Why Manufacturing Marketers Need to Focus On Customer Experience (CX)
Hi everyone! Thanks for joining us for another episode from The Kula Ring archives. Today, we’re excited to bring you a conversation with Augie Ray, Senior Research Analyst & Executive Advisor of Customer Experience at Gartner, Inc.
Why Manufacturing Marketers Need to Focus On Customer Experience (CX) Transcript:
Announcer: You’re listening to the Kula Ring, a podcast made for manufacturing marketers. Here are Carman Pirie and Jeff White.
Jeff White: Welcome to the Kula Ring. My name is Jeff White. Joining me today is Carman Pirie. Carman, we’ve got a really interesting guest, someone you’ve been following on Twitter for quite some time from what I understand.
Carman Pirie: Yeah. It’s always kind of interesting to be able to put a voice to the face as it were, or to the words that you’ve been following.
Jeff White: Yeah, for sure. Now I guess the bigger question, is he following you back?
Carman Pirie: You know, I’m not one to check those things. I couldn’t tell you within a thousand how many followers I have, but my guess is not. But who knows?
Jeff White: Maybe after this, maybe we can get there.
Carman Pirie: Yeah. Before we go live and publish this podcast, we need to try to convince him to follow me back so it won’t look so bad.
Jeff White: Joining us today is Augie Ray, the senior research analyst and executive advisor of customer experience at Gartner. Welcome Augie.
Augie Ray: Hello. And I have to admit I don’t know if I’m following you, but if not, we can correct that egregious mistake immediately.
Carman Pirie: Well, look, in your defense you probably have very little interest in hearing me rant on about local politics here in a remote part of Canada, which is some ways the heart and soul of my Twitter profile. I should probably be more business focused and engage with you on-
Augie Ray: It warms my heart to hear you say that, because anyone who chooses to follow me will get healthy doses of marketing and customer experience, wisdom and articles, but also healthy doses of politics, because I feel like I’ve been pulled into it, given the state of politics in the US, which will be the last we mention about that on this podcast.
Carman Pirie: I do think that may have been what drew me to you originally. And not the—
Augie Ray: I like you already.
Carman Pirie: So with all that said, let’s just leave the politics behind for the next 20 minutes or so and dive straight into customer experience. It’s been your work and obsession at Gartner for the last while. Talk to us a bit about your work. Introduce our listeners to it, if you will. And I’d be curious about its bent on manufacturers and to what extent you see in your work in customer experience are manufacturers maybe carving a different path or going a different way.
Augie Ray: Sure. So I came to customer experience, or CX, from the marketing and social media world. Over decades where I worked at agencies and I worked on the brand side. I ran social media for two Fortune 100 organizations. And one of the things that occurred to me increasingly was that at the end of the day it wasn’t necessarily what brands said that had greatest impact on people’s economic decisions. It was really what brands did.
Now obviously what they say is part of what they do, so I’m not throwing the baby out with the bathwater. But in a world that we all sort of recognize the challenges of understanding what our clients want and need and being able to provide the right message in the right channel at the right time with the rise of social media and the growing power that people have to influence decisions with each other.
With the rise of things like voice technologies, which takes a screen away and arguably makes advertising a little more difficult. It’s not like we want to walk into a room and hear our Alexa start blasting advertising at us. With the rise of ad blocking, there seems to be an opportunity to begin to talk to marketers about what they can do not just to focus on those outbound sorts of communications but to really think about what builds brands and how powerful experiences are. And the role of marketing in understanding not just the marketing funnel, but what happens afterwards to really drive customer satisfaction, loyalty, and advocacy.
So that brought me to this focus and passion, as you say, in customer experience. And so what I try to do is help our clients at Gartner to understand why CX is important for marketing. Why focusing on customer experience is important and the way it actually delivers to business results.
Carman Pirie: So you envision a future world where we’re putting more emphasis, more focus, more attention on customer experience. What does that change look like for the CMO of a manufacturer in Chicago next week?
Augie Ray: We have some interesting data that we have gathered in our research of marketing leaders. And one of the things that I find alarming is that in brands that don’t take customer experiences seriously, where they don’t necessarily see CX as being a primary or only way of competing in the future, our data demonstrates that the CMO will typically be responsible for CX in the organization. But interestingly, in organizations that begin to take CX more seriously, where they do see CX as being a primary, even maybe a sole way of competing in the future, oftentimes what happens is marketing loses responsibility for the CX program. And we think that that’s a mistake.
It’s a mistake for the CMO not to take it more seriously and we see a lot of organizations not getting CX right. And we think it’s maybe a mistake for the brand, because at the end of the day I got back to the old definition of marketing, the four Ps of marketing, which was all the things that a brand needs to do. Promotion is only one of those Ps. And so we think of a more expansive view of CX.
What does that entail? It means defining CX right. It means changing your marketing metrics to not just focus on the marketing funnels, things like awareness and inbound traffic conversion and sales, but also what happens after acquisition. Are we satisfying customers? Are we retaining them? Are they spending more? Are we lifting their lifetime value? Are they participating in advocacy behaviors? Are they referring more business? And so you begin to expand the view of what marketing needs to measure and how it needs to task itself. That’s, broadly speaking, the way we will talk to our clients about this and what it means to marketing.
Practically, what it means, we start with metrics. A lot of marketing organizations don’t think that they are responsible for or need to be held accountable for things like customer satisfaction. Sometimes even retention isn’t necessarily the responsibility of the marketing program. Advocacy may be a goal but often isn’t a hard measurement. And so simply starting by making sure that you bring some balance. The way we like to think about it and talk to our clients is not just the concurrent or lagging measures of financial success. Things like how much traffic did we generate? What was our conversion rate? What were our sales last quarter?
But what are the leading indicators of brand success in the future. How satisfied are customers? What are the retention measures? What are the advocacy measures that you can put in place? Now manufacturers often have difficulty with this. It’s not like they own the entire journey. And so there can be some challenges.
And we try to help. At Gartner our clients do overcome some of those challenges to look for new collaborative opportunities to work with their sales channels or to think about the role of surveys and direct customer feedback in understanding not just what’s driving satisfaction and dissatisfaction but also how it impacts intended stated behaviors for the future. Things like likelihood to repurchase, likelihood to recommend, those sorts of things.
So it starts at the beginning with just looking at your goals and your measures. If you don’t change your goals, you don’t change behaviors. And it’s a good place to start if what you wanna do is begin to expand out of the marketing funnel and think in a broad way about the end to end journey and what really drives retention and growth for an organization.
Carman Pirie: How would you respond to a marketer staring down the barrel of launching a new digital strategy next month and they know that their business has a typical sales cycle of about two years? So they’re going to be a while before they can truly know if what they’re doing is generating those new customers let alone have an impact on the measures you just mentioned.
Augie Ray: Well, you know, there’s a challenge there. Because some of the early signals that you might focus on don’t always necessarily lead to the later success that you want. One of the challenges, this is a challenge for all marketers, not just manufacturers, but if you focus only on what drives clicks, often you lose what is really important in the longer term.
Very simple example. I actually worked with a group of business product manufacturers at one point. They had an organization, an industry organization, and they had a digital strategy to have a website that would appeal to consumers, to sort of generate some interest in business products. Generate some awareness and drive some traffic to their individual sites.
One of their strategies that they had launched before coming to the agency that I worked with was to buy the keyword “free.” Every month they would have a drawing. They would give away some business products. All the manufacturers who were part of this organization would donate the business products and they were developing a great deal of traffic. Great deal of clicks. Great search awareness. Lots of participation in the giveaway.
And one of the first things that our organization did, our agency when we started working with them, was to begin to evaluate were those people becoming customers. Pretty simple idea here. We’ve paid for them. We’ve paid for the traffic. They’ve participated. We have their data. In order to be part of the drawing we knew email addresses, so we had some PIIs, some personally identifiable information. And we found literally almost zero relationship between the participation in the free giveaway and actual customer behavior. So we recommended that they shift away from this rather expensive strategy of buying the keyword free, as you might imagine, pretty expensive.
The end of the story, I’ll just tell you, is that they didn’t want to do it. They had so convinced their leaders that they should focus on traffic. Look at the traffic our website is generating. Look at the volume of data we’re getting. That they weren’t sure that they could convince their leaders to begin to focus on, and this is sort of the point of this story and this topic, to focus on what matters. Not just that first click. Not just participation in a giveaway, but ultimately are they converting those people into clients.
I think the really important thing to do here is to understand that all of the first things that you see in any relationship that takes two years to develop are means to an end and not the end. What we need to do is use our data to understand what are the first things that people do early in that marketing funnel that will lead them to, in fact, begin to have that relationship and to convert. Oftentimes, what we find is it’s not some of the simple and easy things to measure but some of the more complex things to measure. What we often begin to see is then you have to focus on a different way of driving traffic or a different way of measuring things.
One of the things we’ll help our clients with, and I’ll just give you a minute on this and then pause and see if this is helpful, but from the customer experience perspective, one of the things you want to begin to do is to understand if your more satisfied customers are driving more business. Then if you can make that case, then you can begin to look at what are the factors that drive satisfaction and how do we invest in that.
And even if you can’t measure an immediate conversion, you know that you are doing the things that will lead to people having an affinity for your brand, that will ultimately begin to build the results you want. And that’s that difference between that short-term focus that we talked about earlier on the call and the leading indicators of success. And so using your data to understand what drives that relationship becomes really important, so you don’t measure the wrong things in the short run.
Jeff White: You can’t see our faces here, because of course we’re in another country, but when you said that you had a customer that was buying the word “free” …
Carman Pirie: Which is not free.
Jeff White: No, not even close. We both turned ashen white and were very concerned. My palms are still sweaty. I think that that really hits on the head of this, certainly as social media has risen and the power in the vanity metrics of buying essentially friends or likes through a contest or whatever that result in absolutely no real business return, hopefully a lot of people are getting past that. But it certainly was a much bigger thing initially.
Carman Pirie: It’s easier to measure. And that was the initial draw and sometimes just because it’s easy to measure doesn’t mean it should be measured. And in some ways that extends to those goals that you were referencing that our marketers are carrying with them. The KPIs that are guiding their work. When you start talking about adding in marketers being responsible for customer satisfaction scores, et cetera, it goes away from the corporate desire to have the one throat to choke, as an example. Because now all of a sudden it’s not marketing. So now we have shared metrics and shared responsibilities for achieving them and it’s more difficult to diagnose.
Augie Ray: Well, CX is inherently a collaborative effort. And that’s one of the things that we have to really begin to understand. Again, I don’t mean to be a broken record, but I think it’s important to remember that colleges still teach, and they should, the four Ps of marketing. It’s product, place, price and promotion. And yet so many of the marketing clients that we work with are responsible only for promotion. They might not be responsible for distribution, the place. They may not necessarily set the price. And they may have a product team that is responsible for developing the product.
And so in many cases I think of, if I can get on my soapbox for just a minute here, I think of the fact that marketing in the mass media era narrowed their focus to one of their four Ps, promotion. Because in the mass media era, there were few channels of communication. Everyone was watching the same thing at the same time. We all watched the same three television networks. There were media conglomerates in terms of magazines and newspapers. Everyone read the same newspaper at the same time in a city essentially. And so it was easy to control messaging. It was easy to… advertising was the thing to do.
Now we live in this really complex world. Everyone has their own device that knows what they want. They have their own social media tools that create their bubbles. And suddenly everyone isn’t seeing the same thing at the same time. It’s not as easy to get the message out. And so promotion, which I think was so vital in the mass media era, now we live in the era, I think of it as the empowered consumer. And suddenly I think we’ve gotta rethink and I think not do something new with marketing but reclaim what marketing was. Product, price, place and promotion. Those are the things that drive awareness and then drive consideration that drives satisfaction and loyalty and advocacy.
Trying to separate those things is difficult. I think marketing is in a great opportunity to think about this and bringing it all together. That doesn’t mean necessarily that they become the product team. It doesn’t necessarily mean that they have to be responsible for distribution. But a customer experience or viewpoint means that you need to bring people together across the organization so that they understand that what happens in their touch points have an impact in the touch points that other people are responsible for and beginning to do a much better job of collaborating to put the focus back on the customer rather than on our organizational silos and the separate and often competing metrics and goals that different parts of the organization may have.
Carman Pirie: I must say, I think that’s going to be a big challenge for a number of manufacturers who may be more so than many potentially more B2C-facing organizations can find themselves really thinking of the world through their own lens and speaking their own language.
Augie Ray: Well, nobody ever said that getting a strong brand and developing loyal customers was going to be easy. In fact, I think by definition it shouldn’t be. And so again, I mean if you really think about some of the interesting things that are happening out in the world, whether it be in manufacturing and outside, whether it be the role of digital. Or you look at subscription models. Or you look at the role of product development.
I think of the Tide Pod, for instance, and the way it changed an entire product category. And how Tide managed to launch something in the Tide Pod that allowed them to capture a market share in the unit dose market that was something like two or three times greater than their market share in the liquid detergent market. And so is that an example of marketing? Is it an example of product development? Is it an example of customer experience? I think it’s all three things.
The Gillette shave club, same thing. And so there’s a reason, I think, to think more broadly, to bring everyone together, to collaborate and not to think of product development as its own island. To think of distribution as its own island. To think of marketing, and marketing in a narrow sense arguably perhaps, is just out on communications in its own island. There’s really a valid reason to think about how everyone works together to create experiences that will ultimately drive brand strength.
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Carman Pirie: The folks here at Kula have probably heard me ramble on about this ad nauseam about my, in some ways, my frustration with manufacturers. That I feel that they are very good at extracting maximum value for their organizations out of the product development processes, and they’re also very good at extracting value out of production and gaining production efficiencies. It’s kind of in their DNA to do so. But it’s somehow seemingly not in their DNA to have that same focus, if you will, on how the products that they make are marketed and sold. Which I think is in some way kind of the next frontier of value for manufacturers. Does that resonate at all? Or do you think that I’m just, are you joining the rest of the folks here at Kula in thinking I’m on crack?
Augie Ray: It resonates with me, but I’m, you might be preaching to the choir a little bit. The thing that I think is important at the end of the day is that so much of what drives marketing, and everyone else, everything else in the organization becomes very internal-focused. So we talk about the outside-in view, the focus on the customer. And the brands that have really succeeded, I mean the brands that everyone wants to be, the Amazons and the Apples and the Costcos and the Starbucks, started by having this very strong outside-in viewpoint of what customers wanted and needed. What were the unmet expectations? What were the gaps? What’s driving satisfaction and dissatisfaction? If all we focus on is having our email team focus on maximizing email open rates and click rates while the product team focuses on only initial sales, let’s say, or trial and not necessarily longer term measures of loyalty. And if all marketing is focused on is acquisitions and clicks and conversions and inbound traffic, nobody’s thinking about the customer.
And that’s really ultimately what this collaboration is about, is to make sure you have the user research. Make sure you’ve got the data, the customer feedback, voice of customer programs, for instance, to provide a flow of information so that you can always be evaluating what’s driving satisfaction and dissatisfaction, loyalty and advocacy, and ultimately to make sure you’ve got that outside-in viewpoint.
And in fact in one of the topics I know you wanted to discuss today is digital transformation. So a very great example of this. What happens is organizations go chasing after the next hot thing. They read that something is big and they chase it. And they chase the technology first. Then they launch something in the technology, and then they ask themselves now what is the problem this was intended to solve? How are we going to measure it?
What you need to do is the opposite. You need to understand what customers want and need, what unmet expectations are, and then evaluate the technologies that will help you to do that. If you do it in that order, you focus on the customer, thus you are much more inclined to launch something that gets adopted. And you also understand the measures right from the start.
And so we look back on the history of digital marketing. How many organizations have a Second Life island that they needed to launch because it was a hot topic but they never knew what to do with. As a result, they probably still own those Second Life islands.
How many brands launched social media accounts? Many that have been forgotten and are probably stagnant. You can find thousands of those sort of zombie accounts on Twitter and on Facebook. And it was because everyone was doing social media. They didn’t think about what do customers want out of social media. And in fact one of the things customers want is responsiveness. They want answers. They want customer service and the data would demonstrate the brands still do a very bad job of this. They tend to think of social media as another broadcast channel, not as a channel to listen to and understand and respond to customers.
Now it can be expensive. There are challenges in scaling that. But it’s an example of that inside-out versus outside-in. And ultimately today, one of the things that we see is that everyone talks about Voice being the future. And one of the very typical situations that I work with my clients today is that they’ve launched an Alexa skill that gets zero or almost zero use. And it’s because they got excited about the technology rather than thinking about what customers want and need and whether it provides it.
A really good example is all the banks raced into providing Alexa skill so that you could interact with your bank using Voice. Now the question I ask is how many of us stand in the middle of our house and want to scream out our account balances or have them screamed out so that our family hears them or a neighbor hears them. How many of us want, in the middle of watching a television show, to have our Alexa announce that we’re overdrawn, right?
Using Voice is not the way that we interact with our banks. We walk up to a teller and everyone stands behind the line so we can do it privately. We walk up to an ATM and there are blinders on the ATM to make sure that people can’t see what our account balances are, and so this idea of using Voice to interact with your bank… now clearly behaviors may change at some point in the future, but for now it’s a solution in search of a problem, and that’s the problem with innovation. And that’s the problem in digital transformation, is it needs to start with what the customer wants and needs.
Carman Pirie: I can’t help but just imagine, all I can hear are people talking about their video strategies right now, you know, like somehow creating video is going to save marketing. But it’s the same thing, it’s a-
Jeff White: I thought it was chat bots.
Carman Pirie: Chat bots, those are gonna be big.
Augie Ray: Wait, VR. Don’t forget VR.
Jeff White: Oh yeah. And AI and yeah.
Carman Pirie: Augmented reality, I think that was going to totally change everything. At least for a while.
Augie Ray: You know what? I think augmented reality may be the closest, but again, if you start with what people want and need, you know the right technology to launch. And so one of the things manufacturers have seen some success with is to launch augmented reality programs that help to train people how to do things. Maintenance, for instance, of complex products.
Augmented reality, I think, shows some early promise, but only because you put what the customer wants first. And it happens to solve a real challenge, right? Onboarding is a challenge for many manufacturers, particularly in the B2B space. Augmented reality gives them a way of maybe reducing costs, scaling training, improving onboarding and providing what customers really want.
Voice, I’m not as convinced is gonna work in the workplace. Think about your average open office. Do you really want hundreds of employees interacting with their computers by speaking? As it is, open offices are loud enough. So anyways, it’s an interesting idea of putting the customer first, understanding needs, and then going to make the decisions on the right innovative technology that fits that, not doing vice versa.
Carman Pirie: I’d really like to get your advice about, some nuance in your advice, I guess, around being customer-led or customer-driven. In that it’s not just simply about doing what customers say they want.
Augie Ray: Absolutely right. I think everyone knows the, and maybe is tired of hearing it, the whole Henry Ford example where … probably not a true story but everyone sort of knows it. The idea that if Henry Ford had asked customers what they wanted, they would have said a stronger horse that poops less.
Carman Pirie: I think they may be tired of hearing that, but they’re not tired of hearing an answer to this problem.
Augie Ray: Yeah. I think the answer is this. One of the things with customer experience programs that can be a real challenge is that organizations get caught in focusing only on identifying and fixing problems. And there are always problems. You will never solve every problem. It is an endless chase. I compare it to playing a game of Whack-A-Mole. As soon as you identify and fix one problem, another pops up, another pops up. That list never ends.
But ultimately if that’s all your CX program does, reactively identifies problems and fixes them… now that’s important. You need to solve and address problems. But good CX should do something else. And this is getting to what you’re really probing here, which is it needs to be innovative. By putting the customer first as we talked about, you begin to identify what you need to do to innovate. And the way to do that isn’t to listen to what customers say they want. You don’t wanna necessarily ignore that. It’s worth considering. But it’s really focusing on unmet needs.
So sometimes I’ll take it back to this Henry Ford example and say that the unmet needs that people would have identified. They may have said I want a stronger horse that eats less hay and poops less, but the unmet needs were what they’re really saying they want is more efficiency. They need to do more in their fields with less. They are compressed for time. They need a less expensive way to plant seeds and to harvest. Those were the unmet needs and the tractor was in fact the solution to that.
So if you listen for unmet needs and then as a manufacturer you bring your expertise to bear. You don’t just be led by the nose by what you think your customers want. You are the expert in your field. And if you identify unmet needs and you bring your expertise and your manufacturing discipline to understand how to satisfy those unmet needs, you in fact will succeed.
Amazon, a great example of this, the unmet needs, and it wasn’t a high demand but it was future looking demand was that people wanted a better way to buy things. This is what e-commerce really provided. And if you really focus on the very early days of Amazon, kind of hard to remember, they were a book seller. And the challenge that people had is they went to their local store and they didn’t have the books that people wanted. Stores could only carry a limited set of product. They had a limited physical inventory. One of the things that Amazon succeeded with was being able to provide an unlimited inventory and access to any book, whether or not you’d be able to find it on the shelves of your local Dalton.
And so it’s an example of identifying a need, not listening to what people wanted. People would have told you they wanted to be able to get more product at their physical store, but the unmet need was they wanted access to things they couldn’t find in the store and e-commerce was the perfect solution for that.
Jeff White: I think it’s really interesting, I mean it is especially easy to see this kind of forward looking innovation in the SaaS space. You can think of the team at Basecamp that regularly they refuse to just make the changes their customers ask for unless they think it’s going to make the product better in the vision that they have for it. And they have a rabid following as a result of that. I think the other thing, too, is that it sometimes means that people aren’t necessarily seeing what the Amazons are seeing when they’re seeing it. I mean Amazon was there largely… they’re not an e-commerce retail bookseller or widget seller at all. They are a computer company that understands how to put those things together to make more efficient retailing possible and logistics and all of those things. Uber is not a transportation company. They are a software company.
Augie Ray: Well, and ultimately another thing that we have to think about here is just, and it brings us back to one of the first topics you raised, ROI. Chasing short-term ROI is important. We need to produce quarterly results. But that has to be balanced with something else. One of the things I note, a very typical interaction I might have with clients nowadays is they wanna learn to be like Amazon. They’ll say that. What did Amazon do to succeed? We wanna be like Amazon. Well, one of the things Amazon did to succeed was that it lost three billion dollars before it made its first dollar of profit. Do you wanna do that? Everyone ready to sign up?
Now I’m not saying every brand needs to do that. You don’t need to do that. But what it does do is it points to that some of the brands that we today hold up… you mentioned Uber. Uber’s never made a dollar of profit. They may never make a dollar of profit. Right now, every ride that you take on Uber is funded in a significant fashion by the venture capitalists that have invested in Uber, because it continues to lose money.
Now I think Uber is a great example of a product that it came into a very stagnant market with something wildly different, as you point out, a very technology-based solution, but it also made use of mobile. It made use of people’s cars. It made use of the gig economy. It offered rides to people, not just when they were standing on the busiest corners of their city or at the airport, but it allowed them to call transportation anywhere. It gave them a better experience because we rated people and typically the experiences you have on an Uber or Lyft tend to be considerably better than the typical experience you get in a taxi. It changed everything about this on-demand transportation world, but it’s still losing money.
And so one of the things I think we have to be willing to do is to understand when we want to invest in something and that it is worth investing in. Amazon lost money. Uber lost money. But even if it’s not losing money, it might mean accepting a little more risk. And what do you do to mitigate risk? Well, you get more information. That brings us back to VOC data or user research data. Another way that you mitigate risk is to turn a big risk into a bunch of small risks that you test. That’s a test-and-learn culture. The idea of piloting things. Of agile development. And so there are things that we can do to embrace the idea of taking a little more risk, but managing it. Not avoiding it but managing it so that we can build a stronger brand in the future.
Carman Pirie: And of course if we do that, we have to at least have some faith that that increase in customer satisfaction that we’re going to drive is actually going to result in that increased lifetime value.
Augie Ray: It does.
Carman Pirie: And you had mentioned that earlier in some of the work you had done, so I guess to dive into that a little bit further.
Augie Ray: Yeah. So one of the things that can be a challenge. Now for manufacturers I acknowledge that this can be particularly a challenge, although there certainly are ways of overcoming it. We talked about doing a little more to partner with your sales channels to gather data at a customer level around satisfaction and around some of their purchase behavior. Or just even skipping that. One of my manufacturing clients uses inserts in their products to gather more information from people about what’s driving satisfaction or dissatisfaction. So there certainly are different solutions to that.
But the end of the day what you want to be able to do is be able to correlate at a customer level their satisfaction, and you can measure that various ways. Things like NPS, customer satisfaction questions, customer effort scores. But correlate that with their actual transactional behaviors. Do you know that more satisfied customers are buying more? Do you know that they are retained longer? Do you know that they refer more business?
I have a client in the B2B space that’s a SaaS company, and they serve not the really large organizations but they’re particularly for SMBs. They’ve got something like 80,000 clients. They did this analysis, right? They went back and they looked at satisfaction and its relationship to churn. They looked at satisfaction and its relationship to referral rates. And they looked at satisfaction and its relationship to the annual spend.
And what they found was that customers that were promoters versus detractors, the NPS, were 9 points less likely to churn on an annual basis. They found that they tended to refer a significant level of additional business. And they also found that they spent something like three times more money than did detractors. And so added that all together, they were able to come up with understanding that they were delivering something around $5,000 of additional value for every promoter that they had versus every detractor. That encouraged them to understand that if they worked on improving the number of detractors or decreasing the amount of detractors they had, they would expect to have an impact on the business through reduced churn, higher referral rate and annual up spend.
Carman Pirie: Fascinating. And when you look at this data in aggregate across multiple companies and that they worked with the survey, et cetera, do you, I guess I’m assuming that you found that this data holds somewhat consistent, number one. I’m curious, however, what are the changes that we’re seeing, if any, over time? There’s some, you know, some people may suggest that as media gets more fragmented and kids these days, et cetera, and people will complain about millennials or what have you and say that they don’t have the loyalty that they used to or whatnot. Have you seen any changes in the propensity for satisfaction to drive these other measures as time has gone on?
Augie Ray: We’ve not seen a giant change. I think that the discussion of millennials not being loyal may miss a couple of things. That first of all, one of the things to realize about millennials. I generally will push back on any generational stereotypes. They typically are wrong. Our generation was thought of as being somewhat lazy compared to the hardworking older boomers that preceded us, for instance. Slackers followed us, and now they’re hard working people. Millennials, there’s just some really interesting research that indicated that for all the complaining we do about how millennials are destroying different industries, it has nothing to do with their behaviors. It has everything to do with they don’t have money. Right? They just aren’t as economically sound as many other past generations are, or were at their age, and that’s a real concern.
So the thing is that the things that drive behaviors, that drive loyalty, can change. And there are some broad generational things to learn, but I try to avoid those because ultimately what you wanna begin to do, one of the key factors in understanding what drives loyalty and beginning to develop strategies around it, is to understand personas. Personas are different than segments. Segments are a way of gathering people together in a way that matter more to your business, and so you might have segments that are based on geographic area or product type, and that helps you to understand penetration and perhaps to develop some broad strategies.
Personas change that 180 degrees. It’s not what the customer means to your brand. It’s what your brand can mean to the customer. As you begin to understand personas, focusing on millennials, you might understand that all millennials aren’t alike. Which of course they aren’t, just like all boomers or all gen-x aren’t alike. And so you begin to understand that there are different things that drive awareness, that drive interest, that drive consideration. Ultimately that drive loyalty and advocacy.
If you can group people together by that, you begin to find the hooks that allow you to develop the right strategies. This is, by the way, a very powerful way of approaching content strategy. Not to think that everyone wants the same thing, but to begin to understand, if you can, what identifies and separates one group of customers from another in terms of their wants, needs, motivations and expectations so that you can do better at providing for those.
In working with some of our B2B clients, this is a big deal because B2B clients in particular will make the mistake of thinking that they can map a journey for the entire prospect firm at the firm level. As if everyone goes through the same process at the same time. As if everyone in the organization wants the same thing. And of course we know that’s wildly wrong. There are different roles that people have. There are people who are the economic decision makers. There are people that are technical buyers who have to evaluate whether the solutions meet the minimum requirements. There are user buyers that have to actually implement and use and interact with the solution. Each of them have different wants and needs. So if we can begin to understand those personas, not just generalize, we develop a much stronger strategy.
Carman Pirie: Augie, I think we could easily double the length of this podcast and still have lots to talk about. I’m wanting to dive in head first right now into the challenges that brands have in maintaining a consistent voice in that content challenge that you just mentioned in the addressing of multiple personas, et cetera, but I’m gonna save that for our next podcast, when we’re fortunate enough to have you on whenever that is. And in the interim, I’ll thank you for joining us on the Kula Ring today. And thank you in advance for following me on Twitter.
Augie Ray: Well, thank you very much for having me. As you can tell, I love talking about this. I think it’s important. I think it’s important to pull us out of all of those short-term things that we do as marketers and to think about how we can have a more powerful influence over the experiences customers have and ultimately those leading indicators of brand health. It’s an exciting topic. I could go on for hours, but no one would listen. So maybe we’ll get a chance to chat again in the future. Thank you so much.
Carman Pirie: We absolutely look forward to it. And thank you.
Jeff White: Thanks.
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Augie RaySenior Research Analyst & Executive Advisor of Customer Experience at Gartner, Inc.
Augie Ray is a Sr. Director Analyst at Gartner specializing in Customer Experience. He publishes research and advises clients on CX best practices with an emphasis on VoC, persona development, customer journey mapping, CX metrics and program management. Prior to joining Gartner, Augie worked as a Director of Customer Experience Action at American Express, Executive Director of Community and Collaboration at USAA, and led an experiential marketing team at a mid-sized agency.