Good Morning Operators! It’s been a while since I’ve written to you - the last month has been a non-stop adventure with SXSW, a homecoming trip to MI for a reunion at my alma mater, the Whalies, and so much in-between. In today’s episode we’re adding a new element to the mix -I am launching a new video content series called “Ask an Operator” and had the privilege of recording the inaugural episode with Amanda and Eli. I’ve pulled a few highlights from our discussion below, but feel free to check out the full episode as well!

I also want to take a moment to acknowledge the escalation of the tragic conflict in Israel that occurred over the weekend. It’s really difficult to see so many impacted by this violence, and if anyone wants someone to talk to or simply listen, I’m here.

I’m really excited for today’s content because of how it highlights an essential aspect of the DNA of every successful business. Whether you’re slinging sweatshirts, shoes or SaaS - CX is at the center of your business because of how close it is to your customers.

Why CX Matters:

No matter what kind of business you’re in, CX is the heartbeat of your customer base within your organization. If you mess up here, you make it much more difficult to retain customers because of the bad taste left in their mouths from the poor experience they had with you. A few ways in which CX impacts the success of a business:

• Building Strong First Impressions: You only get 1 chance to make a first impression, and if that first impression is negative, acquiring that customer again becomes exponentially more difficult. Good first impressions however can create tremendous stickiness and loyalty. Consider how that first impression sets the foundation for the entire relationship a customer has with a brand by 1) Building trust and expectation of the delivery of a good experience (assuming their experience was positive) 2) Creating obstacles and resistance to considering or paying attention to any messaging from a brand if that first experience was negative.

• Building 1:1 Customer Relationships: CX makes it possible to have a 1:1 relationship with your customers, and that relationship makes it possible to give customers more of what they actually want. In turn, this generates cross selling opportunities which improves profit margins and free cash flow.

  • Case Study: Mckinsey shared a story about Hallosonne, an Austrian company that installs Solar Panel systems on Residential Homes, and how they leveraged intelligence from their CX team to materially grow the business.

    • Initially, Hallosonne had a “rent-only” model, but when they looked at feedback from their customers they learned:

      • Customers preferred to buy these systems vs rent them

      • Customers wanted to receive consultative services for these systems so that they could be better informed on how to maximize value from their investment.  

    According to Mckinsey, firms that adopt a direct customer strategy (i.e. lean into CX) see tremendous outcomes on the bottom line:

  

  • Operational Excellence:

    • In “Ask An Operator” - Amanda mentioned that Good CX can improve speed & execution between front & back of house and shared a story about how the team at Love Wellness learned this through an experience they had with a fulfillment partner.

      • LW once onboarded a new 3PL that had issues with products getting to customers, high error rates and even shipping the wrong products.

      • The LW CX team was the only team that had visibility into these challenges, and LW ended up switching fulfillment partners because of the data the team was able to share highlighting the issue and the impact on customers. Without this insight, the LW may not have been able to improve operations and would have likely incurred brand equity damage with their core customers.

Where CX & Retention Overlap:

• Understanding customers and LTV Behavior:

  • Who are our most valuable customers?

    • What are they buying? 

    • What do they want more of?

    • What do they want less of?

• Understanding LTV Growth Strategy:

  • What are the “triggers” for our most valuable customers to come and purchase from us again? 

Winning and Losing in CX + Retention - A Rideshare Case Study:

Some of you may be familiar with the unfortunate experience yours truly had with Lyft a few months ago with an airport pick up at LGA. As a note, I want to disclose that I am an Uber shareholder and this is not financial/investment advice.

The TLDR: I noticed a significant price difference between Uber & Lyft for me to catch a ride home (>$100 vs $60), so I decided to opt for a Lyft. After waiting 15 minutes for the driver to show up, the driver proceeded to drive right past me while I was waving at him and speaking to him on the phone. When I DM’d Lyft about the issue, I was only offered a refund of the cancellation fee. Needless to say, I subsequently ended up paying the higher fare and taking an Uber home.

This example highlights how important it is to listen to your customers and CX plays an essential role in delivering the insights from this listening that are needed in order to deliver great experiences to your customers so they keep coming back to you. In the Uber vs Lyft example, the learnings are profound; I.e if you execute CX well, then you can 1) Charge higher prices for the same product / service, 2) Generate stronger retention rates (because your customers keep coming back for that experience), and 3) easily differentiate vs peers on product & service offerings, simply because you execute better. 

While this is far from the only variable to consider, the difference in CX between the two certainly contributes to the tremendous gap in market share between Uber and Lyft for the Rideshare category (Bloomberg):

Not only does Uber own more of the market, their customers spend more $$ with them:

In short - Good CX makes it easy to have good Retention. If you provide good experiences to your customers, they will be wiling to transact with you more frequently and spend more money, which increases LTV and bottom line profits.

Highlight Reel - “Ask an Operator”:

Sharing a few bites from “Ask An Operator”’s first episode:

Why Brands Silo CX & Retention:

• Amanda: “Old habits die hard…CX has always been an ugly, expensive outsourced thing where they exist as a fully separate entity…In the last 10 years that’s changed. CX exists as its own business within the business, but it shouldn’t function in a vacuum…This is the only team that actually gets the result of every single thing the company does…Relying on numbers [e.g. email CTRs] isn’t enough and you only get part of the picture. Brands have struggled for a long time to get an answer from part of the picture and then they fall short. CX is that missing piece we’ve now figured out isn’t [just] back of house, but it’s also front of house and that they [Retention & CX] can come together really nicely.”

• Eli: “Retention has evolved… In the 90s it was a whole lot of crm manager, spray & Pray … Efficiency on retention is coming from learning who your customers are and we’ve tried to circumvent that for a very very very long time. So this convergence [of CX & Retention] is a beautiful thing more for customers than for the efficiency of email… I think the people that have adopted this in the last couple of years are seeing how meaningful that can be by actually knowing the message and sending the message to the right person instead of … eventually hitting the target.” 

How Brands can use CX & Retention Together: 

• Amanda: “We hired a director of CRM and she sits with CX… [doing things] together actually saves a ton of time… It’s about having [both teams] work on [Promos, messaging, etc] together and [making decisions together].”

• Eli: “CX is not sexy. People like amanda are going to be instrumental in changing this. This is a moment in time where we’re realizing that the playbook from the 80-year old guy that wrote a CX book in 1990 is not it…Our generation of new CX people is really bringing this together in a meaningful way [by saying] “No this is the core of the business not because you say it is, its the core of the business because you pay them fairly because you hire a decent time because you’re not overworking them when you have two people doing the work of 15. You’re not outsourcing it at a whim..There’s also this point in time where the retention person realizes “it’s actually 10x easier when I just go to talk to my customers, and the voice of the customer is right here in the corner of the office..They’re right here.” 

Hope you all enjoy the hot takes on CX & Retention in the video above. More content to come your way soon 🙂 

In the meantime, cheers and I hope everyone has an excellent week!

Zach