Experientially Engineering the Customer Relationship
Does a good customer experience guarantee a strong customer relationship?
Unfortunately, it does not! In fact, the strength of customer relationships is much more dependent on the consistency of experiences and their correlation with the expectations of the customer. The strength of customer relationships tends to be more dependent on the emotional side of customer contacts than the rational. So, what new innovations will help bankers to build closer, more loyal relationships with their customers?
An inventory of the major banking innovations of the past decade will place most in the Product & Channel category, which mainly involve the rational aspects of a banking relationship, i.e., what a customer receives in exchange for payment in terms of access, functionality and ease of usage. In addition, a strong majority of channel innovations were designed to enable customers to self-serve, which has created more distant relationships and a need for bankers to “re-connect” with customers.
Alongside these efforts, large data warehouses and customer relationship management systems have been built with the intention of building closer customer relationships but most have only delivered the ability to generate more efficiently targeted sales campaigns. Banks have also spent a lot of money on initiatives to make the “branch experience” more pleasing by making the spaces more emotionally engaging but few, if any, of these “experiential” branches have created the wave of new customers needed to justify the investment.
Is it possible that experiential innovation is not the solution to creating closer customer relationships? Should bankers just accept the continued commoditization of their business and resign themselves to the waves of customer comments that state the need for good service at a low price?
In 1995, Joseph Bower and Clayton Christensen wrote in a Harvard Business Review article that disruptive innovation often “sacrifices performance along dimensions that are important to current customers and offers a very different package of attributes that are not (yet) valued by those customers. At the same time, the new attributes can open up entirely new markets.” But finding the next new disruptive technology in banking represents an increasingly difficult task and, visibly, one that does not guarantee long-lasting rewards.
What is the new or different package of attributes that a bank can offer to customers who clearly state that they seek good service at a low price? One path is further product and channel innovation in search of the next, new disruptive technology. The other is to seek more radical changes in the area of experiential innovation.
So far, we have seen only incremental improvements to the emotional and sensory aspects of individual contacts with the bank. We have seen some flashy technology and gimmicky tactics along with some things that take the seriousness away from banking, like Washington Mutual’s “WooHoo Moment.” But these do not represent radical changes in the emotional side of banking. In fact, if a radical change to the rational side of banking would generate more value for the customer in terms of what they get from the relationship, a radical change to the emotional side of banking should generate more value in terms of how the customer feels about the relationship.
To date, the majority of experiential innovations have been related to improving the quality of individual contacts using emotional and sensory stimulation. In some cases, we have seen enhancements to multi-contact processes, such as sales processes for more complex product categories. But most of the improvements we have seen remain “in the moment”—only answering the needs of today and not considering the potential of the ongoing relationship.
Considering the nature of the relationship between bank and customer, the bank is almost guaranteed a regular opportunity to enhance the experience of the overall relationship as well as the individual contacts. In fact, any relationship is essentially the collection of contacts between the two parties over time. The strength of the relationship can be measured based on the resulting outcome of the collection of contacts – both in a rational sense (what I got out of the relationship) and an emotional sense (how I feel as a result of the relationship).
As such, each individual contact should be positive, engaging and fulfilling. But the result of the collection of those contacts should also be positive, engaging, and fulfilling. Here we return to the question of what customers seek from a bank relationship and the progression and growth of that relationship over time. When surveyed, most customers declare that they want “good service at a low price” from their bank, but when asked what they hope to receive from their banking relationship over the course of five to 10 years, they answer on a much more transformational level: “help when I have a problem,” “help managing my day-to-day financial issues” and “help realizing goals and dreams.”
If banks wish to seize the opportunity to play a significant role in the lives of their customers, they will have to engineer more than individual contacts with experiential components. The overall relationship will need to be engineered (even choreographed) to generate a positive, engaging, and fulfilling result in the lives of the customers – in effect, helping customers along the path of realizing their goals, dreams, and aspirations.
Fulfilling this component represents the ultimate level of experiential innovation: moving from incremental improvements (engineering individual contacts to be experiential in terms of emotional and sensory stimulation) to radical improvements (engineering an ongoing collection of contacts to help guide the growth and transformation that people seek in their lives). If the result of product and channel innovation is more rational value received by the customer (convenience, speed, functionality, ease of use, etc.), the result of the experiential innovation is the emotional value received by the customer.
The effect of experiential engineering related to each individual contact (how a person feels about the contact) has the potential to be mood-lifting, but engineering a collection of contacts so that the customer finds meaning and direction in the relationship has the potential to be life-changing. While the individual contact may help the customer to complete a task in the immediate term, a well choreographed set of contacts over time could help customers to realize their goals and dreams in the long-term.
Moving from incremental improvements to radical improvements in the realm of Experiential Innovation requires a new set of processes and measures that will allow bankers to see their customers’ lives as more than a simple set of unrelated contacts.
Properly implemented, this approach has the potential to create disruptive relationships developed over time as the result of the positive, engaging, and fulfilling collection of contacts with the bank. These “learning relationships” with customers would give bankers the ability not only to provide individual solutions, but to guide transformations in the lives of customers by using numerous solutions at different points in the relationship through their knowledge of the customer’s individual needs, wants, desires, and dreams.
It seems that the sweet spot for bankers will be in finding a cost-balanced format in which they can engage both the emotional and the rational aspects of their customers’ lives. Today, banks are not the most emotionally engaging organizations, but they do still possess the ability to significantly influence a customer’s quality of life and the ability to realize his/her goals and dreams. Finding this balance of emotional and rational would allow bankers to “package” and manage each ongoing relationship to generate the desired outcomes of each individual customer over the long-term. Over time, this will build a stronger, more profitable portfolio of customer relationships, which should be at the top of every banker’s agenda.