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Archive for September, 2009

The Experience Portfolio: Thinking about Customer Experience Strategy

Posted by Bob Warfield on September 12, 2009

Recently I was talking with Paul Greenberg and he presented me with a particularly elegant concept that he called the “Experience Portfolio.”  He was talking about the collection of factors that influence the overall customer reaction to the transaction they’re consumating with a vendor.  The Experience Portfolio consists of products, services, experiences and tools.  He talks about the balance between these components in a recent blog post and asks some interesting questions:

How do you think about this when you are developing your Social CRM strategy?

Do you break out the likely effect of the products, services, experiences and tools on the overall experience?

Do you weigh the likely impact of each “functional area” and look at how the ordinary is going to affect the overall experience.

Paul didn’t use the “Portfolio” concept in the post, which was a shame, because I found it to be very evocative of the kinds of tradeoffs that have to be made to optimize a strategy for balancing the components.   Investment portfolios are designed to play off different investments to maximize the returns while minimizing the risks.  Each investment is chosen not only for its strengths, but for its ability to offset the weaknesses of some of the other investments.  Investments must be chosen wisely, because there is not infinite capital to allocate among the various choices.  Putting too much capital in one place may work well for a time but ultimately fail spectacularly.  This concept of the need to balance and allocate scarce resources to produce an optimal outcome comes up over and over again in business, so it should be no surprise that we have to deal with it in terms of our CRM strategies, Social or otherwise.

Let’s look again at the components of our Experience Portfolio.  Think of each one as a place a business can invest in to maximize the likelihood of Customer Satisfaction (or whatever you’re trying to maximize for your customers):

Products:   What you are literally selling.  Zappo’s sells shoes, the hotels in Paul’s blog post sell rooms, and McDonald’s sells hamburgers.  Service companies sell Services, BTW, and we should not confuse their “Service Product” with the ancillary Services in our second category.

Services:  Something else that comes along in addition to the Product that the vendor made happen using People.  Zappo’s is legendary for the Service that comes with their Shoe Products.  The Ritz Carlton adds Service to their Room Product.  A public accounting firm may make a practice of hiring accountants that are especially personable or perhaps more likely to resonate with a particular demographic as an illustration of Services on top of a “Service Product”.

Experiences:   Experiences are the most intangible.   Paul’s examples involve Hotels that have gone out of their way to convey a hip atmosphere.  Clearly Apple conveys an Experience, and not just Products with Services.  So does Starbucks.  Many companies offer little or no Experience.  Think of the most generic possible retail products and outlets.

Tools:  Software and other tools used to help optimize, shape, or deliver the other three components.

To get back to Paul’s three questions, let me briefly answer and then expand.

1.  You have to think about the Experience Portfolio when defining your Social CRM strategy, or any other CRM strategy for that matter.  It has to inform how you think about your product, your brand, who you are selling to, and how you go about servicing, marketing, and selling.

2.  You should be making conscious strategy decisions about each one of the four Experience Portfolio components.  Otherwise you won’t have optimized you portfolio except by accident.

3.  You have to weigh the impact of each component in making your decisions, and you should understand how to measure that impact in practice as well in or to determine whether the strategies and weightings you’ve chosen are working.

How should we go about using the Experience Portfolio to help inform our decisions?   A full explanation would make for a nice Business Book and this is just a blog post, so let me borrow from Paul’s Hotel examples and from my earlier musings about Michael Porter’s Competitive Strategies.   Let’s use 3 hotels as our examples.   Each hotel has decided to optimize for one of Porter’s 3 successful competitive strategies.   One, Motel 6, will compete on price.  Another, the Ritz Carlton, will position itself as the very best hotel “product” that is available anywhere.  The last, and I think I’ll use Paul’s Allegro hotel since he liked it.  The Allegro is using the Porter strategy of positioning for a particular niche or demographic, in this case it is people who have an acute aesthetic sense and desire to be hip.

Now let’s go through the experience portfolio:


–  Motel 6 has to deliver the absolute cheapest product bar none.  It is entirely focused on good enough not to be a total turn off, but no better.  Spending any more means not being able to pass on the savings to the customer.

–  The Ritz Carlton needs the best possible rooms.  It can’t afford to cut corners on the rooms at all.  The bed, the bathroom, the storage, comfortable seating, and every other aspect of the “Room Product” have to be the best that there is.

–  The Allegro needs to offer a room that is good enough for their niche audience, but no better.  Moreover, if there are aspects of the room that are relevant to that niche, they should be dramatically better even than the Ritz Carlton.  In this case, you get the très chic decor, but the room itself is pretty small.  Paul’s other experience, at the Hudson, made the room so small that they went below “good enough for the niche audience” and created a problem.  They didn’t balance their portfolio properly and underspent on the Product.


–  Motel 6 will be good enough on Services as well.  The rooms have to be clean, and check-in and check-out needs to be quick and easy.  That’s it.  No concierge.  The service help concentrates on being invisible.

–  The Ritz views Service as an essential part of the product, which is often the case if you’re going to deliver the Best of the Best.  As such, this is a huge focus for them.  They go to elaborate lengths.  Even the people who are just there to clean the rooms are selected for the friendly outgoing personalities.  Everyone you see greets you.  The hotel will go out of its way to do anything you ask, and they’ll spend time thinking of new things to offer before you ask.

–  The Allegro should be focusing on the service levels their niche expects, but without standing out.  They should be thinking of Services that may be uniquely attractive to their demographic.  Since all the decor is very contemporary, let’s assume for example they might benefit from the very best in-room Internet capabilities.  Perhaps you should have Social Media access to their staff rather than having to call.  Perhaps your reservation gets you a personalized web page “concierge” that let’s you get access to all the kinds of things this niche would care about.


–  Motel 6:  Free coffee and danish is a big deal if you’re at a really nice cheap hotel.  Maybe a pool.

–  Ritz Carlton:  From the Old Wealth ambience to the High Tea (if you like tea, you’ll like the Ritz’s) to the locations chosen for Ritz Carlton hotels, you will not be disappointed.

–  The Allegro:  Sounded like they had their experience dialed in perfectly to appeal to their niche.


–  Motel 6:  The purpose of any Tool is to let them deliver rooms cheaper.  Self-service on the web would be one example.

–  Ritz Carlton:  Has to be very careful that Tools are not percieved as cheapening the experience.  The Ritz would use tools behind the scenes to ensure the quality of the experience and to enable their people to deliver a better experience than they could without tools.  They would be unlikely to ever force a customer to use these Tools unless customers specifically wanted to do so, but for those customers that want access they would ensure the experience with the Tools was the best possible. 

–  The Allegro:  Good enough not to disappoint their niche, but perhaps quite innovative where that would appeal to the niche.  With a contemporary motif, there is a lot of opportunity to do interesting differentiation with the tools.


This approach to allocating scarce resources to the Experience Portfolio is pretty compatible with the comments I saw on Paul’s post:

Natalie got into an ugly situation with the Westin because someone there pulled a clever marketing trick to appeal to demographics that wanted a bike with their room, but failed to follow through on the Experience Portfolio.  The bike was a tactic, not a conscious strategy, and wound up making things worse for them.  She was absolutely right to be annoyed about it.

I take Mitch Leiberman’s post to be that at some point, you may have maxed out the Experience Portfolio along one dimension without creating a differentiated offering.   When that happens, try reducing the investment on one of the dimensions and refocusing it elsewhere to create a more optimal overall experience.  Classified ads are the same every you look.  Giving more font control or some such wasn’t really going to be worth the effort, so Craigslist broke the mold by investing in other portfolio categories than the “Product” specifically.

Wim does an excellent job of taking the tactical (just seek “engagement” for engagement’s sake) and casting it into a strategic frame:  Either gain insight through feedback or create a more personalized experience using engagement.  The nature of the personalization should be informed by your overall strategy for differentiating for your customers.

Esteban recognizes that customers make choices that are influenced by context, intent, expectations, and the subsconscious.   Have you taken care with your Experience Portfolio investments to properly align those inputs (context, intent, etc.) so that what your customers perceive when forming their impression of you are what you want them to percieve?  If not, you’d better hurry to achieve that alignment.

Posted in customer service, Web 2.0 | 2 Comments »

The Customer, as Social CRM, is the Fourth Pillar of CRM

Posted by Bob Warfield on September 9, 2009

A collection of excellent blog posts from the Social CRM community are converging on what I think is the real secret of what Social CRM is all about. 

There has been much talk about the “Pillars of CRM”.  Traditionally we have Marketing, Sales, and Customer Service as the three pillars of CRM.  Clearly the world has changed.  I talk at some length about how in the first of a series of blog posts we’ve taken to calling Helpstream’s “Social CRM Manifesto“.  Give that article a read for a good introduction to how the Customer has come to be in Control, a development which impacts every aspect of how companies deal with Customer Relationship Management.  We’ll be publishing the Manifesto as a series that all hangs together and tells the story of Social CRM, at least the way we see it at Helpstream.

Getting back to the excellent series of posts, the first one I read was by Esteban Kolsky and has the wonderful Hawking-esque title, “A Brief History of CRM.”  He’s pushing the idea that Feedback is the Fourth Pillar.  For me, making Feedback that Fourth Pillar is close, but no cigar.  CRM as its practices today is at heart a command and control system, and Feedback as a role for the customer fits into that World View perfectly (it should, Esteban knows one heck of a lot about CRM!).  My problem is that it is way too passive a description of the role the Customer will play in our brave new world, and some of the comments on the post are also uncomfortable for that reason.  We will no doubt define Feedback in a way that seems more active, but it just doesn’t do it for me.  Make no mistake about it, the Customer is in Control.  Ignore at your own peril.  This is why I am so fond of using Paul Greenberg’s short definition of Social CRM which is that it is what companies do when the customer is in control of the conversation.  That’s why I say the Customer themselves are that Fourth Pillar.  They now have a seat at your table, more on that in a moment.

Esteban and I have been trading Tweets on whether Social CRM is really a new paradigm that changes everything, or whether it is more like a new channel or refinement to CRM.  This of course is an argument that erupts at the beginning of every paradigm shift.  It is uncomfortable when things don’t fit the old model and the established priesthood wants to make things fit.  Ultimately, this is semantics.  When the Social CRM revolution is over, it will be part of CRM.  We don’t need to rebuild the whole wheel.  But for the time being, it is productive to consider the two separately.  Make no mistake: Social CRM is not about replacing CRM at all.  It is productive to insist that Social CRM be integrated with CRM, but not to view it as a subset or adjunct fifth wheel to CRM.  The reason is that any subset or adjunct might be viewed as optional.  It might be viewed that CRM will inform the adjunct what to do and how to operate, not vice versa.  Neither one is true, and the fundamental changes the web has wrought in the power of the customer make that clear.  That’s why I keep harping on it as paradigm shift.  Social CRM will change CRM much more than CRM will shape Social CRM.  When that change is complete, that will be the time to put away the banners and place Social CRM strictly under the CRM banner.  Until then, we have a lot of work to do to get organizations to understand the transformative power that Social CRM makes available.

The next great article I came across this morning was Enabling Social CRM is a Convergence of E2.0 and CRM.  This one really expands on the idea that the Customer needs to become an integral part of the Enterprise.  That’s my Customer-as-Fourth-Pillar idea in a nutshell, and is captured with this great quote:

Should it be such a leap to suggest that in order to truly engage the customer, we should invite them into our Enterprise?

Amen!  Now that is what engagement is all about.  That makes sense to me.  The best practitioners of the CRM art actually understood this before Social CRM came along, but so few actually did anything about it, that I continue to rebel against just viewing Social CRM as “more of the same.”  There are profoundly different ways to think about it.  In this case, Esteban himself is eloquent in a comment on this post (that’s why I know our argument is just semantics and he really does “get it”):

And the biggest shift we are seeing is not on technology, people (enterprise), or process – it is in the society and the customer.  The customer model we used for the past 2,000 years or so is no longer the norm.  We can setup any technology (easy, really) to support any processes we want, and train our people to do things in many different ways. But in doing all that we are not really looking at the source of all this change — the customer.

Absolutely positively 100% true, true, true.  And that last part about it not being just process is where you just have to feel Social CRM in your bones.  You either want to engage with your customers, giving them a seat at your management table as your real Fourth Pillar, or you don’t. 

If you don’t, you’re going to apply the old CRM ways and view the new Social as just a set of tools or a new channel to tack on.  This is not so bad.  I read a great story that describes exactly that model this morning too.  It describes a case where someone got terrible customer service, Tweeted about it, and suddenly they got excellent service.  What’s wrong with that picture?  Why did I have to Tweet in the first place?  Why did the company in question place me in a position of having to tell an unhappy story through the powerful megaphone that is Social Media?   Yes, the story ended well for the Tweeter, but in the end, a bad story got told.  In fact it got told not just in the Tweet but in the blog post.  It’s clearly better than a pure-CRM model, but viewing Social CRM as an “escalation mode” where you do what it takes to satisfy the screamers is just not the way to approach Social CRM.

Enough said.  The best news is that we live in a world where Social CRM is rapidly moving more and more mainstream.  The Social CRM conversation is refining and distilling it all down very quickly.  The players in the CRM market are making acquisitions and partnerships (we partner with Salesforce and Oracle, for example) and realizing that Social CRM is not optional.

Posted in customer service, Web 2.0 | 8 Comments »

What do Customers Want, and How Can Social Media Help?

Posted by Bob Warfield on September 3, 2009

The Twitter #scrm group is a wonderful place to pick up new threads around the whole Social CRM movement.  But as I’ve remarked before, it is so tough to wring a conversation out of Twitter’s fabric (this is a problem for Twitter, not those valiantly trying to have the conversation), that I generally watch without trying to join in. 

Recently, there has been a great back and forth on customer loyalty.  Does it exist anymore?  Don’t people just buy on price?  Can Social Media affect loyalty?

What had been troubling me about the discussion was its fairly one dimensional nature.  Loyalty either existed or it didn’t.  Blogger Glen Ross put it into a better context for me, by writing about customers that are loyal, versus customers that will always buy the cheapest offering no matter what the service levels are.  Exactly!

I was immediately reminded of one of my all time favorite business books, Michael Porter’s classic on Competitive Strategy.  If you’ve never read the book, you should, because it crystalizes competitive strategy in an extremely powerful way.  In this case, Porter says there are three ways that companies can compete:

–  On price

–  By having the best product

–  By focusing on a particular underserved market segment

Porter is at great pains in the book to point out that businesses have to pick just one of these focuses, and that they cannot afford to try to straddle the fence.  Resources are scarce and all the wood must go behind the winning arrow to succeed lest some competitor do a better job appealing.

If we turn that around to the customer’s perspective, and ask ourselves how it applies to customer service and how Social Media can help, it makes total sense.  These three competitive positions reflect 3 broad categories customers fall into.  They buy for value, quality, or because they are part of some special needs market that isn’t seeing the love.  Companies that successfully tap into the right competitive strategy and focus are simply connecting with one of these broad customer types.

There is a continuum of service experiences companies can provide that range from just enough service to avoid destroying the brand to Four Seasons and Ritz Carlton level pampering. 

Companies on the first part of the continuum are all about the cost savings.  For them service is a necessary evil.  BTW, their customers are very likely the ones who only care about price and service is a necessary evil for them too.  That doesn’t mean bad service can win or survive for this segment, BTW.  It means that at best, service done well for the value segment is service that creates no negatives.  Investing to create positives for this audience probably does not have the same benefit as returning that investment as further cost savings.  Really bad service destroys the notion of value, which is paramount.  If I can’t get the value from the product because of bad service, then no matter how cheap it was, that product cost too much and I”m going to talk about by disatisfaction.  Ironically, the value sellers may have less room for bad service than the other two categories because they already refuse to invest much in service, having passed that investment along as savings.  Hence they have little margin for error.

At the other end of the spectrum, service is part of the customer experience.  It is part of the product you are buying because it is the best possible product.  You’re going to Zappo’s not only because they have the great shoes you want, but because their service makes the “product” of buying shoes that much better than your other shoe buying customer experiences.  I liked Denis Pombriant’s recent description of this kind of service:

Customer experience has come to mean a literal experience had by a customer with a vendor, product or service rather than a product or service cultivated — through value add — to be an experience.

One has a sense that the “literal experience” side is very much reactionary.  It’s all it really can be in the case of a value sale.  The process of delivering service is one of reacting to service needs of customers in as inexpensive a way as possible that avoids doing too much damage.  The other end of the spectrum, the Zappo’s/Ritz Carlton end, is the service that is “cultivated through value add” until it becomes something uniquely valuable itself.

The focused competitive strategy deals with the needs of an underserved market.  It is often a vertical market, rather than a broadly horizontal market.  Yes, the major motorcycle makers may all have off-road bikes, but there are makers dedicated strictly to the off-road market.  That’s all they do, and it is a passionate focus.  They can afford to do better than a maker that wants to cater to all.

Moving back to Social Media and Social CRM, we can see how to mesh up our strategies there with these competitive strategies:

The value player wants to provide service that minimizes the negatives enough that costs are conserved and can be passed on to the customer.  Spending any more than that means they have to raise prices to pay for better service.  Spending any less than that on service means they have to raise prices to pay for marketing, refunds, and whatever else is needed to repair the damage.  The customers are pretty tolerant.  They just need answers when they have a problem that they don’t have to work too hard to get (the link is a hilarious Customer Service story by Zoli Erdos, BTW).  Social CRM is extremely effective at lowering service delivery cost while getting the customer the information they need.

The “most differentiated product” player wants service to be a part of the differentiation.  Prompt, attentive, and friendly service that does the unexpected in the customer’s favor is the order of the day.  Social Media is again, very effective at delivering personalized service experiences.  It’s also effective at helping customers to get together with one another.  Being a part of the group is often something this segment desires, which is why Porsche, Ferrari, and similar marques have owner’s clubs and driver’s course and other “team” activities for their customers.  This is where brand is so important because often brand is not just the indicator of value (that’s thinking for the value segment), but is instead a signalling device that says, “I’m a member of this group.”  Hence that polo player looms as large on the breast of you shirt as the big gold Rolex does on your wrist.  These sorts of customers want to display their affinities, and what better place to do that than Socially on the web?  They will also want more access to your experts and perhaps even celebrities within the organization than you can provide except by means of the Social Web.

The focus category also fits very well.  After all, what underserved community wouldn’t like a special place just for them?  A place that engages in the way they want to think about your products and markets, and that only engages that way, instead of making their world a tab on the side of some larger world they’re not really interested in.

So then what is Loyalty in the context of each one of these categories?  It should be easy to see that the category will determine the nature of the loyalty to an extent.  Loyalty is a measure of the conviction the customer has that your product is a good fit for their mode of buying.  For Walmart, loyalty is a conviction that the best prices can be had in those stores.  That conviction means they tell others about the great purchases they made there.  Like other forms of loyalty, it is emotional, not rational.  Most value customers do not have total awareness of prices from every venue for every product.  They have to let their guard down once in a while, and they will do so wandering the halls of a place like Walmart because they’ve gotten enough deals in the past that they would like to believe all the deals around them are good deals (BTW, they’re not!).

For the differentiated product customer, Loyalty is a conviction that the product is the best.  They are willing to pay more for it as a result and will defend that decision to the death.  It’s always entertaining to watch a value enthusiast (Corvette) locked in a discussion with a differentiated product enthusiast (Ferrari).  The former will remark that their car goes just as fast and costs 1/4 as much, so only an idiot would spend that much on the Ferrari.  The latter will shake their head and somewhat look down their nose at the pooly informed value buyer who thinks they know the soul of an automobile by reading a few road tests in magazines.  They know in their bones that there is more to their Ferrari than the 0-60 times.

I could spell out the meaning of Loyalty for the focused niche customer, but you get the idea.  In each case Loyalty exists and can be accessed by an appropriate strategy.  In each case there is a price to be paid when the company lets their customers down on expectations.  Remember that the same person may be a value buyer for some things, a best product buyer for others, and a focused niche person on still others.  I recall trying to buy a Fax machine one time.  I could care less about a Fax machine, but we had to have one for my startup.  So I was a value buyer.  I had always kind of thought Fry’s was a value seller (they aren’t really, they’re an underserved market seller for Geeks) and I was terribly disappointed when I went next door to Staples (which is a value seller) and saw the same Fax for less money.  Fry’s was never the same for me after that.

Posted in business, customer service, Web 2.0 | 2 Comments »

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