analysis and actions directed by general managers

> Initial analysis by sponsoring group

> Broader trends and issues forwarded to general managers’ strategic and operat- ing forums

> Deeper analysis of emerging issues at the corporate, busi- ness unit, or local level

> Centered within sponsoring group, with coordination by and support from central group

Understanding Customer Experience

124 Harvard Business Review | February 2007 | hbr.org

Rating Customers

At-Risk Model

GrowthDangling

$25,000,000

$20,000,000

$15,000,000

$10,000,000

$5,000,000

0

B il

le d

re ve

nu es

Customers with billed revenues above $10M are considered high-value

bubble size represents forecasted revenues

low high Customer satisfaction

A

B

The matrix to the right organizes the customers of HiTouch (a com- posite of actual companies) on the basis of the level of attention they require. The vertical axis shows billed revenues (products and ser- vices provided and paid for). The hor- izontal axis shows an aggregate score indicating level of customer satisfaction. Customers with low billings but high customer satisfac- tion, for example, represent growth opportunities for HiTouch. The bub- bles on the matrix classify HiTouch’s customers according to a third di- mension: forecasted revenues (or- ders placed but not paid for as well as potential orders), indicated by bubble size. Letters inside the bub- bles serve strictly as identifiers. So, for example, customer A has the second-highest billings and the second-highest forecasted reve- nues, but its business is “at risk” because its satisfaction scores are low. Customer B’s low billings, high satisfaction, and high forecasted revenues suggest unexploited po- tential business for HiTouch.

abbreviate the questioning according to the wishes of the

respondent or the substance of the response; they minimize

delays in analyzing the results; and they lead to quick action,

such as a referral to a general manager should scores fall

below a predetermined level. E-mail surveys can also be more

easily tailored. For example, the surveys Marvin Windows

and Doors sends to its distributors are different from those

sent to architects who buy its products.

A well-designed survey is not simply one that elicits the de-

sired information. It must itself avoid becoming an unfortu-

nate aspect of the customer experience. Hence, it shouldn’t

be onerous for the taker or deny him the chance to commu-

nicate the special nature of his experience. One way of keep-

ing surveys mercifully brief is to avoid asking about matters

like recent purchases that the company already has a record

of. Nor should they be triggered by the transactions of regu-

lar customers such as purchasing agents. Such customers are,

after all, among those a business can least afford to annoy. By

the same token, corporate sanctions imposed on dealers who

receive low scores shouldn’t be so harsh that retailers try to

discourage customers from responding by offering to fix any

problem on the spot. The individual customer may be pla-

cated, but widespread resort to this practice keeps general

management from obtaining a broad picture of systemic

problems.

Surveys do have their limitations, and focus groups, user-

group forums, blogs, and marketing and observational

studies can yield insights that surveys cannot. (For more

on listening to users, see Dorothy Leonard and Jeffrey

Rayport,“Spark Innovation Through Empathic Design,” HBR

November–December 1997.) Intuit, for example, is a leader

in “follow them home” studies. Company representatives visit

customers where they live or work and observe how they use

Intuit products such as QuickBooks. It was from watching

the smallest businesses struggle with QuickBooks Pro that

the company recognized a need for a product like Quick-

Books Simple Start. These tools lend themselves to the mea-

surement of present and potential patterns, for they entail

more time, preparation, and expense than transaction-based

surveys.

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LL MM

AA GG

CC YY

AA NN

BB LL

AA CC

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hbr.org | February 2007 | Harvard Business Review 125

Acting on Experience Information Let’s take a look at a company we’ll call HiTouch – which is

actually a composite of companies – as it struggled to create

a system for managing customer experience. HiTouch, a busi-

ness-to-business global financial services provider, received

a shocking wake-up call when a top customer shifted half

its business to an archrival. HiTouch executives had just

completed a quarterly account review classifying the rela-

tionship with this account as “superior.” The stunned execu-

tives wondered what they could have missed.

From their efforts to salvage the account, HiTouch execu-

tives learned enough to initiate a companywide effort to

improve the experience of all other major accounts. After

conducting a mini-audit of existing customer-experience pro-

grams, responsible parties, and results, it discovered that its

vertical-market groups hardly went further than tracking

leads and analyzing buying patterns. Most employees as-

sumed customer experience was the job of marketing or

sales. The company’s only CEM metric came from a mailed

annual customer satisfaction survey whose wording hadn’t

changed in three years.

HiTouch engaged consultants to help with the initiative.

Rather than spending a lot of time establishing formal cus-

tomer experience goals or a detailed plan, the consultants

argued for a “fast prototype” relationship survey of top cus-

tomers. HiTouch’s leaders identified the touch points they

knew had disappointed their most important customers.

Preventing further customer defections, they realized, would

require customer experience goals for every stage of the

value chain. These had to serve every vertical market’s finan-

cial objectives while being compatible with the company’s

branding.

As the issues piled up, it became clear that the effort

needed an executive leader, a budget, and dedicated re-

sources. HiTouch’s top sales executive, having become a be-

liever in the process, stepped up. To ensure a good response

rate, he asked sales account executives to prep customers re-

ceiving the survey. A few showed a predistribution draft to

customers so that they could help refine issue selection and

tone. Of the various questions settled on, two key ones were

“How important to your purchasing decision was HiTouch’s

brand and the service promise it seemed to make?” and “Do

you believe HiTouch delivers the experience promised by its

marketing and sales force?” The pilot survey included a sum-

mary metric that permitted HiTouch to compare responses

by location, service platform, and vertical market.

The sales executive noticed that meetings about the pilot

survey, in which salespeople fed customer experience infor-

mation back to the customers themselves, differed from the

typical sales call by shifting the dialogue away from the in-

dividual transaction and toward relationship development.

They also provided an excellent opportunity to introduce to

the customers HiTouch’s nonsales employees who were in

a position to fix customer problems as they arose. In this

fashion, salespeople began to view their jobs less as a func-

tional responsibility than as an organizational process.

Data from the survey began to flow within 24 hours of

distribution. Many of customers’ verbatim comments were

blunt. Some executives became defensive and tried to ex-

plain away what the data were saying rather than under-

stand the concerns behind them. Some never quit demand-

ing yet one more data point. Others strained to launch

company responses before fully understanding what was

being said.

With 60% of the responses in, it became clear which expe-

riences were critical to overall satisfaction. However, they

were different in each vertical market, with few exceptions.

For each, summary scores were compared with customer

revenue. On that basis, finance placed every customer in one

of four quadrants (see the exhibit “Rating Customers”).

• Model customers: good summary scores; good revenue. • Growth customers: good summary scores; higher poten- tial revenue. Candidates for cross selling and upselling.

• At-Risk customers: low scores; good revenue. Demanding decisive intervention.

• Dangling customers: low scores; low revenue. To be res- cued or abandoned.

Auspiciously, the Growth segment had three times as

many customers as any of the others. But on further exami-

nation it emerged that some of those customers didn’t buy as

much as those in other quadrants. In fact, one of the largest

remaining customers was squarely in the At-Risk quadrant.

The results of the initial survey coincided with the start of

the strategic-planning cycle. By the following quarter, every

A well-designed survey is not simply one that elicits the desired information. It must itself avoid becoming an unfortunate

aspect of the customer experience.

Understanding Customer Experience

vertical-market team, having shown some customers the

findings and described what the team planned to do about

them, was ready to send out transaction surveys of custom-

ers’ experiences with service installation and repair. Every

team had also set experience goals for itself and scheduled

relationship surveys.

A year later, current experience data had replaced ill-

informed opinion at HiTouch. At monthly operations meet-

ings, vertical-market general managers reviewed key cus-

tomer experience issues, and actions taken, before reviewing

financials. A rolling summary of relationship issues un-

earthed by customer surveys kicked off quarterly executive

strategy discussions. Defections within each vertical-market

group dropped by an average of 16%.

Not everything worked as hoped. The company set up

an executive dashboard to keep track of installation experi-

ence issues, but the disclosure of high-volume transaction in-

formation so upset the managers responsible that they

never got around to resolving the underlying issues. The

dashboard was pulled in favor of automatic triggers that

channeled problems to specialists or general managers, who

began to make good progress in solving them. Increased an-

alyst staffing and simplified reporting helped the general

managers identify new opportunities, an area they had been

neglecting.

The Employee Experience Customer experience does not improve until it becomes a

top priority and a company’s work processes, systems, and

structure change to reflect that. When employees observe se-

nior managers persistently demanding experience informa-

tion and using it to make tough decisions, their own deci-

sions are conditioned by that awareness.

Not long after breaking every software-industry growth

record, Siebel Systems (now part of Oracle) saw its satisfac-

tion ratings begin to drop. An adopter of customer experi-

ence management, the company had gathered data reveal-

ing that customers found a large disparity between actual

and expected costs of ownership of Siebel 6, a sales-force

automation tool based on a client-server architecture. The

proposed solution, a shift to a Web-based architecture in

Siebel 7, would require forgoing the development of other

major features – and the revenues they generated – for two

years. Yet Siebel’s leadership went ahead with the shift any-

way. Satisfaction levels soon returned to their formerly lofty

levels, and employees took heart as management placed ex-

perience ahead of revenues.

Once persuaded of the importance of experience, every

function has a role to play.

Marketing has to capture the tastes and standards of every

one of its targeted market segments, circulate that knowl-

edge within the company, and then tailor all consumer com-

munications accordingly.

Service operations must ensure that processes, skills, and

practices are attuned to every touch point. (Present-patterns

surveys are good for tracking high-volume touch points such

as call centers.)

Product development should do more than specify needed

features. It should also design experiences after observing

how customers use products and services, learning why they

use offerings as they do, and figuring out how existing prod-

ucts might be frustrating them. Ideally, product developers

will identify customer behavior that runs counter to a com-

pany’s expectations and uncover needs that haven’t been

identified.

Information technology that can collect, analyze, and dis-

tribute CEM data, integrate the information with that gener-

ated by CRM, and monitor progress must be in place. As the

data flow stabilizes, the form of presentation and its degree

of detail should be keyed to whichever internal audience

the data are meant for. A level of detail that is appropriate for

an analyst, for example, can easily overwhelm a line man-

ager. CEM is a play within a play, so to speak; just as custom-

ers must have a good experience, employees need to have a

good experience digesting information about themselves.

Human resources should put together a communications

and training strategy that conveys the economic rationale

for CEM and paints a picture of how it will alter work and

decision-making processes. Since the front line determines

the bulk of customer experience, it would be a good idea to

study those employees’ individual capabilities, work pro-

cesses, and attitudes. As for performance management, of

course customer experience results should affect compensa-

tion. But as we have learned in recent years, incentives that

are too powerful are more likely to distort behavior than

channel it productively.

Account teams must progress from annual surveys to de-

tailed touch-point analysis, then translate present patterns

of customer experience and issues gleaned from recent trans-

actions into action plans that are shared with customers. Not

every significant implication is readily apparent. Leaders

need to press the data to precipitate customers’ concealed

longings.

• • •

Customer dissatisfaction is widespread and, because of cus-

tomers’ empowerment, increasingly dangerous. Although

companies know a lot about customers’ buying habits, in-

comes, and other characteristics used to classify them, they

know little about the thoughts, emotions, and states of mind

that customers’ interactions with products, services, and

brands induce. Yet unless companies know about these sub-

jective experiences and the role every function plays in shap-

ing them, customer satisfaction is more a slogan than an at-

tainable goal.

Reprint R0702G

To order, see page 158.

126 Harvard Business Review | February 2007 | hbr.org

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