Unleash the Power of Relationships Through Customer Culture
When we consider how Customer Relationship Management has produced underwhelming returns on investment in the luxury and retail industries, we are reminded of the story of a man looking for his house key. He is on his knees searching under a street lamp when a friend approaches and asks if he is sure that is where he misplaced the key. The man says no, he lost it over in the dark alley, but he’s looking under the street lamp because the light is so much better there.
Luxury and retail executives are fumbling in the dark too, looking to solve dismal customer and associate retention rates with CRM technology and analytics. While companies have invested millions of dollars in CRM systems and outsourcing, the investments are producing meager results.
One of the most disappointing aspects of Operational CRM is the hype and promise to deliver immediate outcomes. The techno-analytical solution is supposed to provide the answer to customer and associate retention, but it does not fix the problem. Executives and consultants have lost sight of two simple facts: First, that customer relationship building involves humans, the species otherwise known as homo sapiens; second, that homo sapiens operate in tribes, and that all of these tribes are organized under the concept known as culture.
There are many different definitions of the word culture. Most experts agree that in a corporation, culture usually means the collective way in which the team carries out the enterprise mission. This involves a written or implied set of values, accompanying beliefs, language and behaviors that are, in general, common to all associates.
Building a sustainable Customer Culture takes courage, commitment and hard work. It is solely through Customer Culture that we establish and sustain the inspirational humanistic environment that builds mutually beneficial customer relationships. The unfortunate alternative to building a rich Customer Culture is the current luxury and retail business model where nameless sales people sell luxury products and services to anonymous customers, all in the course of a one-time soulless transaction.
Here are seven simple, effective steps that the Luxury Institute is using successfully to build Customer Cultures that will dramatically increase the customer and associate acquisition, retention and referral rates of your enterprise:
Step 1: Select Customer-Centric People who Build Relationships
Luxury Institute surveys show that, at most, 15% of a brand’s customers report having a relationship with a sales associate. The average brand is in single digits. Recently, one well-known luxury CEO confided that the recycling of ineffective salespeople is one of the major reasons why customer retention in luxury is so low. The incestuous approach to selecting transactional salespeople means that while these individuals have experience in the luxury industry, they often lack the personal values to be effective relationship builders.
Selecting the right people requires a thorough interview process that focuses mostly on personal values. Business skills are secondary. Brands that create rich Customer Cultures select people who demonstrate the ability to embrace cooperation and teamwork, while also going above and beyond for associates and clients. In order to identify the best people, some top-rated brands use personality testing while others conduct extensive value based interviews. Regardless of the method, when you select people with great values, the probability that you will hire effective relationship-builders increases exponentially. High associate and customer retention rates will follow.
Step 2: Build a Customer Culture Based on Values
All individuals have a set of personal values, whether they have them written on a piece of paper or embedded in their brains. These values drive small and large daily decisions and behaviors, especially during challenging moments. Organizations must also have clear, relevant service values that guide associate decisions and behaviors when interacting with peers, customers and all other constituents.
In his book, Obliquity, John Kay makes a strong case for pursuing critical goals indirectly. Kay demonstrates how companies that seek to maximize profits often fail while companies that seek to serve their constituents often achieve the greatest profitability. The Luxury Institute has observed, through working directly with numerous brands, that while increasing sales and profits are worthy goals, they are best pursued through a focus on encouraging and measuring the positive behaviors of associates who live the service values daily.
When guided by their unique service values, luxury and retail brands act in ways that serve the best interests of associates and customers. This behavior dramatically increases the retention rates of both, thus increasing long-term profits. Profits are achieved as a by-product of a great Customer Culture, not as an objective unto itself.
Step 3: Design Service Standards that Empower Your People to Live the Values
Joseph Pine and James Gilmore, authors of the classic book The Experience Economy: Work Is Theater & Every Business a Stage, stated that future economic growth lay in the value of experiences and transformations and that selling goods and services was no longer enough. Many brand executives read the book, put it back on the shelf, and took no action. Today, consumers demand extraordinary experiences. When they fail to get them, they’re turning to Twitter, Facebook and ratings sites to share their stories.
The service values of a brand must translate into purposefully designed service standards. Service standards are the choreographed behaviors and dialogues that consistently deliver extraordinary experiences for associates and customers. The truly customer-centric brands create unique service standards for key elements of the customer experience across all channels and scale them globally. These elements include a major redesign toward customer-centricity of the following experiences: in-store, call-center, website, after sales, and the often overlooked clienteling and relationship building. Brands that create and measure service standards outperform and dramatically outbehave their competition.
Step 4: Educate Based on Deliberate Practice that Delivers High Performance
Corporate sales training programs today are obsolete and ineffective. Even the term “training” evokes what we do to animals rather than how we should be teaching human beings. Rote training does not work well for inspiring human beings to excel in roles that require finesse, diplomacy and relationship building.
In his recent book, Talent is Overrated, author Geoff Colvin takes his readers on a journey of what it really takes to achieve high-performance in any field. His book is based on studies by the world-renowned researcher, Dr. K. Anders Ericsson, who has conducted empirical research over three decades on what truly drives high performance in various domains including sports, medicine, music, creativity, and business.
High-performers engage in a highly individualized method of performance education that Ericsson calls “deliberate practice.” For the Luxury Institute, this means identifying the most critical human elements that make the customer experience unique within each brand. It also means dramatically increasing the ability of every sales professional to consistently create extraordinary experiences through education and practice, eventually leading to mastery.
Most sales associates lack a certain set of skills as they face the initiation and development of the client experience process. Some sales professionals are not good listeners or hesitate to ask clients for their personal information. Others are afraid to approach a client who is browsing or are reluctant to call a client after the first sale. Each sales professional must consistently work on the various aspects of relationship building in order to become an expert.
Three types of feedback are required in this process. The first type is feedback from the manager/coach who can evaluate the sales professional’s effectiveness as they practice or interact with customers. The second is continuous access to objective feedback from benchmark CRM metrics such as customer acquisition, data capture, retention, and customer experience surveys. The third type of feedback requires learning over time to step outside yourself and honestly, often painfully, assess your own performance. Deliberate practice is hard, but it is the only way to educate associates to deliver extraordinary experiences.
Step 5: Measure the Critical Elements of Customer Culture
In order to build a sustainable Customer Culture, you must create, measure and embrace the feedback of customer metrics. The Luxury Institute has observed that the most important transformation a brand can make is to embrace customer-centric metrics for sales teams and individuals. When brands establish individual and team customer-centric objectives and measure acquisition, data capture, retention, recovery and referral rates, the entire organization begins to shift into relationship building mode. When brands measure whether stores and sales professionals are living the service values and service standards daily, positive feedback loops are created. These drive sales and profits, not as objectives, but as the rich outcomes of highly educated and empowered human behavior.
Step 6: Align Compensation and Celebration with Values
Few human resources executives understand the science of aligning reward systems with the human requirements of the 21st century. In his book Drive Daniel Pink discusses what truly motivates humans. Pink demonstrates that carrot and stick rewards can work for simple human tasks where the work is repetitive and routine. However, for complex work such as building customer relationships, the commission-based, pay-for-performance methods that are popular today can actually decrease performance. Pink persuasively argues that in the 21st century, human beings who conduct complex work that requires creative engagement are motivated by three things: having a meaningful purpose, being empowered to have a degree of control, and having the support to achieve mastery. Most brands today have toxic compensation practices that must be modernized for today’s customer-centric world.
Brands also overlook the concept of employee celebration as a powerful and low-cost motivator. Many executives look upon recognition as an awkward event in an environment that is supposed to be serious and focused on business. Brands that embrace Customer Culture identify the benefits of celebrating personal and professional milestones and achievements as a way to create unique experiences for their associates. Customer-Centric brands also continuously find creative ways to recognize team achievements to encourage cooperative behavior. A fun, celebratory environment allows associates to reduce stress and focus on the high performance effort required in building extraordinary associate and customer relationships.
Step 7: Develop Daily Rituals that Invigorate People
Rituals are the ways that human beings recommit to values and to each other. The primary ritual of the Ritz-Carlton is the “Daily Lineup,” where employees at all hotel
locations, on all shifts, and even at headquarters, gather for fifteen minutes. During this time, one of the service values is reviewed and associates brainstorm how it can be applied today. Critical measures are discussed with an emphasis on improvement and a “WOW” story of an associate who has delivered an extraordinary experience is shared. The enthusiastic presence of dedicated leaders at every daily line-up demonstrates to associates the importance of the Ritz-Carlton Customer Culture.
To skeptics, daily rituals are a bit more like a cult than a culture. However, just like in sports and in schools, healthy rituals bind people with meaning and reinvigorate the commitment to values. We have witnessed daily rituals in several organizations that are magical and inspirational because the senior leadership truly believes in a Customer Culture. We have also seen executives destroy company practices with their lack of belief and even ridicule what their colleagues have deemed inspiring rituals. Just as close-knit families have enduring traditions, brands such as Zappos and Ritz-Carlton use rituals to reinforce Customer Culture in fun, engaging and effective ways.
The key reasons that luxury and retail brands are embracing Customer Culture is that it measurably improves revenues and profits while creating an invigorating humanistic environment for all of the brand’s constituents. Luxury and retail brands are beginning to recognize that the mantra of the 21st century is to be powerful and kind: to deliver the highest level of domain performance while creating a cooperative environment that builds enriching long-term customer and associate relationships.
Where is the proof? Luxury Institute clients who have deployed Customer Culture initiatives have increased customer data capture from 40% to 80%, increased customer retention rates from 20% to 35% and more than doubled customer experience ratings of sales associates, in one year. This translates into millions in increased sales and profits. Brands also see increased profitability from selling at full price based on custom offers and long term relationships vs. transaction-driven discounting.
Do it for your brand, do it for your associates, do it for your customers, do it for society, but most of all, do it for yourself. Building a true Customer Culture in your organization will dramatically enhance your own life experience. It will transform you from being just another business executive into a happy and thriving human being who enjoys a meaningful life with a far greater purpose than the pursuit of money. Ironically, the sales and profits will follow.
