You Can Make a Business Case for Customer Experience

Working with business leaders who liked what they heard about the customer experience but still failed to embrace it, thought leader Colin Shaw recognized the need to give CxOs the rationale they needed to turn their businesses around. The result is his book, The DNA of the Customer Experience. Shaw discusses the book with CustomerThink founder Bob Thompson.

The transcript of the interview, conducted June 20, 2007, was edited for clarity.

Bob Thompson
I'd like to welcome to our Inside Scoop program Colin Shaw, the founder and CEO of Beyond Philosophy. Beyond Philosophy is considered one of the world's thought leaders in customer experience, which, of course, is a very, very hot topic today. We're going to mainly be talking about Colin's new book, The DNA of the Customer Experience: How Emotions Drive Value (Palgrave McMillan). It's the third in his series of books on customer experience. Colin, glad to have you.

Colin Shaw
Glad to be here, Bob.

Bob Thompson
Let's start by having you tell us a little bit about your current position in the firm. We know it's about customer experience, but how did you get into this line of work and what are you doing these days?

Colin Shaw
I got into the line of work because of an old boss. I was working for one of the world's largest telecoms companies and had just been appointed SVP of Customer Experience. He called me into his office and said, "Colin, I would like you to improve the customer experience and do it at least cost." Have you noticed how they always throw in the "least cost"? Ever since that day I have thought of little else. "How do you create a great customer experience—at least cost?" We did loads of stuff. Some worked really well. Some didn't. But the important part was I learned a great deal. Most importantly, I learned how to get things done and create a great experience.

Bob Thompson
How long ago was that?

Colin Shaw
It was about eight years ago. I did that for two or three years and then realized that the problem I was grappling with was common throughout the industry. I thought the focus of organizations wanting to improve their customer experience would grow and realized there was no one out there to help organizations think this through. I concluded that there was a remarkable opportunity to establish a company to help organizations improve their customer experience. So the next task was convincing my wife that it would be a good idea to leave my highly paid job and start Beyond Philosophy!

Bob Thompson
Tell us about your current business. Where are you doing these days?

Colin Shaw
Well, the good news is, it has been incredibly successful, and we have been growing rapidly as more and more companies want to know "how" to do this. Our main HQ is London, where I am based, and we opened an office in Atlanta, Georgia, in January of 2006, which is doing really well. We're working with many different organizations, from financial services, insurance companies, retail and technology—in fact, all over different parts of business and all over the world. As you said in your introduction, the whole area of the customer experience is hotting up!

Bob Thompson
Let's get into your book. I was intrigued, especially by the subtitle, How Emotions Drive Value. You have two others previously. The first was Building Great Customer Experiences. The next was, Revolutionize Your Customer Experience. And now, you're into the DNA of how emotions drive value. What's the inspiration to write this book?

Colin Shaw
I think the inspirations have actually come from our clients. The first two books, we're talking about the subject from a more holistic angle where the DNA of customer experience is looking at that detail. A key thing that is missed is that over 50 percent of a customer experience is about how a person feels; it is about emotions. Therefore, "What's the experience you're trying to deliver?" and, "What are the emotions you're trying to evoke?"

When we started to talk with our clients about the emotional side of the customer experience, we basically always had a challenge to prove how emotions drive value. Everybody would say, "Yes, we absolutely think you're right." However, those left-brained, analytical clients of ours wanted a more scientific approach. They would challenge us by saying, "Prove to me that this will improve my bottom line," which is absolutely a fair challenge. So as we aspire to "thought leadership," we decided to start research into this two years ago. We did this with London Business School, who acted as our mentors and checked everything we were doing was correct. We wanted to discover the emotions that drive and destroy value. When we're talking about value, we're talking about short-term spend and driving customer loyalty and, therefore, long-term spend. So the research with London Business School was around which emotions drive value and which emotions destroy value.

Customer experience

Bob Thompson
We'll come back to that topic in just a moment. But I want to back up for just a second here. Maybe this is belaboring the obvious, but in your view, what exactly is a customer experience, and why should business executives worry about it?

Colin Shaw
We define the customer experience as "an interaction between an organization and a customer. It's a blend of an organization's physical performance: the senses stimulated and the emotions evoked, each intuitively measured against customers' expectations across all elements of contact." That's our definition of what a customer experience is.

I could talk for the next four days on just what that means! Importantly it's an interaction; it doesn't necessarily mean it needs to be two human beings. It doesn't mean it needs to be over the phone or face to face.

Bob Thompson
So it could be through a web site, for example?

Colin Shaw
It could be through a web site. Absolutely.

Bob Thompson
Or an ATM or—

Colin Shaw
. Absolutely.

Bob Thompson
—any way that a customer interacts with a company.

Colin Shaw
It could be that you're looking out and you see a billboard with advertising on it. That's an interaction. And therefore, it's a holistic thing.

To your second point, why should businesses worry about it? Well, it's fairly simple, really. It is because everything in the world is becoming the same. There is mass commoditization across all markets. Once one organization launches a new product or service, another organization copies them; this is the time of innovation to imitation. With mass commoditization, that drives prices down. If prices reduce, unless you can increase your volume substantially, your profits reduce. If profits reduce, then shareholder value reduces. Therefore, the research we did for the book shows that some 95 percent of senior business leaders believe the customer experience is the next competitive battleground. We also all know, as consumers, that most customer experiences are, at best, boring and bland. Many are just poor.

That's not to say that you shouldn't be still looking at your prices, still looking at what we would call the physical aspects of the experience or the rational things like price, product and quality, but it absolutely means that you should be looking at how you can differentiate yourself on that experience.

Bob Thompson
It seems like companies are run kind of left-brained. It's very analytical: How can we make the most money? What's the right strategy? Not every company, obviously. But professionally managed companies are, by definition, left brain. And customers act more right brain. It's more about how they feel about the relationship. How do you bridge that gap to get business executives who are in this left-brain mentality to really put themselves in their customer's shoes and start to deal with the emotions, which I suspect might be a little uncomfortable sometimes?

Colin Shaw
Good question, Bob. I think in two ways: first of all, by actually talking to them about experiences that they have had and by "giving" them experiences. So some of the stuff we do is about education and educating those people on what this means. And we do that by a number of different methods of actually giving them experiences and getting them to "feel" things, and we have developed a number of training tools to do what we call "experiential learning." So they actually realize that it's about emotions. The second area is by the research we've just done. The research has been looking at that value. And why have we done that? Because what you actually need to do with left-brain people is talk to them real well in a left-brain way.

Bob Thompson
Right: use analysis to talk about the emotion.

Colin Shaw
Absolutely. To use a logical process and a scientific process is credible. The London Business School are hard task masters on checking our methodology was right.

Clusters of emotions

Bob Thompson
In your book, you describe these clusters of emotions. At a high level, could you describe the clusters that drive value, that positively affect value and destroy value? And how did this research with the London Business School help determine what these clusters should be?

Colin Shaw
I think the first thing that we did to get there is, basically, a lot of work with Prof. Jane Raymond, who's chair of experimental consumer psychology in the U.K., to try to identify what the emotions are. We went through a process of interviewing a number of people on both sides of the Atlantic and coming out with different customer experiences.

Figure 1

Once we collected this data, we engaged an author of two books on statistics Jeremy Miles, and we effectively said to Jeremy: From a statistical point of view, what does that tell us? This work revealed that there are four clusters of emotions that affect value. Three are the drivers, and one destroys value. We've called those clusters "destroying" clusters. So, basically, if you evoke the emotions into the destroying cluster, customers will leave you, and it will reduce your revenues.

Bob Thompson
Give us a quick example of what would be one emotion in this destroying cluster.

Colin Shaw
A typical emotion is frustration. So if you're causing your customers frustration—if your web site is slow; if you wait 20 minutes for them to answer the phone; if you don't do what you say you're going to do—all of those things will drive customers away from you and, therefore, will reduce your revenue.

Bob Thompson
So this cluster analysis was just a way of grouping different emotions? It tended to be seen in the same or similar situations? Is that the idea?

Colin Shaw
Yeah. The clusters of emotions were basically where they came out in a group. Maybe if I sort of explain it a bit further from here, then it gives you an idea. From the destroying cluster, the next cluster up from that is what we call the attention cluster. And those are emotions like feeling stimulated, feeling interested, feeling exploratory. That's the cluster of emotions that will drive short-term spend.

Now when you think about what organizations do, they want to attract customers. They want to gain the customers' attention, hence the name, "attention cluster." And, therefore, what organizations do is they will advertise things; they will try things for that stimulation, that interest people in that organization.

Bob Thompson
To change things up a lot.

Colin Shaw
Absolutely.

Bob Thompson
To keep things interesting.

Colin Shaw
Yeah, to keep you stimulated to go back to the web site, to go back to that organization.

Recommendation and advocacy

Bob Thompson
You wrote about some of these organizations. I think there was a retailer that was famous for changing things constantly and really trying to stimulate that cluster.

Colin Shaw
Yes. There's a retailer in the U.K. called Zara. One of the ways that they differentiate themselves is by constantly changing their range. It's not just once a season; it is 17 times a year, which, therefore, keeps people coming back to them to find out what the latest thing is, etc.

Once you've done that, then the next level up is what we call the recommendation cluster. And this is the first cluster of emotions that will drive loyalty. You can do all that stimulation and interest and everything else, so those will attract customers to you.

The challenge then becomes: How do you actually retain those customers?

Bob Thompson
Right. As long as you keep evoking these emotions, they will come back.

Colin Shaw
Yes.

Bob Thompson
But it doesn't go much deeper than that until you get to this next phase.

Colin Shaw
Correct. And it's in that next phase that the emotions in that cluster, in the recommendation cluster, are things like "valued," "cared for." Trust is another one. So if you start evoking those emotions with customers, then they will become more loyal to you.

Bob Thompson
What kind of a company would you suggest—brand name—that delivers this type of emotion?

Colin Shaw
I think one that I personally use a lot when coming over to the States is Virgin Atlantic; I'm a Gold Card member of Virgin Atlantic: frequent flier. I feel that they value me. They've invited me on sort of a country day out with my wife, Lorraine. I feel that they care for my needs, and I trust them. It's one of those organizations that, therefore, have got my loyalty.

The next stage up is what we call the advocacy cluster. The way that we try and differentiate this between recommendation and advocacy is that recommendation, for us, is if somebody says, "Could you tell us where there's a decent restaurant locally?" Then you would recommend somewhere. But that tends to be a more reactive thing. Advocacy, for us, is: You walk into work the next day and you go, "I really went to a great restaurant last night. It was here." In other words, you're being proactive. And in the advocacy cluster, there are only two emotions, which are, "happy" and "pleased."

And that only goes to show that those are really, really important because there are only two of them, basically, where the others have got five or six emotions in each. When you think about it—when you start looking at those clusters—it starts to make sense, in terms of where you start off.

You can extend that to the example I was giving earlier of Virgin. Whenever I fly with Virgin, I generally enjoy the flight. And they know when to come over and say something to you. They know when to leave you alone. They know you and greet you on the flight. They've got these places called "snooze zones." So if you're flying back from New York, it's an area where you can basically go and just go straight to sleep and they won't disturb you. And it makes you feel that you're happy with their overall service. It's just an overall good experience. Therefore, as I'm doing now, you speak highly of them. Incidentally, these clusters of emotions are shown to improve your Net Promoter Score if you are using that. So you can now lay plans to improve your NPS.

Bob Thompson
I have a couple of questions about the research. How do you determine what these emotions were? Is it as simple as just asking people or is there some other methodology?

Colin Shaw
We first started off by talking to Prof. Jane Raymond and coming at this from a psychological approach. You can well imagine that there are a number of emotions out there, hundreds of different emotions. So what we ended up having to do was to narrow those down.

We went through a process of doing many different interviews and then, gradually, narrowing those down into, I think it was, 50 emotions that were the most important ones, as defined by customers, the ones that drive and destroy value. We literally did interviews with people as they walked out of shops, as they used web sites, as they phoned into call centers and asked them questions about how they felt about that interaction—what they felt about the company—and asked them questions about spend and all those other wonderful things.

As I say, we got all that data together and then passed it over to the statistician—an independent statistician—to chunk all the information and come back to us with what it tells you. But to be honest with you, the interesting thing is—and I think life's like this—when you actually look at them, they make sense. It feels intuitively right. Therefore, it's not like there are ones that stick out like a sore thumb. It feels that they're intuitively right and connected, and, certainly, the feedback we've had from the book and with other clients, is: These are the right things.

Bob Thompson
The $64,000 question, of course, is, again, from a top management point of view: OK, fine, customers are having these feelings. That's all well and good. But why should I invest in improving the customer experience to generate more of these feelings? How is that actually going to connect to me, improving my business?

Emotional signature

Colin Shaw
That, I guess, forms the second part of what we talk about in the book because the other part of the discovery was that all organizations have what we call an "emotional signature." It's a bit like a graphic equalizer in that it depends on the setting of each of the 20 emotions that drive and destroy value as to the output of what your experience sounds like. Therefore, it may be that you are evoking feelings of frustration and disappointment and getting customers to feel stressed and hurried that it's making that sound not very good.

Bob Thompson
This signature, is it a function of process, of the kind of people you have and their style or what have you?

Colin Shaw
It's a good question. It's actually none of them. What it is how the customer feels about you as the organization. The reason that they feel that way could be for all of the things that you've just articulated. It could be for all of them. It could be for some of them. It could be for other things. But what this is looking at is how customers feel about you as an organization.

Bob Thompson
And the signature is what's in their, not in their mind, but their—

Colin Shaw
In their heart, basically.

Bob Thompson
—body, soul, heart. Yeah.

Colin Shaw
Yes. So it is looking at how they feel. When you turn around and say, "What do you think of Virgin?" or whoever it may be. Then it is: What are those feelings?

Now, tie into the second part of what you just talked about: How do you get to the value? Well, the first thing is understanding what that emotional signature is. The second thing is, then, understanding what's causing that. What is causing our customers to feel frustrated, disappointed, etc.? And also, thinking through: "Well, what could I do to evoke feelings of 'cared-for' or 'valued'?" And then, it's a question of looking at it so if you were to increase that—and this is where the scientific bit comes in—through various different algorithms that we've now got; if you were to decrease your levels of frustration and increase your levels of feeling cared for and feeling valued, for instance, then how much will that drive?

And what we can now do is, therefore, produce a number that comes out and says: "Well if you did that, then this is how much additional revenue your organization would gain." And there are four or five examples, case studies, in the book of the type of revenues that organizations would gain from doing that, hence, appealing to the left brain, basically.

Bob Thompson
There have been a lot of theories that have gone around the industry with CRM and other disciplines where the promise is: "If you do these things, you're going to have a more successful business." I'm just wondering, since this is a relatively new area of study: Is there evidence to show that the research is actually bearing out in the real world? That people make an investment, they make changes, they improve these emotional signatures and then they see: "Hey, our business actually did improve"?

Colin Shaw
Sure. And those are the figures that you will see in the book. And if you look in the destroying cluster, you'll see that there's a case study at the back of that for IBM in the book and a few other companies.

Bob Thompson
The last question I have is about how you really get started, kind of circling back to an earlier question about motivation. Where do the motivation—the real drive—and the resources come from for a company to really invest in a customer experience improvement project?

Colin Shaw
It's a good question, and I guess that's the $64,000 question because, invariably, it will start by somebody who is keen and understands this stuff. But the issue is: How do they get the organization motivated? How do they get the budget, the resources and everything else to change things? This brings you full circle to the book because you either get CEOs who will turn around—and these are in the minority, I hasten to add—and go, "No, this is absolutely the right thing to be doing; therefore, I will agree, within reason, to fund it, resource it because I intuitively know that this is the right thing to be doing."

The other way is you have to roll up a business case. And, hence, the reason for the new book, basically, which is to try to provide some science around coming up with those numbers, so you can, then, start to produce the business case that says: If we were to do this; if we were to improve our levels of customers' feeling valued and cared for and happy and reduce the destroying cluster, then we would generate this amount of additional revenue against the cost of making those changes, and therefore, we make a profit off of it. So you have to look at what those organizations are like, and you have to talk in terms that the people in power will make decisions.

Bob Thompson
You've been in this field for some five years now. In your experience, is it always the CEO, or is it other executives in other parts of the organization that have taken this leadership role?

Colin Shaw
Various different executives, in various different parts of the organization. Typically, the type of people that we deal with would be VPs, SVPs of marketing, customer service, customer experience departments—if they've got them—even HR; typically from customer-facing divisions and in those areas of marketing, customer service, etc. But also the CEOs. And a lot of organizations now are starting to create projects across cross-functional groups to pull all these things together.

Bob Thompson
It sounds like it's kind of all over the map.

Colin Shaw
I wish it wasn't, to a certain extent, because then we would know where to target ourselves.

Bob Thompson
Yeah. I do agree. I think that the book is going to add some science for all of us left-brained people. It's nice to see that you've done a thoughtful job of making this connection that I think people intuitively agree about the emotions. Yeah, it's important, but when you can bring it together and show how it's connected to business results, I think that's very powerful.

Do you have any quick thoughts or tips for success if somebody is interested in improving the customer experience, based on your experience in the last few years?

Colin Shaw
The customer experience is a big subject. Certainly, we find that the first thing that you've got to do is you've got to get people to understand it. Just because you understand it, it doesn't mean everybody else does. And therefore, spending some time getting people to "get it," as we call it—understand what we're actually talking about—is the first step and is a critical step if you're to gain support throughout the organization.

I think the second thing to realize is that this is a journey. It is not a destination. This is not something that you're just going to do overnight. It's a long haul. What you're looking at doing is changing the whole of your organization to make them more customer-centric. I had a client the other day who said to me, "This year is going to be the year of the customer." And I said, "That's really interesting. So what was last year? And what's the next year going to be?"

Bob Thompson
I'm sure they're going to be glad to hear that.

Colin Shaw
Absolutely. So if you work for an organization like that, you either need to change them, or leave!

Bob Thompson
Colin, thank you very much. Congratulations on bringing out this book. It's excellent, and I encourage readers to pick up a copy at their favorite bookstore. Thank you very much for sharing your thoughts with us today.

Colin Shaw
Not at all. Good to be talking to you, Bob.

Colin Shaw founder of Beyond Philosophy, the leading experts in the customer experience, is an international author of three best-selling books on customer experience. Beyond Philosophy provides consultancy, training and customer insight research from its offices in London, England, and Atlanta, Georgia in the United States. Visit Shaw's blog at ExperienceClinic.com.