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.

Customer Experience and the “Element of Surprise”

How do you get your customers to talk about the experiences they’ve had with you?   Over the past week, I’ve had a few conversations with executives about improving their organization’s Net Promoter Score (NPS).  While there are certainly differences of opinion on the importance of NPS as a central metric for an organization’s performance with customers (see Randy Brandt’s Core Customer Metric blog), it goes without saying that…. customers telling other prospective customers great things about your business is…  well… a great thing.  Each of the people I spoke with have invested a considerable amount of money making incremental improvements in their products and services and are frustrated by their inability to move their NPS.

What motivates people to proactively tell stories about their customer experiences?  What is it about an experience that makes it a story worth telling?  What are the social and psychological benefits of telling these stories?  Telling stories is one of the ways that we connect with and relate to each other.   It’s a way that we blow off steam when we’ve had something frustrating happen to us.  It’s also a way that we re-live the positive experiences we’ve had… or even a compelling way to share a story about “the next cool thing” we’ve found.

One of the most important drivers of both positive and negative word of mouth is the element of surprise.  This can be a single big surprise or a steady stream of small surprises that build over time.  If you have an experience that surprises you in some way, it creates an orienting response… you pay attention to it.  It might be something small, like a salesperson that is friendlier than expected.   Or something more significant, like Delta Airlines knowing it was my birthday and giving me a bottle of Champagne as an unexpected surprise.  This happened 8 years ago and I still talk about it.   The same thing happens with negative surprises.  We’ve all had them… and we’ve all told lots of people about them.

Some industries, like the airline industry, seem to be highly skewed towards lots of negative surprises.  Delays, cancellations, change fees, lost luggage, inconsistent service from gate agents and flight attendants, etc…   On the positive side, every once and a while a flight attendant or gate agent might be surprisingly pleasant or helpful, or you might get an unexpected upgrade, or something like that.  However, it’s difficult to have these small, infrequent positives ever outweigh the big, relatively consistent, negatives.   Other industries, like consumer banking, seem to be devoid of positive surprises with a smattering of negative surprises like late fees, transaction charges, etc…

Psychologist John Gottman has done some very interesting research on “Why Marriages Succeed or Fail” that seems like it might apply to other long-term relationships.   Based on his analysis of 700 relationships, Gottman found that a central predictor in the success and failure of these relationships was the balance of positive and negative interactions.   These were the interactions where there was something surprising, however small.  These could be small expressions of love, humor, and small recognitions, as well as, negative surprises like sarcasm, annoyance, sniping, or complaints.  He found that there is magic ratio of 5 positive surprises to every 1 negative surprise.  If the positive-to-negative ratio dipped below 5 to 1, the relationship began to spiral downwards.  If the ratio of positive-to-negative surprise ratio rose above 5 to 1, the relationship became stronger.

I would suggest that a similar logic applies to customer relationships.  If you want to build higher levels of customer loyalty and get to the point that customers start generating positive word of mouth, I think creating a drumbeat of small positive surprises is important.  There are always going to be times when the customer has a negative surprise but having a balance of positive surprises should offset this.  I would also suggest that these positive surprises can’t be programmatic and predictable, otherwise they’re not surprises.  They also can’t be delivered in a way that becomes perceived by the customer as an entitlement.  This is how structured “loyalty programs” lose their effect over time.

Most of the design work that we do with our clients is focused on creating a concise set of “signature experience” elements that:  get the customers attention, reinforce the brand story, and are perceived by customers as a difference in kind (surprisingly different) rather than a difference in degree (better sameness).  

So, what’s the balance of positive to negative surprises you deliver to your customers?