‘Lack of strategy’ according to Forrester’s annual State of Customer Experience report 2011.
We agree, but strategy in itself – even if it is bold, differentiated and customer-centric – won’t guarantee success. Where we see most companies fail is in the execution.
In our work with brands around the world we see that there is a lack of coherent thinking about how brand positioning, marketing, customer experience and employee experience fit together, and, dovetail they must if you are to be successful. Many of you will be thinking about how to how to execute your customer experience strategy in 2012 so let’s see what we can learn from a topical example…
A tale of two airlines…
There are two major Asian airlines that have recently posted their 4th quarter results for 2011. They share some common features; both employ very attractive flight attendants dressed in smart red uniforms; both operate state of the art aircraft with the latest in-flight entertainments systems; both re-defined air travel in their respective markets and shook up complacent competitors; both have enthusiastic customers and are rated tops for service in their markets; each are is led by a flamboyant entrepreneur each with his own Formula One racing team. And perhaps not unsurprisingly, Richard Branson and Virgin Atlantic inspired both.
However this is where the similarity ends, Air Asia operating out of Malaysia, declared a 46% increase in profits for Q4 2011 whilst Kingfisher Airlines, the Indian based carrier, reported a doubling of losses between July and September 2011. Air Asia was purchased for 25 cents 10 years ago and today has a cash balance of over half a billion dollars and is expanding rapidly. Kingfisher Airlines is currently $1.2b in debt, contracting rapidly and facing a financial crisis.
So why the difference and, most importantly, what can we learn from them about customer experience strategy?
Air Asia is one of the brands featured in our book ‘Bold-how to be brave in business and win’. In our view, Air Asia demonstrates a number of the characteristics that are shared by the ‘bold’ brands we studied. Its CEO, Tony Fernandes, had a vision of creating a low-cost airline that provides great service and then re-wrote the airline business model to achieve this and, in so doing, virtually guaranteed success. He paid enormous attention to creating a culture and employee experience that reinforced the brand values of simplicity and innovation. When the airline decided to diversify into the long-haul market he started a new brand called Air Asia X because, in Tony Fernandes view, you have to keep different brand cultures and business models separate otherwise “they contaminate each another”. Air Asia was voted best low-cost carrier in the world in 2009 and 2010 and Air Asia X recently won the ‘Best Network Performance’ award for its ability to open up new routes.
Kingfisher Airlines CEO, Vijay Mallya, took a different approach by betting on a five-star service model that went way beyond what any other airline offered. However, this required the market to grow steadily and remain relatively price-insensitive. Kingfisher got off a great start and gained plaudits for its quality product and excellent service experienced by what it calls its ‘guests’. Its cost base was high but it survived by targeting the top of the market.
But then it all started to go wrong. In an attempt to tap into the huge Indian budget market it acquired Air Deccan a low-cost domestic carrier and re-badged it Kingfisher Red. But, instead of keeping the business models and brands separate, Mallya upgraded Kingfisher Red until it started to offer similar service to the master brand but at a lower price. The result was that customers traded down and both brands were compromised- the classic ‘stuck in the middle’ strategy. In the de-regulated airline industry that exists today this unsustainable because customers will always trade down to find better value if they can.
How to make a bad situation worse…
With costs that were too high and margins that were too low, Kingfisher started cutting and one of the first places it looked to do so was its employees. Over the past months the brand has from suffered low morale, damaging in-flight announcements given by disgruntled employees complaining to passengers that they have not been paid and a reported high-turnover of aircrew and top-talent.
Kingfisher is in a stall from which it may be difficult, if not impossible, to recover.
So what can we learn?
There are a number of principles that we can see reflected in this case study:
Don’t gold plate your customer experience
1) Customer experience is a neutral term and does not imply gold-plated service. Ritz-Carlton offers a great customer experience but so too does Premier Inn. Yet their business models and price points are very different and delivered in distinctive ways. Be careful not to upgrade your customer experience beyond the point that target customers want and are willing to pay for simply because it is what you value.
Treat your customer experience and employee experience as one and the same
2) It follows then that if your strategy is to be low-cost, innovative and simple, your culture and values must reflect that. If your strategy is to offer premium service then you need the very best people who are highly motivated and who want to stay with you. If you start de-valuing them they will leave and that will damage your reputation.
Be clear about what you stand for and stick to it
3) Be clear what you stand for as a brand. You cannot be all things to all people; that way lies mediocrity. So be clear about what you promise and stick to it. The reason that so many acquisitions fail is that organisation’s merge two strategically separate and distinct brands and then confuse customers and employees by ramming them together.
This also applies to brands that are growing and seek to expand through launching new products or propositions; make sure that they adhere to your core brand promise and values otherwise they will undermine what your brands stands for and create confusion in the minds of customers and employees. If you do wish to explore a new business model or market then do so by creating a separate brand and culture as HSBC did do successfully with First Direct.
Take a holistic view of the business
4) What you stand for, the operational choices you make, the culture you foster, the experience you deliver, and how you deliver it through your people and processes have to work in harmony to mutually support and reinforce the brand. Each element must work with every other in order for the strategy to work and when you change one element it can have a serious effect on the rest. This means that the business needs to be viewed holistically and strategy executed in the same way. In the words of Ronan Dunne, CEO of O2 “It only works when it all works”.
A differentiating customer experience lies in having a big idea and clear strategy but it lies even more in executing it well so that you can sustain it long term.
Copyright. Smith+Co 2011.