We are frustrated. Despite years of effort across industries, customer satisfaction has only seen marginal improvement since the 1990s.

By marginal improvement, we mean it went up four points. That’s right, four.

This stagnation suggests a need for deeper cultural and operational changes to prioritize customer experiences truly. 

Our discussion in this episode revolves around four key customer-centricity levels: Naive, Transactional, Enlightened, and Natural. These stages represent an organization's maturity in focusing on customers, from the least to the most advanced. 

1. Naive Organizations focus internally and lack regard for customer needs, often viewing the customer as secondary to operational goals.
2. Transactional Organizations acknowledge the importance of the customer but treat interactions as isolated transactions, usually emphasizing efficiency over empathy.
3. Enlightened Organizations offer a more cohesive and emotionally engaging experience, understanding that customers seek meaningful interactions.
4. Natural Organizations are the pinnacle of customer-centricity, with cultures that fully align employee and customer experiences. These companies anticipate customer needs and prioritize creating memorable, personalized moments

Organizations are encouraged to evaluate where they stand on this spectrum and start implementing changes in nine core areas: people, customer strategy, systems, measurement, channels, expectations, marketing and branding, processes, and leadership. Embracing these changes may require a cultural overhaul, but the rewards include increased customer loyalty and satisfaction.

In this episode, we dive into the concept of customer centricity and explore the journey organizations must take to shift their focus more closely to the customer. The journey from Naive to Natural isn’t easy, but it is essential for brands that want to build genuine, long-term customer relationships. 

Here are a few other key takeaways from the discussion you will learn:

• Customer centricity is not just about enthusiastic service—it requires a deep cultural shift within the organization.

• Organizations must balance rational, efficiency-focused goals with emotional aspects to create a holistic customer experience.

• Success depends on how well leadership integrates customer-focused values into every level of the organization.

• The nine organizational areas identified help companies assess and improve their customer focus.

• True customer-centric brands are often those that consider both customer and employee experiences as interconnected.

• Moving towards "Natural" status requires significant effort and incremental improvements rather than a one-time overhaul.

Growth is essential for businesses. However, new customers with varying needs, preferences, and identities often accompany growth. Worse, these new customers can annoy or alienate your current customers.

So, how do you grow without making your current business blow?

Today, we explore the central challenge of growth: expanding your customer base without sparking conflicts between different customer segments. Ryan's new book, The Growth Dilemma, which Ryan co-authored with Wharton Senior Lecturer in Marketing Annie Wilson, Ph.D., addresses this dynamic in-depth, and we discuss how companies can better manage these conflicts to keep all customers satisfied and engaged.

As brands grow, they tend to attract diverse customer segments with unique expectations and behavior. This diversity can create tensions between groups, especially when one segment's actions or values clash with another's. 

For instance, a brand known for its exclusivity may see conflict when a more mainstream audience starts to adopt it, or a company that appeals to one political ideology may face backlash when it attracts customers from an opposing one.

We delve into the four main types of conflict that can arise between customer segments and explore solutions for each. For example, these brands dealt with some of them when:

• Patagonia faced a brand image shift when corporate buyers began over-associating the brand with Wall Street, diverging from Patagonia's environmental ethos. The company responded by limiting corporate orders, thereby preserving its original image.

• Younger users leave Facebook because their parents' generation heavily uses it. Exclusivity can be key to maintaining engagement from specific age groups or communities on social platforms.

• New Balance once faced a backlash after a policy stance was misinterpreted by extremist groups, forcing the brand to distance itself from these associations publicly.

Ultimately, understanding and managing these potential conflicts requires brands to identify sources of friction early on and employ various strategies to keep segments separate when needed. Segmenting offerings, using sub-brands, or creating distinct product lines are all ways to cater to different groups without diluting brand identity or customer satisfaction. 

In this episode, we also offer actionable advice on navigating the complex terrain of customer segments and brand management and setting up companies for smoother, more inclusive growth. Whether you're a business leader or a marketer, this episode is packed with insights into balancing growth with customer harmony, ensuring each segment feels valued without alienating others.

This episode also includes ways to:

• Recognize the importance of managing inter-customer relationships to foster sustainable growth.

• Understand how Functional Conflicts often arise in omnichannel setups and ways to resolve them.

• Learn about Brand Image Conflicts and how brands can address image tensions, as Patagonia did.

• Distinguish between Identity and Ideological Conflicts and why one often influences customer group dynamics more than the other.

• Gain insights into using segmentation strategies, like sub-brands or distinct service channels, to reduce conflict.

• Discover how a clear brand identity can attract and repel certain customers and why that might benefit or hinder growth.

Be the first to hear about pre-order and launch dates and invitations to exclusive book launch events for The Growth Dilemma, published by Harvard Business Review Press!

Deborah has a pickle. She is considering implementing a Loyalty Scheme but isn't sure when and how to do so. She thought we could help. 

We can help. The first question, then, is easy. Now. These things work. They don't create real loyalty, but they get people to keep buying from you, giving you more chances to earn loyalty.

It's the second question, how, that's a little trickier. 

Many companies create these programs to foster loyalty, but often, they work more as reward systems, encouraging repeat transactions rather than building emotional attachment.

For example, although frequent flyer points, like Delta's SkyMiles, incentivize repeat bookings, they don't necessarily create genuine loyalty. Loyalty, we argue, is a deeply emotional connection rather than just a series of repeat transactions.

We explore the psychological principles behind why customers participate in rewards programs and why they might hoard rewards rather than redeem them. A concept called Medium Maximization explains why people often "save" points or miles, viewing them as a bridge to future rewards and experiencing reluctance to part with them. This phenomenon works in favor of companies, as it increases customer engagement without necessarily incurring a cost. 

Additionally, the Goal Gradient Hypothesis illustrates how people accelerate their efforts toward a reward as they approach it, which is why punch-card systems, for example, are so effective.

While rewards programs have significant benefits, they can also have downsides. Complex or restrictive redemption policies can damage the customer experience, as can the use of extrinsic motivations that may unintentionally reduce intrinsic motivations. 

For instance, when a daycare chain imposed a fine on late pickups, late arrivals increased as parents viewed it as a trade-off rather than a rule. Companies should, therefore, be cautious about unintentionally undermining genuine, behavior-based loyalty with overly complicated or restrictive rewards systems.

In this episode, we discuss customer loyalty programs' true purpose and impact. Ultimately, we recommend keeping loyalty programs simple and transparent. Avoid blackout dates or complicated redemption processes, as these can frustrate customers and reduce the program's value. At their core, loyalty schemes are tools to encourage spending rather than create loyalty, so Deborah—and you—should design them with that goal in mind.

Additional Takeaways to Listen for In This Episode:

• How extrinsic rewards, like points, can decrease intrinsic motivation and affect customer behaviors.

• The importance of aligning a rewards program with customer behavior patterns and preferences.

• How Idiosyncratic Fit influences customers to engage more deeply in programs where they feel they have an advantage.

• Examples of how poorly designed loyalty schemes can backfire and damage customer relationships.

• The pros and cons of different reward types, like points versus cashback, and how this impacts customer satisfaction.

• Understanding competitive rewards programs can help you refine your offering to stand out.

Why do customers tell you everything is fine when you ask them face-to-face but then give you a less-than-optimal rating later in a survey? Is everyone duplicitous, or are customers stricken with experience amnesia as soon as they make it to the car park?

It turns out that it is neither a character flaw nor a medical condition that causes it. We explore what does in this episode. 

Let’s face it. It’s a frustrating issue that can make getting accurate and timely customer feedback hard. We begin with a real-life example: a restaurant experience where Colin and his friends told the manager everything was fine with their dinner despite a long wait for food. Later, they reflected on the experience more critically, but the moment to provide that feedback had passed. 

Colin blames it on being British. That may be part of the cause, but other things are happening here, too, and it isn’t uncommon. 

Our listener, Dave Hillman, has encountered this dilemma in his business. His customers express satisfaction face-to-face but provide lower scores on feedback surveys. Why does this happen, and what can businesses do to get more upfront and honest feedback?

We unpack several reasons why in-person feedback can differ from post-experience feedback. We explore factors like the fear of conflict, the desire to avoid awkwardness, and how personal guilt can deter customers from raising issues. We also look at how companies might unintentionally make it harder for customers to share feedback at the moment.

Anonymity, timing, and how feedback is solicited also play significant roles. For instance, collecting feedback immediately after the experience can result in more accurate data as perceptions change over time. We also discuss how phrasing questions differently in person versus on surveys can lead to varying responses.

In this episode, we also provide strategies for businesses to balance both types of feedback—immediate and delayed—and ensure that all input, regardless of when it arrives, is valuable and actionable.

In this episode, you will also learn:

• The cultural reasons behind why people avoid giving critical feedback in person.

• How post-experience reflections, like a football match example, shift perceptions over time.

• The role of sampling bias and how it can skew survey results.

• Why anonymity encourages honesty and how it lowers personal costs in sharing feedback.

• The importance of identifying what truly drives value for customers to guide feedback collection.

• The benefits of using independent third-party surveys to remove bias and get more accurate results.

Let's talk about government and Customer Experience. It might surprise you that government and Customer Experience have a tighter relationship than you think. 

Many organizations, particularly in the private sector, recognize the importance of providing great experiences to keep customers satisfied and loyal. But should governments do the same for their citizens? Can a well-run government improve societal well-being by focusing on efficiency, transparency, and user-friendly services?

In this episode, we explore the government's role in delivering experiences to citizens through essential services or regulatory actions that impact organizations and their customers. Historically, a poorly managed experience with the government has significant consequences (cue: the Boston Tea Party). But beyond extreme cases, day-to-day interactions with government agencies also influence our quality of life.

We start by asking why government agencies should care about CX at all. Using real-world examples, such as the surprisingly smooth process of renewing a passport or the convenience of services like Global Entry at airports, we see how an efficient government improves employee morale and public satisfaction. Plus, efficient government departments can save money, attract top talent, and increase citizen trust.

Beyond service delivery, governments play a vital role in regulating experiences for private companies. Markets can become exploitative without proper regulations, leaving customers vulnerable to poor practices. We look at examples of beneficial regulations, like the Truth in Lending Act, which protects consumers from misleading financial products, and the Americans with Disabilities Act, which ensures accessibility for all. 

However, regulation is a delicate balance. Too little oversight can lead to exploitation, while too much can stifle competition and innovation. Some laws—like those that mandate thousands of training hours for hairstylists or forbid self-service gas stations—seem overly restrictive and detrimental to the customer experience. Finding a middle ground that protects consumers without creating unnecessary barriers is key.

Join us as we discuss governments' critical role in shaping experiences and why every government, like a business, should aim to improve the CX it delivers to its citizens.

More Key Moments in the Discussion: 

• How efficient government services influence national life satisfaction.

• The impact of "bad profits" in the financial sector and their regulatory solutions.

• Why governments can't afford to ignore inefficiency for long.

• Examples of overregulation stifling innovation in U.S. states.

• The link between government CX and economic growth.

• How the White House's consumer protection initiatives aim to improve daily life.

Taking unproven routes can lead to exciting new possibilities. However, it could also lead to potential failure. That's what makes life interesting, isn't it?

 Optimistic thinking has led to groundbreaking achievements, like the moon landing in the 1960s. However, it's important to strike a balance between hope and realism. 

In today's episode, we explore the concept of optimism bias and how it plays a role in the "AI Hype Cycle." We discuss the pros and cons of optimism and why it can be risky and rewarding. 

For those of you who don't watch MBA videos as a hobby, this video summarizes the Hype Cycle's importance and how it relates to the recent trend toward leveraging Big Data. 

So, what is this hype cycle we keep referring to?

 The Gartner Hype Cycle maps out the lifecycle of new technologies, including artificial intelligence (AI). Starting with initial media excitement, the Hype Cycle often leads to inflated expectations, followed by disillusionment as challenges arise. However, innovation doesn't stop there. As understanding improves, we reach a more balanced "slope of enlightenment," eventually leading to the "plateau of productivity," where technology adoption becomes more widespread and realistic.

The discussion touches on AI's current status in the Hype Cycle, questioning whether we are at a turning point where initial optimism is waning. Some organizations overestimate the short-term benefits of AI, hoping it will be the silver bullet to solve all their problems, only to face disappointment when things don't work out as expected. 

Like many other innovations, AI is more complex to implement than initially imagined, and optimism can sometimes blind organizations to its true limitations. Managing expectations is key: while optimism is necessary to drive change and innovation, one must temper it with caution and realistic planning. 

Ultimately, this episode encourages listeners to temper optimism with practicality regarding new technologies like AI. Small, calculated risks are encouraged, but organizations should avoid placing all their bets on one solution. Balance is key to navigating the Hype Cycle successfully.

More Key Points Discussed in This Episode:

• Understanding the pros and cons of optimism bias in business decision-making.

• An overview of the Gartner Hype Cycle and how it applies to AI.

• Why the initial excitement around AI may not meet short-term expectations.

• The risk of overhyping new technologies and the consequences of inflated expectations.

• The importance of balancing optimism with realism in the implementation of AI.

• Strategies for navigating the Hype Cycle without falling victim to disillusionment.

Over the course of three years, Maersk Line improved its Net Promoter Score (NPS) by an impressive 40 points, resulting in a 10% increase in shipping volumes. Even more remarkable, this growth occurred during a global shipping decline. 

But can other companies replicate Maersk’s success? Or are case studies like this more cautionary tales than roadmaps?

We explore the value of case studies in business, particularly how they can be used to highlight the application of concepts and theories in real-world situations. 

The Power and Pitfalls of Case Studies

Case studies are powerful. People love stories, and case studies tap into this by offering relatable and engaging narratives that illustrate both challenges and solutions. For businesses, they’re a great way to demonstrate bona fides to clients and showcase what can be achieved through strategic change.

However, case studies have their pitfalls, too. Maersk’s results were exceptional, but not every company is positioned to follow the same path. 

In the Maersk example, the company was at a unique juncture—facing market pressures and a history of mergers that led to a decline in Customer Experience. Their leadership was open to new ideas, and they had the right project manager in place to lead a global CX transformation.

The pitfall is many companies believe they are the same and will get the same results because they too are having a problem in Customer Experience. However, the specifics of one company’s success may not translate to another unless the conditions, challenges, and resources are aligned.

In this episode, we discuss why case studies are best used for inspiration and education, not as one-size-fits-all solutions. It’s crucial to extract the underlying principles—like customer focus and strategic leadership—rather than overgeneralizing from one company's experience.

In this episode, we also explore:

• The origins of using case studies as a teaching tool in business schools.

• How benchmarks are created and why they can be risky when generalized.

• The role of mental models in simplifying business decision-making.

• Risk aversion in organizations and the desire for examples to follow.

• The "silver bullet" mentality and why people seek easy solutions.

• The dangers of using case studies as the sole resource for business strategy.

If there is one thing that academics know how to do, it’s publish new research. It seems that umpteen studies are published every hour. It can be overwhelming to keep up with it all. 

So, we undertook it to help you with this week’s episode. 

We explore three fascinating studies in the realm of consumer behavior with insights from Dr. Morgan Ward, a Professor of Consumer Behavior at Emory University. From the influence of sound on social status to the role of streaks in motivating behavior and even how firms should use AI to deliver news to customers, this episode provides a wealth of information for businesses looking to understand and serve their customers better than they do today.

Social Status and Product Sound

Dr. Ward’s research delves into how consumers choose products based on the sounds they emit, linking these choices to social status. The study finds that people often seek status through two main channels—dominance and prestige. Some customers buy noisy products, like a Harley Davidson, to assert dominance, while others opt for quiet, high-end products, such as Dyson fans, to signify prestige. Ward emphasizes that understanding the status-seeking motivations of your target audience can help businesses design products that appeal to specific social power desires.

 Key Takeaway:

Customizing product sounds can signal social power, appealing to customers' status-seeking behavior.

The Gamification of Behavior Through Streaks

Ward also discusses the role of streaks in consumer behavior, particularly how brands use streak-based incentives to encourage continued engagement. Apps like Duolingo, Snapchat, and Headspace all capitalize on the idea of maintaining streaks to motivate daily usage. However, there are tradeoffs. Extrinsic motivators like streaks can sometimes overshadow intrinsic motivators, leading to a decrease in overall enjoyment and, ultimately, participation. Ward warns businesses to consider when streaks are appropriate carefully and to balance the motivations that drive consumer behavior.

Key Takeaway:

Streak-based gamification can motivate, but businesses should carefully balance extrinsic and intrinsic motivations.

AI vs. Human Interaction:

Finally, Ward shares research on when companies should use AI versus humans for customer interactions, particularly around delivering good or bad news. Interestingly, the research suggests that AI should handle bad news because customers perceive it as more impartial. In contrast, a human best delivers good news to create a personal connection. These findings affect how businesses structure customer service strategies and use AI.

Key Takeaway:

AI is better suited for delivering bad news, while human interaction is more impactful for delivering good news.

Additional things you’ll learn in this episode:

• How cultural differences affect consumer status-seeking behavior.

• The psychological impact of losing a streak and how it influences future behavior.

• Why some products benefit more from gamification than others.

• The future implications of AI-human interaction in customer service.

Colin doesn’t sit in aisle 13 when he flies on an airline. It’s silly but true. He also fancies his red knickers on days when he is speaking in front of large crowds. 

While this errs on the side of too much information, it also foretells the topic of this week’s episode: superstitions and how they influence our decisions as customers and otherwise.  

Many of us hold on to irrational beliefs that are common sense, even when they defy logic. Airlines, for instance, often skip row 13 because of widespread discomfort with the number, including Colin’s, despite no real reason to avoid it. 

But how do these seemingly irrational habits affect customer behavior, and what can businesses learn from them?

Customers often engage in superstitious practices, particularly when they feel powerless over a situation. Colin recounts a story of Asian customers choosing construction equipment based on serial numbers they considered lucky. In this case, selecting a machine wasn’t just about quality or functionality but also about seeking control over the unknown. 

Humans are pattern-seeking creatures. Our minds are hardwired to find connections between things, even when none exist. Superstitions help people feel like they have some control, which influences customer behavior. 

While some superstitions, like avoiding row 13, are passed down culturally, others are more personal. For example, the host tells a story about football fans ordering fries at a pub, believing it would help England score a goal. While everyone knew it wasn’t logical, the collective belief became a fun ritual.

Superstitions also manifest in business. Companies sometimes hold onto outdated practices with no rational basis. The host shares an example of an advertising agency insisting on a six-word phrase at the end of ads, not because of any research but simply because "that's how it was always done." These business practices, like customer superstitions, can become embedded over time without questioning their effectiveness.

In this episode, we discuss why businesses should understand and acknowledge that customers and companies aren’t always logical. We also explore how accommodating these irrational beliefs can lead to better customer experiences. Rather than dismissing superstitions, companies can work with them to create a more comfortable and personalized environment for their customers.

 Additional things you’ll learn in this episode:

• How mental models shape customer behaviors

• The connection between biases and superstition in decision-making

• Why businesses often cling to irrational processes

• How to spot and eliminate unnecessary "superstitious" practices in your company

• Ways to accommodate and even leverage customer superstitions for a better experience

Hurricane Debbie dumped 17 inches of water in Colin's home. 

It was a traumatic experience, from wading through the murky water to the neighbor’s house—hoping not to encounter the alligators that usually hang out nearby—to watching a team of 12 recovery professionals sweeping through and gutting what remained inside after the water subsided. The experience has been emotionally draining, especially since they didn't have flood insurance, making the cost of repairs overwhelming.

It exposed the emotional nature of these circumstances and reminded us of what is important when treating a distressed customer. This episode explores the Customer Experience lessons learned along the way. 

The story begins with the frantic search for help after the flood. With no time to gather multiple quotes, a friend recommended Servpro, a disaster recovery company. While Servpro did a great job, one small misstep—using the term "demolition"—upset the host's wife, highlighting the importance of language and empathy in high-stress situations. Despite the upsetting circumstances, Colin and his wife appreciated the team's professionalism and sympathy.

We also touch on a less positive customer service experience with the cable company. While their technician was helpful and empathetic, the initial process during the phone call didn't consider the host's extreme situation. The rigid, unempathetic procedure highlighted how companies, like the cable provider, can improve by empowering their employees to handle unique circumstances flexibly.

While getting coffee, the lack of empathy from a cheerful barista served as another example of how businesses can fail to acknowledge customers going through difficult times. While we recognize that coffee chains do not specialize in disaster recovery, it was still a missed opportunity for them to show empathy in a moment requiring more than routine friendliness.

A frustrating visit to a self-storage facility was another eye-opener. The company had implemented a tablet/virtual receptionist system, which lacked the human touch, particularly during hurricane season when people needed help the most. Companies should be prepared to offer a more hands-on, empathetic approach to meet heightened demands during extraordinary times.

The episode is a call to action for companies to build flexibility and empathy into their Customer Experience strategies, especially during times of crisis. Businesses that show genuine concern for their distressed customers during challenging times will create loyal customers for life, while those who don't may lose them.

In this episode, we also dive into:

• The emotional toll of disaster recovery and its impact on Customer Experiences.

• How language choice can impact a customer's emotional state.

• The importance of empowering employees to handle unique customer situations.

• Why self-service solutions may fail in high-stress scenarios.

• The critical role empathy plays in building customer loyalty, especially during crises.