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Want Loyal Customers? Understand the Episodes That Matter

Want Loyal Customers? Understand the Episodes That Matter

More companies are adopting a new key unit of management—the customer episode.

  • March 30, 2017
  • min read

Article

Want Loyal Customers? Understand the Episodes That Matter

This article originally appeared on LinkedIn.

Good services and a steady stream of new product features used to be enough to hold the top spot in an industry. But that’s not necessarily the case anymore. It’s about the key episodes that define the customer experience.

Think about a mortgage. Sure, you check out the interest rate and amortization, but I bet you also care about how easy and fast the approval process is, the convenience of online payments and how the lender will resolve any problems that arise. And if you’re buying a laptop or a tablet, you might consider the level of ongoing technical support to be just as important as the hardware and software.

This shift takes many companies into largely uncharted waters. Product development has well-worn practices. But many firms have not even started to identify their most important experiences, much less manage them. Now, my Bain & Company colleagues are seeing more companies adopt a new key unit of management: the episode, which can encompass a variety of shopping, usage or service activities.

What is an episode? It is when a customer has a task to complete or a need to fulfill through the company. It has a clear start and end, marked by the customer completing what he or she set out to do. Episodes range from a single interaction (such as paying a bill online) to an intricate series of interactions spanning weeks (such as getting fixed broadband service moved to a new home).

Short episodes each have little impact unless something goes wrong. But they tend to be more frequent, so they should be easy for customers to transact. Longer, more complex episodes, though less frequent, usually contain at least one high-stakes “moment of truth,” so they have a large effect on a customer’s attitude about the company.

Consider how this perspective would change an initiative to reduce costs at a telecommunications carrier. Traditionally, the carrier would target cost cuts from its technical support call-center operation. It would probably end up with shorter calls or cheaper or fewer agents. That approach has problems: It likely would lead to bad tickets of work, pushing more work into the back office and the field, with a higher number of expensive technician visits. But taking the perspective of the entire episode, a better response might be to add call-center resources in order to reduce the number of truck rolls and, at the same time, speed up responses to customers.

Companies adopting episode management are not completely replacing their management of individual functions. Rather, the two streams exist side by side. These early leaders are making thoughtful choices in four areas:

1. Define episodes at the right level and focus on those that matter most. The customer’s high-level needs can be broken down into variants of episodes. For example, banks can usefully separate the overall need of “make a payment” into “pay another person,” “pay a bill” or “make an international transfer.” Each of those defines what the customer wants to do, with a clear start and end. And each consists of a number of underlying processes to redesign and improve. When you’re selecting key episodes to start with, consider their level of emotional impact, frequency and economics.

2. Charge Agile teams with continuous improvement of episodes. Many companies have experimented with Agile methods for software and digital projects. But Agile also works well to manage an entire episode. Up to 10 members drawn from each relevant function gather in co-located, cross-functional, self-organizing units to improve the episode in two-week sprints. Besides their Agile work, members remain part of their function as well.

3. Install clear metrics. While individual metrics will vary depending on the episode, most fall into one of three categories. Episode frequency, or the rate per customer, matters a lot for negative events, such as a credit card being declined at the point of sale. It might also be relevant for some positive episodes, such as redeeming reward points.

When gauging an episode’s quality, the Net Promoter Score® allows companies to get a quick picture of their customers’ experiences, which they can compare with those of competitors. Of course, there are other measures, including speed to completion and how often a company resolves a problem at the first contact.

Episode economics could include the all-in cost to complete the episode and the change in customer lifetime value. The benefits of a sharply improved fraud-management system, for instance, include avoiding not only the fraud, but also the lower spending from customers due to repeated disruptions. Measuring cycle time also comes into play for many episodes, because a fast cycle time shows that no errors occurred that would require costly rework.

4. Assign strict accountability for each episode. Someone needs to be explicitly accountable for each episode. Governance might rest with a current executive, or it might require a new role. One telecom carrier created a new role to oversee the episode of “installation of a new landline,” because of the technical complexity and numerous departments involved. Each of the departments, though, still is held accountable for the success of this episode.

When the experience matters as much as the core product, companies will need to work harder to earn their customers’ loyalty and advocacy. They can do that by delivering great episodes, reducing costs in the bargain.

Net Promoter®, Net Promoter System®, Net Promoter Score® and NPS® are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.

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