Transcript:
Peter Crosby:
Welcome to Unpacking the Digital Shelf, where we explore brand manufacturing in the digital age.
Peter Crosby:
Hi, everyone, Peter Crosby here from the Digital Shelf Institute. Every moment of friction in the consumer journey represents a revenue risk to the organization. The trick is, knowing what those frictions are and knowing which ones to focus on to drive the greatest financial impact to your bottom line. Paula Courtney, President and CEO of The Verde Group, uses their customer dissatisfaction research to ID and quantify those opportunities and remove costly frictions from your consumer experience. Lauren and I dug in with Paula on their methodologies and use cases from their work.
Paula Courtney:
It's a pleasure being here. Thank you so much, Peter, for inviting me to your podcast.
Peter Crosby:
Of course. Many of our listeners are on the journey of connecting with and selling directly to consumers. Some of them for the first time in their company's history, some are further along on that journey. With that in mind, I'd love to start with the current state of the consumer mindset, as you've seen it in your research and engagements around how they connect up with brands. What are the experience expectations that you're seeing that should be top of mind for brands today?
Paula Courtney:
So I think one of the first things I'd like to say is that whatever your business is, make it easy for customers to buy from you. So we call it be shoppable, and what that means is having your products available. I know that sounds like crazy, but this is one of the most important or most significant problems that consumers experience, particularly during the pandemic and even post pandemic is this whole notion that the product that you're looking for is not available, or if you're a multi-channel retailer or you sell through multiple channels that it's available in one channel, not available in another, and then that's further complicated when you're pricing on different products is different. So you may want to encourage a more digital consumer so you may offer discounts if they buy online versus in store, but actually, that lack of price transparency creates confusion and creates friction for customers.
Paula Courtney:
So being seamless, being really omnichannel, and what does that mean? I mean, if you're a multi-channel supplier, if you're a multi-channel retailer, make it seem as though no matter how customers buy from you, it's a very seamless and consistent experience both in pricing and product availability, easier said than done. But the shoppability is definitely, are you easy to buy from? And then the second most important factor, and this is even when we interviewed about 10,000 customers or consumers about 10,000 in the US last year. We asked them, "What creates wow? What would you say is an exceptional experience, one that truly surprised you, delighted you, memorable?"
Paula Courtney:
And what's really shocking is that the answer to that question is really not earth-shattering, it's, do you have great customer support? So when I have a problem, is it easy for me to get recovery from you? I think that is overwhelming, the number one most difficult thing for organizations to do is provide seamless customer support, but that's all that customers want, that creates delight and surprise, is to be hassle free in how you buy and when you require support for a problem that may occur in your purchase journey.
Peter Crosby:
And so tell me a bit about Verde Group, and the work that you do there, and where data comes from. What are you bringing to the forward to know these trends? I mean, as you said, it's easier said than done, but... None of these are like, "Oh my gosh, consumers care about X," but you also see every day where many organizations are letting their consumers down and it has an impact on their business.
Paula Courtney:
Yeah. So a couple things. First of all, Verde Group's business is really all about helping organizations prioritize where they need to invest for maximum ROI. So what does that all mean? That means that although we measure and we help our clients measure and manage customer experience, we're all about the money, we follow the money. So to what extent does a particular experience translate to either growth in revenue or revenue erosion? And I think that's really important for organizations to understand that when you go out and you get customer feedback, it's not about putting bigger smiles on customer's faces, it's about connecting that experience with their desire, their willingness to buy more from you, to continue buying from you, to recommend and refer your product to others. So that critical connection is what we help organizations do. I mean, no matter how big and successful you are as an organization, you have limited funds to invest to fix what's broken.
Paula Courtney:
So we help organizations prioritize where they should fix for maximum ROI. So what does that mean? That means that we go to market for our clients with a very purposeful and deliberate interrogation of customer problems. So you're thinking, "Well, that's not sexy. Why would you go out and just focus on pain and friction and problems?" And the reason we do that is because we know that dissatisfaction is a very powerful predictor of market behavior. So when customers have problems, they will stop doing business with you. Understanding which problems they have, and more importantly, the individual contribution of specific problems on that negative market behavior is the most critical discovery for an organization and there's money to be made.
Paula Courtney:
If you can know where your problems are, that hurt you economically, then not only can you rectify them, but also understanding problems is a tremendous source of innovation, and I think that's where there's a lot of focus right now. Big buzzwords in the boardroom, innovate, digitally transform our businesses. These are the words that we hear our clients say time and time again, and yet at the end of the day, all customers want is a frictionless experience, a consistent experience. Do what you say you're going to do, fulfill your value proposition, and that's what we help our clients do.
Paula Courtney:
So where does that data come from? So two places. Not only do we interrogate our clients' customers, and we across a broad range of verticals, financial services, manufacturing, aerospace, transportation, pharmaceutical and healthcare. So we cover a broad range of industries, but also we have a very special focus in retail and the consumer side, because we partner with the Baker Retailing Center at the Wharton School of Business. For the last 15 years, we've gone to market with market studies to try to discover something new in the customer experience for retailers. And so a lot of our studies have been published in major news outlets and publications like Harvard Business Review, and Forbes, and Fortune. And so we always like to sharpen our axe and discover new things, and the last study that we did was trying to uncover what delivers a wow experience, because I guess everyone was tired of the pandemic and tired of bad news and businesses closing down and suffering financially. So we try to give some light to a really dark space that a lot of businesses have been in.
Lauren Livak:
And Paula, do you find that when you dig into how consumers are feeling about brands, that a lot of the data is there, they have ratings and reviews, or they have consumer feedback, and they're just not listening, or reading it, or consuming it, or are you also just finding new sources of data that they might not have known about?
Paula Courtney:
That's a phenomenal question. So there is no question. There is more data out there than most organizations can consume. So problem number one is a lot of the data that's available is not coalesced in a way that makes it consumable, more importantly, in a way that makes it actionable, and most importantly, in a way that helps organizations direct resources to highest return activities. And I think that's where they're failing. So data, no shortage of structured and unstructured data, it's everywhere, but is it merchandised in a way that makes it understandable, or what I call consumable, and does it direct business strategy? And that's the gap. We have so much information, we have very little insight. I hear that a lot. In fact, it's like, data insights managers are really data analysis people, but insights that drive action, I'd say that's a super power and many organizations lack enough of that.
Lauren Livak:
And where do you find the richest form of insight from the consumer? If you could pick one, where would you say that the insight you're getting from their data would be most impactful?
Paula Courtney:
Totally depends on the business. So the first question that a business would ask is, "What is the transaction frequency for our business?" So for example, we have a PNC client, and if you can imagine property and casualty insurance as a consumer, how often are you interacting with that company? Maybe renewals and maybe if you have a claim, God forbid, you have an accident or there's an insurance claim on your home. But aside from those major events, where's the data coming from for that organization to be able to understand you as a customer? So that's a great example. And it's not like insurance companies are big on social, right? I was like, "Oh yeah, let's just tweet about our premiums." It's just not a business that has an abundance of customer insight.
Paula Courtney:
So those organizations will need to be very purposeful and deliberate in how they go out to market to collect it. So traditional customer surveys would be a good form of data, a good source of data for them provided that those surveys are well executed, timed, good questions, and that's a whole science I won't get into. And then there are organizations that have an abundance of customer data because customers are transacting on a high frequent basis, those quick service restaurants or high frequency retail like Walmart and Amazon, they have more data than you can imagine, and the best source for them would be behavioral data, transaction data, what are customers actually doing? What are they buying? What's their trip frequency, basket size? What's in their basket? And then what do we know about that consumer? Age, life stage, et cetera.
Paula Courtney:
So those organizations typically have a lot of that data and that's what we call structured data. And then there's this whole unstructured noise, and that's social. Are there reviews out there? Are people telling stories? What about when they call into a call center and they talk to a rep or they talk to a salesperson? If it's a B2B business, there's a sales rep going out on a sales call and he's meeting with the customer, where's that data going? Is it going into a CRM system? How's that data coalesced with call center data, transaction data, order data? All of that. So it depends on the business and the velocity of transactions and interactions that customers have with an organization, that's where the answer will be, where's the richest source of data for them?
Paula Courtney:
But it's not so much “where's that coming from?” It's “how is it being merchandised?” How is it being sent up to the rest of the organization, to other business unit leaders, and how are they coming together to make decisions as a team? And that's where you get into elite athletes versus just pro-college, I guess.
Peter Crosby:
Yeah. And I'd love to dig into that, Paula, how... Because so often, resources are limited. You have to choose where you're going to place your bets to, as you said, reduce the friction in the consumer experience. And you really focused that prioritization around calculating that financial risk of that friction. And so can you talk us through the methodology that you used to calculate that risk and love to hear, obviously to the extent, no need to mention firm names or anything like that, but particularly in the manufacturing or retail space where you've seen that be successful.
Paula Courtney:
Sure. So the methodology that we deploy is we use traditional market research methods, both qualitative and quantitative research to interrogate on the customer experience, the cradle to grave journey, the onboarding of a customer right through to service and support post purchase, post transaction. So we do that by understanding what we call the moments of truth. What are all the different interactions where customers have an opportunity to have an opinion about the organization. So we call that the cycle of service. What is the entire cycle of service? And usually there's three parts of that cycle. There's your core product and service, what is it? You're a wireless provider, you're a bank, you're an insurance company, you're a retailer. What is the business that you're in? What is the core service that you provide to customers, and what are all the experiences that the customer has in receiving and using that core service?
Paula Courtney:
Then there's what we call the middle ring of experiences, and those are what we call the peripheral experiences. And those are marketing, sales and customer care. All the support systems that the company relies on to bring that core product and service to market, there's experiences around that and we will evaluate those experiences. And then the third level is what we call the relationship ring. And those are the things that are less transactional, less observable, and more emotional. And those are the trust that the customer has, the belief that they feel valued by that company for their business, for their tenure. So all of those are also experiences, because they're things that a company can do to create trust, to build recognition, and reward customers for that loyalty. So that's the outer ring.
Paula Courtney:
So when we collect and interrogate those experiences, we do that in a binary fashion. We simply want to know whether a customer had an experience or not. "Did this happen to you? Did you get greeted when you walked into the store? Did you receive an invoice that was accurate or inaccurate?" So it's the absence or presence of key experiences that we survey against. So that's the essence of our methodology. And then we link all of those experiences to negative market behavior. And the reason why we choose negative market behavior is because problem experiences are highly predictive of negative market action. So when a customer has a friction, when a customer experiences pain, or experiences a problem, an issue, that creates an emotional event, an attitude, that then leads to some market event, and a non-market event is an event. So not buying from you again is a calculable event that we can address.
Paula Courtney:
So what Verde Group does in this methodology is understand the relationship between the things that happen to your customer and what they're going to do as a result. And all this stuff in the middle, we ignore, which is the attitude, the cognitive expression of those experiences, we don't measure because we don't need to, because they're not actionable. If you're measuring a customer's attitude, you're wasting your time, because an attitude is something that happened after the experience and you can't change an attitude unless you understand the experience that created it. So companies can change experiences and that's what we help our clients do.
Lauren Livak:
So Paula, to bring this to life for our audience, do you have any example case studies or just specific examples where you could bring this to life?
Paula Courtney:
So this was a service organization. So they provide, in this organization, shop towels, uniforms to small businesses like restaurants, any employer that requires uniforms and soap dispensers in their bathroom. So this was the company. This was the service that they provided. They had 380 locations across the United States and they were losing business. So they had a significant profound customer retention issue. And they measured that because customers weren't renewing their contracts. And a lot of these customers were small mom and pop shops. And this business did business in a very old fashioned way. So the truck driver for this company would be the person... not only would deliver the new, fresh, clean uniforms and shop towels, but they would also collect the money for that account from the owner operator. So maybe it's a Ma's Pancake House, and she'd write the check and collect it.
Paula Courtney:
So this service rep, this driver was everything for this business. And the sacred cow in this company was that the service reps make or break our business. Without them, we have everything. So they're losing money and yet they know that the service reps are everything. So clearly there must be something wrong with that model because they're losing business. So when we went to this organization, the CEO, I'll never forget. I said to him, "Well, Steve, I need to do a study. We need to survey your customers." And he's like, "You're wasting your time. We don't want another survey because we survey our customers all the time, and they love us. We've got board rooms and our wall is filled with all these charts that show that our NPS scores are through the roof, everyone loves us, but we're not making money, we're losing money. So please don't tell me that you need to survey my customers because I already know they love us. That doesn't tell me why we're losing money."
Paula Courtney:
So that's the case study. So I said, "You have to trust me, because first of all, you're not asking your customers about their experience, you're just asking them how much do they love you? And love does not equate to business. See, satisfied customers can still defect." And he is like, "Really?" And [inaudible 00:20:40], "Yep, it's true." So he's like, "Okay, I'll take the leap of faith, go out and survey my customers in your way," and our way was to interrogate on problems. And it turns out they had tons of problems and they had nothing to do with the service rep. The sacred cow was right and wrong. So sacred cows were those mystical beliefs that executives have about their business and then they're proven wrong when you really talk to their customers.
Peter Crosby:
Yeah.
Paula Courtney:
So it was true that their service reps were really good. They were good at delivering service, et cetera. They weren't the reason why their customers were buying from them. So one of the biggest ahas, and this happened in the boardroom while presenting the findings, that their number one market damage problem were the terms of their contract. They were making their customers sign these five year contracts and they had no teeth. So the customer could opt out of that contract anytime. So the customers hated the term. That was one of the biggest problems of their service contracts. It's like, "If you just sign a one year, we'd be happier, but we don't want to sign a five year, and so we just don't sign them anymore." And so what the CEO was thinking he was doing by creating a captive audience by making customers sign these long contracts, he was doing the opposite, he was making them not sign.
Paula Courtney:
So in the boardroom, while we're presenting these findings, the CEO actually picks up the phone and speaks to legal and says, "Immediately, change the terms of the service contract." But there were a number of other items, and one was that the driver had so much to do when he was delivering and picking up that he wasn't doing... the quality checks on the uniforms weren't being done. So uniforms were being delivered without buttons or with stains, and they were just servicing way too many clients and trying to be accounts receivable, and delivery, and customer service that they weren't taking and care of the quality of their garments, the quality of the product that they were delivering to these shops. And so we pilot tested a bunch of recommendations, but more importantly, we pilot tested those high risk issues, service contract, poor quality control system in place to ensure that customers were getting better quality products, cleaned uniforms, et cetera.
Paula Courtney:
And we tested it on a location that had the highest customer defection rate, 33%, they were losing business like crazy. And they went from a 33% business loss to zero business loss in 10 months. And I remember, at the end of that program, the CEO sat me down. He said, "You priced this project all wrong. You should have done contingency pricing." [crosstalk 00:23:42] a percentage of the lift and that company did incredibly well. They were able to recover their losses and they eventually sold to a much bigger company at a very pretty penny as a result of their quality control that they put in place. So that would be an example for sure.
Peter Crosby:
Yeah. It's so interesting, Paula, because recently, I recorded a podcast with Fred Reichheld who was the creator of the NPS score at Bain and created the system, and he just came out with a new book called Winning on Purpose. And it would break his heart to hear the misuse of NPS as a, "Oh, look, someone might be willing to refer us," and unless you dig and unless you really have your listening posts out on that, it can be a misuse of... that NPS can paper over a lot of problems unless you're using it in the right way. Fred's whole new book is about that process of how you can make sure that it's actually a weapon for good and not for evil.
Paula Courtney:
Right. And earned revenue is his new metric, right? Because he's recognized... Yeah.
Peter Crosby:
Yeah. It's a really cool book to read. I recommend it to our listeners. I love that story. How about taking us into the retail world?
Paula Courtney:
Yeah. The retail one, this is a wonderful one. So this organization still exists today. They are a very high-end brand, not high-end, but a global brand, women's apparel, and I won't say too much more detail on that, but very specialty retailer. And what was interesting about this organization is they have this allure with their brand. It's got very positive... It's a very aspirational brand for young women. And so going to market with a study that basically challenges the appeal of that brand was something that was hard, but their COO was a very forward thinking leader and said, "We need to do a study. We need to understand where our growth potential is, and where there's risk in our business because we're rolling out international stores everywhere." And they pride themselves in the quality of their garments, their quality, the beauty of their products, and one of their number one problems was...
Paula Courtney:
And the CEO, I'll never forget her reaction, but the number one problem was the quality of the product was hurting them. Now, it wasn't a problem that a lot of customers were necessarily experiencing, but those that did, so low frequency from problem but high damage impact, and that's what we try to uncover. So not all problems are created equal in their ability to create risk or financial risk, there could be some problems that happen very infrequently yet create tremendous collateral damage to that brand, and this was a perfect example. So she says, "There is absolutely no way that we have a quality problem with our product, with our garments. We source our material locally, in the US, nothing's from offshore. Our quality is top notch."
Paula Courtney:
And then when we dug deeper... There are two things about quality, there's actual and perceived. So the way this retailer was merchandising their product definitely gave the impression to consumers that it was of low quality. Number one, the product was squished on the racks, okay? And they had two for one sales almost all the time where they would put garments in a giant bin, when you walk into the store, and it's like, "Two for one and 0.99 cents for this and..." So they would constantly discount their product and the way they shelved it was just to compress, not enough of room, and also the handling of the garments in the store was done in a way where a lot of customers would find dirty garments, but they were trying on, stumping with lipstick on it.
Paula Courtney:
And so all of a sudden the perception of poor quality when you're always discounting your product, it's always thrown into a bin and not out properly merchandised or properly shelved, gave the impression that, poor quality, and they would've never known this ever. None of their studies ever told them that, "Hey, let's fix the merchandising of our product, or maybe we should stop with the two for one sales, and maybe we should stop with the impulse towers by the cashier because customers couldn't even see where the line was. So all of these non-intuitive issues came to light and they were able to make some incredible immediate, low cost changes that had a profound positive impact on their business.
Paula Courtney:
This study, to give you an example, was done 15 years ago, and a lot of the leadership team is still there, and they will say, "Okay, this was a study that transformed our business, and we will never forget how we need to look at our customer experience really differently." When you hear about customer complaints, you can often get distracted and think that you got to fix those problems that customers are screaming about, but often problems that hurt you the most are what we call the silent killers. Those issues that you don't hear about, customers just don't... They don't shop there anymore. They leave.
Paula Courtney:
Line abandonment was a huge issue that we discovered. You have long lineups and customers are abandoning their garments in the line and leaving the store. And they said, "No, that's not true you. We don't believe it." So they hired a consulting firm to come into their stores and actually observe with cameras, actually observe customers in line to see if they could see that behavior because they didn't believe the study." So we were on the phone with a consulting firm and they're like, "Yeah, no, we hardly saw any line abandonment from the customers." And I'm thinking, "You know what line abandonment is? It's not physically waiting in line to abandon a purchase, it's seeing that there's a long lineup and not even getting in line and leaving your purchase. That's line abandonment." And they weren't counting that. What?
Peter Crosby:
Happens to me at every pharmacy I go to.
Paula Courtney:
And you don't have to be in line to abandon it, you just have to look at the line and see that it's so long and abandon the store.
Peter Crosby:
And throw the clothes down. Yeah. Exactly. [crosstalk 00:30:56].
Lauren Livak:
I like the example of squished clothing. I always say the stores with the least amount of clothes are the most expensive stores, because it's just the way that they're presented. But I really like that example specifically, because in the brand's mind, they were sitting and planning out how consumers were shopping and what they thought was happening in a bubble and they weren't really understanding what was actually happening with the consumer. And I think we find that digitally now as well, where it's like, "Oh, we have really great content, we're talking about our brand, we're telling our story," but in reality, you're not really understanding how the consumer is interpreting that or the context that you're giving them. And so you really need to put yourself in the shoes of the consumer in order to do that, which I think that was a great example of.
Paula Courtney:
Yeah. No for sure.
Peter Crosby:
So Paula, those are really helpful and bring the imagination to life, I think. And to close in the last few minutes that we have left here, for so many of our listeners, the consumer experience now has so many tough points involved in it, way more than they used to in store and digital, and then hybrid. It's that dreaded word, omnichannel, or whatever we're using these days. So as you think about 2022 and 2023, where are the places in the omnichannel experience that, based on your research, represent the areas of greatest opportunity or impact for leaders to be thinking about now?
Paula Courtney:
Yeah. From the research that we do and the clients that we work with, I'd say that the biggest points of failure tend to be in the connectors, in the connection between one channel versus another. And what a lot of organizations fail to think about is that... And actually, I should tell you that retailers are now moving away from omnichannel into deciding that, "We've got a digital and we've got an in store and the two shall never meet."
Peter Crosby:
Oh my gosh, please don't tell me that.
Paula Courtney:
Yeah. And-
Lauren Livak:
So that's backwards.
Paula Courtney:
It's happening. We're seeing-
Peter Crosby:
What do they think their consumer's doing when they're in the aisle and they pull their phone out and they're-
Paula Courtney:
Exactly. Right. So I think the biggest point of failure is those connectors, the connector between those various channels. And the fact that unfortunately we still have head of digital and head of store, and that's a problem, because sometimes they're not talking and they're not understanding that, that customer is the same customer that's moving in and out of those channels, and when you think digitally, you're not thinking store, and I think we need to think differently. We need to hire talent that's different in our organizations, not hire, "Oh, head of digital and head of store operations." And that's what we're still doing. And I think we're designing points of failure in our business by how we hire executives and leadership to run our different lines of business.
Paula Courtney:
We still count revenue. This was funny. I was talking to a retail, and it was hilarious. They're like, "How much money do you make in your stores versus online?" And they're like, "We don't know. We can't differentiate because when a customer orders a product online, they are shipping it from a store and it's counting it as the store revenue," but it was actually an online order. So they're unable to tell whether that order was originating from an in-store shopper or originating from an online order that came from Eastern Canada, but shipped from a Vancouver store, because that's where the store had it. So you get all these complexities and all of a sudden, you're not really able to know what's going on in your business, and where's the traffic, and where's the experience happening, and how is that experience? And then the Vancouver customer who's shopping for their canoe or kayak in that BC location doesn't have it because they ship them all to that customer in the East Coast.
Paula Courtney:
So we're seeing some of these fundamental problems happening all the time, and you would think, "What? Haven't we moved beyond those things?" So I'd say that there's still a lot of infancy in recognizing those connections between the different channels. That's number one. To answer your question, looking up to 2022, it's like, there's still so much infancy in the digital/in-store experience. And COVID made that murkier because a lot of brick and mortar retailers, that didn't have a very strong digital presence, were forced to get digital very quickly and they failed miserably and they hurt their brand, unfortunately.
Peter Crosby:
Well, time and time again, throughout this podcast, I've heard you say, "And when I spoke to the CEO, the CEO..." You're clearly making it crystal clear that this is leadership that has to happen at the sea level to know that these questions that you're asking are worth asking. I mean, you can see someone making a case for, "Oh, no, let's keep them separate, because it's just too much," but if you don't fashion those questions that are asked across those two silos of the consumer to really get these data points that can help you drive towards this financial impact analysis, then that will go on for another year or two before you realize that you've lost to your competitors if you're not asking those questions at the time.
Paula Courtney:
Yes. Absolutely.
Peter Crosby:
Yeah.
Paula Courtney:
We call that the illusion of progress when you keep asking the same questions and really... There's a lot of activity, you're measuring, you're managing, but really the fundamental changes aren't there, and so you go out, and you research, and your results aren't changing, and you wonder like, "Why?" And it's like, just because you're busy, doesn't mean you're moving ahead in the right direction. Anyways.
Peter Crosby:
Well, Paula, thank you so... I mean, I'd love hearing the passion with which you work, and also the specificity with your approach, and knowing that being able to put these things into a financial context is often the greatest way to drive change. So thank you so much for coming and bringing these stories in this approach to our audience. We really appreciate it.
Paula Courtney:
My pleasure. It was so much fun. Thank you so much for having me on your show.
Lauren Livak:
Thank you, Paula.
Peter Crosby:
Thanks to Paula for joining us. Please share this episode with your friends and thanks as always for being part of our community.
