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Hidden Edge ClubCustomer Intelligence Insights: February 2016

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The Club

The Hidden Edge Club connects senior executives from market-leading organisations to explore new avenues for driving world-class customer experience through analytics. We gather quarterly to share experiences, insights and bench test current thinking. As always, the club meets under Chatham House Rule – what happens here, stays here – to create a confidential environment for new ideas and insight-driven discussion.

The Club meets locally, whilst connecting globally. We gather when there’s something to say, doing so at discrete city-centre private dinning locations. On this occasion, the club united top finance and marketing executives to explore best practice for driving commercial growth through improved customer intelligence.

This document captures the discussion from a high level, exploring a few key outcomes from the night. As dictated by club rules, all quotes and insights have been anonymised and no idea is attributed to any one person.

Hidden Edge Club

The Club united 14 senior leaders from across industries to explore winning strategies for driving commercial ROI on customer experience initiatives.

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Chairperson

The chair for the evening was Paul de Laat, Group Customer Insight Director at John Lewis. As a trusted organisation development individual, he is responsible for driving the use of customer understanding to deliver value to and from customers across the Waitrose and John Lewis Partnership. With more than 20 years of experience, Paul has directed Customer Value Strategy programmes for large-scale organisations such as Lloyds, Vodafone, Orange and Telefonica.

Partner

The Club is funded by SAS, the leading provider of business analytics software and services. They bring to the discussion four decades of experience working with customers at more than 75,000 international sites to make better decisions faster. Their clients rely on their innovation, expertise and business intelligence to transform data into insights. Their market leadership is recognised by thousands of leading businesses, government and university organisations, making them the ideal partner to the Hidden Edge Club.

Guests

Invitations for this event were extended exclusively to finance, digital and marketing executives from the private and public sectors. They included COOs, CFOs and directors and heads of finance, operations, retail and digital. Industries represented include: Retail, telecoms, gaming, financial services & insurance and utilities.

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For our second dinner of 2016, we asked senior leaders about the commercial value of the customer experience in their organisations and explored just how far they are seeing a shift in influence from the business to the customer.

Indeed, a recent PwC report estimated that companies could see a margin improvement of up to two thirds if they could obtain every possible insight from their consumer journeys’ and apply those to their strategies.

‘60% of companies could see a margin improvement of up to two thirds if they could capture and utilise all accessible insights from their own customers’ journeys’ (PwC)’

The shift in influence from the business to the customer has come quickly in a trend Gartner calls the consumerization of retail. But forward-looking business leaders are looking to close this gap at the intersection of personalised customer value and commercial return.

It’s no secret that investing in the customer experience has the potential to drive business value. But in reality, senior decision makers are finding it difficult to balance the increasing demand for personalisation against the return in business value. Obtaining customer insights on this scale can be a severe drain on resources, so there is often a reluctance to invest in customer personalisation if delivering ROI remains uncertain.

So, how are senior leaders mapping customer experience strategy to drive future value? And, how will they prove ROI to a data-driven boardroom?

Today’s most forward-thinking organisations are going beyond a quantitative view of their customers, opting for an enhanced picture of each customer’s real behaviours.

Companies able to assemble these larger swathes of the ‘customer genome’ can achieve revenue increase of 10-20%, according to a recent McKinsey report.

The amount of data generated through daily customer interactions has the potential to provide profit-driving insights. But, more often than not a majority goes unnoticed. In fact, a recent Forrester survey of industry leaders found their companies use a mere 12% of the information they could access. McKinsey found this number to be even smaller at a staggering 1%.

So, what steps are you taking to utilise your data to plan effectively for the next 5 years? What are you missing?

Today’s most critical challenges don’t become tomorrow’s great decisions based on ‘gut feelings’. Being well into the digital revolution, this isn’t a secret to today’s leaders, with 85% of CEOs saying they often or always rely on customer-insights when making key decisions (McKinsey).

The Value of Customer ExperienceEach Dinner Discussion topic is the result of previous discussion outcomes, recommendations from existing members or the result of new research. Each topic is researched by the Seraph Sphere team and validated with existing members and partners. The evening’s topic description can be found below.

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Proving ROI on the customer experience

All guests had an interest in exploring best practice for determining overall value of complex CX strategies. The most important element here was how leaders are predicting the ROI of initiatives before implementation, allowing for the most up-to-date, agile approach to marketing initiatives.

Signals in the noise

Guests are also interested in understanding how industry-leaders are structuring unstructured data and using it to generate actionable insights that will improve their bottom-lines. They want to understand how they can get to the stage where they have full visibility over their operational functions and a clear, insight-driven strategy for their upcoming marketing goals.

Winning boardroom support

Winning boardroom buy-in through data-driven initiatives was another key topic of interest for most guests. The key question here was how to make the business case for improved analytics.

Uniting ChallengesBefore each dinner, we interview guests to gain a better understanding of their core challenges around the discussion topic. As with dinner discussions, this information is protected under Chatham house rules and is presented here in a high-level only.

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At our last customer intelligence dinner, the group discussed insight, data and decision making. So, at this meeting, we explored the next level to creating smart customer experiences. Guests on the night were all from large companies, which for the most part, had captured the necessary data for creating a single customer view across multiple channels. The question of the day, was what to do with this information that Paul referred to as the ‘average customer’.

“My team is doing the difficult analytics to make a guess about the next hot product. But when the audience doesn’t want what you’ve guessed, it doesn’t matter what your lists say.”

However, it was quickly apparent that many guests, Paul included, were sceptical about the usefulness of determining who the average customer actually was.

Instead, It is much more important to delight and deliver for the top 5%, or wherever the majority of your commercial value comes from.

“How many have tried to ask customers what they really want and how they want it? All it takes is a conversation with your top 5%.”

The idea that pleasing the top spenders can create a trickle down effect to other buyers is called ‘halo effect’ – if you please the top 5% they will influence others in the ‘halo area’ and increase revenues. If you do the right thing with at 5%, the halo effect is noticeable, according to Paul.

Paul began the group discussion with the question: Do we agree that the average customer is a bad place to start?

Paul De Laat

“Designing for the ‘average’ customer will only ever give you average products. The ‘average’ customer does not exist…you’re not trying to boil the ocean and please everyone. Pick your specific group.”

Opening Remarks

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Starting with the Average

One guest from the gaming sector began the discussion in agreement with the chair. At his organisation, they work hard to identify the top spenders, find

out exactly what they want and deliver for this group in the hopes that their demands will mirror those of others within their segments.

“In the banking sector, the average customer is actually a great place to start.”

However, in the banking sector, guests disagreed with this idea, saying for this sector, the average customer is actually

a great place to start. The priority is to ensure customer service initiatives are meeting the most common needs

first. Then separately, you can understand the needs of wealthy customers who prefer face-to-face interactions.

Furthermore, several guests found even basic segmentation to be nearly impossible within their

organisations. One guest in the insurance sector said the nearest thing to strategy they had was a ‘spray and pray’

methodology as the driver for new customers is a life transition of some sort – which is nearly impossible to track and use as

a segmenting characteristic. This pain was also felt in the ‘fast fashion’ sector of retail, with one guests sharing that top spenders sit

in a variety of demographic segments, making it difficult to segment well.

Though there were some divided opinions on the merit of designing for the average customer, most agreed that prioritising needs for the top

spenders was a reasonable place to start. Even if this area didn’t encompass the majority of customers, the needs of those who use your product or

service most of the time can be considered to be the most knowledgeable and important.

“The top 1% of our business drives the top 50% of net margins. Therefore, we listen to what they want. They are a good place for us to

start.”

“It’s not doing surveys on the internet. It’s talking to the highest spenders in person to see what they want. The trickle effect is that everyone wants the same thing as the top 5%.”

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“The amount of goodwill you create by asking people and making them a part of the design process is incredible.”

Engaging with the top 5%

Next, Paul asked the questions: What’s the best way to engage with the 5%? Face to face? Surveys? And, how do you use this exercise to build loyalty?

For traditional marketers, used to a one-sided story where they are in the drivers seat, it can be an intimidating change. But according to several

guests, these outdated processes need to be turned on their head. The new customer engagement story must be a two-way conversation.

Guests agree that asking customer what they want is be: this is what the customer told me they want, combined with inferences I’m able

to make (though these are of lesser value than what they say); Now, I need to build a portfolio of offerings for them. “It’s good

segmenting.”

“It’s not doing surveys on the internet. It’s talking to the highest spenders in person to see what they want. The trickle effect is that

everyone wants the same thing as the top 5%.”

Engaging personally with the 5 percent can often be a resource consuming task that many guests would prefer to outsource to a

market research agency, However, these companies often carry out research activities anonymously, which most acknowledged

as a missed opportunity to create good will amongst top spending customers.

“In gaming…we have to create loyalty even though we both want to rob each other. Offering bonuses goes a certain

distance, but then you have to create loyalty in another way.”

One guest from the gaming sector outlined the challenge of gaining and maintaining loyalty in an industry where competition is huge, disruptors are

relentless and where they and their customers are constantly trying to take each others’ money. In this situation, the marketing team was tasked with identifying exact

triggers are to make people feel happy and continue using their site, even when they lose money.

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Driving Future Spend

“The top 5% can be influencers. If we can really deliver to these customers, they’ll bring others with them.”

How are we measuring this? How do you identify customer experience changes that smooth out the experience and link the usually siloed areas?

For one of our guests from the retail sector, the trick is to develop, nurture and listen to their community following. This organisation identifies those

who are most active and interested in inspiring and engaging others, then works to make these individuals influencers for the rest of the

community.

“You can have all the data in the world, but if you have a boardroom that doesn’t believe in good

customer journeys, you should probably look for another job.”

At this point, dinner arrived and Paul concluded the discussion with a word about the importance of boardroom

support, evidence and also innovation. Paul was at Waitrose when the company implemented the customer loyalty scheme

that included ‘pick your 20% off items’ and a free coffee and newspaper. Though he was initially unconvinced, the boardroom

supported it and the evidence came later.

“[On the Waitrose scheme] I thought, ‘Oh no. This is going to be bad’. Which just shows, you can’t prove everything

with data. Someone at the top has to say, ‘this is the right thing to do’. Then you can measure success afterward

Sometimes it’s only with implementation that you can measure the success of an initiative.”

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Join the Debate

Do you want to join the debate? If you’re a senior decision maker within an enterprise-level organisation we would be delighted for you to join us. During 2016, we will be hosting dinner meetings on a quarterly basis to discuss key operational challenges in the market. For further information and to apply to join us visit our website www.hiddenedgeclub.com or contact club manager Lindsay at lindsay.pope@hiddenedgeclub.com.

Chair a Dinner

We are always looking for new leaders with interesting perspectives and experiences to chair these dinner meetings. If you or somebody you know would be an ideal chair please contact us. Alternatively, if you have a topic you feel the Club should debate please also drop us a line via the website.

Want to Know More?

The Hidden Edge Club is operated by the team at Seraph Science, based at Marylebone in Central London. If you would like to know more about the Hidden Edge Club or any of our other clubs you can reach us on +44 (0) 20 3322 6788 or at our website www.seraphscience.com.

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