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Outsource magazine: thought-leadership and outsourcing strategy | August 24, 2017

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Q&A: Don Peppers, Peppers & Rogers

Q&A: Don Peppers, Peppers & Rogers
Outsource Q&As

Don Peppers is one of the world’s foremost authorities on customer-focused relationship management. With his business partner Martha Rogers, he is the author of several game-changing books on relationship management and the customer experience; Outsource caught up with Don to get some invaluable insights into the state of the space in 2010…   

Outsource: Don: let’s begin with a quick look at your career up to now. How’ve you come to be regarded as “one of the leading authorities on customer-focused relationship management strategies for business”?

Don Peppers: My partner Martha Rogers and I together have written eight books together, all concerned with the issue of customer relationships and the customer-facing side of business – not so much the brand issues involved in managing a business, but the customer-relationship issues. Our first book, The One-to-One Future, is widely credited with having kick-started the CRM revolution; I think that created a firestorm of interest. We’ve continued to drill down and unpeel all the layers of the customer-relationship onion one at a time. It is for us still a very fascinating topic. We’re even working on another book right now. We live in marvellous times – I wish I were 15 again today, with all the technologies now becoming available! Just observing it is an awful lot of fun, and highly challenging intellectually.

We wrote that first book in 1993 having started working on it in January 1990. At the end of that time period nobody really knew what interactivity would look like – or how marketing would be changed if marketers could interact individually with customers on a more cost-effective basis; rather than having to meet with them personally, of talking on the phone with them personally, what would happen if you could interact on a much more automated basis. People felt that interactivity was going to arrive in the form of fibre-optic cables connected with a box on your TV, and you’d see a commercial and you’d push a button on your remote control which would print a coupon – and that would be interactivity…

Our feeling was that interactivity would mean that customers could initiate conversations, and that they’d be interested in talking to other customers, and that customers would not just be consumers of media but producers of it too. We felt that interactivity was effectively two-way, and that that two-way nature of it wasn’t fully grasped in the marketing community – which was based on one-way mechanisms.

I think that piece of insight could be coupled with another way of looking at it: we visualised from the very beginning the task of marketing in a two-dimensional space. Think of it this way: there are two things you need to do in order to be able to compete. You need to be able to satisfy a need in a customer; and you have to have a customer who wants that need to be satisfied. If I have those two things, I have a business. Traditional marketing was always focused on just one of dimensions: I can satisfy a certain need, so now I want to find as many customers as I can who want that need to be satisfied. That’s brand-centric marketing: here’s what I do, so who wants it?

But if you could look at that from the other direction and focus on one customer at a time, you could try to satisfy as many of that customer’s needs as possible over the lifetime of your relationship, and that’s customer-centric marketing. It’s really a different dimension of competition – and it’s fuelled a lot of our thinking about what’s happening from a technological standpoint.

O: Looking at contact centres specifically – and bearing in mind the developments in marketing strategy you’ve just outlined – do you feel that customers are experiencing real customer-centric marketing at present? Do you think perhaps a degree of customer trust has actually been lost by call centres?

DP: The reason there’s so much less trust in call centres than there was – even though call centres are obviously much more efficient and ubiquitous than they were – is that the task of automation was approached from the wrong dimension. Constantly, call centre managers are asking themselves, “how do we install this IVR or voice tree to handle calls more efficiently, to reduce our cost?”

And in fact, what ought to happen is, they should ask, “how can we install this automation to better serve our customers – to get customers served faster, more cleanly, more efficiently, with less trouble? If we do that, we also will be more efficient – and we’ll sell more stuff!” We sometimes say that they’re looking at the task through the wrong end of the telescope, because they’re so focused on their own costs that they forget that customers are extremely annoyed, extremely annoyed…

There are a lot of surveys done on the state of call centres today – and justly so. I have a presentation with the title “Push ‘1’ to Get Lost”: customers find that call centres are all about the company, and not about the customer. They’re very irritated. Of course they don’t trust them. Don’t forget one of the essential elements of trust is your degree of self-orientation – your selfishness. The more self-oriented I think you are, the less I’m going to trust you.

And that’s why customers don’t trust advertising, because they know advertising messages are designed to relieve them of their money. They don’t trust that they’re truthful; they get what information they can from them but they don’t trust them. When you see an IVR where it’s impossible to find a human voice, and the IVR is not set up to find a problem that you’ve got personally, I think people’s annoyance rapidly moves into mistrust. They think “these guys are only out for themselves” – which in fact they were, when they set the system up in the first place.

My guess is that when you can’t trust a system like that, if you drill down into the internal methods of the company, the system was designed so as to reduce costs, and there may have been some attention paid to customer service – but the attention would have been as a constraint. They would have said “let’s reduce costs as much as possible, and not reduce customer service below this particular given measure”. As opposed to the other way around, which would have been very customer-friendly, and which would inspire trust. But companies don’t do that – for whatever reason.

O: Do you think there’s a movement towards doing that kind of thing correctly? Or are we so focused on cost-reduction that we’ve just accepted that the sacrifice is going to be made in the area of customer experience?

DP: In any capitalist competitive system I think you’ll see some good companies with good practices which will be imitated over time by other companies with bad practices. I think you’ll see some interesting stuff. For instance, you’d be hard-pressed to find a more customer-friendly interactive architecture than what you’d find at Amazon. Their service comes through even if their terrifically useful online tools don’t prove sufficient to handle a problem and you need to put a call in: you can almost feel the friendliness and confidence on the other end of the line. When you need to talk to a person, they talk to you. Every time a customer talks with a good, trustable firm their expectations of the next business, the next call centre, they speak with go up. Over time things will improve.

What’s really happening in the world now is that customers are much more in control than marketers think. Marketers used to be in control: it was a command-and-control marketing structure where I control my brand, the brand message; I control every word in the press release I put out. Now with social media, customer review sites and so forth, customers are increasingly finding themselves in charge, and most companies realise this with a start, as a result of some kind of service disaster.

O: Do you find that the same for business-to-business products as with consumer?

DP: Well, I think it matters where you are, and what industry you’re in. I do think that in the B2B space there is every bit as much curiosity on the part of the buyer about the quality of a product or service delivery. But don’t forget, because it’s B2B and purchases are generally larger in magnitude, the cost of actually picking up the phone and calling a couple of people who might have been customers, as references, is not huge. It’s something I might do if I were buying a new steam boiler from someone I’d never met before; but it’s not something I’d do if I were buying, for example, a new suitcase. In a sense B2B organisations have always done this kind of customer reference checking; are they doing it online also? Probably: but the relative costs are so small that checking can be done manually.

O: How can organisations measure success in the customer experience – and is that measurement getting more sophisticated?

DP: That’s a good question. I think there are two measurements a company needs to make. One, you need to interact as efficiently as possible; but you also want to have as much effectiveness as possible. Efficiency here means you want to drive interactions into more and more automated spheres; that drives your cost down. But effectiveness means you want the interaction to solve the problem or meet the need of the customer, as quickly and effectively as possible.

Most measurements that I’ve seen in call centres are overwhelmingly pitched towards cost-efficiency rather than towards effectiveness. Part of the problem with this is that cost-efficiency is easy to measure: you measure it in dollars and cents, or pounds and pence, and it’s easily calculated. Whereas effectiveness is something that’s more difficult to picture in terms of financial results. Claims handled on one call: single-call resolution. That’s an example.

One of the best books on the topic, by the way – and it’s something I’ve used a lot and I always recommend it to others – is Bill Price and David Jaffe’s The Best Service is No Service. Bill Price is the ex-VP for Customer Service at Amazon; David Jaffe is an Australian service consultant. They teamed up for this book, and it is the best book I’ve read on call centre and interactive service – central office service. The reason for the title is, the best possible way you’re going to have service delivered is if you don’t have to deliver it because the customer doesn’t have a complaint in the first place. One of the key metrics in this book is, how to reduce actual call volume. You’re inherently increasing your service.

I talked once with the manager of a call centre outsourcing company in Brazil, and he told me that his best corporate customers are customers he signs up on a fixed price for handling all their service enquiries. He looks at a business that has, say, 80,000 customers, who buy once every X months on average; the call volume is X calls per month; and he says he’ll handle all their enquiries at his call centre for X dollars a year. A flat fee.

What he says that does is, it marvellously focuses his business on reducing the call volumes from the customers. It’s clearly in his interests to handle as few calls as possible; one of his big jobs is, when there’s a spike in traffic, he gets on the phone to the CEO of his customer and says “you’ve got a big problem here! And you’ve got to fix it!” And he always gets their attention. Any internal call system could operate in that way. But they don’t. They operate by thinking about contact centres as cost centres. They don’t really pay close enough attention to the satisfaction delivered.

O: That’s a perfect example of innovation – and you’ve obviously singled it out because it stood out. Do you not find many examples of such innovative strategies? It sounds like the exception that proves the rule…

DP: It is an exception right now. What it proves by being an exception is that it’s very difficult to do. And even if call centre managers are like this, not all clients can be – because not all clients are ready for that level. I think though that it also proves that it is possible to run a business like that, if you’re prepared. It’s not rocket science. It doesn’t require a technological breakthrough. It requires a process and a cultural breakthrough.

One thing companies don’t realise is, with all this talk about automation, scripting and so forth, there are always going to be issues that slip through the cracks: no matter how sophisticated your anticipation mechanism is, there will always be things it’s going to miss. And it’s in those situations where your actual employee culture – the way your own employees look at your business and their mission within the company – comes into play.

We argue in several of our books that one of the most important indicators of future success for a company is how customer-oriented the employee culture is. We would argue that the more innovative companies are not just technologically innovative, but culturally innovative. I’ll give you an example: Virgin Blue, the virtual network operator in Australia, had a policy in place in their call centre. If a customer had a complaint, you were authorised to spend – on your own initiative – up to A$100 to resolve it. And the system worked pretty well.

Then Virgin tried something else. They said, “from now on there is no top-end limit whatsoever on what you can authorise to get a resolution”. You know what happened? The average amount to settle a complaint went down. Because when the employees were trusted to think about what that amount would be, it was usually a lot less than A$100. Now, there’s a different way they could have gone with this: they could have said, “from now on you’re only allowed to spend A$50”. But that would have dramatically reduced the flexibility of the people, and would have imposed a routinised solution that would have chopped off all the worst most egregious issues and made it impossible to handle them without escalation.

I guess what I’m saying is, for the organisation of the future that’s going to be successful – and this goes for call centres as well – there has to be a degree of self-organisation in the system. Customer complaints come in, and the employees all have to know what to do, and have to have the authority and the tools and the information and the training to do it. They have to be engaged in their mission and enabled to accomplish it.

If you have employees who are both engaged and enabled, you’ll have a self-organising company. You’ll have no costly, friction-prone, mistake-laden, bureaucratic process of approvals and clearances needing to be put in place. But you’ll have to have employees you trust – and most companies don’t trust their employees, and most employees don’t trust management.

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