WISDOM IN A NUTSHELL
The Customer
Revolution
How To Thrive When Customers Are In Control
By
Patricia B. Seybold
With Ronni T. Marshak & Jeffrey M. Lewis
Crown Business, New York / Random House, Inc, 2001
ISBN: 0609607723
359 pages
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The Customer Revolution Page 2
The Big Idea
BUSINESSES NEED TO BE MORE CUSTOMER-CENTRIC THAN PRODUCT-CENTRIC
IN ORDER TO THRIVE IN THE NEW ECONOMY.
1. Embrace the Customer Revolution and Thrive in the Customer
Economy.
Unless you act now to focus on the quality and consistency of the customer experience you offer,
your firm will be hopelessly lost in the turbulence. Customers have taken matters into their own
hands, maximizing their power of choice. They prefer custom-designed experiences. They want
good service, fair prices, and innovative offerings. If they don’t get it from your business, they will
go elsewhere, and will tell the world too.
Sweet Surrender
Relinquish control of your company’s destiny. The Internet and mobile wireless devices arm the
new customer with tools to access your business, as well as your competitors. Take a look at
some of these examples:
• Peer-to-peer file sharing (Napster)
• Open-source design communities (Linux)
• Self-policing marketplaces (eBay)
Adapt to changing customer desires in real-time. A customer-focused culture attracts and retains
employees because these companies are more fun to work in than those that are product-centric
and bureaucratic.
How to Survive in this Profound Revolution:
• First, recognize every business is now an e-business.
• Second, realize there are no e-customers, only customers.
• Third, adopt new, dynamic partnering relationships as customers’ needs evolve.
• Fourth, be prepared to participate in customer-led, self-organizing communities and to
respond flexibly as customer behavior reshapes your industry.
MAKE IT EASY FOR CUSTOMERS TO DO BUSINESS WITH YOU.
Focus on Customer Relationships
Investors want to know…
1. How many customers do you have?
2. How long have you been in an active relationship with each?
3. How are earnings per customer?
4. How much does it cost you to acquire a new customer?
5. How well are you able to retain your customers?
Monitor and Improve Customers’ Experiences (in Near Real-Time)
The companies that will thrive in the customer economy understand how to build and maintain
customers’ trust by carefully managing customers’ experiences with their brands.
Don’t Rely on Monthly or Weekly Reports.
The real masters of the customer experience game walk around with pagers that alert them when
customer needs aren’t being met. They proactively monitor the processes that impact customers,
from delayed flights to Web site performance, knowing up-to-the-minute is what gives you the
edge in the customer revolution.
Let Customers Dictate Your Business Direction
Anticipate needs. Should you sell direct or use dealers, retailers, or independent agents? Are
your employees well-versed in the workings of your website? Do you offer wireless access?
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The Customer Revolution Page 3
Learn from the Veterans of the Customer Revolution
From business-to-consumer enterprises or business-to-business players, whether a small
business, or conglomerate, it is the company that embraces the customer who leads the pack,
continuously innovating, reinventing, and evolving.
Master the Three Principles of the Customer Economy
1. Customers are in control and they’re reshaping businesses and transforming industries.
2. Customer relationships count, the value of your present and future customer relationships –
your customer franchise—will determine the value of your company
3. Customer experience matters, the feelings the customers have when they interact with your
brand determine their loyalty.
Principle No.1 Customers Are In Control – reshaping businesses, transforming industries.
Before the Customer Revolution Today’s New Customer-Driven Economy
Make and sell products Attract and retain customers
Grow revenue by adding more products and Grow revenue by building flexible,
companies to your portfolio dynamic capabilities for designing and
delivering new value-added services.
Measure year’s revenue growth and profit margin Also need to show growth in customer
value and customer yield
Investors value ability to offer vertically integrated Investors reward ability to partner flexibly
products with captive capacity and control over with others and jointly develop and
margins. produce products at competitive prices
and with dependable quality.
How customers are transforming industries and taking control:
In the past… Today…
Intangible goods like music, information, software, Customers demand to freely share and
and entertainment reaped high profit margins after reuse digital goods, paying once or not at
their creation. all and then altering, distributing and re-
purposing the original material.
Banks, brokerages, and insurers counted on Customers can easily move their financial
customer inertia. records and their relationships, taking their
business elsewhere when unsatisfied.
Pricing varied dramatically from one country to Pricing is more transparent. Customers
another and was complex demand equal prices round the globe.
Manufacturers could give lip service to designing Manufacturers have the tools to make
and configuring products for customers. custom- manufacturing cost-effective and
practical. Many companies now offer
customized products and services.
One could only imagine online marketplaces E-markets exist with customers’ building
where buyers and sellers could efficiently find one projects, medical records, systems
another and transact business. configurations, and/or inventory at their
core. Customers’ projects, processes, and
supply needs are the magnets that draw
suppliers to compete and cooperate in
dynamic e-market spaces.
Principle No.2 Customer Relationships Count – The Value of your Present and Future Customer
Relationships – Your Customer Franchise- Will Determine the Value of Your Company.
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The Customer Revolution Page 4
Investors Care About Your Customer Capital.
This is the sum of the value of all your customer relationships. How many you have, the depth
and quality of those relationships in terms of their capacity to generate current and future
earnings, the duration or your customer retention, and the profitability of those relationships.
Annual reports can include a new section after Return on Equity or Return on Assets, a Customer
Value Index indicating average profit per customer and growth and retention rates.
Principle No.3 Customer Experience Matters – The Feelings Customers Have When They
Interact with Your Brand Determine their Loyalty
On the phone, in your store, on your Website, reading your e-mail, or using your product -how do
you make them feel? A brand must deliver consistent value, make customers return for more, and
want to spread the word to their friends. Companies can create the new position of Total
Customer Experience EVP. Customer scenarios should be monitored in near real-time to see if
the company is fulfilling customers’ expectations and to be able to adjust to customer needs as
they evolve.
An Operational Framework: Measure Customer Value, Monitor What Matters to Customers, and
Deliver a Great Total Customer Experience.
Implement a Customer Flight Deck, and Develop Flight Plans
Like flying a plane into the turbulent customer economy, you need an appropriate flight deck or
instrument panel to indicate your customer value, and measure your customer experiences.
Delivering the Total Customer Experience demands mastery of eight key steps:
1. Create a Compelling Brand Personality
2. Deliver a Seamless Customer Experience Across Channels and Touchpoints
3. Care About Customers and their Outcomes
4. Measure what Matters to Customers
5. Hone Operational Excellence
6. Value Customers’ Time
7. Place Customers’ “DNA” at the Core
8. Design to Morph
Principle No. 1
Customers are in control and they’re reshaping businesses and transforming industries.
2. What Happened In the Music Industry Will Happen To You.
What can we learn from the music industry that would apply to other industries coming under
control of the customer revolution?
• See how customers use your products and services, and then devise means to make it
easier for them to do so. Adjust prices and practices accordingly.
• Watch the early adapters and they will show you how your business practices will change.
• Streamline processes for customers in order to gain loyalty and increase convenience.
• Build a closer relationship by making it easier for the customer to manage assets.
• Many customers like products and services that make them look good and show status.
The Day the Music Died
Arne Frager, founder of The Plant, a well-established recording studio in Sausalito, California
bemoans the revenues of the music industry. Paralyzed by Napster, MP3, and Gnutella free
distribution networks, the whole music industry suffered a 50% cut in earnings. Many of the
recording studios like Arne’s fell silent for the first time in 27 years.
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The creation of the MP3 file format, allowing music lovers to copy entire CDs onto the Net,
created a problem for major record labels. Music fans took control and the balance of power
shifted dramatically.
Technology Fuels a Revolution
Napster’s creator, Shawn Fanning, had a brilliant idea one day in his college dorm room, listening
to a friend complain about how difficult it was to download MP3 files. By January 1999, Shawn
released his brainchild into the world, a combination of instant relay chat, Microsoft file sharing,
and search and filtering capabilities. Investor Bill Bales saw the unstoppable power of this new
peer-to-peer network. When news of copyright lawsuits from musicians Metallica, and numerous
record industry giants spread, Napster users swapped files in a mad frenzy, fearing a shutdown.
By fall of the year 2000, BMG records dropped its lawsuit against Napster and instead invested in
it. The free file-swapping service was turned into one with a low monthly subscription.
The Napster phenomenon shows us:
1. How the music consumer feels liberated with such easy-to-use technology. The music lover
can download and store his own collection in a CD and listen to it in the car, at the office or at
a friends’ place.
2. The customer can “strut his stuff” and show off his good taste in music to his peers.
The target market, mainly college kids with high bandwidth Internet access, got their way. The
record labels were forced to comply and eventually offered electronic downloads.
Renegade Customers and Intellectual Property
It’s renegade customers (or early adopters) who lead the way. Music in digital form can be used
in customized compilations. Customers will continue to insist on having the ability to mix, match,
and share music with others. The challenge for the music industry is to let customers have what
they want and still find a profitable business model.
To understand how the Napster phenomenon might impact other industries, see how the music
consumers behaved:
1. Fans tried out new music.
2. Fans built private collections.
3. Fans made their own “mixes” or custom compilations.
4. Fans created radio stations.
Undiscovered amateurs and struggling professionals posted their wares and got airplay from 24-
hour Internet radio stations like Live365.com
Building Revolutionary Business Models
One by one the large record labels bowed to the demands of the customers. First it was Sony,
then EMI, Columbia, and BMG. By autumn of the year 2000, the powers that be in the music
industry were offering rights-protected music for customers to purchase and download
electronically.
The Takeaways: How Customers Will Reshape Soft Goods Industries – particularly intellectual
property goods such as software, publishing, and music.
1. Customers will try before they buy.
2. Customers will buy by the piece.
3. Customers will mix and match.
4. Customers will want to reshape and re-purpose your goods. (i.e., Photodisc for stock
photography)
5. Customers will want to share it with others.
6. Customers will want to publish their own “mixes”.
7. Customers will want to co-brand your material.
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3. A Dozen Customer Demands That Will Change Your Business.
1. Open, equal access. The Securities and Exchange Commission (SEC) was forced to adapt
new measures when more than 6,000 individual investors blasted the unfair practice of
“selective disclosure” of information, which favored only institutional investors. Today, the
world’s stock exchanges are under siege by these customers.
2. Real-time information
3. Specialist information. The customer demand for expert advice is evident in the health
industry. Customers do their own research on the Web and go to their doctors’ offices armed
with questions.
4. Convenient access
5. Information portability
6. Process transparency
7. Logistics transparency
8. Pricing transparency
9. Fair, global pricing
10. The ability to set prices
11. Choice of distribution channels
12. Control over their private and corporate information
4. Surviving The E-Market Revolution
Value Your Customer’s Time.
Thanks to e-markets, customers can choose from a wide variety of products and suppliers from
companies around the world. The expenses incurred in sourcing a supplier (measured in people,
time and effort) are 30% of a company’s procurement costs.
A company will stick to a supplier and a long-term contract for 2 reasons:
1. To guarantee pricing, quality, and availability of goods
2. To lower the cost of sourcing
What Are E-Markets?
E-markets are electronic trading communities made up of buyers and sellers with common needs.
Whether auction, exchange, or one-stop-solutions, e-markets offer dynamic pricing. In 1999 to
2000, customers jumped at the opportunity to lower their procurement costs. Requests for Quotes
and Proposals on new B2B or business-to-business marketplaces like Buzzsaw - a building
construction resource site - cropped up.
The Key to Surviving the E-Market Revolution is to realize that e-markets are simply one of a
number of avenues through which you will be selling and procuring products and services.
Suppliers need to organize their product information and rules-based pricing using a single,
flexible, information architecture, so all changes in products, descriptions, attributes, pricing, and
availability are entered and managed in a single location.
EBay Sparked the E-Market Revolution.
EBay began as a consumer-to-consumer auction site for used goods, quickly growing into a
business-to-consumer, and business-to-business e-marketplace. It has retained its original
consumer-to-consumer transactions while establishing itself as the premiere online trading
community worldwide, and the first mass-market electronic marketplace. EBay has become the
de facto arbiter of price.
What Did Businesses Learn from eBay?
1. Pricing is transparent.
2. Product availability is transparent.
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3. Auctions take place in real-time.
4. Customers can set the price they’re willing to pay.
5. Customers are in control – they rate the sellers and these ratings matter.
6. Customers can become sellers.
7. Sellers can become customers.
Why B2B E-Markets Emerged When They Did
Steps That Led to the B2B E-Market Frenzy:
1. Customers demand their own customized websites. In 1996, Dell Computer, Microsoft, and
National Semiconductor acceded to demands for account-specific websites, also known as
Premier Pages or extranets. Customers co-designed solutions and previewed new supplier
information and products. These extranets caused 3 major problems:
• Too many log-on passwords to remember per supplier.
• No one-stop-shopping capability
• Corporate procurement workflows were bypassed.
2. Large customers want suppliers to integrate into their procurement systems. In 1998 to 2000,
large and powerful business customers clamored for suppliers to deliver product information
along with customer configuration and pricing inside their Internet firewalls. They wanted
each supplier’s information provided in a format integrated into their own Intranet-based
multi-supplier catalogs.
3. Exchanges and auctions spur interest.
4. Multi-supplier e-catalogs, distributors, and aggregators launch e-markets. An example would
be Grainger.com. It offered one of the key criteria for a true e-market: the ability to buy
products from multiple suppliers with a single purchase order.
5. E-markets emerge in every industry.
6. Large customers form their own buyer-led, industry-specific e-markets.
7. Customer Scenario Nets: e-markets with customer scenarios at the core, revolving around
the customer’s specific projects, tasks, and processes.
A Customer Scenario Net offers one-stop-shopping for all the steps in the scenario. Examples are
Buzzsaw, a building construction resource where one can source materials and suppliers for a
project, and Medscape, where vital doctor-patient health information is exchanged.
How to Prosper in the Midst of the E-Market Revolution:
1. Target key customers with whom you’re seeking to build a relationship.
2. Find out which critical scenarios and projects these customers need to do and determine
where your products and services fit in these scenarios.
3. Organize all the information about your products and services so it’s optimized for customers
who need to make decisions and take action.
4. Create dynamic, rules-based pricing engines for all your products and services so you’ll be
able to present each business customer with the accurate, negotiated and customized pricing
that’s relevant for his company.
5. Organize your product information, pricing and rules and inventory information so they can be
re-usable in 7 different business models or steps earlier described.
6. Participate in a variety of vertical and horizontal e-markets – you want customers to find you
easily.
7. Don’t seek to be the exclusive supplier to an e-market. Customers value choice.
8. Participate in e-markets that help build your brand.
9. Plan now to create or participate in relevant customer scenario nets. Offer tools for
streamlining processes. Find out what information they customers are willing to provide within
the contexts of the tasks they’re performing.
Principle No.2 Customer Relationships Count
The value of your company is based on the value of your present and future customer
relationships.
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5. It’s the Customer Economy: Leverage Your Customer Capital and
Grow Your Customer Franchise.
We predict that by 2005, companies will feel the need to report a Customer Value Index to its
investors, indicating growth in earnings per customer.
The Dawn of the Customer Economy
The AOL –Time Warner merger in January of 2000 marked the dawn of the customer economy.
Now customers could get their Internet, cable, and magazine subscriptions from one source.
Investors valued AOL customers at $7,455 each, while Time Warner customers were valued at
$3,495 each.
Why were AOL customers worth so much more? AOL knew who its customers were, and their
customers thought of themselves as AOL members. Time Warner did not know its customers,
and their customers thought of themselves not as Time Warner members, but as Fortune
magazine subscribers, or cable TV subscribers. The AOL brand was stronger than the Time
Warner brand. This illustrates how deeper customer relationships matter.
Customer Capital
We define Customer Capital as the sum value of all your existing customer relationships in terms
of their capacity to generate current and future earnings, the duration of those customer
relationships (your customer retention) and the profitability of those customer relationships.
Marketers have long used the following elements to determine the profitability of the different
customer segments and the viability of their marketing campaigns:
• The number of active customers
• The different customer segments (demographics, behavior) cohorts (when acquired)
• Current average profit per customer
• Cost to acquire a customer in each segment
• The retention rate for customers in each segment
• Anticipated growth or decline of profits per customer in each segment (based on the recency,
frequency, complexity, and value of their transactions)
Customer Momentum
This is defined as the ability to attract and sustain new customers. How do you determine your
future earnings? Here are some assumptions you need to make:
• How much will it cost you to acquire each new customer in the future?
• What percentage of your marketing budget will you spend on customer acquisition?
• What will be the average profits per customer for each acquisition effort and/or time period?
• What will be the likely retention rate for each new group of customers you acquire?
• How fast will the earnings per customer grow in each segment?
SATISFIED AND LOYAL CUSTOMERS WILL RECRUIT MORE CUSTOMERS. They spread the
word to their families, friends, and colleagues thereby lowering your cost of recruiting new
customers.
Investors care about the value of your customer franchise – the total present value of projected
earnings from current and future customers.
Customer Momentum + Customer Capital = Your Customer Franchise
Educate Investors on the Value of Your Customer Franchise
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The Customer Revolution Page 9
Charles Schwab reports its new and active customer accounts each quarter. Hewlett-Packard’s
20 million customers are in constant touch with the company, continuously buying a steady
stream of supplies, a revenue stream the financial investors need to understand.
Customer Relationships are a Key Intangible Asset
Amazon.com altered its privacy policy in September 2000, notifying customers it maintains the
right to transfer customer lists when it sells off any of its “stores”. The company would then be
able to share or sell the customer information with the company Toys R Us, with whom it had cut
a major deal. You cannot actually transfer a customer relationship, only the customer information.
The new owner of this information can only hope to win the loyalty of the customer accounts. The
list is not as valuable as the close relationship the previous owner established.
Count Your End Customers
We encourage all companies to do the work required to learn who their end customers are.
Although Charles Schwab doesn’t interact directly with its advisors’ clients, it knows who those
clients are, and they are included in the reporting of customer numbers and customer assets.
Known Customer Versus Anonymous Customers
Companies that know who their customers are and have relationships with them are more
valuable to investors than companies in the same industry that don’t know who their customers
are. If you want to start building a relationship with your anonymous customers, you have to gain
their trust and offer a better customer experience each time they are willing to reveal more
information about themselves.
The companies that are leading the way into the customer economy are:
American Airlines, Charles Schwab, Cisco Systems, Dell Computer, Egg, Getty Images, W.W.
Grainger, Hewlett-Packard, IBM, Lands’ End, National Semiconductor, Snap-on Tools, and Wells
Fargo.
These companies have been managing themselves by and for customer value for at least 2
years.
They know:
• How many end customers they have
• Who their customers are
• What their profits per customer are
• How their profits per customer are growing
• What their customers care about
• How satisfied their customers are
• How loyal their customers are
• What actions are most likely to keep their customers loyal
6. Managing By and For Customer Value
“Before the Internet, companies could be customer-aware, but they didn’t have to be
customer-centric. Now they have no other choice.”
-Gideon Sasson, Enterprise President, Charles
Schwab
What the Internet did was to move control directly to the customer’s hands. Customers are really
just a mouse-click away from your competition, and the power of their choice has never been so
strong as with the Internet.
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The Customer Revolution Page 10
The Charles Schwab $420 billion-dollar online brokerage firm is focused on growing customer’s
assets faster, and keeping them satisfied with good customer experiences. Profit and loss are not
so much the metrics now, but customers’ asset accumulation, satisfaction, and retention.
Managing profit & loss in near-real time allows Schwab to compensate immediately for sudden
shortages or “surprises”.
Ask yourself how can we make the customer experience a better one?
Egg, the U.K.-based financial services firm, is managed for customer value, mainly the net
present value of the lifetime value of its customers, or as we have put it – its customer franchise.
Egg’s financial models indicate once a customer is using 2.5 Egg products, they become
profitable.
At Cisco Systems, customer satisfaction is measured at its website and its call centers every
week. A number of customers receive an email or phone survey after completing an interaction.
Every six months, a relationship survey is conducted, targeting decision-makers, as opposed to
the daily or weekly basis customers. When customer satisfaction goals are met, the employees
get their bonuses.
NCR monitors customer loyalty and ties it directly to employee compensation so workers
understand the effect of their efforts. Research, constant monitoring, and quick response to
needs are the elements in the company’s customer intelligence.
Principle No. 3
Customer Experience Matters
The Feelings Customers Have When They Interact with Your Brand Determine Their Loyalty
7. The Saving Grace: Deliver a Great Total Customer Experience
Companies like Virgin spend a lot of money on advertising campaigns, and focus on the
execution of a very memorable customer experience. The Virgin brand image-makers want
customers to associate the brand with fun, quality, and innovation. A strong brand personality like
Richard Branson is another key factor in its successfulness, as well as offering a luxury customer
experience at a price most customers can afford.
The total customer experience is defined as a consistent representation and flawless execution,
across distribution channels and interaction touchpoints, of the emotional connection
and relationship you want your customers to have with your brand.
By identifying and bonding with your branded experience, customers give you permission to
continue to evolve your brand and the value it represents into new areas.
More than a fancy ad campaign, customers want to be treated well on the phone, and on the
Web. Expert advice and guidance, flawless service, easy decision-making tools, reliable
fulfillment, delivery and support along with some good old-fashioned attention to detail are what
customers want.
What brought the dot-com crash in the spring of 2000? The 3 serious mistakes of the investment
community that precipitated the dot-com bust were:
1. They overspent on branding and advertising versus execution and operational efficiency.
2. They expected unreasonably fast returns. It takes at least 3 years to become profitable in
most business ventures. The investors expected returns on their e-businesses in 18 to 24
months – some in less than 12 months.
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The Customer Revolution Page 11
3. Investors failed to realize that customers aren’t loyal to a brand. They become loyal to a
branded experience. It takes time to hone and refine a sustainable customer experience and
money to continuously improve it.
Anatomy of a Total Customer Experience
8 Interaction Touchpoints and Distribution Channels Qualities that Build Trust
to be consistent in:
1. Catalogue 1. Value
2. Call Center 2. Integrity
3. Dedicated Retail Store 3. Reliable fulfillment, delivery, and
support
4. Website 4. Efficient use of customer’s time
5. E-mail 5. Ease of doing business
6. Partnerships 6. Ease of decision-making
7. Multi-product store 7. Ease of interactions (No putting a
customer on hold, passing her
around, etc)
8. E-Markets
When a customer identifies with your brand, saying, for instance, “I’m a Nordstrom kind of girl”
then you will have built a strong customer relationship from positive experiences with your brand.
Egg: Hatching a Branded Experience from Scratch
Created to serve a new breed of retail banking customers as a subsidiary of Prudential, a UK-
based insurance company, Egg was geared toward the young, technology-savvy, 2-career
household. New customers were looking for self-service, personalized attention, and value in a
complete range of financial services with the convenience of Internet banking.
It was to be completely Internet and phone based, with no physical structures. Six months of
research and the input of 30,000 consumers went into the study before Mike Harris proposed it to
Prudential Group’s Sir Peter Davis. A branding consultancy was then hired to come up with and
test a name that would capture the essence of this new company that would offer: savings
accounts with better interest rates no matter what the balance, and with no minimum deposit,
flexible mortgages and loans, (with temporary suspensions of payments for a few months and no
penalties) and convenient, round-the-clock customer service, but not automated indifference.
Customers want to be recognized as individuals – to be seen as a person, not a number.
They want a relationship with someone who can help them make the choices that affect their lives
rather than being ‘sold to’.
-Mike Harris, Egg
The Egg-Hatching Process:
1. Brand name-testing among focus groups.
2. Heavy investment in its call center facility and operations, with a 120,000 square foot
center designed for employee comfort and morale (including exercise and break rooms),
and training of 1,000 Egg associates.
The Egg launch in October of 1998 created an unexpected surge of demand with thousands of
inquiries, millions of website hits, and in 6 months, over 6 billion pounds in total assets of its
500,000 customers. Egg reached its 5-year goal in only 6 months, thus it reset new 5-year goals:
2 million Internet customers by 2004, each treated as an individual.
Resetting expectations, keeping customers fully informed through TV news and website updates,
Egg was able to catch up with the huge initial surge of demand, asking customers to delay
sending in checks until their accounts were opened.
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An Egg Free Zone on the website allowed for an open forum, for customer complaints to be aired
in public. Customer service did not intervene in this zone except to acknowledge the complaint,
while other Egg customers came to the rescue, defending Egg’s service with positive stories.
Later on, a direct email address was provided for customers to send complaints or queries. The
public forum Egg Free Zone worked because:
1. By complaining on the website, customers did not go elsewhere to complain, which would
have meant Egg had no control over them.
2. Customers believed they had more control over their experience because they had an
interested audience.
3. Open airing of complaints was reassuring to prospective customers. Nothing was hidden
from them.
Egg focused on becoming an Internet Financial brand. It was able to build along with the
public perception it was an Internet bank at a time when anything “Net” was fashionable.
How did Egg become a respected Internet bank in 6 months?
1. Self-service through technology
By offering customers self-service on a website where they could fill out application forms, a
call center and a “hand-holding” approach to customer service. Information on how to save
money, draw up a will, plan for your children’s education were provided on the website as
well.
2. Simple functionality
• Online customer service for savings account customers to access their balance
information, or transfer funds in and out of accounts.
• Online financial bookshop (Egg partnership with an online retailer)
• Egg Free Zone open forum for complaints and queries
3.“Free” Internet access (customers still have to pay phone bill) low cost PCs with free
installation and training home service, and a color printer, software and Microsoft Money
package.
Online banking and self-service were more profitable business models, suited to the fresh,
new, young and hip branded experience. To reach the new 5-year goal Egg offered:
• Internet-only application for savings accounts, lured by higher interest rates.
• Online mortgage application with speedier decision in principal, the customer is
immediately informed whether he qualifies for the mortgage, then sends in the paperwork
later. Offline Egg customers have to wait 24 hours for the preliminary decision.
• Lower interest rates plus airline miles and a points reward program for the new Egg credit
cardholder. Some of the Egg Card features were: online application and access to your
account, 2% cash back for online purchases at the Egg Shop (an online mall with 100
stores), no fee, 24-hour online servicing of payments, and an Internet fraud guarantee
designed to address customers’ security concerns about shopping online.
• A ‘smart search’ feature on the website where 1 query lists all merchants and prices
of one item
• A single Egg shopper’s profile used across all retailers
• The ability to order items from multiple stores in a single order.
Morphing the Egg Business Model
The first Egg business model was as a transaction portal, next it morphed into an intermediary
investment supermarket, insurance supermarket and later, an outsourced provider of financial
services.
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The Customer Revolution Page 13
Egg Invest was put up for Egg savings account holders to become investors in order to gain a
larger portfolio share of existing Egg customers, and to attract new customers who are more
interested in investments than savings accounts or credit cards. Egg Insure answered the basic
home, car and life insurance needs with the backing of parent company Prudential. Egg and
Boots followed; a partnership with the UK pharmacy chain Boots, producing a credit and loyalty
card in one. By November 2000, parent company Prudential offered its physical counter space to
Egg since customers made it clear they still appreciated face-to-face interactions.
Takeaways
• Restructuring of Egg business models (flying the plane while changing the engine)
• The position of Director of Customer Experience for Egg’s overall communications
centers and customer experiences, both offline and online, was created.
Unlike Charles Schwab, Egg has not meshed its employee compensation with customer
outcomes and satisfaction.
The following are key ideas from An Operational Framework: Measure Customer Value, Monitor
What Matters to Customers, and Deliver a Great Total Customer Experience.
8. Implement a Customer Flight Deck and Take the Eight Great Steps to a
Great Total Customer Experience.
Monitor navigation, performance, operational controls, and environment across customer
numbers, retention, experience, and spending. The flight plan is your company strategy, of
course. Creating your flight deck starts with your strategic objectives or defining your key
navigation metrics. Define Performance and Operational metrics by asking yourself what causes
them to move. Begin an inventory of measures and a process hierarchy.
9. Step One: Create a Compelling Brand Personality.
The concept for the mobile phone network ‘Sunday’ came to Hong Kong graphic designer Alan
Chan, on a Saturday, when pressed for a logo design for Mandarin Communications and up
against a deadline, he thought of the name Sunday. This was the only day he could enjoy himself
because most Hong Kong residents work six days a week. It represented a whole concept of
easy living; reinforced by intriguing, quirky, edgy ad copy like ‘You look like you haven’t had it in
weeks’. Unveiled on a Sunday, naturally, it brought a whole new customer experience of bright
colors, approachable sales staff, and pioneering services designed to make life much easier -
services that were way ahead of its competitors: Mobile Concierge, Mobile Assist, Mobile
Reporter, SoWAP, mobile banking and commerce, Mobile Cupid, Mobile Jukebox, stock-trading,
and opt-in special promotions.
Takeaways from the Sunday experience:
• Customers appreciate a brand identity that makes them feel good about themselves as
users of the service or product you offer. Base the brand identity on the way the customer
wants to see herself.
• You do need buzz to launch a brand, but it can be created in a clever way using PR as
well as advertising.
• The brand image and the buzz you create need to reinforce the customer experience.
• Carefully design every aspect of the customer experience - from the lighting within the
store, to the way the staff answers the phones.
• Monitor the quality of your customer experience with planted “mystery shoppers” to check
if the brand is consistently represented in the retail stores.
• It isn’t just the graphics; it’s the feeling of your call center, your in-store presence, Web
interaction, site navigation, and ease of use in all your channels and touchpoints - that
creates the compelling brand personality.
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The Customer Revolution Page 14
• Display of merchandise is crucial, Sunday customers were free to touch, look, feel, and
try out products and services. Customers need to feel empowered by having all the
information available to make a decision.
10. Step Two: Deliver a Seamless Customer Experience Across Channels
and Touchpoints.
A touchpoint is the type of media through which customers interact with company
representatives. These include stores, phones, faxes, email, kiosks, ATMs and the Web.
Channels are distribution channels or business relationships set up by the company in order to
deliver faster to their customers.
Snap-On Tools has single-mindedly pursued its vision of offering a consistent branded
experience to professional technicians around the world. Shop online and have the product
delivered to you by mail or by your friendly Snap-on dealer when he comes to your shop.
Customers are free to return the merchandise to the guy in the van when they see it doesn’t meet
their needs. Snap-on’s multi-channel, multi-touchpoint experience is strong because it has a
strong human touch. The company has kept simple functionality by using a single, unified product
database for all its industrial, consumer, dealer and E-market makers and channel partners with
pricing that is appropriate for each type of customer. The room for improvement lies in the
company’s dealer-centric culture. It still needs to hone in on personal relationships with its end
customers. A new CRM system will reflect what products customers buy, whether on credit, for
how much, and what issues do these specialized technicians have with Snap-on tools? With an
online tool chest for easy inventory to help customers keep track of their tools, Snap-on can look
forward to designing its CRM system from the customer’s point of view.
11. Step Three: Care About Customers And Their Outcomes.
COMPANIES WITH ‘THE RIGHT STUFF’ SEE THEIR CUSTOMERS NOT AS REVENUE
TARGETS, PROFIT CONTRIBUTORS, OR ADVERTISING MAGNETS, BUT AS PEOPLE.
Nobody can beat Charles Schwab when it comes to genuine caring for its customers. The
company only hires people who truly share in its customer-centric values: fairness,
responsiveness, and respect.
It’s the companies that focus on customers, and not market share, that will survive the customer
revolution.
A small bookshop in Ireland knows its customers so well, the proprietors can hand pick a
package selection based on any customer’s taste in literature. Kenny’s Book Club has more than
3,000 members all over the world, many of whom the proprietors know through email and
telephone.
As the new CEO in July 1999, Carly Fiorina reorganized Hewlett-Packard from a product-centric
company to a customer-centric company by prioritizing customers through consumer customer
units and business customer units. The product-generating units then supported these customer-
facing units. She added a strategic core business process - owning the total customer
experience.
Pharmaceutical companies focus on doctors, not patients. Newspapers focus on advertisers, and
not readers. These companies need to train their focus on building a great end-user, total
customer experience, because that is what matters in the long run.
At Charles Schwab, the customer-centric values are constantly renewed. These are the ways
they did it.
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1. Cement the Culture with Stories. True customer stories are captured, videotaped, and
passed around as part of the culture-building process.
2. Reinforce the Values in Writing. This was done in 1991, the formalizing of the culture-
building process.
3. Periodically Revitalize Values. Setting a 10-year goal – to serve 10 million investors and
have 1 trillion dollars in custody within 10 years – and including all 7,000 Schwab
employees in the process.
Schwab also segments its customers according to their investment styles and trading behaviors.
This is part of their keen understanding of customer needs. The company constantly tests out
new prototypes, customer scenarios, and monitors customer experiences. From the amount of
time a customer is put on hold, to the number of rings before a call is answered, to the number of
times a customer hangs up, or how quickly emails are answered –Schwab studies its customers
and constantly streamlines, adjusts, and responds.
Finally, Schwab links its compensation packages to customer outcomes, and everyone benefits
when the company’s customer satisfaction goals are met.
The real difference in how Schwab operates isn’t in the details; it’s in the essence of the
company. It’s one of the few companies we’ve found in which every employee truly cares about
customers’ outcomes.
Five Steps to Make Your Corporate Culture More Customer-Focused:
1. Start at the top with a passion for customers. Love your customers to death.
2. Focus on the Customer Experience.
3. Use Customer Measurements.
4. Measure Long-Term Customer Profitability
5. Tell Customer Stories and Instill Values
12. Step Four: Measure What Matters to Customers
Determine what tasks matter most to your customers. Put yourself in their shoes by trying out the
steps they take to contact you, find your nearest branch, search for something on your website,
download from the Web, and get help from your customer representatives or the status of their
account. How seamless is the system? Can they phone immediately after reading your Web
page? Are they passed from department to department and have to repeat the same query to
different customer service representatives?
Hewlett-Packard has a database with the information on its 20 million customers. The company
knows their needs, monitoring, and responding to them in real-time. The relatively rapid progress
that HP’s consumer business model has been able to make in shifting the organizational culture
and execution is based on 4 factors:
1. The initiative is truly led from the customer’s point of view.
2. The initiative is clearly customer-focused in objectives and strategies.
3. A strong integrated change management program is in place.
4. HP uses the Internet and Web as a transformational force in making the process changes
required.
HP’s 5-point customer satisfaction and loyalty rating system include questions like:
1. Were you satisfied with this interaction?
2. Did you get the outcome you wanted?
3. Would you do this again?
4. Would you recommend this to a friend or colleague?
5. Would you repurchase with us?
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The Customer Revolution Page 16
13. Step Five: Hone Operational Excellence
Redesign Customer-Facing Processes from the Back-End
Tesco, the UK-based global grocery chain, has seamlessly integrated its customer in-store
shopping and online shopping, keeping track of what each family bought online and off-line, and
they do not violate consumer privacy by sharing that information with its suppliers.
Another good example is evident in the words of a satisfied Timbuk2 customer:
“Just wanted to let you know how happy I am with my new Timbuk2 bag and the whole buying
experience. You guys made it so easy and your bag builder software rocks! All my friends are
digging my new bag and are planning on ordering their own. Not to knock any retailer, but do you
know how much of a pain it is to find the bag you want in the colors and size you’re looking for?
Who the heck wants to fill out actual paper to special-order anything these days? I thought it
would be cool to create a bag to my specs and not be forced to buy something someone else
determined I needed. Thank you for providing a quality product at a reasonable price.”
Issues to Master for Operational Excellence:
1. Design your back-end processes first.
2. Ensure there are no black holes, that is, no points in the process you can’t see into and
modify.
3. Instrument and proactively monitor performance of all key services.
4. Take responsibility for the end-to-end experience from the customer’s home, office, or
other touchpoint through the entire supply/value chain.
5. Monitor and manage every element that impacts customers, shortens cycle time, and
improves your costs to serve.
14. Step Six: Value Customer’s Time
Streamline decision-making by offering multiple searches, tools, product comparisons,
photos/illustrations; specify price, availability, and arrival times, provide troubleshooting access
before the sale, and design your customer scenario.
How to do Customer Scenario Design:
Select a target customer, an end-to-end scenario, and then put her in a context and walk through
from beginning to end, the end being the successful achievement of the customer’s goal. Map out
all the what-ifs and review each step. Capture the profile information, key events, objects, and
rules. Let your IT people design according to these scenarios. Let them witness the scenario first-
hand in order to design it more seamlessly.
15. Step Seven: Place Customer’s DNA (Do Not Annoy) at the Core.
Buzzsaw.com evolved into an e-market with customer’s building projects at the hub, from the
makers of AutoCAD, a complete construction planning, design, management, bidding, directory
and trading center online. All of its operations are in tune with the customer’s building project, with
real-time interaction and support. Today, Buzzsaw has more than 20,000 customer projects from
all over the world, managed remotely from the U.S.
16. Step Eight: Design to Morph.
When Should You Change Your Business Model or spawn a new one? When:
1. It feels right.
2. Your customers give you cues.
3. Would-be customers give you cues.
4. Existing partners want you to provide a service for them.
5. Would-be partners want you to provide a service for them.
6. You know you’re onto something but you haven’t quite nailed it.
7. The market begins to shift away from your business model.
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The Customer Revolution Page 17
8. Your business model is still taking shape.
Change your business on the fly. Start with an executive team with vision, flexibility, and deep
expertise, and investors willing to support that team. Develop a branded experience that
customers love and save them time. Invest heavily in functional infrastructure and processes.
Listen to customers carefully and suppliers. Watch the market. Spawn new businesses to meet
emerging customer, market, and partner needs. Educate your investors and board members as
you go. Be prepared to cut your losses and walk away from models that don’t work by closing
down or spinning them off.
17. Conclusion: Flight Plans for the Customer Economy.
The Pre-Flight Checklist
• Do you have a top executive who owns the Total Customer Experience from start-to-
end?
• Do you have an operationally efficient engine?
• Do you have a customer-focused culture?
• Do you have a strategic technology architect in charge of your infrastructure?
• Do you have a Customer Relationship Management Strategy and Architecture in place?
• Have you provided your channel partners with the tools they need to co-manage your
customer experience?
• Will your information architecture support mobile wireless devices and other interaction
touchpoints?
• Is your architecture making full use of XML, business events, objects, and e-services?
• Are you able to monitor the quality of your customer’s experiences across systems,
applications, and organizational boundaries?
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