Originally published on GreenBook, May 2021.
In Part One three initiatives buckets were introduced. The initiatives designed to retain customers related to:
- competitive parity,
- retention and
- brand building.
In this part we examine CX initiatives designed to retain customers by keeping the offer contemporary. Competitors’ activity and market adjacencies alter customer expectations. These changed expectations can result in a reduction in the relative value of the existing offer. Investing in competitive parity initiatives does not usually grow the prosperity of the organization however, it does keep the service contemporary and fit for purpose, therefore aiding retention.
Initiatives to maintain competitive parity: Keeping the Offer Contemporary
Your Uber app tells you how far away your ride is. Your taxi app doesn’t. Matter of fact, neither does your online grocer app. Adjacent or even unrelated categories set customer expectations. Trouble is, just keeping pace with customer expectations is unlikely to earn the organization a lift in returns. Service optimization initiatives are about keeping up with the competition and in the long run, remaining relevant to customers. A change to expectations re-frames the customer’s performance assessment. Organizations seem to be universally awash with initiatives sponsored by hopeful managers expecting to change the trajectory of the organization. Many of these initiatives are born in the name of enhancing the customer experience. Perhaps more accurately, many are just the organization attempting to keep pace with the shifting ground of competition and changing expectations born from neighboring categories and direct competitors.
A change to expectations re-frames the customer’s performance assessment.
Walmart is the largest grocer in the USA with almost 1,800 stores. The infancy for today’s Walmart market share can be found in the 1999 Annual Report. ‘By using technology to reduce inventory, expenses and shrinkage, we can create lower prices for our customers.’ Endurance, tenacity, and brutal singularity curated by authentic leadership coupled with creative marketing communication has resulted in generational market leadership. Spraying effort around like a drunken sailor on a plethora of unrelated and resource hungry initiatives does little to improve organizational outcomes but, does detract from the resources available to become a market leader.
The below exhibit[i]
illustrates the steep economic challenges for the competitors caused by the Walmart strategy. The Walmart Brand Building Initiative set in train a decision for all other competitors. That is, either match the initiatives or risk going out of business. In this case, Service Optimization Initiatives are other supermarkets endeavoring to keep up with Walmart. The exhibit below illustrates the consequences of failing to keep up. The trend lines of falling prices and the increasing share of the top 20 brands illustrates the contracting number of competitors able to keep up.
Service Optimization initiatives amount to incremental improvement designed to remain contemporary. Nevertheless, Service Optimization initiatives alone are highly unlikely to be the source of the next share, margin or retention discontinuity.
Service Optimization Initiatives are the organization’s endeavor to keep up with competition.
Service Optimization initiatives are about the market’s voracious appetite for continuous improvement. In the Men’s 100 metres at the Olympics Games the gold medal winner received the same reward – a medal in 1896 for running 12.0 seconds (Tom Burke) as the winner did in 2012 for running 9.63 seconds (Usain Bolt). So, it is in business, you must strive to run faster to just stand still.
No organization is immune from periodically playing catch up. Behemoth Amazon found itself rolling out Service Optimization initiatives in the form of a digital ‘click and collect service’ for its Whole Foods stores as it strived to keep pace with Walmart. Amazon had enabled customers to order groceries online and pick them up in person. Walmart already offered that service.
Organizations fund initiatives but rarely separate what is just the necessary rhythm of incremental improvement from the initiatives that drive break-out change and alters the organization’s relative standing in the market. All too often, clients tell us that they have undertaken programs to improve member experience and yet, such investment is not reflected in their customer engagement measures or retention numbers. One explanation is these are the necessary but unremarkable Service Optimization initiatives.
The next article in this CX series is ‘Classifying CX Initiatives - Part Three: Retention.’
Ken Roberts is Executive Chairman and founder of Forethought.
[i] Source: USDA Research Services, using data from the USA Census Bureau’s Annual Retail Trade Survey + Company Reports, USA Bureau of Labor Statistics (BLS). *Grocery Price growth refers to the growth in prices for “Food at Home” as reported by the USA Census Bureau. Note: Includes all food purchases in CPI, other than meals purchased away from home (e.g., Restaurants). Grocery @ 56% of Food Spend in 2017 vs. 58% in 1990 per BLS.