Customer Equity Accelerator Podcast

Ep. 82 | Quantifying CX with Michael Allenson


"You cannot game customer lifetime value the same way net promoter score can be gamed." - Michael Allenson


This week Michael Allenson, co-founder of Xpedition joins Allison Hartsoe in the Accelerator to cover the quantification of customer experience. Michael began in the customer intelligence space years ago and has gradually watched the industry move from customer satisfaction to customer experience. Although the data behind customer experience continues to improve, many companies still struggle to improve. Michael believes collaboration and coordination across the enterprise is the root cause. Join us as we explore this week’s topic. 

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Show Transcript

Allison Hartsoe: 00:01 This is the Customer Equity Accelerator. If you are a marketing executive who wants to deliver bottom-line impact by identifying and connecting with revenue generating customers, then this is the show for you. I'm your host, Allison Hartsoe, CEO of Ambition Data. Each week I bring you the leaders behind the customer-centric revolution who share their expert advice. Are you ready to accelerate? Then let's go! Welcome everyone. Today's show is about quantifying the customer experience and to help me discuss this topic as Michael Allenson, Michael is the co-founder of Xpedition without the E. Michael, welcome to the show.

Michael Allenson: 00:45 Thank you, Allison. Good to be here.

Allison Hartsoe: 00:47 Can you start by telling us a little bit more about your background, especially this unusual company name?

Michael Allenson: 00:53 Yeah, absolutely. So we started expedition myself, and my partner Kimberlin Lanier, who comes from an employee engagement and experience background and where it all started was, well, if you go back even further, where it started for me is I've always been in the customer intelligence space and helping companies better serve customers. And most recently I spent a number of years at merit CX, which originally started as merits research. And then as we saw this move from customer satisfaction to customer experience over the last 10 or 15 years, we saw the rise of two really big players in the digital CX measurement space and that being Qualtrics and Medallia and Maritz saw the need to move to more of a software as a service kind of delivery and acquired the third place from which was called allegiance. And after that, we created a firm dedicated to serving the customer experience professionals, combining the software of allegiance with the services of Maritz research.

Michael Allenson: 02:02 And so as we develop that organization, I took on the role of leading a global customer experience transformation team. And one of the things that we learned in that process was that a lot of companies were struggling to improve their customer experience despite the fact that the quality of the information and intelligence about what to do was getting better and better. Trough that time, I collaborated with Kim, who was with our sister company, focused on the employee side. And we started to explore and identify that one of the root causes, why companies were struggling to succeed with customer experience was the really difficulty they were having in creating collaboration and coordination across the enterprise because you couldn't just deliver it and improve it through a chief customer officer or the CX Management Team within an organization.

Allison Hartsoe: 02:56 That makes perfect sense. And so is that why the company's name does not include an E in the beginning.

Michael Allenson: 03:03 That's right. I mean, it's great. And we formed the company to solve that very problem, and we named it Xpedition because if you look up expedition in the dictionary, it has two meanings. One has to do with the fact that you're going towards an objective or goal together as a team, as a group, trying to get to somewhere new that you haven't been to before. And it also means that you're trying to get there quickly, expeditiously, and today you just don't have time to wait and to take time to get where you need to go when it comes to customer experience or experience management, which we'll talk about soon I have a feeling

Allison Hartsoe: 03:43 definitely. So I want to circle back to something that you said about the chief customer officer just briefly because I think that's really interesting. I think it was last year on the show we had Diane majors who's from the chief customer officer organization. I'm sure I'm saying that wrong, but anyways, their organization is about putting a chief customer officer in place, and this is a nonprofit organization and allowing that person to be the advocate or the voice for the customer internally. And yet you're talking about how companies are having such a hard time, even though there's all this information, they can't get it off the ground. Why doesn't a CCO, a chief customer officer work?

Michael Allenson: 04:23 Yeah, well, that's a big question. And Diane, just for people who were may want to look it up, leaves the CX Professionals Association, the CX EA and chief customer officers. The first chief customer officer probably maybe was Jeanne Bliss, and she is really, I often refer to her as the Pied Piper of the chief customer officer. And the chief customer officer is a really, really important role in an organization. And today they come from all different stripes. Some come out of marketing. Some come out of operations or CX, they come from all different places to it. They're sort of United by their love of serving customers. But it's really challenging because the whole point of a chief customer officer is to really unite the company around serving customers. But the problem is that the chief customer officer tends to not have very many if any functions reporting to them. So their role is to try to use metrics and other kinds of tools to try to bring people together. And it's a very tough job. And I would say that most chief customer officers have some level of success, but they're not able to get where they need to because the challenge of uniting all of these functions around the customer experience is extraordinarily difficult.

Allison Hartsoe: 05:50 Okay, that makes sense. Now I imagine that's gonna lead us right to the difference between CX and you're calling XM. What do we think about as traditional CX, and what is this new term XM?

Michael Allenson: 06:03 Yeah, so a little bit on XM, it's interesting as backdrop. Recently, some of you may know that Qualtrics was acquired by SAP, and it was not for a small amount. It was for $8 billion. In fact, they were going to go public. They were scheduled to go public on a Thursday, and I think their number when they were to go public and maybe a little bit wrong about this was expected to be about a $4 billion market value. And on the Sunday before the Thursday, they announced that SAP was buying them for 8 billion and since then SAP has been promoting what they call the intelligent enterprise, which combines experience data with operational data to provide much better information. In fact, their CEO is signing all his emails, XO, XO to represent that. And so Qualtrics really has talked a lot about this idea of XM, and it's really the idea, and I go back to, I've gone to many different conferences that represent different functions, whether it's marketing or digital or in other types of brand-related or product related conferences.

Michael Allenson: 07:15 And the same thing would happen every time I would go to these conferences, I would hear speakers talk, and they would say, we own the customer experience. And I would just kind of do a double-take and say, you own the customer experience. I thought it was the chief customer officer or the chief customer experience officer that owned the customer experience. And the truth is that everybody owns the customer experience. And if you think about it from the customer's perspective, what they're expecting is that everybody who is saying they own the customer experience, it's supposed to be working together to deliver them one seamless customer experience. Guess what? They don't do that. And so to tie that back to the whole deal with Qualtrics, I think it is amazing what they're the promise of what they have to offer. But the challenge of the intelligent enterprise is that it promises to give you much better information, much more precise information on the actions and the opportunities that are in front of you to improve the experience. But that currently is not our problem. Our problem is not for a list of things that will improve the customer experience. Our problem is getting the organization to work together to deliver on it.

Allison Hartsoe: 08:29 I see. Okay. So we're really talking about here is not just siloed data versus blended data. If we could take that liberty to kind of peg CX to siloed and XM to blended, but we're talking about the people's ability to take action on the data.

Michael Allenson: 08:45 Yeah, take action on the data and actually work together. Because I'll give you an example. Quite exciting and frustrating the same time. So when I was at Maritz, we were launching a new product that was focused on prediction, and we worked with a client who was testing it out with us in the very early stages, and we combined the data of transactional data with personal details, with customer experience data with call center data. And this is an industry where churn is a big issue. It's just natural within the industry. Every player has the problem. The question is, who manages it best? And we were able to predict with over 95% accuracy who was going to churn in the following three months based on the combination of those for sources of data. So that was a pretty exciting case study, and as we took that case study out to different people that we were looking to do prediction with and most of our clients were in the customer experience space, we would go and inevitably the first meeting would be like, ah, so exciting.

Michael Allenson: 09:57 We're ready to go, let's get this started. And they would say, okay, I need to talk to some other people in the organization. Inevitably the next meeting would be with, they would bring in some of the, probably the people that you work with a lot who were in the marketing department and doing the big data analytics for the organization and the ones who probably are already working with the transactional data and the personal detailed data, but not the CX and call center data. Inevitably we get to that second meeting, and two things would happen. They would say, we're already doing this, but they weren't. They were doing some of it, not all of it.

Allison Hartsoe: 10:33 I love that answer.

Michael Allenson: 10:34 Right. And trying to get them to do any kind of experiment that would be working with the customer experience team was near on impossible.

Allison Hartsoe: 10:44 And why is that? Because I see this all the time, especially in marketing. There's like this wall between call center data or really almost any voice of customer data. Even getting survey off the ground sometimes can be very difficult, but it is the single best differentiator I can find between really fast-moving companies that understand their customer base and what they want as well as what they want to innovate on versus the companies that aren't as fast-moving. It's like that call center data, or that customer's voice is just old, and yet it remains separated.

Michael Allenson: 11:19 Yeah. It's interesting. I mean, I don't know. I can tell you where I think and where I've seen some of the issues are, but I think the root cause issue here is, and I can't count the number of articles I've seen about, oh, we have to get rid of the silos. We have to break down the silos. The silos are the problem. Well, yes the silos are a problem, but you are never going to get rid of the silos because marketers will still need to be led by a marketer who can help them develop themselves. People in the product space are still going to need to be led by the chief product officer, right? That's still going to have to happen. So our enemy is not the silos themselves. Our enemy is the siloed behaviors. So talk a little bit more about what siloed behavior looks like and if possible, does measurement or some type of measurement help you get beyond it?

Michael Allenson: 12:10 Exactly, right? So the siloed behavior, that prediction thing is a perfect example of it. Other examples of it are worked with one of the really giant auto manufacturers, and we were talking with one of our clients there who had been responsible for building their journey maps for the entire company. And it was one of the more impressive journey maps I've ever seen. And they had spent the money to get there. I mean literally, I think they spent about a quarter of $1 million on that journey map, and it had some powerful insights into it. Yet this client was beside herself because she couldn't get the attention from the people across the organization to do it. And it's about breaking into, hey, they have the people who are running the dealer network, the people who are running product development, all the people that you would need to bring together to take action on that they have their own two or three things on their list to deliver to their management.

Michael Allenson: 13:09 And if it's going to get in the way of those things, what's their incentive to go on work on something else?

Allison Hartsoe: 13:15 So is this really just an incentive game?

Michael Allenson: 13:18 Well, I think it's about, like I said, uniting these functions around experience management. And I'll give you a couple of ways to think about how you do that, how people are trying to do it today, and maybe how they can get there. So, first of all, one of the things today that's kind of swept, that's really swept across all businesses over the last 15 or 20 years is, of course, net promoter score, which is, was promoted and was invented by Fred Reichheld at bane and was promoted by Bain. And it did two things. One that I think was incredibly positive and one not so, and the incredibly positive thing is they kind of ushered in the attention from the leadership team to the customer experience because it was a simple measure that was highly correlated with business outcomes and therefore was something that the c suite could grasp and could put on a scorecard as something that they wanted to drive. So the attention from senior management has transformed during that time period as NPS has continued to rise in popularity. But the downside of it is it's very hard for people to understand how they contribute to it. It is by nature, a measure of the relationship and doesn't really help you understand how you in your function are contributing to that. And that's a big problem. And so we need to get away from metrics that are very hard for people to understand their contribution and quantify their value within the experience.

Allison Hartsoe: 14:59 So really metrics that are so general, I'm not really sure what I did in order to drive that number.

Michael Allenson: 15:04 That's right. And so one of the reasons why we found each other was that I have been pretty passionate for about the last five years about getting to being able to quantify customer value, customer relationship value through LTV and other measures that will help people across the, what we call the exosphere, all the experience management domains, product, customer, employee, digital and brand. And really it's not enough if you are in brand to understand what is the response to promotion, you need to understand, well, did you increase the value of the customer asset? Because if you didn't, how can you view what you've done as a success?

Allison Hartsoe: 15:50 I love that thinking. That's very much aligned with the way we think about things. Are you really increasing the value of the customer base? And it sounds like that's where we're going with, whether we call it CX or perhaps the newer term XM, it's all measured by the quality of the base. So when you're measuring the quality of the base, are we talking about customer equity here?

Michael Allenson: 16:11 Yes, and no. Yeah, I mean essentially if you think about, a lot of times people think of customer loyalty and what does it mean to have a loyal customer. And there's a big difference between attitude no and behavioral loyalty.

Allison Hartsoe: 16:25 I'm so glad you said that. Or transactional and the actual like how do we phrase it? Pete fader was on the show a couple of weeks ago, and he said, if you think you have customer loyalty, take away all your coupons and your discounts and then see how many people continue to buy. That's real loyalty.

Michael Allenson: 16:43 Absolutely. And I mean, I think a great example, if you think about companies, I'll give you two companies in a space as a comparator, chick-fil-a and McDonald's both have driven a lot of success, a lot of success. Chick-Fil-A enjoys a level of attitudinal loyalty that is kind of off the charts. Their scores in customer experience are consistently among the highest in the quick-service restaurant space. Mcdonalds are consistently among the lowest. McDonald's does really well with location and speed convenience. But the question is, will people go out of their way for a McDonald's? And you can, if you measure this, you look at it, people will go a lot further out of their way to go get a Chick-Filet sandwich than they will to go get a quarterpounder.

Allison Hartsoe: 17:35 So when there are, I don't know what the ratio is between chick-fil-a's and McDonald's, but just guessing. I would say that there are probably two, three, maybe five times as many McDonald's as there are chick-fil-a's when McDonald's is basically plastered themselves everywhere, and chick-fil-a is hard to find. Does it necessarily matter? In other words, are there more factors than just great scores on customer experience that will overwhelm the fact that we've got great customer experience? Or is that such a singularly powerful driver that when you look at the bottom line, those high scores on customer experience? Yeah, we may not have a thousand locations, but our net revenues are awesome because people love us.

Michael Allenson: 18:18 Yeah, I mean it comes from a couple of different places, and it starts in that space. It starts with the food, right? And Chick-Fil-A certainly has great reputation for the quality and taste of its food. But beyond that, and it's caused some friction with their values because they have a very sort of unabashedly sort of somewhat conservative values you might call them, but going beyond any of that, I mean there are stories that are coming up all the time. There was one a week or two ago where an older person was like in the drive-thru and had a flat tire and the Chick-Fil-A person,

Allison Hartsoe: 18:55 oh, I saw this.

Michael Allenson: 18:56 Yeah. The Chick-Filet person went out and helped them change tire.

Allison Hartsoe: 18:59 It's more about the heart of the company,

Michael Allenson: 19:02 Right? There was another story recently about somebody choking, and the person went out of the drive-thru window and helped the person in their car to stop choking. And so those are stories that go above and beyond that create this aura for a company that when you put that on top of good quality food, and it means a ton.

Allison Hartsoe: 19:23 So good quality food and enough locations that people can find you, but you don't have to compete on location is what you're saying.

Michael Allenson: 19:30 No, I mean you don't have to, I mean McDonald's has certainly chosen as part of its strategy to compete on location and convenience. The same thing is true, and another one in a different space that does that is Walgreens. If you notice they're always on the corner. There's a reason for that so, but I want to bring it back for a second if I might, because I think at the heart of some of this is what companies are doing deliberately with their mission, their vision, their values and the culture that they have because part of succeeding in this way is by uniting your mission with what you are trying to do as an organization with what your employees care about and what you stand for. That means something to customers. When you have that, you have employees that want to work for you and don't turn over at the same way as others in the industry. You have customers that want to be with you, and you have employees that are dying to represent you to the customers. Think about what Apple, when you go into an apple store, how excited are those employees to help you?

Allison Hartsoe: 20:35 So are we saying that the measurement of this is anchored to customer lifetime value or anchored to this plus other factors?

Michael Allenson: 20:46 Well, I, and hopefully I'm understanding your question, right? But I think what you're getting at comes to the heart of this idea that you have to bring these functions together. Because when you think of customer lifetime value, it's not like you can just say, Oh, I'm gonna go get customers who want to stay with me forever, or I want to go hunt for the big fish. You can do that. But you've got to have this underlying thing going on between your customer and your employee strategy and your leadership that creates a foundation upon which you can build incredible success, right? The best marketing is customers that want to tell your story.

Allison Hartsoe: 21:25 Cut It. So we started with the experience management being something that was difficult to roll across companies because there are different silos that may not be easy to break and there are incentives for people to operate within those areas. Marketers reporting to other marketers, for example. And yet there's this concept of the mission and the values of the company getting or essentially creating the heart of the company, the Genesee Quad, the, you know, the essence that makes perhaps makes the brand the brand. And Are we saying that when people think of customer lifetime value, they're starting to get closer to understanding that heart, but it's not that alone. You really have to understand that in concept with the rest of the customer experience. Would that be fair?

Michael Allenson: 22:17 Yeah, I think so. One of the things I kind of wanted to bring it back to is, and we thought about this a lot when I was at Maritz and we were thinking about how do we help organizations that are trying to get better, because you have organizations that are all the way from there, kind of born that way to ones that came up in a very much different paths that are now realizing that the customer-centricity is important. In fact, based on, you know it's now a few years old, but some Gartner figures, over 90% of companies are trying to differentiate themselves on the basis of their customer experience. And so we always started asking this question of nature versus nurture, the ones who are customer-centric by nature, you know they're there. But can you nurture a company that's not by nature customer-centric to be customer-centric.

Michael Allenson: 23:07 And you asked the question about lifetime value and one of the reasons why I have really latched onto this is because people, you give people a metric and you tie that to their variable compensation, they're going to find a way to deliver it. And if you think about like, and, and I don't want this to sound like I'm bashing NPS cause it's not about NPS, it's about any metric of that sort. You go to an auto dealer, or you go to a hotel, or you go to any number of places and how many times did they ask you to give them a 10. That is not what was intended by using that score. The whole idea of the score was to be able to understand how people feel and to be able to take action on it. And so my thought about lifetime value or other measures of the value of an individual customer is you can't gain that.

Michael Allenson: 24:01 And if you're in the digital space and you do some changes to a process, you transform a process. If you look at the people who are going through that process before you changed it versus the ones after, and you look at how their lifetime value evolved over the next weeks to month timeframe to be determined, right? You can see, well what kind of difference is it making to the value of that customer group who is going through that process? So there are ways that you can detect the value of what you're delivering. And if you don't understand it in terms of your impact on the value of the customer base, then you don't really know what impact you've had.

Allison Hartsoe: 24:43 Very much so it reminds me of that John Doerr book measure what matters a way you're aligning across the organization, which is a great way to go. But okay, let's say that I bought into this idea. I want to align my company better. I want people to not just game the metrics but to really be a heartfelt customer experience company. What should I do first, second, third?

Michael Allenson: 25:07 Yeah. So I mentioned that mission, vision, culture alignment thing. I think for me that's almost number one for any company. If you don't know what you stand for that matters to customers and employees and they're not validating that for you, then you're kind of on a pretty wobbly foundation and just having that isn't enough. But without it, it's hard to build the kind of organization you want to. The second thing is you need to be able to infuse customer thinking into every function. By example I mean, so if you think about how you plan and design products and product updates, how do you infuse customer journey thinking into that process to understand how you're going to actually change people's lives with the changes you make or the products you introduced in the digital space? Can you understand both the functional and emotional impacts that you're planning for and that you actually achieve through the digital transformation that you make? In the employee space.

Michael Allenson: 26:07 Can you infuse in employees in their, maybe in their reward and recognition program, customer focus behaviors that you want them to accomplish? And lastly, if you think about it in terms of the brand space, and I use this last because I think this fits with where your mindset is, can you infuse the idea of value of the customer in how you target micro-target and how you put your strategies in place in terms of not just what impact you want to have, but how that marketing is going to actually impact the experience itself. And we call this XM bridging. And what this is is the connection between those experience domains and the customer that helps unite their thinking. Now lastly, the third thing I would say is infusing metrics, and we talked about lifetime value or proxies for it because you may not be able to get a full lifetime value calculation every time you want it into the process.

Michael Allenson: 27:08 And I'll give you a perfect example. One of the things that I've been heavily engaged in recent years is journey maps, and it is an area of high frustration for professionals across companies, whether it's the CX professional or the product professional, the brand professional, they're all using journey maps for different purposes. When you do a journey map, you're identifying where are those pain points for customers, where are those moments of truth? Where are the places where the course of the relationship you have with the customer changes, and I always like to refer to that as a portfolio of opportunities because if you have a journey map, it is basically a list of different actions you could take to improve the experience. Could be fixing problems, it could be solving a problem for customers that's not core to your product, but something that you can extend your product to do. And so as a portfolio of opportunities, can you use a CLV or related metrics to actually put a value on each one of those opportunities where you can balance that against the effort it will take to address that issue and basically come up with your list of things, your list of projects that you're gonna take fully prioritized by the impact it's going to have for your business.

Allison Hartsoe: 28:24 Spot on. Okay, so Michael, I think those are fantastic ways of breaking it down. The mission value, cultural alignment, infusing the customer thinking into every function, and then infusing the metrics. Particularly my favorite tip about using CLV to put a value on those opportunities. I oftentimes find it somewhat boneheaded as the word I like to use when people just map out this whole raft of things they could possibly do without respect to the opportunity cost of what it takes to actually get those opportunities done and whether it will affect the bottom line. So I love your suggestion there. Now, this has been a great conversation. If people want to reach you to ask you more questions, how can they get in touch?

Michael Allenson: 29:03 My email address is just michael@xpedition without the e on the front dot exchange and for those who haven't seen dot exchange email address, that is a real email address. There's no dot com, and so it's, or you can connect with me on LinkedIn. I am just a, my profile is MAllenson so you can find me there and I'm also on Twitter, and conveniently my Twitter handle is @MAllenson, so it's the same as my LinkedIn. You can tell I got an early in their life cycle for both organizations, so that's how you can reach me.

Allison Hartsoe: 29:38 Great. Well as always, links to everything discussed are at Michael, thank you for joining us today.

Michael Allenson: 29:46 Thank you, Allison. And if I could just if anybody is interested they want to come to. I should've given this in contact information. Our website, which is of course without the e on the front and we have just launching our assessment tools that help people pinpoint where their issues are, which you can come and check out on our website and pretty soon we'll be launching our app that helps people solve these problems through solution pathways. And lastly, Kim and I actually have a book coming out in about four to six months that's going to be called experience management, unlocking the promise of the experience centered organization.

Allison Hartsoe: 30:25 Oh, that's fantastic. Well, maybe we'll have you back on the show when your book comes out, but we'll certainly link to your assessment tools on your website.

Michael Allenson: 30:32 Thank you so much.

Allison Hartsoe: 30:33 Remember everyone, when you use your data effectively, you can build customer equity. It is not magic. It's just a very specific journey that you can follow to get results. Thank you for joining today's show. This is your host, Allison Hartsoe, and I have two gifts for you. First, I've written a guide for the customer centric Cmo, which contains some of the best ideas from this podcast, and you can receive it right now. Simply text, ambitiondata, one word to, three, one, nine, nine, six, (31996) and after you get that white paper, you'll have the option for the second gift, which is to receive The Signal. Once a month. I put together a list of three to five things I've seen that represent customer equity signal not noise, and believe me, there's a lot of noise out there. Things I include could be smart tools. I've run across, articles I've shared cool statistics, or people and companies I think are making amazing progress as they build customer equity. I hope you enjoy the CMO guide and The Signal. See you next week on the Customer Equity Accelerator.

Key Concepts: Customer Lifetime Value, Marketing, Digital Data, Customer Centricity, Long-Term Customer Value, Marketing Leaders, Analytics, Creativity, Product Development, Audience Research

Who Should Listen: CAOs, CCOs, CSOs, CDOs, Digital Marketers, Business Analysts, C-suite professionals, Entrepreneurs, eCommerce, Data Scientists, Analysts, CMOs, Customer Insights Leaders, CX Analysts, Data Services Leaders, Data Insights Leaders, SVPs or VPs of Marketing or Digital Marketing, SVPs or VPs of Customer Success, Customer Advocates, Product Managers, Product Developers

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