“Creating a new customer is fundamental. It’s sexy. And keeping a customer is also fundamental. It’s not sexy.” – Jeffrey Eisenberg
You’ve heard the old refrain: it’s more expensive to acquire a new customer than to sell to a current customer. Well, it’s true. In fact, to maximize profitability, smart companies try to establish a business based on repeat business through a core tribe of fanatical, dedicated clients.
Today, the bar has been set very high. Companies like Zappos (acquired by Amazon), Ritz-Carlton, and Nordstrom have been setting new standards in customer satisfaction.
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But the company really blazing the trail is Amazon. Not Apple. Not Uber. Not Google. It’s Amazon. They’ve perfected the art of turning their core service into their number one marketing tool.
In their recent book, Be Like Amazon: Even a Lemonade Stand Can Do It, Bryan & Jeffrey Eisenberg, together with Roy Williams discussed the four pillars of Amazon and the powerful force for growth they’ve created in the way they deliver their service.
In the book, they describe what they refer to as Amazon’s ‘Unifying Principles’ (their term, not Jeff Bezos’ term). These unifying principles are:
- Customer Centricity
- Continuous Optimization
- Culture of Innovation
- Corporate Agility
For the rest of this chapter I’ll go over each of these items and their importance in delivering a service that becomes a powerful marketing tool for your company.
Jay Baer, in his book Hug Your Haters, cited a Forrester study that found that 80% of businesses believed they deliver “superior” customer service. The same study found that only 8% of customers agree their service is superior. That’s a huge disconnect. As business owners, we believe we deliver great service, and our customers have a wonderful experience during their interactions with our company.
Amazon has turned that into one of their core principles. They live and breathe by customer-centricity.
The Eisenberg Brothers and Williams cite a famous example from Amazon’s early days, when it was a bookseller exclusively (and not selling everything under the sun, like they do today). In the mid to late ‘90s Amazon’s employees wrote almost all of the book reviews. Bezos instructed them to be honest about their opinions. As a result, some of the reviews were negative.
Bezos received an angry letter from a book publisher who said that Bezos didn’t understand that he was in the business to sell books, not trash them. Bezos said, “When I read that letter, I thought, ‘we don’t make money when we sell things. We make money when we help customers make purchasing decisions.’”
From the very beginning Amazon was customer-centric. This was just one early example of how Amazon put the interests and concerns of their customers first.
But does being customer-centric work? Eisenberg, Eisenberg, and Williams analyzed the performance of the S&P 500, from 2007 to 2013, and compared the companies on the index with the companies in the Forrester Customer Experience Index, which provides a list of “Customer Service Leaders” and a list of “Customer Service Laggards.” What they found should give any company pause. While the S&P 500 Index was up 14.5% in that seven-year period, the Customer Service Laggards were down 33.9%. The Customer Service Leaders, on the other hand, were up an astonishing 76.9%.
But what about profits and customer retention? How does being customer-centric help your company’s bottom line? Jay Baer said in Hug Your Haters, “Advertising is a tax paid when you’re poor at retaining your current customers.”
Baer goes on to say that a 5% increase in customer retention can boost profits by 25-85%.
Culture of Innovation
Amazon’s second pillar is Innovation. But not innovation for innovation’s sake. It’s innovation in the pursuit of customer centricity.
Take, for example, Amazon’s packaging. The way you package a product for shipment would seem like a boring, innocuous feature. Just package each product so that it doesn’t sustain any damage during shipping, and you’re good to go.
But Amazon applied the principle of innovation in their packaging to solve a huge customer pain point: packages that were notoriously difficult to open. Just think about the number of times you’ve bought a physical product in a store, such as batteries or a piece of electronic equipment. The packaging is so complicated and hard to open that it causes enormous frustration.
It became the subject of a hilarious scene in the famous American sitcom Curb Your Enthusiasm, with Larry David trying to open a package that wouldn’t open.
Amazon solved an issue that had become a customer frustration by innovating their packaging. They created “Frustration Free Packaging.”
The way Amazon explains Frustration Free Packaging is they created their innovation as a way to alleviate “wrap rage.” They say their packaging was designed to feature “ . . . products in recyclable boxes that are easy to open and contain fewer excess materials.”
How can you innovate your products – or the way you deliver your services – so you can continue to delight your customers and drive high customer satisfaction?
Since many nearshore outsourcing providers are in the technology space, innovation is a central part of what a lot of providers deliver as a service. ‘Software’ and ‘innovation’ are terms that seem to go hand in hand.
But, can you innovate a part of your service delivery process? Can you put on your ‘innovation’ hat when designing your customer on-boarding process? Your weekly or daily communications? The way you sell your service?
I’ve spoken to a few software outsourcing companies from Latin America who have developed innovations in the way they perform their daily stand-up meetings when carrying out their agile or Scrum-centered software development approach.
Daily stand-up meetings are a standard practice in Scrum, and are often a regimented process whereby team members, who are typically all sitting in a conference room, must stand up when it’s their turn to speak and quickly state what they did the day (or week before), what they’ll work on today, what roadblocks are standing in their way, and where they need help.
Often, they’ll use little props when it’s their turn, such as a basketball or a hacky-sack. When it’s somebody else’s turn, they’ll pass the prop to the next person whose turn it is to stand up and say their piece.
For remote teams, this is not feasible. One company I worked with made up for that by using two video cameras to “simulate” the in-person stand-up meeting. They used one camera so the U.S.-based team could see their Latin American team when it was their turn to stand, and another camera pointed towards the white board showing the Kanban swim lanes.
On each side, both the U.S. location as well as the Latin American location, there was a wide-screen TV or screen where the image of the meeting was projected. The result of this innovation was a positive customer experience. The U.S.-based client felt they were working with a team that was intimately integrated with them, using the miracle of video-conferencing, not a remote team.
Continuous optimization is closely related to innovation in Amazon’s four pillars, as it is a principle used to improve their operations and products to provide excellent customer service.
Amazon is constantly searching for ways to optimize their operations, products, and services. One of the unique ways it does this is to divide their whole company into small, self-directed teams.
I wanted to include a quote direct from the book, Be Like Amazon, “[Jeff] Bezos has figured out how to combine the entrepreneurial culture of a small company with the financial resources of a large one. And that allows Amazon to tackle and solve problems that other big companies can’t quite wrap their arms around.”
When you empower your employees to continuously improve your processes, you must be prepared to let go. You can’t try to control everything they do, or else you’ll stifle any innovation and optimization they can create in the service of your customers.
This has been a key organizational feature for Amazon, and it should be for you, too.
Amazon’s teams are fairly small. Bezos has established a “two-pizza rule.” He will not allow a team to be larger than can be fed by two pizzas.
Finally, you need to incorporate agility into your corporate culture, the fourth pillar in Amazon’s unifying principles.
Agility has traditionally been associated with software development, as well as with startups.
In his book, The Lean Startup, Eric Ries describes a model for creating startups that is based on agility. Startups should be agile enough to change their business model, product, and approach as soon as they discover their original approach won’t work. They need to be able to fail fast so they can quickly learn what will work and what won’t work, before they run out of operating capital.
Today, corporations as well as small companies need to act like startups. One of the keys to Amazon’s success is their ability to turn on a dime and get rid of things that aren’t working, or adopt things that are working.
There are still too many companies that are stuck in their old ways of operating. Look at Kodak, Blockbuster Video, and Borders Books. Jeffrey Eisenberg, in his blog post, Scaling Growth, uses the term Risk Aversion to describe the opposite of corporate agility (see: http://www.buyerlegends.com/scaling-growth-gift-entrepreneur/).
As a foreign company trying to make it in the world’s largest market, there’s no other way to operate other than as an agile company. If you find a marketing tactic, a development methodology, or a customer communications method that works better than the one you’ve used before, give your people the total freedom and authority to change the way you’ve done things in favor of the new, better way.
In fact, empower your employees to think like owners. Their response to a possible innovation that could change your company’s fortunes for the better should never be, “I need to check with my boss about that.” It should be, “I’ll make this change now knowing my boss will approve because it’s for the benefit of the customer and, consequently, for the company.”
Customer Touch Points
In addition to Amazon’s Four Pillars, I would like to recommend a fifth pillar promoted by nearshore customer service outsourcing firm Infolink. It’s the concept of Customer Journey Support, and identifying key customer touch points.
José Gonzalez, Infolink CEO, has perfected the process of delivering support across the complete journey that a customer will take with your product and company. At each step of the way there are key touch points that define the relationship between your customer and your company.
These touch points include customer on-boarding, first product use, product training, continued use 30 days, 60 days, and 90 days after purchase, technical support, contract renewal, upsell and cross-well.
At each touch point you need to design an experience that will increase your customer’s satisfaction, delight them, and enhance the value they derive from your company.
When you design your customer touch points to maximize their experience with your company, and you pair that with fanatical customer-centricity, continuous optimization, a culture of innovation and corporate agility, your product and/or service becomes one of the most powerful marketing tools that exists today.