How customer experience is becoming central to digital transformation10 min read . Updated: 11 Jan 2018, 11:24 PM IST
A CXO roundtable hosted by Mint and SAP India discusses the growing influence of customers on the digital strategy of companies
Digital disruption has transformed the way brand marketing is done, primarily due to the growing influence of customers in an increasingly connected world. Given this backdrop, Mint recently partnered with SAP India Pvt. Ltd to host a select CXO round table centred around the theme, “Customer Experience (CX): Way to the heart of a digital business".
Cassandra Girard, global vice-president and head, consumer and travel industries, at SAP Hybris; and Yashraj Erande, partner and managing director, The Boston Consulting Group, Mumbai, opened up the discussion by sharing their insights on the ingredients of a successful CX strategy and the challenges it entails.
Customer-centricity defines winners: Girard
Everything you do in your business today, including the way you manage the supply chain, should track back to customer experience. Putting customers at the centre of the business is not natural and quite challenging for most traditional businesses, but customer-centricity is what separates the winners from others. Most industries are being disrupted by digital companies, which do not have issues such as bureaucracy or technological legacy. We live in a world where we want everything right now and the way we want it—and that is now the measure of customer engagement or loyalty. Airlines, retailers and consumer companies are feeling the urge to transform. The same may be true for the workforce of business-to-business companies. It is a mobile world—one in which there is desire to have everything right, 24x7—and there is a digital and physical convergence happening.
Digital needs to be core to your business. Here’s why. In some regions, the youth are no longer buying houses; they use rental housing, and Airbnb for vacations. The same goes for devices such as professional cameras. This shift from “owning" to “renting" will make companies innovate their business models to make them service-oriented.
We have talked about personalization for a decade but we are now actually at the cusp of where it is happening. At the end of the day, the more you understand the customer, the better value you can deliver to them. We are now in a position not only to make sense of the vast amount of information available about customers online but also to derive insights from that information. Artificial intelligence (AI) and machine learning (ML) are having a big impact, which is giving rise to what is called “conversational commerce". You will be able to talk to a machine, a car or your home and technology will integrate everything you want in context in real time. This will be pretty game changing and the challenge will be to design customer experience when there is no “regular" interface—when the interface is voice.
Why CX has come to the fore in the digital age: Erande
There are four relatively new forces or elements shaping the digital model for companies: mobility, micro-transactions, social networks and big data. In India, most of the internet consumption is happening through mobiles. In micro-transactions, the break-even point for transactions have collapsed so much recently that you can actually build economically viable business models for very small transactions—even down to the segment of a single unit.
As businesses get shaped by these forces, they begin to disintegrate from verticalized, end-to-end value chains into stacks. In these stacks, the front end becomes more and more specialized—there are examples of that in e-commerce as well as in other segments. Efficiency and scale, then, really start to matter. When this starts happening on the back of the four forces, you need to really think how to differentiate through customer experience and stay relevant in the market place.
The notion of customer experience has gradually evolved in the digital world. The 1980s were about mass marketing and about standard media to communicate the value proposition of products. Then came segmented marketing, taking into account segments such as males versus females or preferences in different colours. More recently, you started doing some degree of contextual marketing. And the context was: If you are sitting in a movie theatre, you will get a different kind of message; If you are travelling, you will get some other message; If you are in a mall, it will again be different. But still, the message was not very differentiated and specific to who you are. We are now getting into a segment that has massive commercial implications because of the huge amount of data, digital usage and computing power we have.
If you are running a business that is targeting “category growth" versus running a business that is delivering a one-on-one experience, the growth in the latter case is much higher due to personalization. Consider the example of Starbucks, which has been able to use the power of data, mobility, connectivity and machine learning to create an experience that is fundamentally differentiated. When it started off, Starbucks took the typical business approach of manual operations, segmented rather than one-to-one targeting, acting as a single retail channel and using simple gamificiation—if you bought this coffee, you would get certain reward points and so on. But three years ago, the company started its journey of becoming the most personalized brand in the world. The journey that different customers take with the brand is fundamentally different. The firm changed its 10,000 standard mass mailers into 400,000 variants to be sent out every day to customers based on specific customer profiles and the unique journeys Starbucks wanted to nudge them towards. It created a machine learning algorithm that looked at millions of data points to create different customer propositions. The result: when customers open up the Starbucks app, the value propositions or offers they see on their screens are distinct. In its recent annual report, Starbucks noted that in the last two years, it saw a 3x improvement in campaign results, 2x improvement in customer responses, and an 8% incremental revenue growth from existing customers.
Point to remember when building a successful CX strategy
CXOs who participated in the round table were: Rajesh Batra, chief information officer (CIO), Kokilaben Dhirubhai Ambani Hospital; Sauvik Banerjjee, vice-president (VP) of digital initiatives at Tata Industries Ltd, chief technology officer (CTO) of TataCLiQ and advisory to Tata group companies; Pankaj Bhargava, CIO, Pidilite Industries Ltd; Sunil Mehta, senior VP and area systems director—central Asia, JWT; Nitin Chugh, country head-digital banking, HDFC Bank Ltd; Tushar Dani, senior VP-digital transformation, Lodha Group; Rahul Mahajan, executive vice-president-information technology, Lodha Group; Joydeep Dutta, executive director and group CTO, Central Depository Services (India) Ltd; Murari Sridharan, CTO, BankBazaar.com; Krishnan Chatterjee, head of marketing-Indian subcontinent, SAP; and Ben Nottle, senior director, SAP Hybris Customer Engagement, Centre of Excellence, Asia Pacific and Japan. The discussion was moderated by Leslie D’Monte, national technology editor of Mint. Edited excerpts:
Hyper-personalization need of the hour
Building a customer experience strategy is all about a journey rather than individual transactions. What earlier used to be a “macro experience" for customers subsequently became a “micro experience" and is now turning into a “nano" one. Customer experience needs to be highly personalized and devised using the principles of design thinking, especially visual design. Hyper-personalization is indeed the need of the hour. Not only should organizations be able to predict the right kind of experience for customers based on the data and knowledge they have, they should also be able to guide the customers and recommend what is good for them. They should be able to make it a delight rather a nuisance value. Another thing about CX is that it should be relevant and current—and not something that is tangential to what customers want.
Internet of senses?
While companies are talking about the Internet of Things (IoT), maybe we should also consider an ‘Internet of Eyes and Ears’—or the ‘Internet of Senses’. This is because most gadgets today are embedded with cameras, allowing companies to monitor the visual experience. Also, consumers are now talking to gadgets, which are listening to their voice commands such as ‘Do this for me’ or ‘Dial home for me’. With the help of AI (artificial intelligence) and ML (machine learning), and with more and more data coming in, these things are becoming a reality. In addition, companies need to keep innovating, constantly thinking about what the customers may need tomorrow; they need to often preempt them in order to offer a delightful experience. The human element also matters a lot.
Challenges in realising the CX vision
The primary roadblock in realizing the vision of turning an enterprise into a customer-centric digital business is related to cultural issues. The questions that need to be asked are: Who should be the owner of the customer experience in an organization? Does that owner have the power to deliver on the transformation required?
In many organizations, there is a perception that CX is the responsibility of the call centre, where you handle customer friction and customer issues; but companies do not often elevate customer service to a point where it can have a transformative impact. Besides, in different industries and product categories, different types of discussions need to happen on customer experience. For a company like Starbucks, it is quite straightforward to understand how to handle customer experience because such companies have a daily relationship with the customers.
For companies where customer interactions happen, say, in a few months, you need a different type of engagement and the ability for hyper-personalization is a lot more difficult. One observation here is that the CXOs and the boards of traditional organizations are not readily aligned when a customer experience framework is being considered. So while things like social listening and call centre are discussed, it is usually more of ‘customer crib’ management rather than ‘customer experience’ management. One of the challenges faced by companies is therefore the lack of a forward-looking vision of customer experience. Also, if you do not have the right vision or strategy for CX, your cost of acquisition of customers can become very high.
While one can learn about CX from digital-native businesses such as Facebook, Airbnb, Uber and others, the digital transformation happening in traditional businesses is quite different. And while a few digital businesses have come out on top, thousands of similar start-ups have not made a mark—so it does not necessarily mean that you can be successful by copying them. However, there is a lot you can learn in terms of the agility of business and the type of disruptive business model you can have.
Importance of customer feedback
Companies need to ask the question, ‘What exactly is customer feedback and how can we act upon it?’ While negative feedback is easy to capture through the call centre, sentiment analysis of the social media channels and other means, the bigger question they need to address is what they are going to do about it. However, what is even more interesting is to look at what is implicit. For instance, if a transaction is abandoned mid-way, that is feedback; if the users do not fully consume the content in the promotional videos, that is also feedback. Even in the physical world, companies may notice that during peak hours, 20% of the customers who walk into their stores just walk out without buying anything. Such feedback may not lead to one-to-one personalization but can certainly lead to process innovation in companies’ businesses. So both explicit and implicit feedback can have an impact.
Using digital tools, organizations can quickly put customer feedback into action. For instance, if a customer dials into a company’s call centre to complain that the product he or she purchased online does not match the image on the site, then it should quickly trigger a new workflow into the company’s production house to reshoot and republish the product image. Another point to note in the context of CX is that in many places, machines are increasingly being used to reduce customer friction and make certain processes smoother—for example, the check-in and boarding processes at airports. While technologies such as big data analytics have been used in banking and other industries for some time, today, with AI, bots and other tools, you can serve customers even better and faster.