Outcomes-Based Experience Design


Chris O'Leary

Bridging the Gap Between Customer Experience and Business Outcomes

by Chris O’Leary, COO, Customer Innovations, Inc.

In the 25 years we’ve been helping companies design customer experiences, one of the consistent challenges has been to estimate the business impact of specific experiential improvements.  The fact is that many customer experience (CE) programs simply fail to make a compelling argument about the business value that will be generated by specific CE innovations. In the absence of a compelling business justification, executive support and sponsorship may be weak or even absent, orphaning the CE program and robbing it of the executive leadership it needs.

In their efforts to generate a business justification, Customer Experience (CE) managers frequently try two approaches.  Neither approach has been consistently effective in earning senior management support and sponsorship.

First, they may choose to rely on generally held beliefs about the value of customer satisfaction, engagement or Net Promoter Scores (NPS).  Often, this reliance highlights a correlation between these indices and some business outcome (e.g., revenue growth or market share), but treats it as though it was a causal relationship. (see: Keiningham et al., “A Longitudinal Examination of Net Promoter and Firm Revenue Growth,” J. Marketing, Vol. 71  July, 2007, pp. 39-51)

In addition to the confusion of correlation and causation, we’ve also seen many cases in which high satisfaction or NPS scores actually co-exist with declining revenues, market share, and profitability.  These measures reflect how customers feel about the company and not how the company may make customers feel about themselves.  As a result, they are poor predictors of how customers will actually behave.

The second approach, of course, focuses on generating cost savings and efficiencies, most often at the service touch points.  Unfortunately, service efficiency is almost always more important to the company than to the customer, and efforts to streamline or automate the touch points typically end up working against the quality of the overall customer experience.  (See:  The Customers’ Experience Does Not Happen at Your Touchpoints).

What is needed is a fundamentally new approach to focusing and justifying investments in customer experience innovation, one which directly addresses the core challenge of connecting specific experiential innovations with measurable business objectives.

For some time, we have been using a new approach to CE business justification called Outcomes-Based Experience Design, which represents a 180-degree change from common practices:

  • Rather than trying to justify potential CE innovations by predicting or projecting hoped-for business outcomes, this approach starts by clearly defining the desired measurable business outcomes and working backward to identify the innovations required to generate those outcomes.
  • Rather than relying on self-reported satisfaction, loyalty and NPS scores, this approach targets concrete business and customer behavior outcomes, both of which are measurable at the individual and the aggregate level.  Satisfaction, loyalty and NPS are interesting, but should NEVER be used to justify investment in experience innovation!

Rather than competing for attention, funding and time with other business initiatives, this approach anchors CE to the existing strategic priorities, which is where CE should have been all along.

Figure 1: Outcomes-Based Experience Design

As illustrated in Figure 1, the Outcomes-Based Experience Design approach introduces a new measurable outcome, Behavioral Outcomes that connects Experiential Outcomes and Business Outcomes.  Linking Experiential Outcomes and Business Outcomes in this manner enables CE program leaders to define and measure the specific business value that is being created, and this provide a rigorous business justification.

The model works in two directions.  The first direction, going right to left, illustrates the design relationship. When designing the experience innovation, one starts with the business outcome of interest, then determines the specific customer behavior that needs to be influenced, and then designs the specific experiential interventions that are required.

Second, the model illustrates the causal relationship going left to right.  The only way that CE innovation can create a business benefit is by influencing a specific change in customer behavior and choice-making.  The difficulty in business justification discussed earlier arises from the fact that it is so difficult to predict how customers in general will respond to different CE innovations, and even more so for specific groups of customers,

Outcomes-based Experience Design generates a host of critical benefits.  First and foremost, it positions CE innovation as a tool for achieving the priorities of executives and senior managers, NOT competing with those requirements.  Second, it provides metrics and measurability at each stage of the causal relationship.

Third, it allows companies to invest only in those innovations that will influence the target customer behavior, and stop investing in potentially expensive initiatives which may not matter to customers or for which they are not willing to pay.  Identifying (and terminating) uneconomic CE investments will often fund new investments that are far more impactful and that generate meaningful business benefits.

One final note:  This model is effective only if we understand how and why customers behave as they do.  Without the ability to link individual characteristics to the decisions and choices a customer makes, there is no way to design experiential interventions that will be effective in influencing the target behavior.  More important, there is no way to assure that  an experiential intervention targeting undesired customer behavior (e.g., attrition), will not adversely affect desirable customer behavior (e.g., retention, growth).

The necessary foundation of Outcomes-Based Innovation, therefore, is the ability to understand how and why customers make the choices that they do, and to use that information to influence those choices.  The scientific and methodological basis for this understanding has been previously discussed here (Getting Beneath the Voice of the Customer) and here (Customer Experience:  Beyond Better Sameness); practical challenges and applications will be discussed in the future.

Roadmap to the Customer Innovations Blog

I’ve received several requests to put together a “roadmap” to the Customer Innovations blog posts I’ve done.   Here is an organized path through the material I’ve posted so far.  I haven’t tried to be all inclusive but have just the most substantial posts.   Grab a venti dark roast and enjoy!

Customer Experience Strategy:

Evocative Experience Design:

Integrating Customer and Employee Experience:

Other:

Amazon: Putting Customers First

I just came across a wonderful article in the NY Times, titled:  Put Buyers First? What a Concept.  The author had ordered a Playstation from Amazon for his son for Christmas.  On December 21st, he realized he had not received this $500 item.  Apparently, it disappeared after the package had been signed for by a neighbor.  The author called Amazon to report the missing item and, in the author’s words, “The Amazon customer service guy didn’t blink.  After assuring himself that I had never actually touched or seen the PlayStation, he had a replacement on the way before the day was out.  It arrived on Christmas Eve.  Amazon didn’t even charge me for the shipping.” 

On a personal note, I’m a (slightly) obsessive reader…  and a (somewhat) frequent Amazon customer.  I just looked back at my records for 2007.  In one year, I placed 54 orders and spent $3,951.13 with Amazon on books alone!!  (Pretty scarry… OK, I might be a little more than a slightly obsessive reader.)  Be that as it may, across all of my transactions with them, the quality of Amazon’s service has been stellar and, in most cases, they’ve exceeded expectations on delivery times.

The author of the NY Times article goes on to quote Jeff Bezos, on why he’s so obsessed with the customer experience, “[customers] care about having the lowest prices, having vast selection, so they have choice, and getting the products to customers fast,” he said. “And the reason I’m so obsessed with these drivers of the customer experience is that I believe that the success we have had over the past 12 years has been driven exclusively by that customer experience. We are not great advertisers. So we start with customers, figure out what they want, and figure out how to get it to them.”

This level of focus has clearly paid off.  According to Forrester Research, 52 percent of people who shop online say they do their product research on Amazon.  Not only does the focus on flawless service keep customers coming back but as Jeff Bezos has always emphasized, if you do something great for one customer, they’ll tell 100 customers.

That’s what the author of the NY Times article did… and I’m happy to do the same.  Onward and upward!!!

Designing Experiences that Fit the Customers’ Mental Model

In a previous post (What is a Customer Experience Anyway?), I discussed the fact that a customer experience exists only in the mind of the customer.  We define a customer experience to be… how the customer reacts both rationally and emotionally… across their end-to-end process… of accomplishing one or more things that are important to them.

For years, we’ve been helping organizations enable their customers to have better experiences by designing what they do from “mental model of the customer” rather than the “mental model of the company.”  In virtually every case we’ve seen, these two perspectives are fundamentally different.  In fact, we’ve told our clients, “You’ve got to be out of your mind to design a great customer experience.”  We don’t mean going insane; we do mean that you need to set aside the internal, organizational mental model in favor of adopting the customers’ way of thinking.  In most cases, people inside the organization know too much about all the intricacies of what’s involved in producing the product or service.  This makes it very difficult to get their head around the customers’ often flawed, simplistic, irrational, and biased way of looking at how that product or service fits their needs and makes them feel.

If you agree that it’s a good thing to design from the “mental model of the customer,” the next logical question is, “What the #($*&# is a mental model?”  Over the past several years, my colleagues and I have been evolving a rigorous way to efficiently describe the customers’ mental model; a way that allows you to use that model in designs that influence the way customers’ experience what you do.

In order to accomplish this, we’ve been formalizing models that define a set of Customer Cognitive Personae that describe the way different types of customers experience things.  Generally there are several Personae that must be described based on the fundamentally different customer mental models that exist within the target customer population.  Each Personae is defined by a unique instance of four models:

  1. Customer Goal Model: What is the customers’ understanding of what they are trying to accomplish?  Very often the customers’ understanding of their goals are fuzzy and ill-defined.  Although these goals may include a desire for rationally considered benefits, very often the customer has strong latent goals that involve desired emotional states and a means of self-expression and social acceptability.  Customers’ do not buy products; they buy desired states!  Obviously, you can’t design effective products, services, or customer-facing processes that work for the customer without a clear understanding of the customers’ desired state.
  2. Customer Lifecycle Model: What is the end-to-end set of activities a customer would naturally follow to realize their goals and achieve the desired state described above?  As mentioned in a previous post (The Customer Experience Does Not Happen at Your Touchpoints), the customer does a lot outside their touchpoints with your organization.  Understanding what they do is the key to understanding where you might help them have a better experience.  Although this may include improvements in the existing touchpoints, more often, it involves the creation of new touchpoints.  It’s important to acknowledge that, in the real world, every customer follows a somewhat different set of activities.  However, we’ve found there are typically a small number of common customer lifecycles that capture the essence of the natural behaviors for that different types of customer.
  3. Cognitive Schema: As mentioned earlier, a customer’s experience is that customer’s rational and emotional reactions.  In order to understand these reactions, it’s necessary to understand the way customers’ brains process customers’ experiences.  Schemaare a way of doing that.  A schema is a knowledge structure used to describe an individual’s memories and beliefs about a category of experiences.  For example, customers’ schema for the experience they have in a casual dining restaurant allows them to have that experience without having to “figure it out” each time they go out to dinner.   Understanding the customers’ schema for that category of experience is critical for understanding how to design things that really work for the customer.   The knowledge captured in an individual’s schema allows that individual to:
    • Easily identify how current sensory information is similar to or different than what they’ve sensed in past experiences.  Identification knowledge supports a pattern matching process that helps customers recognize what is familiar or unusual about the situation.
    • Quickly elaborate or fill in additional knowledge of the essential characteristics of similar experiences in order to predict what will happen and interpret what does happen.  Elaboration knowledge is related to how an individual recalls past experiences and uses that information to make predictions about what will happen this time.  Elaboration includes the customers conscious and subconscious expectations.
    • Draw inferences, make estimates, create goals and plan one or more alternative actions.  The customers’ Planning Knowledge includes not only what the customer consciously believes is an appropriate set of actions but also includes the triggers for automatic behavioral scripts that make it efficient for customers to act in an experience while consciously attending to other matters.
    • Act utilizing learned skills, rules, procedures, or automatic behaviors that appear relevant to the current situation or problem.  Action Knowledge includes the routines that customers are comfortable following.  The most ergonomic experiences don’t require customers to act in ways that are uncomfortable for them.
  4. Temperamental Profile: On top of the cognitive structure described above, the customers’ subconscious emotional reactions take place in a biochemical environment that defines what experiences different types of customers will find compelling, engaging, and comfortable.   This profile builds on work done by Dr. C. Robert Cloninger, a psychiatrist at Washington University School of Medicine.   Different customer personae will react to experiences differently based on variations in neuromodulator processes that influence their emotional state.  The most effective experiences either match the temperament of the target customer or avoid stressing the customer by providing a “temperament neutral experience.”  A simplified explanation of each of these Temperamental Profiles is:
    • Novelty Seeking is the level to which the customer is both comfortable with, drawn to, and exhilarated by new experiences.  Novelty seeking is regulated by dopamine.  Novelty seeking customers appear to have low base levels of dopamine and, as a result, experience an increased sensitivity to dopamine releases.  This gives Novelty Seekers an enhanced euphoric rush from novel stimulation.
    • Harm Avoidance is the level to which customers desire to escape from unfamiliar, uncertain, or potentially unpleasant experiences.  Harm Avoidance is regulated by serotonin.  Harm Avoidant customers are more prone to the frequent release of serotonin when presented with uncertain or potentially threatening situations.  This frequent release of serotonin leads to a decrease in serotonin sensitivity and a resulting increase in cortisol which is associated with stress.
    • Reward Dependence is the level to which customers seek approval from others.  Reward Dependence is related to norepinephrine.   Reward Dependent customer are warm, dedicated, and dependent people that seek and are comfortable with experiences that involve social contact and communication.
    • Persistence is the level to which customers have behavioral inhibition (put it off) versus behavioral activation (just do it!).  Persistence appears to be connected with prolactin.  High persistance customers are eager to initiative experiences, tend to see roadblocks as personal challenges, and intensify their efforts in response to anticpated rewards.  Low persistence customers require deliberate removal of barriers to action and more subtle encouragement to engage in the experience.

The ability to rigorously describe the “mental model of the customer” has had a profound impact on designing products, services, interactions, etc… that fit with what customers are trying to accomplish; how they go about accomplishing those things; how they percieve, interpret, and evaluate what you do for them; what they feel comfortable with, stimulated by, etc…

For example, we are currently working with a leading healthcare organization to design an integrated patient-physician experience that is sensitive to the fact that people have fundamentally different mental models for their health and the consumption of health related services.  Some customers will be high novelty seeking naturalists; some will be low persistence avoiders; some will be more high harm avoidant active consumers, etc…   The experience that works for each of the personae involve different ways of communicating, prescribing courses of treatment, reinforcing behaviors like wellness programs, etc…

Another client that is aleading quick serve restaurant chain express a desire to “Disneyizing” their experience.  What they hadn’t taken into account in developing that vision is that the current customer experience could be described as:  low novelty seeking; moderately high harm avoidant; and high reward dependent.  Some of the ideas this company had for improving the experience were brilliant.  However, many of those “improvements” would have led to an unintended shift in the temperament of the overall experience; one that would have created tension for existing customers.

Well this post has gone on for a while and, as always, we’ve just scratched the surface.  I’m happy to provide more perspective to readers with an interest in more detail.  In addition, there will an opportunity to expand and illustrate several of these points in future posts.

What is an Experience Anyway?

There’s a lot of talk about “customer” experience today.  In previous posts, I’ve mentioned our working definition of the customers’ experience:  how the customer reacts both rationally and emotionally… across their end-to-end process… of achieving one or more goals that are important to them.   If you think about it from this customer-centric perspective, what actually makes it a “customer” experience?  It’s really just an experience a person has that, while in the course of trying to accomplish something, that person ends up in the role of “customer.”

The fact is, you can’t really understand “customer” experience without understanding the fundamental nature of “human” experience.  How do people experience things?  How does it work?  You have an experience just about every minute you’re awake (and arguably when you’re sleeping too).   You have experiences driving to work, talking with your colleagues, having lunch, going shopping, parenting, getting a cold, taking out the garbage, etc…  You get the picture; the list is endless.

How you experience anything is intimately connected with the way your mind works…. how your mental machinery perceives, interprets, and evaluates the situations you’re in… and how this process influences what you do.  You might say that every human being has about 4 pounds of experience (approximate weight of their central nervous system).

For years, we’ve been helping clients design customer experiences from the “mental model of the customer” rather than the “mental model of the company.”  In order to do this effectively, it’s critical to understand the capabilities, limitations, and idiosyncrasies of human perceptual, affective, and cognitive systems.   Without getting into too much technical detail, I’ll describe a couple of the key points that have had a profound impact on the effective design of outstanding “customer” experiences.

First, your brain is optimized to filter out more than 99% of the sensory information you are continuously exposed to.  This allows you to pay attention to a small number of the most important things.   Your hierarchical neural network is continuously and automatically comparing the flood of sensory information to what it predicts it will experience.  If that sensory information roughly matches what was expected, the information is dealt with subconsciously.  Often this subconscious process involves running automatic behavioral scripts.  For example, if you walk up to the front door of your house… key in hand… and the lock and door appear to behave as expected, you unlock the door and walk in without having to consciously “figure it out.”

If, on the other hand, the sensory information isn’t what was expected, it gets passed up the hierarchy for additional processing at the next level.  Eventually a small number of features of the current situation bubble up to the level of conscious processing.  If an element of the current situation catches you by surprise, it creates an “orienting response”… your attention is turned to it.  Research has shown that conscious processing is severely constrained based the limited capacity of short term memory.  Generally, a person can only consciously attend to seven (plus or minus two) pieces of information held in short term memory.

The most effective experiences are designed around: 1) the brain’s short-term memory limitation and 2) people’s ability to subconsciously run automatic behavioral scripts.   Whether you like it or not, customers filter out… or at least deal with subconsciously…  virtually all the details of every experience they have and only pay attention to a small number what appear to be the most salient things.

The trick is to deliberately design an experience that naturally maps to customers’ automatic behavioral scripts while reserving a very small number of salient differences; things we call the “Signature Elements” of the experience.  These signature elements are the small set of things that get the customers’ attention and are consistent with the brand story the experience is designed to tell.  For example, the Signature Elements of the Whole Foods experience include:  quality natural/organic products; artful food presentation; novelty-seeking assortment; educational product signage; mission for each department; extra mile in-store helpfulness.  These deliberately designed elements form the story that people tell themselves and others about their experience with Whole Foods.

Unfortunately, most companies do exactly the opposite.  They interrupt their customers’ automatic behavioral scripts.  For example: frequent changes to a travel company’s online storefront interrupts the automatic behavioral scripts of their frequent travelers;  or a bank that “greets” customers as they come in to the branch to make a deposit creating a valueless distraction from their customers’ “doing it on automatic pilot” activity and interrupting their train of thought on the six other things that were more of a priority.   In addition, if you’re going to do something different (get the customers’ attention; interrupt their train of thought; create an “orienting response”), you’d better make it good!  Most companies have a hard time being creative and focused on the small set of things that will actually make a difference to customers… and be consistent with a differentiated brand story.  So, as a result, the actual experience customers have with many companies can be summarized as varying degrees of being difficult to do business with.

Well, this post is going on too long and has just scratched the surface of something that is very important.  The key point is design the experience from the “mental model of the customer” not the “mental model of the company.”  This is the essence of Cognitive Ergonomics.  The next logical question is:  “What is a Mental Model?”  And, what does one look like.  I’ll discuss that in one of the next posts.

Cheers,  Frank

Characteristics of an Outstanding Customer Experience

A successful customer experience does more than please and engage customers.  It influences your best customers to do more and more profitable business with your company.  What makes for such an outstanding and influential experience?  We can describe its characteristics and results:

  • Deliver innovative solutions to customers’ problems.  Outstanding experiences leverage a deep understanding of what customers are trying to accomplish, the natural set of activities they follow, and how they think and react emotionally to what happens to them.  The best experiences find ways to solve problems the customer may not be able to articulate or even realize they have.
  • Earn and carefully protect the customers’ trust.  Flawlessly shaping your customers’ experience requires an understanding of both their explicit and implicit expectations.  For example, sales activities must be clearly oriented towards understanding and meeting more of the customers’ needs, not pressuring the customer to buy more than they are ready to or before they are ready to.  The “end of the quarter sales push” does a lot to undermine customer trust.
  • Activity eliminate perceived “violations of justice.”  This complements and extends the previous point.  Customers often have an intense emotional reaction to things that strike them as “just not fair.”  Very often these violations in justice look very different to the customer than they do to the company.  For example, many banks have changed the way they charge fees to include policies about posting checks from high to low.  This increases the likelihood that customers will bounce more checks, increasing the banks fee income while putting the bank in the tenuous position of increasing the portion of its profits derived from its most dissatisfied customers.
  • Go beyond what’s called for.  Outstanding experiences demonstrate the company’s commitment to the customer – and go out of the way to under-promise and over-deliver.  Ideally these are things that surprise the customer and show you uniquely value the relationship… rather than programmatic loyalty programs that quickly feel like an entitlement.
  • Balance value delivered with value captured.  It’s easy to create a good experience if you give the customers “three scoops for a penny.”  But it’s wasteful if you deliver more value than the customer can recognize or is willing to pay for.   Outstanding experiences maximize recognizable value for customers, rather than overserving on baseline or “table stakes” expectations.  They make explicit and effective tradeoffs to approach the “optimal economic” point of value realized by the customer and value captured by your company in the form of price and loyalty.  Outstanding customer experiences are win-win.
  • Engage the “whole person.”  Outstanding experiences address customers’ physical, intellectual, emotional, and spiritual needs.  They help customers clarify their goals and aspirations, visualize what’s possible, and understand and explore their options.
  • Build authentic relationships with customers’.  The key here is to treat customers as individuals.  Getting to know and treat your customers as individuals engenders close personal connections that require acknowledging the customers’ value and genuinely thank them for their business.
  • Tell a compelling story.  Outstanding experiences tell a story that is meaningful for the customer and helps them understand where you’re coming from, what you stand for, and what makes you special.  This is the real meaning of a brand – a consistent story that is told every time the customer interacts with you.   Every interaction with the customer becomes a branding event; differentiating you from your competitors.

I fully realize that these characteristics fall into the category of “says easy… does hard.”  Many of the future posts will discuss what we’ve learned from 25 years of helping companies deliver these kinds of experiences.  This includes the challenges of:  really understanding the customers’ priorities; getting aligned on the differentiated experience the organization intends to deliver; and most importantly, dealing with the fact that the customers’ experience is a product of organizational behavior… not brilliant insight or clever design.

Customer Experience Specification: I Got a Song it Ain’t Got No Melody… I’m Gonna Sing it to My Friends

I’m probably dating myself slightly… but, this (not so) old Billy Preston song could easily describe the way the customer experience is managed by most companies.  The experience customers have with most businesses is like a “song that ain’t got no melody” or, as the next verse goes, “a dance that ain’t got no steps.”  The customer experience is all over the place… some times it works… most times it doesn’t… usually it’s inconsistent and disjointed… essentially ad hoc.

One of the most critical elements of moving to a more repeatable, consistent, or designed experience is a Customer Experience Specification.  This Specification acts like a requirements document that clearly describes the experience the organization intends its customers to have.  A Customer Experience Specification is a powerful way to align the efforts of the many individual areas of the company that often contribute to the design and delivery of interactions that influence the customers’ experience.

Over the past 10 years, we’ve refined our approach to these Customer Experience Specifications.  After a lot of trial and error, we’ve settled into an approach that is highly customer-centric rather than company-centric.  The CE Spec considers three things:  1) What are the customers’ most critical situations… the moments of truth from the customers’ perspective?,  2) When the customer is in that situations, what outcomes do we consistently produce for the customer?, and 3)  How do we produce those outcomes in a way that influences the customers’ perceptions, interpretations, and evaluations of the experience they’ve had with our organization?

Getting aligned on the Customer Experience Specification is a pivotal element of any effort to gain control of or significantly redesign the customer experience.  This “requirements document” can be used to holistically design processes, roles, structure, metrics, technology, etc… to ensure that the organization can consistently deliver the specified experience.

This Customer Experience Specification also provides a way for moving beyond simple customer satisfaction measurement… “are customers’ happy with what we do?”  This Customer Experience Specification allows you to measure “are customers’ having the specific, differentiated experience we intend them to have?”

Across our research and advisory work with companies, we’ve observed that only about one in ten have clearly described the intended customer experience.  Without this critical first step, these companies end in a “dance that ain’t got no steps.”  I’ve seen too many dance floors to know that very few can pull off the… “gonna let the music move me around” strategy.